On March 1, Broke Corp

question 85

Multiple Choice

On March 1, Broke Corp. issues a 5 year 8%, $60,000 note payable. The terms of the note include monthly blended principal and interest payments of $1,217. The entry to record the second instalment payment will include a

• A)debit to Notes Payable of $822.
• B)debit to Cash of $1,217.
• C)debit to Interest Expense of $400.
• D)credit to Interest Expense of $395.

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Definitions:

Measurement Basis

The method or approach used in accounting to determine the value at which assets, liabilities, income, and expenses are recorded in the financial statements.

Cost

The value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore.

Revaluation

An adjustment of the value of an asset to reflect its current market value rather than its cost value.

Useful Life

The estimated period over which an asset is expected to be usable by a company before it is fully depreciated.