Hamm Co. borrowed $10,000 from Townsend Co. on March 1, 2013. Hamm is to repay the principal and interest on March 1, 2014. The interest rate is 8%. If the year-end adjustment is properly recorded, what will be the effects of the accrual on Hamm's 2013 financial statements?

Question

Quizplus · Accepted Answer

Accruing interest on a note payable increases liabilities (interest payable) and increases interest expense.

Hamm Co Borrowed $10,000 from Townsend Co