30) On January 1, 2018, Benbrook Company purchased equipment and signed a six-year mortgage note
for $160,000 at 15%. The note will be paid in equal annual installments of $42,278, beginning January 1,
2019. Calculate the balance of Mortgage Payable after the payment of the first installment. (Round your
answer to the nearest whole number.)
A) $24,000
B) $117,722
C) $141,722
D) $120,702
31) On January 1, 2018, Allgood Company purchased equipment and signed a six-year mortgage note for
$186,000 at 15%. The note will be paid in equal annual installments of $49,148, beginning January 1, 2019.
Calculate the portion of interest expense paid on the third installment. (Round your answer to the nearest
whole number.)
A) $49,148
B) $21,048
C) $27,900
D) $164,752
32) On January 1, 2018, Earnest Company purchased equipment and signed a six-year mortgage note
for$80,000 at 15%. The note will be paid in equal annual installments of $21,139, beginning January 1,
2019. Calculate the portion of principal paid on the third installment. (Round any intermediate
calculations to two decimal places, and your final answer to the nearest dollar.)
A) $12,086
B) $12,000
C) $21,139
D) $9053
33) On April 1, 2018, Nunez Manufacturers purchases equipment for $100,000, paying $30,000 in cash and
signing a 10-year mortgage for $70,000 at 8% annual interest. Prepare the journal entry to record the
acquisition of the equipment. Omit explanation.
34) A-Plus Carpets Company buys a building for $115,000, paying $30,000 cash and signing a 30-year
mortgage note for $85,000 at 11%. Prepare the journal entry for the purchase. Omit explanation.
35) Hardwood Flooring Company buys a building for $115,000, paying $30,000 cash and signing a 30–
year mortgage note for $85,000 at 11% annual interest. The payments will be made in equal monthly
installments of $809. Prepare the journal entry for the first monthly payment. (Round your answers to the
nearest whole dollar number.) Omit explanation.
36) On January 1, 2018, Milton Tools Company purchases machinery with a fair value of $300,000 by
paying $50,000 in cash and signing a 10-year mortgage note at 13% for the balance. Prepare the journal
entry for January 1, 2018. Omit explanation.
37) On December 31, 2018, Anderson Hardware Company purchases $300,000 of property by paying
$50,000 in cash and signing a 10-year mortgage note at 13% for the balance. The amortization schedule
shows that the company will pay $46,072 per year. Journalize the first yearly payment on December 31,
2019. Omit explanation.
38) On January 1, 2018, Sullivan Company purchases $300,000 of property by paying $50,000 in cash and
signing a 10-year mortgage note at 13% for the balance. Sullivan will make yearly payments of $46,072.
Prepare the amortization schedule for the first five payments. (Round your answers to the nearest dollar.)
39) On January 1, 2018, Gadsby Cabinetry Company purchases $300,000 of equipment by paying $50,000
in cash and signing a 10-year mortgage note at 13% for the balance. Gadsby will make yearly payments of
$46,072. The amortization schedule for the first five payments is provided.
Principal
Payment
Interest
Expense
Total
Payment
Ending
Balance
01/01/2018
$250,000
01/01/2019
$13,572
$32,500
$46,072
236,428
01/01/2020
15,336
30,736
46,072
221,092
01/01/2021
17,330
28,742
46,072
203,762
01/01/2022
19,583
26,489
46,072
184,179
01/01/2023
22,129
23,943
46,072
162,050
Prepare the journal entries for the purchase of the equipment and for the January 1, 2019 mortgage
payment. Omit explanations.
1) Bonds are short-term debt issued to multiple lenders called bondholders, usually in increments of
$1,000 per bond.
2) On the maturity date, the bondholder is paid the face amount of the bond plus the last interest
payment.
3) Which of the following is the amount the borrower must pay back to the bondholders at maturity?
A) market value
B) present value
C) stated interest value
D) principal amount
4) The date on which the principal amount is repaid to the bondholder is known as the ________.
A) issuing date
B) interest date
C) maturity date
D) installment date
5) The reason investors buy bonds is to ________.
A) earn interest
B) own controlling interest in the company
C) exercise voting rights in a company
D) receive dividend payments
6) Secured bonds give bondholders the right to take specified assets of the issuer if the issuer fails to pay
principal or interest.
7) Debentures are bonds that mature in installments at regular intervals.
8) Debentures are backed only by the goodwill of the bond issuer.
9) Term bonds all mature at the same specified time.
10) Which of the following describes a serial bond?
A) a bond that matures in installments at regular intervals
B) a bond that gives the bondholder a claim for specific assets
C) a bond that matures at one specified time
D) a bond that is not backed by specific assets
11) Which of the following describes a secured bond?
A) a bond that matures in installments at regular intervals
B) a bond that is backed by issuer’s specific assets
C) a bond that matures at one specified time
D) a bond that is not backed by specific assets
12) Which of the following describes a debenture?
A) a bond that matures in installments at regular intervals
B) a bond that gives the bondholder a claim for specific assets
C) a bond that matures at one specified time
D) a bond that is not backed by specific assets
13) Provide a definition of each of the following types of bonds.
Bond Type
Definition
Term
Serial
Secured
Debenture
Term
The bonds mature at the same specified time.
Serial
intervals.
Secured
If the issuer fails to pay principal or interest, the
bondholders have the right to take specified assets.
Debenture
Unsecured bonds are backed only by the credit
worthiness of the bond issuer.
16) The issue price of a bond—whether it is issued at par, premium, or discount—has an effect on the
principal repayment at maturity.
17) After a bond is issued, investors may buy and sell it through the bond market.
18) Which of the following statements is true of a bond that is issued at a discount?
A) The bond will be issued at par.
B) The stated interest rate is higher than the prevailing market interest rate.
C) At maturity, the bond will repay an amount that is less than the face value.
D) The bond will be issued for an amount less than the face value.
19) Which of the following statements is true of a bond that is issued at a premium?
A) The bond will be issued at an amount above face value.
B) The stated interest rate is lower than the prevailing market interest rate.
C) At maturity, the bond will repay an amount that is greater than the face value.
D) The bond will be issued at par.