Interest Expense

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Interest Expense Questions and Answers

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West County Bank agrees to lend Sandhill Co. $508,000 on January 1. Sandhill Co. signs a $508,000, 6%, 6-month note. What is the adjusting entry required if Sandhill Co. prepares financial statemen...
You just inherited $225,000. You are investing this money for 5 years at 6.25% simple interest. In whole dollars, how much money will you have at the end of 5 years?
Simple interest is the interest earned on: a. the original principal amount involved. b. the reinvested interest from prior periods. c. both the original principal and the reinvested interested fro...
In the General Journal, the transaction from 12/31/2016 Dr. Interest Expense $360 Cr.Interest Payable $360 Explanation E. Why the $360?
On January 2, 2018, Tylor Company issued a 4-year, $600,000 note at 8% fixed interest, interest payable semiannually. Tylor now wants to change the note to a variable rate note. As a result, on Jan...
Sarantuya, a college student, feels that now is a good time to buy stocks. However, because she doesn't have any savings, she decides to borrow $22,000 at an annual interest rate of 9 percent. She...
Manchester Corporation, a U.S. corporation, incurred $125,000 of interest expense during 2015. Manchester manufactures inventory that is sold within the United States and abroad. The total tax book...
Several years ago Brant, Inc., sold $900,000 in bonds to the public. Annual cash interest of 9 percent ($81,000) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent...
Dean is planning to purchase a New Nissan Altima which costs $26,865. He saved $3,200 to put toward it. He is thinking about getting a loan for it from his credit union, but he could also keep driv...
The present value of $40,000 to be received in two years, at 12% compounded annually, is?
West Company borrowed $52,000 on September 1, 2016 from the Valley Bank. West agreed to pay interest annually at the rate of 9% per year. The note issued by West carried an 18-month term. Based on...
Besta Energy Co. decided to launch a new drilling project. On January 1, the company paid $50,000 to acquire an unproved property. During the year, the company paid $250,000 to drill an exploratory...
Bonner's, Inc. borrowed $36,000 for 4 months on a discount basis. The lender used an interest rate of 8% to calculate the discount. The amount of cash Bonner's, Inc. actually had available to use f...
Create the amortization schedule for a loan of $20,000, paid monthly over three years using an 8 percent APR.
You wish to buy a $9,400 dining room set. The furniture store offers you a 3-year loan with a 12 percent APR. What are the monthly payments? How would the payment differ if you paid interest only?
If $100,000 is borrowed for 9 months at an annual rate of 18% interest all due at maturity, then the full amount of cash including principal and interest to be paid at maturity amounts to: A. $6,00...
On November 1, 2018, Aviation Training Corp. borrows $52,000 cash from Community Savings and Loan. Aviation Training signs a three-month, 6% note payable. Interest is payable at maturity. Aviation'...
On March 31, year 1, Mary borrowed $230,000 to buy her principal residence. Mary paid 1 point to reduce her interest rate from 7 percent to 6 percent. The loan is for a 30-year period. What is Mary...
An internal service fund received an interfund transfer of $50,000 cash from the general fund. This transfer should be reported in the statement of revenues, expenses, and changes in fund net posit...
Use the average daily balance method to calculate the finance charge for June (30 days) if last month's balance was $185, the annual interest rate is 20%, and the following transactions occurred:...
Presented below are two independent situations. (a) Blue Co. sold $2,120,000 of 10%, 10-year bonds at 105 on January 1, 2017. The bonds were dated January 1, 2017, and pay interest on July 1 and J...
On January 1, 2016, Northfield Corporation becomes delinquent on a $100,000, 14% note to First National Bank, on which $16,651 of interest has accrued. On January 2, 2016, the bank agrees to restru...
Tom is a mushroom farmer. He invests all his spare cash in additional mushrooms, which grow on otherwise unless land behind barn. The mushrooms increase by 50 percent in weight during their first y...
On January 1 of year 1, Arthur and Aretha Franklin purchased a home for $3.3 million by paying $410,000 down and borrowing the remaining $2.89 million with a 9 percent loan secured by the home. a....
Coronado Industries borrowed $396,000 on April 1. The note requires interest at 10% and principal to be paid in one year. How much interest is recognized for the period from April 1 to December 31?
You are a freshman in college and are planning a trip to Europe when you graduate from college at the end of four years. You plan to save the following amounts annually, starting today: $600, $600,...
You have just deposited $12,000 into an account that promises to pay you an annual interest rate of 6.7 percent each year for the next 8 years. You will leave the money invested in the account and...
Teffan borrows 45,000 from the bank at 9% interest compounded annually to be repaid in 3 equal annual installments. The interest paid in the 3rd year is?
First City Bank pays 8 percent simple interest on its saving account balances, whereas Second City Band pays 8 percent interest compounded annually. If you made a $58,000 deposit in each bank, how...
Crane Company sells 9% bonds having a maturity value of $2,200,000 for $1,962,092. The bonds are dated January 1, 2017, and mature January 1, 2022. Interest is payable annually on January 1. Set u...
On July 1, Orcas Lab issued a $350,000, 6%, 8-month note. Interest is payable at maturity. What is the amount of interest expense that should be recorded in a year-end adjusting entry if the fiscal...
A man needed money to buy lawn equipment. He borrowed $500 for five months and paid $53.94 in interest. What was the rate of interest?
On July 1, Luna Sea Sushi, Inc., issued $300,000 of 5% bonds dated July 1 at 92.000 when the market rate of interest is 7%. Interest is paid each June 30 and December 31. By what amount should Inte...
Sheffield Corporation sells rock-climbing products and also operates an indoor climbing facility for climbing enthusiasts. During the last part of 2017, Sheffield had the following transactions rel...
The amount due on the maturity date of a $11,400, 150-day 8%, note receivable is: a. $10,488 b. $11,780 c. $11,400 d. $11,020 e. $12,312
A company invests $20,000 in a certificate of deposit (CD) that earns 4% compounded continuously. How long will it take for the account to be worth $70,000?
At what interest rate compounded continuously must money be invested to triple in 33 years?
A business has two loans totaling $85,000. One loan has a rate of 6% and the other has a rate of 4.5%. This year the business expects to pay $4,875 in interest on the two loans. How much is each lo...
On 4/1/X3, $100,000 of cash is borrowed on a 3-year note payable bearing interest at a rate of 8% payable annually. Interest expense on this note for the year-ended 12/31/X3 amounts to $6,000. True...
Mom deposited a total of $17,000 in two banks. She earned 8% from one bank and 9% from the other bank. How much did Mom deposit in each bank if her annual income from both banks is $1,470?
To calculate interest expense in the future, you should do which of the following? A. Apply a weighted average interest rate times the beginning debt balance. B. Apply a weighted average interest...
Compute the missing amounts for each of the following notes. Principal Annual Interest Rate Time Total Interest (a) $ ? 9% 120 days $780 (b) $31,500 10% 3 years $? (c) $71,560 ? % 5 months $1,789...
Consider a 27-year loan for $191663 at an annual interest rate of 8%. If payments are made yearly, how many dollars of the 16th payment will go toward interest?
Suppose that a printing firm considers the production of its presses as a continuous income stream. If the annual rate of flow at time t is given by the equation below, in thousands of dollars per...
You need to have $30,250 in 17 years. You can earn an annual interest rate of 4 percent for the first 5 years, 4.6 percent for the next 4 years, and 5.3 percent for the final 8 years. How much do y...
Penn Inc. needs to borrow $250,000 for the next 6 months. The company has a line of credit with a bank that allows the company to borrow funds with a 9% interest rate subject to a 20% of loan compe...
On January 1, 2018, Huff Co. sold $5,000,000 of its 10% bonds for $4,426,480 to yield 12%. Interest is payable semiannually on January 1 and July 1.
Crimson Tide borrows $15,000 on September 1, 2018. The principal is due to be repaid in four years. Interest is payable each August 31 at an annual rate of 10%. I need to know how to get the ending...
On July 1, 2018, Ross-Livermore Industries issued nine-month notes in the amount of $400 million. Interest is payable at maturity. Required: Determine the amount of interest expense that should b...
A 13-year annuity pays $2,800 per month, and payments are made at the end of each month. The interest rate is 12 percent compounded monthly for the first seven years, and 10 percent compounded mont...
On January 1, 20X1, Perkins issued $100,000 face, 8%, 5-year bonds at $92,278. The bonds pay interest annually and were priced to yield 10%. Using the effective-interest method, how much is interes...
Truck #2 has a list price of $20,000 and is acquired for a down payment of $2,500 cash and a zero-interest-bearing note with a face amount of $17,500. The note is due April 1, 2018. Larkspur would...
Schlitterbahn Waterslide Company issued 26,000, 10-year, 4%, $100 bonds on January 1 at face value. Interest is payable each December 31.
Oriole Company borrowed $403,000 on April 1. The note requires interest at 12% and principal to be paid in one year. How much interest is recognized for the period from April 1 to December 31? a. $...
Allstar Company signed a $150,000 mortgage on July 1, 2018, for the purchase of their new garage building. The mortgage entailed equal monthly payments of $2,700 at the end of each month. The inter...
Assume that you borrow $2,000 from your sister and that you will pay her back in one lump sum. She charges you 9 percent interest in 1 year and increases the rate by 1 percent per year until the lo...
Allstar Company signed a $200,000 mortgage on July 1, 2018 for the purchase of their new garage building. The mortgage entailed equal monthly payments of $2,900 at the end of each month. The intere...
On April 12, Hong Company agrees to accept a 60-day, 10%, $10,500 note from Indigo Company to extend the due date on an overdue account. What is the journal entry that Indigo Company would make, wh...
On June 30, Year 1, Block Co. acquired $100,000 face amount, 3-year, 9% bonds of Blue Co. for $102,380, including accrued interest. The bonds were issued to yield 10% and mature on December 31, Yea...
Ivanhoe Excavating Inc. is purchasing a bulldozer. The equipment has a price of $108,100. The manufacturer has offered a payment plan that would allow Ivanhoe to make 15 equal annual payments of $1...
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