Question: On July 1, 2013, Avery Services issued a 4% long-term note payable for $10,000. It is payable over a 5-year term in $2,000 principal installments

On July 1, 2013, Avery Services issued a 4% long-term note payable for $10,000. It is payable over a 5-year term in $2,000 principal installments on July 1 of each year. Each yearly installment will include both principal repayment of $2,000 and interest payment for the preceding one-year period. What happens on December 31, 2013 before statements are prepared?

a) Avery must accrue $200 of interest expense

b ) Avery must accrue for the coming $2,000 principal payment

c )Avery must pay out $200 of interest expense to the note holder

d )Avery does not need to take any actions

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