Question

Q1: On March 1, 2019 a company borrows $50,000 by signing a note. The note has a 6% annual interest rate and matures on December 31, 2019. Interest and principal are paid in cash on the maturity date. What amount of interest expense would the company report in 2019?

Q2: On March 1, 2019 a company borrows $50,000 by signing a note. The note has a 6% annual interest rate and matures on December 31, 2019. Interest and principal are paid in cash on the maturity date. How much cash will the company pay when the loan is repaid on December 31, 2019?

Q3: On March 1, 2019 a company borrows $50,000 by signing a two-year note. The note has a 6% annual interest rate and matures on March 1, 2021. Interest and principal are paid in cash on the maturity date. What amount of interest expense would the company report in 2020?

Q4: On March 1, 2019 a company borrows $50,000 by signing a note. The note has a 6% annual interest rate and matures on December 31, 2019. Interest and principal are paid in cash on the maturity date. Which of the following are included when recording the repayment of the loan with interest on December 31, 2019? (Select all that apply)

Q5: Group of answer choices Interest expense increases by $3,000

Interest expense increases by $2,500

Interest expense decreases by $2,500

Note payable decreases by $50,000

Cash decreases by $50,000

Note payable decreases by $53,000

Cash decreases by $53,000

Note payable decreases by $52,500

Cash decreases by $52,500

Interest expense decreases by $3,000

Q6: Calculate current assets Sales Revenue $25,000 Accounts Payable $1,200 Accounts Receivable $2,600 Inventory $3,200 Supplies $300 Cost of Goods Sold $16,000 Notes Payable (due in 2 years) $24,000 Equipment $40,000 Accumulated Depreciation $12,000 Land $30,000 Unearned Revenue $1,100 Taxes Payable $1,400 Prepaid Rent (3 months) $2,100 Cash $5,200 F

Q7: Calculate current liabilities Sales Revenue $25,000 Accounts Payable $1,200 Accounts Receivable $2,600 Inventory $3,200 Supplies $300 Cost of Goods Sold $16,000 Notes Payable (due in 2 years) $24,000 Equipment $40,000 Accumulated Depreciation $12,000 Land $30,000 Unearned Revenue $1,100 Taxes Payable $1,400 Prepaid Rent (3 months) $2,100 Cash $5,200

Answer 1

Q1.Annual Interest expense =50000*6%=$3,000

Number of months =10

Interest expense reported in 2019=3000*(10/12)=$2500

Q2.Amount of cash company pays:

Principal =$50000

Interest=$2500

Total Cash to be paid=50000+2500=$52500

Q3.

Annual Interest expense =50000*6%=$3,000

Number of months the loan earns interest in 2020=12

Interest expense reported in 2020=3000*(12/12)=$3000

Q4

The Journal Entry will be:

Interest expense...Debit $2500

Note Payable.........Debit $50000

Cash...................................................Credit $52500

Interest expense increases by $2,500

Note payable decreases by $50,000

Cash decreases by $52,500

Q6 Current Asset=Accounts Receivable + Inventory +Supplies+ Prepaid Rent (3 months) + Cash =2600+3200+300+2100+5200=$13400

Q7.Current Liabilities=Accounts Payable +Unearned Revenue + Taxes Payable

=1200+1100+1400=$3700