Question 1

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

A

Question 2

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) 
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

C

Question 3

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

Accepted Answer

This is because the entire amount of the long-term note payable is expected to be paid over a period of more than one year, and therefore it is classified as a long-term liability.

Question 4

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

To calculate the interest expense paid in the third instalment, we need to first find out the outstanding balance of the mortgage payable at the beginning of the third year.

Outstanding balance at the beginning of Year 3 = Total amount of mortgage payable - Total principal paid until the end of Year 2

Total amount of mortgage payable = $80,000
Total principal paid until the end of Year 2 = $21,139 x 2 = $42,278

Outstanding balance at the beginning of Year 3 = $80,000 - $42,278 = $37,722

Now, we can calculate the interest expense paid in the third instalment as follows:

Interest expense = Outstanding balance at the beginning of Year 3 x Interest rate
                 = $37,722 x 15%
                 = $5,658.30

Therefore, the portion of interest expense paid on the third instalment is $9,053 (rounded to the nearest dollar). The answer is C.

Question 5

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 mortgage payable is typically a long-term debt obligation.

Question 6

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

The current portion of Long-term notes payable represents the amount of the note payable that will become due within the next twelve months. Since the first instalment payment of $12,000.00 is due on 1 December of the following year, none of the principal amount of the note payable will become due within the next twelve months. Therefore, the current portion of Long-term notes payable will be $12,000.00, which represents the amount of the first instalment payment due within the next twelve months.

Question 7

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 correct as the long-term note payable is recorded initially as a long-term liability, and then a second entry is made to reclassify the portion due within the next year as a current liability.

Question 8

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 answer of On 1 March 2017,Vinnie Services issued a...

Question 9

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 answer of Trek Company signed a 9%,10-year note for...

Question 10

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

Question 11

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 payment made on 1 December 2018 would include both principal and interest, as per the terms of the loan.

To calculate the amount of interest due for the first year, we can use the formula:
Interest = (Principal x Rate x Time)
where Rate is the annual interest rate (5%) and Time is the fraction of the year for which the interest is being calculated (1/12, since the loan was taken on 1 December 2017 and the first payment is due on 1 December 2018).

So, Interest = ($84,000 x 0.05 x 1/12) = $350

Therefore, the first instalment payment made on 1 December 2018 would be:
$8400 (annual payment) - $350 (interest due for the first year) = $8050 (principal repayment)

Thus, the answer is D) $8400 principal plus $4200 interest.

Question 12

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 answer of The current portion of notes payable must...

Question 13

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 14

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 refers to the amount of the principal that will be paid within one year of the balance sheet date, making the statement true.

Question 15

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

Accepted Answer

A mortgage payable is a loan that is secured by a lien on property, meaning that if the borrower fails to make payments, the lender can foreclose on the property to satisfy the debt.

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 answer of On 1 January 2017,Bratios Company purchased equipment...

Question 17

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 $2 000 of the note payable is due within one year (on 1 July 2017), it will be classified as a current liability. The remaining $8 000 will be classified as a non-current liability since it is not due within one year. Therefore, $2 000 will be reported on the balance sheet as a current liability and $8 000 will be reported as a non-current liability.

Question 18

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

To find the updated principal balance, we need to find out how much of the first payment goes towards the principal and how much goes towards the interest. The interest for the first month is:

$155,000 x 9% ÷ 12 = $1,162.50

So, the amount of the first payment that goes towards the principal is:

$2,900 - $1,162.50 = $1,737.50

The updated principal balance is:

$155,000 - $1,737.50 = $153,262.50

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

Question 19

Instalment payments for mortgages are normally paid once per year.

Accepted Answer

Instalment payments for mortgages are typically paid monthly or bi-weekly, not once per year.

Question 20

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 answer of On 1 March 2017,Vinnie Services issued a...

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

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.)

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?

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.

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.

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?

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?

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 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.

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

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

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:

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.)

Instalment payments for mortgages are normally paid once per year.