Horngren's Financial & Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780133866292
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 12, Problem 12.1CTEI
Raffle's Kids, a nonprofit organization that provides aid to victims of domestic violence, low-income families, and special-needs children, has a 30-year, 5% mortgage on the existing building. The mortgage requires monthly payments of $3,000. Raffle's bookkeeper is preparing financial statements for the board and, in doing so, lists the mortgage balance of $287,000 under current liabilities because the board hopes to be able to pay the mortgage off in full next year. Of the mortgage principal, $20,000 will be paid next year if Raffie's pays according to the mortgage agreement. The board members call you, their trusted CPA, to advise them on how Raffle's Kids should report the mortgage on its
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Ethical Issue: Raffie’s Kids, a nonprofit organization that provides aid to victims of domestic violence, low-income families, and special-needs children, has a 30-year, 5% mortgage on the existing building. The mortgage requires monthly payments of $3,000. Raffie’s bookkeeper is preparing financial statements for the board and, in doing so, lists the mortgage balance of $287,000 under current liabilities because the Board hopes to be able to pay the mortgage off in full next year. Of the mortgage principal, $20,000 will be paid next year if Raffie’s pays according to the mortgage agreement. The Board members call you, their trusted professional bookkeeper confidant, to advise them on how Raffie’s Kids should report the mortgage on its Balance Sheet.
1. What is the ethical issue?
2. What is your recommendation to the Board of Raffie’s Kids?
Bonnie's Family is a non-profit organization which assists families with low-income,
special needs children, or are victims of domestic violence. They have a 30 year mortgage
with a 5% interest rate which requires a payment of $3,000 per month. In preparing the
financial statements for the board, you list the mortgage balance of $287,000 as a current
liability based on the board hoping to pay it off within the next year. If Bonnie's pays
according to the mortgage agreement, only $20,000 will be paid in the next year. The
board asks an independent CPA to advise how to report the mortgage on the balance
sheet.
1. Explain how to account for the mortgage payment based on U.S. GAAP, assuming
the board feels they will pay the entire balance in the next year.
2. Provide supporting information to the accounting for the mortgage on the balance
sheet for your response to requirement 1.
Becky Smith signed a note in the amount of $200,000 in favor of County Home Laons., to obtain a loan to buy a house in Marrero, Louisiana. The note endorsed "Pay to the order of ____________ without recourse County Home Loans, Inc. "Almost five years later Smith defaulted on the payment. The Federal National Mortgage Association (Fannie mae) wanted to foreclose on the house and sell it to recover the balance due. Smith argued that the words "to the order of ____________" in the endorsement made the note an incomplete order instrument and the Fannie Mae could not enforce it. What is Fannie Mae's best response to this argument?
Chapter 12 Solutions
Horngren's Financial & Managerial Accounting (5th Edition)
Ch. 12 - Flipco signed a 10-year note payable on January 1,...Ch. 12 - Daniels's bonds payable carry a stated interest...Ch. 12 - A bond that matures in installments at regular...Ch. 12 - Prob. 4QCCh. 12 - Nicholas Smith Fitness Gym has 700,000 of 20-year...Ch. 12 - Prob. 6QCCh. 12 - Prob. 7QCCh. 12 - The debt to equity ratio is calculated as a. Total...Ch. 12 - Mike Gordon wishes to have 80,000 in five years....Ch. 12 - Prob. 10BQC
Ch. 12 - Prob. 1RQCh. 12 - What is an amortization schedule?Ch. 12 - What is a mortgage payable?Ch. 12 - What is a bond payable?Ch. 12 - What is the difference between the stated interest...Ch. 12 - When does a discount on bonds payable occur?Ch. 12 - When does a premium on bonds payable occur?Ch. 12 - When a bond is issued, what is its present value?Ch. 12 - Why would a company choose to issue bonds instead...Ch. 12 - Prob. 10RQCh. 12 - Prob. 11RQCh. 12 - What is the normal balance of the account Discount...Ch. 12 - Prob. 13RQCh. 12 - Prob. 14RQCh. 12 - Prob. 15RQCh. 12 - Prob. 16RQCh. 12 - Prob. 17RQCh. 12 - Prob. 18ARQCh. 12 - Prob. 19ARQCh. 12 - Prob. 20ARQCh. 12 - Prob. 21BRQCh. 12 - Prob. 12.1SECh. 12 - Prob. 12.2SECh. 12 - Determining bond prices Bond prices depend on the...Ch. 12 - Prob. 12.4SECh. 12 - Determining bond amounts Quick Drive-Ins borrowed...Ch. 12 - Prob. 12.6SECh. 12 - Prob. 12.7SECh. 12 - Prob. 12.8SECh. 12 - Prob. 12.9SECh. 12 - Prob. 12.10SECh. 12 - Prob. 12.11SECh. 12 - Computing the debt to equity ratio Richards...Ch. 12 - Prob. 12.13SECh. 12 - Prob. 12.14SECh. 12 - Prob. 12.15SECh. 12 - Prob. 12.16SECh. 12 - Accounting for long-term notes payable...Ch. 12 - Prob. 12.18ECh. 12 - Prob. 12.19ECh. 12 - Prob. 12.20ECh. 12 - Prob. 12.21ECh. 12 - Prob. 12.22ECh. 12 - Prob. 12.23ECh. 12 - Prob. 12.24ECh. 12 - Prob. 12.25ECh. 12 - Prob. 12.26ECh. 12 - Prob. 12.27ECh. 12 - Prob. 12.28ECh. 12 - Prob. 12.29ECh. 12 - Prob. 12.30ECh. 12 - Journalizing liability transactions and reporting...Ch. 12 - Analyzing, journalizing, and reporting bond...Ch. 12 - Analyzing and journalizing bond transactions On...Ch. 12 - Analyzing and journalizing bond transactions On...Ch. 12 - Prob. 12.35APCh. 12 - Prob. 12.36APCh. 12 - A Determining the present value of bonds payable...Ch. 12 - Prob. 12.38BPCh. 12 - Prob. 12.39BPCh. 12 - Analyzing and journalizing bond transactions On...Ch. 12 - Analyzing and journalizing bond transactions On...Ch. 12 - Prob. 12.42BPCh. 12 - Prob. 12.43BPCh. 12 - Prob. 12.44BPCh. 12 - Prob. 12.45CPCh. 12 - The following questions are not related....Ch. 12 - Raffle's Kids, a nonprofit organization that...Ch. 12 - Bill and Edna had been married two years and had...Ch. 12 - Prob. 12.1CTFSC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- The government has imposed a fine on JJ’s Place. The fine calls for annual payments of $60,000, $70,000, $75,000, and $50,000, respectively, over the next four years. The first payment is due one year from today. The government plans to invest the funds until the final payment is collected and then donate the entire amount, including the investment earnings, to help the local community shelter. The government will earn 5.5 percent on the funds held. How much will the community shelter receive four years from today?arrow_forwardHope Still, chief executive of Great Divide Technologies (GDT), a state-certified aircraft repair company, worked with her local bank to get a $210,000 loan under the Paycheck Protection Program in early May of 2020 that allowed her to keep paying her 19 employees. The loan would be fully forgiven if GDT uses at least 60% of the funds for payroll costs and the remainder for Interest on mortgages. rent, and utilities. Otherwise, the loan plus 1% accrued annual Interest must be repaid after two years. The company recorded the loan with a $210,000 credit to note payable. Required: Prepare the appropriate Journal entry GDT would record when, after two years. It's determined that the conditions for debt forgiveness will not be met. Assume that accrued Interest had been recorded with debits to interest expense and credits to the note payable. Note: If no entry is required for a transaction/event, select "No Journal entry required" in the first account field. View transaction Bat Journal…arrow_forwardHello, I need help solving this accounting problem.arrow_forward
- the kerwins are selling their home in order to assist in providing their input for a house they have decided to purchase for $16,000,000. the sale agreement on the house being purchased requires a deposit of 20 percent plus closing costs of $800,000 to be paid on signing on August 31,2018. the balance of the purchase price (second deposit) that is not being financed by mortgage loan is due on September 30,2018, the date on which the sale is to be closed. currently, the kerwins have a mortgage balance of @2,000,000 on their old home, which has appraised at $8,000,000. a purchaser has been identified but the proceeds from the sale of this property will not be received until december 30,2018. the kerwins have been pre-approved by local building society to qualify for a 25-year mortgage of $11,000,000 on the new house. this will attract an interest of 5.50% per annum with monthly compounding. in the mean time rbnc bank ltd, a commercial bank, is offering a bridging loan at a rate of 8.50%…arrow_forwardWhen Albertina openied her law office, she bought $19,000 worth of law books and $7600 worth of furniture. She paid $1300 down and agreed to amortize the balance with semiannual payments for 5 years at 11% compounded semiannually. Find the amount of each payment. Then use the formula for the remaining balance to find the number of remaining payments when the loan has been reduced below $12,000. What is the amount of each payment? $ (Round to the nearest cent as needed.)arrow_forwardThe Bowers have a mortgage with National Trust Bank. The bank requires that the Bowers pay their homeowner’s insurance, property taxes, and mortgage in one monthly payment to the bank. Their monthly mortgage payment is $1,500.00. Their semi-annual property tax bill is $6,250.00. Their annual homeowner’s insurance bill is $1,200.00. How much is the monthly payment they make to National Trust? $2642.00arrow_forward
- In year 1, Abby purchased a new home for $200,000 by making a down payment of $150,000 and financing the remaining $50,000 with a loan, secured by the residence, at 6 percent. As of January 1, year 4 the outstanding balance on the loan was $40,000. On January 1, year 4, when her home was worth $300,000, Abby refinanced the home by taking out a $120,000 mortgage at 5 percent. With the loan proceeds, she paid off the $40,000 balance of the existing mortgage and used the remaining $80,000 for purposes unrelated to the home. During year 4, she made interest-only payments on the new loan of $6,000. What amount of the $6,000 interest expense on the new loan can Abby deduct in year 4 on the new mortgage as home-related interest expense?arrow_forwardIn year 1, Abby purchased a new home for $200,000 by making a down payment of $150,000 and financing the remaining $50,000 with a loan, secured by the residence, at 6 percent. As of January 1, year 4 the outstanding balance on the loan was $40,000. On January 1, year 4, when her home was worth $300,000, Abby refinanced the home by taking out a $120,000 mortgage at 5 percent. With the loan proceeds, she paid off the $40,000 balance of the existing mortgage and used the remaining $80,000 for purposes unrelated to the home. During year 4, she made interest- only payments on the new loan of $6,000. What amount of the $6,000 interest expense on the new loan can Abby deduct in year 4 on the new mortgage as home-related interest expense? Multiple Choice $2,000 $6,000 $0 $5,000arrow_forwardMulroy Inc. is a company that owns 5 car dealerships. On October 25, 2021 the owner, Jack Mulroy pledged to contribute a new Ford Explorer to a local charity’s raffle for their annual fundraiser. The fundraiser will be held on November 30, 2021 at which time the car will be delivered to the winner of the raffle. Mulroy, Inc. delivered the Ford Explorer as pledged to the winner on November 30, 2021. The accountant for Mulroy is unsure if the Contribution should be recognized as an expense in October when the pledge was made or in November when the car was delivered. Accounting Issue: When should Mulroy recognize the contribution? Your Interpretation of the Guidance: Mulroy Inc. should recognize the contribution in October 2021 November 2021arrow_forward
- Bridgit has purchased a new home at auction for $655,000. To be able to pay for the house, she takes out a reducing balance loan from the bank for the sum of $520,000. The bank charges interest at the rate of 8.75%, compounding quarterly. Bridgit plans to pay off the loan over a period of 20 years. a. What quarterly instalment must Bridgit pay the bank? Express your answer to the nearest cent. b. How much interest will Bridgit pay over the period of the loan? 0 1 c. Complete the amortization table for the first 2 payments made on this loan. Quarter Payment Interest Principal reduction 2 0 Working space provided: 0 0 Balance $520,000 oH .0022 c mora sauber od zodat bas obemarrow_forwardThe Ability-to-Repay Rule, adopted by the Consumer Financial Protection Bureau in compliance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, requires lenders to determine whether a consumer applying for a Qualified Mortgage can afford to repay the loan. One of the requirements is that the borrower's total monthly debt (including property taxes) cannot exceed 43% of the borrower's monthly pre-tax income.† Suppose that the Foleys have applied for a $400,000 Qualified Mortgage with an interest rate of 6%/year compounded monthly and a term of 30 years. The property tax on the home they wish to purchase is $6000/year. If the Foleys' annual income is $72,000, will they qualify for the mortgage? (Round your answers to two decimal places.) The Foley's monthly payment would be $ _________ . Their monthly income is $ _______. Thus, provided they do not have other significant debts, the Foley's (Qualify/Not Qualify) for the mortgage.arrow_forwardRick and Taylor opened up TFSA's and will be depositing $13,000 into each over the next few months. These are their only TFSA's and no previous contributions have ever been made They will be seeking advice on how to invest inside the TFSA's. Rick's most recent NOA states unused RRSP room of $104,000. Taylor's most recent NOA states unused RRSP room of $64,000. Rick has a DB pension plan that is based on his last 3 year's average earnings with a 2% pay-out per year of pensionable service. Rick's 2021 PA = $10,819. Taylor's Group RRSP plan Rick's RRSP Plan Taylor's Spousal RRSP Rick and Taylor's Net Worth Statement Long-Term Assets $1,577,005 Total Assets $1,607,835 Total Long-Term Liabilties $726,566 Total Liabilities $730,056 Are there any tax advantages they can gain by restructuring areas of their finances (More contributions to their RRSPs)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
How to (Legally) Never Pay Taxes Again; Author: Next Level Life;https://www.youtube.com/watch?v=q63F1pBrUHA;License: Standard Youtube License