INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
9th Edition
ISBN: 9781260216141
Author: SPICELAND
Publisher: MCG CUSTOM
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Chapter 5, Problem 5.15BE
Variable consideration
• LO5–6
In January 2018, Continental Fund Services, Inc., enters into a one-year contract with a client to provide investment advisory services. The company will receive a management fee, prepaid at the beginning of the contract, that is calculated as 1% of the client’s $150 million total assets being managed. In addition, the contract specifies that Continental will receive a performance bonus of 20% of any returns in excess of the return on the Dow Jones Industrial Average market index. Continental estimates that it will earn a $2 million performance bonus, but is very uncertain of that estimate, given that the bonus depends on a highly volatile stock market. On what transaction price should Continental base revenue recognition?
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Problem 23National Bank loaned 5,000,000 to Bank net company on Jan. 1, 2018. The terms of the loan require principal payment of 1,000,000 each year for 5 years plus interest at 10%. The first principal and interest payment is due on Dec. 31, 2018. National Bank made the required payments on Dec. 31, 2018 and Dec. 31, 2019. However during 2020, Bank net began to experience financial difficulties and was unable to make the required principal and interest payment on Dec. 31, 2020. National bank projected the cash flows from the loan as of Dec. 31, 2020 as follows: Dec. 31, 2021, 500,000, Dec. 31, 2022, 1,000,000 and Dec. 31, 2023 1,500,000. At 10% PV factors are .9091 for one period, .8264 for two periods, and .7513 for three periods. What is the entry to recognize the impairment loss?
Problem 25Davao Bank loaned P7,500,000 to a borrower on January 1, 2018. The terms of the loan were payment in full on January 1, 2023, plus annual interest payment at 12%. The interest payment was made as scheduled on January 1, 2019. However, due to financial setbacks, the borrower was unable to make its 2020 interest payment and Davao Bank considers the loan impaired and projects the cash flows from the loan as of December 31, 2020. The bank has accrued the interest at December 31, 2019, but did not continue to accrue interest for 2020 due to the impairment of the loan. The projected cash flows are:
Date of cash flow Amount projectedas of Dec. 31, 2020December31, 2021 500,000December31, 2022 1,000,000December31, 2023 2,000,000December31, 2024 4,000,000The present value at l2% is as follows:For one period 0.89For two periods 0.80For three periods 0.71For four periods 0.64
Required:1.Prepare a table of amortization for the loan receivable.2. Prepare journal entries for 2018 – 2024.
Problem 27
On January 1, 2022, De Vera Company loaned Dagpin Company amounting to P2,000,000 and received a two-year, 6%, P2,000,000 note. The note calls for annual interest to be paid each December 31. De Vera collected the 2022 interest on schedule. However, on December 31, 2023, based on the Dagpin’s recent financial difficulties, De Vera expects that the 2023 interest, which was recorded in the books, will not be collected and that only P1,200,000 of the principal will be recovered. The P1,200,000 principal amount is expected to be collected in two equal installments on December 31, 2025 and December 31, 2027. The prevailing interest rate for similar type of note as of December 31, 2023 is 8%.
What is the loan impairment loss to be recognized for the year 2023
How much is the interest income for the year 2025?
The carrying amount of the loan as of December 31, 2026 is:
Chapter 5 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
Ch. 5 - What are the five key steps a company follows to...Ch. 5 - What indicators suggest that a performance...Ch. 5 - What criteria determine whether a company can...Ch. 5 - We recognize service revenue either at one point...Ch. 5 - What characteristics make a good or service a...Ch. 5 - Prob. 5.6QCh. 5 - What must a contract include for the contract to...Ch. 5 - How might the definition of probable affect...Ch. 5 - When a contract includes an option to buy...Ch. 5 - Prob. 5.10Q
Ch. 5 - Prob. 5.11QCh. 5 - Is a customers right to return merchandise a...Ch. 5 - Prob. 5.13QCh. 5 - Under what circumstances should sellers consider...Ch. 5 - When should a seller view a payment to its...Ch. 5 - What are three methods for estimating stand-alone...Ch. 5 - When is revenue recognized with respect to...Ch. 5 - In a franchise arrangement, what are a franchisors...Ch. 5 - When does a company typically recognize revenue...Ch. 5 - Prob. 5.20QCh. 5 - Prob. 5.21QCh. 5 - Prob. 5.22QCh. 5 - Must bad debt expense be reported on its own line...Ch. 5 - Explain the difference between contract assets,...Ch. 5 - Explain how to account for revenue on a long-term...Ch. 5 - Prob. 5.26QCh. 5 - Prob. 5.27QCh. 5 - What are the two general criteria that must be...Ch. 5 - Explain why, in most cases, a seller recognizes...Ch. 5 - Revenue recognition for most installment sales...Ch. 5 - Prob. 5.31QCh. 5 - How does a company report deferred gross profit...Ch. 5 - Prob. 5.33QCh. 5 - Briefly describe the guidelines for recognizing...Ch. 5 - Prob. 5.35QCh. 5 - Briefly describe the guidelines provided by GAAP...Ch. 5 - Revenue recognition at a point in time LO52 On...Ch. 5 - Timing of revenue recognition LO53 Estate...Ch. 5 - Prob. 5.3BECh. 5 - Allocating the transaction price LO54 Sarjit...Ch. 5 - Existence of a contract LO5-5 Tulane Tires wrote...Ch. 5 - Prob. 5.6BECh. 5 - Prob. 5.7BECh. 5 - Performance obligations; warranties LO55 Vroom...Ch. 5 - Prob. 5.9BECh. 5 - Prob. 5.10BECh. 5 - Performance obligations; construction LO55...Ch. 5 - Prob. 5.12BECh. 5 - Prob. 5.13BECh. 5 - Variable consideration LO56 Leo Consulting enters...Ch. 5 - Variable consideration LO56 In January 2018,...Ch. 5 - Prob. 5.16BECh. 5 - Prob. 5.17BECh. 5 - Payment s by the seller to the customer LO56...Ch. 5 - Estimating stand-alone selling prices: adjusted...Ch. 5 - Estimating stand-alone selling prices: expected...Ch. 5 - Estimating stand-alone selling prices; residual...Ch. 5 - Timing of revenue recognition; licenses LO57 Saar...Ch. 5 - Prob. 5.23BECh. 5 - Prob. 5.24BECh. 5 - Timing of revenue recognition; franchises LO57...Ch. 5 - Timing of revenue recognition; bill-and-hold LO57...Ch. 5 - Prob. 5.27BECh. 5 - Prob. 5.28BECh. 5 - Contract assets and contract liabilities LO58...Ch. 5 - Prob. 5.30BECh. 5 - Long-term contract; revenue recognition over time;...Ch. 5 - Prob. 5.32BECh. 5 - Long-term contract; revenue recognition upon...Ch. 5 - Long-term contract; revenue recognition; loss on...Ch. 5 - Installment sales method On July 1, 2018, Apache...Ch. 5 - Prob. 5.36BECh. 5 - Cost recovery method Refer to the situation...Ch. 5 - Prob. 5.38BECh. 5 - Prob. 5.39BECh. 5 - Revenue recognition; software contracts under IFRS...Ch. 5 - Prob. 5.41BECh. 5 - Prob. 5.1ECh. 5 - Prob. 5.2ECh. 5 - Allocating transaction price LO54 Video Planet...Ch. 5 - Prob. 5.4ECh. 5 - Prob. 5.5ECh. 5 - Prob. 5.6ECh. 5 - Prob. 5.7ECh. 5 - Prob. 5.8ECh. 5 - Prob. 5.9ECh. 5 - Variable considerationmost likely amount; change...Ch. 5 - Variable considerationexpected value; change in...Ch. 5 - Prob. 5.12ECh. 5 - Approaches for estimating stand-alone selling...Ch. 5 - FASB codification research LO56, LO57 Access the...Ch. 5 - Franchises; residual method LO56, LO57 Monitor...Ch. 5 - FASB codification research LO58 Access the FASB...Ch. 5 - Long-term contract; revenue recognition over time...Ch. 5 - Long-term contract; revenue recognition over time...Ch. 5 - Long-term contract; revenue recognition over time;...Ch. 5 - Long-term contract; revenue recognition upon...Ch. 5 - Income (loss) recognition; Long-term contract;...Ch. 5 - Long-term contract; revenue recognition over time;...Ch. 5 - Installment sales method Charter Corporation,...Ch. 5 - Installment sales method; journal entries [This is...Ch. 5 - Installment sales; alternative recognition methods...Ch. 5 - Journal entries; point of delivery, installment...Ch. 5 - Prob. 5.27ECh. 5 - Prob. 5.28ECh. 5 - Prob. 5.29ECh. 5 - Prob. 5.30ECh. 5 - Prob. 5.31ECh. 5 - Prob. 5.32ECh. 5 - Prob. 5.33ECh. 5 - Prob. 5.34ECh. 5 - Prob. 5.35ECh. 5 - Prob. 5.1PCh. 5 - Prob. 5.2PCh. 5 - Prob. 5.3PCh. 5 - Prob. 5.4PCh. 5 - Prob. 5.5PCh. 5 - Variable consideration; change of estimate LO53,...Ch. 5 - Prob. 5.7PCh. 5 - Prob. 5.8PCh. 5 - Prob. 5.9PCh. 5 - Long-term contract; revenue recognition over time ...Ch. 5 - Long-term contract; revenue recognition upon...Ch. 5 - Long-term contract; revenue recognized over time;...Ch. 5 - Long-term contract; revenue recognition over time...Ch. 5 - Income statement presentation; installment sales...Ch. 5 - Prob. 5.15PCh. 5 - Installment sales; alternative recognition methods...Ch. 5 - Installment sales and cost recovery methods...Ch. 5 - Prob. 5.18PCh. 5 - Franchise sales; installment sales method Olive...Ch. 5 - Prob. 5.1BYPCh. 5 - Judgment Case 52 Satisfaction of performance...Ch. 5 - Judgment Case 53 Satisfaction of performance...Ch. 5 - Prob. 5.4BYPCh. 5 - Prob. 5.5BYPCh. 5 - Prob. 5.6BYPCh. 5 - Prob. 5.8BYPCh. 5 - Prob. 5.9BYPCh. 5 - Prob. 5.10BYPCh. 5 - Prob. 5.11BYPCh. 5 - Prob. 5.12BYPCh. 5 - Prob. 5.13BYPCh. 5 - Prob. 5.14BYPCh. 5 - Prob. 5.15BYPCh. 5 - Prob. 5.16BYPCh. 5 - Prob. 5.19BYPCh. 5 - Prob. 1CCTC
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