Question 1

On December 31, 2016, Thompson Hardware Company purchases $300,000 of property by paying $50,000 in cash and signing a 10-year mortgage note at 13% for the balance. The amortization schedule shows that the company will pay $46,072 per year. Journalize the first yearly payment on December 31, 2017.

Accepted Answer

The answer of On December 31, 2016, Thompson Hardware Company...

Question 2

On January 1, 2016, Belden, Inc. issued long-term notes payable for $50,000. The note will be paid over 10 years with payments of $5,000 plus 12% interest due each January 1, beginning January 1, 2017. The amortization schedule for the first three payments is provided. Prepare the journal entry for the issuance of the note and for the January 1, 2018 note payment.

Accepted Answer

The answer of On January 1, 2016, Belden, Inc. issued...

Question 3

Suminski Flooring Company buys a building for $115,000, paying $30,000 cash and signing a 30-year mortgage note for $85,000 at 11% annual interest. The payment will be made in equal monthly installments of $809. Prepare the journal entry for the first monthly payment. (Round your answers to the nearest whole dollar number.)

Accepted Answer

The answer of Suminski Flooring Company buys a building for...

Question 4

The difference between mortgages payable and notes payable is that notes payable are always secured by specific assets.

Accepted Answer

Notes payable can be either secured or unsecured, while mortgages payable are always secured by the property being purchased with the loan.

Question 5

On January 1, 2016, Belden, Inc. issued long-term notes payable for $50,000. The note will be paid over 10 years with payments of $5,000 plus 12% interest due each January 1, beginning January 1, 2017. Prepare the amortization schedule for the first three payments.

Accepted Answer

The answer of On January 1, 2016, Belden, Inc. issued...

Question 6

Installment payments for mortgages generally contain both an amount for principal repayment and an amount for interest.

Accepted Answer

This is true. Installment payments for mortgages are typically structured so that both principal and interest are paid off over the life of the loan.

Question 7

On January 1, 2016, Alldredge Company purchased equipment and signed a six-year mortgage note for $194,000 at 15%. The note will be paid in equal annual installments of $51,262, beginning January 1, 2017. Calculate the portion of interest expense paid on the third installment. (Round your answer to the nearest whole number.)

Accepted Answer

B)
 11ea8a42_4f60_09b8_8b44_6929b1b552be_TB5024_00

Question 8

On April 1, 2017, Nurix Manufacturers purchases equipment for $100,000, paying $30,000 in cash and signing a 10-year mortgage for $70,000 at 8% annual interest. Prepare the journal entry to record the acquisition of the equipment.

Accepted Answer

The answer of On April 1, 2017, Nurix Manufacturers purchases...

Question 9

On April 1, 2017, Ardos Gardening Products borrowed $100,000 on a 15%, 10-year note with annual installment payments of $10,000 plus interest due on April 1 of each subsequent year. Prepare the journal entry for the issuance of the note.

Accepted Answer

The answer of On April 1, 2017, Ardos Gardening Products...

Question 10

On January 1, 2016, Demarest Company purchased equipment and signed a six-year mortgage note for$160,000 at 15%. The note will be paid in equal annual installments of $42,278, beginning January 1, 2017. Calculate the portion of principal amount paid on the third installment. (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

Accepted Answer

A)
 11ea8a42_4f60_30c9_8b44_41963a2e2294_TB5024_00

Question 11

On January 1, 2017, Sullivan Cabinetry Company purchases $300,000 of property by paying $50,000 in cash and signing a 10-year mortgage note at 13% for the balance. Sullivan will make yearly payments of $46,072. Prepare the amortization schedule for the first five payments. (Round your answers to the nearest dollar.)

Accepted Answer

The answer of On January 1, 2017, Sullivan Cabinetry Company...

Question 12

On January 1, 2017, Gaskin Cabinetry Company purchases $300,000 of equipment by paying $50,000 in cash and signing a 10-year mortgage note at 13% for the balance. Gaskin will make yearly payments of $46,072. The amortization schedule for the first five payments is provided.  Prepare the journal entry for the purchase of the equipment and for the January 1, 2018 mortgage payment.

Accepted Answer

The answer of On January 1, 2017, Gaskin Cabinetry Company...

Question 13

On January 1, 2017, Anderson Tools Company purchases machinery with a fair value of $300,000 by paying $50,000 in cash and signing a 10-year mortgage note at 13% for the balance. Prepare the journal entry for January 1, 2017.

Accepted Answer

The answer of On January 1, 2017, Anderson Tools Company...

Question 14

On January 1, 2016, Bratios Company purchased equipment and signed a six-year mortgage note for $194,000 at 15%. The note will be paid in equal annual installments of $51,262, beginning January 1, 2017. On January 1, 2017, the journal entry to record the first installment payment will include a ________. (Round your answer to the nearest whole number.)

Accepted Answer

The first annual installment payment will include both principal and interest. The interest component can be calculated as ($194,000 x 15%) = $29,100. Therefore, the journal entry will include a debit to Interest Expense for $29,100, a credit to Cash for $51,262, and a decrease in the Mortgage Payable balance (not necessarily equal to the payment amount) as principal is repaid. Option A is incorrect because the Mortgage Payable balance will not be reduced by the full payment amount. Option C is incorrect because it only reflects the cash payment and does not account for the interest expense. Option D is incorrect because the Mortgage Payable balance will not remain at its original amount after the first installment payment.

Question 15

Hernandez Carpets Company buys a building for $115,000, paying $30,000 cash and signing a 30-year mortgage note for $85,000 at 11%. Prepare the journal entry for the purchase.

Accepted Answer

The answer of Hernandez Carpets Company buys a building for...

Question 16

A mortgage payable is a long-term debt that is backed with a security interest in specific property.

Accepted Answer

A mortgage payable is a type of long-term debt that is secured by a security interest in specific property, typically real estate. This means that if the borrower defaults on the loan, the lender has the right to foreclose on the property and sell it to recover the outstanding balance on the loan.

Question 17

On January 1, 2016, Brubeck Company purchased equipment and signed a six-year mortgage note for $110,000 at 15%. The note will be paid in equal annual installments of $29,066, beginning January 1, 2017. Calculate the balance of Mortgage Payable after the payment of the first installment. (Round your answer to the nearest whole number.)

Accepted Answer

C)
 11ea8a42_4f60_09b7_8b44_278b3ecc00f0_TB5024_00

Question 18

Bonds are short-term debt issued to multiple lenders called bondholders, usually in increments of $1,000 per bond.

Accepted Answer

Bonds can be short-term or long-term debt instruments issued by corporations, governments, and other entities to raise funds. They are not exclusively short-term.

Question 19

On January 1, 2017, Shea Landscaping borrowed $100,000 on a 15%, 10-year note with annual installment payments of $10,000 plus interest due on December 31 of each year. Prepare the journal entry for the first installment payment made on December 31, 2017.

Accepted Answer

The answer of On January 1, 2017, Shea Landscaping borrowed...

Question 20

On the maturity date, the bondholder is paid the face amount of the bond plus the last interest payment.

Accepted Answer

This is generally true for most bonds, where the face amount (also known as the principal or par value) and the last interest payment are paid to the bondholder on the maturity date. However, certain types of bonds, such as zero-coupon bonds, do not make periodic interest payments and instead pay the full face amount at maturity.

Quiz 14: Long-Term Liabilities