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Final Exam Review Problems - Answers

# Final Exam Review Problems - Answers - Final Exam Review...

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Final Exam Review Problems – Answers Chapter 10 1. a. Cash 60,000 Notes Payable 60,000 b . Interest Expense (60,000 x 8% x 4/12) 1,600 Interest Payable 1,600 c. Notes Payable 60,000 Interest Payable 1,600 Interest Expense (60,000 x 8% x 2/12) 800 Cash 62,400 2. Please note the change to this question (see announcement and reposted review questions). The sales of \$54,250 does not include sales tax. Cash 58,590 Sales 54,250 Sales Tax Payable (54,250 x 8%) 4,340 3. a. Cash (\$200,000 x 102%) 204,000 Bonds Payable 200,000 Premium on Bonds Payable 4,000 b. \$200,000 x 8% = \$16,000 c. Amortization of bond premium - \$4,000 / 10 years = \$400 per year Interest expense = \$16,000 - \$400 = \$15,600 The interest expense is the same every year 2007 interest expense = \$15,600 d . Bond Interest Expense 15,600 Premium on Bonds Payable 400 Bond Interest Payable 16,000 e, Premium on Bonds Payable on January 1, 2008 = \$4,000 - \$400 - \$400 = \$3,200 Bonds Payable \$200,000 Plus: Premium on Bonds Payable 3,200 Carrying Value \$203,200

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4. a. Cash (\$800,000 x 95%) 760,000 Discount on Bonds Payable 40,000 Bonds Payable 800,000 b. \$800,000 x 6% = \$48,000 c. Amortization of bond discount = \$40,000 / 5 years = \$8,000 per year Interest expense = \$48,000 + \$8,000 = \$56,000 The interest expense is the same every year 2007 interest expense = \$56,000 d . Bond Interest Expense 56,000 Bond Interest Payable 48,000 Discount on Bonds Payable 8,000 e. Discount on Bonds Payable on January 1, 2008 = \$40,000 - \$8,000 - \$8,000 = \$24,000 Bonds Payable \$800,000 Less: Discount on Bonds Payable 24,000 Carrying Value \$776,000 5. Bonds Payable 160,000 Loss on Redemption of Bonds Payable (143,700 – 163,200) 19,500 Cash (160,000 x 102%) 163,200 Discount on Bonds Payable (160,000 – 143,700) 16,300 6. Bonds Payable 200,000 Premium on Bonds Payable (214,000 – 200,000 ) 14,000 Cash (200,000 x 96%) 192,000 Gain on Redemption of Bonds Payable (214,000 – 192,000) 22,000 7. a. Long-term liabilities Bonds payable 10% \$400,000 Less: Unamortized bond discount 30,000 \$370,000 Notes payable, 9% 70,000 Mortgage payable (long-term portion) 170,000 Total long-term liabilities \$610,000 (b) Bond interest payable, the current portion of the mortgage payable (\$10,000), accounts payable, and taxes payable should be classified as current liabilities.
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