Fox Co. purchases land on January 1 of Year 1 and issues a 3-year, $70,000 zero-interest-bearing note as payment. The market rate is 10%, and Fox Co. uses the effective interest method to amortize discounts and premiums. Required Stated Interest = 0% e. Repeat the requirements of parts a, b, and c with the stated interest on the note as 5%. e. (Part a: prepare a debt amortization schedule for the note) • Note: Round your answers to the nearest whole dollar. Do not use negative signs with your answers. Date Jan. 1, Year 1 Dec. 31, Year 1 $ Dec. 31, Year 2 Dec. 31, Year 3 Stated Rate = 5% $ Cash 3,500 $ 3,500✔ 3,500 ✓ 10,500 $ Interest Expense Discount Amortization 7,000 * $ 7,000 x 7,000 * 21,000 $ 0x 7,000 * 1,167 x 8,167 Note Payable, Net 50,937 x 0x 0 x 1,167 $ e. (Part b: prepare the entry for issuance of the note in exchange for land on January 1 of Year 1)

Fox Co. purchases land on January 1 of Year 1 and issues a 3-year, $70,000 zero-interest-bearing note as payment. The market rate is 10%, and Fox Co. uses the effective interest method to amortize discounts and premiums. Required Stated Interest = 0% e. Repeat the requirements of parts a, b, and c with the stated interest on the note as 5%. e. (Part a: prepare a debt amortization schedule for the note) • Note: Round your answers to the nearest whole dollar. Do not use negative signs with your answers. Date Jan. 1, Year 1 Dec. 31, Year 1 $ Dec. 31, Year 2 Dec. 31, Year 3 Stated Rate = 5% $ Cash 3,500 $ 3,500✔ 3,500 ✓ 10,500 $ Interest Expense Discount Amortization 7,000 * $ 7,000 x 7,000 * 21,000 $ 0x 7,000 * 1,167 x 8,167 Note Payable, Net 50,937 x 0x 0 x 1,167 $ e. (Part b: prepare the entry for issuance of the note in exchange for land on January 1 of Year 1)

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 January 1, 20x1, an entity obtains an 11%, P5,000,000 bank loan. The bank charges the entity an 8.74% nonrefundable loan origination fee. The principal on the loan matures on December 31, 20x4 but interest is due annually every December 31. Requirements: Compute for the initial carrying amount of the loan. Compute for the effective interest rate on the loan. Compute for the carrying amount of the loan on December 31 20x1.
On January 1, Amil Corp. lent $37,000 to Windsor Ltd., accepting Windsor's $49,247, three-year, zero-interest-bearing note. The implied interest is 10%.(a) Prepare Amil's journal entries for the initial transaction, recognition of interest each year assuming use of the effective interest method, and the collection of $49,247 at maturity. (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.) Account Titles and Explanation Debit Credit (To record initial transaction) (To record interest income in the first year) (To record interest income in the second year) (To record interest income in the third year) (To record collection at maturity)
On January 1, year 2, Connor Corporation signed a $100,000 noninterest-bearing note due in three years at a discount rate of 10%. Connor elects to use the fair value option for reporting its financial liabilities. On December 31, year 2, Connor's credit rating and risk factors indicated that the rate of interest applicable to its borrowings was 9%. The present value factors at 10% and 9% are presented below. PV factor .751 10%, 3 periods PV factor .826 10%, 2 periods PV factor .909 10%, 1 periods PV factor .772 9%, 3 periods PV factor .842 9%, 2 periods PV factor .917 9%, 1 periods At what amount should Connor present the note on the December 31, year 2 balance sheet? $82,610 $84,200 $75,100 $77,200
At December 31, 20X1, Evans Corp. has a note payable balance of $100,000. This note was originally issued on December 31, 20X1, and will be paid back in installments over a five-year period. $15,500 of the outstanding amount of $100,000 on December 31, 20X1, will be paid back in 20X2. Question: How should this note be classified in the liability section of Evans's balance sheet at December 31, 20X1? Select one: a. The full $100,000 should be classified in the long-term liability section. b. $15,500 should be classified in the current liability section, and $84,500 should be classified in the long-term liability section. c. $84,500 should be classified in the current liability section, and $15,500 should be classified in the long-term liability section. d. The full $100,000 should be classified in the current liability section.
On January 1, 20x1, SUBDUE Co. borrowed 10%, P4,000,000 loan from CONQUER Bank. Principal is due on January 1, 20x4 but interests are due annually starting January 1, 20x2. SUBDUE was charged by the bank a 3% nonrefundable loan origination fee representing service fee. How much is the carrying amount of the note on initial recognition?
Leon Acrobats lent $12,174 to Donaldson, Inc., accepting Donaldson's 2-year, $15,000, zero-interest-bearing note. The implied interest rate is 11%. Prepare Leon's journal entries for the initial transaction, recognition of interest each year, and the collection of $15,000 at maturity. (Round answers to O decimal places, e.g. 5,275. 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.) Account Titles and Explanation (To record the initial transations) (To record the recognition of interest in year one) (To recognize the interest in year 2) Debit Credit [] |||||
3. On January 1, 20x1, Otters Co. issued a 3-year, noninterest bearing note of P1,200,000 in exchange for equipment. The note is due in three equal annual installments beginning on January 1, 20x1 and every January 1 thereafter. The effective interest rate is 10%. Requirements: a) Prepare amortization table; b) How much is the interest expense in 20x1?; c) How much is the carrying amount of the note on Dec 31, 20x1?
Lime Co. incurs a $4,000 note with equal principal installment payments due for the next eight years. What is the amount of the current portion of the noncurrent note payable due in the second year? A. $800 B. $1,000 C. nothing, since this is a noncurrent note payment D. $500
On January 1, 2025, Coronado Co. borrowed and received $150,000 from a major customer evidenced by a zero-interest-bearing note due in 4 years. As consideration for the zero-interest-bearing feature, Coronado agrees to supply the customer's inventory needs for the loan period at lower than the market price. The appropriate rate at which to impute interest is 9%. Prepare the journal entry to record the initial transaction on January 1, 2025. Prepare the journal entry to record any adjusting entries needed at December 31, 2025. Assume that the sales of Coronado's product to this customer occur evenly over the 4-year period and that the effective-interest method is used.
On January 1, 20x1, PRISM Co. acquired machinery by issuing a 3-year, P1,200,000 noninterest-bearing note payable due as follows: Date Amount of installment December 31, 20x1 600,000 December 31, 20x2 400,000 December 31, 20x3 200,000 TOTAL 1,200,000 The prevailing rate of interest for this type of note is 10%. How much is the carrying amount of the note on December 31, 20x1? Select the correct response: 867,312 1,026,296 528,926 489,762
Adams Acrobats lent $17,147 to Donaldson, Inc., accepting Donaldson's 2-year, $20,000, zero-interest-bearing note. The implied interest rate is 8%. Prepare Adams's journal entries for the initial transaction, recognition of interest each year, and the collection of $20,000 at maturity. (Round answers to O decimal places, e.g. 5,275. 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.) Account Titles and Explanation (To record the initial transations) (To record the recognition of interest in year one) (To recognize the interest in year 2) (To record the collection of the note) Debit Credit INT
Lang Warehouses borrowed $157,000 from a bank and signed a note requiring 2 annual payments of $85,034 beginning one year from the date of the agreement. (EV of $1, PV of $1. EVA of $1. PVA of $1. ÉVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Determine the interest rate implicit in this agreement. (Do not round intermediate calculations. Round interest rate to 1 decimal place.) Solve for i Present value: Annuity payment