Question

Testbank Multiple Choice Question 90

Concord Corporation signed a three-month, zero-interest-bearing note on November 1, 2020 for the purchase of $497100 of inventory. The face value of the note was $508500. Concord used a “Discount of Note Payable” account to initially record the note. Assuming that the discount will be amortized equally over the 3-month period and that there was no adjusting entry made for November, the adjusting entry made at December 31, 2020 will include a

debit to Interest Expense for $7600.

debit to Discount on Note Payable for $3800.

credit to Interest Expense for $7600.

credit to Discount on Note Payable for $3800.

Testbank Multiple Choice Question 82

Which of the following is not a factor that is considered when evaluating whether or not to record a liability for pending litigation?

The type of litigation involved.

Time period in which the underlying cause of action occurred.

The probability of an unfavorable outcome.

The ability to make a reasonable estimate of the amount of the loss.

Answer 1

90.) Option - 'A'; Debit to Interest Expense for $7,600

The discount on note payable at signing is $11,400 [$5,08,500 - $4,97,100]. Then this equates to $3,800 a month [$11,400 / 3 months]. By December 31, two months have passed. So, $3,800 * 2 = $7,600. So, we will Debit the Interest Expense and Credit the discount on the Note Payable account.

82.) Option - 'A'

The type of litigation involved is not a factor that is considered when evaluating whether or not to record a liability for pending litigation.