Which one of the following is the result of the amortization of a discount on a short-term note payable?
A)Increases assets and decreases liabilities
B)Decreases assets and increases liabilities
C)Increases liabilities and decreases shareholders' equity
D)Decreases liabilities and owners' equity

Question

Quizplus · Accepted Answer

Amortization of a discount on a short-term note payable increases the carrying amount of the liability (thus increasing liabilities) and decreases shareholders' equity because the amortization expense reduces net income, which in turn reduces retained earnings, a component of shareholders' equity.

Which One of the Following Is the Result of the Amortization