The Platte Corporation issues a 5-year note payable on January 1, Year 1 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 answers correctly shows the effect of the issuance of the note on Platte's financial statements?

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question

The Platte Corporation issues a 5-year note payable on January 1, Year 1 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 answers correctly shows the effect of the issuance of the note on Platte's financial statements?
The Platte Corporation issues a 5-year note payable on January 1, Year 1 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 answers correctly shows the effect of the issuance of the note on Platte's financial statements? A) Choice A B) Choice B C) Choice C D) Choice D

A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D

Quizplus · Accepted Answer

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

The Platte Corporation Issues a 5-Year Note Payable on January