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.

Answer 1

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