Chapter 4, Problem 2.3E

A state borrowed $10,000,000 on a 9-month, 9% note payable to provide temporary financing for the General Fund. At year end, the note has been outstanding for 6 months. The state should report General Fund interest expenditures and interest payable on the short-term note in its financial statements of

1. a. $0; the interest will be recognized when it matures.
2. b. $450,000.
3. c. $450,000, unless the state does not expect to be able to pay the interest when it matures.
4. d. $675,000.