Interest Payable on a Loan Becomes a Liability

question 4

Multiple Choice

Interest payable on a loan becomes a liability:

• A) at the maturity date.
• B) when the borrowed money is received.
• C) as it accrues.
• D) when the note payable is issued.

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Definitions:

Maturity Date

The specified date on which the final payment of a loan or financial instrument, such as a bond, is due and payable.

Notes Payable

Written promises to pay specified sums of money at future dates, categorized as liabilities.

Annual Interest

The amount of interest due over the course of a year on a loan or financial investment.

Merchandise

Goods bought and sold in business operations, often referred to as stock or inventory.