Question : Learning Objective 7-5 1) On November 1, 2011, The Mane Event, : 1253338

Learning Objective 7-5

1) On November 1, 2011, The Mane Event, Inc. borrowed $40,000 from a local bank for 24 months at 11% annual interest. Both principal and interest are due when the note matures. Which statement below is TRUE?

A) The note is a current-term liability on the balance sheet at Dec. 31, 2011.

B) The note is a long-term liability on the balance sheet at Dec. 31, 2012.

C) The transaction represents an investing activity.

D) The transaction represents a financing activity.

2) Borrowing cash is ________ activity.

A) an operating

B) an investing

C) a financing

D) both an investing activity and a financing

3) On January 1, 2011, Dew Drop Inn borrowed $80,000 at 8% interest. The loan will be repaid with equal annual installment payments of $8,900 made on the last day of each year, which is the companys yearend. Notes payable at December 31, 2011 equals ________.

A) $80,000 on the income statement

B) $80,000 on the balance sheet

C) $75,958 on the balance sheet

D) $77,500 on the balance sheet

4) On January 1, 2011, Dew Drop Inn borrowed $80,000 at 8% interest. The loan will be repaid with equal annual installment payments of $8,900 made on the last day of each year, which is the companys yearend. Compared to the prior year’s interest expense on this note, interest expense for the year ended December 31, 2012 (2nd year) is ________.

A)  more because the note payable balance at January 1, 2012 is less

B) less because the note payable balance at January 1, 2012 is less

C)  more because the note payable balance at January 1, 2012 is more

D)  the same

5) On October 31, 2011, Bondable, Inc. issued $20,000 of 10-year, 6% bonds at 100. The bonds pay interest annually on October 31. On its income statement for the year ended December 31, 2011, the year the bonds were issued, Bondable will show Interest expense of ________.

A) $0

B) $200

C) $1,200

D) $120

6) On October 31, 2011, Bondable, Inc. issued $20,000 of 10-year, 6% bonds at 100. The bonds pay interest annually on October 31. On its statement of cash flows for the year ended December 31, 2011, Bondable will show Cash paid for interest of ________.

A) $0

B) $(200) in the cash flows from financing activities section of the statement

C) $(1,200) in the cash flows from operating activities section of the statement

D) $(120) in the cash flows from operating activities section of the statement

7) On October 31, 2011, Bondable, Inc. issued $20,000 of 10-year, 6% bonds at 100. The bonds pay interest annually on October 31. Which of the following will appear on Bondable’s balance sheet at December 31, 2011?

A) Bonds payable $18,800

B) Bonds payable $20,000

C) Bonds payable $21,200

D) Interest expense $1,200

8) On November 30, 2011, Just in Thyme, Inc. issued $10,000 of 20-year, 9% bonds at 100. The bonds pay interest semiannually on May 31 and November 30. On its income statement for the year ended December 31, 2011, the year the bonds were issued, Just in Thyme will show Interest expense of ________.

A) $0

B) $900

C) $450

D) $75

9) On November 30, 2011, Just in Thyme, Inc. issued $10,000 of 20-year, 9% bonds at 100. The bonds pay interest semiannually on May 31 and November 30. On its statement of cash flows for the year ended December 31, 2011, Just in Thyme will show Cash paid for interest of ________.

A) $0

B) $(75) in the cash flows from financing activities section of the statement

C) $(450) in the cash flows from operating activities section of the statement

D) $(900) in the cash flows from operating activities section of the statement

10) On November 30, 2011, Just in Thyme, Inc. issued $10,000 of 20-year, 9% bonds at 100. The bonds pay interest semiannually on May 31 and November 30. Which of the following will appear on Just in Thyme’s balance sheet at December 31, 2011?

A) Bonds payable $10,900

B) Bonds payable $10,000

C) Bonds payable $9,100

D) Interest expense $900