On December 31, 2017, Firth Company borrowed $62,092 from Paris Bank, signing a 5-year, $100,000 zero-interest-rate note. The note was issued to yield 10% interest. Unfortunately, during 2019, Firth began to experience financial difficulty. As a result, at December 31, 2019, Paris Bank determined that it was probable that it would collect only $75,000 at maturity. The market rate of interest on loans of this nature is now 11%.Instructions(a) Prepare the entry (if any) to record the impairment of the loan on December 31, 2019, by Paris Bank.(b) Prepare the entry on March 31, 2020, if Paris learns that Firth will be able to repay the loan under the original terms.

Question

On December 31, 2017, Firth Company borrowed $62,092 from Paris Bank, signing a 5-year, $100,000 zero-interest-rate note. The note was issued to yield 10% interest. Unfortunately, during 2019, Firth began to experience financial difficulty. As a result, at December 31, 2019, Paris Bank determined that it was probable that it would collect only $75,000 at maturity. The market rate of interest on loans of this nature is now 11%.
Instructions
(a) Prepare the entry (if any) to record the impairment of the loan on December 31, 2019, by Paris Bank.
(b) Prepare the entry on March 31, 2020, if Paris learns that Firth will be able to repay the loan under the original terms.

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Accounting

Financial Accounting

Related Accounting Q&A

Find answers to questions asked by students like you.

Q: Explicit consideration of taxes is a necessary aspect of any complete economic study of an investmen...

A: Explicit consideration of taxes is a necessary aspect of any complete economic study of an investmen...

Q: Journalize the first annual interest payment on December 31, 20X1.

A: Journal : Recording of a business transaction in a chronological order.

Q: What is the difference between a contribution approach income statement and a traditionalapproach in...

A: Contribution Approach Income Statement: Under this approach, contribution amount is the main focus a...

Q: Explain how changesin activity affect c ontributionm argin and net operatingincome.

A: Contribution Margin is the amount of margin from sales revenue after deducting variable expenses.  C...

Q: Suppose you own 80 shares of Facebook common stock when the company declares a 4% stock dividend. Wh...

A: Stock dividend means dividend in the form of equity or preference shares given to the shareholders. ...

Q: (Sales with Returns) Organic Growth Company is presently testing a number of new agricultural seeds ...

A: Journal entry:   Journal entry is a set of economic events which can be measured in monetary terms. ...

Q: Listed below are selected transactions of Baileys’ Department Store for the current year ending Dece...

A:  

Q: Identify the errors in the following income statement: Curbstone Company Income Statement For the Ye...

A: Following are the errors in the Income Statement: Sales minus Cost of goods sold results in Gross p...

Q: You are a Senior Manager in Federer & Co, a firm of Chartered Certified Accountants offeringaudi...

A: The ethical principle determined in the above case is confidentiality as due to temporary staff assi...

Q: pividing Partnership Income yler Hawes and Piper Albright formed a partnership, investing $60,000 an...

A: Click to see the answer

Q: On the first day of the current fiscal year, $200,000 of 5-year, 10% bonds, with interest payable an...

A: Discount on Bonds payable = Face value of bonds - issue price of bonds = $200,000 - $192,462 = $7,53...

Q: If the market rate of interest is greater than the contractual rate of interest, bonds will sell a. ...

A: Bonds: Bonds are a debt instrument on which interest is paid. They can be issued at a discount/par o...

Q: Formerly, the company produced a smaller tote bag that was not very popular. Three hundred of theses...

A: Click to see the answer

Q: Your client, Cascade Company, is planning to invest some of its excess cash in 5-year revenue bonds ...

A: (a) To determine exactly the fair value for the security of the particular company, the necessary th...

Q: On the first day of the current fiscal year, $200,000 of 10-year, 7% bonds, with interest payable an...

A: Bonds   Bond is a long-term financial instrument issued by a company for which the company pays inte...

Q: Journalize for Harper and Co. each of the following transactions or state no entry required and expl...

A: Journal entry:   Journal entry is a set of economic events which can be measured in monetary terms. ...

Q: Under IFRS, a company:(a) should evaluate only equity investments for impairment.(b) accounts for im...

A: Under IFRS ( International Financial Reporting Standards), Impairment loss on debt investments is ca...

Q: Describe presentation and disclosure regarding revenue.

A: Disclosure:   A disclosure is a statement that recognizes the policies of the business as it serves ...

Q: Compare and contrast the relative advantages and disadvantages of sequential, block, group, alphabet...

A: Click to see the answer

Q: (Fair Value Hedge) Sarazan Company issues a 4-year, 7.5% fixed-rate interest only, nonrepayable $1,0...

A: Given information is: Note value = $1,000,000 Interest rate = 7.5% Interest expense = 1,000,000 * 7....

Q: (One Difference, Multiple Rates, Effect of Beginning Balance versus No Beginning Deferred Taxes) At ...

A: Click to see the answer

Q: On July 10, 2017, Amodt Music sold CDs to retailers on account and recorded sales revenue of $700,00...

A: a. Prepare Amodt’s journal entries to record the sale on July 10, 2017.

Q: Current assets under IFRS are listed generally:(a) by importance.(b) in the reverse order of their e...

A: Answer:   Option b

Q: Assume that on January 1, First Union Co. purchases for cash a $400,000 of Medford City 5% bond at 1...

A: Total amount paid for investment = Investment  + Accrued interest = $400,000 + $4,500 = $404,500

Q: Reservoir Bottling Co. reported the following information at the end of the year. Total currentasset...

A: Given, Current assets is $237,513 Book value is $219,344 and $129,175 Market value $343,222 Current ...

Q: Net income was $504,500 in 2020, $489,000 in 2021, and $526,500 in 2022. What is the percentage of c...

A: Formulas:     Amount Percentage   a 2020-2021 =489000-504500 =-(15,500/504,500) De...

Q: Apr. 3   Inventory   12 units @ $45   11   Purchase   13 units @ $47   14   Sale   18 units   ...

A: Definition: Last-in-First-Out (LIFO): In this method, items purchased recently are sold first. So, t...

Q: Leno Computers manufactures tablet computers for sale to retailers such as Fallon Electronics. Recen...

A: Contract: Contract refers to a written or oral agreement which is legally enforceable by law.

Q: Department G had 1,800 units 25% completed at the beginning of the period, 13,600 units were complet...

A: In first In first Out method, the units produced first are dispatched first.

Q: (Sales with Returns) On March 10, 2017, Steele Company sold to Barr Hardware 200 tool sets at a pric...

A: Requirement a:

Q: The outbreak of COVID-19 has negative as well as positive repercussions on the design of accounting ...

A: Click to see the answer

Q: The following describes the revenue cycle procedures for a hypothetical company.The sales department...

A: Transaction Processing System: Transaction processing system refers to a system that helps an organ...

Q: Good afternoon, I emailed you yesterday inquiring about missing solution on problem 14-1A in Financi...

A: Click to see the answer

Q: Indicate what impact the following adjustments have on the accounting equation, Assets = Liabilities...

A: Assets = Liabilities + Equity This equation is made on the basis of double entry system. Balance she...

Q: An inexperienced accountant for Culver Corporation showed the following in the income statement: inc...

A: Comprehensive Income statement includes the Income statement and other comprehensive income for the ...

Q: (Debt and Equity Investments) Cardinal Paz Corp. carries an account in its general ledger called Inv...

A: Available for sale securities are the securities purchased with an intent to sell before their matur...

Q: When bonds are issued at a premium the debt declines each period. Explain.

A: Click to see the answer

Q: (Permanent and Temporary Differences, One Rate) The accounting records of Shinault Inc. show the fol...

A: Schedule for calculation of Taxable Income Particulars Amount Pretax financial income 750,000 ...

Q: (Entries for Held-to-Maturity Securities) On January 1, 2017, Dagwood Company purchased at par 6% bo...

A: Journal entry:   It is a systematic record of a financial transaction of an organization recorded in...

Q: Niles Company granted 9 million of its no par common shares to executives, subject to forfeiture if ...

A: Click to see the answer

Q: (Entries and Questions for Bond Transactions) On June 30, 2017, Mischa Auer Companyissued $4,000,000...

A: Click to see the answer