On July 1, 2010, a company obtained a 10,000 one year loan with an interest rate of 10%. The principal and interest will be paid at the due date, June 30, 2011. The firms fiscal year end is on December 31st. The company did not record any entries related to this transaction.

As a result,

a. Liabilities are understated by 10,000, assets are understated by 10,000, and income before taxes is correct.

b. Liabilities are understated by 10,000, assets are understated by 10,000 and income before taxes is understated by 500.

c. Liabilities are understated by 10,500, assets are understated by 10,000 and income before taxes is overstated by 500.

d. Liabilities are understated by 10,000, assets are understated by 9,500 and income before taxes is overstated by 500