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11 Dec 2019
Why is compound interest preferable to the simple interest
a. Compound interest pays at least double the interest on the principal during each month.
b. Compound interest is paid by the week or by the month, not only once during a year.
c. Compound interest is based on the entire principal, not just a percentage of the principal.
d. Compound interest pays interest on the principal and the interest earned in each period.
Ā
Why is compound interest preferable to the simple interest
a. Compound interest pays at least double the interest on the principal during each month.
b. Compound interest is paid by the week or by the month, not only once during a year.
c. Compound interest is based on the entire principal, not just a percentage of the principal.
d. Compound interest pays interest on the principal and the interest earned in each period.
Ā
Irving HeathcoteLv2
5 May 2020
Related questions
The following transactions were completed by Hobson Inc., whosefiscal year is the calendar year:
| 2014 | |
| July 1. | Issued $7,430,000 of five-year, 8%callable bonds dated July 1, 2014, at a market (effective) rate of9%, receiving cash of $7,136,042. Interest is payable semiannuallyon December 31 and June 30. |
| Oct. 1. | Borrowed $310,000 as a 10-year, 7%installment note from Marble Bank. The note requires annualpayments of $44,137, with the first payment occurring on September30, 2015. |
| Dec. 31. | Accrued $5,425 of interest on theinstallment note. The interest is payable on the date of the nextinstallment note payment. |
| Dec. 31. | Paid the semiannual interest on thebonds. The bond discount is amortized annually in a separatejournal entry. |
| Dec. 31. | Recorded bond discount amortizationof $29,396, which was determined using the straight-linemethod. |
| Dec. 31. | Closed the interest expenseaccount. |
| 2015 | |
| June 30. | Paid the semiannual interest on thebonds. |
| Sept. 30. | Paid the annual payment on thenote, which consisted of interest of $21,700 and principal of$22,437. |
| Dec. 31. | Accrued $5,032 of interest on theinstallment note. The interest is payable on the date of the nextinstallment note payment. |
| Dec. 31. | Paid the semiannual interest on thebonds. The bond discount is amortized annually in a separatejournal entry. |
| Dec. 31. | Recorded bond discount amortizationof $58,792, which was determined using the straight-linemethod. |
| Dec. 31. | Closed the interest expenseaccount. |
| 2016 | |
| June 30. | Recorded the redemption of thebonds, which were called at 98. The balance in the bond discountaccount is $176,374 after payment of interest and amortization ofdiscount have been recorded. (Record the redemption only.) |
| Sept. 30. | Paid the second annual payment onthe note, which consisted of interest of $20,129 and principal of$24,008. |
Required:
1. Journalize the entries to record theforegoing transactions. For compound transactions, if an amount boxdoes not require an entry, leave it blank or enter "0". Whenrequired, round your answers to the nearest dollar.
