Sometimes It May Be Better to Use Savings Rather Than

question 45

Multiple Choice

Sometimes it may be better to use savings rather than credit to make a purchase.This would be recommended when

• A)the borrower has adequate savings.
• B)interest rates are rising.
• C)interest rates are falling.
• D)the cost of borrowing is greater than the interest earned on the savings.
• E)interest earned on savings is greater than the interest paid on the loan.

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Definitions:

Reversal

The process of undoing or nullifying a previous accounting entry or transaction.

Impairment Loss

The difference when the recorded value of an asset or a cash-producing entity surpasses the amount it can be recovered for.

Depreciable Asset

An asset that loses value over time due to wear and tear, obsolescence, or age, and for which depreciation can be applied.