On January 1,2014,JG Purchased a Machine and Gave a $30,000

question 12

Multiple Choice

On January 1,2014,JG purchased a machine and gave a $30,000 three-year,8% note.The market or "going" interest rate was 12%.The annual interest payments are to be paid on each December 31.On January 1,2014,JG should record the net liability amount determined as follows:

• A) Compute the present value of its face amount and the three $2,400 interest amounts by using a discount rate of 8%.
• B) Compute the present value of its face amount and the three $2,400 interest amounts by using a discount rate of 12%.
• C) Use its face amount, $30,000 plus the $7,200 interest.
• D) Use its face amount, $30,000 minus $7,200 interest.

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Definitions:

Significance Level

The likelihood of incorrectly dismissing the null hypothesis in a statistical analysis, commonly represented by alpha, when it is in fact correct.

Type I Error

The mistake of rejecting the null hypothesis when it is actually true, commonly referred to as a "false positive" result.

Alpha (α)

A pre-specified significance level in hypothesis testing, representing the probability of making a Type I error, or falsely rejecting the null hypothesis.

Hypothesis Test

A statistical method used to determine if there is enough evidence in a sample of data to infer that a certain condition holds true for the entire population.