Question : 61.Refer to the information above. At December 31, Year 1, : 1237449

 

 

61.Refer to the information above. At December 31, Year 1, the adjusting entry with respect to this note includes a:   

A.Credit to Interest Payable for $1,600.

 

B.Credit to Notes Payable for $1,600.

 

C.Debit to Interest Expense for $3,200.

 

D.Credit to Cash for $3,200.

 

 

 

 

On September 1, 2015, Able Company purchased a building from Regal Corporation by paying $200,000 cash and issuing a one-year note payable for the balance of the purchase price. Interest on the note is stated at an annual rate of 9% and is paid at maturity. In its December 31, 2015, balance sheet, Able correctly presented the note and interest payable as follows: 

 

62.Refer to the information above. How much must Able pay Regal Corporation on September 1, 2016, when the note matures?   

A.$600,000.

 

B.$618,000.

 

C.$654,000.

 

D.Some other amount.

$600,000 + ($600,000 × .09) = $654,000

 

 

 

63.Refer to the information above. What is the amount of the interest expense Able will recognize on this note in 2016?   

A.$18,000.

 

B.$31,500.

 

C.$36,000.

 

D.$54,000.

$600,000 × .09 × 8/12 = $36,000

 

 

 

64.Refer to the information above. What is the total cash (including interest) paid for the building purchased by Able?   

A.$800,000.

 

B.$836,000.

 

C.$854,000.

 

D.$816,000.

$200,000 + $600,000 + $54,000 = $854,000

 

 

 

65.Refer to the information above. The adjusting entry at December 31, 2015, with respect to this note included:   

A.A debit to Interest Expense for $18,000.

 

B.A credit to Cash for $18,000.

 

C.A credit to Notes Payable for $18,000.

 

D.A credit to Interest Expense for $18,000.

 

 

 

 

On September 1, 2015, Select Company borrowed $600,000 from a bank and signed a 12%, six-month note payable, with interest on the note due at maturity.

 

66.Refer to the information above. The total amount of the current liability (including interest payable) for this loan that appears in Select Company’s balance sheet at December 31, 2015, is:   

A.$600,000.

 

B.$624,000.

 

C.$636,000.

 

D.$672,000.

$600,000 + ($600,000 × 12% × 4/12) = $624,000

 

 

 

67.Refer to the information above. Assume Select made no adjusting entry with respect to this note before preparing the financial statements at December 31, 2015. What is the effect of this error on the financial statements for 2015?   

A.Total liabilities are overstated.

 

B.Net income is overstated.

 

C.Owners’ equity is understated.

 

D.Interest Payable is overstated.

 

 

 

 

68.Sanford Corporation borrowed $90,000 by issuing a 12%, six-month note payable, all due at the maturity date. After one month, the company’s total liability for this loan amounts to:   

A.$90,000.

 

B.$90,450.

 

C.$90,900.

 

D.$91,800.

$90,000 + ($90,000 × 12% × 1/12) = $90,900

 

 

 

69.On November 1 of the current year, Garcia Company borrowed $50,000 by issuing a 9%, six-month note payable, all due at maturity date. Interest expense on this note to be recognized during the current year amounts to:   

A.$500.

 

B.$750.

 

C.$1,500.

 

D.$4,500.

$50,000 × .09 × 2/12 = $750

 

 

 

70.The current portion of long-term debt should be reported:   

A.Separately in the long-term liabilities section of the balance sheet.

 

B.In the long-term liabilities section of the balance sheet, along with the other long-term debt.

 

C.In the current liabilities section of the balance sheet.

 

D.In a separate section of the balance sheet, between long-term liabilities and shareholders’ equity.