Alden Trucking Company Is Replacing Part of Its Fleet of Trucks

question 18

Multiple Choice

Alden Trucking Company is replacing part of its fleet of trucks by purchasing them under a note agreement with Kenworthy on January 1, 2016. Alden financed $37,908,000, and the note agreement will require $10 million in annual payments starting on December 31, 2016 and continuing for a total of four more years (final payment December 31, 2020) . Kenworthy will charge Alden Trucking Company the market interest rate of 10% compounded annually. Upon the first payment of the note on December 31, 2016, the amount of interest expense to be recorded is:

• A)$1,000,000.
• B)$2,790,800.
• C)$3790, 800.
• D)$4,000,000.

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Definitions:

Considerations

Factors or aspects that need to be taken into account before making a decision or evaluation.

Substitute Items

Products or services that can replace or serve as alternatives to another, meeting the same needs or fulfilling the same functions.

Perceived Benefits

The advantages or positive outcomes that consumers believe they will gain from purchasing and using a product or service.

Decreasing Cost

A situation in which a company experiences a reduction in the cost per unit as the level of production increases, often due to economies of scale.