Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN: 9781285595047
Author: Weil
Publisher: Cengage
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On April 1, 2028, A Company issued a P 9,000,000 non-interest-bearing note due March 31, 2031, for a piece of land with a cash price of P 6,949,800. Effective interest rate is 9%. Determine the interest expense for the year ended December 31, 2029?
A company sells 3-year service contracts for air conditioning units for P1,500 each. Sales of service contracts and repairs are made evenly throughout each year. The company estimates that 15% of repairs are done in the first year from the date of sale, 35% in the second year and 50% in the third year. Service contracts sold in 2021, 2022 and 2023 were 1,400, 1,820 and 1,650, respectively. How much is the unearned revenue from service contracts as of December 31, 2024?
On December 15, 2011, Rigsby Sales Co. sold a tract of land that cost $3,600,000 for $4,500,000. Rigsby appropriately uses the installment sale method of accounting for this transaction. Terms called for a down payment of $500,000 with the balance in two equal annual installments, payable on December 15, 2012 and December 15, 2013. Ignore interest charges. Rigsby has a December 31 year-end.In its December 31, 2011 balance sheet, Rigsby would report: a realized gross profit of $100,000.a deferred gross profit of $100,000.an installment receivables (net) of $3,200,000.an installment receivables (net) of $4,000,000.
On July 1, 2020, Marin Inc. made two sales:
1.
It sold excess land in exchange for a four-year, non–interest-bearing promissory note in the face amount of $1,165,880. The land’s carrying value is $640,000.
2.
It rendered services in exchange for an eight-year promissory note having a face value of $480,000. Interest at a rate of 2% is payable annually.
The customers in the above transactions have credit ratings that require them to borrow money at 11% interest. Marin recently had to pay 7% interest for money it borrowed from British Bank.
3.
On July 1, 2020, Marin also agreed to accept an instalment note from one of its customers in partial settlement of accounts receivable that were overdue. The note calls for four equal payments of $21,000, including the principal and interest due, on the anniversary of the note. The implied interest rate on this note is 9%.
Required:
1. Prepare the journal entries to record the three notes receivable transactions of Marin…
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- 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?arrow_forwardMatthew Company started to manufacture in 2012 copying machines that are sold on the installment basis. Matthew recognizes revenue when equipment is sold for financial reporting purposes and when installment payments are received for tax purposes. In 2012, Matthew recognized gross profit of P10,000,000 for financial reporting purposes and P6,000,00 for tax purposes. The amounts of gross profit expected to be recognized for tax purposes in 2013 and 2014 is P2,000,000 each. Matthew guarantees the copying machines for two years. Warranty costs are recognized on the accrual basis for financial accounting purposes and when paid for tax purposes. Warranty expense accrued in 2012 is P2,800,000 but only P1,000,000 of the warranty cost was paid in 2012. It is expected that in 2013 and 2014, P1,100,000 and P700,000, respectively, of warranty costs will be paid. In addition, during 2012, P500,000 interest, net of 20% final income tax, was received and earned, and P200,000 insurance premium on…arrow_forwardMatthew Company started to manufacture in 2012 copying machines that are sold on the installment basis. Matthew recognizes revenue when equipment is sold for financial reporting purposes and when installment payments are received for tax purposes. In 2012, Matthew recognized gross profit of P10,000,000 for financial reporting purposes and P6,000,00 for tax purposes. The amounts of gross profit expected to be recognized for tax purposes in 2013 and 2014 is P2,000,000 each. Matthew guarantees the copying machines for two years. Warranty costs are recognized on the accrual basis for financial accounting purposes and when paid for tax purposes. Warranty expense accrued in 2012 is P2,800,000 but only P1,000,000 of the warranty cost was paid in 2012. It is expected that in 2013 and 2014, P1,100,000 and P700,000, respectively, of warranty costs will be paid. In addition, during 2012, P500,000 interest, net of 20% final income tax, was received and earned, and P200,000 insurance premium on…arrow_forward
- Magenta Company purchased a machine from Pink Corporation on October 31, 2021. In payment for the $292,000 purchase, Magenta issued a one-year installment note to be paid in equal monthly payments of $25,944 at the end of each month. The payments include interest at the rate of 12%. The amount of interest expense that Magenta will report in its income statement for the year ended December 31, 2021, is:arrow_forwardRashford Inc. financed the purchase of equipment costing $480000 on April 1, 2022, by making a down payment of $120000 in cash and using an installment note payable for the balance. The note requires the company to make monthly payments of blended interest and principal on the first of each month (starting in the month after the purchase) for the following 5 years. The note bears interest at the rate of 5% per annum. The company reports under ASPE and its year-end is July 31. 1. Prepare the journal entries that are required for the 2022 fiscal year from the beginning of the term of the note plus the first payment entry after the company's year-end.arrow_forwardThe records for Pharoah Co. show this data for 2021: ● Gross profit on installment sales recorded on the books was $480,000. Gross profit from collections of installment receivables was $340,000. ● Life insurance on officers was $4,400. ● Machinery was acquired in January for $360,000. Straight-line depreciation over a ten-year life (no salvage value) is used. For tax purposes, MACRS depreciation is used and Pharoah may deduct 14% for 2021. ● Interest received on tax exempt Iowa State bonds was $9,600. ● The estimated warranty liability related to 2021 sales was $22,200. Repair costs under warranties during 2021 were $14,200. The remainder will be incurred in 2022. ● Pretax financial income is $660,000. The tax rate is 20%. (a) Prepare a schedule starting with pretax financial income and compute taxable income. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Schedule of…arrow_forward
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