Assume Cain lends $1,000 to Abel and takes back a Note which matures in 1 year and the borrowing rate is 4% per annum.

Multiple Choice

• If Cain prepares financial statements prior to the maturity date of the note, he will have to make an adjusting entry to set up the interest expense incurred

• None of the other statements are correct

• If the note is paid on maturity then Abel will record $40 in interest income

• If the note is dishonoured on maturity then Abel will set up a receivable for more than $1,000

• If the note is paid on maturity then Abel will record $40 in interest expense