On January 1, 2017, Marin Inc. borrowed and received $310,000 from a major customer, Bramble Corp. The debt is evidenced by a zero-interest-bearing note due in 4 years. Marin, as consideration for the zero-interest-bearing feature of the note, agrees that it will supply inventory to Bramble for the loan period at a below-market price. The appropriate rate at which to impute interest is 9%. Show Transcribed Text Prepare the journal entries to record any adjusting entries needed at December 31, 2017. Assume that the sales of Marin' product to Bramble occur 31% in year 1, 31% in year 2, 21% in year 3, and 17% in year 4. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Interest Expense Discount on Notes Payable (To record interest expense) Unearned Sales Revenue (TO record sales of 1st year) Debit Credit

On January 1, 2017, Marin Inc. borrowed and received $310,000 from a major customer, Bramble Corp. The debt is evidenced by a zero-interest-bearing note due in 4 years. Marin, as consideration for the zero-interest-bearing feature of the note, agrees that it will supply inventory to Bramble for the loan period at a below-market price. The appropriate rate at which to impute interest is 9%. Show Transcribed Text Prepare the journal entries to record any adjusting entries needed at December 31, 2017. Assume that the sales of Marin' product to Bramble occur 31% in year 1, 31% in year 2, 21% in year 3, and 17% in year 4. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Interest Expense Discount on Notes Payable (To record interest expense) Unearned Sales Revenue (TO record sales of 1st year) Debit Credit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, 2017, Sage Hill Inc. borrowed and received $410,000 from a major customer, Cheyenne Corp. The debt is evidenced by a zero-interest-bearing note due in 4 years. Sage Hill, as consideration for the zero-interest-bearing feature of the note, agrees that it will supply inventory to Cheyenne for the loan period at a below-market price. The appropriate rate at which to impute interest is 7%. Prepare the journal entry to record the initial transaction on January 1, 2017.
On January 1, 2025, Coronado Co. borrowed and received $150,000 from a major customer evidenced by a zero-interest-bearing note due in 4 years. As consideration for the zero-interest-bearing feature, Coronado 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%. Prepare the journal entry to record the initial transaction on January 1, 2025. Prepare the journal entry to record any adjusting entries needed at December 31, 2025. Assume that the sales of Coronado's product to this customer occur evenly over the 4-year period and that the effective-interest method is used.
(Imputation of Interest with Right) On January 1, 2017, Margaret 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, 2017. (Round all computations to the nearest dollar.)(b) Prepare the journal entry to record any adjusting entries needed at December 31, 2017. Assume that the sales of Avery’s product to this customer occur evenly over the 3-year period.
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.
KMC Inc. provided a loan to Jim Ltd on January 1st, 2016 and received in exchange a 4-year, $120,000 note bearing interest at 8% to be paid annually on December 31. The market rate of interest for financial instruments of similar risk is 2%. KMC Inc. financial year ends December 31 and the company uses the effective interest method to amortize discount and recognize interest revenue. Required:               Round to nearest whole number d) Prepare the journal entry in KMC’s books to record the issuance of the note on January 1, 2016. e) Prepare KMC’s 4-year Note Amortization schedule. f) Prepare the journal entry KMC records on December 31, 2017.
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.)
KMC Inc. provided a loan to Jim Ltd on January 1st, 2016 and received in exchange a 4-year, $120,000 note bearing interest at 8% to be paid annually on December 31. The market rate of interest for financial instruments of similar risk is 2%. KMC Inc. financial year ends December 31 and the company uses the effective interest method to amortize discount and recognize interest revenue. Required: Round to the nearest whole number a) what is the face value of the note? b) Calculate the present value of the note. c) Is this note issued at par, discount or premium? d) Prepare the journal entry in KMC’s books to record the issuance of the note on January 1, 2016. e) Prepare KMC’s 4-year Note Amortization schedule. f) Prepare the journal entry KMC records on December 31, 2017.
On June 1, 2017, Santos Furniture Co. borrowed P5,000,000 (face value) from Sonic Co., a major customer, through a non-interest-bearing note due in 4 years. Because the note was non-interest-bearing, Santos Furniture agreed to sell furniture to this customer at lower than market price. A 10% rate of interest is normally charged on this type of loan. Prepare the journal entry to record this transaction and determine the amount of interest expense to report for 2017.
On April 1, 2017, Indigo Company assigns $549,400 of its accounts receivable to the Third National Bank as collateral for a $301,600 loan due July 1, 2017. The assignment agreement calls for Indigo to continue to collect the receivables. Third National Bank assesses a finance charge of 3% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type). Your answer is partially correct. Try again. Prepare the April 1, 2017, journal entry for Indigo Company. (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 the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Apr. 1, 2017 SHOW LIST OF ACCOUNTS LINK TO TEXT…
(Refinancing of Short-Term Debt) On December 31, 2017, Kate Holmes Company has $7,000,000 of short-term debt in the form of notes payable to Gotham State Bank due in 2018. On January 28, 2018, Holmes enters into a refinancing agreement with Gotham that will permit it to borrow up to 60% of the gross amount of its accounts receivable. Receivables areexpected to range between a low of $6,000,000 in May to a high of $8,000,000 in October during the year 2018. The interest cost of the maturing short-term debt is 15%, and the new agreement calls for a fluctuating interest at 1% above the prime rate on notes due in 2022. Holmes’s December 31, 2017, balance sheet is issued on February 15, 2018.InstructionsPrepare a partial balance sheet for Holmes at December 31, 2017, showing how its $7,000,000 of short-term debt should be presented, including footnote disclosure.
Shlee Corporation issued a 4-year, $60,000, zero-interest-bearing note to Garcia Company on January 1, 2017, and received cash of $60,000. In addition, Shlee agreed to sell merchandise to Garcia at an amount less than regular selling price over the 4-year period. The market rate of interest for similar notes is 12%. Prepare Shlee Corporation’s January 1 journal entry.
On January 1, 2017, Oldham Company sold goods to Windall Company in exchange for a 3-year, non-interest-bearing note with a face value of $10,000. If Oldham entered into a separate financing transaction with Windall, an appropriate interest rate would be 8%. Which of the following statements is true about the journal entry that records the transaction when Oldham delivers the goods to Windall on January 1, 2017?Credit Sales Revenue $7,600 Credit Interest Revenue $2,400 Debit Note Receivable for $10,000 Credit Discount on Note Receivable $2,400