Question Details

Bargain Surplus made cash sales during the month of October 



	1.	Parton owes $2 million that is due on February 28. The company borrows $1,600,000 on February 25 (5-year note) and uses the proceeds to pay down the $2 million note and uses other cash to pay the balance. How much of the $2 million note is classified as long-term in the December 31 financial statements.
a.	$2,000,000.
b.	$0.
c.	$1,600,000.
d.	$400,000.

	2.	Venible newspapers sold 6,000 of annual subscriptions at $125 each on June 1. How much unearned revenue will exist as of December 31?
a.	$0.
b.	$312,500.
c.	$375,000.
d.	$750,000.

	3.	Bargain Surplus made cash sales during the month of October of $225,000. The sales are subject to a 6% sales tax that was also collected. Which of the following would be included in the summary journal entry to reflect the sale transactions?
a.	Debit Accounts Receivable for $225,000.
b.	Credit Sales Taxes Payable for $12,736.
c.	Credit Sales Revenue for $208,490.
d.	Credit Sales Taxes Payable for $13,500.

	4.	On February 10, 2014, after issuance of its financial statements for 2013, Higgins Company entered into a financing agreement with Cleveland Bank, allowing Higgins Company to borrow up to $6,000,000 at any time through 2016. Amounts borrowed under the agreement bear interest at 2% above the bank's prime interest rate and mature two years from the date of loan. Higgins Company presently has $2,250,000 of notes payable with Star National Bank maturing March 15, 2014. The company intends to borrow $3,750,000 under the agreement with Cleveland and liquidate the notes payable to Star National Bank. The agreement with Cleveland also requires Higgins to maintain a working capital level of $9,000,000 and prohibits the payment of dividends on common stock without prior approval by Cleveland Bank.  From the above information only, the total short-term debt of Higgins Company as of the December 31, 2013 balance sheet date is
a.	$0.
b.	$2,250,000.
c.	$3,000,000.
d.	$6,000,000.

 
	5.	On December 31, 2014, Isle Co. has $4,000,000 of short-term notes payable due on February 14, 2015. On January 10, 2013, Isle arranged a line of credit with Beach Bank which allows Isle to borrow up to $3,000,000 at one percent above the prime rate for three years. On February 2, 2015, Isle borrowed $2,400,000 from Beach Bank and used $1,000,000 additional cash to liquidate $3,400,000 of the short-term notes payable. The amount of the short-term notes payable that should be reported as current liabilities on the December 31, 2014 balance sheet which is issued on March 5, 2015 is
a.	$0.
b.	$600,000.
c.	$1,000,000.
d.	$1,600,000.





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