Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 4, Problem 9.2E
To determine
To prepare: Entries for recording elimination of intercomany loan, accrued interest, interest expense, and interest income.
Introduction: Consolidation is a process in which financial statements of subsidiary is merged with financial statements of the parent. In this process, effect of intercompany transactions are eliminated.
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Saratoga Company owns 80% of the outstanding common stock of Windsor Company. On May 1, 2017, Windsor Company arranges a 1-year, $50,000 loan from Saratoga Company. The loan agreement specifies that interest will accrue at the rate of 6% per annum and that all interest will be paid on the maturity date of the loan.The financial reporting period ends on December 31, 2017, and the note originating from the loan remains outstanding.1. Prepare the entries that both companies would have made on their separate books, including the accrual of interest.2. Prepare the eliminations, in entry form, that will be made on a consolidated worksheet prepared as of December 31, 2017.
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.
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.
Chapter 4 Solutions
Advanced Accounting
Ch. 4 - Prob. 1UTICh. 4 - Prob. 2UTICh. 4 - Prob. 3UTICh. 4 - Prob. 4UTICh. 4 - Prob. 5UTICh. 4 - Prob. 6UTICh. 4 - Sorel is an 80%-owned subsidiary of Pattern...Ch. 4 - Hide Corporation is a wholly owned subsidiary of...Ch. 4 - Prob. 2.2ECh. 4 - Prob. 3E
Ch. 4 - On January 1, 2016, Jungle Company sold a machine...Ch. 4 - Prob. 4.2ECh. 4 - Prob. 4.3ECh. 4 - Prob. 5.1ECh. 4 - Prob. 5.2ECh. 4 - Prob. 6ECh. 4 - Prob. 7ECh. 4 - Prob. 8ECh. 4 - Prob. 9.1ECh. 4 - Prob. 9.2ECh. 4 - Prob. 10.1ECh. 4 - Prob. 10.2ECh. 4 - Prob. 4.1PCh. 4 - Prob. 4.2.1PCh. 4 - Prob. 4.2.2PCh. 4 - Prob. 4.3.1PCh. 4 - Prob. 4.3.2PCh. 4 - Prob. 4.4.1PCh. 4 - Prob. 4.4.2PCh. 4 - Prob. 4.7.1PCh. 4 - Prob. 4.7.2PCh. 4 - Prob. 4.8.1PCh. 4 - Prob. 4.8.2PCh. 4 - OnJanuary 1, 2015, Peanut Company acquired 80% of...Ch. 4 - Prob. 4.11PCh. 4 - Prob. 4.13.1PCh. 4 - Prob. 4.13.2PCh. 4 - Prob. 4.14.1PCh. 4 - Prob. 4.14.2PCh. 4 - Prob. 4A.1APCh. 4 - Prob. 4A.2APCh. 4 - Prob. 4.1.1C
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