Current Attempt in Progress On January 1, 2024, Blossom Inc. purchased an investment in Drexall Inc. bonds for $167,000, at par value. The bonds pay interest on December 31 each year. However, the company has determined that, due to a default on making interest and principal payments, there is objective evidence of impairment, which represents a triggering or loss event. The present value of the discounted revised cash flows is $116,100 using the original effective interest rate and $106,100 using the current market interest rate. The market value of the bonds is $96,100. Prepare the journal entries for impairment under ASPE and IFRS, respectively, assuming the company uses the amortized cost model. (Credit account titles are automatically indented when 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.) Account Titles Debit Credit

Current Attempt in Progress On January 1, 2024, Blossom Inc. purchased an investment in Drexall Inc. bonds for $167,000, at par value. The bonds pay interest on December 31 each year. However, the company has determined that, due to a default on making interest and principal payments, there is objective evidence of impairment, which represents a triggering or loss event. The present value of the discounted revised cash flows is $116,100 using the original effective interest rate and $106,100 using the current market interest rate. The market value of the bonds is $96,100. Prepare the journal entries for impairment under ASPE and IFRS, respectively, assuming the company uses the amortized cost model. (Credit account titles are automatically indented when 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.) Account Titles Debit Credit

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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A company buys a debt investment for $316, 000. At the end of 2023, the amortized cost of the investment is $315,000 and the fair value of the investment is $322, 000. The company intends to hold the investment until maturity and does not intend to use the fair value option. Therefore, the company must report the investment at $316,000 on its 2023 year-end balance sheet. True or False
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, 2017, Fisher Company makes the two following acquisitions: Purchases land habing a fair market value of $800,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $1,175,464. Purchases equipment by issuing a 4%, 8-year promissory note having a maturity value of $350,000 (interest payable annually). The company has to pay 8% interest for funds from its bank. Instructions: Record the two journal entries that should be recorded by Fisher Company for the two purchases on January 1, 2017. Record the interest at the end of the first year on both notes using the effective-interest method.
On June 1, 2019, Hansen Company purchased twenty $1,000 Francisco Company bonds at par and classified them as held-to-maturity. In 2020, Francisco experienced financial difficulties and on Dec 31, 2020, based on an evaluation of the investment, Hansen determined that expected credit losses are $4,200. In 2021, Francisco improved its financial condition, and, on Dec 31, 2021, Hansen believed that expected credit losses would only be $2,100. Required: Prepare the journal entries for Hansen to record the above events under U.S. GAAP.
Concord Corporation purchased a computer on December 31, 2024, for $115,500, paying $33,000 down and agreeing to pay the balance in five equal installments of $16,500 payable each December 31 beginning in 2025. An assumed interest rate of 10% is implicit in the purchase price. Prepare the journal entry at December 31, 2025, to record the payment and interest (effective-interest method employed). (Round answers to 2 decimal places, e.g. 52.75. Credit account titles are automatically indented when 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 Account Titles and Explanation c. 31, 2025 Interest Expense Notes Payable Cash Discount on Notes Payable Debit 6600 16,500 Credit 6600 16500 Prepare the journal entry at December 31, 2026, to record the payment and interest (effective-interest method employed). (Round answers to 2 decimal places, e.g. 52.75.…
On December 31, 2025, Cullumber Company acquired a computer from Plato Corporation by issuing a $614,000.00 zero-interest- bearing note, payable in full on December 31, 2029. Cullumber Company's credit rating permits it to borrow funds from its several lines of credit at 10%. The computer is expected to have a 5-year life and a $76,000 salvage value. Click here to view factor tables. (a) Prepare the journal entry for the purchase on December 31, 2025. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 2 decimal places, eg. 58,971.23. 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 entered. Do not indent manually. List all debit entries before credit entries.) Date Account Titles and Explanation December 31,2025 eTextbook and Media List of Accounts Debit Credit
On January 1, 2025, Sunland Company makes the two following acquisitions. 1. Purchases land having a fair market value of $860,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $1,263,622. 2. Purchases equipment by issuing a 5%, 9-year promissory note having a maturity value of $350,000 (Interest payable annually on January 1). The company has to pay 9% interest for funds from its bank. (a) Record the two journal entries that should be recorded by Sarasota Company for the two purchases on January 1, 2025. (b) Record the interest at the end of the first year on both notes using the effective-interest method.
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
To get cash to purchase operating assets, Ballard Company, with a December 31 fiscal year-end, issued bonds with the following characteristics: (i) (ii) (iii) (iv) C. Date of bonds: January 1, 2011 Maturity amount and date: $100,000 due in 10 years (December 31, 2020). Interest: 11% per year payable each December 31. Date issued: January 1, 2011. Required: a. Construct the amortization table for the first 2 years for each bond. See (b). b. Give the journal entries to record the issuance and the first 2 interest payments under each of 3 different independent cases: Case A - The bonds sold at par. Case B - The bonds sold to yield 12%. Case C - The bonds sold to yield 10% Provide the following amounts to be reported on the 2011 financial statements: a., Interest expense b., Bonds payable c., Unamortized premium or discount d., Net Liability e., Stated rate of interest (coupon rate) f., Cash paid for interest Case A $ Case B $ Case C $
On December 31, 2015 the Neptune Corporation acquired acustom-made plant asset by issuing a promissory note with a face value of $ 1,200,000, a due date of December 31, 2025 and a stated (coupon) rate of interest of 4%. Interest is compounded annually and is payable at the end on each year. The fair value of the customized asset is not readily determinable and the note receivable is not publicly traded. Given the company's incremental borrowing rate and current market conditions, the imputed rate of interest for the note is estimated as 7%. Determine the present value of the note and prepare the journal entry to record the transaction for Neptune Corporation.