Corporate Financial Accounting
14th Edition
ISBN: 9781305653535
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
thumb_up100%
Chapter 10, Problem 10.6EX
Fixed asset purchases with note
On June 30, Collins Management Company purchased land for $400,000 and a building for $560,000, paying $360,000 cash and issuing a 5% note for the balance, secured by a mortgage on the property. The terms of the note provide for 20 semiannual payments of $30,000 on the principal plus the interest accrued from the date of the preceding payment.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
On January 1, 20X1 Red Company acquired a building for P10M. The entity paid P1M down and signed a non-interest bearing note for the balance. Note is payable in 3 equal annual installment beginning Jan 1, 20X1. Prevailing rate for the note of this type is 12%.
REQUIRED:
Journal entries to record the purchase of the building up to the settlement of the note.
Prepare an amortization table.
How should the note be presented in the statement of financial position at Dec 31, 20X1?
Recording a Note Payable Issued for Non-Cash Consideration
Lathrop Inc. purchased equipment on January 1, 2020, for $97,500 cash plus a note payable. The fair value of the equipment on January 1, 2020, is $352,733. The market rate of interest is 6%. 5M Corp. uses the effective interest method to amortize discounts and premiums. Record the entries over the term of the note payable for the following three separate scenarios for the structuring of the note payable.
a. The principal of $260,000 is due on December 31, 2021, and the note specified 5% interest payable each December 31 over a two-year period.
b. The face value of the note payable is instead $286,780 and is due on December 31, 2021. The note is structured as a zero-interest-bearing note payable over a two-year period.
c. The loan is extended to three years with equal payments of $95,485 due on each December 31 over the term of the note. The note will be fully paid upon maturity.
Case One
Case Two
Case Three
Note: Round…
On January 1, 20X1 Grin Corporation acquired a building for P10M. The entity paid P1M down and signed a 3-year non-interest bearing note for the balance. Note is payable on due date. Prevailing rate for the note of this type is 12%.
REQUIRED:
Journal entries to record the purchase of the building up to the settlement of the note.
How should the note be presented in the statement of financial position at Dec 31, 20X1?
Chapter 10 Solutions
Corporate Financial Accounting
Ch. 10 - Does a discounted note payable provide credit...Ch. 10 - Employees are subject to taxes withheld from their...Ch. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - To match revenues and expenses properly, should...Ch. 10 - Prob. 7DQCh. 10 - Installment notes require equal periodic payments....Ch. 10 - When should the liability associated with a...Ch. 10 - Prob. 10DQ
Ch. 10 - Proceeds from notes payable On January 26, Nyree...Ch. 10 - Prob. 10.2BECh. 10 - Journalize period payroll The payroll register of...Ch. 10 - Prob. 10.4BECh. 10 - Prob. 10.5BECh. 10 - Journalizing installment notes On the first day of...Ch. 10 - Prob. 10.7BECh. 10 - Current liabilities Bon Nebo Co. sold 25,000...Ch. 10 - Entries for notes payable Bennett Enterprises...Ch. 10 - Evaluating alternative notes A borrower has two...Ch. 10 - Entries for notes payable A business issued a...Ch. 10 - Entries for discounted note payable A business...Ch. 10 - Fixed asset purchases with note On June 30,...Ch. 10 - Prob. 10.7EXCh. 10 - Calculate payroll An employee earns 44 per hour...Ch. 10 - Prob. 10.9EXCh. 10 - Summary payroll data In the following summary of...Ch. 10 - Payroll tax entries According to a summary of the...Ch. 10 - Payroll entries The payroll register for D. Salah...Ch. 10 - Prob. 10.13EXCh. 10 - Prob. 10.14EXCh. 10 - Prob. 10.15EXCh. 10 - Accrued vacation pay A business provides its...Ch. 10 - Prob. 10.17EXCh. 10 - Prob. 10.18EXCh. 10 - Entries for installment note transactions On the...Ch. 10 - Entries for installment note transactions On...Ch. 10 - Entries for installment note transactions On...Ch. 10 - Prob. 10.22EXCh. 10 - Prob. 10.23EXCh. 10 - Prob. 10.24EXCh. 10 - Liability transactions The following items were...Ch. 10 - Entries for payroll and payroll taxes The...Ch. 10 - Wage and tax statement data on employer FICA tax...Ch. 10 - Prob. 10.4APRCh. 10 - Payroll accounts and year-end entries The...Ch. 10 - Prob. 10.1BPRCh. 10 - Prob. 10.2BPRCh. 10 - Wage and tax statement data and employer FICA tax...Ch. 10 - Prob. 10.4BPRCh. 10 - Payroll accounts and year-end entries The...Ch. 10 - Prob. 3COPCh. 10 - Prob. 10.1ADMCh. 10 - Prob. 10.2ADMCh. 10 - Neiman Marcus and Kohls: Short-term liquidity...Ch. 10 - Cabelas and Dicks Sporting Goods: Short-term...Ch. 10 - Ethics in Action Tonya Latirno is a staff...Ch. 10 - Prob. 10.3TIF
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
- Fixed asset purchases with note On June 30, Collins Management Company purchased land for 400,000 and a building for 560,000, paying 360,000 cash and issuing a 5% note for the balance, secured by a mortgage on the property. The terms of the note provide for 20 semiannual payments of 30,000 on the principal plus the interest accrued from the date of the preceding payment. Journalize the entry to record (A) the transaction on June 30, (B) the payment of the first installment on December 31, and (C) the payment of the second installment the following June 30.arrow_forwardKessel Company purchased a building and land with a fair market value of $475,000 (building, $300,000 and land, $175,000) on January 1, 2018. Kessel signed a 25- year, 8% mortgage payable. Kessel will make monthly payments of 3,666.13. Round to two decimal places. Explanations are not for journal entries. Requirements 1. Journalize the mortgae payable issuance on January 1, 2018. 2. Prepare an amortization schedule for the first two payments. 3. Journalize the first payment on January 31, 2018. 4. Journalize the second payment on February 28, 2018arrow_forwardAmortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued $20,000,000 of 5-year, 11% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Ebert receiving cash of $19,264,099. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Cash Discount on Bonds Payable Bonds Payable First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Interest Expense Discount on Bonds Payable Cash Second semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.…arrow_forward
- To get cash to purchase operating assets, Ballard Company, with a December 31 fiscal year-end, issued bonds with the following characteristics: (i) (ii) (iii) (iv) C. Date of bonds: January 1, 2011 Maturity amount and date: $100,000 due in 10 years (December 31, 2020). Interest: 11% per year payable each December 31. Date issued: January 1, 2011. Required: a. Construct the amortization table for the first 2 years for each bond. See (b). b. Give the journal entries to record the issuance and the first 2 interest payments under each of 3 different independent cases: Case A - The bonds sold at par. Case B - The bonds sold to yield 12%. Case C - The bonds sold to yield 10% Provide the following amounts to be reported on the 2011 financial statements: a., Interest expense b., Bonds payable c., Unamortized premium or discount d., Net Liability e., Stated rate of interest (coupon rate) f., Cash paid for interest Case A $ Case B $ Case C $arrow_forwardEntity A invested $18,000 in 10.00% loan notes. The loan interest is paid in arrears. The loan notes are repayable at a premium after 3 years. The effective rate of interest is 12.00%. Entity A intends to collect the contractual cash flows which consist solely of repayments of interest and principal. REQUIRED: (1) Measure the interest revenue recognised in the Statement of Profit or Loss of year 3. (2) Measure the loan notes recognised in the Statement of Financial Position of year 2arrow_forwardAssume bonds payable are amortized using the straight-line amortization method unless stated otherwise. Accounting for mortgages payable Ember Company purchased a building with a market value of $280,000 and land with a market value of $55,000 on January 1, 2018. Ember Company paid $15,000 cash and signed a 25-year, 12% mortgage payable for the balance. Requirements Journalize January 1, 2018, purchase. Journalize the first monthly payment of $3,370 on January 31, 2018. (Round to the nearest dollar.)arrow_forward
- Chapter : Fixed Assets On December 10, 2018, Stella contracted with Billys Construction to have a new building constructed for $1,600,000 on land owned by Tosewarld. The payments made by Stella to Billys Construction are shown in the schedule below. See table Additional Information : Construction was completed and the building was ready for occupancy on December 31, 2019. Stella had the following debt outstanding at December 31, 2019 : 17%, 3-year note of $800,000 to finance construction of building, dated December 31, 2018, with interest payable annually on December 31 (Specific Construction Debt) 13%, 5-year note payable of $800,000, dated December 31, 2015, with interest payable annually on December 31 10%, 10-year bonds issue of $850,000, bonds issued December 31, 2014, with interest payable annually on December 31 Instructions: a. Compute the weighted-average accumulated expenditures on Stella’s new building during the capitalization period. b. Compute the avoidable…arrow_forwardOn January 1, 20X1 Blu Corporation acquired a building for P10M. The entity paid P1M down and signed a non-interest bearing note for the balance. Note is payable in 3 equal annual installment every Dec 31. Prevailing rate for the note of this type is 12%. REQUIRED: Journal entries to record the purchase of the building up to the settlement of the note. Prepare an amortization table. How should the note be presented in the statement of financial position at Dec 31, 20X1?arrow_forwardChapter : Fixed Assets On December 10, 2018, Stella contracted with Billys Construction to have a new building constructed for $1,600,000 on land owned by Tosewarld. The payments made by Stella to Billys Construction are shown in the schedule below. See table Additional Information : Construction was completed and the building was ready for occupancy on December 31, 2019. Stella had the following debt outstanding at December 31, 2019 : 17%, 3-year note of $800,000 to finance construction of building, dated December 31, 2018, with interest payable annually on December 31 (Specific Construction Debt) 13%, 5-year note payable of $800,000, dated December 31, 2015, with interest payable annually on December 31 10%, 10-year bonds issue of $850,000, bonds issued December 31, 2014, with interest payable annually on December 31 Instructions: a. Some interest cost of Stella is capitalized for the year ended December 31, 2019. Identify the items relating to interest costs that must be…arrow_forward
- Amortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued $18,000,000 of 5-year, 10% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Ebert receiving cash of $16,675,281. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. 2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. 3. Second semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. b. Compute the amount of the bond interest expense for the first year. Round to the nearest dollar.arrow_forwardAmortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued $25,000,000 of 5-year, 9% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 11%, resulting in Ebert receiving cash of $23,115,584. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Cash Discount on Bonds Payable Bonds Payable 2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Interest Expense Discount on Bonds Payable Cash 3. Second semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Interest Expense Discount on Bonds Payable Cash b. Compute the amount of…arrow_forwardAmortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued $24,000,000 of 5-year, 11% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Ebert receiving cash of $23,116,919. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. fill in the blank 75d57bff7072073_2 fill in the blank 75d57bff7072073_3 fill in the blank 75d57bff7072073_5 fill in the blank 75d57bff7072073_6 fill in the blank 75d57bff7072073_8 fill in the blank 75d57bff7072073_9 2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. fill in the blank 977a63fce061fea_2 fill in the blank…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
7.2 Ch 7: Notes Payable and Interest, Revenue recognition explained; Author: Accounting Prof - making it easy, The finance storyteller;https://www.youtube.com/watch?v=wMC3wCdPnRg;License: Standard YouTube License, CC-BY