Question 2 Bangladesh Ltd had the following transactions related to liabilities. The company's financial year ends on Dec 31 and its financial statements are issued on April 30 following the reporting date. 2007 a. On Nov 1, the company borrowed $1.6 million cash from Bank ABC and issued a six-month promissory note. Interest at 7.5% on the note was payable at maturity. b. The company received a special order from Wrangler Ltd for $150,000. The customer paid 80% of the order amount on Nov 26. The company recorded the revenue on Jan 5, the date the goods were delivered to the customer. C. The company sold a line of deluxe yachts that carry a six-month warranty. Customers are offered the opportunity to buy a two-year extended warranty for an additional charge. During the year, the company received $320,000 cash from customers for these extended warranties and $27,000 should be recorded as extended warranties revenue on Dec 31. d. On Dec 31, the company obtained an agreement from Bank ABC to extend the loan borrowed on Nov 1 unconditionally for $0.6 million for another 2 years upon maturity. 2008 e. Due to declining interest rate, on Mar 31, the company issued $1.0 million 3-year note to its major shareholder, Mr. Malta, for the repayment of the loan borrowed from Bank ABC on Nov 1 last year to save interest expense. Required: (1) Assuming the above transactions were not recorded, please prepare the necessary journal entries for recording the above transactions from (a) to (d) in 2007, including all necessary adjusting entries at year-end. (Indicate clearly when no journal entry is required. Explanation is not required.) (2) Prepare the current and non-current liabilities sections of the statement of financial position as of December 31, 2007.
Question 2 Bangladesh Ltd had the following transactions related to liabilities. The company's financial year ends on Dec 31 and its financial statements are issued on April 30 following the reporting date. 2007 a. On Nov 1, the company borrowed $1.6 million cash from Bank ABC and issued a six-month promissory note. Interest at 7.5% on the note was payable at maturity. b. The company received a special order from Wrangler Ltd for $150,000. The customer paid 80% of the order amount on Nov 26. The company recorded the revenue on Jan 5, the date the goods were delivered to the customer. C. The company sold a line of deluxe yachts that carry a six-month warranty. Customers are offered the opportunity to buy a two-year extended warranty for an additional charge. During the year, the company received $320,000 cash from customers for these extended warranties and $27,000 should be recorded as extended warranties revenue on Dec 31. d. On Dec 31, the company obtained an agreement from Bank ABC to extend the loan borrowed on Nov 1 unconditionally for $0.6 million for another 2 years upon maturity. 2008 e. Due to declining interest rate, on Mar 31, the company issued $1.0 million 3-year note to its major shareholder, Mr. Malta, for the repayment of the loan borrowed from Bank ABC on Nov 1 last year to save interest expense. Required: (1) Assuming the above transactions were not recorded, please prepare the necessary journal entries for recording the above transactions from (a) to (d) in 2007, including all necessary adjusting entries at year-end. (Indicate clearly when no journal entry is required. Explanation is not required.) (2) Prepare the current and non-current liabilities sections of the statement of financial position as of December 31, 2007.
Chapter9: Accounting For Receivables
Section: Chapter Questions
Problem 22MC: A company collects an honored note with a maturity date of 24 months from establishment, a 10%...
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Transcribed Image Text:Question 2
Bangladesh Ltd had the following transactions related to liabilities. The company's financial year
ends on Dec 31 and its financial statements are issued on April 30 following the reporting date.
2007
a.
On Nov 1, the company borrowed $1.6 million cash from Bank ABC and issued a six-month
promissory note. Interest at 7.5% on the note was payable at maturity.
b. The company received a special order from Wrangler Ltd for $150,000. The customer paid
80% of the order amount on Nov 26. The company recorded the revenue on Jan 5, the
date the goods were delivered to the customer.
C.
The company sold a line of deluxe yachts that carry a six-month warranty. Customers are
offered the opportunity to buy a two-year extended warranty for an additional charge.
During the year, the company received $320,000 cash from customers for these extended
warranties and $27,000 should be recorded as extended warranties revenue on Dec 31.
d. On Dec 31, the company obtained an agreement from Bank ABC to extend the loan
borrowed on Nov 1 unconditionally for $0.6 million for another 2 years upon maturity.
2008
e. Due to declining interest rate, on Mar 31, the company issued $1.0 million 3-year note to
its major shareholder, Mr. Malta, for the repayment of the loan borrowed from Bank ABC
on Nov 1 last year to save interest expense.
Required:
(1) Assuming the above transactions were not recorded, please prepare the necessary journal
entries for recording the above transactions from (a) to (d) in 2007, including all necessary
adjusting entries at year-end. (Indicate clearly when no journal entry is required.
Explanation is not required.)
(2) Prepare the current and non-current liabilities sections of the statement of financial
position as of December 31, 2007.
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