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To calculate interest, three variables must be considered:
the principal, the annual
interest rate, and the time period for the loan.
The interest formula is principal
times interest rate times time. When computing interest for one year, "Time" equals
1.
When the computation period is less than one year, then "Time" is a fraction.
Example: Part I
Starbucks borrows $100,000 for 2 months at an annual interest rate of 12%.
Compute the interest on the note for the loan period.
Part II
Remember the computation is principal of $100,000 times interest rate of 12% times
time of 2 months out of 12 months.
So, the interest for the 2 month loan period is
$2,000.
A contingent liability is a potential liability that arises as the result of a past event.
A common example of a contingent liability is one that is related to some past event
that may be litigated in the future.
For example, let's say a customer falls in your
store and is hurt.
This is the past event.
A contingent liability may or may not be
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This note was uploaded on 03/19/2008 for the course ACCT 201 taught by Professor Anothony during the Fall '07 term at Michigan State University.
 Fall '07
 anothony
 Accounting

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