FIN ACC W/ CONNECT & PROCTORIO >BI<
5th Edition
ISBN: 9781264523405
Author: SPICELAND
Publisher: MCG CUSTOM
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Question
Chapter C, Problem 1SSQ
To determine
State the option that explains the difference between the simple interest and compound interest.
Expert Solution & Answer
Answer to Problem 1SSQ
b. Simple interest includes interest earned on the initial investment only.
Explanation of Solution
Time value of money:
Time value of money refers to the concept that the value of money available at present worth more in the future due to its potential earning capacity.
Justification for the incorrect answer
Option a:
Compound interest is the interest earned on the principal amount, plus the interest accumulated for the compounding years. Therefore, Option a is an incorrect answer.
Option c:
Simple interest refers to the interest that is earned on the initial investment only and these are calculated quarterly, semiannually and annually. It is not necessary for a simple interest to be calculated for a shorter time interval. Therefore, Option c is an incorrect answer.
Option d:
Simple interest refers to the interest that is earned on the initial investment only and these are calculated quarterly, semiannually and annually. It is not necessary for a simple interest to be calculated for a longer time interval. Therefore, Option d is an incorrect answer.
Justification for the correct answer
Option b:
Simple interest refers to the interest that is earned on the initial investment only.
Therefore, from the above explanation it is observed that Option b. (Simple interest includes interest earned on the initial investment only) is the correct answer and other options a, c and d are incorrect answer.
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Students have asked these similar questions
PROBLEM E
Mulles, the owner of a successful fertilizer business, felt that it is time to expand operations. Mulles offered
to form a partnership with Lucena, the owner of a nearby warehouse. The partnership would be called
Mulles & Lucena Storage and Sales. Lucena accepted Mulles' offer and the partnership was formed on July
1,2024.
Presented below is the trial balance for Mulles Fertilizer Supply on June 30, 2024:
Cash
Accounts Receivable
Allowance for Uncollectible Accounts.
Inventory
Prepaid Rent
Store Equipment
Accumulated Depreciation
Notes Payable
Accounts Payable
Mulles, Capital
Total
P 229,500
2,103,000
P 117,000
1,012,500
29,250
390,000
P3,764,250
97,500
330,000
505,500
2,714,250
P3,764,250
The partners agreed to share profits and losses equally and decided to invest an equal amount in the
partnership. Lucena and Mulles agreed that Lucena's land is worth P500,000 and his building P1,450,000.
Lucena is to contribute cash in an amount sufficient to make his capital account…
PLEASE HELP. ALL RED CELLS ARE INCORRECT. NOTICE, REVENUE ACCOUNTS ARE IN THE DROPDOWN!
Journalize these transactions, also post the transcations to T-accounts and determine month-end balances. Finally prepare a trail balance.
Chapter C Solutions
FIN ACC W/ CONNECT & PROCTORIO >BI<
Ch. C - Prob. 1SSQCh. C - Prob. 2SSQCh. C - Prob. 3SSQCh. C - Prob. 4SSQCh. C - Prob. 1RQCh. C - Prob. 2RQCh. C - Prob. 3RQCh. C - Prob. 4RQCh. C - Prob. 5RQCh. C - Prob. 1BE
Ch. C - Prob. 2BECh. C - Prob. 3BECh. C - Prob. 4BECh. C - Prob. 5BECh. C - Prob. 6BECh. C - Prob. 7BECh. C - Prob. 8BECh. C - Prob. 9BECh. C - Prob. 10BECh. C - Prob. 11BECh. C - Prob. 12BECh. C - Prob. 13BECh. C - Prob. 1ECh. C - Prob. 2ECh. C - Prob. 3ECh. C - Prob. 4ECh. C - Prob. 5ECh. C - EC-6 GMG Studios plans to invest $60,000 at the...Ch. C - Prob. 7ECh. C - Prob. 8ECh. C - Prob. 1PACh. C - Prob. 2PACh. C - Prob. 3PACh. C - Prob. 1PBCh. C - Prob. 2PBCh. C - Prob. 3PB
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