Question : 21) On January 1, 2011, Ace Electronics borrowed $40,000 a : 1253318

21) On January 1, 2011, Ace Electronics borrowed $40,000 on a five-year, 7% note. The loan will be repaid in 5 equal installments of $9,756 each year, beginning on December 31, 2011. With each successive payment on the note, ________ of the payment will be applied to the loan principal.

A) more

B) the same amount

C) less

D) The answer cannot be determined from the information given.

22) On January 1, 2011, Ace Electronics borrowed $40,000 on a five-year, 7% note. Ace will pay only the interest on the loan on December 31 each year. The entire principal will be repaid on December 31, 2015, the last interest payment date. On its statement of cash flows for the year ended December 31, 2011, Ace will show cash paid for interest as ________ activity.

A) $(9,756), an operating

B) $(2,800), a financing

C) $(9,756), a financing

D) $(2,800), an operating

23) On January 1, 2012, Ace Electronics borrowed $40,000 on a five-year, 7% note. Ace will pay only the interest on the loan on December 31 each year. The entire principal will be repaid on December 31, 2016, the last interest payment date. Interest expense for the year ended December 31, 2013 will be ________ interest expense for 2012.

A) higher than

B) the same as

C) lower than

D) The answer cannot be determined from the information given.

24) On January 1, 2012, Ace Electronics borrowed $40,000 on a five-year, 7% note. Ace will pay only the interest on the loan on December 31 each year. The entire principal will be repaid on December 31, 2016, the last interest payment date. Notes payable at December 31, 2013 will be ________ notes payable at December 31, 2012.

A) higher than

B) the same as

C) lower than

D) The answer cannot be determined from the information given.

25) B. Row, Inc. needed some long-term financing and arranged for a 10-year, $100,000, 7% mortgage loan on January 1, 2010. Annual payments of $14,238 will be made on December 31 each year. What effect will the payments have on the accounting equation?

A) Total assets, liabilities and shareholders’ equity will all decrease.

B) Only total assets and total liabilities will decrease.

C) Only total assets and total shareholders’ equity will decrease.

D) Total liabilities will increase and total shareholders’ equity will decrease.

26) B. Row, Inc. needed some long-term financing and arranged for a 10-year, $100,000, 7% mortgage loan on January 1, 2010. Annual payments of $14,238 will be made on December 31 each year. After the first payment, Mortgage payable will have a balance of ________.

A) $100,000

B) $85,762

C) $92,762

D) $93,000

27) B. Row, Inc. needed some long-term financing and arranged for a 10-year, $100,000, 7% mortgage loan on January 1, 2010. Annual payments of $14,238 will be made on December 31 each year. After the SECOND payment, Mortgage payable will have a balance of ________ (rounded to the nearest $1).

A) $100,000

B) $85,762

C) $85,017

D) $86,000

28) B. Row, Inc. needed some long-term financing and arranged for a 10-year, $100,000, 7% mortgage loan on January 1, 2010. Annual payments of $14,238 will be made on December 31 each year. Interest expense for the year ended December 31, 2012 will be ________ interest expense for 2011.

A) higher than

B) the same as

C) lower than

D) The answer cannot be determined from the information given.

29) When a company borrows money for longer than one year, that obligation is called a long-term liability.

30) Principal = rate multiplied by time multiplied by interest.