Darwin Borrows $200,000 from Evermore Bank to Buy a Home

question 27

Multiple Choice

Darwin borrows $200,000 from Evermore Bank to buy a home.Less than six months into the term,Darwin stops making payments on the loan.To initiate the process to repossess and auction off the property securing the loan,Evermore must

• A)issue a notice of sale to the borrower.
• B)offer the property for sale in an auction on the courthouse steps.
• C)record a notice of default with the appropriate county office.
• D)resort to litigation to establish clear ownership of the property.

Understand the effects of sales discounts, returns, and freight costs on transactions.

Compute adjustments for inventory shrinkage and the cost of merchandise purchased.

Understand the accounting treatment of expenses and revenue recognition for a merchandising business.

Understand the closure of accounts and calculation of financial ratios in accounting.

---

Definitions:

Profit Margin Ratio

A financial metric used to assess a company’s profitability by comparing net income to revenue.

Gross Profit Ratio

The proportion of money left over from revenues after accounting for the cost of goods sold.

FOB Shipping Point

A term that indicates the buyer is responsible for goods once they leave the seller's premises, including paying shipping costs and bearing the risk of loss in transit.

Record Revenue

The act of documenting the income earned by a company from its business activities during a specific period, following accounting principles.