A Company Needs to Record 6 Months of Accrued Interest

question 120

Multiple Choice

A company needs to record 6 months of accrued interest on a 4-year, 12%, $12,000 promissory note payable. How much interest expense should be accrued?

• A)$2,160
• B)$1,440
• C)$1,080
• D)$720

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Definitions:

Idle Capacity

The unused portion of a company's production or service capacity, where resources are available but not being fully utilized.

Minimum Acceptable Price

The lowest price at which a seller is willing to sell a product or service, often determined by costs, market conditions, and profitability goals.

Special Order

A one-time customer order often requiring a deviation from the standard product line or service offerings, potentially at a different pricing or cost structure.

Outside Supplier

An external entity that provides goods or services to a company, often used in the context of manufacturing or production.