Assume Cain lends $1,000 to Abel and takes back a Note which matures in 1 year and the borrowing rate is 4% per annum.
Multiple Choice
If the note is paid on maturity then Abel will record $40 in interest income
If the note is dishonoured on maturity then Abel will set up a receivable for more than $1,000
If the note is paid on maturity then Abel will record $40 in interest expense
If Cain prepares financial statements prior to the maturity date of the note, he will have to make an adjusting entry to set up the interest expense incurred
None of the other statements are correct