Case 4 - Audit of Non-Current Liabilities Ford Corporation issued 15-year, 10%, P6,000,000 note payable on January 1, 2019 and pays interest semi- annually every June 30 and December 31. When note was issued on January 1, 2019, the prevailing market rate of interest for similar note was at 8%. The test of journal entries revealed the following pro-forma entries made on January 1, 2019: Account titles used: Cash Interest expense Note payable XX XX XX Remarks Fair value (based on effective interest) Difference of face value and proceeds Face value of note payable The company's accountant records the payment of interest as debit to interest expense and credit to cash. It is your first time to audit the client. The errors were discovered during your 2023 audit.
Case 4 - Audit of Non-Current Liabilities Ford Corporation issued 15-year, 10%, P6,000,000 note payable on January 1, 2019 and pays interest semi- annually every June 30 and December 31. When note was issued on January 1, 2019, the prevailing market rate of interest for similar note was at 8%. The test of journal entries revealed the following pro-forma entries made on January 1, 2019: Account titles used: Cash Interest expense Note payable XX XX XX Remarks Fair value (based on effective interest) Difference of face value and proceeds Face value of note payable The company's accountant records the payment of interest as debit to interest expense and credit to cash. It is your first time to audit the client. The errors were discovered during your 2023 audit.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Determine the following as a result of your audit:
subquestion a. How much is the correct amount of interest expense that should be reported in its Statement of Comprehensive Income for the period ending December 31, 2023?
subquestion b. As an audit manager, you review the working papers of your audit staff and senior auditor and summarized the proposed
include a credit to premium on note payable of?
please show solution.
Transcribed Image Text:Case 4 - Audit of Non-Current Liabilities
Ford Corporation issued 15-year, 10%, P6,000,000 note payable on January 1, 2019 and pays interest semi-
annually every June 30 and December 31. When note was issued on January 1, 2019, the prevailing market
rate of interest for similar note was at 8%. The test of journal entries revealed the following pro-forma entries
made on January 1, 2019:
Account titles used:
Cash
Interest expense
Note payable
XX
XX
XX
Remarks
Fair value (based on effective interest)
Difference of face value and proceeds
Face value of note payable
The company's accountant records the payment of interest as debit to interest expense and credit to cash. It is
your first time to audit the client. The errors were discovered during your 2023 audit.
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