Moss County Bank agrees to lend the Sadowski Brick Company $200,000 on January 1

Question

Moss County Bank agrees to lend the Sadowski Brick Company $200,000 on January 1. Sadowski Brick Company signs a $200,000, 6%, 9-month note. What is the adjusting entry required if Sadowski Brick Company prepares financial statements on June 30?

A. Interest Expense 6000(D) Cash 6000 (C)
B. Interest Payable 6000(D) Interest Expense 6000(C)
C. Interest Expense 6000(D) Interest Payable 6000(C)
D. Interest Payable 6000(D) Cash 6000(C)

On October 1, Sam's Painting Service borrows $50,000 from National Bank on a 3-month, $50,000, 4% note. The entry by Sam's Painting Service to record payment of the note and accrued interest on January 1 is

A. Notes Payable 50500(D) Cash 50500(C)
B. Notes Payable 50000(D) Interest Payable 2000(D) Cash 52000 (C)
C. Notes Payable 50000 (D) Interest Payble 500 (D) Cash 50500 (C)
D. Notes Payable 50000 (D) Interest Expense 500 (D) Cash 50500 (C)

Hulse Corporation retires its $500,000 face value bonds at 105 on January 1, following the payment of annual interest. The carrying value of the bonds at the redemption date is $518,725. The entry to record the redemption will include a


A credit of $18,725 to Loss on Bond Redemption.


B debit of $18,725 to Premium on Bonds Payable.


C credit of $6,275 to Gain on Bond Redemption.


D debit of $25,000 to Premium on Bonds Payable.

Explanation / Answer

1. c) assuming interest isn't payable until maturity. 2.c) assuming interest was properly accrued on 12/31. 3.b) to eliminate premium on redemption.

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