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Balance Sheet & Income Statements

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Emily and Tom have decided borrow funds to purchase the additional plant capacity. In a memo advise Emily and Tom about what the effects of borrowing will have on their balance sheet and profit and loss statement for book purposes and tax purposes.

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Solution Summary

The solution evaluates the impacts of borrowing on the financial statements.

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Debt refers to any money that your business borrows and is obliged to pay back. Debt is usually obtained from banks and other traditional lenders, but also may be obtained from other individuals. Debts will usually require monthly payments of principal and interest over a fixed period of time. Thus the main impact on debt will be on the balance sheet (under the liabilities section). Depending on the nature of debt, it ...

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