Baltimore Company issued a $9,000 face value discount note to Bank of the Chesapeake on March 1, Year 1. The note had a 5% discount rate and a one-year term to maturity. How would the adjustment to record interest expense on December 31, Year 1 affect the financial statements? Balance Sheet Income Statement Stockholders' a. Assets n/a = Liabilities + Equity Revenue Expense = Net Income Statement of Cash Flows 375 (375) n/a 375 (375) n/a b. n/a 450 (450) n/a 450 (450) C. (375) n/a (375) n/a 375 (375) n/a (375) OA d. (450) (450) n/a n/a n/a n/a (450) OA

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Baltimore Company issued a $9,000 face value discount note to Bank of the Chesapeake on March 1, Year 1. The note had a 5% discount rate and a one-year term to
maturity.
How would the adjustment to record interest expense on December 31, Year 1 affect the financial statements?
Balance Sheet
Income Statement
Stockholders'
a.
Assets
n/a
= Liabilities +
Equity
Revenue
Expense
=
Net Income
Statement of Cash Flows
375
(375)
n/a
375
(375)
n/a
b.
n/a
450
(450)
n/a
450
(450)
C.
(375)
n/a
(375)
n/a
375
(375)
n/a
(375) OA
d.
(450)
(450)
n/a
n/a
n/a
n/a
(450) OA
Transcribed Image Text:Baltimore Company issued a $9,000 face value discount note to Bank of the Chesapeake on March 1, Year 1. The note had a 5% discount rate and a one-year term to maturity. How would the adjustment to record interest expense on December 31, Year 1 affect the financial statements? Balance Sheet Income Statement Stockholders' a. Assets n/a = Liabilities + Equity Revenue Expense = Net Income Statement of Cash Flows 375 (375) n/a 375 (375) n/a b. n/a 450 (450) n/a 450 (450) C. (375) n/a (375) n/a 375 (375) n/a (375) OA d. (450) (450) n/a n/a n/a n/a (450) OA
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