Chapter 10 Exercises

BE10-1  Identify whether obligations are current liabilities.

(LO 1), C
Linton Company has these obligations at December 31: (a) a note payable for $100,000 due in 2
years, (b) a 10-year mortgage payable of $200,000 payable in ten $20,000 annual payments, (c)
interest payable of $15,000 on the mortgage, and (d) accounts payable of $60,000. For each
obligation, indicate whether it should be classified as a current liability, noncurrent liability, or both.

BE10-2  Prepare entries for an interest-bearing note payable.

(LO 2), AP
Graves Company borrows $90,000 on July 1 from the bank by signing a $90,000, 7%, 1-year note
payable. Prepare the journal entries to record (a) the proceeds of the note and (b) accrued interest at
December 31, assuming adjusting entries are made only at the end of the year.

E10-20  Prepare journal entries to record issuance of bonds, payment of interest, amortization of premium
using straight-line, and redemption at maturity.
(LO 5, 6, 8), AP
Prophet Company issued $500,000, 6%, 30-year bonds on January 1, 2014, at 103. Interest is
payable annually on January 1. Prophet uses straight-line amortization for bond premium or
discount.

Instructions
Prepare the journal entries to record the following events.
(a)  The issuance of the bonds.
(b)  The accrual of interest and the premium amortization on December 31, 2014.
(c)  The payment of interest on January 1, 2015.
(d)  The redemption of the bonds at maturity, assuming interest for the last interest period has been
paid and recorded.

*E10-21  Prepare journal entries to record issuance of bonds, payment of interest, amortization of discount
using straight-line, and redemption at maturity.
(LO 5, 6, 8), AP
Dailey Company issued $300,000, 8%, 15-year bonds on December 31, 2013, for $288,000. Interest
is payable annually on December 31. Dailey uses the straight-line method to amortize bond premium
or discount.

Instructions
Prepare the journal entries to record the following events.
(a)  The issuance of the bonds.
(b)  The payment of interest and the discount amortization on December 31, 2014.
(c)  The redemption of the bonds at maturity, assuming interest for the last interest period has been
paid and recorded.