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Case 4 - Audit of Non-Current Liabilities Ford Corporation issued 15-year, 10%, P6,000,000 note payable on January 1, 2019 and pays interest semi- annually every June 30 and December 31. When note was issued on January 1, 2019, the prevailing market rate of interest for similar note was at 8%. The test of journal entries revealed the following pro-forma entries made on January 1, 2019: Account titles used: Cash Interest expense Note payable XX XX XX Remarks Fair value (based on effective interest) Difference of face value and proceeds Face value of note payable The company's accountant records the payment of interest as debit to interest expense and credit to cash. It is your first time to audit the client. The errors were discovered during your 2023 audit.

Case 4 - Audit of Non-Current Liabilities Ford Corporation issued 15-year, 10%, P6,000,000 note payable on January 1, 2019 and pays interest semi- annually every June 30 and December 31. When note was issued on January 1, 2019, the prevailing market rate of interest for similar note was at 8%. The test of journal entries revealed the following pro-forma entries made on January 1, 2019: Account titles used: Cash Interest expense Note payable XX XX XX Remarks Fair value (based on effective interest) Difference of face value and proceeds Face value of note payable The company's accountant records the payment of interest as debit to interest expense and credit to cash. It is your first time to audit the client. The errors were discovered during your 2023 audit.

Principles of Accounting Volume 1
Principles of Accounting Volume 1
19th Edition
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 5PB: Dixon Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1,...
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Determine the following as a result of your audit:

subquestion a. How much is the correct amount of interest expense that should be reported in its Statement of Comprehensive Income for the period ending December 31, 2023?

subquestion b. As an audit manager, you review the working papers of your audit staff and senior auditor and summarized the proposed adjusting entries (PAJE’s): Your proposed adjusting journal entry will 
include a credit to premium on note payable of?

please show solution. 

Case 4 - Audit of Non-Current Liabilities Ford Corporation issued 15-year, 10%, P6,000,000 note payable on January 1, 2019 and pays interest semi- annually every June 30 and December 31. When note was issued on January 1, 2019, the prevailing market rate of interest for similar note was at 8%. The test of journal entries revealed the following pro-forma entries made on January 1, 2019: Account titles used: Cash Interest expense Note payable XX XX XX Remarks Fair value (based on effective interest) Difference of face value and proceeds Face value of note payable The company's accountant records the payment of interest as debit to interest expense and credit to cash. It is your first time to audit the client. The errors were discovered during your 2023 audit.
Transcribed Image Text:Case 4 - Audit of Non-Current Liabilities Ford Corporation issued 15-year, 10%, P6,000,000 note payable on January 1, 2019 and pays interest semi- annually every June 30 and December 31. When note was issued on January 1, 2019, the prevailing market rate of interest for similar note was at 8%. The test of journal entries revealed the following pro-forma entries made on January 1, 2019: Account titles used: Cash Interest expense Note payable XX XX XX Remarks Fair value (based on effective interest) Difference of face value and proceeds Face value of note payable The company's accountant records the payment of interest as debit to interest expense and credit to cash. It is your first time to audit the client. The errors were discovered during your 2023 audit.
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