n entity had a note payable P5,000,000 due June 15, 2021. The entity signed an agreement on December 1, 2020 to borrow up to P5,000,000 to refinance the note payable on a long-term basis with no payments due until 2022. The financing agreement stipulated that borrowing may not exceed 80% of the value of the collateral. At the date of the issuance of 2020 financial statements, the value of the collateral was P6,000,000 and is not expected to fall below this amo

n entity had a note payable P5,000,000 due June 15, 2021. The entity signed an agreement on December 1, 2020 to borrow up to P5,000,000 to refinance the note payable on a long-term basis with no payments due until 2022. The financing agreement stipulated that borrowing may not exceed 80% of the value of the collateral. At the date of the issuance of 2020 financial statements, the value of the collateral was P6,000,000 and is not expected to fall below this amo

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 14RE: On January 1, 2019, Boater Company issues a 20,000 non-interest-bearing, 5-year note for equipment....

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On January 1, 2019, Northfield Corporation becomes delinquent on a 100,000, 14% note to First National Bank, on which 16,651 of interest has accrued. On January 2, 2019, the bank agrees to restructure the note. It forgives the accrued interest, extends the repayment date to December 31, 2021, and reduces the interest rate to 10%. Required: Prepare a schedule for Northfield to compute the annual interest expense in regard to the preceding note for each year of the restructuring agreement.
On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major customer in exchange for used equipment. The equipment had originally cost Park 200,000 and had a book value of 20,000 on the date of the sale. At the 12% imputed interest rate for this type of loan, the present value of the note is 25,500 on January 1, 2019. Park uses the effective interest rate. What is the carrying value of the note receivable on Parks December 31, 2019, balance sheet? a. 28,560 b. 29,000 c. 32,500 d. 36,000
Short-Term Debt Expected to Be Refinanced On December 31, 2019, Excello Electric Company had 1 million of short-term notes payable due February 7, 2020. Excello expected to refinance these notes on a long-term basis. On January 15, 2020, the company issued bonds with a face value of 900,000 for 882,000. On January 22, 2020, the proceeds from the bond issue plus additional cash held by Excello on December 31, 2019, were used to liquidate the 1 million of short-term notes. The December 31, 2019, balance sheet is issued on February 12, 2020. Required: Prepare a partial balance sheet as of December 31, 2019, showing how the 1 million of short-term notes payable should be disclosed. Include an appropriate footnote for proper disclosure.
Spath Company borrows 75,000 by issuing a 4-year, noninterest-bearing note to a customer on January 1, 2019. In addition, Spath agrees to sell inventory to the customer at reduced prices over a 5-year period. Spaths incremental borrowing rate is 12%. The customer agrees to purchase an equal amount of inventory each year over the 5-year period so that a straight-line method of revenue recognition is appropriate. Required: Prepare the journal entries on Spaths books for 2019 and 2020. (Round answers to 2 decimal places.)
On January 1, 2019, Boater Company issues a 20,000 non-interest-bearing, 5-year note for equipment. Neither the fair value of the note nor the equipment is determinable. Boaters incremental borrowing rate is 9%. The asset has a useful life of 7 years. Prepare the journal entry for Boater to record the issuance of the note on January 1.