Answer the following subquestion as a result of an audit:  a. How much is the correct carrying value of the notes payable as of December 31, 2023? b. How much is the correct interest expense that Meekah should recognized in the December 31, 2023 statement of comprehensive income? c. How much of the note is reported in the non-current liability section of the December 31, 2023 statement of financial position?

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Chapter1: Financial Statements And Business Decisions
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Answer the following subquestion as a result of an audit: 

a. How much is the correct carrying value of the notes payable as of December 31, 2023?


b. How much is the correct interest expense that Meekah should recognized in the December 31, 2023 statement of comprehensive income?


c. How much of the note is reported in the non-current liability section of the December 31, 2023 statement of financial position?

 

 

 

Case 9 - Audit of Non-Current Liabilities
You were assigned to audit the non-current liabilities of Meekah Inc. for the year ended December 31, 2023.
Upon inquiry and investigation, you noted that the company has issued one notes payable as of the reporting
date. Details about this were noted as follows:
On June 30, 2022, Meekah Inc. purchased a machinery by paying P700,000 cash and issuing P4,000,000, 5%
notes payable in 5 years. The note will be paid following the schedule below:
Date of payment Amount due
June 30, 2023
June 30, 2024
June 30, 2025
June 30, 2026
June 30, 2027
Date
June 30, 2022
1,200,000
1,000,000
Interest is payable every June 30 of each year based on outstanding balance of the note. Interest payment starts
on June 30, 2023. Further investigation revealed that on the date of issue, the prevailing market rate of interest
is at 3%. Journal entries in relation to the note for the years 2022 and 2023 were as follows:
Particulars
Debit
4,700,000
June 30, 2023
800,000
600,000
400,000
Machinery
Cash
Notes payable
To record purchase of machinery.
Notes payable
Interest expense
Cash
To record payment of notes.
No other entries were made related to the note payable.
1,200,000
200,000
Credit
700,000
4,000,000
1,400,000
Transcribed Image Text:Case 9 - Audit of Non-Current Liabilities You were assigned to audit the non-current liabilities of Meekah Inc. for the year ended December 31, 2023. Upon inquiry and investigation, you noted that the company has issued one notes payable as of the reporting date. Details about this were noted as follows: On June 30, 2022, Meekah Inc. purchased a machinery by paying P700,000 cash and issuing P4,000,000, 5% notes payable in 5 years. The note will be paid following the schedule below: Date of payment Amount due June 30, 2023 June 30, 2024 June 30, 2025 June 30, 2026 June 30, 2027 Date June 30, 2022 1,200,000 1,000,000 Interest is payable every June 30 of each year based on outstanding balance of the note. Interest payment starts on June 30, 2023. Further investigation revealed that on the date of issue, the prevailing market rate of interest is at 3%. Journal entries in relation to the note for the years 2022 and 2023 were as follows: Particulars Debit 4,700,000 June 30, 2023 800,000 600,000 400,000 Machinery Cash Notes payable To record purchase of machinery. Notes payable Interest expense Cash To record payment of notes. No other entries were made related to the note payable. 1,200,000 200,000 Credit 700,000 4,000,000 1,400,000
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