On 1 November 2013, EZ Products Borrowed $48 000 on a 5

question 75

Multiple Choice

On 1 November 2013, EZ Products borrowed $48 000 on a 5%, 10- year note with annual instalment payments of $4 800 plus interest due on 1 November of each succeeding year. Which of the following describes the first instalment payment made on 1 November 2014?

• A)$2 400 principal plus $2 400 interest
• B)$4 800 principal plus $2 400 interest
• C)$2 000 interest only
• D)$4 800 principal plus $400 interest

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Definitions:

Estimates

Approximations used in accounting when precise data is unavailable, often used for calculating allowances for doubtful accounts or depreciation.

Actual Overhead Cost

The real expenses incurred for overhead, including costs associated with running the business that are not directly tied to a specific product or service.

Overhead Applied

The process of assigning a portion of fixed and variable overhead costs to individual units of production.

Underapplied

A situation where the allocated or applied costs are less than the actual costs incurred, often in reference to manufacturing overhead.