LR Corporation is a cash basis business.LR signed a six-month, 12% note payable of $10,000 on October 1, 2022.By recording the interest expense related to the note only when it is paid on April 1, 2023, LR will understate expenses by ________ on its year-end financial statements on December 31, 2022.
A)$300
B)$600
C)$0
D)$11,200

Question

Quizplus · Accepted Answer

The interest for three months (October to December) is $300, which should be recognized as an expense in 2022.

LR Corporation Is a Cash Basis Business