 As a business owner you have the need to raise capital from several investors in order to the run the business operations. Which of the two sources of financing you would prefer to use and why?  Western bank issues a 90 day, 12 percent note payable to Allison Corp. in the amount of $8,000. Draft the journal entries to record the issuance of notes payable and the payment of interest expense.  Briefly describe that under what conditions a liability can be treated as short term or long term liability.  Do you agree that a current or long-term liability gives rise to interest expense? If yes, then how? Also explain the other liability that is generated by this transaction.  A rental agency collects rent in advance. Why is the rent collected treated as a liability? In which category this liability will be classified into and how would you record it? Where should it appear in the financial statements

Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter7: Financial Activities
Section: Chapter Questions
Problem 7QE
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 As a business owner you have the need to raise capital from several investors in order to the
run the business operations. Which of the two sources of financing you would prefer to use
and why?
 Western bank issues a 90 day, 12 percent note payable to Allison Corp. in the amount of
$8,000. Draft the journal entries to record the issuance of notes payable and the payment of
interest expense.
 Briefly describe that under what conditions a liability can be treated as short term or long term
liability.
 Do you agree that a current or long-term liability gives rise to interest expense? If yes, then
how? Also explain the other liability that is generated by this transaction.
 A rental agency collects rent in advance. Why is the rent collected treated as a liability? In
which category this liability will be classified into and how would you record it? Where should
it appear in the financial statements

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