Interest expense on an interest-bearing note is
A) always equal to zero.
B) accrued over the life of the note.
C) only recorded at the time the note is issued.
D) only recorded at maturity when the note is paid.

Question

Quizplus · Accepted Answer

Interest expense is accrued over the life of the note because interest accrues as time passes, based on the interest rate and the principal balance of the note. It is not only recorded at the time of issuance or only at maturity when the note is paid. Hence, options C and D can be eliminated. Option A is incorrect because if a note is interest-bearing, it indicates that interest will be charged on the principal amount, so interest expense will not be equal to zero.

Interest Expense on an Interest-Bearing Note Is