United Company purchased equipment on June 1, 2011, and gave a 10-month, 5% note with a face

Question:

United Company purchased equipment on June 1, 2011, and gave a 10-month, 5% note with a of $20,000 with interest and principal payable at maturity. How much interest expense will be recognized on the income statement for the year ended December 31, 2011? What effect does the adjustment for interest have on the statement of cash flows for 2011? Is the adjustment to record the interest expense an accrual or a deferral?

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...