Interest on Craig’s Notes Payable has been incurred, but not recorded or paid. The interest that has been incurred is calculated as principal multiplied by the interest rate multiplied by the time period ($8,000 x 10% x 1/12 = $66.66). Interest Expense of $66.66 must be recorded as an accrued expense and Interest Payable, a liability, recorded for the amount that Craig is obligated to pay later. So an adjusting entry is needed to bring accounts up to date at December 31.

Suppose a new "payment technology" allows individuals to make payments using u.s. treasury bonds (i.e., u.s. treasury bonds are immediately cashed when needed to make a payment and that balance is transferred to the payee). how do you think this payment technology would affect the transactions component of the demand for money? a. this would lead to a decreased need to hold cash for transactions; however, the transactions demand for money would remain unchanged. b. this would lead to a decreased need to hold cash for transactions, thus the transactions demand for money would decrease. c. this would lead to an increased need to hold cash for transactions, thus the transactions demand for money would increase. d. this technology would not change the transactions component of the demand for money.