On January 1, Year 1, Niagara Corporation arranges a $6,000 line of credit with Centennial Bank. It accepted the bank's offer of 1% above the prime rate with interest payments on December 31 of each year. Allborrowings 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 shows the effect of this event on the financial statements?AssetsA. 2,000B. 2,000C. 2,000D. 2,000Multiple ChoiceOOOOBalance SheetLiabilities +2,000n/an/a2,000Option BOption DOption AOption CStockholders'Equityn/a2,0002,000n/aRevenuen/a2,0002,000n/aIncome StatementExpensen/an/an/an/a= Net Incomen/a2,0002,000n/aStatement of Cash Flows2,000 IA2,000 IA2,000 OA2,000 FA

Borrowing is the obligation for the entity which is to be settle in the future and the settlement of…

Answered: On January 1, Year 1, Niagara…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Campus Flights takes out a bank loan in the amount of $210,000 on March 1. The terms of the loan include a repayment of principal in ten equal installments, paid annually from March 1. The annual interest rate on the loan is 9 percent, recognized on December 31. A. Compute the interest recognized as of December 31 in year 1. 15,750 ✔ 3. Compute the principal due in year 1.
During the fiscal year ended December 31, Duckworth Corporation engaged in the following transactions involving notes payable: Sept. 16. Purchased office equipment from Earthtime Equipment. The invoice amount was $24,000, and Earthtime agreed to accept, as full payment, on 12%, three-month note for the invoice amount. Nov. 1. Borrowed $100,000 from Sandra Duckworth, a major corporate stockholder. The corporation issued Duckworth a $100,000, 15%, 120-day note payable. Dec. 1. Purchased merchandise inventory in the amount of $5,000 from Teller Corporation. Teller accepted a 90-day, 14% note as a full settlement of the purchase. Duckworth Corporation uses a perpetual inventory system. Dec. 16. The $24,000 note payable to Earthtime Equipment matured today. Duckworth paid the accrued interest on this note and issued a new 30-day, 16% note payable in the amount of $24,000 to replace the note that matured.
On January 1, Year 1, Mahoney Company borrowed $168,000 cash from Sun Bank by issuing a 5-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 equals $42.077, What is the amount of principal repayment included in the payment made on December 31, Year 1? Multiple Choice Ο Ο Ο Ο $13,440 $37.467 $40,725 $28,637
On January 1, 20X1, MWB, Inc. borrowed cash by issuing a $600,000, 6-year note that specified 6% interest to be paid on December 31 of each year and the $600,000 to be paid at maturity. If the note had instead been an installment note to be paid in six equal payments at the end of each year beginning December 31, 20X1, which of the following would be true? Select one: a. The first year's interest expense would have been higher b. The annual cash payment would have been less c. The second year's interest expense would have been less than in year three d. The second year's interest expense would have been less than in year one e. The effective interest rate would have been higher.
On January 1, MM Company borrows $360,000 cash from a bank and in return signs an 8% installment note for five annual payments of $90, 164 each. Analyze transactions involving issuance of the note and its first annual payment, by showing their effects on the accounting equation-specifically, identify the accounts and amounts (including + or -) for each transaction.
Colson Company has a line of credit with Federal Bank, Colson can borrow up to $386,000 at any time over the course of the calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during the first four months of the year. Colson agreed to pay interest at an annual rate equal to 2.50 percent above the bank's prime rate. Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month. The interest rate is applied to the outstanding monthly balance. For example, Colson pays 6.25 percent (3.75 percent + 2.50 percent) annual interest on $81,000 for the month of January. Month January February March April Amount Borrowed or (Repaid). $ 81,000 117,900 (24,400) 27,600 Required a. Compute the amount of interest that Colson will pay on the line of credit for the first four months of the year. b. Compute the amount of Colson's liability at the end of each of the first…
The following selected transactions relate to liabilities of Colorado Adventures. Colorado's fiscal year ends on December 31. January 13 Negotiate a revolving credit agreement with First Bank that can be renewed annually upon bank approval. The amount available under the line of credit is $10 million at the bank's prime rate. February 1 Arrange a three-month bank loan of $3.8 million with First Bank under the line of credit agreement. Interest at the prime rate of 7% is payable at maturity. May 1 Pay the 7% note at maturity. Required: Record the appropriate entries, if any, on January 13, February 1, and May 1. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in dollars, not in millions (i.e. 5 million should be entered as 5,000,000).)
On the first day of the fiscal year, Shiller Company borrowed $32,000 by giving a 5-year, 11% installment note to Soros Bank. The note requires annual payments of $8,783, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $3,520 and principal repayment of $5,263. Journalize the entries to record the following: Question Content Area a1. Issued the installment note for cash on the first day of the fiscal year. If an amount box does not require an entry, leave it blank. blank Account Debit Credit blank Question Content Area a2. Paid the first annual payment on the note. If an amount box does not require an entry, leave it blank. blank Account Debit Credit blank
Boyd Company has a line of credit with State Bank. Boyd can borrow up to $500,000 at any time over the course of the Year 1 calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during Year 1. Boyd agreed to pay interest at an annual rate equal to 1 percent above the bank's prime rate. Funds are borrowed or repaid on the first day of each month, Interest is payable in cash on the last day of the month. The interest rate is applied to the outstanding monthly balance. For example, Boyd pays 6 percent (5 percent +1 percent) annual interest on $70,000 for the month of January. Amount Borrowed or (Repaid) $ 70,000 50,000 (42,000) No change (30,000) (20,000) Boyd earned $35,000 of cash revenue during Year 1. Month January February March April through October November December Income Statement Required Prepare an income statement, balance sheet, and statement of cash flows for Year 1. Service revenue Expenses…
Franklin Company obtained a $110,000 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. 1-January 1-February 1-Marchi Amount Borrowed Prime Rate for the Month 4.08 4.58 5.08 Based on this information alone, the amount of interest expense recognized in March would be closest to: (Do not round intermediate calculations. Round your answer to the nearest whole number.) Multiple Choice $177, $309. (Repaid) $ 32,000 (11,000) 32,000 $199.
On January 1, Year 1, Brown Co. borrowed cash from First Bank by issuing a $100,000 face value, four-year term note that had an 8 percent annual interest rate. The note is to be repaid by making annual cash payments of $30,192 that include both interest and principal on December 31 of each year. Brown used the proceeds from the loan to purchase land that generated rental revenues of $52,000 cash per year. Prepare an income statement, a balance sheet, and a statement of cash flows for each of the four years.
Below are the details of a loan Levis' obtained from their bank on November 1, 2021. 3 Required: Prepare the following journal entries: a. On November 1, 2021 Levis' borrowed $200,000 from a bank with a five year term at an interest rate of 7% per annum. 6 7 Date ACCOUNT TITLES Debit Credit 8. 1-Nov 9 10 b. The first loan payment is due at the end of the month in the amount of $3,800. This payment includes 11 $1,440 of interest. 12 13 Date ACCOUNT TITLES Debit Credit 14 30-Nov 15 c. Total loan payments made in 2022 will be $600. It is determined that $36,000 of this amount will 8 go towards the principal of the loan. 9 Date ACCOUNT TITLES Debit Credit 31-Dec

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