IBM Signs an Agreement to Lend One of Its Customers

question 12

Multiple Choice

IBM signs an agreement to lend one of its customers $200,000 to be paid back in one year at 5.5% interest.IBM would record this loan under:

• A)loans payable.
• B)accounts receivable.
• C)notes receivable.
• D)unearned revenue.

---

Definitions:

Absorption Costing

An inventory pricing approach that incorporates all costs associated with manufacturing, including both variable and fixed expenses, into the product's cost.

Variable Costing

An accounting method that includes only variable production costs in the cost of goods sold and treats fixed overhead expenses as period costs.

Direct Materials

Raw materials directly used in the manufacturing of a product that can be directly traced to that product.

Variable Overhead

Variable overhead refers to the indirect costs of production that fluctuate with the level of output, such as utilities and materials.