Genetech Has $4,000,000 in Assets

question 35

Multiple Choice

Genetech has $4,000,000 in assets. It has decided to finance 30% with long-term financing (9% rate) and 70% with short-term financing (7%) rate. What will be its annual interest costs?

• A) $78,000
• B) $126,000
• C) $440,000
• D) $304,000

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Definitions:

Adjusting Entry

An adjusting entry is a journal entry made at the end of an accounting period to record any unrecognized income or expenses for that period, ensuring the accounts comply with the accrual basis of accounting.

Direct Write-off Method

An accounting method where uncollectible debts are charged directly to expense as they are deemed to be uncollectible, not matching expenses to related revenues.

Allowance Method

An accounting technique that estimates and accounts for bad debts or credit losses in financial statements.

Uncollectible Receivables

Accounts receivable that a company does not expect to collect and writes off as a loss.