Ex 2 Practice Problems

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Troy University, Troy *

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2292

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Accounting

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Apr 25, 2024

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docx

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2

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1. If 2,000,000 of 10% bonds are issued at 97, the amount received from the sale is a. $2,060,000 b. $2,000,000 c. $2,100,000 d. $1,940,000 2. Levi Company issued $200,000 of 12% bonds on January 1 at face value. The bonds pay interest semiannually on January 1 and July 1. The bonds are dated January 1 and mature in five years in January. The total interest expense related to these bonds for the current year ending on December 31 is a. $2,000 b. $6,000 c. $18,000 d. $24,000 3. Bonds with a face amount of 1,000,000 are sold for 106. The journal entry to record the issuance is a. Cash 1,000,000 Premium on Bonds Payable 60,000 Bonds Payable 1,060,000 b. Cash 1,060,000 Premium on Bonds Payable 60,000 Bonds Payable 1,000,000 c. Cash 1,060,000 Discount on Bonds Payable 60,000 Bonds Payable 1,000,000 d. Cash 1,060,000 Bonds Payable 1,060,000 4. On January 1, Gemstone Company obtained a $165,000, 10-year 7% installment note from Guarantee Bank. The note requires annual payments of $23, 492, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $11,550 and principal repayment of $11,942. The journal entry to record the payment of the first annual amount due on the note would include a a. Debit to Cash for $11,942 b. Credit to Interest Payable for $11,550 c. Debit to Notes Payable for $11,942 d. Debit to Interest Expense for $23,492
5. Jarvis Corporation makes an investment in 100 shares of Saxton Company's common stock. The stock was purchased for $45 per share plus a $280 brokerage fee. The entry for the purchase is a. Cash 4,500 Investments- Saxton Company Stock 4,500 b. Investments- Saxton Company Stock 4,780 Cash 4,780 c. Investments- Saxton Company Stock 4,500 Brokerage Fee Expense 280 Cash 4,780 d. Investments- Saxton Company Stock 4,500 Cash 4,500 6. Zach Company owns 45% of voting stock of Tomas Corp. and uses the equity method recording this investment. Tomas Corp. has $20,000 in net income. Zach Company's entry would include a a. Credit to cash for $9,000 b. Debit to the investment account for $9,000 c. Credit to the investment account for $9,000 d. Credit to a loss account for $9,000 7. Ruben Company purchased $100,000 of Evan's Company bonds at 100 plus $1,500 in accrued interest. The bond interest rate is 8% and interest is paid semiannually. The journal entry to record the purchase would be a. Debit Investments- Evans Company Bonds, $101,500; Credit Cash, $101,500 b. Debit Investments- Evans Company Bonds, $100,000; Credit Interest Revenue, $1,500, and Cash, $98,500 c. Debit Investments- Evans Company Bonds, $100,000; Credit Interest Receivable, $1,500, and Cash, $101,500 d. Debit Investments- Evans Company Bonds, $100,000; Credit Cash, $100,000
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