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Use the following data for Questions 1 - 5:?

  • 1.On November 30, 2005, Crown Food purchased two trucks for a total of $70,000, issuing a one-year, 8% note payable, all due at maturity. The interest on this loan is stated separately. Refer to the above data. The December 31, 2005, adjusting entry for this note includes: A. A credit to Interest Payable for $467. B. A credit to Interest Payable for $934. C. A credit to Interest Payable for $5,600. D. A credit to Cash for $934. 2. Refer to the data in Question 1. The total liabilities related to this note reported in Crown Food's December 31, 2005, balance sheet is: A. $75,000 B. $70,467 C. $70,000 D. $70,934 3. Refer to the data in Question 1. What is the amount of interest expense Crown Food's recognizes on this note in 2006 A. $467. B. $5,133 C. $5,600 D. $934 4. Refer to the data in Question 1. How much must Crown Food pay the lender upon maturity of this note? A. $70,467 B. $70,133 C. $70,000 D. $75,600 5. Refer to the data in Question 1. The liability for this loan as of December 31, 2005: A. Is classified as a long-term liability if Crown Food has the intent and ability to refinance by taking out a new loan not due for several years B. Is classified as a long-term liability, since it was used to acquire noncurrent assets. C. Is equal to the book value of the two trucks that were acquired in exchange. D. Is equal to its maturity value.

  • Answer:

    1. A 2. B 3. B 4. D 5. A

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