As a result of the recognition of interest expense on 12/31/12,
A)liabilities will increase and assets will decrease.
B)assets and liabilities will decrease.
C)assets will increase and retained earnings will increase.
D)liabilities will increase and retained earnings will decrease.

Question

Quizplus · Accepted Answer

The adjusting entry will increase liabilities (decrease discount on notes payable) and increase expenses (interest expense), which decreases net income and retained earnings.

As a Result of the Recognition of Interest Expense on 12/31/12