15. On October 1, year 1, Fleur Retailers signed a 4-month, 16% note
payable to finance the purchase of holiday merchandise. At that date,
there was no direct method of pricing the merchandise, and the note’s
market rate of interest was 11%. Fleur recorded the purchase at the
note’s face amount. All of the merchandise was sold by December 1,
year 1. Fleur’s year 1 financial statements reported interest payable
and interest expense on the note for 3 months at 16%. All amounts
due on the note were paid February 1, year 2. As a result of Fleur’s
accounting treatment of the note, interest, and merchandise, which of
the following items was reported correctly?
16. Agee Corp. pays its outside salespersons fixed monthly salaries
and commissions on net sales. Sales commissions are computed and
paid on a monthly basis (in the month following the month of the
sale), and the fixed salaries are treated as advances against
commissions. However, if the fixed salaries for salespersons exceed
their sales commissions earned for a month, such excess is not
charged back to them. Pertinent data for the month of April year 2 for
the three salespersons in sales region 330 are as follows:
17. For sales region 330, what total amount should Agee accrue for
sales commissions payable at April 30, year 2?
18. On January 1, a company issued a $50,000 face value, 8% fiveyear bond for $46,139 that will yield 10%. Interest is payable on June
30 and December 31. What is the bond carrying amount on December
31 of the current year?
19. Album Co. issued ten-year $200,000 debenture bonds on January
2. The bonds pay interest semiannually. Album uses the effective
interest method to amortize bond premiums and discounts. The
carrying value of the bonds on January 2 was $185,953. A journal
entry was recorded for the first interest payment on June 30, debiting
interest expense for $13,016 and crediting cash for $12,000. What is
the annual stated interest rate for the debenture bonds?