Question

31. Assume that the total issue price for a $500,000 face-value bond issue with semi-annual interest payments has been correctly calculated to be $578,450. The market interest rate for bond issues of similar risk is 6%, compounded semi-annually. How much interest expense will accrue and be recorded at the end of the first 6 month period?

		a. $30,000.00
		b. $34,707.00
		c. $17,353.50
		d. $15,000.00

Wilson Co. sold $500 of goods to Donner Co. with terms of 2/10, n/30. If Wilson receives payment for the goods from Donner within 10 days, Wilson will record a

		a. debit to Accounts Receivable for $500.
		b. credit to Cash for $490.
		c. debit to Sales Discounts for $10.
		d. credit to Sales Discounts for $10.

The maturity value of a $3,000, 60-day, 6 percent note would be (use a 365-day year):

		a. $3,029.59
		b. $3,000.00
		c. $3,042.68
		d. $3,032.43

34.

Which of the following accounts would be found in an accrual adjusting entry?

		a. Prepaid Insurance
		b. Unearned Revenue
		c. Supplies
		d. Wages Payable

Answer 1

31. Interest expense = Carrying value * Market rate of interest / 2

= $578,450 * 6% / 2

= $17,353.50

The answer is Option c.

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Sales discount = $500 * 2% = $10

The answer is Option c.

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Maturity value = $3,000 + ($3,000 * 6% * 60 / 365)

= $3,000 + 29.59

= $3,029.59

The answer is Option a.

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34. The answer is Option d.