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On January 1, Year 1, Platte Corporation issues a 5-year note payable for $5,000. The interest rate is 5% and the annual payment of $1,156, due each December 31, includes both interest and principal.
-Which of the following correctly shows the effect of the issuance of the note on Platte's financial statements?

Question

Quizplus · Accepted Answer

Issuing a long-term installment note will increase assets (cash) and increase liabilities (installment notes payable). The cash proceeds will be reported as a cash inflow for financing activities on the statement of cash flows.

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