Question: On July 1, 2007, Leach Company needs exactly 103,200 dollar in cash to pay an existing obligation. Leach has decided to borrow from State Bank, which charges 14 percent interest on loans. The loan will be due in one year. Leach is hesitant, however, whether to ask the bank for A] an interest-bearing loan with interest and principle payable at the end of the year or B] a loan due in one year but with interest deducted in advance.
Make an appropriate balance sheet presentation for July 1st, 2007, straight away after the note has been issued, suppose that
[A] Interest is paid when the loan is due
[B] Interest is deducted in advance