A wholesaler's cost of goods sold per unit includes labor

The Interest Expense on a $1,000, 4%, 3-month note is

A. $40 B. $10 C. $100 D. $120

Bellington, Inc is considering the purchase of new, sophisticated machinery for a special

three-year project. The machinery requires a special lubricating oil that probably will never be used, but must be available at all times should the machine break down. Bellington purchases $2,000 of lubricating oil to keep on hand just in case it is needed. At the end of the three-year project, it is expected the lubricating oil can be sold back to the distributor for $2,000. Which of the following statements is MOST correct? A) The $2,000 represents an additional investment in working capital that should be included in the capital budgeting analysis. B) The $2,000 for the lubricating oil should be excluded from the analysis because it is recovered at the end of three years, so the final cost is zero. C) The $2,000 for lubricating oil is simply an accounting entry and does not represent a real cash flow. D) The lubricating oil is a sunk cost that should be excluded from the analysis.