Tony Lent Dave $1,000 for One Year with the Understanding

question 98

Multiple Choice

Tony lent Dave $1,000 for one year with the understanding that Dave would repay $1,070.If the actual inflation rate was 7 percent,then the real rate of interest Tony received is _____.

• A)14 percent
• B)7 percent
• C)4 percent
• D)0 percent
• E)−7 percent

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Definitions:

Accrued Revenues

Income earned but not yet received or recorded at the end of an accounting period, reflecting revenues for services performed or goods sold but not yet billed.

Asset Accounts

Accounts that record the value of everything a company owns and uses to generate revenue.

Liability Accounts

Accounts on a company's balance sheet that represent what it owes to others, such as loans, accounts payable, mortgages, deferred revenues, bonds, warranties, and accrued expenses.

Trial Balance

A financial report that lists all the active accounts and their balances at a certain point in time, used to verify the equality of debits and credits in the accounting system.