On July 1,2019,Goode Company borrowed $100,000.The company signed a note payable with interest at 6 percent per year.The note and interest are due on December 31,2019.On December 31,2019,Goode paid $103,000 to settle the debt in full.Assuming no accruals for interest have been made during the year,transaction analysis of the $103,000 cash payment on December 31,2019 should reflect which of the following?

Question

Quizplus · Accepted Answer

When the company paid $103,000 to settle the debt, the liability decreased by the full amount of the note payable ($100,000), and the remaining $3,000 represents the interest expense for the period. Therefore, the liabilities decreased by $100,000 and the stockholders' equity decreased by $3,000. The payment was made using cash, so the assets decreased by the full amount of $103,000. Therefore, option D is the correct transaction analysis for this scenario.

On July 1,2019,Goode Company Borrowed $100,000