Which of the Following Statements Is Correct About a Corporation

question 45

Multiple Choice

Which of the following statements is correct about a corporation that borrows from its bank at "Prime plus 1 percent"? The interest rate:

• A) is set at a level of the prime rate at initiation of the loan, plus 1 percent.
• B) can fluctuate up to 1% upward over the life of the loan.
• C) can be changed upward but not downward over the life of the loan.
• D) can be changed upward or downward in accordance with prime rate changes over the life of the loan.

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Definitions:

Owner's Capital

The amount of equity a proprietor has in the business, representing the difference between the business's assets and liabilities.

Prepaid Expenses

Expenses paid in advance for goods or services to be received in the future.

Adjusting Journal Entry

An accounting entry made at the end of an accounting period to allocate income and expenditures to the appropriate period.

Wages Expense

Costs incurred by a company for the payment of wages to its employees, typically reported on the income statement.