Reference no: EM132540096

Questions -

Q1. On January 1, 2018, Bellamy Corporation borrowed $400,000 on a 15-year mortgage to purchase land and a building. The land and building are pledged as collateral on the mortgage, which has an interest rate of 12 percent compounded monthly. The payments of $4,800 are made at the end of each month, beginning on January 1, 2018. How much interest expense should Bellamy Corporation record on January 31, 2018?

Q2. During May, Lucky Company sells $524,000 in product that has a one year warranty. Experience shows that warranty expenses average about 8% of the selling price. The warranty liability account has a balance of $23,800 before adjustment. Customers returned product for warranty repairs during the month that used $10,800 in parts for repairs. The entry to record the customer warranty repairs is:

a) Debit Estimated Warranty Liability $10,800; credit Parts Inventory $10,800.

b) Debit Warranty Expense $10,800; credit Estimated Warranty Liability $10,800.

c) Debit Warranty Expense $41,920; credit Estimated Warranty Liability $41,920.

d) Debit Warranty Expense $18,120; credit Estimated Warranty Liability $18,120.

Q3. At the beginning of the year, Brandt Company issued 5,000 shares of $1 par common stock in exchange for land with a book value of $130,000 and a fair value of $100,000. The market value of the stock at the date of the transaction was $20 per share. The entry to record this transaction would include a

a) Credit to Common Stock for $100,000

b) Credit to Paid-in Capital in Excess of Par, Common Stock of $95,000

c) Debit to Common Stock for $5,000

d) Debit to Land of $130,000