Final Answer:
Badger Biking Company's repayment of $21,000 for the note in (b) above results in a decrease in liabilities by that amount.
Step-by-step explanation:
In accounting, when a company repays a loan or note payable, it impacts the financial statements by reducing the liabilities on the balance sheet. In this case, Badger Biking Company is decreasing its liabilities by $21,000. Liabilities represent the company's obligations to external parties, and as the company repays the note, it fulfills part of its financial obligations.
The note payable is a liability on the balance sheet, representing the amount the company owes to a creditor. When the company makes a repayment, it reduces the outstanding balance of the note payable. The calculation is straightforward: subtract the repayment amount from the original note amount to find the remaining balance. In this instance, the $21,000 repayment reduces the overall liabilities, positively impacting the company's financial position.
This repayment doesn't directly impact the income statement as it represents a reduction in debt rather than an expense related to operations. However, it is crucial for understanding the company's overall financial health and its ability to meet its obligations. It demonstrates responsible financial management and can contribute to improved financial ratios, such as debt-to-equity ratio, indicating lower financial risk for Badger Biking Company.