Question 1

On April 1, 2015, Ardoos 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 succeeding year. Provide the first journal entry for the issuance of the note.

Accepted Answer

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Question 2

On January 1, 2015, Paramount Inc. issued long-term notes payable for $50,000. The note will be paid over ten years with payments of $5,000 plus 12% interest due each January 1, beginning January 1, 2016. Prepare the amortization schedule for the first three payments.

Accepted Answer

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Question 3

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

Accepted Answer

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Question 4

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

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Question 5

On January 1, 2015, Anderson Company purchases property of $300,000 by paying $50,000 in cash and signing a 10-year mortgage note at 13% for the balance. The amortization schedule shows that Anderson Company will pay $46,072 per year. Journalize the first yearly payment on January 1, 2016.

Accepted Answer

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Question 6

In order to expand business, the management of Vereos Inc. decided to issue Long-term notes payable for $50,000. The note will be paid over ten years with payments of $5,000 plus 12% interest. Provide the journal entry needed after 1 year for the first installment payment.

Accepted Answer

The answer of In order to expand business, the management...

Question 7

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.

Question 8

On April 1, 2015, Ardoos 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 succeeding year. Provide the journal entry for the first installment payment made on April 1, 2016.

Accepted Answer

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Question 9

On January 1, 2015, Bratios Company purchases equipment and signs a 6-year mortgage note for $80,000 at 15%. The note will be paid in equal annual installments of $21,139, beginning January 1, 2016. Calculate the portion of interest expense paid on the third installment.

Accepted Answer

The total interest expense for the entire mortgage note is:
Interest expense = Total payments - Principal amount
Interest expense = (6 x $21,139) - $80,000
Interest expense = $126,834 - $80,000
Interest expense = $46,834

To find the portion of interest expense paid on the third installment (which is the third year), we need to find out how much of the installment is going towards interest and how much towards reducing the principal.

The interest component of the third installment can be calculated as follows:
Interest = Principal balance x Interest rate
Principal balance at the beginning of year 3 = $80,000 - ($21,139 x 2) = $37,722
Interest rate = 15%
Interest = $37,722 x 15% = $5,658

Therefore, the portion of interest expense paid on the third installment is $5,658.

The closest option is B) $9,053.

Question 10

On January 1, 2015, Bratios Company purchases equipment and signs a 6-year mortgage note for $80,000 at 15%. The note will be paid in equal annual installments of $21,139, beginning January 1, 2016. Calculate the portion of principal amount paid on the third installment.

Accepted Answer

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Question 11

On January 1, 2015, Bratios Company purchased equipment and signed a 6-year mortgage note for $80,000 at 15%. The note will be paid in equal annual installments of $21,139, beginning January 1, 2016. On January 1, 2016, the journal entry to record the first installment payment will include a:

Accepted Answer

The first installment payment includes both principal and interest payments. The interest expense is calculated as the outstanding loan balance multiplied by the interest rate, which is $80,000 x 15% = $12,000. Therefore, the journal entry to record the first installment payment includes a debit to Interest Expense for $12,000, a debit to Mortgage Payable for $9,139 (the principal portion of the installment payment), and a credit to Cash for $21,139.

Question 12

On January 1, 2013, Anderson 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. On January 1, 2013, what will be the journal entry?

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Question 13

On April 1, 2015, Nurix Manufacturers purchases equipment for $100,000, paying $30,000 in cash and signing a 10-year mortgage for $70,000 taken out at 8%. Prepare the journal entry to record the acquisition of the equipment.

Accepted Answer

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Question 14

On May 1, 2015, Vinnie Services issued a long-term notes payable for $35,000. It is payable over a 5-year term in $7,000 annual principal payments plus interest, on May 1 of each year beginning on May 1, 2016. Provide the initial journal entry for the issuance of the note.

Accepted Answer

The answer of On May 1, 2015, Vinnie Services issued...

Question 15

On January 1, 2015, Bratios Company purchases equipment and signs a 6-year mortgage note for $80,000 at 15%. The note will be paid in equal annual installments of $21,139, beginning January 1, 2016. Calculate the balance of the Mortgage Payable account after the payment of the first installment.

Accepted Answer

The first installment payment of $21,139 is made on January 1, 2016. This payment is comprised of both interest expense and principal reduction.

To calculate the interest expense, we first need to determine the carrying value of the mortgage payable account as of January 1, 2016.

Carrying value as of January 1, 2016 = $80,000 (original loan amount) - $21,139 (first installment payment) = $58,861

We can then calculate the interest expense for the year by multiplying the carrying value by the interest rate:

Interest expense = $58,861 × 0.15 = $8,829.15

The remaining portion of the installment payment goes towards reducing the principal balance of the mortgage payable. We can calculate this amount as follows:

Principal reduction = $21,139 - $8,829.15 = $12,309.85

To determine the balance of the mortgage payable account after the payment of the first installment, we subtract the amount of principal reduction from the carrying value:

Balance of mortgage payable after first installment = $58,861 - $12,309.85 = $46,551.15

Therefore, the correct answer is C) $70,861.

Question 16

If a bond is issued at a discount, it will sell for more than face value.

Accepted Answer

If a bond is issued at a discount, it will sell for less than face value.

Question 17

If a bond is issued at a premium, it will sell for more than face value.

Accepted Answer

When a bond is issued at a premium, it means that the investor is willing to pay more than the face value (or par value) of the bond. This happens when the stated interest rate on the bond is higher than the prevailing market interest rate. As a result, the bond will sell for more than its face value.

Question 18

In order to expand business, the management of Vereos Inc. decided to issue long-term notes payable for $50,000. The instrument carries interest at the rate of 12% with 10 equal yearly installments, beginning in one year. What will be the journal entry at the inception?

Accepted Answer