Question

please answer the multiple choice questions.

Section A: Multiple Choice (60 points) 1. Paris Company buys a building on a plot of land for S100,000, paying $20,000 cash and signing a 20-year mortgage note for $80,000 at 6%. Monthly payments are 5570 What portion of the first monthly payment is interest expense? A) $4,800 B) 5570 C) 5550 D) $400 2. On July 1, 2013, Avery Services issued a long-term note payable for $10,000. It is payable over a year Irm in S2,000 installments on July 1 of cach succeeding year. When the note was issued, the principal amount was recorded in long-term moles payable and a second entry was made to reclassify the current portion. How will this information be shown on the balance sheet dated December 31, 2013? A) S10,000 shown as current liability only B) $2,000 shown as current liability, S10,000 shown as long-term liability C) $2,000 shown as current liability: $8,000 shown as long-term liability D) The entire 510,000 shown as long-term liability 3. On November 1, 2014, EZ Products borrowed S48,000 on a 5% 10-year note with annual installment payments of S4,800 plus interest due on November 1 of each succeeding year. How much interest expense should be accrued at December 31, 2014 for the period of November through year-end? A) S1.200 B) $2,400 C) S400 D) $200 4. On January 1, 2013, Thames Company purchases property and signs a 6-year mortgage note $60,000 at 4% Please see the partial amortization schedule below. Payment Interest Number Date Payment Expense Principal Balance 1/1/2013 50,000.00 1/31/2013 980.00 20000 7800 59,22000 2/28/2013 980 od 197.40 78260 58.437.40 1/31/2013 980.00 194.79 7 85 21 57.652.19 4/30/2013 192217 787787 5626437 5/31/2013 90 od 199 55 790.4556.073 91 6/30/2013 980 od 16.91 793 552 7/31/2013 90 od 184.27 795.73 4.485 10 3120119 00181 62 7953 5168671 NO Page 1 of 7 ON 9/30/2013 10103112012 11 11 30 201 12 2012 2013 N 1/31/2014 2/29/2014 3/31/2014 4/10 2014 $/31/2014 Tanan- 9000 11.7 90 od 980 90 90 980.00 - 17896 10 52255 67 52.081.95 173.61 51.275 56 1209 SO90 .466 222549552 1622 $11. 49.6540 165 52 814.4548.840.23 162 81720 4802303 160 OS $19.92 47,203.09 15734 82266 46.350.44 REMER

Answer 1

Answer to Q#1 (First question in the list): Option-(D): $400 Reason: When cost of the land is $100,000 and down payment of $20,000 is paid, the note amount will be $100,000 - $20,000 = $80,000 only. As the note is repaid in monthly installments, the monthly interest rate will be 6% / 12 = 0.5%. In fist monthly installment, interest is payable on the total note amount at the monthly interest rate. Therefore, ($100,000 - $20,000] Mortgage note amount Monthly interest rate Interest expense included in first monthly installment $80,000 0.5% $400 ($80000 x 0.5%)