Answer the following statements true (T) or false (F)
1. Short-term notes payable represent a written promise by the business to pay a debt, without the
addition of interest, within one year or less.
2. To compute the interest for notes payable, multiply principal times the annual rate of interest.
3. When borrowing cash from a bank, the business is required to sign a promissory note stating that the
business will pay the principal plus interest at a specified maturity date.
4. If a long-term debt is paid in installments, the business will report the current portion of the note
payable as a current liability.
5. A journal entry is prepared to reclassify the current portion of a note payable.
1. False
2. False
3. True
4. True
5, False - No journal entry is needed to reclassify the current portion of a note payable.
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