Question : 121. A corporation borrowed $125,000 cash by signing a 5-year, 9% : 1225300

121. A corporation borrowed $125,000 cash by signing a 5-year, 9% installment note requiring equal annual payments each December 31 of $32,136. What journal entry would the issuer record for the first payment? 

A. Debit Interest Expense $7,136; debit Notes Payable $25,000; credit Cash $32,136.

B. Debit Notes Payable $32,136; debit Interest Payable $11,250; credit Cash $43,386.

C. Debit Interest Expense $11,250; debit Notes Payable $20,886; credit Cash $32,136.

D. Debit Notes Payable $32,136; credit Cash $32,136.

E. Debit Notes Payable $11,250; credit Cash $11,250.

122. On January 1, Year 1, Merrill Company borrowed $100,000 on a 10-year, 7% installment note payable. The terms of the note require Merrill to pay 10 equal payments of $14,238 each December 31 for 10 years. The required general journal entry to record the first payment on the note on December 31, Year 1 is: 

A. Debit Interest Expense $7,000; debit Notes Payable $7,238; credit Cash $14,238.

B. Debit Notes Payable $7,000; debit Interest Expense $7,238; credit Cash $14,238.

C. Debit Notes Payable $10,000; debit Interest Expense $7,000; credit Cash $17,000.

D. Debit Notes Payable $14,238; credit Cash $14,238.

E. Debit Notes Payable $10,000; debit Interest Expense $4,238; credit Cash $14,238.

123. On January 1, a company issues bonds dated January 1 with a par value of $300,000. 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 $312,177. The journal entry to record the issuance of the bond is: 

A. Debit Cash $312,177; credit Discount on Bonds Payable $12,177; credit Bonds Payable $300,000.

B. Debit Cash $300,000; debit Premium on Bonds Payable $12,177; credit Bonds Payable $312,177.

C. Debit Bonds Payable $300,000; debit Interest Expense $12,177; credit Cash $312,177.

D. Debit Cash $312,177; credit Premium on Bonds Payable $12,177; credit Bonds Payable $300,000.

E. Debit Cash $312,177; credit Bonds Payable $312,177.

124. On January 1, a company issues bonds dated January 1 with a par value of $300,000. 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 $312,177. The journal entry to record the first interest payment using straight-line amortization is: 

A. Debit Interest Payable $13,500; credit Cash $13,500.00.

B. Debit Interest Expense $12,282.30; debit Discount on Bonds Payable $1,217.70; credit Cash $13,500.00.

C. Debit Interest Expense $14,717.70; credit Premium on Bonds Payable $1,217.70; credit Cash $13,500.00.

D. Debit Interest Expense $14,717.70; credit Discount on Bonds Payable $1,217.70; credit Cash $13,500.00.

E. Debit Interest Expense $12,282.30; debit Premium on Bonds Payable $1,217.70; credit Cash $13,500.00.

125. On January 1, a company issues bonds dated January 1 with a par value of $300,000. 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 $312,177. The journal entry to record the first interest payment using the effective interest method of amortization is: 

A. Debit Interest Expense $12,487.08; debit Premium on Bonds Payable $1,012.92; credit Cash $13,500.00.

B. Debit Interest Payable $13,500; credit Cash $13,500.00.

C. Debit Interest Expense $12,487.08; debit Discount on Bonds Payable $1,012.92; credit Cash $13,500.00.

D. Debit Interest Expense $14,717.70; credit Premium on Bonds Payable $1,217.70; credit Cash $13,500.00.

E. Debit Interest Expense $12,282.30; debit Premium on Bonds Payable $1,217.70; credit Cash $13,500.00.

126. On January 1, a company issues bonds dated January 1 with a par value of $400,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $383,793. The journal entry to record the issuance of the bond is: 

A. Debit Cash $400,000; debit Discount on Bonds Payable $16,207; credit Bonds Payable $416,207.

B. Debit Cash $383,793; debit Discount on Bonds Payable $16,207; credit Bonds Payable $400,000.

C. Debit Bonds Payable $400,000; debit Interest Expense $16,207; credit Cash $416,207.

D. Debit Cash $383,793; debit Premium on Bonds Payable $16,207; credit Bonds Payable $400,000.

E. Debit Cash $383,793; credit Bonds Payable $383,793.

127. On January 1, a company issues bonds dated January 1 with a par value of $400,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $383,793. The journal entry to record the first interest payment using straight-line amortization is: 

A. Debit Interest Payable $14,000.00; credit Cash $14,000.00.

B. Debit Interest Expense $14,000.00; credit Cash $14,000.00.

C. Debit Interest Expense $15,620.70; credit Discount on Bonds Payable $1,620.70; credit Cash $14,000.00.

D. Debit Interest Expense $12,379.30; debit Discount on Bonds Payable $1,620.70; credit Cash $14,000.00.

E. Debit Interest Expense $15,620.70; credit Premium on Bonds Payable $1,620.70; credit Cash $14,000.00.

128. On January 1, a company issues bonds dated January 1 with a par value of $400,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $383,793. The journal entry to record the first interest payment using the effective interest method of amortization is: 

A. Debit Interest Expense $12,648.28; debit Premium on Bonds Payable $1,351.72; credit Cash $14,000.00.

B. Debit Interest Payable $14,000.00; credit Cash $14,000.00.

C. Debit Interest Expense $12,648.28; debit Discount on Bonds Payable $1,351.72; credit Cash $14,000.00.

D. Debit Interest Expense $15,351.72; credit Discount on Bonds Payable $1,351.72; credit Cash $14,000.00.

E. Debit Interest Expense $15,351.72; credit Premium on Bonds Payable $1,351.72; credit Cash $14,000.00.

129. All of the following statements regarding accounting treatments for liabilities under U.S. GAAP and IFRS are True except: 

A. Accounting for bonds and notes under U.S. GAAP and IFRS is similar.

B. Both U.S. GAAP and IFRS require companies to distinguish between operating leases and capital leases.

C. The criteria for identifying a lease as a capital lease are more general under IFRS.

D. Both U.S. GAAP and IFRS require companies to record costs of retirement benefits as employees work and earn them.

E. Use of the fair value option to account for bonds and notes is not acceptable under U.S. GAAP or IFRS.

130. On January 1, $300,000 of par value bonds with a carrying value of $310,000 is converted to 50,000 shares of $5 par value common stock. The entry to record the conversion of the bonds includes all of the following entries except: 

A. Debit to Bonds Payable $310,000.

B. Debit to Premium on Bonds Payable $10,000.

C. Credit to Common Stock $250,000.

D. Credit to Paid-In Capital in Excess of Par Value, Common Stock $60,000.

E. Debit to Bonds Payable $300,000.