Hamm Co Borrowed $10,000 from Townsend Co

Multiple Choice

Hamm Co. borrowed $10,000 from Townsend Co. on March 1, 2013. Hamm is to repay the principal and interest on March 1, 2014. The interest rate is 8%. If the year-end adjustment is properly recorded, what will be the effects of the accrual on Hamm's 2013 financial statements?

A) Increase assets and increase liabilities
B) Increase assets and increase revenues
C) Increase liabilities and increase expenses
D) No effect