Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 16, Problem 16.15P
a.
To determine
The amount of loss G would have to report in net income if there is an impairment and the amount of loss G would report in other comprehensive income.
b.
To determine
To prepare: The
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Marigold Company in its first year of operations provides the following information related to one of its available-for-sale debt securities at December 31, 2020.
Amortized cost
$51,100
Fair value
42,200
Expected credit losses
12,600
A. What is the amount of credit loss that marigold should report on this available-for-sale security at december 31, 2020?
Amount of the credit loss $ 8,900
B. Prepare the journal entry to record the credit loss, if any ( and other adjustments needed), at December 31, 2020?
date account titles and explanations debit credit
12/31/20 8,900
8,900
Please note that the answer is NOT Debit Loss on available for sale debt securities and Credit avilable for sale debt securities.
These are the account titles I can choose from...
Accumulated Other…
On January 1, Windsor, Inc. sold used equipment with a cost of $17,000 and a carrying amount of $2,300 to Swifty Corporation in
exchange for a $5,100, three-year non-interest-bearing note receivable. Although no interest was specified, the market rate for a
loan of that risk would be 7%. Assume that Windsor follows IFRS.
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.
(a)
Prepare the entry to record the sale of Windsor's equipment and receipt of the note. (Round answers to O decimal places, e.g.
5,275. Credit account titles are automatically indented when 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
Debit
Credit
Notes Receivable
Accumulated Depreciation - Equipment
Equipment
1700
Gain on Disposal of Equipment
Details for one of the loan of BB Company that is probably impaired during the period is as follows:
The company made a loan of P40,000,000 to a customer with similar credit risk to BB Company on January 1, 2021.
Interest is receivable on this loan at the end of each year at 2% per annum for the next five years.
The loan was properly recorded and classified as amortized cost.
The company made and initial assessment of the loan and the total expected credit losses over the life of the loan was P1,000,000. The discount rate applicable was at 2%.
On January 1, 2021, the probability of default over the next 12 months was 5%.
At December 31, 2021, there was a significant increase in the credit risk on the loan made by BB Company, the expert assessed that the total expected credit losses over the life of the loan was increase to P2,200,000. The discount rate applicable was at 2%.
How much is the balance of the allowance for credit losses as of December 31, 2021?
Chapter 16 Solutions
Intermediate Accounting (2nd Edition)
Ch. 16 - Prob. 16.1QCh. 16 - Is reporting an investment at its cost considered...Ch. 16 - Prob. 16.3QCh. 16 - Prob. 16.4QCh. 16 - Prob. 16.5QCh. 16 - Prob. 16.6QCh. 16 - What categories can managers use to classify...Ch. 16 - When is the equity method of accounting for...Ch. 16 - Prob. 16.9QCh. 16 - Can companies apply the fair value option to all...
Ch. 16 - What is the fair value hierarchy for investment...Ch. 16 - Prob. 16.12QCh. 16 - Prob. 16.13QCh. 16 - Prob. 16.14QCh. 16 - Prob. 16.15QCh. 16 - Prob. 16.16QCh. 16 - Prob. 16.17QCh. 16 - Deutsch Imports has three securities in its...Ch. 16 - Prob. 16.2MCCh. 16 - Prob. 16.3MCCh. 16 - Prob. 16.4MCCh. 16 - Prob. 16.5MCCh. 16 - Prob. 16.6MCCh. 16 - Prob. 16.7MCCh. 16 - Prob. 16.1BECh. 16 - Prob. 16.2BECh. 16 - Debt Investments, Trading. Using the information...Ch. 16 - Prob. 16.4BECh. 16 - Prob. 16.5BECh. 16 - Prob. 16.6BECh. 16 - Prob. 16.7BECh. 16 - Prob. 16.8BECh. 16 - Prob. 16.9BECh. 16 - Prob. 16.10BECh. 16 - Prob. 16.11BECh. 16 - Prob. 16.12BECh. 16 - Prob. 16.13BECh. 16 - Notes Receivable. Aaron Anatole accepted a...Ch. 16 - Prob. 16.15BECh. 16 - Prob. 16.16BECh. 16 - Prob. 16.17BECh. 16 - Debt Investments. Impairments. IFRS. For each debt...Ch. 16 - Prob. 16.19BECh. 16 - Prob. 16.1ECh. 16 - Prob. 16.2ECh. 16 - Prob. 16.3ECh. 16 - Prob. 16.4ECh. 16 - Prob. 16.5ECh. 16 - Prob. 16.6ECh. 16 - Prob. 16.7ECh. 16 - Debt and Equity Investments, Available-for-Sale...Ch. 16 - Prob. 16.9ECh. 16 - Equity Investments without a Readily Determinable...Ch. 16 - Prob. 16.11ECh. 16 - Prob. 16.12ECh. 16 - Prob. 16.13ECh. 16 - Equity-Investments, Equity Method. Book Value of...Ch. 16 - Prob. 16.15ECh. 16 - Prob. 16.16ECh. 16 - Notes Receivable. Each of the following three...Ch. 16 - Notes Receivable. On January 1, 2018, Racine...Ch. 16 - Debt Investment, Held to Maturity, Impairments....Ch. 16 - Debt Investment, Impairments, IFRS. Repeat E16-19...Ch. 16 - Prob. 16.21ECh. 16 - Prob. 16.22ECh. 16 - Prob. 16.23ECh. 16 - Prob. 16.24ECh. 16 - Prob. 16.25ECh. 16 - Prob. 16.1PCh. 16 - Debt Investments, Trading. Freder Software Group...Ch. 16 - Prob. 16.3PCh. 16 - Equity Investments, Readily Determinable Fair...Ch. 16 - Prob. 16.5PCh. 16 - Prob. 16.6PCh. 16 - Prob. 16.7PCh. 16 - Prob. 16.8PCh. 16 - Prob. 16.9PCh. 16 - Prob. 16.10PCh. 16 - Prob. 16.11PCh. 16 - Equity Investments, Equity Method, Fair Value...Ch. 16 - Prob. 16.13PCh. 16 - Prob. 16.14PCh. 16 - Prob. 16.15PCh. 16 - Prob. 16.16PCh. 16 - Prob. 16.17PCh. 16 - Prob. 16.18PCh. 16 - Prob. 16.19PCh. 16 - Prob. 1JCCh. 16 - Prob. 2JCCh. 16 - Prob. 1SSCCh. 16 - Prob. 1BCCCh. 16 - Prob. 2BCC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Edwards Construction currently has debt outstanding with a market value of $128,000 and a cost of 12 percent. The company has EBIT of $15,360 that is expected to continue in perpetuity. Assume there are no taxes. a-1. What is the value of the company's equity? (Do not round intermediate calculations. Leave no cell blank - be certain to enter "0" wherever required.) a-2. What is the debt-to-value ratio? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What are the equity value and debt-to-value ratio if the company's growth rate is 4 percent? (Do not round intermediate calculations and round your "Debt-to-value" answer to 3 decimal places, e.g., 32.161.) c. What are the equity value and debt-to-value ratio if the company's growth rate is 9 percent? (Do not round intermediate calculations and round your "Debt-to-value" answer to 3 decimal places, e.g., 32.161.)arrow_forwardDetails for one of the loan of BB Company that is probably impaired during the period is as follows: - The company made a loan of P40,000,000 to a customer with similar credit risk to BB Company on January 1, 2021. - Interest is receivable on this loan at the end of each year at 2% per annum for the next five years. • The loan was properly recorded and classified as amortized cost. The company made and initial assessment of the loan and the total expected credit losses over the life of the loan was P1,000,000. The discount rate applicable was at 2%. . On January 1, 2021, the probability of default over the next 12 months was 5%. At December 31, 2021, there was a significant increase in the credit risk on the loan made by BB Company, the expert assessed that the total expected credit losses over the life of the loan was increase to P2,200,000. The discount rate applicable was at 2%. Pv Factor 6 decimal places How much is the total impairment loss recognized by BB Company in its…arrow_forwardIncome, Cash Flow, and Future Losses On January L 2017, Cermack National Bank loaned 55,000,000 under a 2-year, zero coupon note to a real estate developer. The bank recognized interest revenue on this note of approximately $400,000 per year. Due to an economic downturn, the developer was unable to pay the $5,800,000 maturity amount on December 31, 2018. The bank convinced the developer to pay $800,000 on December 31, 2018, and agreed to extend $5,000,000 credit to the developer despite the gloomy economic outlook for the next several years. Thus, on December 31, 2018, the bank issued a new 2-year, zero coupon note to the developer to mature on December 31, 2020, for $6,000,000. The bank recognized interest revenue on this note of approximately $500,000 per year. The banks external auditor insisted that the riskiness of the new loan be recognized by increasing the allowance for uncollectible notes by $1,500,000 on December 31, 2018, and $2,000,000 on December 31, 2019. On December 31, 20201 the bank received $1,200,000 from the developer and learned that the developer was in bankruptcy and that no additional amounts would be recovered. Required: Prepare a schedule showing the effect of the notes on net income in each of the 4 years.arrow_forward
- Income, Cash Flow, and Future Losses On January L 2017, Cermack National Bank loaned 55,000,000 under a 2-year, zero coupon note to a real estate developer. The bank recognized interest revenue on this note of approximately $400,000 per year. Due to an economic downturn, the developer was unable to pay the $5,800,000 maturity amount on December 31, 2018. The bank convinced the developer to pay $800,000 on December 31, 2018, and agreed to extend $5,000,000 credit to the developer despite the gloomy economic outlook for the next several years. Thus, on December 31, 2018, the bank issued a new 2-year, zero coupon note to the developer to mature on December 31, 2020, for $6,000,000. The bank recognized interest revenue on this note of approximately $500,000 per year. The banks external auditor insisted that the riskiness of the new loan be recognized by increasing the allowance for uncollectible notes by $1,500,000 on December 31, 2018, and $2,000,000 on December 31, 2019. On December 31, 20201 the bank received $1,200,000 from the developer and learned that the developer was in bankruptcy and that no additional amounts would be recovered. Required: 1. Prepare a schedule showing annual cash flows fur the two notes in each of the 4 years.arrow_forwardIncome, Cash Flow, and Future Losses On January L 2017, Cermack National Bank loaned 55,000,000 under a 2-year, zero coupon note to a real estate developer. The bank recognized interest revenue on this note of approximately $400,000 per year. Due to an economic downturn, the developer was unable to pay the $5,800,000 maturity amount on December 31, 2018. The bank convinced the developer to pay $800,000 on December 31, 2018, and agreed to extend $5,000,000 credit to the developer despite the gloomy economic outlook for the next several years. Thus, on December 31, 2018, the bank issued a new 2-year, zero coupon note to the developer to mature on December 31, 2020, for $6,000,000. The bank recognized interest revenue on this note of approximately $500,000 per year. The banks external auditor insisted that the riskiness of the new loan be recognized by increasing the allowance for uncollectible notes by $1,500,000 on December 31, 2018, and $2,000,000 on December 31, 2019. On December 31, 20201 the bank received $1,200,000 from the developer and learned that the developer was in bankruptcy and that no additional amounts would be recovered. Required: Which figure, net income or net cash flow, does the better job of telling the banks stock-holders about the effect of these notes on the bank? Explain by reference to the schedules prepared in Requirements 1 and 2.arrow_forwardAncing Co. Acquired a machine and, as consideration, issued a three year, non interest bearing note with face amount of 1,600,000, payable im lump-sum. Case 1: the cash selling price of the machine is 1,400,000. Provide the journal entry. Case 2: the cash selling price of the machine is not determinable. The prevailing market rate of interest for similar debt instruments is 10%. Provide the journal entry.arrow_forward
- Level Company's current ratio is 2.5 to 1. Level's current liabilities are $252,000. Loan provisions require that Level's current ratio not drop below 1.5 to 1. What is the maximum additional short-term debt that Level may incur? a. $168,000 b. $378,000 c. $420,000 d. $630,000arrow_forwardOn January 1, Windsors Inc. sold used equipment with a cost of $15,000 and a carrying amount of $2,100 to Novak Corp. in exchange for a $5,000, three-year non-interest-bearing note receivable. Although no interest was specified, the market rate for a loan of that risk would be 9%. Assume that Windsors follows IFRS. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Your answer is incorrect. Prepare the entry to record the sale of Windsors' equipment and receipt of the note. (Round answers to O decimal places, e.g. 5,275. 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. List all debit entries before credit entries. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Account Titles and Explanation Debit Creditarrow_forwardThe debt is amortized by the periodic payment shown. Compute (a) the number of payments required to amortize the debt; (b) the outstanding principal at the time indicated. Debt Principal Debt Payment Payment Interval Interest Rate Conversion Period Outstanding Principal After: $16,000 $1,128 1 month 5% semi-annually 7th payment (a) The number of payments required to amortize the debt is nothing. (Round up to the nearest integer.) (b) The outstanding principal is $nothing. (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)arrow_forward
- The entity has an unsecured overdraft of R20000 at prospect Bank that carries an interest rate of 22% per annum. In which one of the following statement will this item be shown? A.Statement of financial position as a current liability B.Statement of financial position as a non current liability C.Statement of income and expenditure as finance costs C.Statement of financial position as current assetarrow_forwardSheridan Company in its first year of operations provides the following information related to one of its available-for-sale debt securities at December 31, 2025. Amortized cost Fair value Expected credit loss (a) $50,800 41,600 12.450 Your answer is correct. What is the amount of the credit loss that Sheridan should report on this available-for-sale security at December 31, 2025? (Do not leave any answer field blank. Enter O for amounts.) Amount of the credit loss. $ 9200arrow_forwardEdwards Construction currently has debt outstanding with a market value of $116,000 and a cost of 12 percent. The company has EBIT of $13,920 that is expected to continue in perpetuity. Assume there are no taxes. a-1. What is the value of the company's equity? (Do not round intermediate calculations. Leave no cell blank - be certain to enter "0" wherever required.) a- What is the debt-to-value ratio? (Do not round intermediate calculations and round 2. your answer to the nearest whole number, e.g., 32.) b. What are the equity value and debt-to-value ratio if the company's growth rate is 5 percent? (Do not round intermediate calculations and round your "Debt-to- value" answer to 3 decimal places, e.g., 32.161.) c. What are the equity value and debt-to-value ratio if the company's growth rate is 8 percent? (Do not round intermediate calculations and round your "Debt-to- value" answer to 3 decimal places, e.g., 32.161.) Answer is complete but not entirely correct. a-1. Value of equity…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Financial instruments products; Author: fi-compass;https://www.youtube.com/watch?v=gvxozM3TUIg;License: Standard Youtube License