On January 1, 2019, Carson Inc sold used equipment with a cost of S15,000 and a carrying amount of $2,500 to Disc Corp. in exchange for a $5,000, three-year non-interest-bearing note receivable. Aitocs Inc. typically borrows funds at a rate of 10%, while Bathgate Corp. has various lines of credit at 9%. Assume that Carson follows IFRS.
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On January 1, 2019, Carson Inc sold used equipment with a cost of S15,000 and a carrying
amount of $2,500 to Disc Corp. in exchange for a $5,000, three-year non-interest-bearing note
receivable. Aitocs Inc. typically borrows funds at a rate of 10%, while Bathgate Corp. has various
lines of credit at 9%. Assume that Carson follows IFRS.
Required:
Prepare all
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- On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major customer in exchange for used equipment. The equipment had originally cost Park 200,000 and had a book value of 20,000 on the date of the sale. At the 12% imputed interest rate for this type of loan, the present value of the note is 25,500 on January 1, 2019. Park uses the effective interest rate. What is the carrying value of the note receivable on Parks December 31, 2019, balance sheet? a. 28,560 b. 29,000 c. 32,500 d. 36,000Hamlet Corporation purchases computer equipment at a price of 100,000 on January 1, 2019, paying 40,000 down and agreeing to pay the balance in three 20.000 annual instalments beginning December 31, 2019. It is not possible to value either the equipment or the 60,000 note directly; how-ever, Hamlet's incremental borrowing rate is 12%. Required: 1. Prepare a schedule to compute the interest expense and discount amortization on the note. 2. Prepare all the journal entries for Hamlet to record the issuance of the note, each annual interest expense, and the three annual installment payments.On January 1, 2019, Northfield Corporation becomes delinquent on a 100,000, 14% note to First National Bank, on which 16,651 of interest has accrued. On January 2, 2019, the bank agrees to restructure the note. It forgives the accrued interest, extends the repayment date to December 31, 2021, and reduces the interest rate to 10%. Required: Prepare a schedule for Northfield to compute the annual interest expense in regard to the preceding note for each year of the restructuring agreement.
- On July 1, 2019, Aldrich Company purchased as an available-for-sale security 200,000 face value, 9% U.S. Treasury notes for 194,000. The notes mature July 1, 2020, and pay interest semiannually on January 1 and July 1. The notes were sold on December 1, 2019, for 199,000. Aldrich normally uses straight-line amortization on all of its notes. In its income statement for the year ended December 31, 2019, what amount should Aldrich report as a gain on the sale of the available-for-sale security? a. 2,500 b. 3,500 c. 5,000 d. 6,000On January 1, 2019, Boater Company issues a 20,000 non-interest-bearing, 5-year note for equipment. Neither the fair value of the note nor the equipment is determinable. Boaters incremental borrowing rate is 9%. The asset has a useful life of 7 years. Prepare the journal entry for Boater to record the issuance of the note on January 1.Anderson Air is a customer of Handler Cleaning Operations. For Anderson Airs latest purchase on January 1, 2018, Handler Cleaning Operations issues a note with a principal amount of $1,255,000, 6% annual interest rate, and a 24-month maturity date on December 31, 2019. Record the journal entries for Handler Cleaning Operations for the following transactions. A. Entry for note issuance B. Subsequent interest entry on December 31, 2018 C. Honored note entry at maturity on December 31, 2019
- On December 1 of the current year, Jordan Inc. assigns 125,000 of its accounts receivable to McLaughlin Company for cash. McLaughlin Company charges a 750 service fee, advances 85% of Jordans accounts receivable, and charges an annual interest rate of 9% on any outstanding loan balance. Prepare the related journal entries for Jordan.On December 11, 2019, Hooper Inc. made a credit sale to Marshall Company and required Marshall to sign a $27,000, 60-day note. Required: Prepare the journal entries necessary to record the receipt of the note by Hooper, the accrual of interest on December 31, 2019, and the customer’s repayment on February 9, 2020, assuming: 1. Interest of 9% was assessed in addition to the face value of the note. 2. The note was issued as a $27,000 non-interest-bearing note with a present value of $26,598. The implicit interest rate on the note receivable was 9%. Assume a 360-day year. CHART OF ACCOUNTS Hooper Inc. General Ledger ASSETS 111 Cash 121 Accounts Receivable 125 Notes Receivable 126 Discount on Notes Receivable 127 Interest Receivable 141 Inventory 152 Prepaid Insurance 181 Equipment 198 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Income 261 Income Taxes…On January 1, 2019, a company sells a piece of equipment for a list price of $260,000. It receives $30,000 and accepts a note receivable for the remainder. The balance due is on December 31, 2021, and the note pays an annual interest of 3% every December 31st. Required: Assuming the customer’s borrowing rate is 5%, prepare all journal entries for 2019 and 2020 under IFRS.
- On January 1, 2020, Avery Co. borrowed and received $400,000 from a major customer evidenced by a zero-interest-bearing note due in 3 years. As consideration for the zero-interest-bearing feature, Avery agrees to supply the customer's inventory needs for the loan period at lower than the market price. The appropriate rate at which to impute interest is 8%. Instructions a. Prepare the journal entry to record the initial transaction on January 1, 2020. (Round all computations to the nearest dollar.) b. Prepare the journal entry to record any adjusting entries needed at December 31, 2020. Assume that the sales of Avery's product to this customer occur evenly over the 3-year period.On June , 2019 , XYZ Company factored receivables of \$700,000 to ABC Company . ABC Company assesses a finance charge of 1% of the receivables and retains 4% of the receivables . Assume that XYZ Company factors the receivables on a without guarantee (without recourse ) basis . The journal entry to be recorded by XYZ company is:On January 1, 2020, Blue Co. borrowed and received $ 507,000 from a major customer evidenced by a zero-interest-bearing note due in 4 years. As consideration for the zero-interest-bearing feature, Blue agrees to supply the customer’s inventory needs for the loan period at lower than the market price. The appropriate rate at which to impute interest is 9%. (a) Prepare the journal entry to record the initial transaction on January 1, 2020. (b) Prepare the journal entry to record any adjusting entries needed at December 31, 2020. Assume that the sales of Blue’s product to this customer occur evenly over the 4-year period. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)