In Year 7, Nortel Manufacturing Issued $100,000 Semi-Annual 12% Bonds

question 17

Multiple Choice

In Year 7, Nortel Manufacturing issued $100,000 semi-annual 12% bonds at par.Interest is payable on July 1 and January 1.What entry is necessary at December 31, Year 9?

• A)Interest Expense 6,000 Cash 6,000
• B)Interest Expense 6,000 Bonds Payable 6,000
• C)Interest Expense 6,000 Interest Payable 6,000
• D)Interest Expense 12,000 Interest Payable 12,000
• E)Cash 6,000 Interest Payable 6,000

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Definitions:

Marginal Analysis

An examination of the additional benefits of an activity compared to the additional costs incurred by that same activity.

Maximize Profits

The process by which businesses aim to achieve the highest possible profit through revenue maximization and/or cost minimization strategies.

Minimize Losses

Minimize losses refers to strategies or actions taken by businesses and investors to reduce financial losses or the negative impact of less successful investments.

Marginal Cost (MC)

The cost of producing one additional unit of output.