Interest expense equals the carrying amount of the liability at the beginning of the period times the effective interest rate. The carrying amount of the liability equals the face amount of the bond minus the discount. As the discount is amortized over the life of the bond, the carrying amount increases, Consequently, the interest expense increases over the term of the bond.

The most economical point at which to correct input errors is at the earliest time after the data has been entered into the system. The earliest point is the entry of data into each field of a record. Errors can easily be rectified because the proper information is already available.

Prevention costs are incurred to prevent defects from occurring. An example is equipment maintenance. Appraisal costs are incurred to detect defective output during and after the production process. An example is product testing. Thus, total prevention and appraisal cost for the month equals US $1,940 (US $1,154 +US $786).

Economists use a variety of economic indicators to forecast turns in the business cycle. Economic indicators are variables that in the past have had a high correlation with aggregate economic activity. The best known are the composite indexes calculated by The Conference Board, a private research group with more than 2,700 corporate and other members worldwide. Indicators may lead, lag, or coincide with economic activity. The Conference Board's lagging indicators include average duration of unemployment in weeks, the change in the index of labor cost per unit of output, the average prime rate charged by banks, the ratio of manufacturing and trade inventories to sales, the commercial and industrial loans outstanding, the ratio 'of consumer installment credit outstanding to personal income, and the change in the CPI for services.

All income statement account balances are closed either to a summary account such as income summary or revenue and expense summary) or to retained earnings. The normal balance of an expense account is a debit. Thus, an expense account is credited in a closing entry.