1. Chapter 12 Sample Problems

2. 1. Flipco signed a 10-year note payable on January 1, 2016, of $800,000. The note requires annual principal payments each December 31, of $80,000 plus interest at 5%. The entry to record the annual payment on December 31, 2017, includes:

3. 2. Daniels’ bonds payable carry a stated interest rate of 5%, and the market rate of interest is 7%. The price of Daniels’ bonds will be at:

4. 3.

5. 4. Alan Smith Antiques issued its 7%, 20-year bonds payable at a price of $846,720 (face value is $900,000). The company uses the straight- line amortization method for the bond discount or premium. Interest expense for each year is: (Round your answer to the nearest whole dollar.)

6. 5. Nicholas Smith Fitness Gym has $700,000 of 20-year bonds payable outstanding. These bonds had a discount of $56,000 at issuance, which was 10 years ago. The company uses the straight-line amortization method. The current carrying amount of these bonds payable is:

7. 6. Vasquez issued a $400,000 face value, 8%, 20-year bond at 95
6. Vasquez issued a $400,000 face value, 8%, 20-year bond at 95. Which of the following is the correct journal entry to record the retirement of the bond at maturity?

8. 7. Sassy, Inc.’s trial balance shows $200,000 face value of bonds with a discount balance of $2,000. The bonds mature in 10 years. How will the bonds be presented on the balance sheet?

10. 9. Mike Gordon wishes to have $80,000 in five years
9. Mike Gordon wishes to have $80,000 in five years. If he can earn annual interest of 2%, how much must he invest today? (Use present value of $1 table, future value of $1 table, present value of annuity of $1 table, and future value of annuity of $1 table.)

11. 10. Hicks Corporation issued $500,000 of 5%, 10-year bonds payable at a price of 92. The market interest rate at the date of issuance was 6%, and the bonds pay interest semiannually. The journal entry to record the first semiannual interest payment using the effective-interest amortization method is:

12. 11.
2016
Jul. 1 Purchased equipment costing $450,000 by issuing a fifteen-year, 14% note payable. The note requires annual principal payments of $30,000 plus interest each Jul. 1.
Dec. 31 Accrued interest on the note payable.
2017
Jul. 1 Paid the first installment on the note.
Requirements:
Journalize the transactions for the company.
Considering the given transactions only, what are Cargo Video Productions’ total liabilities on December 31, 2017?

13. 12. Kanta Company purchased a building and land with a fair market value of $450,000 (building = $300,000 and land = $150,000) on January 1, Kanta signed a 20-year, 7% mortgage payable. Kanta will make monthly payments of $3,

14. 13.

15. 14. 2016 Mar. 1 Borrowed $525,000 from Longwood Bank
Mar. 1 Borrowed $525,000 from Longwood Bank. The fifteen-year, 7% note requires payments due annually, on March 1. Each payment consists of $35,000 principal plus one year’s interest. Dec. 1 Mortgaged the warehouse for $550,000 cash with Sandi Bank. The mortgage requires monthly payments of %7,000. The interest rate on the note is 8% and accrues monthly. The first payment is due on January 1, Dec. 31 Recorded interest accrued on the Sandi Bank note. Dec. 31 Recorded interest accrued on the Longwood Bank note Jan. 1 Paid Sandi Bank monthly mortgage payment. Feb. 1 Paid Sandi Bank monthly mortgage payment. Mar. 1 Paid Sandi Bank monthly mortgage payment. Mar. 1 Paid first installment on note due to Longwood Bank.

16. Requirements:
Journalize the transactions in the Great Value Pharmacies general journal. Round all answers to the nearest dollar. Explanations are not required.
Prepare the liabilities section of the balance sheet for Great Value Pharmacies on March 1, 2017 after all the journal entries are recorded.

17. 15. George’s Hamburgers issued 5%, 10-year bonds payable at 90 on December 31, At December 31, 2018, George reported the bonds payable as follows: George’s pays semiannual interest each June 30 and December 31. (Assume bonds payable are amortized using the straight-line amortization method.) Requirements: