Problem 2-18 (IAA) During the current year, Jolly Company offered a P20 cash rebate coupon to customers who purchased one of its new line of products. The entity sold 10,000 of these products during the current year. By year-end, 7,600 of the rebates had been claimed and 7,100 had been paid. The historical experience with such rebates indicated that 85% of customers claim the rebates. What amount should be reported as rebate expense for the current year? a. 142,000 b. 152,000 170,000 d. 200,000 C. -

Problem 2-18 (IAA) During the current year, Jolly Company offered a P20 cash rebate coupon to customers who purchased one of its new line of products. The entity sold 10,000 of these products during the current year. By year-end, 7,600 of the rebates had been claimed and 7,100 had been paid. The historical experience with such rebates indicated that 85% of customers claim the rebates. What amount should be reported as rebate expense for the current year? a. 142,000 b. 152,000 170,000 d. 200,000 C. -

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 11MCQ

See similar textbooks

Similar questions

Income, Cash Flow, and Future Losses On January L 2017, Cermack National Bank loaned 55,000,000 under a 2-year, zero coupon note to a real estate developer. The bank recognized interest revenue on this note of approximately $400,000 per year. Due to an economic downturn, the developer was unable to pay the $5,800,000 maturity amount on December 31, 2018. The bank convinced the developer to pay $800,000 on December 31, 2018, and agreed to extend $5,000,000 credit to the developer despite the gloomy economic outlook for the next several years. Thus, on December 31, 2018, the bank issued a new 2-year, zero coupon note to the developer to mature on December 31, 2020, for $6,000,000. The bank recognized interest revenue on this note of approximately $500,000 per year. The banks external auditor insisted that the riskiness of the new loan be recognized by increasing the allowance for uncollectible notes by $1,500,000 on December 31, 2018, and $2,000,000 on December 31, 2019. On December 31, 20201 the bank received $1,200,000 from the developer and learned that the developer was in bankruptcy and that no additional amounts would be recovered. Required: Prepare a schedule showing the effect of the notes on net income in each of the 4 years.
Income, Cash Flow, and Future Losses On January L 2017, Cermack National Bank loaned 55,000,000 under a 2-year, zero coupon note to a real estate developer. The bank recognized interest revenue on this note of approximately $400,000 per year. Due to an economic downturn, the developer was unable to pay the $5,800,000 maturity amount on December 31, 2018. The bank convinced the developer to pay $800,000 on December 31, 2018, and agreed to extend $5,000,000 credit to the developer despite the gloomy economic outlook for the next several years. Thus, on December 31, 2018, the bank issued a new 2-year, zero coupon note to the developer to mature on December 31, 2020, for $6,000,000. The bank recognized interest revenue on this note of approximately $500,000 per year. The banks external auditor insisted that the riskiness of the new loan be recognized by increasing the allowance for uncollectible notes by $1,500,000 on December 31, 2018, and $2,000,000 on December 31, 2019. On December 31, 20201 the bank received $1,200,000 from the developer and learned that the developer was in bankruptcy and that no additional amounts would be recovered. Required: 1. Prepare a schedule showing annual cash flows fur the two notes in each of the 4 years.
Income, Cash Flow, and Future Losses On January L 2017, Cermack National Bank loaned 55,000,000 under a 2-year, zero coupon note to a real estate developer. The bank recognized interest revenue on this note of approximately $400,000 per year. Due to an economic downturn, the developer was unable to pay the $5,800,000 maturity amount on December 31, 2018. The bank convinced the developer to pay $800,000 on December 31, 2018, and agreed to extend $5,000,000 credit to the developer despite the gloomy economic outlook for the next several years. Thus, on December 31, 2018, the bank issued a new 2-year, zero coupon note to the developer to mature on December 31, 2020, for $6,000,000. The bank recognized interest revenue on this note of approximately $500,000 per year. The banks external auditor insisted that the riskiness of the new loan be recognized by increasing the allowance for uncollectible notes by $1,500,000 on December 31, 2018, and $2,000,000 on December 31, 2019. On December 31, 20201 the bank received $1,200,000 from the developer and learned that the developer was in bankruptcy and that no additional amounts would be recovered. Required: Which figure, net income or net cash flow, does the better job of telling the banks stock-holders about the effect of these notes on the bank? Explain by reference to the schedules prepared in Requirements 1 and 2.
(Appendix 14.1)Pamlico Company has a 500,000, 15%, 3-year note dated January 1, 2019, payable to Forest National Bank. On December 31, 2020, the bank agreed to settle the note and unpaid interest of 75,000 for 50,000 cash and marketable securities having a current market value of 375,000. Pamlicos acquisition cost of the securities is 385,000. Ignoring income taxes, what amount should Pamlico report as a gain from the debt restructuring on its 2020 income statement? a. 65,000 b. 75,000 c. 140,000 d. 150,000
Described below are certain transactions of Jeno Corporation during 2022. 1. On April 1, the corporation bought a truck for P6,000,000 from Haechan Corporation, payingP1,000,000 in cash and signing a one year, 12% note for the balance of the purchase price. 2. On May 1, the corporation received proceeds of P18,760,000 from Jisung Bank by signing a 10% note payable in equal annual installments of P2,000,000. The payment is to apply first to interest and then to principal. The first installment is due or April 30, 2023.3. On August 1, the Board of Directors declared a P300,000 cash dividend that was payable on September 10, to shareholders of record on August 31.4. On December 15, the corporation purchased goods from Chenle Company for P1,500,000 subjectto cash discount terms 2/10, n/30. Purchases and accounts payable are recorded by the corporation at net amounts after cash discounts. The invoice was paid on January 14, 2023.5. Sales during the month of December amounted to P6,832,000,…
Show the solution in good accounting form. On January 1, 2020, HIBISCUS Company purchased 4,000 of P1,000 face value, 10% bonds of IXORA Company for 24,270,600. The bonds will mature on January 1, 2025 and pay interest semi-annually on January 1 and July 1. Bonds effective interest rate is 8%. HIBISCUS has a business model of collecting all the contractural cash flows related to the instrument. How much should HIBISCUS report as interest income on the bonds in the year 2020?
On July 1, 2003, East Company purchased as a long-term investment, P500,000 face amount, 8% bonds of Rand Corp. for P461,500 to yield 10% per year. The bonds pay interest semiannually on January 1 and July 1. In its December 31, 2003 balance sheet, East should report interest receivable of a. 18,460 b. 20,000 c. 23,075 d. 25,000
During 2021, Thurs Company offered a P30 cash rebate coupon to customers who purchased one of its new line ofproducts. The company sold 20,000 of these products during 2021. By the end of 2021, 15,200 of the rebates had beenclaimed and 14,200 had been paid. The historical experience with such rebates indicated that 85% of customers claim therebates. What amount should be reported as rebate expense for 2021?a. 600,000 c. 456,000b. 510,000 d. 426,000
Please provide solutions and explanation. Thank you so much. 1. On April 1, 20x1, Ronald Ryan Co. acquired 12%, P4,000,000 bonds dated January 1, 20x1 at 98 including interest. The bonds mature on December 31, 20x3 but pays annual interest at each year-end. How much is the initial carrying amount of the investment? a. 3,920,000 b. 3,800,000 c. 4,000,000 d. 4,120,000 2. On January 1, 20x1, Mitch Co. acquired 12%, P4,000,000 bonds at 98. Commission paid to brokers amounted to P204,000. Principal is due on December 31, 20x4 but interest payments are made annually starting December 31, 20x1. The adjusted effective interest rate on the investment is closest to a. 12% b. 11% c. 10.2650% d. indeterminable 3. Use the following information for the next three questions: On January 1, 20x1, ABC Co. acquired 10%, ₱1,000,000 bonds for ₱827,135. The bonds mature on December 31, 20x3 and pay annual interest every December 31. ABC Co. incurred transaction costs ₱80,000 on the acquisition.…
38. In 2021, Davidson Inc. offers a coupon for $20 off qualifying purchases of its new line of products. Davidson sold 10,000 of these products during the year. By year-end of 2021, 7,100 coupons had been redeemed and the $20 reduction of purchase price provided to customers. Davidson's historical experience with such coupons indicates that 85% of customers use the coupon. Davidson recognizes coupon expense in the period coupons are issued. What is the coupon promotion liability that Davidson should report in its December 31, 2021, balance sheet? A. $28,000. B. $20,000. C. $18,000. D. $19,000.
Please provide solution and explanation. Thank you. 1. On January 1, 20x1, Mitch Co. acquired 12%, P4,000,000 bonds at 98. Commission paid to brokers amounted to P204,000. Principal is due on December 31, 20x4 but interest payments are made annually starting December 31, 20x1. The adjusted effective interest rate on the investment is closest to a. 12% b. 11% c. 10.2650% d. indeterminable
12. The records for Ivanhoe Co. show this data for 2021: ● Gross profit on installment sales recorded on the books was $350,000. Gross profit from collections of installment receivables was $210,000. ● Life insurance on officers was $3,100. ● Machinery was acquired in January for $230,000. Straight-line depreciation over a ten-year life (no salvage value) is used. For tax purposes, MACRS depreciation is used and Ivanhoe may deduct 14% for 2021. ● Interest received on tax exempt Iowa State bonds was $8,300. ● The estimated warranty liability related to 2021 sales was $20,900. Repair costs under warranties during 2021 were $12,900. The remainder will be incurred in 2022. ● Pretax financial income is $530,000. The tax rate is 20%. (a) Prepare a schedule starting with pretax financial income and compute taxable income. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Schedule…