18-1 Quiz

What is the payment of an operating expense necessary to earn revenue called?

• Revenue expenditure

• Debt financing

• Line of credit

• Prime interest rate

What is obtaining capital by borrowing money for a period of time called?

• Revenue expenditure

• Debt financing

• Line of credit

• Prime interest rate

What is a bank loan agreement that provides immediate short-term access to cash called?

• Revenue expenditure

• Debt financing

• Line of credit

• Prime interest rate

What is the interest rate charged to a bank's most creditworthy customers called?

• Revenue expenditure

• Debt financing

• Line of credit

• Prime interest rate

What account title is used for a line of credit?

• Line of Credit

• Notes Payable

• Interest Expense

• Cash

When drawing on a line of credit, which accounts are affected?

• Liability and Notes Payable

• Interest Expense and Cash

• Line of Credit and Cash

• Cash and Notes Payable

What is the term for a promissory note signed for an extension of time on an account payable?

• Line of Credit

• Notes Payable

• Interest Expense

• Cash

What information is specified in the loan agreement for a line of credit?

• The loan agreement specifies the maximum amount that can be borrowed, the interest rate, term of the agreement, and repayment terms.

• Only the loan agreement.

• The maximum amount borrowed and repayment terms.

• The interest rate and terms of the agreement.

On a line of credit, how would an interest rate of 3% over the prime rate be stated?

• 13%

• Prime minus 3%

• Prime plus 3%

• Prime plus 13%

Is interest expense an operating or a nonoperating expense?

• operating
• nonoperating