Determine the impact on the balance sheet accounts if the following information

Question

Determine the impact on the balance sheet accounts if the following information is not used to adjust the accounts of Mood Food Company for the month of January, 2013: (Round to nearest dollar) The company has an outstanding loan to its President in the amount of $100,000. The loan accrues interest at the annual rate of 6%. Principal and interest are due January 1, 2015. Assets overstated and Stockholders' Equity understated by $500. Assets understated and Stockholders' Equity understated by $500. None of these answers are correct. Assets overstated and Stockholders' Equity overstated by $500. Assets understated and Stockholders' Equity overstated by $500.

Explanation / Answer

Solution :

The correct answer is Assets understated and Stockholders' Equity understated by $500. (100000 *6%/12)

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