Nicholas Corporation accrues the interest expense on a short-term note payable at the end of its fiscal year. Due to this transaction A. current liabilities will increase and stockholders' equity will increase. B. current liabilities will decrease and stockholders' equity will decrease. C. current liabilities will increase and current assets will increase. D. current liabilities will increase and stockholders' equity will decrease.

Question

Business

Emelia Wiley

30 April, 06:02

Nicholas Corporation accrues the interest expense on a short-term note payable at the end of its fiscal year. Due to this transaction A. current liabilities will increase and stockholders' equity will increase. B. current liabilities will decrease and stockholders' equity will decrease. C. current liabilities will increase and current assets will increase. D. current liabilities will increase and stockholders' equity will decrease.

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Answers (1)

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Victor Reeves · Answer 1

D. current liabilities will increase and stockholders' equity will decrease.

Explanation:

It accrued interest expense. It recognize interest expense and interest payable.

so we have an expense, which decrease the net income. The net income is part of equity, so it decrease the equity as well.

and it recognize a payable which increase the liablities.

This makes D the correct option.