Exercise 9168 Effect of a discount note on financial stateme

Exercise 9-168 Effect of a discount note on financial statements (Appendix.) Mark Miller started a moving cash from a local bank by issuing a one-year $80,000 face value note with annual interest basec on a 12 percent discount. During 2016, Miller provided services for $65,400 cash. Required Answer the following questions Record the events in T-accounts prior to answering the questions a. What is the amount of total liabilities on the December 31, 2016, balance sheet? b. What is the amount of net income on the 2016 income statement? .8 company on January 1, 2016. On March 1, 2016, Miller borrowed

Solution

Here Discount on notes payable 80000*12/100 =9600

b) Amount of liabilities on Dec,31= fv of notes payable 80000$

c)Calculation of net income durin the year:

Service revenue=65400

Less: Discount write off(9600/12*10months)=8000

Total =65400-8000=57400

D)Cash flow from operating activities:

revenue in cash = 65400

		Debit	Credit
a)	cash	70400
	Discount on notes payable	9600
	Notes payable		80000
b)	Cash	65400
	Service revenue		65400