Sweet Acacia Limited has been experiencing increased customer demand for its specialty food products. To meet this demand, the company has bought additional refrigeration units to hold more inventory. To finance this purchase, Sweet Acacia issued a four-year non-interest-bearing note, with a face value of $800,000. The prevailing interest rate for similar instruments is 9%. The company agreed to repay the note in four equal instalments. Sweet Acacia used the effective interest method to amortize any premium or discount. the factor table PRESENT VALUE OF 1. the factor table PRESENT VALUE OF AN ANNUITY OF 1. (a) Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, prepare the journal entry at the date of purchase. (Hint: Refer to Chapter 3 for tips on calculating.) (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places e.g. 58,971. 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 0 for the

Sweet Acacia Limited has been experiencing increased customer demand for its specialty food products. To meet this demand, the company has bought additional refrigeration units to hold more inventory. To finance this purchase, Sweet Acacia issued a four-year non-interest-bearing note, with a face value of $800,000. The prevailing interest rate for similar instruments is 9%. The company agreed to repay the note in four equal instalments. Sweet Acacia used the effective interest method to amortize any premium or discount. the factor table PRESENT VALUE OF 1. the factor table PRESENT VALUE OF AN ANNUITY OF 1. (a) Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, prepare the journal entry at the date of purchase. (Hint: Refer to Chapter 3 for tips on calculating.) (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places e.g. 58,971. 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 0 for the

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

On January 1, 2020, ABC Co. borrowed P5,000,000 from a bank at a variable rate of interest for 4 years. Interest will be paid annually to the bank on December 31, and the principal is due on December 31, 2023. Under the agreement, the market rate of interest on each January 1 resets the variable rate for that period and the amount of interest to be paid on December 31. To protect itself from fluctuations in interest rate, the entity hedged the variable interest by entering into a four-year “receive variable, pay fixed” interest rate swap with a speculator. The interest rate swap s based on the notional amount of P5,000,000 and an 8% fixed interest rate. This agreement means that the entity will receive a swap payment from the speculator if the market rate on January 1 is more than 8% and will make a swap payment to the speculator if the market rate on January 1 is lower than 8%. The swap payments are made at the end of each year. The entity has designated this interest rate swap as…
Loan covenants require that E-Gadget Corporation (EGC)generate $200,000 cash from operating activities each year.Without intervening during the last month of the currentyear, EGC will generate only $180,000 cash from operations. What are the pros and cons of each of the followingpossible interventions: ( a ) pressuring customers to payoverdue accounts, ( b ) delaying payment of amounts owingto suppliers, and ( c ) purchasing additional equipment toincrease depreciation?
On January 1, 2016, LLB Industries borrowed $340,000 from Trust Bank by issuing a two-year, 10% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2016, and designated the swap as a fair value hedge. Its intent was to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. The agreement called for the company to receive payment based on a 10% fixed interest rate on a notional amount of $340,000 and to pay interest based on a floating interest rate. The contract called for cash settlement of the net interest amount quarterly. Floating (LIBOR) settlement rates were 10% at January 1, 8% at March 31, and 6% June 30, 2016. The fair values of the swap are quotes obtained from a derivatives dealer. Those quotes and the fair values of the note are as indicated below. Fair value of interest rate swap Fair value of note payable January 1 March 31 0 $ 7,872 $340,000 $347,872 Net cash…
Vd
A company provided a special promotion of zero-interest financing for 3 years on its products. The company received a $306,000 zero-interest-bearing note on January 1, 2020. The company imputes an 8% interest rate on this zero-interest note transaction. What is the total amount of revenue to be recognized in 2020? (Add sales revenue and interest revenue.) (Present value factor for 8% and 3 years, single sum is 0.79. Please do not use your own present value tables or financial calculator.) (Please do not round your answer in any part of the computation.)
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 January 1, 2021, LLB Industries borrowed $370,000 from Trust Bank by issuing a two-year, 8% note, with interest payable quarterly. LLB entered into a two-year interest rate swap agreement on January 1, 2021, and designated the swap as a fair value hedge. Its intent was to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. The agreement called for the company to receive payment based on a 8% fixed interest rate on a notional amount of $370,000 and to pay interest based on a floating interest rate. The contract called for cash settlement of the net interest amount quarterly. Floating (LIBOR) settlement rates were 8% at January 1, 6% at March 31, and 4% June 30, 2021. The fair values of the swap are quotes obtained from a derivatives dealer. Those quotes and the fair values of the note are as indicated below. Fair value of interest rate swap Fair value of note payable Required: 1. Calculate the net cash settlement at March 31 and…
Ochoa Bros. received $2 million as loan proceeds from a large bank on April 30, 2015. The market interest rate of 8% per annum is to be paid annually and the principal is to be repaid in 10 years' time if not put earlier by the bank. The bank holds a put option on the debt requiring redemption of the loan after seven years. An amount of $200,000 plus the original principal of $2 million would be repaid if the bank exercises the put. Ochoa agreed to the put option in exchange for relaxed debt covenants. Believing interest rates will fall, on April 30, 2018, Ochoa entered into an interest rate swap (at no cost). Ochoa does not opt for hedge accounting. Swap Terms Notional Amount: $2,000,000 Interest Rate on Swap: Prime + 2% payable annually Current prime rate: 6% Interest Reset Date: Every April 30 Term: 4 years Cost to enter swap: zero Additional information: RESET DATE SWAP VALUE PRIME RATE April 30, 2019 $(75,267) 7.5% April 30, 2020 $(86,198) 8.5% April 30, 2021 $zero 6%…
Prepare the entry to record any unrealized holding gain or loss. (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 0 for the amounts.) Account Titles and Explanation Debit Credit
On December 30, Year 1, ABC Corporation sold a machine to DEF Corporation in exchange for a non-interest bearing note requiring ten annual payments of P10,000. DEF made the first payment on December 30, Year 1. The market interest rate for similar notes at date of issuance was 8%. Information on present value factors is as follows: For 9 periods, the present value of P1 at 8% is 0.50 while the present value of ordinary annuity of P1 at 8% is 6.25. Meanwhile, for 10 periods, the present value of P1 at 8% is 0.46 and the present value of ordinary annuity of P1 at 8% is 6.71. In its December 31, Year 1 balance sheet, what amount should ABC Corporation report as note receivable? *
On December 31, 2025, Crane Company signed a $1,067,100 note to Cheyenne 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, Crane's financial situation worsened. On December 31, 2027, Cheyenne Bank determined that it was probable that the company would pay back only $640,260 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $1,067,100 loan. (a) Determine the amount of cash Crane 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 Crane received from the loan $ eTextbook and Media eTextbook Save for Later Assistance Used Attempts: 0 of 3 used Submit Answer