Question

1. According to an inventory count, White Farm Equipment had office supplies amounting to $100 at year-end. It had $50 of supplies at the beginning of the year and purchased $600 of supplies during the year. What was the total supplies expense for the year?

a) $450

b) $650

c) $600

d) $550

2. Smittybilt Winch Corporation issues 500, 10-year, 8%, 1,000 bonds dated January 1, 2018, at 103. The Journal entry to record the bond issuance:

a) Cash 500,000

Bonds Payable 500,000

Cash 498,800

b) Discount on bonds 1,200

Bonds payable 500,000

Cash 515,000

c) Premium on bonds 15,000

Bonds Payable 500,000

Cash 500,000

d) Premium on bonds 15,000

Bonds Payable 515,000

3. Roadrunne Transportation Company issued a one-year 6%, $100,000 note on August 31, 2018. Interest expense for the year ended December 31, 2018 was

a) $6000

b) $2000

c) $2500

d) $1500

Answer 1

(1) Total supplies expense for the year = Beginning Supplies + Purchased supplies – Ending Supplies

      = $50 + $600 - $100 = $550

Option (d) is correct

(2) The Journal entry to record the bond issuance:

Cash- Debit $515000    (500 * 1000 * 103%)

Premium on Bonds- Credit $15000

Bonds Payable- Credit $500000

Option (c) is correct

(3) Interest expense for the year ended December 31, 2018 was :-

$100000 * 6% * 4 months/12 months

= $2000

Option (b) is correct