On July 1, 2016, 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, 2017.
The effect on Falcon's financial statements on July 1, 2016 is as follows

Question

On July 1, 2016, 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, 2017. ​
The effect on Falcon's financial statements on July 1, 2016 is as follows

Quizplus · Accepted Answer

When Falcon Company receives the promissory note from Jordyn Company, an asset is created because Falcon is owed money. This increases Falcon's assets. At the same time, Falcon has earned revenue in the form of interest, which increases owners' equity. Therefore, the correct answer is A.

On July 1, 2016, Falcon Company Received a $20,000 Promissory