Bonita Company owes $167,000 plus $14,900 of accrued interest to Windsor State Bank. The debt is a 10-year, 10% note. During2020, Bonita's business deteriorated due to a faltering regional economy. On December 31, 2020, Windsor State Bank agrees toaccept an old machine and cancel the entire debt. The machine has a cost of $322,000, accumulated depreciation of $177,100, and afair value of $149,000.(a)Prepare journal entries for Bonita Company and Windsor State Bank to record this debt settlement. (If no entry is required,select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indentedwhen amount is entered. Do not indent manually.)DateDecember31, 2020Account Titles and ExplanationBonita Company (Debtor):Notes PayableInterest PayableDebit167,00014,900Credit

Journal Entry is the primary step in recording the transactions in the books of accounts.The…

Answered: Bonita Company owes $167,000 plus…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On December 31 , 2018 Nicholas Co. is in financial difficulty and cannot pay a note due that day . It is a $3,300,000 8% issued at par note, payable to Key Bank. Key Bank agrees to accept from Nicholas equipment that has a fair value of 1,450,000, originally costing $2,400,000, with accumulated depreciation of $1,250,000. Key Bank also extends the maturity date to December 31, 2021, reduces the face amount of the note to $1,250,000, and reduces the interest rate to 6%, with interest payable at the end of each year. a. Nicholas should recognize a gain or loss on the transfer of the equipment of: b. At the end of each of the next three years Nicholas records the $ 75,000 interest paid to Key Bank as a: c. In determining the carrying value of the note at December 31, 2018 Key Bank uses an effective interest rate equal to: d. Key Bank records a loss on restructuring of: e. In recording the loss on restructuring, Key bank:
Pharoah Inc. owes Waterway Bank $166,000 plus $16,300 of accrued interest. The debt is a 10-year, 10% note. During 2023, Pharoah's business declined due to a slowing regional economy. On December 31, 2023, the bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $302,000, accumulated depreciation of $185,000, and a fair value of $146,000. The bank plans to dispose of the machine at a cost of $6,000. Both Pharoah and Waterway Bank prepare financial statements in accordance with IFRS 9. (a) Prepare the journal entries for Pharpah and Waterway Bank to record this debt settlement. Assume Waterway Bank had previously recognized an allowance for doubtful accounts for the impairment prior to the settlement. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Date…
On January 1, 2019, Worthylake Company sold used machinery to Brown Company, accepting a $25,000, non-interest-bearing note maturing on January 1, 2021. Worthylake carried the machinery on its books at a cost of $22,000 and a current book value of $15,000. Neither the fair value of the machinery nor the note was determinable at the time of sale; however, Brown’s incremental borrowing rate was 12%. Required: Prepare the journal entries on Worthylake’s books to record: 1. sale of the machinery 2. related adjusting entries on December 31, 2019, and 2020 3. payment of the note by Brown on January 1, 2021
On January 1, 2024, Whispering Winds Company sold property to Oriole Company which originally cost Whispering Winds $2640000. There was no established exchange price for this property. Oriole gave Whispering Winds a $4050000 zero - interest - bearing note payable in three equal annual installments of $1350000 with the first payment due December 31, 2024. The note has no ready market. The prevailing rate of interest for a note of this type is 10% . The present value of a $4050000 note payable in three equal annual installments of $1350000 at a 10% rate of interest is $3357250. What is the amount of interest income that should be recognized by Whispering Winds in 2024 if the effective - interest method is used? Select answer from the options below a. $405000 b. $135000 c. $0 d. $335725
On January 1, 2022, Lorry Manufacturing Company purchased equipment from Wales Inc. There was no established market price for the equipment which has an 8 year life and no salvage value. Lorry gave Wales a P105,000 zero-interest-bearing note payable in 3 equal annual installments of P35,000, with the first payment due December 31, 2022. The prevailing rate of interest for a note of this type is 8%. The present value of the note at 8% was P90,199. Assuming that Lorry uses the straight-line method of depreciation, what amounts will be reported in the company’s 2022 income statement for depreciation expense of the equipment? P8,750 P11,275 P13,125 P30,066
On January 1, 2019, Worthylake Company sold used machinery to Brown Company, accepting a $25,000, non-interest-bearing note maturing on January 1, 2021. Worthylake carried the machinery on its books at a cost of $21,000 and a current book value of $15,000. Neither the fair value of the machinery nor the note was determinable at the time of sale; however, Brown’s incremental borrowing rate was 10%. Required: Prepare the journal entries on Worthylake’s books to record: 1. sale of the machinery 2. related adjusting entries on December 31, 2019, and 2020 3. payment of the note by Brown on January 1, 2021
On December 31, 2020, Stellar Company signed a $ 1,022,000 note to Pearl Bank. The market interest rate at that time was 11%. The stated interest rate on the note was 9%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Stellar’s financial situation worsened. On December 31, 2022, Pearl Bank determined that it was probable that the company would pay back only $ 613,200 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $ 1,022,000 loan.
Whispering Company owes $190,000 plus $16,600 of accrued interest to Metlock State Bank. The debt is a 10-year, 10% note. During 2025, Whispering's business deteriorated due to a faltering regional economy. On December 31, 2025, Metlock State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $344,000, accumulated depreciation of $189,200, and a fair value of $166,000. (a) Prepare journal entries for Whispering Company and Metlock State Bank to record this debt settlement. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is ent ed. Do not indent manually. List all debit entries before credit entries.) No. Date Account Titles and Explanation Whispering Company (Debtor): Debit Credit
On January 1, 2023, Hornets Company sold land that originally cost P400,000 to the Egi Company. As payment, Egi gave Hornets a P600,000 note. The note bears an interest rate of 8% and is to be repaid in three annual installments of P200,000 plus interest on the outstanding balance. The first payment is due on December 31, 2023. The market price of the land is not reliably determinable. The prevailing interest rate for notes of this type is 8%. Question:30. Assume the same facts given in the problem, but change the prevailing interest rate for notes of this type to 12% (instead of 8%). At how much should the note be recorded on January 1, 2023? A. P600,000B. P560,138C. P480,360D. P427,080
am.108.

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