How should Anth report the effects of the interestābearing notes receivable on its December 31, 2021, balance sheet and its income statement for the year ended December 31, 2021? Why?
Added by Manuel K.
Step 1
- Determine if the notes are classified as current or non-current assets based on their maturity date. If they are due within one year, they are current; if due after one year, they are non-current. Show moreā¦
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On December 31, 2017, Jovial Company received two 1,000,000 notes receivable from customers in exchange for services rendered. On both notes, interest is calculated on the outstanding principal balance at the annual rate of 3% and payable at maturity. The note from Zeta Company, made under customary trade terms, is due in nine months, and the note from Yola Company is due in five years. The market interest rate for similar notes on December 31, 2017, is 8%. The present value of 1 due in nine months is 0.944, and the present value of 1 due in five years is 0.68. 1. At what amount should the note receivable from Zeta Company be reported on December 31, 2017? a. 1,000,000 b. 944,000 c. 965,200 d. 972,320 2. At what amount should the note receivable from Yola Company be reported on December 31, 2017? a. 1,000,000 b. 782,000 c. 932,000 d. 680,000
Azat N.
On January 1, 2019, Hart Corporation purchased 1,000 of ABC 8%, P1,000 callable bonds for P877,068, which represented a 10% effective interest rate. The bonds are dated January 1, 2019, and mature on January 1, 2029. Interest is payable annually on January 1. On January 1, 2020, Hart sold half of the bonds at 101. Assume that Hart uses the effective interest method of amortization and that its fiscal year ends December 31. Instruction: Determine the following: 1. Interest income for the year ended December 31, 2019 2. Carrying value of the bonds as of December 31, 2019 3. Interest income for the year ended December 31, 2020 4. Carrying value of the bonds as of December 31, 2020 5. Gain or loss on sale of the bonds. 6. Give the entry to adjust the allowance for doubtful accounts at December 31, 2020.
Akash M.
On December 31, 2018, Chang Company sold a machine in the ordinary course of business to Door Company in exchange for a non-interest bearing note requiring ten annual payments of P1,000,000. The entity made the first payment on December 31, 2018. The market interest rate for similar notes at the date of issuance was 8%. PV of an ordinary annuity of 1 at 8% for 9 periods: 6.25. PV of an ordinary annuity of 1 at 8% for 10 periods: 6.71. What is the amount of sales revenue? Sales revenue: 1,000,000 x 6.25 = 6,250,000. On December 31, 2018, what is the carrying amount of the note receivable? Carrying amount of the note receivable: 1,000,000 x 6.71 = 6,710,000. What is the interest income for 2019? Interest revenue for 2019: 6.25 x Notes receivable at the end of 2019 - Payment on note for 2019 - Note receivable at the beginning of 2019 = 6.25 x 1,000,000 - 1,000,000 - 6,710,000 = 580,000. What is the carrying amount of the note receivable on December 31, 2019? Carrying value of note receivable at the end of 2019: 6.25 x 1,000,000 + 500,000 = 6,750,000.
Madhur L.
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