A Company Borrowed $1 Million on 1 June 2018, with Principal

question 15

Multiple Choice

A company borrowed $1 million on 1 June 2018, with principal and interest to be repaid in three years' time. The interest rate is 12 per cent per annum. What is the interest expense for the year ended 30 June 2018?

• A) $0
• B) $10 000
• C) $120 000
• D) None of the above

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Definitions:

Security Interest

A legal claim or lien on collateral that secures the payment or performance of an obligation.

Secured Transactions

Financial transactions in which the borrower pledges collateral to ensure repayment of a loan.

Credit

A financial term denoting an arrangement where goods, services, or money is received with the promise of future payment.

Sellers

Individuals or entities engaged in providing goods or services to buyers in exchange for payment.