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intermediate accounting volume 2
Intermediate Accounting Volume 2 2nd Edition Hanlon, Hodder, Nelson, Roulstone, Dragoo - Solutions
On January 1, 2020, Baker Inc. enters into an operating lease of equipment for one year for \(\$ 1,000\) per month on January 1, 2020. The equipment cost \(\$ 200,000\) and has a useful life of 10 years. Assuming that Baker Inc. elects to account for the lease under the short-term lease option,
Tropical Products Inc. is in the process of negotiating a lease of equipment with a fair value of \(\$ 50,000\), and it must determine the proper lease classification. The following table describes four scenarios under negotiation.Required Determine the proper classification for each of the four
The following separate scenarios relate to a 5-year lease, pertaining to equipment with a fair value of \(\$ 25,000\). Assume in all scenarios that payments are made at the beginning of the period.1. Lease payments include a fixed payment of \(\$ 5,000\) per year.2. Lease payments include a fixed
On January 1, 2020, Ashe Company entered into a 5 -year equipment lease (with no renewal options) requiring payments of \(\$ 10,000\), with the first payment due immediately. The lessor's implicit interest rate, known to Ashe, is \(6 \%\). Ownership of the equipment remains with the lessor at
On January 1, 2020, Lessee Inc. enters into a 5-year equipment lease agreement for \(\$ 15,000\) annually (first payment due immediately). The lease grants the lessee an option to renew the lease for an additional 3 years. Lease payments adjust to current market rates for equivalent rentals at the
On December 30, 2019, Drew Company leased equipment under a lease for a period of 5 years. Drew contracted to pay \(\$ 90,000\) on December 31,2019 , with an annual increase of \(3 \%\) (calculated on the previous year's lease payment) for each of the next four years due on December 31. The leased
On January 1, 2020, Alex Company signed a 5-year lease contract for equipment with Abel Company. The equipment had a normal selling price of \(\$ 55,000\) and an estimated useful life of 6 years. Five annual payments of \(\$ 11,815\) are payable by Abel on January 1 , beginning in 2020 . The asset
Assume the same information in Exercise 17-57 except that the lessee also paid legal fees in the execution of the lease of \(\$ 1,800\) on January \(1,2020\).Requireda. How would Abel Company classify the lease?b. Prepare an amortization schedule of the lease liability.c. Prepare the entries for
Mac Leasing Company (lessor) and Ash Corporation (lessee) signed a four-year lease on January 1, 2020. The underlying asset has an estimated life of six years, and the property reverts to Mac at the end of the lease term. Lease payments of \(\$ 11,923\) are payable on January 1 of each year and
On the first day of its accounting year, January 1, 2020, Lessee Inc. leased a building at an annual payment of \(\$ 138,847.84\) to be paid at the beginning of each year for 10 years. The first payment was paid immediately. The building, which is new, cost \(\$ 1,100,000\) and has an estimated
On January 1, 2020, lessor Marcy and lessee Lenox contract for the lease of a machine for five payments of \(\$ 7,000\) each. The \(\$ 7,000\) payments are to be paid at the end of each year. They also agree that at the time of the fifth payment, for an added \(\$ 6,000\) purchase option payment,
On the first day of its accounting year, Lessee Inc. leased certain property at a semiannual payment of \(\$ 60,000\) receivable at the beginning of each period for 8 years. The first payment was paid immediately. The leased property, which is new, cost \(\$ 1,100,000\) and has an estimated useful
Flint Company leased equipment to Land Company for a five-year period. Flint paid \(\$ 46,965\) for the equipment, its current carrying value (estimated useful life five years). The lease started on January 1, 2020. Flint uses a target rate of return of \(8 \%\) in all lease contracts. The first
Use the same information from Exercise 17 - 63 but assume instead that the lease contract contains a purchase option stating that Land Company can purchase the equipment for \(\$ 4,000\) on January 1,2025 , at which time its estimated residual value is \(\$ 6,500\). It is reasonably certain that
Dunlap Company leased a large copier to Rust Company for a three-year period. Dunlap paid \(\$ 30,000\) for the copier and immediately leased it on January 1, 2020 (estimated useful life is four years, and Dunlap expects the residual value at the end of the lease term to be \(\$ 6,000\) ). Dunlap
Rex Corporation (lessor) and Lee Company (lessee) agreed to a lease with the following information:» Rex's carrying value of the underlying asset (inventory item) was \(\$ 400,000\).- Lease term is four years, beginning January 1, 2020. Lease payments are made each January 1, beginning January
On January 1, 2020, the first day of its accounting year, Lessor Inc., leased certain equipment at an annual payment of \(\$ 10,254.19\), receivable at the beginning of each year for 10 years. The first payment was received immediately. The equipment has an estimated useful life of 12 years and no
On January 1, 2020, the first day of its accounting year, Lessor Inc., leased certain property at an annual payment of \(\$ 20,000\) receivable at the beginning of each year for 5 years. The first payment was received immediately. The leased property, which is new, has an estimated useful life of 8
Information for four separate finance/sales-type lease scenarios is provided as follows:Required Answer the following questions for each separate scenario, assuming that the lessee is aware of the lessor's implicit lease rate.a. Compute the lessor's lease payment.b. Compute the lessee's balance of
Information for four separate finance/sales-type lease scenarios is provided as follows:Required Answer the following questions for each separate scenario assuming that the lessee is aware of the lessor's implicit lease rate.a. Compute the lessor's lease payment.b. Compute the balance of the
A lessor entered into a 5-year lease appropriately classified as a sales-type lease. The cost of the underlying asset was \(\$ 40,000\) and the fair value of the asset was \(\$ 50,000\). The lease included a purchase option that allowed the lessee to purchase the underlying asset for \(\$ 5,000\)
Try-Star Leasing Company enters into a contract with LLX Corporation for equipment under lease for a threeyear period. The equipment will have no residual value when the lease term ends and has an economic life of 3 years. Try-Star expects to collect all payments from LLX Corporation. The carrying
Using the information from Exercise 17-72, complete the following requirements from the lessor's perspective.Requireda. Determine the classification of the lease to Try-Star Leasing Company.b. Provide all journal entries relating to the lease for Try-Star Leasing Company for 2020-2022. Assume that
Lessory Corporation, a manufacturer of equipment, enters into a lease of specialized equipment with LesseeX Corp. Title to the asset remains with Lessory Corp upon lease expiration. LesseeX Corp does not guarantee the residual value of the specialized equipment at the end of the lease term, and the
Using the information from Exercise 17-74, complete the following requirements from the lessor's perspective. Assume that lessor classifies the equipment as inventory prior to the lease arrangement.Requireda. Determine the classification of the lease to Lessory Corporation.b. Determine the lease
On January 1, 2020, Frozen Yogart Inc. signed a 10 -year lease for its retail outlet. The lease payments, paid semiannually, are based upon semiannual sales and will equal \(5 \%\) of sales with a semiannual sale minimum of \(\$ 500,000\). Based upon the previous three years, average sales per
On January 2, 2020, Wayne Inc. signed an eight-year lease for office space for \(\$ 24,000\) annually, with the first payment due immediately. Wayne has the option to renew the lease for an additional four-year period on or before January 2, 2028, at market lease rates at the time of renewal. Wayne
On January 1, 2020, Lessee Inc. leased equipment at an annual payment of \(\$ 85,099\) payable at the beginning of each year for 4 years. The equipment had a fair value of \(\$ 400,000\), a book value of \(\$ 375,000\), and was commonly purchased or leased by customers. The lessor estimates that
Renewable Co. uses leasing as a secondary means of selling its products. The company contracted with Green Corporation to lease a machine with an economic life of 12 years to be used by Green Corporation in its operations. The fair value of the asset at the inception of the lease was \(\$
Using the information from Exercise 17-79, answer the following question from the perspective of the lessor.Requireda. How would Renewable Co. classify the lease?b. What baiances (account titles, amounts) appear on Renewable's balance sheet at the end of the first year, related to the lease?c. What
For each of the following debt scenarios described below, identify the bond type that applies.a. Bonds issued by a public corporationb. Mortgage note issued for commercial propertyc. Bonds issued at a discount, pays interest periodically and principal at bond maturityd. Bonds which may be converted
Rowe Corporation authorized \(\$ 5,000\) of \(8 \%\) (cash interest payable semiannually) 10 -year bonds. The bonds were dated January 1, 2020; interest dates are June 30 and December 31. Assume three different cases with respect to the sale of the bonds: Case A: Bonds sold on January 1, 2020, at
An eight-year, \(6 \%, \$ 1,000\) bond (cash interest payable annually) is sold to yield \(6 \%\) interest. Compute the bond selling price.
A 10 -year, \(7 \%, \$ 1,000\) bond (cash interest payable \(3.5 \%\) semiannually) is sold to yield \(6 \%\) interest. Compute the bond selling price.
A 10 -year, \(6 \%, \$ 1,000\) bond (cash interest payable \(3 \%\) semiannually) is sold to yield \(8 \%\) interest. Compute the bond selling price.
Rowe Corporation authorized \(\$ 600,000\) of \(8 \%\) (cash interest payable semiannually) 10 -year bonds. The bonds were dated January 1, 2020. Interest dates are June 30 and December 31. Assuming that the bonds were sold on March 1, 2020, at face value, record the following journal entries.a.
Yale Corporation issued to Zap Corporation \(\$ 60,000,8 \%\) (cash interest payable semiannually on July 1 and January 1) 10 -year bonds dated and sold on January 1,2020 . If the bonds were sold at face value, provide the journal entries to be made at each of the following dates. Yale's fiscal
Yale Corporation issued to Zap Corporation \(\$ 60,000,8 \%\) (cash interest payable semiannually on June 30 and December 31) 10 -year bonds dated and sold on January 1,2020 . Assume that the company uses the straight-line amortization method. If the bonds were sold at 97, provide journal entries
Yale Corporation issued to Zap Corporation \(\$ 60,000,8 \%\) (cash interest payable semiannually on June 30 and December 31) 10 -year bonds dated and sold on January 1, 2020. Assume that the company uses the straight-line amortization method. If the bonds were sold at 103 , provide journal entries
Yale Corporation issued to Zap Corporation \(\$ 60,000,8 \%\) (cash interest payable semiannually on June 30 and December 31) 10-year bonds dated and sold on January 1, 2020. Assume that the company uses the effective interest amortization method. If the bonds were sold to yield \(9 \%\), provide
Yale Corporation issued to Zap Corporation \(\$ 60,000,8 \%\) (cash interest payable semiannually on June 30 and December 31) 10 -year bonds dated and sold on January 1, 2020. Assume that the company uses the effective interest amortization method. If the bonds were sold to yield \(7 \%\), provide
For the Yale Corporation bonds in Brief Exercise 16-34, show how the bonds and related accounts would be presented in the balance sheet as of June 30, 2020.Exercise 16-34Yale Corporation issued to Zap Corporation \(\$ 60,000,8 \%\) (cash interest payable semiannually on June 30 and December 31) 10
Yale Corporation issued to Zap Corporation \(\$ 60,000,8 \%\) (cash interest payable semiannually on June 30 and December 31) 10 -year bonds dated and sold on January 1, 2020. Assume that the company uses the effective interest amortization method and bond issuance costs are \(\$ 1,500\). If the
Lacey Corp. issued a three-year, \(\$ 5,000\) note with an \(8 \%\) stated rate to Hayley Co. on January 1, 2020, and received cash of \(\$ 5,000\). The note requires semiannual interest payments on June 30 and December 31. Provide journal entries to be made at each of the following dates.a.
On January 1, 2020, Landry Inc. issued a three-year, \(\$ 5,000\), zero-interest-bearing note to Dillon LLP, and received \(\$ 4,198\). The implied interest rate is \(6 \%\) on this note transaction. Provide journal entries to be made at each of the following dates.a. January 1,2020 , for issuance
Fem Company purchased goods on January 1,2020 , and issued a two-year, \(\$ 2,500\) note with a \(5 \%\) stated rate. The fair value of the goods is \(\$ 2,366\). The note requires annual interest payments on December 31 . The market rate of interest appropriate for this note is \(8 \%\). Provide
On January 1, 2020, Allen Corp. issued a 3-year, zero-interest-bearing note payable for \(\$ 10,000\) to Town Corp. for a cash receipt of \(\$ 10,000\). In lieu of interest payments, Allen Corp. agreed to sell merchandise to Town Corp. at a discount and provide free shipping during the 3 -year
On January 1, 2020, a borrower signed a long-term note, face amount \(\$ 50,000\) with time to maturity of 6 years. The interest rate is \(7 \%\) and equal annual installment payments will pay off the loan after six years.a. How much is each annual installment payment?b. Record the first
Darien Inc. redeemed \(\$ 5,000\) of its bonds at 102 on January 1, 2020. At this date, the unamortized discount was \(\$ 690\). Prepare the journal entry on January 1, 2020, for the bond redemption. Assume Darien has a December 31 year-end and all adjusting entries were made.
Stonewall Corporation issued \(\$ 20,000\) of \(5 \%, 10\)-year convertible bonds. Each \(\$ 1,000\) bond is convertible to 10 shares of common stock (par \$50) of Stonewall Corporation. The bonds were sold at 105 on January 1, 2020. Provide the entry for Stonewall Corporation on January 1, 2020,
On December 1, 2020, Junction Company issued at 104, 4,000 of its \(9 \%, 10\)-year, \(\$ 1,000\) par value, nonconvertible bonds with detachable stock purchase warrants. Each bond carried two detachable warrants; each warrant was for one share of common stock at a specified option price of \(\$
Josie Corporation issued 10 -year, \(8 \%\) interest-bearing bonds payable at face value for \(\$ 10,000\) on January 1 , 2020. At that time, Josie Corporation elected to account for the bonds payable using the fair value option method. At December 31, 2020, the fair value of the bonds payable was
Target Corporation reported the following amounts (in millions) in a recent Form 10-K.- Total assets: \(\$ 44,553\)- Total liabilities: \(\$ 28,322\)- Total noncurrent liabilities: \(\$ 15,545\)- Total stockholders' equity: \$16,231 Compute the following ratios.a. Total liabilities-to-equityb.
For each account \(a\) through \(m\) listed below, indicate the account type (asset, liability, or equity) and the financial statement (balance sheet or statement of comprehensive income) where the account would be reported.a. Discount on Bonds Payable (10-year bonds)b. Premium on Bonds payable
For each of the following bond scenarios \(a\) through \(e\) described below, identify a bond type that applies.a. Harrison County Flood Control Improvement Bonds issued in the state of Texas.b. Bonds backed by liens on equipment are issued.c. Treasury bill where the registered owner receives the
On January 1, 2020, the following debt was authorized and issued by Anderson Company.1. \(\$ 50,000,5\)-year, \(9 \%\) convertible bonds payable, cash interest payable semiannually to yield \(10 \%\).2. \(\$ 10,000,8\)-year, \(10 \%\) note payable, cash interest payable semiannually to yield \(9.5
Calculate the bond selling price for the three separate scenarios that follow.a. 33M Corp. authorized and issued \(\$ 100,000,6 \%, 20\)-year bonds payable on January 1, 2020. Calculate the selling price of the bonds if the bonds pay cash interest semiannually on July 1 and January 1 , and the
On May 1, 2020, Setup Inc. sold an issue of 5\%, \(\$ 1,000\) bonds dated January 1, 2020, to yield 5\%. The bonds pay interest every June 30 and December 31, and mature December 31, 2024.Requireda. Provide journal entries to be made by Setup Inc. at each of the following dates.1. May 1,2020 , bond
On October 1, 2020, New Co. issued an eight-year, \(6 \%, \$ 1,000\) bond at face value, with cash interest payable semiannually on April 1 and October 1.Required Provide journal entries to be made by New Co. at each of the following dates.a. October 1,2020 -Issuance.b. December 31,2020 -Interest
On January 1,2020 , Williams Inc. issued 8 -year, \(\$ 50,000,5 \%\) bonds, priced to yield \(6 \%\), with cash interest payable semiannually on June 30 and December 31. The company amortizes the bond discount using the effective interest method.Required Provide an amortization schedule of
On January 1, 2020, Williams Inc. issued 8-year, \(\$ 50,000,5 \%\) bonds, priced to yield \(6 \%\), with cash interest payable semiannually on June 30 and December 31. The company amortizes the bond discount using the straightline interest method.Required Provide an amortization schedule of
Mitchell Inc. issued 40, \(6 \%, \$ 1,000\) bonds on January 1,2020 , for \(\$ 38,950\). The bonds pay cash interest annually each December 31 and were issued to yield \(7 \%\). The bonds mature December 31, 2022, and the company uses the effective interest method to amortize bond discounts or
Mitchell Inc. issued 40, 6\%, \(\$ 1,000\) bonds on January 1, 2020. The bonds pay cash interest semiannually each July 1, and December 31, and were issued to yield 7\%. The bonds mature December 31, 2022, and the company uses the effective interest method to amortize bond discounts or
Refer to the information in Exercise 16-57. However, now assume that the interest payments are made on July 1 , and January 1.Requireda. Determine the selling price of the bonds.b. Prepare an amortization schedule for the full bond term.c. Prepare journal entries on the following dates.1. January
Mitchell Inc. issued \(40,6 \%, \$ 1,000\) bonds on January 1,2020 . The bonds pay cash interest semiannually each July 1 , and December 31 , and were issued to yield \(7 \%\). Debt issuance costs were \(\$ 800\). The bonds mature December 31,2022 , and the company uses the effective interest
Mitchell Inc. issued \(60,6 \%, \$ 1,000\) bonds on January 1,2020 . The bonds pay cash interest annually each December 31 and were issued to yield \(5 \%\). The bonds mature December 31, 2024, and the company uses the effective interest method to amortize bond discounts or premiums.Requireda.
Mitchell Inc. issued \(60,6 \%, \$ 1,000\) bonds on January 1, 2020. The bonds pay cash interest semiannually each June 30, and December 31, and were issued to yield 5\%. The bonds mature December 31, 2024, and the company uses the effective interest method to amortize bond discounts or
Mitchell Inc., issued 40, \(6 \%, \$ 1,000\) bonds on January 1, 2020. The bonds pay cash interest semiannually each June 30 and December 31, and were issued to yield \(7 \%\). The bonds mature December 31, 2022, and the company will use the straight-line interest method to amortize the bond
Mitchell Inc., issued \(70,6 \%, \$ 1,000\) bonds on January 1,2020 . The bonds pay cash interest annually each January 1 (beginning January 1, 2021), and were issued to yield 4\%. The bonds mature January 1, 2030, and the company will use the straight-line interest method to amortize the bond
Master Corp. issued \(5 \%, \$ 300,000\) bonds on January 1, 2020. The bonds pay cash interest semiannually each July 1 and January 1, and were issued to yield \(6 \%\). The bonds mature January 1,2030, and the company uses the effective interest method to amortize bond discounts or
Master Corp. issued \(8 \%, \$ 80,000\) bonds on February 1,2020 . The bonds pay interest semiannually each July 31 and January 31 and were issued to yield \(7 \%\). The bonds mature January 31, 2030, and the company uses the effective interest method to amortize bond discounts or
For the following separate bond issues, assume that the bonds are sold on January 1, 2020, interest is paid semiannually on July 1 and December 31, and the bond term is 5 years.Required Complete the table by measuring the bond selling price on January 1, 2020, and interest expense and interest
Lathrop Inc. purchased equipment on January 1, 2020, for \(\$ 75,000\) cash plus a note payable. The fair value of the equipment on January 1,2020 , is \(\$ 271,333\). The market rate of interest is \(6 \% .5 \mathrm{M}\) Corp. uses the effective interest method to amortize discounts and
On January 1, 2020, Jet Air Inc. contracted with Systems Plus Inc. to manufacture heavy equipment. Jet Air Inc. issued a \(\$ 75,000\) note to Systems Plus Inc. in exchange for the equipment that required 5\% interest payments annually over 3 years on December 31 of each year. Although the fair
On June 30, 2020, BMO Company purchased land for expansion with an assessed value of \(\$ 108,661\) by issuing a 5-year, zero-interest-bearing note. The face value of the note is \(\$ 175,000\).Requireda. Compute the rate of interest implied by this transaction.b. Prepare an amortization schedule
On January 1,2020 , a borrower signed a long-term note, face amount, \(\$ 100,000\); time to maturity, three years; stated rate of interest, \(8 \%\). The market rate of interest of \(10 \%\) determined the cash received by the borrower. The note will be paid in three equal annual installments of
On March 1,2020 , Sandollar Inc. issued \(\$ 30,000\) of bonds at 105 , paying \(8 \%\) cash interest semiannually on June 30 and December 31. The bonds are scheduled to mature December 31, 2023. On September 1, 2020, \(\$ 10,000\) of the bonds were retired when the bonds were selling at 89 .
On January 1, 2020, Rocket Corporation issued \(\$ 250,000\) of \(6 \%, 20\)-year bonds at 98 . The interest is payable each December 31. Rocket uses straight-line amortization. The company's accounting period ends December 31.On January 1, 2029, Rocket issued \(\$ 250,000,5 \%\) 20-year, refunding
Dillon Corp. issued \(\$ 100,000\) of \(6 \%\) (cash payable each December 31), 10 -year bonds on January 1, 2020. The bonds are callable at any point after 2024 at 103. The bonds sold on January 1, 2020, at 98 . Straight-line amortization of bond discounts and premiums is used. Due to a drop in
Stonewall Corporation issued \(\$ 20,000\) of \(5 \%, 10\)-year convertible bonds. Each \(\$ 1,000\) bond is convertible to 10 shares of common stock (par \$50) of Stonewall Corporation. The bonds were sold at 105 on January 1, 2020.Requireda. Provide the entry for Stonewall Corporation on January
On January 1,2020 , Sierra Corp. issued \(500, \$ 1,000,6 \%\) convertible bonds at face value. Each bond is convertible into 15 shares of \(\$ 1\) par value common stock. As an inducement to convert the bonds into common stock in 2022 prompted by a drop in interest rates, the company offered \(\$
Harley Corporation issued \(\$ 75,000\) of \(6 \%, 10\)-year, nonconvertible bonds with detachable stock purchase warrants. Each \(\$ 1,000\) bond carried 20 detachable warrants, each of which was for one share of Harley common stock, par \(\$ 20\), at a specified exercise price of \(\$ 60\). The
Target Shoppers Inc. reported cash sales of \(\$ 18,000\) for the month of June 2020. Sales taxes payable are recordeda. Assume that sales of Target Shoppers Inc. are subject to a \(6 \%\) sales tax. Record the sales entry.b. Now assume that the cash collected on sales includes the \(6 \%\) sales
On June 15, 2020, Red Buckle Inc. purchased merchandise for resale for \(\$ 12,000\) on credit terms \(2 / 10, \mathbf{n} / 30\). On June 20 , Red Buckle paid for the merchandise. Record the entry on June 15 and the entry on June 20 using the perpetual inventory method.
Jet Air Inc. collected \(\$ 300\) cash from a customer who purchased a one-way airline ticket on June 1, 2020, for a flight from Minneapolis to New York on August 15, 2020. Record the entry on June 1, and the entry on August 15 for Jet Air Inc.
Chica's Inc. sold a \(\$ 50\) gift card on February 1, 2020. The gift card was redeemed on February 14, 2020. Record the entries on (1) February 1 and (2) February 14 for Chica's Inc.
BSW Inc. had a weekly payroll of \(\$ 5,000\) for three employees with mandatory withholdings of social security tax \((7.65 \%)\), federal withholdings of \(\$ 1,000\), and state withholdings of \(\$ 200\). Voluntary withholdings included retirement plan contributions of \(\$ 100\), and health
The following information relating to compensated absences was available from Graf Company's accounting records at December 31, 2020.- Employees' rights to vacation pay vest and are attributable to services already rendered. Payment is probable, and Graf's obligation was reasonably estimated at
On December 15, 2020, the board of directors of Limited Label Inc. approved a bonus payout of \(\$ 70,000\) to executives, based upon services performed in 2020. The bonus is payable on January 25, 2021. Record the entries required on (1) December 15, 2020, and (2) January 25, 2021.
On August 31, 2020, Pine Company issued a 9 -month, \(12 \%\) note payable to National Bank in the amount of \(\$ 900,000\). Interest is due at maturity. Record the entries for Pine Company on the following dates.a. Issuance of the note on August 31, 2020.b. Adjusting entry on December 31, 2020,
First Choice Company buys equipment on October 1, 2020, providing as payment a noninterest-bearing note for \(\$ 20,000\) to be paid one year from today. The equipment could be purchased for \(\$ 18,182\) in cash today. Record the entries for First Choice Company on the following dates.a. Issuance
The face value of commercial paper borrowings at December 31,2020 , was \(\$ 6\) million. The six-month loan originated on September \(1,2020\).a. Prepare the journal entry for issuance of the loan on September 1, 2020, assuming that the loan is discounted at \(5.7 \%\). Discount on Note Payable is
Maple Leaf Co. has a \(\$ 50,000,5 \%, 10\)-year note issued July 31, 2011.a. How will the \(\$ 50,000\) be classified on the December 31,2020 , balance sheet?b. If the \(\$ 50,000\) is refinanced into a five-year note on January 31, 2021 (before the 2020 financial statements are issued), how will
On December 31, 2020, Mainstreet Inc. has a \$100,000 note payable due on demand or on June 30, 2025, whichever is earlier, to First Bank. The repayment of the note by First Bank is not expected at any point in 2021. How will the \(\$ 100,000\) note payable be classified on the December 31,2020 ,
Finisher Inc. sells merchandise of \(\$ 250,000\) in 2020 that includes a three-year limited warranty. Warranty costs are estimated to be \(1 \%\) of sales. The company incurred actual costs of \(\$ 800\) in 2020 related to the warranties.a. Record the warranty accrual at the time of sale in
Madison Co. sells merchandise of \(\$ 250,000\) in 2020, along with a two-year warranty (for years 2020 and 2021) for \(\$ 25\) per product. Warranty costs are estimated to be \(0.5 \%\) of sales. The company sold \(\$ 2,500\) of warranties in 2020 and incurred actual costs of \(\$ 800\) in 2020
On November 5, 2020, a Dunn Corporation truck was in an accident with an auto driven by R. Bell. Dunn received notice on January 12, 2021, of a lawsuit for \(\$ 350,000\) in damages for personal injuries suffered by Bell. Dunn Corporation's legal counsel believes it is probable that Bell will be
Pitt Company is the defendant in a lawsuit filed by Hoffman in 2020 disputing the validity of a copyright held by Pitt. At December 31, 2020, Pitt determined that Hoffman would probably be successful against Pitt for an estimated amount of \(\$ 800,000\). Appropriately, an \(\$ 800,000\) loss was
The following information pertains to a fire insurance policy in effect during the calendar year 2020, covering Vail Company's inventory:Vail's inventory averages \(\$ 500,000\) uniformly throughout the year. How much of a contingent liability should Vail accrue at December 31, 2020, to cover
Marathon Inc. estimates that it will be required to spend approximately \(\$ 40,000\) to remove an underground storage tank in 10 years that was constructed in 2020 for \(\$ 300,000\). The present value of this obligation based on the company's discount rate of \(8 \%\) is \(\$ 18,528\). Record the
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