Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 14, Problem 14.31BE
Short-Term Debt Expected to Be Refinanced, IFRS. Using the information provided m BE14-30, prepare the
BE14-30. Short-Term Debt Expected to Be Refinanced, U.S. GAAP. Saxon Woods, Inc. has a fiscal year-end of December 31, 2017. The company reported $124,500 in short-term notes payable due on April 1, 2018. on its year-end
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
KMC Inc. provided a loan to Jim Ltd on January 1st, 2016 and received in exchange a 4-year, $120,000 note bearing interest at 8% to be paid annually on December 31. The market rate of interest for financial instruments of similar risk is 2%.
KMC Inc. financial year ends December 31 and the company uses the effective interest method to amortize discount and recognize interest revenue.
Required: Round to nearest whole number
d) Prepare the journal entry in KMC’s books to record the issuance of the note on January 1, 2016.
e) Prepare KMC’s 4-year Note Amortization schedule.
f) Prepare the journal entry KMC records on December 31, 2017.
An entity purchased 8 year debt instruments with a face value of P4,000,000 on January 1, 2017 for trading purposes. Interest is paid annually at a nominal rate of 11% that is paid every December 31. The following information is provided as follows:
Date
Effective Rate without Transaction Cost
Effective Rate with Transaction Cost
01/01/2017
13%
12%
12/31/2017
14%
14.5%
12/31/2018
13%
14%
12/31/2019
9%
10%
12/31/2020
7%
9%
12/31/2021
12.5%
13%
Requirements:
What is the initial carrying amount of the bond investment?
What is the 2017 interest income?
What is the December 31, 2017 carrying amount?
How much is the 2018 unrealized gain recognized in the income statement?
What is the total or net amount recognized in profit or loss in 2019?
If the entity changes its business model in 2018 to collect contractual cash flows only, what is the 2019 interest income?
If the entity changes its business model in 2018 to both collect contractual cash flows and to sell…
(Refinancing of Short-Term Debt) On December 31, 2017, Kate Holmes Company has $7,000,000 of short-term debt in the form of notes payable to Gotham State Bank due in 2018. On January 28, 2018, Holmes enters into a refinancing agreement with Gotham that will permit it to borrow up to 60% of the gross amount of its accounts receivable. Receivables areexpected to range between a low of $6,000,000 in May to a high of $8,000,000 in October during the year 2018. The interest cost of the maturing short-term debt is 15%, and the new agreement calls for a fluctuating interest at 1% above the prime rate on notes due in 2022. Holmes’s December 31, 2017, balance sheet is issued on February 15, 2018.InstructionsPrepare a partial balance sheet for Holmes at December 31, 2017, showing how its $7,000,000 of short-term debt should be presented, including footnote disclosure.
Chapter 14 Solutions
Intermediate Accounting (2nd Edition)
Ch. 14 - What conditions or terms does a note payable...Ch. 14 - If the market rate of interest exceeds the face or...Ch. 14 - What is included in bond issue costs and how...Ch. 14 - Prob. 14.4QCh. 14 - When a bond is issued at a discount, will its...Ch. 14 - Prob. 14.6QCh. 14 - Prob. 14.7QCh. 14 - Under IFRS, how do firms account for convertible...Ch. 14 - Prob. 14.9QCh. 14 - Can companies reclassify short-term debt expected...
Ch. 14 - Under IFRS, can companies reclassify short-term...Ch. 14 - Do companies always reclassify long-term debt that...Ch. 14 - Prob. 14.13QCh. 14 - Prob. 14.14QCh. 14 - Prob. 14.15QCh. 14 - Prob. 14.16QCh. 14 - Prob. 14.1MCCh. 14 - Prob. 14.2MCCh. 14 - Prob. 14.3MCCh. 14 - Prob. 14.4MCCh. 14 - Prob. 14.5MCCh. 14 - Clothes Horse Corp. (CHC) Issued 500,000 bonds due...Ch. 14 - Prob. 14.7MCCh. 14 - Prob. 14.8MCCh. 14 - Prob. 14.9MCCh. 14 - Prob. 14.10MCCh. 14 - Prob. 14.11MCCh. 14 - Prob. 14.1BECh. 14 - Notes Payable. Using the information provided in...Ch. 14 - Prob. 14.3BECh. 14 - Prob. 14.4BECh. 14 - Prob. 14.5BECh. 14 - Prob. 14.6BECh. 14 - Bond Terminology. Match each term with its...Ch. 14 - Bond Pricing. Fill in the missing items for each...Ch. 14 - Prob. 14.9BECh. 14 - Bond Issue Price. Using the information from...Ch. 14 - Prob. 14.11BECh. 14 - Prob. 14.12BECh. 14 - Prob. 14.13BECh. 14 - Prob. 14.14BECh. 14 - Prob. 14.15BECh. 14 - Prob. 14.16BECh. 14 - Prob. 14.17BECh. 14 - Prob. 14.18BECh. 14 - Bonds Issued between Interest Payment Dates. For...Ch. 14 - Prob. 14.20BECh. 14 - Prob. 14.21BECh. 14 - Prob. 14.22BECh. 14 - Prob. 14.23BECh. 14 - Prob. 14.24BECh. 14 - Prob. 14.25BECh. 14 - Prob. 14.26BECh. 14 - Prob. 14.27BECh. 14 - Prob. 14.28BECh. 14 - Prob. 14.29BECh. 14 - Prob. 14.30BECh. 14 - Short-Term Debt Expected to Be Refinanced, IFRS....Ch. 14 - Prob. 14.32BECh. 14 - Prob. 14.33BECh. 14 - Prob. 14.34BECh. 14 - Prob. 14.35BECh. 14 - Fair Value Option. Saratoga Company issued bonds...Ch. 14 - Prob. 14.37BECh. 14 - Financial Statement Disclosure. Use the following...Ch. 14 - Prob. 14.1ECh. 14 - Prob. 14.2ECh. 14 - Prob. 14.3ECh. 14 - Prob. 14.4ECh. 14 - Prob. 14.5ECh. 14 - Bond Issue, Interest Payments, Effective Interest...Ch. 14 - Prob. 14.7ECh. 14 - Prob. 14.8ECh. 14 - Prob. 14.9ECh. 14 - Prob. 14.10ECh. 14 - Prob. 14.11ECh. 14 - Prob. 14.12ECh. 14 - Convertible Bonds, Conversion. On January 1, 2018,...Ch. 14 - Convertible Bonds, Conversion. Using the...Ch. 14 - Prob. 14.15ECh. 14 - Prob. 14.16ECh. 14 - Prob. 14.17ECh. 14 - Prob. 14.18ECh. 14 - Warrants. DHC Associates issued 2,100 of its...Ch. 14 - Prob. 14.20ECh. 14 - Prob. 14.21ECh. 14 - Prob. 14.1PCh. 14 - Long-Term Notes Payable, Semiannual Interest,...Ch. 14 - Note Payable Issued at a Discount with...Ch. 14 - Prob. 14.4PCh. 14 - Prob. 14.5PCh. 14 - Bond Issue, Interest Payments, Effective Interest...Ch. 14 - Prob. 14.7PCh. 14 - Bonds Sold between Interest Dates at a Discount,...Ch. 14 - Prob. 14.9PCh. 14 - Prob. 14.10PCh. 14 - Convertible Bonds, Bond Issue Costs, Conversion....Ch. 14 - Prob. 14.12PCh. 14 - Prob. 14.13PCh. 14 - Prob. 1JCCh. 14 - Prob. 2JCCh. 14 - Prob. 3JCCh. 14 - Prob. 1FSCCh. 14 - Prob. 1SSCCh. 14 - Surfing the Standards Case 2: Bonds with...Ch. 14 - Prob. 1BCC
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
- Taken from the records of Care Company as of December 31, 2021 are the following information: Long-term debt of P10,000,000 dated January 1, 2014 due December 31, 2022. Albano expects to refinance this liability on a long-term basis on January 2022. The financing agreement was consummated on February 2, 2022. Note payable due on January 1, 2024 amounting to P6,000,000. The note is payable on demand. Bank loan of P14,000,000 due December 31, 2026 wherein a breach of loan covenant was committed by Albano during 2021. The bank agreed on December 31, 2021 to provide Sayonara a grace period to rectify the breach ending December 31, 2022. Serial bonds dated January 8, 2021 totalling P10,000,000 payable in 10 annual instalments. 5. How much would be included in the current liabilities section of Care’s year-end financial statement?arrow_forwardMichek Company loans Sarasota Company $2,000,000 at 6% for 3 years on January 1, 2017. Michek intends to hold this loan to maturity. The fair value of the loan at the end of each reporting period is as follows. December 31, 2017 $2,050,000 December 31, 2018 2,020,000 December 31, 2019 2,000,000 Prepare the journal entry(ies) at December 31, 2017, and December 31, 2019, for Michek related to these bonds, assuming (a) it does not use the fair value option, and (b) it uses the fair value option. Interest is paid on January 1.arrow_forward1) Remaining VAT accounts of our company as of the end of January 2021 are as follows. 191 Deductible VAT = 10.000 TL Debt Remaining 391 Calculated VAT = 8.000 TL Credit Remainder Record the journal (daily book) regarding VAT offset.arrow_forward
- "On 1 September 2014, Select Company borrowed P600,000 from a bank and signed a 12%, six-month note payable, with interest on the note due at maturity. The total amount of the current liability (including interest payable) for this loan that appears in Select Company's statement of financial position at 31 December 2014 is: " O A. P600,000. O B, P636,000. OC P672,000. O D. P624,000.arrow_forwardAn entity purchased 4-year debt instruments with a face value of P10,000,000 on January 1, 2019 to collect contractual cash flows that are solely payments of principal and interest. Interest is paid annually at a nominal rate of 10% that is paid every December 31. The following information is provided as follows: Date Effective Rate without Transaction Cost Effective Rate with Transaction Cost 01/01/2019 12% 13% 12/31/2019 14% 14.50% 12/31/2020 11% 11.50% 12/31/2021 9% 9.50% 12/31/2022 10.5% 11% Requirements: What is the initial carrying amount of the bond investment? What is the 2020 interest income? What is the December 31, 2020 carrying amount? If the entity changes its business model in 2020 to both collect contractual cash flows and to sell the financial asset, what is the unrealized gain or loss in equity on December 31, 2021? If the entity changes its business model in 2020 to both collect contractual cash flows and to sell the financial asset, what is the…arrow_forwardKMC Inc. provided a loan to Jim Ltd on January 1st, 2016 and received in exchange a 4-year, $120,000 note bearing interest at 8% to be paid annually on December 31. The market rate of interest for financial instruments of similar risk is 2%. KMC Inc. financial year ends December 31 and the company uses the effective interest method to amortize discount and recognize interest revenue. Required: Round to the nearest whole number a) what is the face value of the note? b) Calculate the present value of the note. c) Is this note issued at par, discount or premium? d) Prepare the journal entry in KMC’s books to record the issuance of the note on January 1, 2016. e) Prepare KMC’s 4-year Note Amortization schedule. f) Prepare the journal entry KMC records on December 31, 2017.arrow_forward
- Coulson Company is in the process of refinancing some long-term debt. Its fiscal year ends on December 31, 2016, and its financial statements will be issued on March 15, 2017. Under current U.S. GAAP, how would the debt be classified if the refinancing is completed on December 15, 2016? What if instead it is completed on January 15, 2017?arrow_forwardCulver Company loans Sheffield Company $1,870,000 at 7% for 3 years on January 1, 2025. Culver intends to hold this loan to maturity and has the financial ability to do so. The fair value of the loan at the end of each reporting period is as follows. December 31, 2025 December 31, 2026 December 31, 2027 No. Prepare the journal entries at December 31, 2025, and December 31, 2027, for Culver related to these bonds, assuming (a) it does not use the fair value option, and (b) it uses the fair value option. Interest is paid on January 1. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Record journal entries in the order presented in the problem.) (a) No. (b) Date $1,924,000 1,892,000 Date 1,870,000 Account Titles and Explanation Account Titles and Explanation (To record interest revenue) Debit Debit II…arrow_forwardOn September 30, 2022 World Company borrowed P1, 000, 000 on a 9% note payable. The entity paid the first of four quarterly payments of P264, 200 when due on December 31, 2022. 1. What amount should be reported as interest expense for 2022? A. 90, 000 В. 22,500 C. 67,500 D. 30,000 2. On December 31, 2022, what is the carrying amount of the note payable? A. 758, 300 В. 750, 000 С. 825, 800 D. 735, 800arrow_forward
- Windsor, Inc. lends Flint industries $43200 on August 1, 2022, accepting a 9-month, 6% interest note. If Windsor, Inc. 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?arrow_forwardRemo Company reported the following liability balances on December 31, 2022: 12% note payable issued on October 1, 2021, maturing on October 1, 2023 - P2,000,000 10% note payable issued on March 1, 2021, maturing on March 1, 2023 - P4,000,000 The 2022 financial statements were issued on March 31, 2023. Under the loan agreement for the 12% note payable, the entity has the discretion to refinance the obligation for at least twelve months after December 31, 2022. On March 1, 2023, the entire P4,000,000 balance of the 10% note payable was refinanced through the issuance of a long-term obligation payable lump sum. What amount of the notes payable should be classified as noncurrent on December 31, 2022? A) P2,000,000 B) P6,000,000 P4,000,000 POarrow_forwardShort-Term Debt Expected to Be Refinanced On December 31, 2019, Carrboro Textile Company had short-term debt in the form of notes payable totaling $600,000. These notes were due on June 1, 2020. Carrboro expected to refinance these notes on a long-term basis. On February 1, 2020, Carrboro entered into an agreement with Worldwide Life Insurance Company whereby Worldwide will lend Carrboro $480,000, payable in 5 years at 12%. The money will be available to Carrboro on May 20, 2020. Carrboro issues its December 31, 2019, year-end financial statements on March 2, 2020. Required: 1. Show how the $600,000 notes payable will be classified on Carrboro Textile's balance sheet on December 31, 2019. CARRBORO TEXTILE COMPANY Partial Balance Sheet December 31, 2019 Current Liabilities: Notes payable Long-Term Liabilities: Notes payable 2. If short-term debt that is expected be refinanced is classified as a long-term liability the company has shown to refinance at which point it is to classify the…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Financial Accounting
Accounting
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
7.2 Ch 7: Notes Payable and Interest, Revenue recognition explained; Author: Accounting Prof - making it easy, The finance storyteller;https://www.youtube.com/watch?v=wMC3wCdPnRg;License: Standard YouTube License, CC-BY