On January 1, 2011, Williams Company Lent $17,800 Cash to Stone

question 100

Multiple Choice

On January 1, 2011, Williams Company lent $17,800 cash to Stone Company. The promissory note made by Stone for $20,000 did not bear explicit interest and was due on December 31, 2013. No other rights or privileges were exchanged. The prevailing interest rate for a loan of this type was six percent.
Assume that the present value of $1 for two periods at six percent is .89. Stone should recognize interest expense in 2011 of

• A) $0.
• B) $1,068.
• C) $1,100.
• D) $1,200.

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Definitions:

Middle Cerebral Artery

A major artery in the brain that supplies blood to the outer areas of the frontal, temporal, and parietal lobes.

Cerebral Cortex

The outer layer of neural tissue of the cerebrum of the brain, playing a key role in memory, attention, perception, awareness, thought, language, and consciousness.

Abdominal Aorta

The continuation of the thoracic aorta that runs through the abdomen, supplying blood to the abdominal and pelvic organs and the legs.

Common Iliac Artery

A major artery in the pelvic region that splits into the internal and external iliac arteries, supplying blood to the pelvis and legs.