Question: Houston Company borrowed $ 2 0 , 0 0 0 from Dallas Company on March 1 , Year 1 . Houston issued a note payable

Houston Company borrowed $20,000 from Dallas Company on March 1, Year 1. Houston issued a note payable that had a one-year term and the annual interest rate is 8%. How will the
necessary adjustment, dated December 31, Year 1, affect the Year 1 financial statements?
Multiple Choice
Increase liabilities and increase expenses
Increase assets and increase revenues
Increase assets and increase liabilities
No effect
Houston Company borrowed $20,000 from Dallas Company on March 1, Year

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