Chapter 9 quiz

What is a main feature of an installment note?

• A. One big payment at maturity

• B. Equal payments made each installment

• C. Interest is paid only in the first installment

• D. Principal is not repaid

Each installment note payment includes:

• A. Only interest

• B. Only principal

• C. Interest and a reduction of the loan balance

• D. Fees

On Apr. 1, 2026, Riley Company borrows $40,000 on a 7%, 5-year installment note, with monthly payments of $792.41.
What is the journal entry on Apr. 1?

• Dr Notes Payable 40,000; Cr Cash 40,000

• Dr Cash 40,000; Cr Notes Payable 40,000

• Dr Interest Expense 40,000; Cr Cash 40,000

• Dr Cash 40,000; Cr Interest Payable 40,000

On Apr. 1, 2026, Riley Company borrows $40,000 on a 7%, 5-year installment note with monthly payments of $792.41.
What is the interest expense on the first monthly payment?

• A. $150.00

• B. $233.33

• C. $100.00

• D. 792.41

On Apr. 1, 2026, Riley Company borrows $40,000 on a 7%, 5-year installment note with monthly payments of $792.41.
Interest for April is $233.33. How much of the payment reduces the note?

• A. $233.33

• B. $792.41

• C. $559.08

• D. $40,000

On Apr. 1, 2026, Riley Company borrows $40,000 on a 7%, 5-year installment note, with monthly payments of $792.41.
Which entry records the first monthly payment of $792.41 on the installment note?

• Dr Notes Payable 792.41; Cr Cash 792.41

• Dr Interest Expense 233.33; Dr Notes Payable 559.08; Cr Cash 792.41

• Dr Notes Payable 233.33; Dr Interest Expense 559.08; Cr Cash 792.41

• Dr Interest Expense 792.41; Cr Cash 792.41

On Apr. 1, 2026, Riley Company borrows $40,000 on a 7%, 5-year installment note, with monthly payments of $792.41.
After the first monthly payment, what is the new carrying (book) value of the note?

• $40,000.00

• $39,767.00

• $39,440.92

• $39,208.00

In each succeeding payment on an installment note, the amount of interest expense:

• A. Increases

• B. Decreases

• C. Stays the same

• D. Increases then decreases

On March 1, 2025, Seaside Adventures, Inc. issued $520,000 of 6% bonds, interest payable semiannually. What is the correct journal entry to record the issuance (assume issued at face value)?

• Debit Cash $520,000
  Credit Bonds Payable $520,000

• Debit Bonds Payable $520,000
  Credit Cash $520,000

• Debit Interest Expense $520,000
  Credit Cash $520,000

• Debit Cash $520,000
  Credit Interest Payable $520,000

How much cash interest will Seaside Adventures pay on September 1, 2025?

• $31,200

• $15,600

• $7,800

• $6,000