1, 2017, larry\'s Bike Shop signed a $100,000, 9%, six-rnonth exec payable with
ID: 2511467 • Letter: 1
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1, 2017, larry's Bike Shop signed a $100,000, 9%, six-rnonth exec payable with the amount borrowed plus accrued interest due six months later on March 2018 arry's Bikes records ng enery for the note on December 31, 2017 In recoeding the intcrest at maturity write aur the entin, juwv 18, larry's Hikes wold wvdadanALrch / . 2018 ond1hen pick-i? which one row a timetine for both 2017 amd 201s to shisk ahout how much inderest expense ach year and the pesable am for each yeur A. Debie Interest Expense, $3,000 B. Debit Interest Expense, $1.,500. C. Debit Interest Payable, SI,500 D. Debit laterest Expense, $4,500 26. Goodwill is: A. Depleted over the greater of its estimated life or forty years B. Only recorded by the seller of a business. C. The value of a business as a whole, over and above the value of its net identifiable assets D. A tangible asset that is depreciated. Use the following information to answer #27 (Hint label each account which category it belongs to to help you determine what to use in your formula. The balance sheet of Sam's Sports, Inc. has the following partial list of account balances in no particular order Cash $102,000 $10,000 S 94,000 S182,000 $56,000 A/R Inventory Current Investments S10,000 Current Liabilities $133,000 Long term Liabilities$223,000 Prepaid Expenses $8,000 27. What is the Current Ratio? A. 2.54 B. 2.98 C. 2.92 D. 2.84 28. Elman's Plumbing purchases a new truck for $50,000. The truck has a useful life of 5 years and no residual value. What amount of depreciation expense will Elman's take in the second year using straight line depreciation? A. $20,000 B. $10,000 C. SO D. $40,000Explanation / Answer
Answer to Question No. 25:
Option B i.e. Debit Interest Expense, $1,500.
The Adjusting Entry on December 31, 2017 will record Interest Expense for 4 moth.
Interest Accrued on December 31, 2017 = $100,000 * 9% * 4/12 = $3,000
And, On March 1, 2018, the Interest Expense for 2 months will be recorded by debiting the Interest Expense.
Interest Expense = $100,000 * 9% * 2/12
Interest Expense = $1,500
The Journal entry to record the amount paid on Maturity will be:
Notes Payable 100,000
Interest Payable 3,000
Interest Expense 1,500
Cash 104,500
Answer to Question No. 26:
Option C i.e. The Value of a business as a whole, over and above the value of its net identifiable assets.
Goodwill is a intangible assets which denotes the value of the reputation of the business.
Answer to Question No. 27:
Option B i.e. 2.98.
Current Ratio = Current Assets / Current Liabilities
Current Assets = A/R + Inventory + Current Investments + Prepaid Expenses + Cash
Current Assets = $94,000 + $182,000 + $10,000 + $8,000 + $102,000
Current Assets = $396,000
Current Liabilities = $133,000
Current Ratio = 396,000 / 133,000
Current Ratio = 2.98
Answer to Question No. 28:
Option B i.e. $10,000.
Straight Line Depreciation per Year = (Cost – Salvage Value) / Useful Life
Straight Line Depreciation per Year = (50,000 – 0) / 5
Straight Line Depreciation per Year = $10,000
In Straight line Depreciation method, Depreciation for each year remains same. Therefore, Depreciation in the second year will be $10,000.
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