On July 1,2013,Avery Services Issued a 4% Long-Term Note Payable $$\begin{array} { | l | r | r | } \hline \text { Interest expense } & 200 & \\\hline \text { Cash } & & 200 \\\hline\end{array}$$

question 80

Multiple Choice

On July 1,2013,Avery Services issued a 4% long-term note payable for $10,000.It is payable over a 5-year term in $2,000 principal installments on July 1 of each year.
-Which of the following entries needs to be made at year-end 2013 to accrue interest?

• A) \[\begin{array} { | l | r | r | }
• \hline \text { Interest expense } & 200 & \\
• \hline \text { Cash } & & 200 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | r | r | }
• \hline \text { Interest expense } & 200 & \\
• \hline \text { Interest payable } & & 200 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | r | r | }
• \hline \text { Interest expense } & 400 & \\
• \hline \text { Accounts payable } & & 400 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | r | r | }
• \hline \text { Interest revenue } & 400 & \\
• \hline \text { Cash } & & 400 \\
• \hline
• \end{array}\]

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Definitions:

Bottleneck

A point of congestion or blockage in a production system that significantly reduces efficiency.

Theory of Constraints

A management philosophy focusing on identifying and relieving bottlenecks in processes to improve performance.

External Failure Cost

Costs incurred when a product fails to meet quality standards after it is delivered to the customer, including returns, repairs, and lost reputation.

Prevention Cost

Costs incurred to prevent defects in products or services, including costs for quality training and process control.