On October 1,2012,Balkan,Inc.accepted from another corporation a 1-year note receivable in the amount of $15,000,with an interest rate of 6%.On December 31,2012,Balkan accrued the interest income earned to date.How did this accrual affect Balkan's financial statements?
A) Option A
B) Option B
C) Option C
D) Option D

Question

On October 1,2012,Balkan,Inc.accepted from another corporation a 1-year note receivable in the amount of $15,000,with an interest rate of 6%.On December 31,2012,Balkan accrued the interest income earned to date.How did this accrual affect Balkan's financial statements? 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Quizplus · Accepted Answer

Accruing the interest income earned to date on the note receivable would increase Balkan's assets and equity on the balance sheet, as well as increase the interest income and total revenue on the income statement. Therefore, Option C, which shows an increase in assets and equity on the balance sheet and an increase in interest income and total revenue on the income statement, is the best choice. Option A is incorrect because it shows a decrease in assets and equity, while Option B is incorrect because it shows no change in assets or equity. Option D is incorrect because it shows a decrease in revenue.