Which of the following details is most likely to apply to a financing contract in accounting?

• A. The calculation of depreciation expense for fixed assets
• B. The allocation of production costs to inventory accounts
• C. The obligation to repay borrowed funds with interest over a specified period
• D. The recognition of revenue when goods are delivered to customers

Answer: (C)

Verified step by step guidance

1. Understand the concept of a financing contract in accounting. A financing contract typically involves an agreement where one party borrows funds from another and agrees to repay the borrowed amount along with interest over a specified period.
2. Review the options provided in the problem. Each option represents a different accounting concept or principle.
3. Option 1: 'The calculation of depreciation expense for fixed assets' relates to the allocation of the cost of tangible assets over their useful life, which is part of asset management, not financing contracts.
4. Option 2: 'The allocation of production costs to inventory accounts' pertains to cost accounting and inventory valuation, which is unrelated to financing contracts.
5. Option 3: 'The obligation to repay borrowed funds with interest over a specified period' directly aligns with the definition of a financing contract, as it involves borrowing and repayment terms. Option 4: 'The recognition of revenue when goods are delivered to customers' relates to revenue recognition principles, not financing contracts.