Reference no: EM132852953

Question 1 - Seatle Company issued a $90,000 face value discount note payable to First Federal Bank on September 1, year 1. The note had a 4% discount rate and a one-year term. What is the amount of interest expense appearing on the Year 1 Income statement?

A) $1,200

B) $3,600

C) $2,400

D) $7,200

Question 2 - Seatle Company issued a $90,000 face value discount note payable to First Federal Bank on September 1, year 1. The note had a 4% discount rate and a one-year term. What is the effect of the accural of interest expense on the element of the financial statement?

A) Liabilities will increase and retained earnings will decrease.

B) Assets and liabilities will decrease.

C) Assets will increase and retained earnings will increase.

D) Liabilities will increase and Assets will decrease.

Question 3 - Seatle Company issued a $90,000 face value discount note payable to First Federal Bank on September 1, year 1. The note had a 4% discount rate and a one-year term. What is the carrying value of the liability appearing on the December 31, Year 1 balance sheet?

A) $80,400

B) $87,600

C) $90,000

D) $88,800

Question 4 - Baltimore Company issued a $9,000 face value discount note to Bank of the Chesapeake on March 1, Year 1. The note had a 5% discount rate and a one-year term to maturity. How would the adjusting entry to record interest expense on December 31, year 1 affect the elements of the financial statements?