Which choice reflects the financial statement effects of the cash payment on December 31, 2013?

Question

Quizplus · Accepted Answer

The 12/31/13 payment will decrease assets (cash), decrease liabilities (notes payable) for the amount of the principal repayment, and increases expenses for the amount of the interest expense, which decreases net income and equity. The principal repayment is reported as a cash outflow for financing activities and the interest payment is reported as a cash outflow for operating activities.

Which Choice Reflects the Financial Statement Effects of the Cash