On July 1, 2014, Falcon Company received a $20,000 promissory note for services from Jordyn Company.The annual interest rate is 5%.Principal and interest are paid in cash at the maturity date of June 30, 2013.
The effect on Falcon's financial statements on July 1, 2014 is as follows

Question

Quizplus · Accepted Answer

When Falcon Company received the $20,000 promissory note, it increased its assets by $20,000 (accounts receivable). Since this note is for services provided, it represents earned revenue, which also increases the owners' equity by $20,000. There is no effect on liabilities or expenses, so the correct answer is A.

On July 1, 2014, Falcon Company Received a $20,000 Promissory