Universal Travel, Inc. borrowed $500,000 on November 1, 2021, and signed a twelve-month note bearing interest at 6%.

Universal Travel, Inc. borrowed $500,000 on November 1, 2021, and signed a twelve-month note bearing interest at 6%. Principal and interest are payable in full at maturity on October 31, 2022. In connection with this note, Universal Travel, Inc. should record interest expense in 2022 in the amount of:

A) $8,000.

B) $30,000.

C) $5,000.

D) $25,000.

Answer: D

Large, highly-rated firms sometimes sell commercial paper:

A) To borrow funds at a lower rate than through a bank.

B) To borrow funds when they cannot obtain a loan from a bank.

C) Because they can't borrow anywhere else.

D) To improve their credit rating.

Answer: A

An informal agreement that allows a company to borrow up to a prearranged limit without having to follow formal loan procedures and prepare paperwork is known as:

A) A line of credit.

B) Commercial Paper.

C) A debt covenant.

D) Working capital.

Answer: A