Question

When projection statements show only a small amount of additional funds needed, which of the following is an appropriate choice?

A. increase notes payable

B. increase prepaid expenses

C. increase long-term debt

D. decrease long-term debt

Answer 1

Option (A) is correct

When only a small amount of additional funds are needed, then it can be borrowed from notes payable. These short term notes payable will be classified as current liabilities.

Option (B) is incorrect as increase in prepaid expenses represents expense incurred. It is not additional funds requirement.

Option (C) is incorrect as increase in long term debt is not for short term funds.

Option (D) is incorrect as decrease in long term debt is repayment of debt. It is not additional funds requirement.