Gomez Service Company Paid Its First Installment on a Note

question 77

Multiple Choice

Gomez Service Company paid its first installment on a note payable for an amount of $2,000. How will this transaction affect the accounting equation?

• A) Increase Liabilities (Notes Payable) and decrease Assets (Cash)
• B) Decrease Assets (Cash) and decrease Stockholders' Equity (Note Payable Expense)
• C) Decrease Assets (Cash) and decrease Assets (Notes Receivable)
• D) Decrease Assets (Cash) and decrease Liabilities (Notes Payable)

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Definitions:

Exercise Price

The price at which the holder of an option can buy (for a call option) or sell (for a put option) the underlying asset.

Standard Deviation

A measure of the dispersion or variation in a set of values, indicating how much the numbers in the set deviate from the mean (average).

Risk-free Rate

This is the theoretical rate of return of an investment with zero risk, typically represented by the yield on government securities.

Call Option

A financial agreement which permits the purchaser the option, though not the requirement, to purchase a specific asset like a stock, bond, commodity, or another type of asset at a predetermined price during a defined timeframe.