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Notes Payable: December 31, 2000 Analysis

The document contains 4 multiple choice questions related to accounting topics such as notes payable, annuities, and loan origination fees. Question 1 asks about the value of a note payable on a balance sheet. Question 2 asks about the non-current portion of a note payable for a contest winner. Question 3 asks about the expense related to a contest prize. Question 4 asks about the income from a loan in the year it was given.

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BHANDAMME PARAGAS
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211 views1 page

Notes Payable: December 31, 2000 Analysis

The document contains 4 multiple choice questions related to accounting topics such as notes payable, annuities, and loan origination fees. Question 1 asks about the value of a note payable on a balance sheet. Question 2 asks about the non-current portion of a note payable for a contest winner. Question 3 asks about the expense related to a contest prize. Question 4 asks about the income from a loan in the year it was given.

Uploaded by

BHANDAMME PARAGAS
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

1. On December 30, 20X6, Bart, Inc., purchased a machine from Fell Corp.

in exchange for a
noninterest bearing note requiring eight payments of ₱20,000. The first payment was made
on December 30, 20X6, and the others are due annually on December 30. At the date of
issuance, the prevailing rate of interest for this type of note was 11%. On Bart's December
31, 20X6, balance sheet, the note payable to Fell was
a. 94,240 b. 102,920 c. 104,620 d. 114,240

The next two items are based on the following information:


House Publishers offered a contest in which the winner would receive ₱1,000,000, payable over
20 years. On December 31, 2000, House announced the winner of the contest and signed a note
payable to the winner for ₱1,000,000, payable in ₱50,000 installments every January 2. Also on
December 31, 2000, House purchased an annuity for ₱418,250 to provide the ₱950,000 prize
monies remaining after the first ₱50,000 installment, which was paid on January 2, 2001.

2. In its December 31, 20x0, balance sheet, what amount should House report as note payable-
contest winner, net of current portion?
a. 368,250 b. 418,250 c. 900,000 d. 950,000

3. In its 20x0 income statement, what should House report as contest prize expense?
a. 0 b. 418,250 c. 468,250 d. 1,000,000

4. On December 1, 20x5, Money Co. gave Home Co. a ₱200,000, 11% loan. Money paid
proceeds of ₱194,000 after the deduction of a ₱6,000 nonrefundable loan origination fee.
Principal and interest are due in 60 monthly installments of ₱4,310, beginning January 1,
20x6. The repayments yield an effective interest rate of 11% at a present value of ₱200,000
and 12.4% at a present value of ₱194,000. What amount of income from this loan should
Money report in its 20x5 income statement?
a. 0 b. 1,833 c. 2,005 d. 7,833

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