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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: A one-year bank loan of $720,000 at an annual interest rate of 6% had been obtained on December 1. The company's pays all employees up-to-date each Friday for a five-day workweek. Since December 31 fell on Tuesday, there was a liability to employees at December 31 for two day's pay (Monday and Tuesday). Employees earn na total of $12,800 per week. On December 1, rent on the office building had been paid for three months. The monthly rent is $7,000. • 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. 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? Multiple Choice $3,200 $3,500 $3,600

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: A one-year bank loan of $720,000 at an annual interest rate of 6% had been obtained on December 1. The company's pays all employees up-to-date each Friday for a five-day workweek. Since December 31 fell on Tuesday, there was a liability to employees at December 31 for two day's pay (Monday and Tuesday). Employees earn na total of $12,800 per week. On December 1, rent on the office building had been paid for three months. The monthly rent is $7,000. • 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. 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? Multiple Choice $3,200 $3,500 $3,600

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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: A one-year bank loan of $720,000 at an annual interest rate of 6% had been obtained on December 1. • The company's pays all employees up-to-date each Friday for a five-day workweek. Since December 31 fell on Tuesday, there was a liability to employees at December 31 for two day's pay (Monday and Tuesday). Employees earn a total of $12,800 per week. • On December 1, rent on the office building had been paid for three months. The monthly rent is $7,000. 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. • 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? Multiple Choice $3,200 $3,500 $3,600
Transcribed Image Text: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: A one-year bank loan of $720,000 at an annual interest rate of 6% had been obtained on December 1. • The company's pays all employees up-to-date each Friday for a five-day workweek. Since December 31 fell on Tuesday, there was a liability to employees at December 31 for two day's pay (Monday and Tuesday). Employees earn a total of $12,800 per week. • On December 1, rent on the office building had been paid for three months. The monthly rent is $7,000. 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. • 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? Multiple Choice $3,200 $3,500 $3,600
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