On October 1, 2014, Balkan, Inc. accepted from another corporation a 1-year note receivable in the amount of $15,000, with an interest rate of 6%. How did this transaction affect Balkan's financial statements?
A) Option A
B) Option B
C) Option C
D) Option D

Question

On October 1, 2014, Balkan, Inc. accepted from another corporation a 1-year note receivable in the amount of $15,000, with an interest rate of 6%. How did this transaction affect Balkan's financial statements? 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Quizplus · Accepted Answer

The transaction would increase Balkan's assets by $15,000 (the note receivable), and also increase its income from interest by $900 ($15,000 x 6% interest rate). This would be reflected on the balance sheet as an increase in assets and on the income statement as an increase in interest income.