[The Following Information Applies to the Questions Displayed Below

question 66

Multiple Choice

[The following information applies to the questions displayed below.]
Gamma Company adjusts its accounts at the end of each month.The following information has been assembled in order to prepare the required adjusting entries at December 31:
(1) A one-year bank loan of $720,000 at an annual interest rate of 6% had been obtained on December 1.
(2) The company's pays all employees up-to-date each Friday.Since December 31 fell on Tuesday,there was a liability to employees at December 31 for two day's pay.Employees earn a total of $12,800 per week.
(3) On December 1,rent on the office building had been paid for three months.The monthly rent is $7,000.
(4) Depreciation of office equipment is based on an estimated useful life of five years.The balance in the Office Equipment account is $12,360;no change has occurred in the account during the year.
(5) All fees totaling $19,800 were earned during the month for clients who had paid in advance.
-What amount of interest expense has accrued on the bank loan?

• A)$3,200
• B)$3,500
• C)$3,600
• D)$3,900

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Definitions:

Entrepreneur's Potential Earnings

The forecasted income an entrepreneur can expect from their business venture, taking into account risks and opportunities.

Annual Lease

A contract for the rental of property, typically real estate, that lasts for one year.

Payments to Workers

Payments to workers include salaries, wages, benefits, and other compensation provided to employees in exchange for their labor.

Entrepreneur's Forgone Interest

The potential interest income an entrepreneur sacrifices by investing their own money into their business instead of depositing it for interest.