Solve the Problem. -The James Family Wants to Save Some Money in Interest

question 17

Multiple Choice

Solve the problem.
-The James family wants to save some money in interest by paying off their auto loan 12 months early. The 36-month loan required payments of $455 per month. The car cost $18,600 with a down payment of $6000. How much unearned interest did they save?

• A)$468.00
• B)$1,702.70
• C)$1,486.84
• D)$442.70

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Definitions:

Prepaid Item

An expense paid in advance and recorded as an asset until it is actually used or consumed.

Adjusting Entry

Financial records established at the conclusion of an accounting term to assign earnings and costs to the period they truly belong.

Insurance Expense

The cost incurred by a business or individual for purchasing insurance policies to protect against potential losses or liabilities.

Prepaid Insurance

An asset account that represents insurance expenses paid in advance and is recognized as an expense over the period the insurance contract covers.