Tran Company acquired an equipment from a manufacturer on June 30, 2018 and signed a $540,000, 18 month interest-bearing note in exchange. The company is obligated to pay a total of $562,500 when the note matures. Determine accrued interest on December 31, 2018
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Tran Company acquired an equipment from a manufacturer on June 30, 2018 and signed a $540,000, 18 month interest-bearing note in exchange. The company is obligated to pay a total of $562,500 when the note matures. Determine accrued interest on December 31, 2018
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- 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. 36,000Spath Company borrows 75,000 by issuing a 4-year, noninterest-bearing note to a customer on January 1, 2019. In addition, Spath agrees to sell inventory to the customer at reduced prices over a 5-year period. Spaths incremental borrowing rate is 12%. The customer agrees to purchase an equal amount of inventory each year over the 5-year period so that a straight-line method of revenue recognition is appropriate. Required: Prepare the journal entries on Spaths books for 2019 and 2020. (Round answers to 2 decimal places.)On January 1, 2019, Boater Company issues a 20,000 non-interest-bearing, 5-year note for equipment. Neither the fair value of the note nor the equipment is determinable. Boaters incremental borrowing rate is 9%. The asset has a useful life of 7 years. Prepare the journal entry for Boater to record the issuance of the note on January 1.
- 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.Accrued Interest On May 1, the Garnett Corporation wanted to purchase a $200,000 piece of equipment, but Garnett was only able to furnish $75,000 of its own cash to purchase the equipment. Garnett borrowed the remainder of the $200,000 from the Peoples National Bank on a 3-year, 4% note. Required: If the company keeps its records on a calendar year, what adjusting entry should Garnett make on December 31?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
- On January 1, 2018, King Inc. borrowed $150,000 and signed a 5-year, note payable with a 10% interest rate. Each annual payment is in the amount of $39,569 and payment is due each Dec. 31. What is the journal entry on Jan. 1 to record the cash received and on Dec. 31 to record the annual payment? (You will need to prepare the first row in the amortization table to determine the amounts.)Notes Receivable On January 1, 2019, Lisa Company sold machinery with a book value of 118,000 to Mark Company. Mark signed a 180,000 non-interest-bearing note, payable in three 60,000 annual installments on December 31, 2019, 2020, and 2021. The fair value of the machinery was 149,211.12 on the date of sale. The machinery had been purchased by Lisa at a cost of 160,000. Required: 1. Prepare all the journal entries on Lisas books for January 1, 2019, through December 31, 2021. 2. Prepare the notes receivable portion of Lisas balance sheet on December 31, 2019 and 2020.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.)
- 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?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.On January 1, Kilgore Inc. accepts a 20,000 non-interest-bearing, 5-year note from Dieland Company for equipment. Neither the fair value of the note nor the equipment is determinable. Kilgore had originally purchased the equipment for 18,000, and the equipment has a book value of 14,000 on January 1. Kilgore knows Dielands incremental borrowing rate of 9%. Prepare the journal entry for Kilgore to record the sale of the equipment on January 1.
