Question 1

Perez Co. receives $2,200,000 when it issues a $2,200,000, 8%, mortgage note payable to finance the construction of a building at December 31, 2014. The terms provide for semiannual installment payments of $140,820 on June 30 and December 31.
Instructions
Prepare the journal entries to record the mortgage loan and the first two installment payments.

Accepted Answer

The answer of Perez Co. receives $2,200,000 when it issues...

Question 2

Molina Corporation issues 4,000, 10-year, 8%, $1,000 bonds dated January 1, 2014, at 103. The journal entry to record the issuance will show a

Accepted Answer

A)  debit to Cash of $4,000,000. 
B)  debit to Premium on Bonds Payable for $120,000. 
C)  credit to Bonds Payable for $4,000,000. 
D)  credit to Cash for $4,120,000.

Question 3

The interest charged on a $250,000 note payable, at the rate of 6%, on a 90-day note would be

Accepted Answer

A)  $15,000. 
B)  $7,500. 
C)  $3,750. 
D)  $1,250.

Question 4

If bonds are issued at a discount, the issuing corporation will pay a principal amount less than the face amount of the bonds on the maturity date.

Accepted Answer

A) True 
 B)False

Question 5

The current portion of long-term debt should

Accepted Answer

A)  be paid immediately. 
B)  be reclassified as a current liability. 
C)  be classified as a long-term liability. 
D)  not be separated from the long-term portion of debt.

Question 6

Bond interest paid by a corporation is an expense, whereas dividends paid are not an expense of the corporation.

Accepted Answer

A) True 
 B)False

Question 7

The following totals for the month of April were taken from the payroll records of Metz Company.  The journal entry to record the monthly payroll on April 30 would include a

Accepted Answer

A)  debit to Salaries and Wages Expense for $30,000. 
B)  credit to Salaries and Wages Payable for $30,000. 
C)  debit to Salaries and Wages Payable for $30,000. 
D)  debit to Salaries and Wages Expense for $19,905.

Question 8

Whitmore Corporation Issues a £1,800,000, 10%, 10-year mortgage on December 31, 2014. The terms call for semi-annual installment payments of £144,435.The entry to record the first installment payment will include

Accepted Answer

A)  a debit to Interest Payment of £144,435. 
B)  a debit to Mortgage Notes Payable of £54,435. 
C)  a debit to Interest Expense of £180,000. 
D)  a credit to cash of £144,435.

Question 9

Winrow Company received proceeds of $565,500 on 10-year, 8% bonds issued on January 1, 2013. The bonds had a face value of $400,000, pay interest annually on December 31st, and have a call price of 101. Winrow uses the straight-line method of amortization. What is the carrying value of the bonds on January 1, 2015?

Accepted Answer

A)  $600,000 
B)  $572,400 
C)  $593,100 
D)  $568,950

Question 10

Chang Company retired bonds with a face amount of ¥60,000,000 at 98 when the carrying value of the bond was ¥59,780,000. The entry to record the retirement would include a

Accepted Answer

A)  gain on bond redemption of ¥980,000. 
B)  loss on bond redemption of ¥980,000. 
C)  loss on bond redemption of ¥1,200,000. 
D)  gain on bond redemption of ¥1,420,000.

Question 11

Morales Company issued $400,000 of 8%, 5-year bonds at 106, which pays interest annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?

Accepted Answer

A)  $424,000 
B)  $421,600 
C)  $419,200 
D)  $426,400

Question 12

Steiner Sales Company has the following selected accounts after posting adjusting entries:  Instructions
Prepare the current liability section of Steiner Sales Company's balance sheet, assuming $15,000 of the mortgage is payable next year.

Accepted Answer

The answer of Steiner Sales Company has the following selected...

Question 13

Bonds with a face value of $400,000 and a quoted price of 98½ have a selling price of

Accepted Answer

A)  $393,000. 
B)  $392,200. 
C)  $392,020. 
D)  $394,000.

Question 14

Liabilities are classified as current or long-term based on their

Accepted Answer

A)  description. 
B)  payment terms. 
C)  due date. 
D)  amount.

Exam 10: Reporting and Analyzing Liabilities