Which of the following is a claims exchange transaction?
A)Accrual of interest on a note payable
B)Issued a note to purchase equipment
C)Repaid principal on a note payable
D)Paid interest on a note payable

Question

Quizplus · Accepted Answer

The accrual of interest on a note payable is a claims exchange transaction because the stockholders' equity account Retained Earnings decreases (because Interest Expense increases)and the liability account Interest Payable increases.Issuing the note is an asset source transaction because the asset account Cash increases and the liability account Notes Payable increases.Repaying the principal (or interest)on a note payable is an asset use transaction since the asset account Cash decreases and the liability account Notes Payable (or Interest Payable)decreases.

Which of the Following Is a Claims Exchange Transaction