The Accounting Department Forgot to Adjust for Interest on the Note

question 51

Multiple Choice

The accounting department forgot to adjust for interest on the note payable.This error would cause:

• A)the period end assets to be understated.
• B)the period end liabilities to be understated.
• C)the period's net income to be understated.
• D)None of these answers are correct.

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Definitions:

Amortization Of Discount

The process of gradually recognizing the discount on bonds payable as interest expense over the life of the bond.

Bond Interest Expense

The cost incurred by an issuer of bonds due to the interest it must pay to bondholders over the life of the bond.

Carrying Value

The book value of assets and liabilities as reported on the balance sheet, considering depreciation, amortization, or impairment.

Future Sacrifice

An expectation to forgo benefits in the future due to current investment or decisions.