8) On 1/1/16 a company borrowed $100,000 from a bank to be repaid in installment

Question

8) On 1/1/16 a company borrowed $100,000 from a bank to be repaid in installments of $20,000 per year with the first installment payment being due on 1/1/17. On the balance sheet as of 12/31/16, how much of this note would be report ed as a current liability and how much would be reported as a long-term liability? a) S0 as a current liability; $100,000 as a long-term liability b) $20,000 as a current liability; $80,000 as a long-term liability c) $20,000 as a current liability; $100,000 as a long-term liability d) $40,000 as a current liability; $60,000 as a long-term liability 9) Cl ub Co. issued a $50,000, 60-day note that was discounted by River Bank. The discount rate is 6%. The cash proceeds received by Club Co. on the date the note is issued are a) $50,500 b) $50,250 c) $49,500 d) $50,000 10) As part of the initial investment, Olin contributes accounts receivable that had a balance of $25,000 in the accounts of a sole proprietorship. If $1,250 of the accounts are completely worthless and the provision for possible future uncollectibility of the remaining accounts is to be $750, the amount credited to Olin, Capital for the new partnership is: a) $25,000 b) $24,250 c) $23,750 d) $23,000 11) B and C are partners with capital balances of $80,000 and $48,000 respectively. If Z buys one-half of C's interests for $30,000, for what amount will C's capital account be debited to record the admission of Z? a) $40,000 b) $80,000 c) $30,000 d) $24,000

Explanation / Answer

8. B. As only 20,000$ is due in the 1 year term.

20,000 as current liability and 80,000$ as long term liability.

9. C. 6% for the whole year so for 60 day rate = 6%*60/360= 1%

The cash proceeds are =. 50,000- (50,000*1/100)= 49,500$

10. After deducting the bad debts and the provision for bad debts the amount credited is 25000-2000= 23000$

11. Z buys 1/2 of C's interest = 48000/2= 24000$

So capital account of C will be debited by 24000$

Cash a/c is debited by 30000$.

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