Facts: On October 1 MetroBats (calendar year company) borrowed $100,000 from the

Question

Facts: On October 1 MetroBats (calendar year company) borrowed $100,000 from the bank by signing a 6 month note payable. Principal and interest are due in six months. At the end of the current year, MetroBats made the proper accruals for this item.

Question 1 (2 points)
On October 1, the proper accounting treatment of the borrowing of the funds from the bank will:

Question 1 options:
1)
Decrease current assets and current liabilities.

2)
Decrease current assets, current liabilities, and owners’ equity.

3)
Increase current assets and increase current liabilities.

4)
Increase current assets and increase long-term liabilities

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Question 2 (2 points)
The proper accounting treatment of the accrual at the end of the current year will:

Question 2 options:
1)
Decrease current assets and decrease current liabilities.

2)
Decrease current assets and decrease owners’ equity.

3)
Increase current liabilities and decrease owners’ equity.

4)
Increase current assets and increase current liabilities

Explanation / Answer

question 1: 3) question 2: 2)

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