Required informationProblem 9-1B Record and analyze installment notes (LO9-2)[The following information applies to the questions displayed below.]On January 1, 2021, Stoops Entertainment purchases a building for $450,000, paying $100,000 down and borrowing theremaining $350,000, signing a 7%, 20-year mortgage. Installment payments of $2,713.55 are due at the end of eachmonth, with the first payment due on January 31, 2021.Problem 9-1B Part 33-a. Record the first monthly mortgage payment on January 31, 2021. (If no entry is required for a particular transaction/event, select"No Journal Entry Required" in the first account field. Do not round intermediate calculations. Round your final answers to 2decimal places.)Answer is complete and correct.NoDateGeneral JournalDebitCreditJanuary 31, 2021 Interest Expense2,041.67Notes Payable671.88Cash2,713.55 3-b. How much of the first payment goes to interest expense and how much goes to reducing the carrying value of the loan? (Roundyour answers to 2 decimal places.)X Answer is not complete.Reducing theCarrying ValueInterestExpenseFirst payment

The installment amount has two components-principal and interest. The principal portion which is…

Answered: Required information Problem 9-1B…

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 30E

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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
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.
Notes Receivable and Income On January 1, 2019, Pitt Company sold a patent to Chatham Inc. which had a carrying value on Pitts books of 10,000. Chatham gave Pitt a 60,000, non-interest-bearing note payable in five equal annual installments of 12,000 with the first payment due and paid on January 1, 2020. There was no established price for the patent, and the note has no ready market value. The prevailing rate of interest for a note of this type at January 1, 2019, is 12%. Required: 1. Prepare a schedule showing the income or loss before income taxes that Pitt should record for the years ended December 31, 2019 and 2020. Show supporting computations in good form. 2. Next Level If Pitt inadvertently failed to discount the note and instead recorded it at its gross value, what would be the effect on income or loss before income taxes for the year ended December 31, 2019?
Wilbury Corporation issued 1 million of 13.5% bonds for 985,071.68. The bonds are dated and issued October 1, 2019, are due September 30, 2020, and pay interest semiannually on March 31 and September 30. Assume an effective yield rate of 14%. Required: 1. Prepare a bond interest expense and discount amortization schedule using the straight-line method. 2. Prepare a bond interest expense and discount amortization schedule using the effective interest method. 3. Prepare adjusting entries for the end of the fiscal year December 31, 2019, using the: a. straight-line method of amortization b. effective interest method of amortization 4. If income before interest and income taxes of 30% in 2020 is 500,000, compute net income under each alternative. 5. Assume the company retired the bonds on June 30, 2020, at 98 plus accrued interest. Prepare the journal entries to record the bond retirement using the: a. straight line method of amortization b. effective interest method of amortization 6. Compute the companys times interest earned (pretax operating income divided by interest expense) for 2020 under each alternative.
Short-Term Debt Expected to Be Refinanced On December 31, 2019, Atwood Table Company has 8 million of short-term notes payable owed to City National Bank. On February 1, 2020, Atwood negotiates a revolving credit agreement providing for unrestricted borrowings up to 6 million. Borrowings will bear interest at 1% over the prevailing prime rate, will have stated maturities of 120 days, and will be continuously renewable for 120-day periods for 4 years. Atwood plans to refinance as much as possible of the notes outstanding with the proceeds available from this agreement. Assume that Atwoods December 31, 2019, year-end financial statements are issued on March 30, 2020. Required: Prepare a partial December 31, 2019, balance sheet for Atwood showing how the 8 million short-term debt should be reported. Next Level What is the justification for allowing short-term debt that is expected to be refinanced to be classified as a long-term liability.
Non-Interest-Bearing Note Payable: Present Value On January 1, 2019, Northern Manufacturing Company bought a piece of equipment by signing a non-interest-bearing 80,000, 1-year note. The face value of the note includes the price of the equipment and the interest. The effective interest rate is an annual rate of 16%, and the note is to be paid in four 20,000 quarterly installments on March 31, June 30, September 30, and December 31. The price of the equipment is the present value of the four payments discounted at the effective interest rate. Required: Prepare all journal entries to record the preceding information. Present value techniques should be used. If Northerns financial statements were issued on June 30, 2019, what amount would the company report as notes payable?
Entries for installment note transactions On January 1, 20Y2, Hebron Company issued a 175,000, five-year, 8% installment note to Ventsam Bank. The note requires annual payments of 43,830, beginning on December 31, 20Y2. Journalize the entries to record the following:
On Janaury 1, 2021, ABC Company acquired equipment by issuing a 3-year, P4,800,000 non-interest bearing note due in semi-annual payment starting July 1, 2021. The prevailing rate of interest of this type of note is 10%. (PVF 5 decimal) How much is the carrying amount of the note on INITIAL recognition?a. 4,060,552b. 4,000,000c. 3,980,342d. 3,786,309 How much is the CARRYING amount of the note on December 31, 2021?a. 3,463,580b. 3,343,341c. 2,836,760d. 2,279,830
18.On January 1, 2021, REEDY SLENDER Co. purchased fixtures at an installment price of ₱520,000. REEDY paid ₱40,000 cash down payment and issued a three-year noninterest bearing note of ₱480,000 payable in three equal annual installments starting December 31, 2021 for the balance. The prevailing rate for the note as of January 1, 2021 is 12%. How much is the initial cost of the fixtures? 360,000 424,293 480,000 520,000

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