On September 1st the company borrows $1,000,000 from a local bank for nine months. A note is signed with principal and 3% interest to be paid when the note matures next year. A note payable was recognized on September 1st and no other entries regarding this transaction were made until December 31st. 11. $ In the adjusting entry recorded on December 31st determine the amount of interest expense that should be reported. 12. What effect would failure to record the adjusting entry for this note payable have on the financial statement items? A. would cause it to be overstated B. would cause it to be understated C. would have no effect Assets Liabilities Stockholders' Equity Revenue Expenses Net income