Final Exam Review Problems

# Final Exam Review Problems - FINAL EXAM REVIEW PROBLEMS...

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FINAL EXAM REVIEW PROBLEMS Chapter 10, Reporting and Analyzing Liabilities 1. On March 1, Holden Company borrows \$60,000 from New National Bank by signing a 6- month, 8%, interest-bearing note. Prepare the necessary entries below associated with the note payable on the books of Holden Company. a. Prepare the entry on March 1 when the note was issued. b. Prepare any adjusting entries necessary on June 30 in order to prepare the semiannual financial statements. Assume no other interest accrual entries have been made. c. Prepare the entry to record payment of the note at maturity. 2. Landen Company had cash sales of \$54,250 for the month of June. Sales are subject to 8% sales tax. Prepare the entry to record the sale. Page 1

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3. On January 1, 2006 Milton Company issued \$200,000 of 8%, 10-year bonds at 102. Interest is paid annually on January 1, and the straight-line method is used for amortization. Milton has a calendar year end. a. Prepare the journal entry to record the sale of the bonds. b. How much interest is paid each interest period? c. How much bond interest expense is recorded on December 31, 2006? December 31, 2007? d. Prepare the journal entry to record the accrued bond interest and amortization of the bond premium on December 31, 2007. e. What is the carrying value of the bonds on January 1, 2008? Page 2
4. On January 1, 2006, Matrix Corporation issued \$800,000, 6%, 5-year bonds dated January 1, 2006, at 95. The bonds pay annual interest on January 1. The company uses the straight-line method of amortization and has a calendar year end. a. Prepare the journal entry to record the sale of the bonds. What amount was received for the bonds? b. How much interest is paid each interest period? How much interest is paid each interest period? c. How much bond interest expense is recorded on December 31, 2006? December 31, 2007? What is the discount amortization for 2006? d. Prepare the journal entry to record the accrued bond interest and amortization of the bond discount on December 31, 2007. How much bond interest expense is recorded on December 31, 2007? e. What is the carrying value of the bonds on January 1, 2008? What is the carrying value of the bonds on January 1, 2008? 5. Norton Company retires its \$160,000 face value bonds at 102 on January 1, following the payment of annual interest. The carrying value of the bonds at the redemption date is \$143,700. Prepare the journal entry to record the bond redemption. 6. Folton Inc. retires its \$200,000 face value bonds at 96 on January 1, following the

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Final Exam Review Problems - FINAL EXAM REVIEW PROBLEMS...

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