Company A has the following information excerpted from its financial statements: Suppose the company has only two liability accounts as of Dec. 31, Year 2: Accounts Payable and Loan Payable. Which of the following statements is correct?

Correct answer. On Dec. 31, Year 2, the ending balance in Loan Payable is 9,240 (Total Liabilities 19,600 – Accounts Payable 10,360). The ending balance in Year 3 = The ending balance in Year 2 (9,240) + proceeds from loan in Year 3 (3,000) – repayment of loan in Year 3 (9,400) = 2,840.