MC Qu. 145 On July 1, Shady Creek Resort... On July 1, Shady Creek Resort borrow
ID: 2339268 • Letter: M
Question
MC Qu. 145 On July 1, Shady Creek Resort...
On July 1, Shady Creek Resort borrowed $390,000 cash by signing a 10-year, 9% installment note requiring equal payments each June 30 of $60,770. What is the journal entry to record the first annual payment?
Multiple Choice:
Debit Cash $390,000; debit Interest Expense $60,770; credit Notes Payable $450,770.
Debit Interest Expense $60,770; credit Cash $60,770.
Debit Interest Expense $35,100; credit Cash $35,100.
Debit Interest Expense $35,100; debit Interest Payable $25,670; credit Cash $60,770.
Debit Interest Expense $35,100; debit Notes Payable $25,670; credit Cash $60,770.
MC Qu. 148 On January 1, Year 1, Stratton...
On January 1, Year 1, Stratton Company borrowed $210,000 on a 10-year, 10% installment note payable. The terms of the note require Stratton to pay 10 equal payments of $34,177 each December 31 for 10 years. The required general journal entry to record the payment on the note on December 31, Year 2 is:
Multiple Choice:
Debit Interest Expense $21,000; debit Notes Payable $13,177; credit Cash $34,177.
Debit Notes Payable $21,000; debit Interest Expense $13,177; credit Cash $34,177.
Debit Interest Expense $19,682; debit Notes Payable $14,495; credit Cash $34,177.
Debit Notes Payable $34,177; credit Cash $34,177.
Debit Notes Payable $210,000; debit Interest Expense $13,177; credit Cash $34,177.
MC Qu. 149 On January 1, a company issues...
On January 1, a company issues bonds dated January 1 with a par value of $220,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $228,930. The journal entry to record the issuance of the bond is:
Multiple Choice:
Debit Cash $228,930; credit Discount on Bonds Payable $8,930; credit Bonds Payable $220,000.
Debit Cash $220,000; debit Premium on Bonds Payable $8,930; credit Bonds Payable $228,930.
Debit Bonds Payable $220,000; debit Bond Interest Expense $8,930; credit Cash $228,930.
Debit Cash $228,930; credit Bonds Payable $228,930.
Debit Cash $228,930; credit Premium on Bonds Payable $8,930; credit Bonds Payable $220,000.
Explanation / Answer
Requirement MC Q-145 Year Equal annual Payments PVIR@9% 0 1 Present Value Interest component 10 60770 0.91743119 55752 5018 9 60770 0.84167999 51149 9621 8 60770 0.77218348 46926 13844 7 60770 0.70842521 43051 17719 6 60770 0.64993139 39496 21274 5 60770 0.59626733 36235 24535 4 60770 0.54703424 33243 27527 3 60770 0.50186628 30498 30272 2 60770 0.46042778 27980 32790 1 60770 0.42241081 25670 35100 607700 390001 217699 The last choice i.e 5th one has the correct answer. It can be evidenced from the above table Interest expense Debit 35100 Notes Payable Debit 25670 Cash Credit 60770 Requirement MC Q-148 Year Equal annual Payments PVIR@9% 0 1 Present Value Interest component 10 34177 0.90909091 31070 3107 9 34177 0.82644628 28245 5932 8 34177 0.7513148 25678 8499 7 34177 0.68301346 23343 10834 6 34177 0.62092132 21221 12956 5 34177 0.56447393 19292 14885 4 34177 0.51315812 17538 16639 3 34177 0.46650738 15944 18233 2 34177 0.42409762 14494 19683 1 34177 0.38554329 13177 21000 341770 210003 131767 The Third choice has the correct answer which can be evidenced from the above table Interest expense Debit 19682 Notes Payable Debit 14495 Cash Credit 34177 Requirement MC Q-149 Year Interest paid PVIF@8% Present value 0 1 1 Jun-30 9900 0.96153846 9519.230769 Dec-31 9900 0.92455621 9153.106509 2 Jun-30 9900 0.88899636 8801.063951 Dec-31 9900 0.85480419 8462.561491 3 Jun-30 9900 0.82192711 8137.078357 Dec-31 9900 0.79031453 7824.113805 4 Jun-30 9900 0.75991781 7523.186351 Dec-31 9900 0.73069021 7233.83303 5 Jun-30 9900 0.70258674 6955.608682 Dec-31 9900 0.67556417 6688.085271 5 Dec-31 220000 0.67556417 148624.1171 Total 228930 Less : Face Value 220000 Premium on bonds 8930 The last choice i.e 5th one has the correct answer The journal entry for issuance of bonds is Cash Debit 228930 Bonds Payable Credit 220000 Premium on bonds Credit 8930
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