On August 1, a $30,000, 6%, 3-Year Installment Note Payable

question 40

Multiple Choice

On August 1, a $30,000, 6%, 3-year installment note payable is issued by a company. The note requires equal payments of principal plus accrued interest each year on July 31. The present value of an annuity factor for 3 years at 6% is 2.6730. The payment each July 31 will be:

• A)$10,000.00.
• B)$11,223.34.
• C)$10,800.00.
• D)$10,400.00.
• E)$1,223.34.

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Definitions:

Amortized Cost Basis

An accounting method that gradually reduces the cost value of a tangible or intangible asset through periodic amortization charges.

Fair Value

Fair value is the price at which an asset would be bought or sold in an orderly transaction between market participants at the measurement date.

GAAP Accounting

A set of accounting standards and practices known as Generally Accepted Accounting Principles, used primarily in the United States to ensure financial reporting consistency and transparency.

Business Combinations

Transactions in which one entity gains control over one or more other businesses, often through mergers or acquisitions.