On January 1, 2020, Lynn Company borrows $3,000,000 from National Back at 11% annual interest. In addition, Lynn is required to keep a compensatory balance of $300,000 on deposit at Natinal Banck which will earn interest at 5% the effective interest that Lynn pays on its $3,000,000 loan is?

On January 1, 2020, Lynn Company borrows $3,000,000 from National Back at 11% annual interest. In addition, Lynn is required to keep a compensatory balance of $300,000 on deposit at Natinal Banck which will earn interest at 5% the effective interest that Lynn pays on its $3,000,000 loan is?

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter5: Introduction To Business Expenses

Section: Chapter Questions

Problem 61P

See similar textbooks

Related questions

Q: On December 31, 2020, Coronado Company has $6,976,000 of short-term debt in the form of notes…

A: Balance Sheet includes: Assets accounts Liabilities accounts Capital accounts Assets accounts…

Q: On September 1, 2021, Speedy Lube signed a 30-year, $1,080,000 mortgage note payable to Jonstown…

A: The loan amortization table refers to the table used to calculate the principal portion and interest…

Q: Precision Castparts, a manufacturer of processed engine parts in the automotive and airline…

A: Formulas that are used:- For Precision Castparts:- For Midwest Bank:-

Q: At January 1, 2020, Student Ltd owes Tultion Corp for a $120,000 note payable. The note bears…

A: Restructuring in accounting refers to the process of significant changes in financial statements…

Q: On January 1, 2021, Corvallis Carnivals borrows $17,000 to purchase a delivery truck by agreeing to…

Q: MNO Bank granted a loan to a borrower on January 1, 2020. The interest on the loan is 10% payable…

A: Loan receivables refer to the net balance that is being held in the borrower's account in the books…

Q: Colson Company has a line of credit with Federal Bank. Colson can borrow up to $457,500 at any time…

Q: for the interest income for 2020

A: Since the effective interest rate after considering all the cost have already been provided, we…

Q: On May 1, 2020, Christina Fashions borrowed $106,000 at a bank by signing a four-year, 6% loan. The…

A: Interest payable is a liability any individual or company owes for the obligation to be repaid. It…

Q: On December 31, 2020, Chase Bank has a 5-year loan renewable with a face value of $5,000,000 dated…

A: 5 year Loan = $5000000 Accrued Interests = $500000 Total receivable…

Q: On February 10, 2021, after issuance of its financial statements for 2020, Ikli Company entered into…

A: Current liabilities: Liabilities that have to be paid within one year or one operating cycle,…

Q: Cucina Corporation signed a new installment note on January 1, 2021, and deposited the proceeds of…

A: Beginning Notes Payable Interest Expense Repaid Principal on Notes Payable Ending Notes Payable…

Q: On December 31, 2020, Culver Company has $7,051,000 of short-term debt in the form of notes payable…

A: The low range of expectation of payment in May 2021 would be multiplied with the permit it to borrow…

Q: On April 1, 2020, NYC Corporation secures a loan with a finance company, using its accounts…

A: Formula: Finance charge amount = Receivable amount x % of charge

Q: On January 1, 2021, Stoops Entertainment purchases a building for $480,000, paying $110,000 down and…

A: Given: Opening balance of borrowing = $370,000 Interest rate = 9% Payment = monthly. Monthly payment…

Q: er 31, 2020. The loan matures in three years on December 31, 2022. Principal amount 5,000,000 Direct…

Q: On January 1, 2019, Zoom Bank provided a loan of P4,000,000 to D Company. Under the loan agreement,…

A: An impairment loss is the amount by which the carrying amount of an asset or a cash-generating unit…

Q: Solid Bank loaned P5,000,000 to a borrower on January 1, 2018. The terms of the loan require…

A: As per amortized cost method, the financial instrument is measured at fair value which is increased…

Q: Company AAA borrowed P1,000,000 on July 1, 2021 and issued a 9% one-year note payable every after…

A: Note payable is one of the liability of the business, on which regular interest payments needs to be…

Q: On April 1, 2020, ABC Corporation borrows $50,000 on a 6-month note that charges an annual interest…

A: Total cash paid on maturity = Face value of the Notes + Interest on Notes where, Interest on Notes =…

Q: On January 1, 2020, MWB, Inc. borrowed cash by issuing a $600,000, 6-year note that specified 6%…

A: solution given Face value $600000 Life 6 year Coupon rate 6% If interest to…

Q: Cucina Corporation signed a new installment note on January 1, 2021, and deposited the proceeds of…

A: The process of recording business transactions in the books of accounts for the first time is…

Q: At the beginning of the year, your company borrows $33,600 by signing a six-year promissory note…

A: Solution A promissory note is a promise made by a party to pay a specified sum to another party at…

Q: On December 31, 2020, Gibson Company has $18,200,000 of short-term debt in the form of notes payable…

A: Prepare partial balance sheet for Gibson Company at December 31, 2020.

Q: The Moustache Company is replacing most of the windows in its Alden factory by purchasing them under…

A: Interest expense for 2019 = face value of notes x rate of interest x period = $37,908,000 x 10% =…

Q: Upon January 1, 2020, Sally Corp. borrowed $360,000 from County Bank and signed a 15-year note…

A: It is simply a fee levied against the borrower for the use of an asset. Borrowed assets might…

Q: On June 1, 2020, Taby Company loaned ₱500,000 on a 12% note, payable in five annual installments of…

A: Accrued interest receivable refers to the amount of loan interest which has been arise but not yet…

Q: On May 1, 2020, Christina Fashions borrowed $106,000 at a bank by signing a four-year, 6% loan. The…

A: Interest is the amount paid over and above the principal amount to the lender. Basically, it is the…

Q: On April 1, 2020, Bonita Company assigns $533,000 of its accounts receivable to the Third National…

A: Finance Charge = Accounts receivable x 3% = $533,000 x 3% = $15,990

Q: On October 1, 2021, Chrysanthemum Co. purchased equipment by issuing a four-year, 9% promissory note…

A: Lets understand the basics. When any asset is purchase against notes payable then asset needs to be…

Q: On January 1, 2020, Caribou Explorations Limited (CEL) sold inventory costing $32,000 and, in…

A: Journal entry A journal entry is a record of the business transactions within the accounting books…

Q: Colson Company has a line of credit with Federal Bank. Colson can borrow up to $457,500 at any time…

A: Compute annual interest rate for Colson company for first four month of 2018 as shown below:

Q: Solid Bank loaned P5,000,000 to a borrower on January 1, 2018. The terms of the loan require…

A: Impairment loss is the amount by which the carrying value of asset exceeds its recoverable value.…

Q: On January 1, 2021, Stoops Entertainment purchases a building for $580,000, paying $110,000 down and…

A: Solution 4: Total payments in 15 years = $858,069

Q: On September 1, 2020, ABC Company borrows $40,000 on a 2-month note that charges an annual interest…

A: Maturity Amount = Amount Borrowed + Interest Rate

Q: On January 1, 2019, Brooks, Inc. borrows $90,000 from a bank and signs a 5% installment note…

A: Amount Borrowed: $90,000 Interest rate : 5% per annum

Q: On December 31, 2020, Culver Company has $7,051,000 of short-term debt in the form of notes payable…

A: Balance sheet is a financial statement which shows the position of a firm at a particular point of…

Q: Durango, Inc. borrowed $20,000 on October 1, 2020. Durango will not make any payments on this loan…

A: Total interest for 3 years = Amount owe at the end - amount borrowed = $26000 - 20000 = $6000…

Q: On April 1, 2020, Bonita Company assigns $533,000 of its accounts receivable to the Third National…

A: journal entry for cash collected from accounts recievable = cash account XX To Accounts…

Q: On January 1, 2018, Company B borrowed 50,000 signing a 3-year installment note payable with yearly…

A: Note Payable - payment schedule: Beginning Balance Interest Installment amount Principal amount…

Q: The Schitt Company borrowed $900 on January 1, 2020 at an annual rate of interest of eight percent.…

A: Interest Expense - Interest Expense is the amount payable on the borrowed money. It is the expense…

Q: Cucina Corporation signed a new installment note on January 1, 2021, and deposited the proceeds of…

A: Working note: Computation of annual installment payments:

Q: On August 1, 2021, Stucko Company borrowed $21,000 on an 8-month, 3%, short-term note payable. Which…

A: Interest expense on note = Amount borrowed x rate of interest x no. of month /12 = $21,000 x 3% x…

Q: On January 2, 2021, Tripod Company receives a government loan of P2,000,000 paying a coupon interest…

Q: Assuming the customer’s borrowing rate is 5%, prepare all journal entries for 2019 and 2020 under…

A: At first, we will find out the present value of the note payable.

Q: On April 1, 2021, John Vaughn purchased appliances from the Acme Appliance Company for $1,000. In…

A: Purchased Amount = $1,000 Time Period = 18 Months Annual Interest Rate = 24%

Q: On July 1, 2021, ABC Co. borrowed P1,000,000 and issued a one-year note payable. The lender…

A: According to this question, we prepare the journal entries with reference to the given scenarios.…

Q: MNO Bank granted a loan to a borrower on January 1, 2020. The interest on the loan is 10% payable…

A: Carrying value of loan on January 1, 2020 =Principal value of loan +Direct orgination cost…

Q: On January 1, 2021, Corvallis Carnivals borrows $30,000 to purchase a delivery truck by agreeing to…

A: Given: To calculate the note payable and the first monthly payment as,

Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

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, 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
On January 1, 2018, King Inc. borrowed $150,000 and signed a 5-year, note payable with a 10% interest rate. Each annual payment is in the amount of $39,569 and payment is due each Dec. 31. What is the journal entry on Jan. 1 to record the cash received and on Dec. 31 to record the annual payment? (You will need to prepare the first row in the amortization table to determine the amounts.)
If Bergen Air Systems takes out a $100,000 loan, with eight equal principal payments due over the next eight years, how much will be accounted for as a current portion of a noncurrent note payable each year?
Hamlet Corporation purchases computer equipment at a price of 100,000 on January 1, 2019, paying 40,000 down and agreeing to pay the balance in three 20.000 annual instalments beginning December 31, 2019. It is not possible to value either the equipment or the 60,000 note directly; how-ever, Hamlet's incremental borrowing rate is 12%. Required: 1. Prepare a schedule to compute the interest expense and discount amortization on the note. 2. Prepare all the journal entries for Hamlet to record the issuance of the note, each annual interest expense, and the three annual installment payments.
Chemical Enterprises issues a note in the amount of $156,000 to a customer on January 1, 2018. Terms of the note show a maturity date of 36 months, and an annual interest rate of 8%. What is the accumulated interest entry if 9 months have passed since note establishment?
On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
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 December 1 of the current year, Jordan Inc. assigns 125,000 of its accounts receivable to McLaughlin Company for cash. McLaughlin Company charges a 750 service fee, advances 85% of Jordans accounts receivable, and charges an annual interest rate of 9% on any outstanding loan balance. Prepare the related journal entries for Jordan.
On July 1, 2019, Aldrich Company purchased as an available-for-sale security 200,000 face value, 9% U.S. Treasury notes for 194,000. The notes mature July 1, 2020, and pay interest semiannually on January 1 and July 1. The notes were sold on December 1, 2019, for 199,000. Aldrich normally uses straight-line amortization on all of its notes. In its income statement for the year ended December 31, 2019, what amount should Aldrich report as a gain on the sale of the available-for-sale security? a. 2,500 b. 3,500 c. 5,000 d. 6,000
Homeland Plus specializes in home goods and accessories. In order for the company to expand its business, the company takes out a long-term loan in the amount of $650,000. Assume that any loans are created on January 1. The terms of the loan include a periodic payment plan, where interest payments are accumulated each year but are only computed against the outstanding principal balance during that current period. The annual interest rate is 8.5%. Each year on December 31, the company pays down the principal balance by $80,000. This payment is considered part of the outstanding principal balance when computing the interest accumulation that also occurs on December 31 of that year. A. Determine the outstanding principal balance on December 31 of the first year that is computed for interest. B. Compute the interest accrued on December 31 of the first year. C. Make a journal entry to record interest accumulated during the first year, but not paid as of December 31 of that first year.
Pickles R Us is a pickle farm located in the Northeast. The following transactions take place: A. On November 6, Pickles borrows $820,000 from a bank to cover the initial cost of expansion. Terms of the loan are payment due in six months from November 6, and annual interest rate of 3%. B. On December 12, Pickles borrows an additional $200,000 with payment due in three months from December 12, and an annual interest rate of 10%. C. Pickles pays its accounts in full on March 12, for the December 12 loan, and on May 6 for the November 6 loan. Record the journal entries to recognize the initial borrowings, and the two payments for Pickles.