INTERMEDIATE ACCT VOL.2>CUSTOM<
9th Edition
ISBN: 9781307165067
Author: SPICELAND
Publisher: MCG/CREATE
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 13, Problem 13.1E
Bank loan; accrued interest
• LO13–2
On November 1, 2018, Quantum Technology, a geothermal energy supplier, borrowed $16 million cash to fund a geological survey. The loan was made by Nevada BancCorp under a noncommitted short-term line of credit arrangement. Quantum issued a nine-month, 12% promissory note. Interest was payable at maturity. Quantum’s fiscal period is the calendar year.
Required:
1. Prepare the
2. Prepare the appropriate
3. Prepare the journal entry for the payment of the note at maturity.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Prepare all necessary entries in general journal form for Garfield Corp.
E7.13 (LO 4) (Note Transactions at Unrealistic Interest Rates) On July 1, 2020, Agincourt Inc. made two sales.
1. It sold land having a fair value of $700,000 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of $1,101,460. The land is carried on Agincourt’s books at a cost of $590,000.
2. It rendered services in exchange for a 3%, 8-year promissory note having a face value of $400,000 (interest payable annually).
Agincourt Inc. recently had to pay 8% interest for money that it borrowed from British National Bank. The customers in these two transactions have credit ratings that require them to borrow money at 12% interest.
Instructions
Record the two journal entries that should be recorded by Agincourt Inc. for the sales transactions above that took place on July 1, 2020.
Sh.13.
December 31. 2024 January 13 Negotiated a revolving credit agreement with Parish Bank that can be renewed annually upon bank approval. The amount available under the line of credit is $25.0 million at the bank’s prime rate. February 1 Arranged a three-month bank loan of $2.0 million with Parish Bank under the line of credit agreement. Interest at the prime rate of 13% was payable at maturity. May 1 Paid the 13% note at maturity. December 1 Supported by the credit line, issued $17.6 million of commercial paper on a nine-month note. Interest was discounted at issuance at a 12% discount rate. December 31 Recorded any necessary adjusting entry(s). 2025 September 1 Paid the commercial paper at maturity. Required: Prepare the appropriate journal entries through the maturity of each liabil ity.
Problem 25Davao Bank loaned P7,500,000 to a borrower on January 1, 2018. The terms of the loan were payment in full on January 1, 2023, plus annual interest payment at 12%. The interest payment was made as scheduled on January 1, 2019. However, due to financial setbacks, the borrower was unable to make its 2020 interest payment and Davao Bank considers the loan impaired and projects the cash flows from the loan as of December 31, 2020. The bank has accrued the interest at December 31, 2019, but did not continue to accrue interest for 2020 due to the impairment of the loan. The projected cash flows are:
Date of cash flow Amount projectedas of Dec. 31, 2020December31, 2021 500,000December31, 2022 1,000,000December31, 2023 2,000,000December31, 2024 4,000,000The present value at l2% is as follows:For one period 0.89For two periods 0.80For three periods 0.71For four periods 0.64
Required:1.Prepare a table of amortization for the loan receivable.2. Prepare journal entries for 2018 – 2024.
Chapter 13 Solutions
INTERMEDIATE ACCT VOL.2>CUSTOM<
Ch. 13 - What are the essential characteristics of...Ch. 13 - Prob. 13.2QCh. 13 - Bronson Distributors owes a supplier 100,000 on...Ch. 13 - Bank loans often are arranged under existing lines...Ch. 13 - Prob. 13.5QCh. 13 - Prob. 13.6QCh. 13 - Salaries of 5,000 have been earned by employees by...Ch. 13 - Prob. 13.8QCh. 13 - Prob. 13.9QCh. 13 - Prob. 13.10Q
Ch. 13 - Prob. 13.11QCh. 13 - Prob. 13.12QCh. 13 - Long-term obligations usually are reclassified and...Ch. 13 - How do IFRS and U.S. GAAP differ with respect to...Ch. 13 - Prob. 13.15QCh. 13 - Prob. 13.16QCh. 13 - Prob. 13.17QCh. 13 - Prob. 13.18QCh. 13 - Suppose the analysis of a loss contingency...Ch. 13 - Prob. 13.20QCh. 13 - Distinguish between the accounting treatment of a...Ch. 13 - At December 31, the end of the reporting period,...Ch. 13 - After the end of the reporting period, a...Ch. 13 - Prob. 13.24QCh. 13 - Prob. 13.25QCh. 13 - Prob. 13.26QCh. 13 - Prob. 13.27QCh. 13 - Prob. 13.28QCh. 13 - Bank loan; accrued interest LO132 On October 1,...Ch. 13 - Non-interest-bearing note; accrued interest LO132...Ch. 13 - Determining accrued interest LO132 On July1,...Ch. 13 - Commercial paper LO132 Branch Corporation issued...Ch. 13 - Non-interest-bearing note; effective interest rate...Ch. 13 - Prob. 13.6BECh. 13 - Advance collection LO133 In Lizzie Shoes...Ch. 13 - Sales tax LO133 DuringDecember, Rainey Equipment...Ch. 13 - Classifying debt LO134 Consider the following...Ch. 13 - Prob. 13.10BECh. 13 - Prob. 13.11BECh. 13 - Prob. 13.12BECh. 13 - Prob. 13.13BECh. 13 - Contingency LO135, LO136 Skill Hardware is the...Ch. 13 - Contingency LO135, LO136 Bell International can...Ch. 13 - Prob. 13.16BECh. 13 - Prob. 13.17BECh. 13 - Unasserted assessment LO135, LO136 At March 13,...Ch. 13 - Bank loan; accrued interest LO132 On November 1,...Ch. 13 - Determining accrued interest in various situations...Ch. 13 - Short-term notes LO132 The following selected...Ch. 13 - Paid future absences LO133 JWS Transport Companys...Ch. 13 - Paid future absences LO133 On January 1, 2018,...Ch. 13 - Prob. 13.6ECh. 13 - Customer deposits LO133 Diversified...Ch. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - FASB codification research LO133, LO134, LO135...Ch. 13 - Current noncurrent classification of debt; Sprint...Ch. 13 - Prob. 13.12ECh. 13 - Current noncurrent classification of debt LO131,...Ch. 13 - Prob. 13.14ECh. 13 - Warranties LO135, LO136 Cupola Awning Corporation...Ch. 13 - Extended warranties LO135, LO136 Carnes...Ch. 13 - Prob. 13.17ECh. 13 - Impairment of accounts receivable LO135, LO136...Ch. 13 - Prob. 13.19ECh. 13 - Various transactions involving contingencies ...Ch. 13 - Prob. 13.21ECh. 13 - Prob. 13.22ECh. 13 - Disclosures of liabilities Indicate (by letter)...Ch. 13 - Warranty expense; change in estimate LO135, LO136...Ch. 13 - Change in accounting estimate LO133 The...Ch. 13 - Contingency; Dow Chemical Company disclosure ...Ch. 13 - Payroll-related liabilities Appendix Lee...Ch. 13 - Prob. 13.1PCh. 13 - Prob. 13.2PCh. 13 - Current noncurrent classification of debt LO131,...Ch. 13 - Various liabilities LO131 through LO134 The...Ch. 13 - Bonus compensation; algebra LO133 Sometimes...Ch. 13 - Various contingencies LO135, LO136 Eastern...Ch. 13 - Prob. 13.7PCh. 13 - Expected cash flow approach; product recall LO136...Ch. 13 - Subsequent events LO136 Lincoln Chemicals became...Ch. 13 - Subsequent events; classification of debt; loss...Ch. 13 - Prob. 13.11PCh. 13 - Various liabilities; balance sheet classification;...Ch. 13 - Payroll-related liabilities Appendix Alamar...Ch. 13 - Prob. 13.1BYPCh. 13 - Prob. 13.3BYPCh. 13 - Prob. 13.4BYPCh. 13 - Prob. 13.5BYPCh. 13 - Prob. 13.7BYPCh. 13 - Prob. 13.8BYPCh. 13 - Judgment Case 139 Loss contingency and full...Ch. 13 - Prob. 13.10BYPCh. 13 - Prob. 13.12BYPCh. 13 - Prob. 13.13BYPCh. 13 - Prob. 13.14BYPCh. 13 - Prob. 13.15BYPCh. 13 - Prob. 13.16BYPCh. 13 - Prob. 13.18BYPCh. 13 - Real World Case 1319 Contingencies LO135 Real...Ch. 13 - Real World Case 1320 Contingencies and Subsequent...Ch. 13 - Prob. 1CCTCCh. 13 - Prob. 1CCIFRS
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
- EA14. LO 9.6 Arvan Patel is a customer of Bank’s Hardware Store. For Mr. Patel’s latest purchase on January 1, 2018, Bank’s Hardware issues a note with a principal amount of $480,000, 13% annual interest rate, and a 24-month maturity date on December 31, 2019. Record the journal entries for Bank’s Hardware Store for the following transactions. Note issuance Subsequent interest entry on December 31, 2018 Honored note entry at maturity on December 31, 2019. Solutionarrow_forwardP18–15 VOLUNTARY SETTLEMENTS: PAYMENTS Jacobi Supply Company recently ran into certain financial difficulties that have resulted in the initiation of voluntary settlement procedures. The firm currently has $150,000 in outstanding debts and approximately $75,000 in liquidatable short-term assets. Indicate, for each of the following plans, whether the plan is an extension, a composition, or a combination of the two. Also indicate the cash payments and timing of the payments required of the firm under each plan. Each creditor will be paid ¢50¢ on the dollar immediately, and the debts will be considered fully satisfied. Each creditor will be paid ¢80¢ on the dollar in two quarterly installments of ¢50¢ and ¢30¢. The first installment is to be paid in 90 days. Each creditor will be paid the full amount of its claims in three installments of ¢50¢, ¢25¢, and ¢25¢ on the dollar. The installments will be made in 60-day intervals, beginning in 60 days. A group of creditors with claims of $50,000…arrow_forward16. On 1 January 2022, Marina Tower exchanged equipment for an $800,000 zero-interest-bearing note due on January 1, 2023. The prevailing rate of interest for a note of this type at January 1, 2020 was 10%. The present value of $1 at 10% for three periods is 0.75. What amount of interest revenue should be included in Marina's 2023 income statement?Question 16Answera.$60,000b.$66,000c.$0d.$80,000. please answer do not image formatarrow_forward
- (Appendix 13.1) Derivatives Danburg. Company has a 5 million, 9% bank loan outstanding with its local bank. On January 1, 2019, when the loan has 4 years remaining, Danburg contracts with Bradford Investment Bank to enter into a 4-year interest-rate swap with a 5 million notional amount. Danburg agrees to receive from Bradford a fixed interest rate of 9% and to pay Bradford an interest amount each year that is variable based on the LIBOR interest rate at the beginning of the year. The interest payments are made at year-end. The applicable interest rate on the swap is reset each year after the annual interest payment is made. The LIBOR interest rate is 8.6% and 9.5% at the beginning of 2019 and 2020, respectively. The 3-year fixed interest rate is 10% at December 31, 2019, and the 2 year rate is 8% at December 31, 2020. Required: 1. Prepare the journal entries of Danburg for the bank loan and derivative for 2019 and 2020. Round calculations to the nearest dollar. 2. Prepare the appropriate disclosures in Danburgs financial statements for 2019 and 2020.arrow_forwardHw.128. A business borrowed $200,000 on January 1, 2019 to be paid back on January 1 2022. On January 1, 2019, the business received an amount equal to $200,000, less discounted interest based on 11.5% per year, which is the market rate. The company closes its books every December 31. a. Prepare the journal entry for the debtor on January 1, 2019. b. Prepare the journal entry on December 31, 2020 related to this debt. Suppose that the company from the previous exercise number 4 received the full sum of $200,000 on January 1, 2019 and committed to repay the loan by making three annual payments (January 1 of 2020, 2021 and 2022) equal based on an interest rate of 11.5%.arrow_forwardH5. Required information Skip to question [The following information applies to the questions displayed below.] On January 1, 2021, Eagle Company borrows $21,000 cash by signing a four-year, 5% installment note. The note requires four equal payments of $5,922, consisting of accrued interest and principal on December 31 of each year from 2021 through 2024. Prepare an amortization table for this installment note. (Round all amounts to the nearest whole dollar.)arrow_forward
- 12. 12 Multiple Choices. A company pledged its entire accounts receivable amounting to P2,500,000 to a financing institution to a loan approved for P2,000,000. The term of the loan requires the company to pay the principal when it becomes mature 4 years from now and also to pay 12% annual interest every end of the year. Should the company has made no collateral for the loan, interest rate could have been 18%. Assuming the transaction occurred on June 30, 20A, what shall be the proper accounting treatment for the pledged accounts? a.disclose the loan to notes to financial statements and derecognize the pledged accounts b.derecognize the pledged accounts c.disclose it to the notes to financial statements d.recognized the loan and derecognize the pledged accounts e.do nothingarrow_forwardProblem 26 Jem Riane Delos Reyes Bank granted a loan of P3,000,000 to a borrower on January 1, 2021. The terms of the loan were payment in full on December 31, 2026 plus annual interest payment at 8% every December 31. The first interest payment was made on December 31, 2021. However, on December 31, 2021, due to financial difficulties, the borrower informed Freetown Bank that it would probably miss the interest payments for the next two years. After that, the borrower expects to resume the annual interest payment but the principal would be paid on December 31, 2027 or one year late with interest paid for that additional year. Accordingly, the payments from the borrower are scheduled as follows: Date of Flow Cash Flow Amount 12/31/2022 No interest payment Nil 12/31/2023 No interest payment Nil 12/31/2024 Interest payment P 240,000 12/31/2025 Interest payment 240,000 12/31/2026 Interest payment 240,000 12/31/2027 Interest payment 240,000 Principal payment 3,000,000 The…arrow_forwardA 13.2% P600,000 note payable was issued by Robin Company on March 1, 2020. The principal and interest, compounded annually, are due in three years. How much should be reported as noncurrent liabilities on December 31, 2021?arrow_forward
- Q#5 . On January 1, 2021, The Barrett Company purchased merchandise from a supplier. Payment was a noninterest-bearing note requiring five annual payments of $22,000 on each December 31 beginning on December 31, 2021, and a lump-sum payment of $120,000 on December 31, 2025. A 12% interest rate properly reflects the time value of money in this situation. ((FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)Required:Calculate the amount at which Barrett should record the note payable and corresponding merchandise purchased on January 1, 2021. (Round your final answer to nearest whole dollar amount.) Table values are based on: n = i = Cash Flow Amount Present Value Payments Lump Sum Amount recordedarrow_forwardPROBLEM 5On January 1, 2021, Joy Company sold used equipment and received a non-interest bearing note requiring payment of P2,000,000 principal on December 31, 2022. The prevailing rate of interest for this type of note at the date of issuance is 10%.On January 1, 2022, to augment the company's cash requirement, Joy Company discounted the note to a financial institution at 14%. On December 31, 2022, the factor collected in full the notes receivable. The discounting is accounted for as a secured borrowing. Requirement:1. Prepare the necessary journal entry to record the above transactions.2. How much is the carrying value of the notes receivable at December 31, 2021?3. Assuming the customer failed to pay the notes on December 31, 2022, prepare the journal entry to record the dishonored note.arrow_forwardIA 9. Problem Solving. A promissory note which is dated October 1, 20A was received from a client for service delivered by the ML Company for P450,500. Its term is 90 days and carries with it an 12% interest. On November 15, 20A, due to financial difficulty, ML company have the client’s promissory note discounted to a C19 Financing even at 18% discount. Pertaining to this transaction alone, compute the net amount of increase in profit assuming the bank was paid by its client on the said due date. Although we assume 360 days a year, use the actual number of days of each month mentioned. Round off final answer to the nearest peso.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
7.2 Ch 7: Notes Payable and Interest, Revenue recognition explained; Author: Accounting Prof - making it easy, The finance storyteller;https://www.youtube.com/watch?v=wMC3wCdPnRg;License: Standard YouTube License, CC-BY