Anthony Loaned $2,000 to Cleopatra for One Year at 10

question 94

Multiple Choice

Anthony loaned $2,000 to Cleopatra for one year at 10% interest, all due at maturity. He insisted the terms of the transaction be formalized in a promissory note. In this situation:

• A) The maturity value of the note is $2,000.
• B) Anthony is considered the maker of the note and records the note as an asset in his accounting records.
• C) Anthony is considered the maker of the note and records the note as a liability in his accounting records.
• D) Cleopatra is considered the maker of the note and records the note as a liability in her [his] accounting records.

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Definitions:

Economic Profits

The surplus remaining after total costs are subtracted from total revenues, taking into account both explicit and implicit costs.

Accounting Profits

The difference between total revenue and explicit costs; the net income a firm reports on its income statement.

Total Costs

The aggregate of all expenses associated with manufacturing products or services, which includes fixed and variable costs.

Most Efficient Output

The level of production at which a firm achieves the lowest possible cost per unit, maximizing productivity and minimizing waste.