1 answer

Please help solve and explain why. On March 1, 2018, Lewis Services issued a 5% long-term...

Question:

Please help solve and explain why.On March 1, 2018, Lewis Services issued a 5% long-term notes payable for $25,000. It is payable over a 5-year term in $5,000

On March 1, 2018, Lewis Services issued a 5% long-term notes payable for $25,000. It is payable over a 5-year term in $5,000 principal installments on March 1 of each year, beginning March 1, 2019. Which of the following entries needs to be made on March 1, 2018? 25,000 25,000 O A. Long - Term Notes Payable Accounts Payable O B. Long - Term Notes Payable Cash 5,000 5,000 25,000 25,000 OC. Cash Long - Term Notes Payable O D. Current Portion of Long - Term Notes Payable Long - Term Notes Payable 25,000 25,000

Answers

On march 1, 2018, Lewis services issued a 5% long term notes payable for $25,000. It is payable over a 5 year term in $5,000 principal installments on March 1 of each year, Beginning March 1, 2019. This transaction has the following effects :

i. Assets increases in the form of cash because when note is issued, cash is received.

ii. Long term liabilities increase in the form of long term note payable by $25,000 at the time of issue.

It is a long term liability. In the balance sheet at Dec 31, 2018, $5,000 note will be shown as current liabilities and remaining $20,000 note will be shown as long term liability.

Journal

Account Title and Explanation

Debit

Credit

Cash 25,000
Long term notes payable 25,000

Correct option is (C)

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