At the beginning of the year, your company borrows $31,500 bysigning a Five-year promissory note that states an annual interestrate of 7% plus principal repayments of $6,300 each year. Interestis paid at the end of the second and fourth quarters, whereasprincipal payments are due at the end of each year. How does thisnew promissory note affect the current and non-current liabilityamounts reported on the classified balance sheet prepared at theend of the first quarter?
A.Increase current liabilities by $551.25; increase non-currentliabilities by $31,500
B.Increase current liabilities by $2,205; increase non-currentliabilities by $31,500
C.Increase current liabilities by $6,851.25; increasenon-current liabilities by $31,500
D.Increase current liabilities by $6,851.25; increasenon-current liabilities by $25,200
At the beginning of the year, your company borrows $31,500 bysigning a Five-year promissory note that states an annual interestrate of 7% plus principal repayments of $6,300 each year. Interestis paid at the end of the second and fourth quarters, whereasprincipal payments are due at the end of each year. How does thisnew promissory note affect the current and non-current liabilityamounts reported on the classified balance sheet prepared at theend of the first quarter?
A.Increase current liabilities by $551.25; increase non-currentliabilities by $31,500
B.Increase current liabilities by $2,205; increase non-currentliabilities by $31,500
C.Increase current liabilities by $6,851.25; increasenon-current liabilities by $31,500
D.Increase current liabilities by $6,851.25; increasenon-current liabilities by $25,200
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