On October 1, Sam's Painting Service Borrows $100,000 from National

question 72

Multiple Choice

On October 1, Sam's Painting Service borrows $100,000 from National Bank on a 3-month, $100,000, 4% note. The entry by Sam's Painting Service to record payment of the note and accrued interest on January 1 is

• A) Notes Payable 101,000 Cash 101,000
• B) Notes Payable 100,000 Interest Payable 1,000
• Cash 101,000
• C) Notes Payable 100,000 Interest Payable 4,000
• Cash 104,000
• D) Notes Payable 100,000 Interest Expense 1,000
• Cash 101,000

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Definitions:

Notes Payable

A financial obligation represented by a written promise to pay a certain amount of money at a future date or dates, typically carrying interest.

Historical Cost Principle

A financial reporting rule mandating that assets are documented and presented at their initial acquisition price.

Balance Sheet Reporting

The process of disclosing a company's financial health at a given moment by listing its assets, liabilities, and equity.

Financial Reporting

The process of disclosing financial results and related information by a company to its stakeholders.