IBM Signs an Agreement to Lend One of Its Customers

question 233

Multiple Choice

IBM signs an agreement to lend one of its customers $200,000 to be repaid in one year at 5% interest.IBM would record this loan as:

• A)Notes Payable.
• B)Accounts Receivable.
• C)Notes Receivable.
• D)Unearned Revenue.

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Definitions:

Dividends Paid

The part of a company's profits paid out to shareholders, typically as cash or shares.

Interest Expense

The cost incurred by an entity for borrowed funds; it is the price paid for the use of borrowed money, or, for corporations, the price paid for the use of borrowed capital.

Payout Ratio

A financial metric that measures the proportion of earnings a company pays to its shareholders in the form of dividends.

Net Income

Net income is the total profit of a company after all expenses and taxes have been deducted from total revenue.