Financial & Managerial Accounting
13th Edition
ISBN: 9781285866307
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 10.6EX
A.
To determine
Note Payable: Note payable is an obligation of the business to pay to its creditors, in future for the benefits received that carry some interest.
To journalize: The transactions on June 30.
B.
To determine
To journalize: The payment of first installment on December 31.
C.
To determine
To journalize: The payment of second installment on June 30.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Subject : Accounting
Recording Purchase of Equipment through Debt and Equity
On January 1, Vale Inc. acquires equipment with a 10-year useful life by issuing a two-year, zero-interest bearing installment note payable. The market rate is 14% for similar transactions. Terms are $19,600 cash payment immediately plus payments of $14,000 cash at
the end of each of the next two years. The company uses the effective interest method to amortize any discount on note payable and the straight-line method to record depreciation expense.
Required
a. Prepare the entry to record the purchase of this equipment.
b. Prepare the entry at the end of year one for (1) interest accrual, (2) cash payment, and (3) depreciation expense.
c. Prepare the entry at the end of year two for (1) interest accrual, (2) cash payment, and (3) depreciation expense.
d. Assume instead that Vale exchanged 280 shares of its own $1 par common stock along with $19,600 cash for
the equipment. The stock was not actively traded, but the equipment was…
Subject: accounting
Chapter 10 Solutions
Financial & Managerial Accounting
Ch. 10 - Does a discounted note payable provide credit...Ch. 10 - Employees are subject to taxes withheld from their...Ch. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - Prob. 6DQCh. 10 - To match revenues and expenses properly, should...Ch. 10 - Prob. 8DQCh. 10 - When should the liability associated with a...Ch. 10 - Prob. 10DQ
Ch. 10 - Proceeds from notes payable On October 12,...Ch. 10 - Proceeds from notes payable On January 26, Nyree...Ch. 10 - Prob. 10.2APECh. 10 - Prob. 10.2BPECh. 10 - Prob. 10.3APECh. 10 - Prob. 10.3BPECh. 10 - Prob. 10.4APECh. 10 - Prob. 10.4BPECh. 10 - Prob. 10.5APECh. 10 - Prob. 10.5BPECh. 10 - Prob. 10.6APECh. 10 - Prob. 10.6BPECh. 10 - Prob. 10.7APECh. 10 - Prob. 10.7BPECh. 10 - Quick ratio Nabors Company reported the following...Ch. 10 - Quick ratio Adieu Company reported the following...Ch. 10 - Current liabilities Bon Nebo Co. sold 25,000...Ch. 10 - Entries for discounting notes payable Griffin...Ch. 10 - Evaluating alternative notes A borrower has two...Ch. 10 - Entries for notes payable A business issued a...Ch. 10 - Entries for discounted note payable A business...Ch. 10 - Prob. 10.6EXCh. 10 - Prob. 10.7EXCh. 10 - Calculate payroll An employee earns 32 per hour...Ch. 10 - Prob. 10.9EXCh. 10 - Prob. 10.10EXCh. 10 - Payroll tax entries According to a summary of the...Ch. 10 - Prob. 10.12EXCh. 10 - Prob. 10.13EXCh. 10 - Prob. 10.14EXCh. 10 - Prob. 10.15EXCh. 10 - Accrued vacation pay A business provides its...Ch. 10 - Pension plan entries Yuri Co. operates a chain of...Ch. 10 - Prob. 10.18EXCh. 10 - Accrued product warranty Lowe Manufacturing Co....Ch. 10 - Prob. 10.20EXCh. 10 - Prob. 10.21EXCh. 10 - Quick ratio Gmeiner Co. had the following current...Ch. 10 - Prob. 10.23EXCh. 10 - Liability transactions The following items were...Ch. 10 - Entries for payroll and payroll taxes The...Ch. 10 - Wage and tax statement data on employer FICA tax...Ch. 10 - Payroll register The following data for Throwback...Ch. 10 - Payroll accounts and year-end entries The...Ch. 10 - Prob. 10.1BPRCh. 10 - Entries for payroll and payroll taxes The...Ch. 10 - Prob. 10.3BPRCh. 10 - Prob. 10.4BPRCh. 10 - Payroll accounts and year-end entries The...Ch. 10 - Prob. 1CPPCh. 10 - Ethics and professional conduct in business Tonya...Ch. 10 - Prob. 10.2CPCh. 10 - Prob. 10.3CPCh. 10 - Prob. 10.5CP
Knowledge Booster
Similar questions
- Recording a Note Payable Issued for Non-Cash Consideration Lathrop Inc. purchased equipment on January 1, 2020, for $97,500 cash plus a note payable. The fair value of the equipment on January 1, 2020, is $352,733. The market rate of interest is 6%. 5M Corp. uses the effective interest method to amortize discounts and premiums. Record the entries over the term of the note payable for the following three separate scenarios for the structuring of the note payable. a. The principal of $260,000 is due on December 31, 2021, and the note specified 5% interest payable each December 31 over a two-year period. b. The face value of the note payable is instead $286,780 and is due on December 31, 2021. The note is structured as a zero-interest-bearing note payable over a two-year period. c. The loan is extended to three years with equal payments of $95,485 due on each December 31 over the term of the note. The note will be fully paid upon maturity. Case One Case Two Case Three Note: Round…arrow_forwardRecording Purchase of Equipment through Debt Relay Company purchases equipment by making a down payment of $28,000 cash. In addition, Relay signs a note requiring monthly payments of $5,600, starting one month after purchase and continuing for a total of 20 months. The contract calls for no interest, yet the prevailing interest rate is 12% on similar transactions. a. Record the entry required for the purchase of this equipment. b. Record the entry to recognize interest expense, one month after this purchase. Ignore the cash payment part of the transaction. • Note: Round your answers to the nearest whole number. a. b. Account Name To record the purchase of equipment. To record the interest incurred. Dr. Cr.arrow_forwardAmortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued $20,000,000 of 5-year, 11% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Ebert receiving cash of $19,264,099. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Cash Discount on Bonds Payable Bonds Payable First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Interest Expense Discount on Bonds Payable Cash Second semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.…arrow_forward
- Amortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued $18,000,000 of 5-year, 10% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Ebert receiving cash of $16,675,281. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. 2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. 3. Second semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. b. Compute the amount of the bond interest expense for the first year. Round to the nearest dollar.arrow_forwardAmortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued $25,000,000 of 5-year, 9% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 11%, resulting in Ebert receiving cash of $23,115,584. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Cash Discount on Bonds Payable Bonds Payable 2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Interest Expense Discount on Bonds Payable Cash 3. Second semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Interest Expense Discount on Bonds Payable Cash b. Compute the amount of…arrow_forwardAmortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued $24,000,000 of 5-year, 11% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Ebert receiving cash of $23,116,919. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. fill in the blank 75d57bff7072073_2 fill in the blank 75d57bff7072073_3 fill in the blank 75d57bff7072073_5 fill in the blank 75d57bff7072073_6 fill in the blank 75d57bff7072073_8 fill in the blank 75d57bff7072073_9 2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. fill in the blank 977a63fce061fea_2 fill in the blank…arrow_forward
- Amortize discount by interest method On the first day of its fiscal year, Ebert Company issued $50,000,000 of 10-year, 7% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 9%, resulting in Ebert receiving cash of $43,495,895. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. 88 2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. 3. Second semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. b. Compute the amount of the bond interest expense for the first year. Round to the nearest dollar. Annual interest paid Discount amortized Interest expense for…arrow_forwardAmortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued $16,000,000 of 5-year, 10% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Ebert receiving cash of $14,822,472. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank Use these accounts to journalize: Cash Discount on Bonds Payable Bonds Payable 2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Use these accounts to journalize: interest Expense Discount on Bonds Payable Cash 3. Second semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.…arrow_forwardAmortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued $20,000,000 of 5-year, 11% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Ebert Company receiving cash of $19,264,099. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round amounts to the nearest dollar. For a compound transaction, if an amount box does not reguire an entry, leave it blank. Cash 19,264,099 Discount on Bonds Payable -20,000,000 X Bonds Payable Feedback Check My Work 2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank. Interest Expense Discount on Bonds Payable Cash 00arrow_forward
- dont give answer in image formatarrow_forwardDiscounting of Notes Payable On October 30, 2019, Sanchez Company acquired a piece of machinery and signed a 12-month note for 24,000. The lace value of the note includes the price of the machinery and interest. The note is to be paid in four 6,000 quarterly installments. The value of the machinery is the present value of the four quarterly payments discounted at an annual interest rate of 16%. Required: 1. Prepare all the journal entries required to record the preceding information including the year-end adjusting entry and any payments. Present value techniques should be used. 2. Show how the preceding items would be reported on the December 31, 2019, balance sheet.arrow_forwardInvestment Discount Amortization Schedule On January 1, 2019, Rodgers Company purchased 200,000 face value, 10%, 3-year bonds for 190,165.35, a price that yields a 12% effective annual interest rate. The bonds pay interest semiannually on June 30 and December 31. Required: 1. Record the purchase of the bonds. 2. Prepare an investment interest income and discount amortization schedule using the effective interest method. 3. Record the receipts of interest on June 30, 2019, and June 30, 2021.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College