On November 1, 2021, FDN Trading accepted a 90-day, 8% P9,000,000 note from ABC Co. FDN immediately discounted with recourse the note to a bank that offers a 10% discount rate. FDN assumes the interest expense associated with this transaction. How much interest expense should FDN Trading debit on its records? Calculate the total interest expense and NOT the net interest expense.

On November 1, 2021, FDN Trading accepted a 90-day, 8% P9,000,000 note from ABC Co. FDN immediately discounted with recourse the note to a bank that offers a 10% discount rate. FDN assumes the interest expense associated with this transaction. How much interest expense should FDN Trading debit on its records? Calculate the total interest expense and NOT the net interest expense.

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 28E: On January 1, 2019, Northfield Corporation becomes delinquent on a 100,000, 14% note to First...

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On June 1, Phillips Corporation sold, with recourse, a note receivable from a customer to a bank. The note has a face value of 15,000 and a maturity value (principal plus interest) of 15,400. The discount is calculated to be 385, and the accrued interest income is 100. The recourse liability is estimated to be 1,000. Prepare the journal entry of Phillips to record the sale of the note receivable.
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.
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