Final answer:
Option (a), The interest loan is reported as an expense to the borrower, Company B, and as revenue to the lender, Company A. Company A records the loan as an asset, and Company B has a liability on their balance sheet.
Step-by-step explanation:
When Company A lends $100,000 to Company B, the correct way to report this transaction in the companies' financial statements is d) as an expense to company B and a revenue to company A. Company B, the borrower, will record the loan as a liability on its balance sheet and the interest payments as an expense in its income statement. On the other hand, Company A, the lender, will record the loan as an asset (specifically a notes receivable) on its balance sheet and the interest payments it receives as interest income, which is a type of revenue, in its income statement.
In general, when loans are issued by a bank, the loan amount is considered an asset for the bank because it is expected to generate income through interest payments. Conversely, the borrower records the loan as a liability, which represents a future obligation to repay the loan amount and any accrued interest.