Hays paid the first year's interest payment on December 31,2012.Barnett Bank's prime rate was 4 percent for 2012.Which of the following answers shows the effect of this event on the financial statements?

Question

Quizplus · Accepted Answer

The payment of the interest will decrease the cash balance on the balance sheet, but will not affect the other accounts. Therefore, the cash balance will decrease by the amount of the interest payment. This will result in a decrease in the total assets on the balance sheet, which is reflected in choice B.

Hays Paid the First Year's Interest Payment on December 31,2012