1. On January 1, 20x1, Bark, Inc. issues a noninterest-bearing note of P2,000,000 in exchange for equipment. The note is due on December 31, 20x3. The effective interest rate is 16%. Requirement: Provide all the entries during the term of the note.
1. On January 1, 20x1, Bark, Inc. issues a noninterest-bearing note of P2,000,000 in exchange for equipment. The note is due on December 31, 20x3. The effective interest rate is 16%. Requirement: Provide all the entries during the term of the note.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:b. How much is the interest expense in 20x2?
C. How much is the carrying amount of the note on Dec. 31,
4. Help the inexperienced accountant of Ala-alipaw Co.
reconstruct the information required in the numbered blanks:
the note are due on July 1, 20x1. On initial recognition, which
payable of P6,000. The principal and the 6-month interest on
88
Chapter 2
Notes Payable
89
note
10. On March 1, 20x1, Nickelodeon Co. issued a P6,000, 12%
outstanding account
dated January 1, 20x1 in exchange for an
Requirements:
a. Prepare the journal entries
of the following accounts increased?
a. Prepaid interest
b. Interest payable
al u
c. Discount on note payable
d. Interest expense
20x1?
Hint: Recall the concept of "Pre-acquisition accrued interest" that is applied to notes receivabl
(1)
Face amount
Discount on notes payable on initial recognition (2)
(3)
(4)
PROBLEM 3: EXERCISES
1. On January 1, 20x1, Bark, Inc. issues a noninterest-bearine
note of P2,000,000 in exchange for equipment. The note is due
on December 31, 20x3. The effective interest rate is 16%.
Effective interest rate
Term of the note (in years)
Раутеnts
Interest expense
Amortization Present value
Date
Requirement: Provide all the entries during the term of the note.
1,119,272
898,356
1/1/x1
179,084
12/31/x1 400,000
400,000
400,000
(5)
(6)
256,263
(8)
(7)
2. On January 1, 20x1, J&J Co. issues a noninterest-bearing note
of P3,000,000 in exchange for equipment. The note is due in
three equal annual installments every December 31. The
12/31/x2
12/31/x3
102,735
344,828
(9)
400,000
(10)
344,828
effective interest rate is 18%.
Requirements:
a. Compute for current and noncurrent portions of the note
payable on December 31, 20x1.
b. Compute for the balance of discount on note payable on
December 31, 20x1 and determine how this amount is
allocated to the current and noncurrent portions of the note.
c. Provide all the entries during the term of the note payable.
5. The current and noncurrent portions of Baa-baa Co.'s note
payable at the end of the 1st year are P213,534 and P507,016,
respectively. The note is payable in four equal annual
payments of P300,000 every December 31. Baa-baa Co.
reported interest expense of P86,466 in the 2nd year. The note
was initially recognized at P911,205 on Jan. 1 of Year 1.
Requirement: Prepare a complete amortization table for the note.
antron
3. On January 1, 20x1, Drive Co. paid cash of P200,000 and
issued a noninterest-bearing note P2,000,000 in exchange for a
vehicle. The note is due in four equal annual installments. The
first installment is due on January 1, 20x1 and the succeeding
installments are due every 1st of January. The prevailing rae
of interest for this type of note is 12%.
PROBLEM 4: MULTIPLE CHOICE - COMPUTATIONAL
l. On March 1, 20X4, Fine Co. borrowed P10,000 and signed a
two-year note bearing interest at 12% per annum compounded
annually. Interest is payable in full at maturity on February 28,
20X6. What amount should Fine report as a liability tfor
accrued interest at December 31, 20X5?
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