Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

Which of the following actions would most responsibly help Elizabeth pay off her bill sooner and reduce her overall interest expense?

Only pay the minimum amount due each month

Wait until the due date to make a single large payment at the end of the year

Skip a payment and pay double the next month

Make payments larger than the minimum required each month

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Verified step by step guidance

Understand the concept of interest expense: Interest expense is the cost incurred for borrowing money, and it is typically calculated based on the outstanding balance of a loan or credit card. Paying off the balance sooner reduces the principal amount on which interest is calculated, thereby lowering the overall interest expense.

Analyze the options provided: Paying only the minimum amount due each month will keep the balance high for a longer period, resulting in higher interest expense. Waiting until the end of the year to make a single large payment allows interest to accumulate over time, which increases the total cost. Skipping a payment and paying double the next month may lead to penalties and additional interest charges.

Identify the most responsible action: Making payments larger than the minimum required each month reduces the principal balance faster, which decreases the amount of interest accrued over time. This approach is financially responsible and helps Elizabeth pay off her bill sooner.

Apply the concept of compounding interest: Credit card interest is typically compounded daily or monthly. By reducing the principal balance earlier, Elizabeth minimizes the compounding effect, which further reduces her overall interest expense.

Plan a payment strategy: Elizabeth should review her budget to determine how much she can afford to pay above the minimum each month. Consistently making larger payments will help her achieve her goal of paying off the bill sooner and reducing interest costs.