ACCT200 chapter 7

48) Jones Company issued bonds with a $200,000 face value on January 1, Year 1. The five-year term bonds were issued at 97 and had a 7½% stated rate of interest that is payable in cash on December 31st of each year. Jones amortizes the bond discount using the straight-line method. Based on this information: The amount of cash outflow from operating activities shown on Jones's December 31, Year 2 statement of cash flows would be:

A) $15,000.

46) Jones Company issued bonds with a $200,000 face value on January 1, Year 1. The five-year term bonds were issued at 97 and had a 7½% stated rate of interest that is payable in cash on December 31st of each year. Jones amortizes the bond discount using the straight-line method. Based on this information: The amount of interest expense shown on Jones's December 31, Year 1 income statement would be:

A) $16,200.

66) Victor Company issued bonds with a $250,000 face value and a 6% stated rate of interest on January 1, Year 1. The bonds carried a 5-year term and sold for 95. Victor uses the straight-line method of amortization. Interest is payable on December 31 of each year. The amount of interest expense appearing on the December 31, Year 3 income statement would be:

A) $17,500.

74) Weller Company issued bonds with a face value of $400,000, a 10% stated rate of interest, and a 10-year term. The bonds were issued on January 1, Year 1, and Weller uses the effective interest method of amortization. The market rate of interest on the date of issue was 8%. Interest is paid annually on December 31. Assuming Weller issued the bond for $431,940, the amount of interest expense appearing on the Year 3 income statement would be:

A) $33,649.

70) Wayne Company issued bonds with a face value of $600,000, a 6% stated rate of interest, and a 10-year term. The bonds were issued on January 1, Year 1, and Wayne uses the straight-line method of amortization. Interest is paid annually on December 31. Assuming Wayne issued the bond for 102½, the amount of interest expense appearing on the Year 1 income statement would be:

A) $34,500.

58) Denver Co. issued bonds with a face value of $100,000 and a stated interest rate of 8%. The bonds have a life of five years and were sold at 102 ½. If Denver amortizes discounts and premiums using the straight-line method, the amount of interest expense each full year would be:

A) $7,500.

8) Riley Company borrowed $36,000 on April 1, Year 1 from the Titan Bank. The note issued by Riley carried a one year term and a 7% annual interest rate. Riley earned cash revenue of $1,700 in Year 1 and $1,400 in Year 2. Assume no other transactions.

A) $770.

12) Which of the following is a claims exchange transaction?

A) Accrued interest on a note payable.

20) Which of the following reflects the effect of the year-end estimation of warranty expense? Assets = Liab. + Equity Revenue − Expense = Net Inc. Cash flow A. NA = + + − NA − + = − NA B. NA = + + − − − NA = − NA C. NA = − + + NA − + = − −OA D. − = NA + - NA − + = − NA

A) Choice A

28) The Platte Corporation issues a 5-year note payable on January 1, Year 1 for $5,000. The interest rate is 5% and the annual payment of $1,156, due each December 31, includes both interest and principal. Which of the following answers correctly shows the effect of the issuance of the note on Platte's financial statements? Assets = Liab. + Equity Revenue − Expense = Net Inc. Cash flow A. 5,000 = 5,000 + NA NA − NA = NA + FA B. 5,000 = 5,000 + NA NA − NA = NA + OA C. 5,000 = NA + 5,000 NA − NA = NA + FA D. NA = 5,000 + (5,000) NA − 5,000 = (5,000) NA

A) Choice A

32) On January 1, Year 1, the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note. The principal and interest are repaid by making annual payments beginning on December 31, Year 1. The annual payment on the loan based on the present value of annuity factor would be $81,150. Which choice reflects the financial statement effects of the cash payment on December 31, Year 1? Assets = Liab. + Equity Revenue − Expense = Net Inc. Cash flow A. − = − + − NA − + = − −FA/−OA B. − = − + NA NA − NA = NA −FA C. − = + + − NA − + = − −FA/−OA D. − = − + NA NA − + = − −OA

A) Choice A

36) On January 1, Year 1, the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank. It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year. All borrowings and repayments are to take place on January 1 of each year. Niagara records the first year's interest payment on December 31, Year 1. Centennial's prime rate is 4% for Year 1. Which of the following answers shows the effect of this event on the financial statements? Assets = Liab. + Equity Revenue − Expense = Net Inc. Cash flow A. (100) = NA + (100) NA − 100 = (100) (100) OA B. (100) = (100) + NA NA − NA = NA (100) FA C. (80) = (80) + NA NA − NA = NA (80) FA D. (80) = NA + (80) NA − 80 = (80) (80) OA

A) Choice A

51) On January 1, Year 1, Pierce Corporation issued $25,000 in 8%, 5-year bonds payable at 102. Interest payments are due each December 31. Pierce uses the straight-line method of amortization. Which of the following answers shows the effect of the bond issuance on January 1, Year 1? Assets = Liab. + Equity Revenue − Expense = Net Inc. Cash flow A. 25,500 = 25,500 + NA NA − NA = NA 25,500 FA B. 25,500 = 25,500 + NA NA − NA = NA 25,500 OA C. 25,500 = 24,500 + 500 500 − NA = 500 25,500 OA D. 25,500 = 24,500 + 500 500 − NA = 500 25,500 FA

A) Choice A

3) Houston Co. borrowed $20,000 from Dallas Co. on March 1, Year 1. Houston is to repay the principal and interest on March 1, Year 2. The interest rate is 8%. If the year-end adjustment is properly recorded, what will be the effects of the accrual on Houston's Year 1 financial statements?

A) Increase liabilities and increase expenses

15) Monthly remittance of sales tax:

A) Reduces liabilities.

33) How does the amortization of the principal balance on an installment note payable affect the amount of interest expense recorded each succeeding year?

A) Reduces the amount of interest expense each year

1) Interest charges on notes payable may be based on a(n):

A) fixed or variable interest rate.

44) Issuing bonds payable when the market rate of interest is less than the stated interest rate:

A) results in bonds being issued at a premium.

34) Currie Company borrowed $20,000 from the Sierra Bank by issuing a 10% three-year note. Currie agreed to repay the principal and interest by making annual payments in the amount of $8,042. Based on this information, the amount of the interest expense associated with the second payment would be: (Round your answer to the nearest dollar.)

B) $1,396.

7) Madison Company issued an interest-bearing note payable with a face amount of $24,000 and a stated interest rate of 8% to the Metropolitan Bank on August 1, Year 1. The note carried a one-year term. Based on this information alone, the amount of total liabilities appearing on Madison's Year 1 balance sheet would be:

B) $24,800

10) Riley Company borrowed $36,000 on April 1, Year 1 from the Titan Bank. The note issued by Riley carried a one year term and a 7% annual interest rate. Riley earned cash revenue of $1,700 in Year 1 and $1,400 in Year 2. Assume no other transactions. The amount of total liabilities that would appear on Riley's December 31 balance sheets for Year 1 and Year 2, respectively, would be:

B) $37,890 and $0.

69) Wayne Company issued bonds with a face value of $600,000, a 6% stated rate of interest, and a 10-year term. The bonds were issued on January 1, Year 1, and Wayne uses the straight-line method of amortization. Interest is paid annually on December 31. Assuming Wayne issued the bonds for 102½, the carrying value of the bonds on the December 31, Year 1 balance sheet would be:

B) $613,500.

26) Which of the following correctly describes an installment note?

B) An installment note requires equal payments of interest and principal in which the amount of interest decreases over the life of the note.

43) Pace Company issued at 97 bonds with a face value of $200,000. As a result of the issue:

B) Assets and liabilities would both increase by $194,000.

39) On January 1, Year 1, Burton Corporation recorded an event that increased its cash account by $196,000, increased its discount on bonds payable account by $4,000, and increased its bonds payable account by $200,000. Which of the following correctly describes that event?

B) Burton issued bonds at 98.

19) In December Year 1, Lucas Corporation sold merchandise for $10,000 cash. Lucas estimated that $700 of warranty claims might be filed in regard to these sales. On February 12, Year 2, warranty work amounting to $550 was performed for one of the customers ($430 labor paid in cash and $120 from the materials inventory). Which of the following answers indicates the effect of the February 12, Year 2 transaction on the financial statements of Lucas Corporation? Assets = Liab. + Equity Revenue − Expense = Net Inc. Cash flow A. (430) = (550) + (120) NA − 120 = (120) (430) OA B. (550) = (550) + NA NA − NA = NA (430) OA C. (550) = (550) + NA NA − 550 = (550) (430) FA D. (550) = NA + (550) NA − 550 = (550) (430) OA

B) Choice B

11) Issuing a note payable is a(n):

B) asset source transaction.

24) On a classified balance sheet, the financial statement user will be able to distinguish between:

B) current and noncurrent assets.

40) Bonds payable are usually classified on the balance sheet as:

B) long-term liabilities.

62) King Company experienced an accounting event that affected its financial statements as indicated below: Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash Flow − − − NA + − −FA/−OA Which of the following accounting events could have caused these effects on King's statements?

C) Made a payment on an installment loan.

21) When do the effects of product warranties appear on the statement of cash flows?

C) When there is a settlement of a warranty claim made by a customer.

71) Straight-line interest amortization of a premium or discount on bonds payable:

C) assigns the same amount of interest to each interest period over the term of the liability.

76) If a company uses the effective interest method of amortizing a bond premium, the carrying value of the bond will:

C) decrease by larger amounts each year.

59) If a bond is sold at 101, its stated rate of interest would be:

C) higher than the market rate.

68) Wayne Company issued bonds with a face value of $600,000, a 6% stated rate of interest, and a 10-year term. The bonds were issued on January 1, Year 1, and Wayne uses the straight-line method of amortization. Interest is paid annually on December 31. If Wayne issued the bonds for 96, the:

C) market rate of interest was higher than the stated interest rate.

57) The reason bonds are sometimes issued at a discount is:

C) the stated rate of interest is lower than the rate being paid on investments in the securities market with comparable risk.

9) Riley Company borrowed $36,000 on April 1, Year 1 from the Titan Bank. The note issued by Riley carried a one year term and a 7% annual interest rate. Riley earned cash revenue of $1,700 in Year 1 and $1,400 in Year 2. Assume no other transactions. The amount of cash flow from operating activities that would appear on the Year 2 statement of cash flows would be:

D) $1,120 outflow

49) Eureka Company issued $100,000 in bonds payable on January 1, Year 1. The bonds were issued at face value and carried 5-year term to maturity. They had a 7% stated rate of interest that was payable in cash on January 1st of each year beginning January 1, Year 2. Based on this information, the amount of total liabilities appearing on the December 31, Year 1 balance sheet would be:

D) $107,000.

5) West Company borrowed $10,000 on September 1, Year 1 from the Valley Bank. West agreed to pay interest annually at the rate of 6% per year. The note issued by West carried an 18-month term. Based on this information the amount of interest expense appearing on West's Year 1 income statement would be:

D) $200.

25) Which of the following items would be least likely to appear in the current liabilities section of a classified balance sheet?

D) Bonds Payable.

2) The party who borrows money in a note payable is known as the:

D) Both Maker and Issuer.

18) In December Year 1, Lucas Corporation sold merchandise for $10,000 cash. Lucas estimated that $700 of warranty claims might be filed in regard to these sales. On February 12, Year 2, warranty work amounting to $550 was performed for one of the customers ($430 labor paid in cash and $120 from the materials inventory). Which of the following answers correctly shows the effect of the recognition of the warranty obligation at the end of Year 1 on the financial statements of Lucas? Assets = Liab. + Equity Revenue − Expense = Net Inc. Cash flow A. NA = (700) + 700 700 − NA = 700 NA B. (700) = NA + (700) NA − 700 = (700) (700) OA C. (700) = (700) + NA NA − NA = NA (700) OA D. NA = 700 + (700) NA − 700 = (700) NA

D) Choice D

35) On January 1, Year 1, the Niagara Corporation arranges a $6,000 line of credit with the Centennial Bank. It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year. All borrowings and repayments are to take place on January 1 of each year. Niagara begins its loan transactions with Centennial Bank by borrowing $2,000 on January 1, Year 1. Which of the following answers shows the effect of this event on the financial statements? Assets = Liab. + Equity Revenue − Expense = Net Inc. Cash flow A. 2,000 = 2,000 + NA NA − NA = NA 2,000 IA B. 2,000 = NA + 2,000 2,000 − NA = 2,000 2,000 IA C. 2,000 = NA + 2,000 2,000 − NA = 2,000 2,000 OA D. 2,000 = 2,000 + NA NA − NA = NA 2,000 FA

D) Choice D

45) Marvin Company issues $125,000 of bonds at face value on January 1. The bonds carry a 6% annual stated rate of interest. Interest is payable in cash on December 31 of each year. Which of the following reflects the financial statement effects of the first interest payment? Assets = Liab. + Equity Revenue − Expense = Net Inc. Cash flow A. (7,500) = (7,500) + NA NA − NA = NA (7,500) FA B. (7,500) = NA + (7,500) NA − 7,500 = (7,500) (7,500) FA C. (7,500) = (7,500) + NA NA − NA = NA (7,500) OA D. (7,500) = NA + (7,500) NA − 7,500 = (7,500) (7,500) OA

D) Choice D

55) The Gordon Corporation issued $70,000 of 6%, 5-year bonds on January 1, Year 1 at 98. The interest payments are due on December 31 each year. Gordon uses the straight-line method of amortization. Which of the following answers shows the effect of the first interest payment and amortization of premium or discount? Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash flow A. (4,200) = (4,200) + NA NA − NA = NA (4,200) FA B. (4,480) = (280) + (4,200) NA − 4,200 = (4,200) (4,480) FA C. (4,480) = (280) + (4,200) NA − 4,200 = (4,200) (4,200) OA/(280) FA D. (4,200) = 280 + (4,480) NA − 4,480 = (4,480) (4,200) OA

D) Choice D

56) The Gordon Corporation issued $70,000 of 6%, 5-year bonds on January 1, Year 1 at 98. The interest payments are due on December 31 each year. Gordon uses the straight-line method of amortization. On December 31, Year 5, Gordon Corporation records interest and amortization. Immediately after that, Gordon pays off the bonds as scheduled. Which of the following answers shows the effect of the bond payoff on the financial statements? Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash flow A. (68,600) = (68,600) + NA NA − NA = NA (68,600) FA B. (68,600) = (68,600) + NA NA − NA = NA (68,600) OA C. (70,000) = (68,600) + (1,400) NA − 1,400 = (1,400) (68,600) FA/(1,400) OA D. (70,000) = (70,000) + NA NA − NA = NA (68,600) FA/(1,400) OA

D) Choice D

16) Under what condition is a pending lawsuit recognized as a liability on a company's balance sheet?

D) The outcome is probable and can be reasonably estimated.

75) If a company uses the effective interest method of amortizing a bond discount, the interest expense that is recognized each year will:

D) be greater than the interest payment and also will increase from year to year.

72) The carrying value of a bond issued at a premium:

D) decreases by equal amounts each year if straight-line amortization is used and decreases by increasing amounts each year if effective interest amortization is used.

6) Madison Company issued an interest-bearing note payable with a face amount of $24,000 and a stated interest rate of 8% to the Metropolitan Bank on August 1, Year 1. The note carried a one-year term. The amount of cash flow from operating activities on the Year 1 statement of cash flows would be:

D) zero.

64) Jacobs Company issued bonds with $300,000 face value on January 1, Year 1. The bonds were issued at 102 and carried a 5-year term to maturity. They had a 9% stated rate of interest that was payable in cash on December 31st of each year. Jacobs uses the straight-line method of amortization. Based on this information alone, the recognition of interest expense on December 31, Year 1 would act to:

A) Decrease equity by $25,800, decrease liabilities by $1,200, and decrease assets by $27,000.

42) Bluestone Company issued bonds with a face value of $500,000 on January 1, Year 1 at 90. How would this event affect the company's financial statements?

A) Increase assets (cash) by $450,000, decrease liabilities (discounts on bonds payable) by $50,000, and increase liabilities by $500,000.

23) Which of the following items is not classified as a current asset?

A) Office equipment.

67) Victor Company issued bonds with a $250,000 face value and a 6% stated rate of interest on January 1, Year 1. The bonds carried a 5-year term and sold for 95. Victor uses the straight-line method of amortization. Interest is payable on December 31 of each year. The amount of cash flow from operating activities on the December 31, Year 3 statement of cash flows would be:

B) $15,000.

29) The Platte Corporation issues a 5-year note payable on January 1, Year 1 for $5,000. The interest rate is 5% and the annual payment of $1,156, due each December 31, includes both interest and principal. Which of the following shows the effect of the December 31, Year 1 payment? Assets = Liab. + Equity Revenue − Expense = Net Inc. Cash flow A. (1,156) = (1,156) + NA NA − NA = NA (1,156) FA B. (1,156) = (906) + (250) NA − 250 = (250) (906) FA/(250) OA C. (1,156) = NA + (1,156) NA − 1,156 = (1,156) (1,156) OA D. (1,156) = (906) + (250) NA − 250 = (250) (1,156) FA

B) Choice B

41) Johansen Company issued a bond at a discount. Which of the following choices accurately reflects how the issue would affect Johansen's financial statements? Assets = Liab. + Equity Revenue − Expense = Net Inc. Cash flow A. + = + + NA NA − + = − + OA B. + = + + NA NA − NA = NA + FA C. + = + + − NA − + = − + FA D. + = + + NA NA − NA = NA + OA

B) Choice B

54) The Gordon Corporation issued $70,000 of 6%, 5-year bonds on January 1, Year 1 at 98. The interest payments are due on December 31 each year. Gordon uses the straight-line method of amortization. Which of the following answers shows the effect of the bond issuance on the financial statements? Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash flow A. 70,000 = 70,000 + NA NA − NA = NA 70,000 FA B. 68,600 = 68,600 + NA NA − NA = NA 68,600 FA C. 68,600 = 70,000 + (1,400) NA − 1,400 = (1,400) 68,600 FA D. 70,000 = 68,600 + 1,400 NA − (1,400) = 1,400 70,000 FA

B) Choice B

61) Bruce Company experienced an accounting event that that increased interest expense, decreased the discount on bonds payable, and decreased cash. Which of the following choices accurately reflects how this event would affect Bruce's financial statements? Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash Flow A. − = − + NA NA − NA = NA − IA B. − = + + − NA − + = − − OA C. − = + + − NA − + = − − IA D. − = NA + − NA − + = − − OA

B) Choice B

4) Franklin Company issued a $40,000 note to the Mercantile Bank on August 1, Year 1. The note carried a one-year term and a 12% rate of interest. The accrual of interest on December 31, Year 1 will:

B) Increase liabilities and decrease equity by $2,000.

60) A five-year, $500,000 bond was issued on January 1, Year 1. The stated rate of interest was 8%, and the effective rate of interest was 10%. The interest is paid semiannually. Which of the following statements is correct?

B) This bond was issued at a discount, and each semiannual cash payment is $20,000.

47) Jones Company issued bonds with a $200,000 face value on January 1, Year 1. The five-year term bonds were issued at 97 and had a 7½% stated rate of interest that is payable in cash on December 31st of each year. Jones amortizes the bond discount using the straight-line method. Based on this information: The total amount of liabilities shown on Jones's December 31, Year 2 balance sheet would be:

C) $196,400.

73) Weller Company issued bonds with a face value of $400,000, a 10% stated rate of interest, and a 10-year term. The bonds were issued on January 1, Year 1, and Weller uses the effective interest method of amortization. The market rate of interest on the date of issue was 8%. Interest is paid annually on December 31. Assuming Weller issued the bonds for $431,940, the carrying value of the bonds on the December 31, Year 3 balance sheet would be closest to:

C) $414,264.

14) Which of the following represents the impact of a taxable cash sale of $400 on the accounting equation if the sales tax rate is 5%?

C) An increase to cash for $420, an increase to sales tax payable for $20, and an increase to sales revenue for $400.

30) The Platte Corporation issues a 5-year note payable on January 1, Year 1 for $5,000. The interest rate is 5% and the annual payment of $1,156, due each December 31, includes both interest and principal. Which of the following correctly shows the effects of the December 31, Year 2 payment (rounded to the nearest whole dollar)? Assets = Liab. + Equity Revenue − Expense = Net Inc. Cash flow A. (1,156) = (951) + (205) NA − 205 = (205) (1,156) FA B. (1,156) = (906) + (250) NA − 250 = (250) (906) FA/ (250) OA C. (1,156) = (951) + (205) NA − 205 = (205) (951) FA/ (205) OA D. (1,156) = (951) + (205) NA − 205 = (205) (1,156) OA

C) Choice C

50) Kier Company issued $200,000 in bonds on January 1, Year 1. The bonds were issued at face value and carried a 4-year term to maturity. They had a 6½% stated rate of interest that was payable in cash on December 31st. Based on this information alone, the amount of interest expense shown on the December 31, Year 1 income statement and the cash flow from operating activities shown on the December 31, Year 1 statement of cash flows would be: Interest Expense Cash Outflow A. $ 13,000 zero B. zero $ 13,000 C. $ 13,000 $ 13,000 D. zero zero

C) Choice C

52) On January 1, Year 1, Pierce Corporation issued $25,000 in 8%, 5-year bonds payable at 102. Interest payments are due each December 31. Pierce uses the straight-line method of amortization. Which of the following shows the effect of the interest payment and amortization on December 31, Year 1? Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash flow A. (2,000) = (160) + (1,840) (1,840) − NA = (1,840) (2,000) FA B. (2,000) = (100) + (1,900) NA − 1,900 = (1,900) (100) FA/(1,900) OA C. (2,000) = (100) + (1,900) NA − 1,900 = (1,900) (2,000) OA D. (2,000) = NA + NA NA − NA = NA (2,000) OA

C) Choice C

17) Burger Barn has been named as a plaintiff in a $5 million lawsuit filed by a customer over the addictive nature of the company's french fries. Burger Barn's attorneys have advised them that the likelihood of a future obligation from the suit is remote. As a result of the lawsuit, Burger Barn should:

C) Ignore the lawsuit in its financial statements.

63) On January 1, Year 1, Sheffield Co. issued bonds with a face value of $200,000, a term of ten years, and a stated interest rate of 6%. The bonds were issued at 105, and interest is payable each December 31. Sheffield uses the straight-line method to amortize the bond discount. The carrying value of the bonds that would be reported on the December 31, Year 4 balance sheet is:

D) $206,000.

65) Victor Company issued bonds with a $250,000 face value and a 6% stated rate of interest on January 1, Year 1. The bonds carried a 5-year term and sold for 95. Victor uses the straight-line method of amortization. Interest is payable on December 31 of each year. The carrying value of the bond liability on the December 31, Year 3 balance sheet was:

D) $245,000.

37) North Woods Company has a line of credit with the Olympia State Bank. North Woods agreed to pay interest at an annual rate equal to 2% above the bank's prime rate. Funds are borrowed or repaid on the first day of each month and interest is paid in cash on the last day of each month. Borrowing is shown as a positive amount, and repayments are shown as negative amounts indicated by parentheses. Activity to date is given as follows: Month Amount Borrowed (Repaid) Prime Rate for the Month January $ 40,000 6 % February 60,000 5 % March (40,000 ) 3 % The amount of interest paid at the end of March would be:

D) $250.

38) Franklin Company obtained a $160,000 line of credit from the State Bank on January 1, Year 1. The company agreed to accept a variable interest rate that was set at 2% above the bank's prime lending rate. The bank's prime rate of interest and the amounts borrowed or repaid during the first three months of Year 1 are shown in the following table. Assume that Franklin borrows or repays on the first day of each month. Borrowing is shown as a positive amount and repayments are shown as negative amounts indicated by parentheses. Amount Borrowed (Repaid) Prime Rate for the Month 1-Jan $ 40,000 4.0 % 1-Feb (10,000 ) 4.5 % 1-Mar 40,000 5.0 % Based on this information alone, the amount of interest expense recognized in March would be closest to:

D) $408.

31) On January 1, Year 1, the Mahoney Company borrowed $324,000 cash from Sun Bank by issuing a five-year 8% term note. The principal and interest are repaid by making annual payments beginning on December 31, Year 1. The annual payment on the loan based on the present value of annuity factor would be $81,150. The amount of principal repayment included in the December 31, Year 1 payment is:

D) $55,230.

53) On January 1, Year 1, The Hanover Corporation issued $70,500 of 8%, 5-year bonds at 97. Hanover uses the straight-line method of bond discount amortization. The interest payments are due on December 31 each year. How much interest expense will Hanover report on its income statement on December 31, Year 1?

D) $6,063

13) Selling $130 of merchandise to a customer for $200 cash in a state where the sales tax rate is 4%:

D) All of these answer choices are correct.

22) Benitez Co. had sales of $800,000 in Year 1. The company expects to incur warranty expenses amounting to 3% of sales. There were $13,000 of warranty obligations paid in cash during Year 1. Based on this information:

D) All of these answer choices are correct.

27) Regardless of the specific type of long-term debt, which of the following is normally required with debt transactions?

D) to repay the interest and repay the debt