On January 1, Year 1, the Niagara Corporation Arranges a $6,000

question 47

Multiple Choice

On January 1, Year 1, the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank. It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year. All borrowings and repayments are to take place on January 1 of each year. Niagara records the first year's interest payment on December 31, Year 1. Centennial's prime rate is 4% for Year 1. Which of the following answers shows the effect of this event on the financial statements?

• A) Choice A
• B) Choice B
• C) Choice C
• D) Choice D

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Definitions:

Unit Price

The cost per unit of a product, allowing consumers to compare the value of similar items sold in different quantities or volumes.

Marginal Utility

The augmented joy or usefulness a shopper obtains by buying an extra unit of a commodity or service.

Utility Maximization

The economic principle that individuals seek to allocate their resources in a way that maximizes their satisfaction or utility.

Consumption

The spending on goods and services by households or individuals.