MyLab Accounting with Pearson eText -- Access Card -- for Horngren's Financial & Managerial Accounting, The Managerial Chapters
6th Edition
ISBN: 9780134461724
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 12, Problem 12.1EI
Raffle's Kids, a nonprofit organization that provides aid to victims of domestic violence, low-income families, and special-needs children, has a 30-year, 5% mortgage on the existing building. The mortgage requires monthly payments of $3,000. Raffle's bookkeeper is preparing financial statements for the board and, in doing so, lists the mortgage balance of $287,000 under current liabilities because the board hopes to be able to pay the mortgage off in full next year. Of the mortgage principal, $20,000 will be paid next year if Raffie's pays according to the mortgage agreement. The board members call you, their trusted CPA, to advise them on how Raffle's Kids should report the mortgage on its balance sheet. What is the ethical issue? Provide and discuss the reason for your recommendation.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Raffie’s Kids, a nonprofit organization that provides aid to victims of domestic violence, low-income families, and special-needs children, has a 30-year, 5% mortgage on the existing building. The mortgage requires monthly payments of $3,000. Raffie’s bookkeeper is preparing financial statements for the board and, in doing so, lists the mortgage balance of $287,000 under current liabilities because the board hopes to be able to pay the mortgage off in full next year. Of the mortgage principal, $20,000 will be paid next year if Raffie’s pays according to the mortgage agreement. The board members call you, their trusted CPA, to advise them on how Raffie’s Kids should report the mortgage on its balance sheet.
Raffie’s Kids, a nonprofit organization that provides aid to victims of domestic violence, low-income families, and special-needs children, has a 30-year, 5% mortgage on the existing building. The mortgage requires monthly payments of $3,000. Raffie’s bookkeeper is preparing financial statements for the board and, in doing so, lists the mortgage balance of $287,000 under current liabilities because the board hopes to be able to pay the mortgage off in full next year. Of the mortgage principal, $20,000 will be paid next year if Raffie’s pays according to the mortgage agreement. The board members call you, their trusted CPA, to advise them on how Raffie’s Kids should report the mortgage on its balance sheet.
1. What is the ethical issue?
2. What is the reason for your recommendation?
Financial Textbook, Pg. 14-55
Raffie’s Kids, a nonprofit organization that provides aid to victims of domestic violence, low-income families, and special-needs children, has a 30-year, 5% mortgage on the existing building. The mortgage requires monthly payments of $3,000. Raffie’s bookkeeper is preparing financial statements for the board and, in doing so, lists the mortgage balance of $287,000 under current liabilities because the board hopes to be able to pay the mortgage off in full next year. Of the mortgage principal, $20,000 will be paid next year if Raffie’s pays according to the mortgage agreement. The board members call you, their trusted CPA, to advise them on how Raffie’s Kids should report the mortgage on its balance sheet.
Requirements
What is the ethical issue?
Provide and discuss the reason for your recommendation.
Chapter 12 Solutions
MyLab Accounting with Pearson eText -- Access Card -- for Horngren's Financial & Managerial Accounting, The Managerial Chapters
Ch. 12 - Prob. 1QCCh. 12 - Daniels's bonds payable carry a stated interest...Ch. 12 - A bond that matures in installments at regular...Ch. 12 - Prob. 4QCCh. 12 - Nicholas Smith Fitness Gym has 700,000 of 20-year...Ch. 12 - Prob. 6QCCh. 12 - Prob. 7QCCh. 12 - The debt to equity ratio is calculated as a. Total...Ch. 12 - Mike Gordon wishes to have 80,000 in five years....Ch. 12 - Prob. 10QC
Ch. 12 - Prob. 1RQCh. 12 - What is an amortization schedule?Ch. 12 - What is a mortgage payable?Ch. 12 - What is a bond payable?Ch. 12 - What is the difference between the stated interest...Ch. 12 - When does a discount on bonds payable occur?Ch. 12 - When does a premium on bonds payable occur?Ch. 12 - When a bond is issued, what is its present value?Ch. 12 - Why would a company choose to issue bonds instead...Ch. 12 - Prob. 10RQCh. 12 - Prob. 11RQCh. 12 - Prob. 12RQCh. 12 - Prob. 13RQCh. 12 - Prob. 14RQCh. 12 - Prob. 15RQCh. 12 - Prob. 16RQCh. 12 - Prob. 17RQCh. 12 - Prob. 18RQCh. 12 - Prob. 19RQCh. 12 - Prob. 20RQCh. 12 - Prob. 21RQCh. 12 - Prob. 12.1SECh. 12 - Prob. 12.2SECh. 12 - Determining bond prices Bond prices depend on the...Ch. 12 - Prob. 12.4SECh. 12 - Prob. 12.5SECh. 12 - S12-6 Journalizing bond transactions
Power Company...Ch. 12 - S12-7 Journalizing bond transactions
Owen Company...Ch. 12 - S12-8 Journalizing bond transactions
Wilkes Mutual...Ch. 12 - Prob. 12.9SECh. 12 - Prob. 12.10SECh. 12 - Prob. 12.11SECh. 12 - Prob. 12.12SECh. 12 - Prob. 12.13SECh. 12 - Prob. 12.14SECh. 12 - Prob. 12.15SECh. 12 - Prob. 12.16SECh. 12 - Prob. 12.17SECh. 12 - Prob. 12.18ECh. 12 - E12-19 Preparing an amortization schedule and...Ch. 12 - E12-20 Analyzing alternative plans to raise...Ch. 12 - E12-21 Determining bond prices and interest...Ch. 12 - E12-22 Journalizing bond issuance and interest...Ch. 12 - Prob. 12.23ECh. 12 - Prob. 12.24ECh. 12 - E12-25 Journalizing bond issuance and interest...Ch. 12 - Prob. 12.26ECh. 12 - Prob. 12.27ECh. 12 - Prob. 12.28ECh. 12 - Prob. 12.29ECh. 12 - Prob. 12.30ECh. 12 - Prob. 12.31ECh. 12 - Prob. 12.32APCh. 12 - P12-33A Analyzing, journalizing, and reporting...Ch. 12 - Prob. 12.34APCh. 12 - Prob. 12.35APCh. 12 - Prob. 12.36APCh. 12 - Prob. 12.37APCh. 12 - P12AB-38A Determining the present value of bonds...Ch. 12 - Prob. 12.39BPCh. 12 - Prob. 12.40BPCh. 12 - Prob. 12.41BPCh. 12 - Prob. 12.42BPCh. 12 - Prob. 12.43BPCh. 12 - Prob. 12.44BPCh. 12 - Prob. 12.45BPCh. 12 - Prob. 47CPCh. 12 - Prob. 12.1TICh. 12 - The following questions are not related....Ch. 12 - Raffle's Kids, a nonprofit organization that...Ch. 12 - Bill and Edna had been married two years and had...Ch. 12 - Prob. 12.1FSC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- The employee credit union at State University is planning the allocation of funds for the coming year. The credit union makes four types of loans to its members. In addition, the credit union invests in risk-free securities to stabilize income. The various revenue-producing investments, together with annual rates of return, are as follows: The credit union will have 2 million available for investment during the coming year. State laws are credit union policies impose the following restrictions on the composition of the loans and investments: Risk-free securities may not exceed 30% of the total funds available for investment. Signature loans may not exceed 10% of the funds invested in all loans (automobile, furniture, other secured, and signature loans). Furniture loans plus other secured loans may not exceed the automobile loans. Other secured loans plus signature loans may not exceed the funds invested in risk-free securities. How should the 2 million be allocated to each of the loan/investment alternatives to maximize total annual return? What is the projected total annual return?arrow_forwardHassad owns a rental house on Lake Tahoe. He uses a real estate firm to screen prospective renters, but he makes the final decision on all rentals. He also is responsible for setting the weekly rental price of the house. During the current year, the house rents for 1,500 per week. Hassad pays a commission of 150 and a cleaning fee of 75 for each week the property is rented. During the current year, he incurs the following additional expenses related to the property: a. What is the proper tax treatment if Hassad rents the house for only 1 week (7 days) and uses it 50 days for personal purposes? b. What is the proper tax treatment if Hassad rents the house for 8 weeks (56 days) and uses it 44 days for personal purposes? c. What is the proper tax treatment if Hassad rents the house for 25 weeks (175 days) and uses it 15 days for personal purposes?arrow_forwardEthical Issue: Raffie’s Kids, a nonprofit organization that provides aid to victims of domestic violence, low-income families, and special-needs children, has a 30-year, 5% mortgage on the existing building. The mortgage requires monthly payments of $3,000. Raffie’s bookkeeper is preparing financial statements for the board and, in doing so, lists the mortgage balance of $287,000 under current liabilities because the Board hopes to be able to pay the mortgage off in full next year. Of the mortgage principal, $20,000 will be paid next year if Raffie’s pays according to the mortgage agreement. The Board members call you, their trusted professional bookkeeper confidant, to advise them on how Raffie’s Kids should report the mortgage on its Balance Sheet. 1. What is the ethical issue? 2. What is your recommendation to the Board of Raffie’s Kids?arrow_forward
- Lorissa owes Waterbury State Bank $200,000. During the current year, she isunable to make the required payments on the loan and negotiates the followingterms to extinguish the debt. Lorissa transfers to Waterbury ownership ofinvestment property with a value of $90,000 and a basis of $55,000, and commonstock with a value of $50,000 and a basis of $70,000. Lorissa also pays Waterbury$5,000 cash, and Waterbury forgives the remaining amount of debt. Before theagreement, Lorissa's assets are $290,000, and her liabilities are $440,000.Determine how much gross income Lorissa has from the extinguishment of the debt.arrow_forwardChuck Ponzi has talked an elderly woman into loaning him $50,000 for a new business venture. She has, however, successfully passed a finance class and requires Chuck to sign a binding contract on repayment of the $50,000 with an annual interest rate of 11% over the next 15 years. Determine the cash flow to the woman under a discount loan, in which Ponzi will have a lump-sum payment at the end of the contract. What is the amount of payment that the woman will receive at the end of years 1 through 14?arrow_forwardIn year 1, Abby purchased a new home for $200,000 by making a down payment of $150,000 and financing the remaining $50,000 with a loan, secured by the residence, at 6 percent. As of January 1, year 4 the outstanding balance on the loan was $40,000. On January 1, year 4, when her home was worth $300,000, Abby refinanced the home by taking out a $120,000 mortgage at 5 percent. With the loan proceeds, she paid off the $40,000 balance of the existing mortgage and used the remaining $80,000 for purposes unrelated to the home. During year 4, she made interest-only payments on the new loan of $6,000. What amount of the $6,000 interest expense on the new loan can Abby deduct in year 4 on the new mortgage as home-related interest expense?arrow_forward
- Jane requested a loan from a bank amounting to P405,630 to continue her small business. But she only received 83.84% of the loan as the bank collected the interest at the time money is requested. If the agreement will mature after 12 years and 4 months: Determine the Simple interest, simple discount rate, total interest accumulated at the end of the year.arrow_forwardWally is employed as an executive with Pay More Incorporated. To entice Wally to work for Pay More, the corporation loaned him $20,000 at the beginning of the year at a simple interest rate of 1 percent. Wally would have paid interest of $2,400 this year if the interest rate on the loan had been set at the prevailing federal interest rate. Required: Wally used the funds as a down payment on a speedboat and repaid the $20,000 loan (including $200 of interest) at year-end. a-1. Does this loan result in any income to either party? a-2. Indicate the amount below. Assume instead that Pay More forgave the loan and interest on December 31. What amount of gross income does Wally recognize this year?arrow_forwardJane requested a loan from the bank amounting to 312,870 to continue her small business. But she only recieved 84.68% of the loan as the bank collected the interest at the time money is requested. If the agreement will mature after 8 years and 9 months, Determine the simple interest rate, simple discount rate and totl interest accumulated at the end of 4 yearsarrow_forward
- A local firm sponsors a student loan program for the children of employees.No interest is charged until graduation, and then the interest rate is 5%. Maria borrows $9000 per year, and she graduates after 4 years. Since tuition must be paid ahead of time, assume that she borrows the money at the start of each year. If Maria makes five equal annual payments, what is each payment? Use the cash flow from when she started borrowing the money to when it is all paid back, and then calculate the internal rate of return for Maria’s loan. Is this arrangement attractive to Maria?arrow_forwardJane requested a loan from a bank amounting to P405,630 to contin her small business. But she only received 83.84% of the loan as the bank collected the interest at the time money is requested. If the agreement will mature after 12 years and 4 months: Determine the 1.Simple interest, 2.simple discount rate, 3.total interest accumulated at the end of the year.arrow_forwardThe employee credit union at State University is planning the allocation of funds for thecoming year. The credit union makes four types of loans to its members. In addition,the credit union invests in risk-free securities to stabilize income. The various revenueproducinginvestments, together with annual rates of return, are as follows: The credit union will have $2 million available for investment during the coming year.State laws and credit union policies impose the following restrictions on the compositionof the loans and investments: of the loans and investments:Risk-free securities may not exceed 30 percent of the total funds available for investment.Signature loans may not exceed 10 percent of the funds invested in all loans (automobile,furniture, other secured, and signature loans).Furniture loans plus other secured loans may not exceed the automobile loans.Other secured loans plus signature loans may not exceed the funds invested in risk-freesecurities. How should the $2 million…arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
How to (Legally) Never Pay Taxes Again; Author: Next Level Life;https://www.youtube.com/watch?v=q63F1pBrUHA;License: Standard Youtube License