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:

Work in Process

Inventory that represents partially completed goods which are still in the production process.

Actual Manufacturing Overhead Cost

The actual costs incurred for indirect manufacturing expenses, such as utilities, rent, and maintenance.

Year

A period of time consisting of 12 months or 365 days, used as a basic unit for measuring time in relation to the earth's orbit around the sun.

Cost of Goods Available for Sale

The total cost of inventory that a business has ready for sale, comprising both beginning inventory plus the cost of goods manufactured.