Chapter 14, Problem 20E

1)

To determine

Introduction:

Accounting treatment of Loans and Borrowings (Non-Current Liabilities)

• Loans and Borrowings are long term negotiable instruments of debt issued by corporate entities to secure funds and fund either long term capital expenditure or similar long term investment opportunities.

• Loans and Borrowings are accompanied by periodic interest payments. They are issued at par, at premium or at a discount.

• Loans and Borrowings when issued at a discount represent a loss to the company since the repayment value is more than the value of the Loans and Borrowings borrowed.

Journal Entries

• Journal entries are the first step in recording financial transactions and preparation of financial statements.

• These represent the impact of the financial transaction and demonstrate the effect on the accounts impacted in the form of debits and credits.

• Assets and expenses have debit balances and Liabilities and Incomes have credit balances and according to the business transaction, the accounts are appropriately debited will be credited by credited to reflect the effect of business transactions and events.

To Prepare:

Journal Entries to record cash issuances of Loans and Borrowings

2)

To determine

Introduction:

Accounting treatment of Loans and Borrowings (Non-Current Liabilities)

• Loans and Borrowings are long term negotiable instruments of debt issued by corporate entities to secure funds and fund either long term capital expenditure or similar long term investment opportunities.

• Loans and Borrowings are accompanied by periodic interest payments. They are issued at par, at premium or at a discount.

• Loans and Borrowings when issued at a discount represent an loss to the company since the repayment value is more than the value of the Loans and Borrowings borrowed.

Journal Entries

• Journal entries are the first step in recording financial transactions and preparation of financial statements.

• These represent the impact of the financial transaction and demonstrate the effect on the accounts impacted in the form of debits and credits.

• Assets and expenses have debit balances and Liabilities and Incomes have credit balances and according to the business transaction, the accounts are appropriately debited will be credited by credited to reflect the effect of business transactions and events.

To Prepare:

Journal Entries to record cash repayments of Loans and Borrowings

3)

To determine

Introduction:

Accounting treatment of Loans and Borrowings (Non-Current Liabilities)

• Loans and Borrowings are long term negotiable instruments of debt issued by corporate entities to secure funds and fund either long term capital expenditure or similar long term investment opportunities.

• Loans and Borrowings are accompanied by periodic interest payments. They are issued at par, at premium or at a discount.

• Loans and Borrowings when issued at a discount represent a loss to the company since the repayment value is more than the value of the Loans and Borrowings borrowed.

To Determine:

Calculate premium or discount on Loans and Borrowings

4)

To determine

Introduction:

Accounting treatment of Loans and Borrowings (Non-Current Liabilities)

• Loans and Borrowings are long term negotiable instruments of debt issued by corporate entities to secure funds and fund either long term capital expenditure or similar long term investment opportunities.

• Loans and Borrowings are accompanied by periodic interest payments. They are issued at par, at premium or at a discount.

• Loans and Borrowings when issued at a discount represent a loss to the company since the repayment value is more than the value of the Loans and Borrowings borrowed.

To Determine:

Whether contract rate is higher or lower than market rate at the time of issuance.