Which of the Following Statements Is Correct Regarding the Adjustment

question 166

Multiple Choice

Which of the following statements is correct regarding the adjustment to record interest accrued on a note payable?

• A)Interest on the note payable is classified as an expense since it is a cost of borrowing.
• B)Interest on a note payable should be credited to Notes Payable because it increases the amount of principal to be repaid at the maturity of the note.
• C)Interest on the note payable is classified as revenue since it is an amount that can be earned on investments.
• D)Interest on the note payable will not accumulate because it is paid at the end of each year.

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Definitions:

Dishonor

Refers to the refusal by a bank to pay a check or draft presented for payment, usually due to insufficient funds.

Ratification

The approval or formal sanctioning of an agreement or act, often making it officially valid.

Unauthorized

Actions or access that have not been approved or given consent by the proper authority.

Promissory Note

A written promise to pay a specified amount of money, either on demand or at a future date.