Shaw Ltd has received a large order from its long-established and valued South African customer Norden Ply, who has always paid on time in the past. Shaw Ltd is concerned however that, as a consequence of political upheaval in the region, there is a small chance that Norden Pty may fail to pay within six months of the goods being shipped What is the most appropriate action for Shaw Ltd to take? A. Refuse to accept the order B. Approach a debt factor C. Take out export credit insurance D. Demand cash on delivery

Shaw Ltd has received a large order from its long-established and valued South African customer Norden Ply, who has always paid on time in the past. Shaw Ltd is concerned however that, as a consequence of political upheaval in the region, there is a small chance that Norden Pty may fail to pay within six months of the goods being shipped What is the most appropriate action for Shaw Ltd to take? A. Refuse to accept the order B. Approach a debt factor C. Take out export credit insurance D. Demand cash on delivery

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 15P

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Assume that a U.S.-based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes for given problem. Harrington Company was sued by an employee in late 2017. General counsel concluded that there was an 80 percent probability that the company would lose the lawsuit. The range of possible loss is estimated to be $20,000 to $70,000, with no amount in the range more likely than any other. The lawsuit was settled in 2018, with Harrington making a payment of $60,000.a. Determine the appropriate accounting for this lawsuit for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.b. Prepare the entry(ies) that Harrington would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert U.S. GAAP balances to IFRS.
Apple Punch Company is experiencing financial difficulties and a downward trend in its operations. The firm is unable to service its debt and as a result, has missed payment of an annual interest on its loan from Bank of PUP. The principal amount of the loan is P2,000,000 (which is already due) with annual interest of 12% payable annually. Apple Punch management has negotiated a modification of its debt’s terms with its creditors. The creditors agree to the following new terms (assume that at this time, the prevailing market rate of interest remained at 12%): • forgive all accrued interest • reduce the principal amount of the loan to P1,800,000 • extend the payment of principal for two years • reduce the interest rate for the remaining two years to 8% The gain on debt restructuring is A. 562,040 B. 0 C. 440,000 D. 322,040
Berlin executed a promissory note in favor of Munich by way of accommodation. It says: "Pay to Munich or order the amount of Php8,000.00. Signed, Berlin." Munich then indorsed the note to Cologne, and Cologne to Munster. When Munster sought collection from Munich, the latter countered as indorser that there should have been a presentment first to the maker who dishonors it. Is Munich correct? a. No, since Munich is the real debtor and thus, there is no need for presentment for payment and dishonor by the maker. b. Yes, since as an indorser who is secondarily liable, there must first be presentment for payment and dishonor by the maker. c. No, since the absolute rule is that there is no need for presentment for payment and dishonor to hold an indorser liable. d. Yes, since the secondary liability of Munich and Cologne would only arise after presentment for payment and dishonor by the maker.
Before any debt cancellation, the insolvent KuhnCo holds business equipment, its only asset, with a fair market value of $1 million and related liabilities of $1.25 million. The lender agrees to cancel $400,000 of the liabilities. KuhnCo has no other liabilities. a. How much gross income does KuhnCo report as a result of the debt cancellation? b. How would your answer change, if at all, had the lender cancelled $200,000 of the debt?
Harrington Company was sued by an employee in late 2017. General counsel concluded that there was an 75 percent probability that the company would lose the lawsuit. The range of possible loss is estimated to be $35,000 to $90,000, with no amount in the range more likely than any other. The lawsuit was settled in 2018, with Harrington making a payment of $70,000. Assume that a U.S. based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS . Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes. a. Prepare journal entries for this lawsuit for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS b. Prepare the entries that Harrington would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert U.S. GAAP balances to IFRS.
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Sapporo K.K. was sued by a competitor in late 2017, and company management concluded that there was a 55 percent probability that the company would lose the lawsuit. The best estimate of the loss on December 31, 2017, was 4,000,000 yen. In 2018, the lawsuit is concluded with Sapporo paying its competitor 5,000,000 yen on May 15, 2018. Assume that a foreign company using IFRS is owned by a company using U.S. GAAP. Thus, IFRS balances must be converted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes. Required: Prepare journal entries for this lawsuit for the years ending December 31, 2017, and December 31, 2018, under (1) IFRS and (2) U.S. GAAP. Prepare the entry(ies) that the U.S. parent would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert IFRS balances to U.S. GAAP.
GHIJ Corporation is experiencing financial difficulties and a downward trend in its results of operations. The firm is unable to service its debt and as a result, has missed payment of an annual interest on its loan from CVB Company. The principal amount of the loan is P 5,000,000 (which is already due ) with annual interest of 10% payable annually. GHIJ Corporation’s management has negotiated a modification of its debt terms with its creditors. The creditors agree to the following new terms (assume that at this time, the prevailing market rate of interest remained at 11%): • Forgive all accrued interest. • Reduce the principal amount of the loan to P 4,000,000. • Extend the payment of principal for 3 years. • Reduce the interest rate for the remaining 3 years to 8% How much is the gain on debt restructuring?
Harrington Company was sued by an employee in late 2020. General counsel concluded that there was an 80 percent probability that the company would lose the lawsuit. The range of possible loss is estimated to be $20,000 to $70,000, with no amount in the range more likely than any other. The lawsuit was settled in 2021, with Harrington making a payment of $60,000. Assume that Harrington Company is a U.S.-based company that is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes. Required: Prepare journal entries for this lawsuit for the years ending December 31, 2020, and December 31, 2021, under (1) U.S. GAAP and (2) IFRS. Prepare the entry(ies) that Harrington would make on the December 31, 2020, and December 31, 2021, conversion worksheets to convert U.S. GAAP balances to IFRS.
An employee sued Harrington Company in late 2023. General counsel concluded that there was an 80 percent probability that the company would lose the lawsuit. The range of loss is estimated to be $21,000 to $73,500, with no amount in the range more likely than any other. They settled the lawsuit in 2024, with Harrington making a payment of $63,000. Assume that Harrington Company is a U.S.-based company that is issuing securities to foreign investors who require financial statements prepared accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes. Required: Prepare journal entries for this lawsuit for the years ending December 31, 2023, and December 31, 2024, under (1) U.S. GAAP and (2) IFRS. Prepare the entry(ies) that Harrington would make on the December 31, 2023, and December 31, 2024, conversion worksheets to convert U.S. GAAP balances to IFRS. Record the entry for the litigation liability as per U.S. GAAP. Note: Enter…
Einhorn Industries believes it is not probable that Thaler Inc. will default on an account receivable, but given thepossibility of default, Einhorn believes it will collect $30,000 less than the receivable’s current carrying value onEinhorn’s balance sheet. Under current GAAP, how much impairment charge should Einhorn recognize?
A clothing wholesaler is experiencing cash flow problems for several years due to its accounts receivables. Some of the amounts due by debtors are irrecoverable and the company is contemplating creating a provision for doubtful debts. (a) How is a provision for doubtful debts created and maintained? Explain, with figures if necessary, in not more than 200 words. (b) Discuss, in not more than 200 words, the concept or convention on which a provision for doubtful debts is based. (c) Explain, in not more than 300 words the differences between a bad debt and a provision for doubtful debts. (d) The financial year end of the clothing wholesaler is 31 December. You have been provided the following information by the management of the company: YEAR Bad debts written off year to 31 December Accounts receivable at 31 December after bad debts written off Percentage allowance for doubtful debts 1 Use…