rovident Manufacturing recently began paying all of its invoices within 20 days of receipt, rather than its usual 30 days. How would this adjustment likely affect Provident’s chances of receiving a ba

rovident Manufacturing recently began paying all of its invoices within 20 days of receipt, rather than its usual 30 days. How would this adjustment likely affect Provident’s chances of receiving a ba

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, 2017, Cheyenne Company issued a $1,224,300, 5-year, zero-interest-bearing note to Ayayai Bank. The note was issued to yield 8% annual interest. Unfortunately, during 2018 Cheyenne fell into financial trouble due to increased competition. After reviewing all available evidence on December 31, 2018, Ayayai Bank decided that the loan was impaired. Cheyenne will probably pay back only $816,200 of the principal at maturity.
On December 31, 2025, Nash Company signed a $1,035,300 note to Crane Bank. The market interest rate at that time was 11%. The stated interest rate on the note was 9%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Nash's financial situation worsened. On December 31, 2027, Crane Bank determined that it was probable that the company would pay back only $621,180 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $1,035,300 loan. (a) Your answer is incorrect. Determine the amount of cash Nash received from the loan on December 31, 2025. (Round present value factors to 5 decimal places, e.g. 0.52513 and final answer to O decimal places, e.g. 5,275.) Amount of cash Nash received from the loan $ Prepare a note amortization schedule for Crane Bank up to December 31, 2022. (Round answers to O decimal places, eg. 5,275) Note Amortization Schedule (Before Impairment) Cash Received 128430…
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Uno Bank reports a loan receivable from Davao Air in the amount of P50 million on January 1, 2016. Since the pandemic greatly affected the airline industry, Davao Air is currently facing financial difficulties. The initial loan’s repayment terms include 10% interest rate on outstanding balance plus annual principal payment of P10 million on December 31 of each year, starting on December 31, 2016. Davao Air has made timely payments of the loan and interest until December 31, 2019. In 2020, the Covid-19 pandemic hit the country and greatly affected the airline industry and since then, Davao Air is experiencing financial difficulties. Because of the financial distress being suffered by Davao Air, on December 31, 2020, Uno Bank concluded that the principal and interest currently due can be collected in the next three years but it is probable that no further interest can be collected. The probable amounts and timing of collections are determined as follows: P3M at Dec. 31, 2021P4M at…
7. You just received a $1,000 bill for your credit card, which has an annual interest rate of 18%. Your credit card company uses the previous balance method (i.e. charges interest on the unpaid balance on the first day of the billing period) in order to calculate the interest you owe. Suppose you make a $200 payment tomorrow, and make no new charges to your credit card in the next month. What will be the balance on your next credit card bill (a month from now)? Compute the total return and the annual return for each of the following investments
Over the past 10 years, a bank has experienced the following loan losses on its C&I loans, consumer loans, and total loan portfolio. Year 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 C&I Loans 0.0080 0.0088 0.0100 0.0120 0.0104 0.0084 0.0072 0.0080 0.0096 0.0144 Consumer Loans 0.0165 0.0183 Commercial Sector = 8.0% ; Consumer Sector = 18.0% Commercial Sector = 18.3%; Consumer Sector 8.2% 0.0210 0.0255 Commercial Sector = 8.2%; Consumer Sector 18.3% 0.0219 0.0174 0.0147 Using regression analysis on these historical loan losses, the bank has estimated the following: Xc= 0.002+0.8X₁ and X = 0.003 + 1.8X , where Xc = loss rate in the commercial sector, X₁, = loss rate in the consumer (household) sector, and X₁ loss rate for its total loan portfolio. O Commercial Sector = 18.0%; Consumer Sector = 8.0% 0.0165 0.0201 0.0309 (1) If the bank's total loan loss rates increase to 10 percent, what are the expected loss rate increases in the commercial and consumer sectors? Total Loans 0.0075…
On January 1, Yumati Electric borrows $700,000 at an interest rate of 6% today and will repay this amount by making 14 semiannual payments beginning May 31. What is the approximate amount of each payments that Yumati will need to make? (Use spreadsheet software or a financial calculator to calculate your answer. Do not round any intermediary calculations, and round your final answer to the nearest dollar.)
On December 31, 2020, Stellar Company signed a $ 1,022,000 note to Pearl Bank. The market interest rate at that time was 11%. The stated interest rate on the note was 9%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Stellar’s financial situation worsened. On December 31, 2022, Pearl Bank determined that it was probable that the company would pay back only $ 613,200 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $ 1,022,000 loan.
On December 31, 2017, Firth Company borrowed $62,092 from Paris Bank, signing a 5-year, $100,000 zero-interest-rate note. The note was issued to yield 10% interest. Unfortunately, during 2019, Firth began to experience financial difficulty. As a result, at December 31, 2019, Paris Bank determined that it was probable that it would collect only $75,000 at maturity. The market rate of interest on loans of this nature is now 11%.Instructions(a) Prepare the entry (if any) to record the impairment of the loan on December 31, 2019, by Paris Bank.(b) Prepare the entry on March 31, 2020, if Paris learns that Firth will be able to repay the loan under the original terms.
On December 31, 2019, GMC had a document payable with a value in the $ 100,000 books. GMC has faced economic difficulties that have not allowed to meet the payment of this debt. Suppose that on the date mentioned the The bank agreed to change the terms of the loan as follows: the principal (maturity value) was reduced to $ 80,000, the expiration date was changed to 31 December 2022, and the contractual interest rate was reduced from 15% to 10%. Determine the effect of this restructuring of debt on the Net Income of GMC on 12/31/19. to. GMC is going to report a profit of $ 20,000. b. GMC will report a profit equal to 5% of the principal. c. GMC is going to report a profit of $ 4,000. d. When the terms of the contract are adjusted, the debtor does NOT report earnings.
Which is correct ?
(Expected Cash Flows) On December 31, 2017, Conchita Martinez Company signed a $1,000,000 note to Sauk City Bank. The market interest rate at that time was 12%. The stated interest rate on the note was 10%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Conchita Martinez’s financial situation worsened. On December 31, 2019, Sauk City Bank determined that it was probable that the company would pay back only $600,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $1,000,000 loan.Instructions(a) Determine the amount of cash Conchita Martinez received from the loan on December 31, 2017.(b) Prepare a note amortization schedule for Sauk City Bank up to December 31, 2019.(c) Determine the loss on impairment that Sauk City Bank should recognize on December 31, 2019.