On June 30, 2010, Musk and Associates borrows money from a local bank, repayable in full on June 30, 2020. For the Balance Sheet dated December 31, 2019, how should the loan be classified? Long-term asset. Current liability. Current asset. None of the answers are correct. Long-term liability.
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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.You are the accountant for Speedy Company and are preparing the financial statements for 2019. Near the end of 2019, Speedy loaned its president 100,000 (a material amount) because she was having financial difficulties. The note was properly recorded as a note receivable by Speedy. You are unsure of how to classify this note on the 2019 ending balance sheet and ask the president when the note is due. She replies, We never really set a due date; I might repay it in 2020 or maybe in a couple of years when I get more financially secure. It would be best to classify this note as a current asset in the usual manner because that will increase our working capital and current ratio, which will make our creditors and shareholders happy. Required: From financial reporting and ethical perspectives, what do you think of the presidents suggestion?It is February 16, 2020, and you are auditing Davenport Corporation's financial statements for 2019 (which will be issued in March 2020). You read in the newspaper that Travis Corporation, a major customer of Davenport, is in financial difficulty. Included in Davenports accounts receivable is 50,000 (a material amount) owed to it by Travis. You approach Jim Davenport, president, with this information and suggest that a reduction of accounts receivable and recognition of a loss for 2019 might be appropriate. Jim replies, Why should we make an adjustment? Ted Travis, the president of Travis Corporation, is a friend of mine; he will find a way to pay us, one way or another. Furthermore, this occurred in 2020, so lets wait and see what happens; we can always make an adjustment later this year. Our 2019 income and year-end working capital are not that high; our creditors and shareholders wouldnt stand for lower amounts than they already are. Required: From financial reporting and ethical perspectives, prepare a response to Jim Davenport regarding this issue.
- 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. 36,000Mirror Mart uses the balance sheet aging method to account for uncollectible debt on receivables. The following is the past-due category information for outstanding receivable debt for 2019. To manage earnings more efficiently, Mirror Mart decided to change past-due categories as follows. Complete the following. A. Complete each table by filling in the blanks. B. Determine the difference between total uncollectible. C. Explain how the new total uncollectible amount affects net income and accounts receivable.At the end of 2019, Framber Company received 8,000 as a prepayment for renting a building to a tenant during 2020. The company erroneously recorded the transaction by debiting Cash and crediting Rent Revenue in 2019 instead of 2020. Upon discovery of this error in 2020, what correcting journal entry will Framber make? Ignore income taxes.
- Interest-Bearing and Non-Interest-Bearing Notes On December 11, 2019, Hooper Inc. made a credit sale to Marshall Company and required Marshall to sign a 12,000,60-day note. Required: Prepare the journal entries necessary to record the receipt of the note by Hooper, the accrual of interest on December 31, 2019, and the customers repayment on February 9, 2020, assuming: 1. Interest of 12% was in addition to the face value of the note. 2. The note was issued as a 12,000 non-interest-bearing note with a present value of 11,765. The implicit interest rate on the note receivable was 12%. Assume a 360-day year. (Round to the nearest dollar.)Marmol Corporation uses the allowance method for bad debts. During 2019, Marmol charged 50,000 to bad debt expense and wrote off 45,200 of uncollectible accounts receivable. These transactions resulted in a decrease in working capital of: a. 0 b. 4,800 c. 45,200 d. 50,000On January 1, 2019, an entity was indebted to a bank under a P4,800,000, 10% loan. The loan was dated January 1, 2017 and was due on December 31, 2020. The annual interest was last paid on December 31, 2017. The entity was experiencing financial troubles and therefore the bank considered the loan impaired. The bank agreed to reduce last year's interest and the remaining two years interest payments to P200,000 each and delay all such payments on December 31, 2020. The present value of 1 at 10% for 2 periods is 0.83. The entity also reported the net realizable value of accounts receivable in the amounts of P1,000,000 and P1,200,000 on December 21, 2019 and 2018, respectively. It was also disclosed that the allowance for doubtful accounts on December 31, 2019 and 2018 were P100, 000 and P130,000 respectively. Credit sales amounted to P4,770,000 & collections from customers totaled P4,800,000. Certain accounts were written off during the year.What is the impairment on the loan for…
- On June 30, 2019, Franz Inc. borrowed P1,800,000 for one year from the bank with an interest of 12%. As security for the loan, Franz pledged its accounts receivable amounting to P2,500,000 to the bank. The bank charged the company 8.46% of the accounts receivable pledged as service charge deducted from the amount borrowed. How much was the cash received by the company and the interest expense recognized for the year ended December 31, 2019? a. P 1,800,000; 211,500 b. P 1,548,000; 306,000 c. P 1,588,500; P 319,500 d. P 1,584,000; P 306,000 e. P 1,588,500; P 324,000 f. P 1,584,000; P 216,000On December 31,2019, Halen company performed environmental consulting services for Stuart Corporation was short of cash, and Halen company agreed to accept 900,000 zero-interest-bearing note due December 31,2021 as payment in full. Stuart Corporation is somewhat of a credit risk and typically borrows funds at a rate of10%. (PVIFA n=2,i=10% =1.7355 and PVIF n=2,i=10% =0.8264)Instruction :3.1 Prepare the journal entry to record the transaction of December 31, 2019, for Halen company.3.2 Assuming Halen’s fiscal year-end is December 31, prepare the journal entry for December 31,2020.Mathew Corporation's had a specific receivable from a customer in the amount of P 600,000 as of December 31, 2020. During 2021, the customer informed Mathew Corporation that servicing of its payable will be made once there is significant improvement in their financial capabilities. Since there are no available historical data relating to similar borrowers, Mathew Corporation uses its experienced judgment to estimate the amount of impairment loss. Reasonable estimate revealed that the fair value of the receivable as of December 31, 2021 represents 40% of the outstanding receivable. QUESTION:What amount of impairment loss on its receivable should Mathew report for 2021?
