WATASHIWA Corp. included the following in its notes receivable as of December 31, 2015: Note receivable from sale of land Note receivable from consultation P2,640,000 3,600,000 4,800,000 Note receivable from sale of equipment The following transactions during 2015 and other information relate to the company's notes receceivable: a) On January 1, 2015, WATASHIWA Corp. sold a tract of land to Twice Company. The land, purchased 10 years ago, was carried on WATASHIWA's books at P1,500,000. WATASHIWA received a noninterest-bearing note for P2,640,000 from Twice. The note is due on December 31, 2016. There was no established exchange price for the land. The prevailing interest rate for this note on January 1, 2015 was 10%. b) On January 1, 2015, WATASHIWA Corp. received a 5%, P3,600,000 promissory note in exchange for the consultation services rendered. The note will mature on December 31, 2017, with interest receivable every December 31. The fair value of the services rendered is not readily determinable. The prevailing rate of interest for a note of this type was 10% on January 1, 2015. c) On January 1, 2015, WATASHIWA Corp. sold an old equipment with a carrying amount of P4,800,000, receiving P7,200,000 note. The note bears an interest rate of 4% and is to be repaid in 3 annual installments of P2,400,000 (plus interest on the outstanding balance). WATASHIWA received the first payment on December 31, 2015. There is no established market value for the equipment. The market interest rate for similar notes was 14% on January 1, 2015. Note: Round off present value factors to four decimal places and final answers to the nearest hundred. 1. What amount of consultation fee revenue should be recognized in 2015? 2. What amount should be reported as gain on sale of equipment? 3. The amount to be reported as noncurrent notes receivable on December 31, 2015 is 4. The amount to be reported as current notes receivable on December 31, 2015 is 5. How much interest income should be recognized in 2015?
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
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