In September of Year 1,Hansen Company issued a note payable to borrow money from its bank.Principal and interest on the note would come due in June Year 2.Interest expense on this note must be accrued at the end of Year 1 for the period from issuance of the note to the last day of the accounting period.

Question

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Because the money borrowed helps Hansen to generate revenue in Year 1,it is necessary for Hansen to recognize the expense (interest)related to that borrowed money in Year 1.

In September of Year 1,Hansen Company Issued a Note Payable