A Company Has a Loan That Accrues Interest at a Rate

question 45

Multiple Choice

A company has a loan that accrues interest at a rate of $20 a day.The company pays the interest once a quarter.Which of these would be an accurate adjustment for a month in which no payments are made?

• A)Debit Interest Payable and credit Interest Expense.
• B)Debit Notes Payable and credit Cash.
• C)Debit Interest Expense and credit Interest Payable.
• D)Debit Cash and credit Notes Payable.

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Definitions:

Variable Cost

Costs that change in proportion to the level of goods or services produced, such as materials and labor directly involved in production.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the degree to which a company can increase profits by increasing sales.

Break-even Sales

The amount of revenue needed to cover both the variable and fixed costs of a business, resulting in zero profit or loss.

Variable Cost

Costs that vary directly with the level of production or service delivery, such as raw materials and labor costs.