On March 1, 2018, Everson Services issued a 4% long-term notes payable for $16,000. It is payable over a 4-year term in $4000 annual principal payments on March 1 of each year plus interest, beginning March 1, 2019. Each yearly installment will include both principal repayment of $4000 and interest payment for the preceding one-year period. On March 1, 2019, ________. The accounting period ends on December 31.
A) Everson must accrue $4000 of Interest Expense
B) Everson must accrue the next note payment of $4000 as the current portion of principal payment
C) Everson must pay $640 of interest to the note holder
D) Everson will receive $4000 as an installment payment
C) Everson must pay $640 of interest to the note holder
Explanation: Interest payment = $16,000 × 4% = $640
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