Question 1

When a long-term note payable is issued,the entire amount should be initially recorded as a long-term note payable.

Accepted Answer

When a long-term note payable is issued, the entire amount should be initially recorded as a long-term note payable on the balance sheet. Over time, as payments are made, the principal portion of the note will be reduced and the interest expense will be recorded.

Question 2

The difference between a mortgage payable and a note payable is that notes payable are always long-term.

Accepted Answer

Notes payable can be short-term or long-term, while mortgages payable are always long-term.

Question 3

Instalment payments for mortgages are normally paid once per year.

Accepted Answer

Instalment payments for mortgages are typically paid on a monthly basis, although some may choose to pay annually or on another schedule depending on their individual circumstances and preferences.

Question 4

A mortgage payable is a debt that is backed with a security interest in property.

Accepted Answer

A mortgage payable is a type of loan that is secured by a property, usually the one being purchased. The property serves as collateral for the loan, which makes it a secured debt.

Question 5

Trek Company signed a 9%,10-year note for $151,000.The company paid $2700 as the instalment for the first month.What portion of the first monthly payment is principal? (Round to the nearest dollar. )
A)$15,283
B)$4267
C)$1510
D)$1567

Accepted Answer

The monthly interest is calculated as (9% annual rate / 12 months) * $151,000 = $1,133. The principal portion is the total payment minus the interest: $2,700 - $1,133 = $1,567.

Question 6

On 1 December 2017,Fine Products borrowed $84,000 on a 5%,10-year note with annual instalment payments of $8400 plus interest due on 1 December of each succeeding year.Which of the following describes the first instalment payment made on 1 December 2018?
A)$8400 principal plus $420 interest
B)$4200 interest only
C)$8400 principal plus $8400 interest
D)$8400 principal plus $4200 interest

Accepted Answer

The first instalment payment made on 1 December 2018 consists of both principal and interest. To calculate the interest for the first year, we need to use the formula:

Interest = (Principal x Rate x Time) / 100

where Rate = 5% and Time = 1 year

Therefore, Interest = (84,000 x 5 x 1) / 100 = 4,200

So, the first instalment payment will be:

Principal = 8,400 (as given in the question)
Interest = 4,200

Hence, the correct choice is D.

Question 7

On 1 January 2017,Bratios Company purchases equipment and signs a 6-year mortgage payable for $110,000 at 15%.The mortgage will be paid in equal annual instalments of $29,066,beginning 1 January 2018.Calculate the balance of the Mortgage payable account after the payment of the first instalment.
A)$16,500
B)$82,983
C)$80,934
D)$97,434

Accepted Answer

The answer of On 1 January 2017,Bratios Company purchases equipment...

Question 8

On 1 December 2016,Fine Products borrowed $96,000 on a 8%,8-year note with annual instalment payments of $12,000.00 plus interest due on 1 December of each succeeding year.On 1 December,the principal amount was initially recorded as Long-term notes payable.What amount of the note payable will be shown as current portion of Long-term notes payable on the balance sheet as of 31 December 2016?
A)$12,000.00
B)$7680.00
C)$24,000.00
D)$19,680.00

Accepted Answer

Since the annual instalment payments are $12,000.00 each, the current portion of Long-term notes payable on the balance sheet as of 31 December 2016 will also be $12,000.00.

Question 9

When a long-term note payable that requires annual instalment payments is initially recorded,it is first recorded as a long-term note payable.Then,at the same date,a second entry is made to reclassify the current portion.

Accepted Answer

This is true, as the current portion of the long-term note payable is typically a shorter-term liability that is due within the next year and needs to be reclassified as a current liability on the balance sheet.

Question 10

The current portion of notes payable must be reported on the balance sheet combined with the long-term portion under non-current liabilities.

Accepted Answer

The current portion of notes payable should be reported separately under current liabilities, as it is due within one year, while the long-term portion is reported under non-current liabilities.

Question 11

On 1 July 2016,Avery Services issued a long-term note payable for $10 000.It is payable over a five year term in $2 000 instalments on 1 July of each succeeding year.When the note was issued,the principal amount was recorded in long-term notes payable and a second entry was made to reclassify the current portion.How will this information be shown on the balance sheet dated 31 December 2016?
A)$2 000 shown as current liability;$8 000 shown as non-current liability
B)$2 000 shown as current liability;$10 000 shown as non-current liability
C)The entire $10 000 shown as non-current liability
D)$10 000 shown as current liability only

Accepted Answer

Since the first $2,000 payment is due within a year, it will be reported as the current portion of the long-term note payable. The remaining $8,000 will be reported as the non-current portion. Therefore, the balance sheet will reflect a current liability of $2,000 and a non-current liability of $8,000 for the long-term note payable.

Question 12

On 1 January 2017,Bratios Company purchases equipment and signs a 6-year mortgage payable for $93,000 at 15%.The mortgage will be paid in equal annual instalments of $24,574,beginning 1 January 2018.Calculate the portion of principal amount paid on the third instalment.(Round to the nearest dollar. )
A)$14,050
B)$10,524
C)$24,574
D)$13,950

Accepted Answer

The third instalment's principal portion is calculated by first determining the interest for the third year, then subtracting it from the total instalment. The interest for the third year is calculated on the remaining principal after the first two instalments. The principal portion of the third instalment is $14,050.

Question 13

On 1 March 2017,Vinnie Services issued a 6% long-term note payable for $20,000.It is payable over a 5-year term in $4000 annual principal payments on 1 March of each year plus interest,beginning 1 March 2018.How will this information be shown on the balance sheet dated 31 December 2017?
A)$20,000 shown as current liability only
B)$4000 shown as current liability;$16,000 shown as long-term liability
C)the entire $20,000 shown as long-term liability
D)$4000 shown as current liability;$20,000 shown as long-term liability

Accepted Answer

The $4000 due within the next year is a current liability, while the remaining $16,000 is a long-term liability.

Question 14

On 1 January 2017,Bratios Company purchases equipment and signs a 6-year mortgage payable for $80,000 at 15%.The mortgage will be paid in equal annual instalments of $21,139,beginning 1 January 2018.Calculate the portion of interest expense paid on the third instalment.(Round to the nearest dollar. )
A)$21,139
B)$70,861
C)$9053
D)$12,000

Accepted Answer

Each year, the mortgage payable will be reduced by the amount of the annual installment, which is $21,139. Therefore, the remaining balance of the mortgage payable at the beginning of the third installment (1 January 2020) would be:

$80,000 - $21,139 - $21,139 = $37,722

The interest expense for the third installment, which covers one year from 1 January 2020 to 31 December 2020, can be calculated as:

$37,722 × 15% = $5,658.30

Therefore, the portion of interest expense paid on the third installment, which is the amount of interest included in the $21,139 installment, would be:

$21,139 - ($37,722 × 15%) ≈ $9,053

So, the correct answer is C ($9,053).

Question 15

The current portion of notes payable is the principal amount that will be paid within one year of the balance sheet date.

Accepted Answer

The current portion of notes payable is a current liability that represents the principal amount of a loan that is due within one year from the date of the balance sheet. Therefore, the statement is true.

Question 16

On 1 January 2017,Bratios Company purchased equipment and signed a 6-year mortgage payable for $160,000 at 15%.The mortgage will be paid in equal annual instalments of $42,278,beginning 1 January 2018.The journal entry to record the first instalment payment on 1 January 2018 will include a:
A)credit to Mortgage payable for $160,000.
B)debit to Interest expense for $24,000.
C)debit to Mortgage payable for $42,278.
D)credit to Cash for $18,278.

Accepted Answer

The interest expense for the first year is calculated as 15% of $160,000, which equals $24,000. The journal entry will include a debit to Interest expense for this amount.

Question 17

On 1 March 2017,Vinnie Services issued a 5% long-term note payable for $18,000.It is payable over a 3-year term in $6000 principal instalments on 1 March of each year,beginning 1 March 2018.Each yearly instalment will include both principal repayment of $6000 and interest payment for the preceding one-year period.What is the amount of total cash payment that the Vinnie will make on 1 March 2018?
A)$6900
B)$6450
C)$6000
D)$18,000

Accepted Answer

The total cash payment on 1 March 2018 includes a $6000 principal repayment and $900 interest (5% of $18,000 for one year), totaling $6900.

Question 18

On 1 March 2017,Vinnie Services issued a 9% long-term note payable for $21,000.It is payable over a 3-year term in $7000 principal instalments on 1 March of each year,beginning 1 March 2018.Which of the following entries needs to be made at 1 March 2017?
A) $$\begin{array} { | c | l | l | } 
\hline \text { Long-term note payable } & \$ 7000 & \
\hline \text { Cash } & & 7000 \
\hline
\end{array}$$
B) $$\begin{array} { | c | l | l | } 
\hline \text { Long-term note payable } & \$ 21,000 & \
\hline \text { Accounts payable } & & 21,000 \
\hline
\end{array}$$
C) $$\begin{array} { | c | l | l | } 
\hline \text { Cash } & \$ 21,000 & \
\hline \text { Long-term note payable } & & 21,000 \
\hline
\end{array}$$
D) $$\begin{array} { | c | l | l | } 
\hline \text { Current portion of long-term note payable } & \$ 21,000 & \
\hline \text { Long-term note payable } & & 21,000 \
\hline
\end{array}$$

Accepted Answer

The correct entry records the receipt of cash from issuing the note payable, increasing cash and creating a liability for the long-term note payable.

Question 19

Trek Company signed a 9%,10-year note for $155,000.The company paid $2900 as the instalment for the first month.After the first payment,what is the updated principal balance? (Round to the nearest dollar. )
A)$153,837
B)$157,900
C)$153,263
D)$152,100

Accepted Answer

First, we need to find the amount of the payment that goes towards the principal:

Payment = Interest + Principal
$2900 = 0.09/12 x $155,000 + Principal
$2900 = $1162.50 + Principal
Principal = $1737.50

To find the updated principal balance, we need to subtract the principal portion of the first payment from the original principal balance:

Updated Principal Balance = Original Principal Balance - Principal Payment
Updated Principal Balance = $155,000 - $1737.50
Updated Principal Balance = $153,262.50

Rounding to the nearest dollar, the answer is C: $153,263.

Question 20

Trek Company signed a 11%,10-year note for $158,000.The company paid $2700 as the instalment for the first month.What portion of the first monthly payment is interest expense? (Round to the nearest dollar. )
A)$1448
B)$1252
C)$15,867
D)$30,547

Accepted Answer

The interest expense for the first month is calculated by multiplying the principal amount ($158,000) by the annual interest rate (11%) and then dividing by 12 months. This gives $158,000 * 0.11 / 12 = $1,448.33, which rounds to $1,448.

Quiz 12: Non-Current Liabilities, Debentures Payable and Classification of Liabilities on the Balance Sheet

When a long-term note payable is issued,the entire amount should be initially recorded as a long-term note payable.

The difference between a mortgage payable and a note payable is that notes payable are always long-term.

Instalment payments for mortgages are normally paid once per year.

A mortgage payable is a debt that is backed with a security interest in property.

Trek Company signed a 9%,10-year note for $151,000.The company paid $2700 as the instalment for the first month.What portion of the first monthly payment is principal? (Round to the nearest dollar. )

On 1 December 2017,Fine Products borrowed $84,000 on a 5%,10-year note with annual instalment payments of $8400 plus interest due on 1 December of each succeeding year.Which of the following describes the first instalment payment made on 1 December 2018?

On 1 January 2017,Bratios Company purchases equipment and signs a 6-year mortgage payable for $110,000 at 15%.The mortgage will be paid in equal annual instalments of $29,066,beginning 1 January 2018.Calculate the balance of the Mortgage payable account after the payment of the first instalment.

When a long-term note payable that requires annual instalment payments is initially recorded,it is first recorded as a long-term note payable.Then,at the same date,a second entry is made to reclassify the current portion.

The current portion of notes payable must be reported on the balance sheet combined with the long-term portion under non-current liabilities.

On 1 March 2017,Vinnie Services issued a 6% long-term note payable for $20,000.It is payable over a 5-year term in $4000 annual principal payments on 1 March of each year plus interest,beginning 1 March 2018.How will this information be shown on the balance sheet dated 31 December 2017?

The current portion of notes payable is the principal amount that will be paid within one year of the balance sheet date.

On 1 January 2017,Bratios Company purchased equipment and signed a 6-year mortgage payable for $160,000 at 15%.The mortgage will be paid in equal annual instalments of $42,278,beginning 1 January 2018.The journal entry to record the first instalment payment on 1 January 2018 will include a:

On 1 March 2017,Vinnie Services issued a 9% long-term note payable for $21,000.It is payable over a 3-year term in $7000 principal instalments on 1 March of each year,beginning 1 March 2018.Which of the following entries needs to be made at 1 March 2017?

Trek Company signed a 9%,10-year note for $155,000.The company paid $2900 as the instalment for the first month.After the first payment,what is the updated principal balance? (Round to the nearest dollar. )

Trek Company signed a 11%,10-year note for $158,000.The company paid $2700 as the instalment for the first month.What portion of the first monthly payment is interest expense? (Round to the nearest dollar. )