On October 1, Steve's Carpet Service Borrows $€ 400,000$ From First National Bank on a 3month

question 64

Multiple Choice

On October 1, Steve's Carpet Service borrows $€ 400,000$ from First National Bank on a 3month, $€ 400,000,8 \%$ note. What entry must Steve's Carpet Service make on December 31 before financial statements are prepared?

• A) \(\begin{array} { l }\text { Interest Payable }&8,000 \\
• \text {Interest Expense}&&8,000 \\\end{array}\)
• B) \(\begin{array} { l }\text { Interest Expense }&32,000 \\
• \text { Interest Payable}&&32,000 \\\end{array}\)
• C) \(\begin{array} { l }\text { Interest Expense }&8,000 \\
• \text {Interest Payable }&&8,000 \\\end{array}\)
• D)\(\begin{array} { l } \text { Interest Expense}&8,000 \\
• \text { Notes Payable}&&8,000 \\
• \end{array}\)

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Definitions:

Demand Curve

A graphical representation showing the relationship between the price of a good and the amount of that good consumers are willing to buy.

Support Price

A price level set by governments in order to maintain the market price of a good or service at a particular minimum level to protect producers.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service versus what they actually pay, measuring the benefit to consumers from participation in the market.

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, resulting in market equilibrium.