29 Jun Question 101. A mortgage note pay
Question
101. A mortgage note payable with a fixed interest rate requires the borrower to make installment payments over the term of the loan. Each installment payment includes interest on the unpaid balance of the loan and a payment on the principal. With each installment payment, indicate the effect on the portion allocated to interest expense and the portion allocated to principal.
Portion Allocated Portion Allocated
to Interest Expense to Payment of Principal
a. Increases Increases
b. Increases Decreases
c. Decreases Decreases
d. Decreases Increases
102. The entry to record an installment payment on a long-term note payable is
a. Mortgage Payable
Cash
b. Interest Expense
Cash
c. Mortgage Payable
Interest Expense
Cash
d. Bonds Payable
Cash
103. Winter Company purchased a building on January 2 by signing a long-term $600,000 mortgage with monthly payments of $5,400. The mortgage carries an interest rate of 10 percent.
The entry to record the first monthly payment will include a
a. debit to the Cash account for $5,400.
b. credit to the Cash account for $5,000.
c. debit to the Interest Expense account for $5,000.
d. credit to the Mortgage Payable account for $5,400.
104. Horton Company purchased a building on January 2 by signing a long-term $480,000 mortgage with monthly payments of $4,400. The mortgage carries an interest rate of 10 percent. The amount owed on the mortgage after the first payment will be
a. $480,000.
b. $479,600.
c. $476,000.
d. $475,600.
105. Farris Company borrowed $800,000 from BankTwo on January 1, 2011 in order to expand its mining capabilities. The five-year note required annual payments of $208,349 and carried an annual interest rate of 9.5%.What is the amount of expense Farris must recognize on its 2012 income statement?
a. $76,000
b. $63,427
c. $56,206
d. $49,659
106. Farris Company borrowed $800,000 from BankTwo on January 1, 2011 in order to expand its mining capabilities. The five-year note required annual payments of $208,349 and carried an annual interest rate of 9.5%.What is the balance in the notes payable account at December 31, 2012?
a. $800,000
b. $522,729
c. $667,651
d. $648,000
107. The lessee has substantially all of the benefits and risks of ownership in a(n
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