Question

1?Straight Industries purchased a large piece of equipment from Curvy Company on January 1, 2016. Straight Industries signed a note, agreeing to pay Curvy Company $430,000 for the equipment on December 31, 2018. The market rate of interest for similar notes was 8%. The present value of $430,000 discounted at 8% for three years was $341,348. On January 1, 2016, Straight Industries recorded the purchase with a debit to equipment for $341,348 and a credit to notes payable for $341,348. On December 31, 2016, Straight recorded an adjusting entry to account for interest that had accrued on the note. Assuming no adjusting entries have been made during the year, the interest expense accrued at December 31, 2016 is closest to?which one

$29,893.

$27,308.

$32,093.

$34,400.

2?Short Company purchased land by paying $15,000 cash on the purchase date and agreed to pay $15,000 for each of the next ten years beginning one-year from the purchase date. Short's incremental borrowing rate is 11%. On the balance sheet as of the purchase date, after the initial $15,000 payment was made, the liability reported is closest to: (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided.)

$103,338.

$150,000.

$52,828.

$88,338.

3 Purdum Farms borrowed $22 million by signing a five-year note on December 31, 2015. Repayments of the principal are payable annually in installments of $4.4 million each. Purdum Farms makes the first payment on December 31, 2016 and then prepares its balance sheet. What amount will be reported as current and long-term liabilities, respectively, in connection with the note at December 31, 2016, after the first payment is made?

$4.4 million in current liabilities and $13.2 million in long term liabilities.

$4.4 million in current liabilities and $17.6 million in long term liabilities.

Zero in current liabilities and $22 million in long term liabilities.

Zero in current liabilities and $17.6 million in long term liabilities.

Answer 1