Accounting & the 3 Statements
Walk me through how issuing $100 of debt (cash) flows through the three statements, including the first year's interest at 10% (25% tax).
Model answer
At issuance: Income statement — nothing. Cash flow statement — financing inflow +$100. Balance sheet — cash +$100 (asset); debt +$100 (liability) → balances, equity unchanged. First year of interest…
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