On January 1 2019, Sunrise Company is experiencing extreme financial pressure and is in default in meeting interest payment on its long term note of P6,000,000 due on December 31, 2020. The interest rate is 12% payable every December 31. The accrued interest payable on January 1, 2019 is P720,000. In the agreement with the creditor, Sunrise Company obtain the following changes in the terms of note: a. The accrued interest on January 1, 2019 is forgiven. b. The principal is reduced by P500,000. c. The new interest rate is 8% payable in every December 31. d. The new date of maturity is December 31, 2022. The present value of 1 at 12% for four period is 0.6355 and the present value of an ordinary annuity of 1 at 12% for four period is 3.0373. Required: 1. Journal entry to record the modification of terms on January 1, 2019. 2. Journal entry to record the interest payment and amortization of discount for 2019.

On January 1 2019, Sunrise Company is experiencing extreme financial pressure and is in default in meeting interest payment on its long term note of P6,000,000 due on December 31, 2020. The interest rate is 12% payable every December 31. The accrued interest payable on January 1, 2019 is P720,000. In the agreement with the creditor, Sunrise Company obtain the following changes in the terms of note: a. The accrued interest on January 1, 2019 is forgiven. b. The principal is reduced by P500,000. c. The new interest rate is 8% payable in every December 31. d. The new date of maturity is December 31, 2022. The present value of 1 at 12% for four period is 0.6355 and the present value of an ordinary annuity of 1 at 12% for four period is 3.0373. Required: 1. Journal entry to record the modification of terms on January 1, 2019. 2. Journal entry to record the interest payment and amortization of discount for 2019.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

[The following information applies to the questions displayed below.] Agrico Inc. accepted a 10-month, 12.8% (annual rate), $9,000 note from one of its customers on May 15, 2019; interest is payable with the principal at maturity. b-1. Prepare the horizontal model to record collection of the note and interest at maturity. (Use amounts with + for increases and amounts with – for decreases.) Please don't provide solution image based thanku
Pharoah Ltd. borrowed ¥63,600,000 on November 1, 2021, by signing a ¥65,031,000, 3-month, zero- interest-bearing note. Prepare Pharoah's November 1, 2021, entry; the December 31, 2021, annual adjusting entry; and the February 1, 2022, entry. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)
Vaughn Manufacturing lends Pina Colada industries $51600 on August 1, 2022, accepting a 9-month, 12% interest note. If Vaughn Manufacturing accrued interest at its December 31, 2022 year-end, what entry must it make to record the collection of the note and interest at its maturity date? Cash 56244 Notes Receivable 51600 Interest Revenue 4644 Cash 56244 Notes Receivable 51600 Interest Receivable 2580 Interest Revenue 2064 Cash 56244 Notes Receivable 56244 Notes Receivable 51600 Interest Receivable 2580 Interest Revenue 2064 Cash 56244
Splish Corporation borrowed $58,500 on November 1, 2020, by signing a $60,000, 3-month, zero-interest-bearing note. Prepare Splish's November 1, 2020, entry; the December 31, 2020, annual adjusting entry; and the February 1, 2021, entry. (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 amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit (To record interest) (To pay note)
Blue Cells Can contain On December 31, 2017, Short Co. is in financial difficulty and cannot pay a note due that day. It is a $2,000,000 face value note with $200,000 accrued interest payable to Bryan, Inc. The original market rate of interest on the note was 12.58613%. Bryan agrees to forgive the accrued interest, extend the maturity date (two years) to December 31, 2019, and reduce the interest rate to 4%. The present value of the restructured cash flows is $1,712,000 (using the original market rate). Do NOT add rows to the spreadsheet! Discount Cash Premium Interest payable Par Interest expense Discount on bond payable Yes Bonds payable No Loss on redemption Gain on redemptin Cash Interest payable Interest receivable Notes payable Gain on restructuring Loss on restructuring Discount on Note payable Premium on Note payable…
At January 1, 2021, Clayton Hoists Inc. owed Third BancCorp $12 million, under a 10% note due December 31, 2022. Interest was paid last on December 31, 2019. Clayton was experiencing severe financial difficulties and asked Third BancCorp to modify the terms of the debt agreement. After negotiation Third BancCorp agreed to do the following:∙ Forgive the interest accrued for the year just ended.∙ Reduce the remaining two years’ interest payments to $1 million each.∙ Reduce the principal amount to $11 million.Required:Prepare the journal entries by Third BancCorp necessitated by the restructuring of the debt at1. January 1, 2021.2. December 31, 2021.3. December 31, 2022.
At January 1, 2018, Brainard Industries, Inc., owed Second BancCorp $12 million under a 10% note due December 31, 2020. Interest was paid last on December 31, 2016. Brainard was experiencing severe financial difficultiesand asked Second BancCorp to modify the terms of the debt agreement. After negotiation Second BancCorpagreed to:a. Forgive the interest accrued for the year just ended.b. Reduce the remaining two years’ interest payments to $1 million each and delay the first payment untilDecember 31, 2019.c. Reduce the unpaid principal amount to $11 million.Required:Prepare the journal entries by Brainard Industries, Inc., necessitated by the restructuring of the debt at (1) January1, 2018; (2) December 31, 2019; and (3) December 31, 2020.
On January 1, 2025, Vaughn Co. sold equipment in exchange for an $930000 zero-interest-bearing note due on January 1, 2028. The prevailing rate of interest for a note of this type at January 1, 2025 was 10%. The present value of $1 at 10% for three periods is 0.75131. What amount of interest revenue should be reported in Vaughn's 2026 income statement? O $93000 $69872 O $0 O $76859
At January 1, 2024, Mahmoud Industries, Incorporated, owed Second BancCorp $12 million under a 10% note due December 31, 2026. Interest was paid last on December 31, 2022. Mahmoud was experiencing severe financial difficulties and asked Second BancCorp to modify the terms of the debt agreement. After negotiation Second BancCorp agreed to: Forgive the interest accrued for the year just ended. Reduce the remaining two years’ interest payments to $1 million each and delay the first payment until December 31, 2025. Reduce the unpaid principal amount to $11 million. Required: Prepare the journal entries by Mahmoud Industries, Incorporated, necessitated by the restructuring of the debt at (1) January 1, 2024; (2) December 31, 2025; and (3) December 31, 2026.
On January 1, 2019, a company sells a piece of equipment for a list price of $260,000. It receives $30,000 and accepts a note receivable for the remainder. The balance due is on December 31, 2021, and the note pays an annual interest of 3% every December 31st. Required: Assuming the customer’s borrowing rate is 5%, prepare all journal entries for 2019 and 2020 under IFRS.
The information in the following table relates to the accounts receivable and allowance for doubtful debts of Prime Moving Ltd. The company’s accounting period ends on 30 June each year. The company policy is to provide an allowance for doubtful debts at the rate of 3% of accounts receivable at 30 June each year. The balance of the Allowance for Doubtful Debts account on 1 July 2019 was $13,000. The following information is given for the year ending 30 June 2020 and 30 June 2021, in order to determine the bad debts expense for each year and the balance of allowance for doubtful debts at the end of each year. 2020 2021 Accounts receivable (ending balance at 30 June) $520,000 $585,000 Bad debts written off during the year 7,800 0 Allowance for doubtful debts at 1 July (Beginning of the period) (a) (d) Bad debts expense for the year (b) (e) Allowance for doubtful debts at 30 June (Ending balance) (c) (f) Required: Determine the…
18. Melanie Corp. borrowed $101,000 cash on September 1, 2019, and signed a one-year 6%, interest-bearing note payable. The interest and principal are both due on August 31, 2020. Assume that the appropriate adjusting entry was made on December 31, 2019 and that no adjusting entries have been made during 2020. Which of the following would be the required journal entry to pay the note on August 31, 2020? Multiple Choice Interest payable2,020 Notes payable101,000 Cash 103,020 Notes payable101,000 Interest expense6,060 Cash 107,060 Interest expense6,060 Cash 6,060 Interest expense4,040 Interest payable2,020 Notes payable101,000 Cash 107,060