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:

Selling Expenses

Costs associated with the selling of a company's goods or services, not including the cost of producing the goods.

Nonoperating Items

Revenue and expenses arising from activities outside of a company's normal business operations, such as investing or financing activities.

Gross Margin

The difference between sales revenue and the cost of goods sold, expressed as a percentage of sales revenue.

Operating Expenses

Costs related to the day-to-day functions of a business, excluding the cost of goods sold.