On September 1, Piano Keys Corp

question 133

Multiple Choice

On September 1, Piano Keys Corp.borrowed $30,000 from their bank, and signed a 5%, 3-month bank loan.Principal and interest are due on December 1.If Piano Keys prepares monthly financial statements, the adjusting entry that it should prepare for interest on September 30 would be

• A)debit Interest Expense, $125; credit Interest Payable, $125.
• B)debit Interest Expense, $1,500; credit Interest Payable, $1,500.
• C)debit Bank Loan Payable, $375; credit Cash, $375.
• D)debit Cash, $30,000; credit Bank Loan Payable, $30,000.

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Definitions:

Net Present Value

An assessment that measures the current value of a dollar against its future value, considering the effects of inflation and returns.

Market Rates

The prevailing interest rates available in the marketplace for loans and deposits, set by the dynamics of supply and demand.

Net Present Value

The disparity between the current value of cash coming in and the current value of cash going out over a certain time frame, employed in capital budgeting to evaluate an investment or project's profitability.

Independent Projects

Investment projects that do not affect each other’s outcomes or acceptability. Evaluating one does not impact the consideration of another.