On January 1, 2015, Jantzen Company sold land to Dansko Company. There was no established market price for the land. Dansko gave Jantzen a CHF2,400,000 Zerointerest- bearing note payable in three equal annual installments of CHF800,000 with the first payment due December 31, 2015. The note has no ready market. The prevailing rate of interest for a note of this type is 10%. The present value of a CHF2,400,000 note payable in three equal annual installments of CHF800,000 at a 10% rate of interest is CHF1,989,600. The note will be reported on Dansko's 2015 statement of financial position at a carrying value of a. CHF1,989,600 b. CHF2,126,400 c. CHF2,188,560 d. CHF2,400,000

On January 1, 2015, Jantzen Company sold land to Dansko Company. There was no established market price for the land. Dansko gave Jantzen a CHF2,400,000 Zerointerest- bearing note payable in three equal annual installments of CHF800,000 with the first payment due December 31, 2015. The note has no ready market. The prevailing rate of interest for a note of this type is 10%. The present value of a CHF2,400,000 note payable in three equal annual installments of CHF800,000 at a 10% rate of interest is CHF1,989,600. The note will be reported on Dansko's 2015 statement of financial position at a carrying value of a. CHF1,989,600 b. CHF2,126,400 c. CHF2,188,560 d. CHF2,400,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

BDO loaned P5,000,000 to NOBLE Company on January 1, 2016. The terms of the loan require the principal payment of P5,000,000 to be made after 5 years on December 31, 2020 and interest at 12% to be paid annually on December 31. The first interest payment is due on December 31, 2016. NOBLE Company made the required interest payment during 2016. However, during 2017 NOBLE Company began to experience financial difficulties, which led to the default of the 2017 required interest payment. This caused BDO to reassess the collectability of the loan. On December 31, 2018, BDO did not continue to accrue interest and determined that the remaining principal payment will be collected but it is probable that the accrued interest further interest cannot be collected. The probable timing and amount of collections is determined as follows: December 31, 2019 P500,000 December 31, 2020 1,000,000 December 31, 2021 1,500,000 December 31, 2022 2,000,000 The present value at 12% is as follows: For one period…
On January 1, 2021, Gobert Company sold property to Beasley Company. There was no established exchange price for the property, and Beasley gave Gobert a $751,000 zero-interest- bearing note payable on January 1, 2025. The prevailing rate of interest for a note of this type is 6%. The property had a book value of $341,000 to Gobert. What should be the balance of the Discount on Notes Payable account on the books of Beasley at December 31, 2021 after adjusting entries are made, assuming that the effective-interest method is used?
Blue Cells Can contain On December 31, 2017, Short Co. is in financial difficulty and cannot pay a note due that day. It is a $2,000,000 face value note with $200,000 accrued interest payable to Bryan, Inc. The original market rate of interest on the note was 12.58613%. Bryan agrees to forgive the accrued interest, extend the maturity date (two years) to December 31, 2019, and reduce the interest rate to 4%. The present value of the restructured cash flows is $1,712,000 (using the original market rate). Do NOT add rows to the spreadsheet! Discount Cash Premium Interest payable Par Interest expense Discount on bond payable Yes Bonds payable No Loss on redemption Gain on redemptin Cash Interest payable Interest receivable Notes payable Gain on restructuring Loss on restructuring Discount on Note payable Premium on Note payable…
On January 1, 2018, Apple Company sold delivery equipment costing P1,000,000 with accumulated depreciation of P150,000 in exchange for a 3-year, P1,800,000 noninterest bearing note receivable due on December 31, 2020. The prevailing market rate of interest for this type of note is 12%. How much is the gain or loss on sale of delivery equipment in 2018?
At January 1, 2018, Brainard Industries, Inc., owed Second BancCorp $12 million under a 10% note due December 31, 2020. Interest was paid last on December 31, 2016. Brainard was experiencing severe financial difficultiesand asked Second BancCorp to modify the terms of the debt agreement. After negotiation Second BancCorpagreed to:a. Forgive the interest accrued for the year just ended.b. Reduce the remaining two years’ interest payments to $1 million each and delay the first payment untilDecember 31, 2019.c. Reduce the unpaid principal amount to $11 million.Required:Prepare the journal entries by Brainard Industries, Inc., necessitated by the restructuring of the debt at (1) January1, 2018; (2) December 31, 2019; and (3) December 31, 2020.
On Jan. 1, 20x4, Bernie Bird Co. sold a building, which had a carrying amount of P350,000, receiving a P125,000 down payment and, as additional consideration, a P400,000 noninterest bearing note due on January 1, 20x7. There was no established exchange price for the building, and the note had no ready market. The prevailing rate of interest for a note of this type at January 1, 20x4, was 10%. What amount of interest income should be included in the entity’s 20x4, income statement? a. 0 b. 35,053 c. 30,053 d. 40,109
9
16. On January 1, 2012, the Dolce Corporation issued a three-year, non-interest bearing note with face value of P3,000,000 for a piece of land purchased from Jardine Corporation. The note is payable in annual installments of P1,000,000 every December 31, starting on December 31, 2012. The land has an equivalent cash price of P2,400,000, a price that provides the note an effective interest rate of 12%. What is the interest expense for the year ending December 31, 2012? * a. P360,000 b. P288,000 c. P240,000 d. P168,000
On December 31, 2020, Stellar Company signed a $ 1,022,000 note to Pearl Bank. The market interest rate at that time was 11%. The stated interest rate on the note was 9%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Stellar’s financial situation worsened. On December 31, 2022, Pearl Bank determined that it was probable that the company would pay back only $ 613,200 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $ 1,022,000 loan.
On December 31, 2021, Empoy Company has overdue notes payable of P5,000,000 with accrued interest of P500,000. The company is threatened with a court suit if it would not settle its debt. The company entered into an agreement with the creditor to transfer real estate carried in the books of Empoy at P3million. The real estate has a current fair market value of P4.5million. What was the total amount of gain reported by Empoy as a result of debt restructuring/ a.) 2,500,000 b.) 1,500,000 c.) 1,000,000 d.) 500,000
On December 31, 2021, Empoy Company has overdue notes payable of P5,000,000 with accrued interest of P500,000. The company is threatened with a court suit if it would not settle its debt. The company entered into an agreement with the creditor to transfer real estate carried in the books of Empoy at P3million. The real estate has a current fair market value of P4.5million. What was the total amount of gain reported by Empoy as a result of debt restructuring? 2,500,000 1,500,000 1,000,000 500,000
Please provide complete solutions. Thank you