Practice Midterm Quiz 15a

Question 1

65. Rocky Company borrowed $10,000 on April 1, 20X1. The loan has an annual interest rate of 14%. Rocky Company repaid the loan in full (both principal and interest) on January 31, 20X2; no payments were made on the loan between April 1, 20X1 and January 31, 20X2. [Note: The correct adjusting entry with respect to this loan was recorded on December 31, 20X1.] The single journal entry to record the repayment of the loan (both principal and interest) on January 31, 20X2 includes aa. Credit to Interest Payable for $1,283
    b. Debit to Interest Payable for $1,283
    c. Credit to Interest Payable for $1,050
    d. Debit to Interest Payable for $1,050
    e. Credit to Interest Expense for $1,167
    f. Debit to Interest Expense for $1,167
    g. Credit to Interest Expense for $1,400
    h. Debit to Interest Expense for $1,400

Answer 1

65.
Solution = D

	Loan Payable (principal amount)	10,000 (debit)
	Interest Payable (9 months; in adjusting entry)	1,050 (debit)
	Interest Expense (1 month; $10,000 x .14 x 1/12)	117 (debit)
		Cash		11,167 (credit)

Question 2

66. Borrower Company borrowed $100,000 from Bank B on May 1 of Year 1. The annual interest rate on the loan is 12%. Borrower Company will repay the entire loan, both principal and accrued interest, after two years on April 30 of Year 3. So, Borrower Company will pay NO CASH to Bank B between May 1 of Year 1 and April 30 of Year 3. [Note: There is no interest compounding with this loan. So, Borrower Company never owes any interest on the accrued interest. Instead, Borrower Company only owes interest on the original $100,000 borrowed amount.]

What is Borrower Company’s INTEREST EXPENSE with respect to this loan in Year 3?

a. $12,000
b. $8,000
c. $4,000
d. $16,000
e. $24,000
f. $20,000

Answer 2

66.
Solution = C

Year 1: $100,000 × 0.12 × (8/12) = $8,000
Year 2: $100,000 × 0.12 × (12/12) = $12,000
Year 3: $100,000 × 0.12 × (4/12) = $4,000

Question 3

67. On January 1 of Year 1, Kylie Ramona borrowed $400,000 under a mortgage note payable contract. The annual interest rate on this mortgage is 12% compounded monthly. This is a 15-year, fully-amortizing monthly mortgage. The monthly payments are $4,800.67 and are due at the end of each month, starting on January 31 of Year 1.

Which ONE of the following is included in the journal entry made by Kylie Ramona on February 28 of Year 1 to record the payment in cash of $4,800.67? Note: The February 28 payment is the SECOND monthly payment.

a. DEBIT to Interest Expense for $3,991.99
b. DEBIT to Interest Expense for $800.67
c. DEBIT to Mortgage Note Payable for $800.67
d. DEBIT to Mortgage Note Payable for $4,000.00
e. DEBIT to Mortgage Note Payable for $4,800.67

Answer 3

67.
Solution = A
Interest Expense 3,991.99
Mortgage Note Payable 808.68
Cash 4,800.67
Payment Date / Amount / Interest / Principal / Balance 400000
31 Jan / $4800.67 / 4000 / 800.67 / 399199.33
28 Feb / $4800.67 / 3991.99 / 808.68 / 398390.65

Question 4

68. On January 1 of Year 1, Kylie Ramona borrowed $400,000 under a mortgage note payable contract. The annual interest rate on this mortgage is 12% compounded monthly. This is a 15-year, fully-amortizing monthly mortgage. The monthly payments are $4,800.67 and are due at the end of each month, starting on January 31 of Year 1.

What is the REMAINING BALANCE of the mortgage note payable as of February 28 of Year 1 after the monthly payment is made on that date? Note: The February 28 payment is the SECOND monthly payment.

a. $390,398.66
b. $407,991.99
c. $392,008.01
d. $398,390.65
e. $409,601.34

Answer 4

68.
Solution = D
See the solution for Question 55.

Question 5

69. On January 1 of Year 1, Kylie Ramona borrowed $400,000 under a mortgage note payable contract. The annual interest rate on this mortgage is 12% compounded monthly. This is a 15-year, fully-amortizing monthly mortgage. The monthly payments are $4,800.67 and are due at the end of each month, starting on January 31 of Year 1. – On January 31 of Year 1, Kylie Ramona decided to pay an extra $5,000.00 on the mortgage, so the total payment on that date was $9,800.67. Kylie Ramona made the regular $4,800.67 payment on February 28 of Year 1.

What is the REMAINING BALANCE of the mortgage note payable as of February 28 of Year 1 after the monthly payment is made on that date? Note: The February 28 payment is the SECOND monthly payment. Also note that an extra $5,000.00 was paid on January 31.

a. $393,390.65
b. $393,340.65
c. $385,398.66
d. $407,941.99
e. $392,008.01
f. $398,390.65
g. $409,601.34

Answer 5

69.
Solution = B

Payment Date / Amount / Interest / Principal / Balance 400,000
31 Jan / $9800.67 / 4000 / 5800.67 / 394,199.33
28 Feb / $4800.67 / 3941.99 / 858.68 / 393,340.65

Question 6

70. Which ONE of the following is NOT one of Disney’s 5 operating segments?

a. Media Networks
b. Parks and Resorts
c. Studio Entertainment
d. Food and Beverage
e. Interactive

Answer 6

70.

Answer = D

Question 7

71. Which ONE of the following is NOT one of the 5 movie company labels owned by Disney?

a. Touchstone
b. Marvel
c. Searchlight
d. Pixar
e. Lucasfilm

Answer 7

71.

Answer = C