By December 31, 2020, PEI Potato Corp. had performed a significant amount of environmental consulting services for Spud Ltd. Spud was short of cash, and PEI Potato agreed to accept a $200,000, non–interest-bearing note due December 31, 2022, as payment in full. Spud is a bit of a credit risk and typically borrows funds at a rate of 12%. PEI Potato is much more creditworthy and has various lines of credit at 9%. PEO Potato Corp. reports under IFRS. Required Prepare the journal entry to record the transaction on December 31, 2020, for PEI Potato Corp. Assuming PEI Potato's fiscal year end is December 31, prepare the journal entry required at December 31, 2021. Assuming PEI Potato's fiscal year end is December 31, prepare the journal entry required at December 31, 2022. What are the amount and classification of the note on PEI Potato Corp.'s SFP as at December 31, 2021? Assume instead that PEI Potato reports under ASPE and uses the straight-line method to amortize the discount on the note. What would the interest income be relating to the note for 2021 and 2022? If an appropriate market rate of interest for the note receivable is not known, how should the transaction be valued and recorded on December 31, 2020?

By December 31, 2020, PEI Potato Corp. had performed a significant amount of environmental consulting services for Spud Ltd. Spud was short of cash, and PEI Potato agreed to accept a $200,000, non–interest-bearing note due December 31, 2022, as payment in full. Spud is a bit of a credit risk and typically borrows funds at a rate of 12%. PEI Potato is much more creditworthy and has various lines of credit at 9%. PEO Potato Corp. reports under IFRS. Required Prepare the journal entry to record the transaction on December 31, 2020, for PEI Potato Corp. Assuming PEI Potato's fiscal year end is December 31, prepare the journal entry required at December 31, 2021. Assuming PEI Potato's fiscal year end is December 31, prepare the journal entry required at December 31, 2022. What are the amount and classification of the note on PEI Potato Corp.'s SFP as at December 31, 2021? Assume instead that PEI Potato reports under ASPE and uses the straight-line method to amortize the discount on the note. What would the interest income be relating to the note for 2021 and 2022? If an appropriate market rate of interest for the note receivable is not known, how should the transaction be valued and recorded on December 31, 2020?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 19P

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