If a long - Accounting records that do not include...

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If a long-term note payable of $10,000 carries an annual interest rate of 12%, then $1,200 in interest  expense accrues each year. At the close of each month, therefore, the company makes an adjusting  entry to increase (debit) interest expense for $100 and to increase (credit) interest payable for $100.
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Unformatted text preview: Accounting records that do not include adjusting entries for accrued expenses understate total liabilities and total expenses and overstate net income....
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