On November 1, 2017, a company signed a promissory note. The interest and princi

Question

On November 1, 2017, a company signed a promissory note. The interest and principal are due on July 1, 2018 What accounts relating to the note payable will be reported on the financial statements for the fiscal year ending December 31, 2017? 0 A. Interest receivable will be reported on the balance sheet B. Short-term notes payable and interest payable will be reported on the balance sheet. C. Short-term notes payable, interest payable and interest expense will be reported on the balance sheet D. Short -term notes payable will be reported on the balance sheet and interest payable will be reported on the income statement

Explanation / Answer

Assume the company sign the promissory note = $ 10000 and interest is accrued till Year end is $ 300.

So in this cash there is laibility to pay the prmossory note on closing of balance sheet and the interest expenses accrued but not paid so interest expenses will be show in the income statement and payable of interest will shown in balance sheet under Current liabilty sectiom.

Option A: This is wrong becase there is no interest receivable in the transaction.

Option C: Interest Expenses will be treported in income statement so this statement is also not correct.

Option D = Interest Payable will be reported in balance sheet under liability side so the this option is also wrong.

Option B = This option is correct becasue the interest payable and note payable both reported on the balance sheet.

Answer = Option B

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