As Interest Is Recorded on an Interest-Bearing Note, the Interest

question 29

Multiple Choice

As interest is recorded on an interest-bearing note, the Interest Expense account is:

• A) decreased; the Interest Payable account is increased.
• B) increased; the Interest Payable account is increased.
• C) increased; the Notes Payable account is decreased.
• D) increased; the Notes Payable account is increased.

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Definitions:

Step-Variable Cost

A cost that remains constant for a certain level of activity, but changes in step fashion once a certain threshold is surpassed.

Activity

An event that causes the consumption of overhead resources.

Variable Cost Per Unit

The cost that varies with the level of output, computed on a per-unit basis.

Fixed Cost

A fixed cost is a business expense that remains constant regardless of changes in production levels or sales volumes.