ECONOMICS

COST ACCOUNTING

BREAK EVEN POINT

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
A business takes out a bank loan of £15, 000. The loan will be repaid over 3 years, with a monthly repayment of £500. The total interest the business will pay for this loan is:
A
£1, 500
B
£3, 000
C
£15, 500
D
£8, 000
Explanation: 

Detailed explanation-1: -The loan repayment period ranges between 12 months and 60 months. The lender charges a competitive rate of interest. Customised and flexible loan repayment options are offered.

Detailed explanation-2: -Car loans, home loans and certain personal loans are examples of long-term loans. Long term loans can be availed to meet any business need like buying of machinery or any personal need like owning a house. Long-term loans are the most popular form of credit in the financial industry.

Detailed explanation-3: -So, to get your monthly loan payment, you must divide your interest rate by 12. Whatever figure you get, multiply it by your principal. A simpler way to look at it is monthly payment = principal x (interest rate / 12). The formula might seem complex, but it doesn’t have to be.

Detailed explanation-4: -What is the journal entry of repaid bank loan? Bank loan A/C.

There is 1 question to complete.