Question
On November 30, 2018, Master's Co. borrows $500,000 from its bank for five years at an annual interest rate of 10%. According to the terms
On November 30, 2018, Master's Co. borrows $500,000 from its bank for five years at an annual interest rate of 10%. According to the terms of the loan, the principal amount will not be due for five years. Interest accrues monthly on the last day of each month, beginning December 31, 2018. With respect to this borrowing, Master's December 31, 2018, balance sheet included only a long-term note payable of $500,000. As a result:
Liabilities are understated by $12,500 accrued interest payable | ||
Liabilities are understated by $4,167 accrued interest payable | ||
The December 31, 2018, financial statements are accurately presented | ||
Liabilities are understated by $8,333 accrued interest payable |
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