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QUESTION 46

1. Indicate the effect of the following event on the companys accounting equation. For each account title affected indicate the specific account name, dollar change, and whether it increased or decreased. Show the correct effect in the Stockholders Equity column so the Balance Sheet balances.

   Issued 1,000 shrs. $100 par, 8% Preferred stock, for Land, when the stock was selling for $300/share

   		Increased the asset cash $300,000, the stockholders' equity accounts preferred stock $100,000 and additional paid in capital-preferred $200,000.
   		Increased the asset land $300,000, the stockholders' equity account preferred stock $300,000.
   		Increased the asset land $300,000, the stockholders' equity accounts preferred stock $200,000 and additional paid in capital-preferred $100,000.
   		Increased the asset land $300,000, the stockholders' equity accounts preferred stock $100,000 and additional paid in capital-preferred $200,000.

QUESTION 45

1. On January 1, 2020, Smith Company signed a ten-year Note for the acquisition of equipment. Annual note payments of $22,000, based on an interest rate of 10% are to be made every December 31, beginning with December 2020. The present value of the minimum lease payments is $135,180.

   Required:

   Indicate the effect of the following on the companys accounting equation. Indicate each account title affected and the dollar change and whether it increased or decreased.

   To record the second note payment on December 31, 2021.

   		Increase interest expense $12,669.80, thereby decreasing net income and retained earnings for $12,669.80 Decrease cash $22,000 and note payable $9,330.20.
   		Increase interest expense $13,518, thereby decreasing net income, retained earnings, and cash for $13,518.
   		Increase interest expense $22,000, thereby decreasing net income, retained earnings, and cash for $22,000.
   		Increase interest expense $13,500, thereby decreasing net income and retained earnings for $13,500. Decrease cash $22,000 and note payable $8,500.

QUESTION 44

1. On January 1, 2020, Smith Company signed a ten-year Note for the acquisition of equipment. Annual note payments of $22,000, based on an interest rate of 10% are to be made every December 31, beginning with December 2020. The present value of the minimum lease payments is $135,180.

   Required:

   Indicate the effect of the following on the companys accounting equation. Indicate each account title affected and the dollar change and whether it increased or decreased.

   To record the first note payment on December 31, 2020.

   		Increase interest expense $13,518, thereby decreasing net income, retained earnings, and cash for $13,518.
   		Increase interest expense $13,518, thereby decreasing net income and retained earnings for $13,518. Decrease cash $22,000 and note payable $8,482.
   		Increase interest expense $13,500, thereby decreasing net income and retained earnings for $13,500. Decrease cash $22,000 and note payable $8,500.
   		Increase interest expense $22,000, thereby decreasing net income, retained earnings, and cash for $22,000.

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