A Business Makes a Payment of $1440 on a Loan

question 22

Multiple Choice

A business makes a payment of $1440 on a loan payable,consisting of a $110 interest payment and a $1330 principal payment.Which of the following journal entries would be recorded?

• A)Loan payable is credited for $1330,Cash is credited for $110 and Interest expense is debited for $1440.
• B)Cash is credited for $1440,Loan payable is debited for $1330 and Interest expense is debited for $110.
• C)Loan payable is credited for $1440,Cash is debited for $1330 and Interest expense is debited for $110.
• D)Cash is credited for $1330,Interest expense is credited for $110 and Loan payable is debited for $1440.

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Definitions:

Total Revenue

The total amount of money a company receives from selling its goods or services without deducting any costs.

Total Cost

The aggregate amount of expenses incurred in the production of goods or services, including both fixed and variable costs.

Marginal Cost

The increase in total cost that arises from producing one additional unit of a good or service.

Average Variable Cost

The total variable costs divided by the quantity of output produced; it varies with output levels.