Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 7, Problem 33P
a.
To determine
Record the given events in the
b.
To determine
Prepare an income statement, balance sheet, and statement of
c.
To determine
Write a memo discussing the advantages of arranging line of credit to a business.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Notes payable-discount basis On May 15, 2022, Powell Inc. obtained a six-month working capital loan from its bank. The face amount of the note signed by the treasurer was $600,000. The interest rate charged by the bank was 7 %. The bank
made the loan on a discount basis. Required: Calculate the loan proceeds made available to Powell, and use the horizontal model (or write the journal entry) to show the effect of signing the note and the receipt of the cash proceeds on May
15, 2022. Calculate the amount of interest expense applicable to this loan during the fiscal year ended June 30, 2022. What is the amount of the current liability related to this loan to be shown in the June 30, 2022, balance sheet?
Problem 1
On September 1, 2020, Rayhak Company assigned specific receivables totaling to P750,000 to Pak Bank as a collateral on a P625,000, 12% loan. Rayhak will continue to collect the assigned accounts receivable. The bank also assessed a 2% service charge on the total accounts receivable assigned. Rayhak is to make monthly payments to the bank with the cash collected on the assigned accounts receivable. Collections of assigned account during September 2020totaled P260,000 gross of cash discounts amounting to P3,500. Prepare all the e journal entries relating to the problem for the month of September 2020. (Books of Rayhak)
Problem 8-4 (IAA)
Rose Company provided the following selected transactions
related to liabilities:
2020
Feb. 1 Negotiated a revolving credit agreement with
Second Bank which can be renewed annually upon
bank approval.
The amount available under the line of credit is
P30,000,000 at the prime bank rate.
April 1 Arranged a 3-month bank loan of P12,000,000 with
Second Bank under the line of credit agreement.
Interest at the prime rate of 8% was payable at
maturity.
July 1 Paid the 8% note at maturity.
Nov. 1 Supported by the credit line, Rose Company
issued P20,000,000 of commercial paper on a
nine-month note. Interest was discounted at
issuance at a 6% discount rate.
Dec. 31 Recorded any necessary adjusting entry.
2021
Aug. 1 Paid the commercial paper at maturity.
Required:
Prepare the appropriate journal entries through the
maturity of each liability.
Chapter 7 Solutions
Survey Of Accounting
Ch. 7 - 1. What type of transaction is a cash payment to...Ch. 7 - Prob. 2QCh. 7 - How does recording accrued interest affect the...Ch. 7 - 4. Who is the maker of a note payable?Ch. 7 - How does the going concern assumption discussed in...Ch. 7 - 6. Why is it necessary to make an adjusting entry...Ch. 7 - Assume that on October 1, 2018, Big Company...Ch. 7 - Prob. 8QCh. 7 - Prob. 9QCh. 7 - Prob. 10Q
Ch. 7 - 11. Are contingent liabilities recorded on a...Ch. 7 - Prob. 12QCh. 7 - Prob. 13QCh. 7 - Prob. 14QCh. 7 - Prob. 15QCh. 7 - Prob. 16QCh. 7 - 1. What is the difference between classification...Ch. 7 - 2. At the beginning of Year 1, B Co. has a note...Ch. 7 - 3. What is the purpose of a line of credit for a...Ch. 7 - 4. What are the primary sources of debt financing...Ch. 7 - 5. What are some advantages of issuing bonds...Ch. 7 - 6. What are some disadvantages of issuing bonds?Ch. 7 - 7. Why can a company usually issue bonds at a...Ch. 7 - 15. If Roc Co. issued 100,000 of 5 percent,...Ch. 7 - 16. What is the mechanism is used to adjust the...Ch. 7 - 17. When the effective interest rate is higher...Ch. 7 - 18. What type of transaction is the issuance of...Ch. 7 - 19. What factors may cause the effective interest...Ch. 7 - 20. If a bond is selling at 97, how much cash will...Ch. 7 - Prob. 30QCh. 7 - 22. Gay Co. has a balance m the Bonds Payable...Ch. 7 - Prob. 32QCh. 7 - Prob. 33QCh. 7 - Recognizing accrued interest expense Abardeen...Ch. 7 - Prob. 2ECh. 7 - Prob. 3ECh. 7 - Prob. 4ECh. 7 - Prob. 5ECh. 7 - Effect of warranties on income and cash flow To...Ch. 7 - Effect of warranty obligations and payments on...Ch. 7 - Principle due at maturity versus installments...Ch. 7 - Prob. 9ECh. 7 - Amortization of a long-term loan A partial...Ch. 7 - Prob. 11ECh. 7 - Prob. 12ECh. 7 - Prob. 13ECh. 7 - Prob. 14ECh. 7 - Exercise 7-15 Straight-line amortization of a bond...Ch. 7 - Prob. 16ECh. 7 - Prob. 17ECh. 7 - Prob. 18ECh. 7 - Prob. 19ECh. 7 - Prob. 20ECh. 7 - Prob. 21ECh. 7 - Exercise 7-22 Preparing a classified balance sheet...Ch. 7 - Exercise 7-23 Effective interest amortization of a...Ch. 7 - Prob. 24ECh. 7 - Prob. 25ECh. 7 - Prob. 26PCh. 7 - Prob. 27PCh. 7 - Prob. 28PCh. 7 - Problem 7-29 Current liabilities The following...Ch. 7 - Prob. 30PCh. 7 - Prob. 31PCh. 7 - Problem 7-32 Accounting for a line of credit Elite...Ch. 7 - Prob. 33PCh. 7 - Prob. 34PCh. 7 - Problem 7-35 Straight-line amortization of a bond...Ch. 7 - Prob. 36PCh. 7 - Prob. 37PCh. 7 - Prob. 38PCh. 7 - Writing Assignment Definition of elements of...Ch. 7 - Prob. 5ATC
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
- Comprehensive Receivables Problem Blackmon Corporations December 31, 2018, balance sheet disclosed the following information relating to its receivables: The company has a recourse liability of 700 related to a note receivable sold to a bank. During 2019, credit sales (terms, n/EOM) totaled 2,200,000, and collections on accounts receivable (unassigned) amounted to 1,900,000. Uncollectible accounts totaling 18,000 from several customers were written off, and a 1,350 accounts receivable previously written off was collected. Additionally, the following transactions relating to Blackmons receivables occurred during the year: On December 31, 2019, an aging of the accounts receivable balance indicated the following: Required: 1. Prepare the journal entries to record the preceding receivable transactions during 2019 and the necessary adjusting entry on December 31, 2019. Assume a 360-day year for interest calculations and round calculations to the nearest dollar. 2. Prepare the receivables portion of Blackmons December 31, 2019, balance sheet. 3. Next Level Compute Blackmons accounts receivable turnover in days, assuming a 360-day business year. What is your evaluation of its collection policies? 4. If Blackmon uses IFRS, what might be the heading of the section for the receivables reported in Requirement 2?arrow_forwardFifty Incorporated normally borrows from a bank to finance their daily operations. Information about the company’s borrowings are as follows: Date of the Loan Term of the Loan Interest Rate Amount June 1, 2019 25 months 12% 1 million January 31, 2020 20 months 15% 1.5 million May 1, 2021 30 months 18% 3 million Interest is paid upon maturity of the Loan. Under cash basis, interest expense that would be recognized in 2021 would bearrow_forwardProblem 1 On Jan. 1, 2020, Aldama Company has a note payable to bank in the amount of Php2,800,000. Transactions during 2020 and other information relating to liabilities are: - Principal amount of the note payable to bank is Php2.8M and bears a 12% interest. The note is dated April 1, 2019 and is payable in four equal annual installments beginning April 1, 2020. The first principal and interest payment was made on April 1, 2020. - On July 1, 2020, the entity issued for Php1,774,000 a Php2,000,000 face amount note to a wealthy shareholder. The note was dated July 1, 2020 and matures on July 1, 2021. No explicit interest rate is stated in the note and the entire face amount of the note payable is at maturity date Required: a. Prepare journal entries for 2020 b. Compute the total current liabilities on December 31, 2020 C. Determine the interest expense to be reported in 2020arrow_forward
- For items 1 to 2 China Bank granted a loan to a borrower on January 1, 2023. The interest rate on the loan is 10% payable annually starting December 31, 2023. The loan matures in five years on December 31, 2027. The data related to the loan are: Principal amount Direct loan origination cost Indirect loan origination cost Origination fee received from borrower P4,000,000 104,410 72,880 526,450 Note: Round-off to four decimal places the PV Factors. The effective interest rate of the loan is? (Round off answer to nearest whole number, e.g. 4%)arrow_forward5 The following selected transactions relate to liabilities of United Insulation Corporation. United's fiscal year ends on December 31. 2016 Jan 13Negotiated a revolving credit agreement with Parish Bank that can be renewed annually upon bank approval. The amount available under the line of credit is $26.0 million at the bank's prime rate. Feb.1 Arranged a three-month bank loan.of $9.0 million with Parish Bank under the line of credit agreement. Interest at the prime rate of 7% was payable at maturity. May 1 Paid the 7% note at maturity. Dec.1 Supported by the credit line, issued $13.0 million of commercial paper on a nine- month note. Interest was discounted at issuance at a 6% discount rate. 31 Recorded any necessary adjusting entry(s). 2017 Sept.1 Paid the commercial paper at maturity. Required: Prepare the appropriate journal entries through the maturity of each liability 2016 and 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the…arrow_forwardProblem 7-2 (IFRS) Awesome Bank granted a loan to a borrower on January 1, 2021. The interest rate on the loan is 10% payable annually starting December 31, 2021. The loan matures in five years On December 31, 2025. Principal amount Direct origination cost Origination fee received from borrower 4,000,000 61,500 350,000 The effective rate on the loan after considering the direct origination cost and origination fee received is 12%. Required: 1. Compute the carrying amount of the loan receivable or January 1, 2021. 2. Prepare a table of amortization for the loan receivable. 3. Prepare the journal entries for 2021 and 2022.arrow_forward
- Part 1 Cucina Corp. signed a new installment note on January 1, 2018, and deposited the proceeds of $70,000 in its bank account. The note has a 3-year term, compounds 5 percent interest annually, and requires an annual installment payment on December 31. Cucina Corp. has a December 31 year-end and adjusts its accounts only at year-end. Required: Use an online application, such as the loan calculator with annual payments at mycalculators.com, to generate an amortization schedule. Enter that information into an amortization schedule with the following headings: Year, Beginning Notes Payable, Interest Expense, Repaid Principal on Notes Payable, and Ending Notes Payable. Prepare the journal entries on (a) January 1, 2018, and December 31 of (b) 2018, (c) 2019, and (d) 2020. If Cucina Corp.'s year-end were March 31, rather than December 31, prepare the adjusting journal entry would it make for this note on March 31, 2018? PART 1 REQUIRED 1 IS IN AN ATTACHED IMAGE Required 2…arrow_forwardPART 1 Cucina Corp. signed a new installment note on January 1, 2018, and deposited the proceeds of $70,000 in its bank account. The note has a 3-year term, compounds 5 percent interest annually, and requires an annual installment payment on December 31. Cucina Corp. has a December 31 year-end and adjusts its accounts only at year-end. Required: Use an online application, such as the loan calculator with annual payments at mycalculators.com, to generate an amortization schedule. Enter that information into an amortization schedule with the following headings: Year, Beginning Notes Payable, Interest Expense, Repaid Principal on Notes Payable, and Ending Notes Payable. Prepare the journal entries on (a) January 1, 2018, and December 31 of (b) 2018, (c) 2019, and (d) 2020. If Cucina Corp.'s year-end were March 31, rather than December 31, prepare the adjusting journal entry would it make for this note on March 31, 2018? PART 1 REQUIRED 1 IN ATTACHED IMAGE Required 2 Prepare…arrow_forwardProblem 9-1: Glencoe Inc. operates with a June 30 year-end. During 2016, the following transactions occurred: January 1: Signed a one year, 10% loan for $25,000. Interest and principal are to be paid at maturity. January 10: Signed a line of credit with Little Local Bank to establish a $400,000 line of credit. Interest of 9% will be charged on all borrowed funds. February 1: Issued a $20,000 non-interest-bearing, six-month note to pay for a new machine. Interest on the note, at 12%, was deducted in advance. March 1: Borrowed $150,000 on the line of credit. June 1: Repaid $100,000 on the line of credit plus accrued interest. June 30: Made all necessary adjusting entries. August 1: Repaid the non-interest-bearing note. September 1: Borrowed $200,000 on the line of credit. November 1: Insured a 3 month, 8%, $12,000 note in payment of an overdue open account. December 31: Repaid the one-year loan [from transaction (a)] plus accrued interest. Record all journal entries necessary to…arrow_forward
- QUESTION 3 (15 marks): On December 31, 2025, Almonte Corporation borrowed $120,000 by signing a 12% note that is to be repaid in 6 annual fixed principal repayments, the first of which is due on December 31, 2026. REQUIRED: (a) Prepare a journal entry to record the initial borrowing of the money. (b) Assume that the payments are to consist of accrued interest plus fixed principal payments. Prepare general journal entries to record the first and second installment payments. (c) What amount should be shown as a current liability at December 31, 2026? (d) What amount should be shown as a long-term liability at December 31, 2026? (e) Contrary to the assumption in (b) above, assume now that the note requires blended installment payments of $29,187. Prepare the general journal entry to record the first installment payment.arrow_forwardNOTES PAYABLE Feel Na Feel has signed several long-term notes with financial institutions. The maturities of these notes are given in the schedule below. The total unpaid interest for all of these notes amounts to P600,000 on March 31, 2020. The company’s fiscal year runs from April 1 to March 31 Due Date Amount Due April 1, 2020 P 400,000 July 1, 2020 600,000 October 1, 2020 300,000 January 1, 2021 300,000 April 1, 2022 – March 31, 2023 1,200.000 April 1, 2023 – March 31, 2024 1,000,000 April 1, 2024 – March 31,…arrow_forwardDate Transaction description Obtained a loan of $41,000 from Earth Bank at a simple interest rate of 6% per year. The first interest payment is due at the end of August 2021 and the principal of the loan is to be repaid on June 1, 2024. Paid the full amount owing to Sport Borders, Check No. 603. Payment fell within discount period. Paid the full amount owing to J. J. Spud, Check No. 604. Payment fell within discount period. Made cash sales of $4,184 during the first 3 days of the month. 2 3 Purchased 6 Downhill Snowboards from Good Sports for $180 each, terms 2/10, n/30. Sold 6 Tony Eagle Mark 3 Freestyle Skateboards to Balls 'n All for $204 each, Invoice No. 501. Purchased 5 Freestyle Snowboards with cash for $170 each, Check No. 605. Purchased 5 Pipe Dream surfboards from Sports 'R Us for $150 each, terms net 30. 4 4. 7 After completing this practice set page, you should know how to record basic transactions in the journals provided below and understand the posting process in the…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
What Does ROI (Return On Investment) Really Mean?; Author: REtipster;https://www.youtube.com/watch?v=Z6ThJvNr1Dw;License: Standard Youtube License