How does the amortization of the discount on a note payable affect a company's financial statements?
A)Decreases interest expense and decreases liabilities
B)Decreases interest expense and increases liabilities
C)Increases interest expense and decreases liabilities
D)Increases interest expense and increases liabilities

Question

Quizplus · Accepted Answer

The amortization of the discount on a note payable increases interest expense because it represents the cost of borrowing. It also increases liabilities because the discount is being reduced, effectively increasing the carrying amount of the note payable.

How Does the Amortization of the Discount on a Note