Franklin Company issued a $40,000 note to the Mercantile Bank on August 1,2016.The note carried a one-year term and a 12% rate of interest.The adjusting entry on Franklin's books to record accrued interest expense on December 31,2016 will
A) Decrease assets and decrease retained earnings by $2,000.
B) Increase liabilities and decrease equity by $2,000.
C) Increase liabilities and decrease equity by $1,600.
D) Decrease equity and increase liabilities by $4,800.
Correct Answer:
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