INTERMEDIATE ACCOUNTING
3rd Edition
ISBN: 9780136946694
Author: GORDON
Publisher: RENT PEARS
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 14, Problem 14.33BE
To determine
To prepare: The journal to record necessary entries under U.S GAAP if required.
Given information:
Loan taken by the company amounted to $1,500,000.
Term period of loan is 15 year.
Rate of interest given is 4%.
Compensated balance amounted to $150,000.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
On January 1, 2001, XDR Bank extended a P900,000 loan to SRN, Inc. Principal is due on December
31, 2005 but 12% interest is due annually every December 31. On December 31, 2003, SRN, Inc. was
delinquent and it was ascertained that the loan is impaired. XDR Bank assessed that interests accruing
on the loan will not be collected; however, the principal is expected to be received in three equal annual
installments starting on December 31, 2004. Accrued interest receivable on December 31, 2003
amounted to P100,000. The current market rate on December 31, 2003 is 14%. How much is the
balance of allowance for impairment loss on December 31, 2003 immediately after impairment testing?
Marigold Corporation has elected to use the fair value option for one of its notes payable. The note was issued at an effective rate of 10% and has a carrying value of $15,000. At year-end, Marigold’s borrowing rate (credit risk) has declined; the fair value of the note payable is now $16,300.
Determine the unrealized holding gain or loss on the note.
Prepare the entry to record any unrealized holding gain or loss.
Ames, Inc. has $500,000 of notes payable due June 15, year 3. Ames signed an agreement on December 1, year 2, to borrow up to $500,000 to refinance the notes payable on a long-term basis with no payments due until year 4. The financing agreement stipulated that borrowings may not exceed 80% of the value of the collateral Ames was providing. At the date of issuance of the December 31, year 2 financial statements, the value of the collateral was $600,000 and is not expected to fall below this amount during year 3. In Ames Inc., December 31, year 2 balance sheet, the obligation for these notes payable should be classified as
Short-term
Long-term
$500,000
$0
$100,000
$400,000
$ 20,000
$480,000
$0
$500,000
Chapter 14 Solutions
INTERMEDIATE ACCOUNTING
Ch. 14 - What conditions or terms does a note payable...Ch. 14 - If the market rate of interest exceeds the face or...Ch. 14 - What is included in bond issue costs and how...Ch. 14 - Prob. 14.4QCh. 14 - When a bond is issued at a discount, will its...Ch. 14 - Prob. 14.6QCh. 14 - Prob. 14.7QCh. 14 - Under IFRS, how do firms account for convertible...Ch. 14 - Prob. 14.9QCh. 14 - Can companies reclassify short-term debt expected...
Ch. 14 - Under IFRS, can companies reclassify short-term...Ch. 14 - Do companies always reclassify long-term debt that...Ch. 14 - Prob. 14.13QCh. 14 - Prob. 14.14QCh. 14 - Prob. 14.15QCh. 14 - Prob. 14.16QCh. 14 - Prob. 14.1MCCh. 14 - Prob. 14.2MCCh. 14 - Prob. 14.3MCCh. 14 - Prob. 14.4MCCh. 14 - Prob. 14.5MCCh. 14 - Clothes Horse Corp. (CHC) Issued 500,000 bonds due...Ch. 14 - Prob. 14.7MCCh. 14 - Prob. 14.8MCCh. 14 - Prob. 14.9MCCh. 14 - Prob. 14.10MCCh. 14 - Prob. 14.11MCCh. 14 - Prob. 14.1BECh. 14 - Notes Payable. Using the information provided in...Ch. 14 - Prob. 14.3BECh. 14 - Prob. 14.4BECh. 14 - Prob. 14.5BECh. 14 - Prob. 14.6BECh. 14 - Bond Terminology. Match each term with its...Ch. 14 - Bond Pricing. Fill in the missing items for each...Ch. 14 - Prob. 14.9BECh. 14 - Bond Issue Price. Using the information from...Ch. 14 - Prob. 14.11BECh. 14 - Prob. 14.12BECh. 14 - Prob. 14.13BECh. 14 - Prob. 14.14BECh. 14 - Prob. 14.15BECh. 14 - Prob. 14.16BECh. 14 - Prob. 14.17BECh. 14 - Prob. 14.18BECh. 14 - Bonds Issued between Interest Payment Dates. For...Ch. 14 - Prob. 14.20BECh. 14 - Prob. 14.21BECh. 14 - Prob. 14.22BECh. 14 - Prob. 14.23BECh. 14 - Prob. 14.24BECh. 14 - Prob. 14.25BECh. 14 - Prob. 14.26BECh. 14 - Prob. 14.27BECh. 14 - Prob. 14.28BECh. 14 - Prob. 14.29BECh. 14 - Prob. 14.30BECh. 14 - Prob. 14.31BECh. 14 - Prob. 14.32BECh. 14 - Prob. 14.33BECh. 14 - Prob. 14.34BECh. 14 - Prob. 14.35BECh. 14 - Prob. 14.36BECh. 14 - Prob. 14.37BECh. 14 - Prob. 14.1ECh. 14 - Prob. 14.2ECh. 14 - Prob. 14.3ECh. 14 - Prob. 14.4ECh. 14 - Prob. 14.5ECh. 14 - Prob. 14.6ECh. 14 - Prob. 14.7ECh. 14 - Prob. 14.8ECh. 14 - Prob. 14.9ECh. 14 - Prob. 14.10ECh. 14 - Prob. 14.11ECh. 14 - Prob. 14.12ECh. 14 - Prob. 14.13ECh. 14 - Prob. 14.14ECh. 14 - Prob. 14.15ECh. 14 - Prob. 14.16ECh. 14 - Warrants. DHC Associates issued 2,100 of its...Ch. 14 - Prob. 14.18ECh. 14 - Prob. 14.19ECh. 14 - Prob. 14.1PCh. 14 - Prob. 14.2PCh. 14 - Prob. 14.3PCh. 14 - Prob. 14.4PCh. 14 - Prob. 14.5PCh. 14 - Prob. 14.6PCh. 14 - Prob. 14.7PCh. 14 - Prob. 14.8PCh. 14 - Prob. 14.9PCh. 14 - Prob. 14.10PCh. 14 - Prob. 14.11PCh. 14 - Prob. 14.12PCh. 14 - Prob. 14.13PCh. 14 - Prob. 1JCCh. 14 - Prob. 2JCCh. 14 - Prob. 3JCCh. 14 - Prob. 1FSCCh. 14 - Prob. 1SSCCh. 14 - Surfing the Standards Case 2: Bonds with...Ch. 14 - Prob. 1BCC
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
- On July 31, 2021, Sampaguita Company borrowed from a bank via issuing a 13.5% note. Transaction costs of P40,000 related to the borrowing was paid. The note was irrevocably designated at fair value for measuring purposes. Analyzing the changes in the fair value at yearend, P20,000 was attributable to credit risk.The net effects of the note are the following: P276,250 loss for the 2021 Income Statement and P256,250 loss on the 2021 Statement of Comprehensive Income. How much is the face value of the note?arrow_forwardCoronado Corporation has elected to use the fair value option for one of its notes payable. The note was issued at an effective rate of 12% and has a carrying value of $13,000. At year - end, Coronado's borrowing rate (credit risk) has declined; the fair value of the note payable is now $14,600. (a) Determine the unrealized holding gain or loss on the note. (Enter loss using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).) Unrealized holding gain or loss $enter the unrealized holding gain or loss in dollars eTextbook and Media List of Accounts Attempts: 0 of 6 used (b) The parts of this question must be completed in order. This part will be available when you complete the part above.arrow_forwardOn May 2, Splish Company lends $8,900 to Chang, Inc., issuing a 6-month, 10% note. At the November 2, maturity date, Chang indicates that it cannot pay. Parts b and c are independent assumptions. Prepare the entry to record the issuance of the note, the entry to record the dishonor of the note, assuming that Splish Company expects collection will occur and the entry to record the dishonor of the note, instead assuming that Splish Company does not expect collection in the future.arrow_forward
- At January 1, 2018, NCI Industries, Inc., was indebted to First Federal Bank under a $240,000, 10% unsecurednote. The note was signed January 1, 2014, and was due December 31, 2019. Annual interest was last paid onDecember 31, 2016. NCI was experiencing severe financial difficulties and negotiated a restructuring of the termsof the debt agreement. First Federal agreed to reduce last year’s interest and the remaining two years’ interestpayments to $11,555 each and delay all payments until December 31, 2019, the maturity date.Required:Prepare the journal entries by NCI Industries, Inc., necessitated by the restructuring of the debt at: (1) January 1,2018; (2) December 31, 2018; and (3) December 31, 2019.arrow_forwardQUELL Co. owes PUT DOWN Bank F4,000,000 plus accrued interest of P360,000. The unamortized discount on the loan is P80,000. The debt is a 10-year, 12% loan. During 20x1, QUELL's business deteriorated due to loss of demand for its services. On December 31, 20x1, PUT DOWN Bank agrees to accept old equipment and cancel the entire debt. The equipment has a cost of P12,000,000, accumulated depreciation of P8,800,000, and fair value of P3,600,000. How much is the gain (loss) on the extinguishment of the debt?a. 1,800,000b. 760,000c. (1,800,000)d. 1,080,000arrow_forwardOn 1 January, Laja Bhd owes the Arbor Bank Bhd RM350,000 which is due on December 31. Since Laja seems unable to repay the note, the bank agreed that Laja can "settle" this balance by agreeing to make four, annual installments on each of the next four years, provided that it adds a "Note Payable is repayable on demand" clause to the note. Specifically, the lender will "do its best" not to call the note "provided that no adverse significant shift in operations occurs." However, Arbor Bank Bhd has the sole discretion to ascertain if these adverse conditions arose, and then to call the note due immediately. C. REQUIRED: (a) Explain how should Laja Bhd present the liability in the statement of financial position? (b) Assume Laja Bhd does not agree to the "Notes Payable is repayable on demand", explain the accounting treatment for the liability with the withdrawal of the clause.arrow_forward
- On December 31, 2021, LOL Company is experiencing extreme financial pressure and is in default in meeting interest payment on its long-term note of P7,000,000 due on December 31, 2021. The interest rate is 10% payable every December 31. In an agreement with the creditor, LOL obtained the following changes in the terms of the note: * The accrued interest of P700,000 on December 31, 2021 is forgiven. The principal is reduced by P1,000,000. * The new interest rate is 8%. The new date of maturity is December 31, 2026. At the time of restructuring, the market rate of interest was 10%. What is LOL Company's gain on debt restructuring?arrow_forwardOn January 1, 2019, Pigero Company took 3-year, P4,000,000 loan from a bank. Theloan agreement requires Pigero to maintain a current ratio of 2:1. If the current ratiofalls below 2:1, the loan becomes payable on demand. As of December 31, 2019,Pigero’s current ratio is 1.8:1. On December 31, 2019, the bank agreed not to collectthe loan in 2020 and gave Pigero 12 months to rectify the breach of loan agreement.How much is presented as current liability in relation to the loan in Pigero’s 2019year-end financial statement?arrow_forwardMika Company secured a one-year bank loan of P8,000,000 on October 1, 2010. The loan is discounted at 10%. The entity signed a note for the loan and pledged P10,000,000 of its accounts receivable as collateral for the same. The accounting period of the entity ends on December 31. How much is received by Mika Company on its loan transaction?arrow_forward
- On December 31 , 2018 Nicholas Co. is in financial difficulty and cannot pay a note due that day . It is a $3,300,000 8% issued at par note, payable to Key Bank. Key Bank agrees to accept from Nicholas equipment that has a fair value of 1,450,000, originally costing $2,400,000, with accumulated depreciation of $1,250,000. Key Bank also extends the maturity date to December 31, 2021, reduces the face amount of the note to $1,250,000, and reduces the interest rate to 6%, with interest payable at the end of each year. a. Nicholas should recognize a gain or loss on the transfer of the equipment of: b. At the end of each of the next three years Nicholas records the $ 75,000 interest paid to Key Bank as a: c. In determining the carrying value of the note at December 31, 2018 Key Bank uses an effective interest rate equal to: d. Key Bank records a loss on restructuring of: e. In recording the loss on restructuring, Key bank:arrow_forwardOn July 31, 2021, JUNGKOOK Company borrowed from a bank via issuing a 13.2% note. Transaction costs of P45,000 related to the borrowing was paid. The note was irrevocably designated at fair value for measuring purposes. Analyzing the changes in the fair value at yearend, P50,000 was not attributable to credit risk.The net effects of the note are the following: P264,500 loss for the 2021 Income Statement and P234,500 loss on the 2021 Statement of Comprehensive Income.1. How much is the face value of the note?arrow_forwardOn January 1, 20x1, SUBDUE Co. borrowed 10%, P4, 000, 000 loan from CONQUER Bank. Principal is due on January 1, 20x4 but interests are due annually starting January 1, 20x2. SUBDUE was charged by the bank a 3% nonrefundable loan origination fee representing service fee. How much is the carrying amount of the note on initial recognition?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Financial instruments products; Author: fi-compass;https://www.youtube.com/watch?v=gvxozM3TUIg;License: Standard Youtube License