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intermediate accounting 11th

Intermediate Accounting IFRS International Adaptation 5th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions

P13.13 (LO 3) (Debtor Entries for Continuation of Debt with New Effective Interest) Crocker plc owes Yaeger Ltd. a 10-year, 10% note in the amount of £330,000 plus £33,000 of accrued interest. The note is due today, December 31, 2025. Because Crocker is in financial trouble, Yaeger agrees to
P13.12 (LO 3) (Modification of Note under Different Circumstances) Halvor Corporation is having financial difficulty and therefore has asked Frontenac National Bank to restructure its $5 million note outstanding. The present note has 3 years remaining and pays a current rate of interest of 10%. The
P13.11 (LO 3) (Modification of Debt) Daniel Perkins is the sole shareholder of Perkins Inc., which is currently under protection of the U.S. bankruptcy court. As a “debtor in possession,” he has negotiated the following revised loan agreement with United Bank. Perkins Inc.’s $600,000, 12%,
P13.10 (LO 1, 3) (Entries for Life Cycle of Bonds) On April 1, 2025, Sarkar Sailboats sold 15,000 of its 11%, 15-year, R$1,000 face value bonds to yield 12%. Interest payment dates are April 1 and October 1. On April 2, 2026, Sarkar took advantage of favorable prices of its shares to extinguish
P13.8 (LO 1, 3) (Comprehensive Bond Problem) In each of the following independent cases, the company closes its books on December 31.1. Sanford Co. sells $500,000 of 10% bonds on March 1, 2025. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2028. The
P13.7 (LO 1, 3, 4) (Issuance and Retirement of Bonds; Income Statement Presentation)Chen Ltd. issued its 9%, 25-year mortgage bonds in the principal amount of ¥30,000,000 on January 2, 2011, at a discount of ¥2,722,992 (effective rate of 10%). The indenture securing the issue provided that the
P13.6 (LO 2) (Entries for Zero-Interest-Bearing Note; Payable in Installments) Sabonis Cosmetics Co. purchased machinery on December 31, 2024, paying $50,000 down and agreeing to pay the balance in four equal installments of $40,000 payable each December 31. An assumed interest rate of 8%is
P13.5 (LO 2) (Entries for Zero-Interest-Bearing Note) On December 31, 2025, Faital plc acquired a computer system from Plato Group by issuing a £600,000 zero-interest-bearing note, payable in full on December 31, 2029. Faital’s credit rating permits it to borrow funds from its several lines of
P13.4 (LO 1) Writing (Effective-Interest Method) Samantha Cordelia, an intermediate accounting student, is having difficulty amortizing bond premiums and discounts using the effective-interest method. Furthermore, she cannot understand why IFRS requires that this method be used. She has come to you
P13.3 (LO 1) (Negative Amortization) Good-Deal Auto developed a new sales gimmick to help sell its inventory of new automobiles. Because many new car buyers need financing, Good-Deal offered a low down payment and low car payments for the first year after purchase. It believes that this promotion
P13.2 (LO 1, 3) (Issuance and Retirement of Bonds) Venzuela Co. is building a new hockey arena at a cost of $2,500,000. It received a down payment of $500,000 from local businesses to support the project and now needs to borrow $2,000,000 to complete the project. It decides to issue $2,000,000 of
P13.1 (LO 1) Groupwork (Analysis of Amortization Schedule and Interest Entries) The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet SpA on January 1, 2019, and the subsequent interest payments and charges. The company’s year-end is December 31, and
E13.22 (LO 4) (Long-Term Debt Disclosure) At December 31, 2025, Redmond Company has outstanding three long-term debt issues. The first is a $2,000,000 note payable which matures June 30, 2028. The second is a $6,000,000 bond issue which matures September 30, 2029. The third is a$12,500,000 sinking
E13.21 (LO 4) (Fair Value Option) Fallen AG commonly issues long-term notes payable to its various lenders. Fallen has had a pretty good credit rating, such that its effective borrowing rate is quite low(less than 8% on an annual basis). Fallen has elected to use the fair value option for the
E13.20 (LO 3) (Entries for Settlement of Debt) Consider the following independent situations.Instructionsa. Gottlieb Stores owes €199,800 to Ceballos SpA. The debt is a 10-year, 11% note. Because Gottlieb is in financial trouble, Ceballos agrees to accept some land and cancel the entire debt. The
E13.19 (LO 3) (Loan Modification) Use the same information as in E13.18 except that Sterling Bank reduced the principal to £1,900,000 rather than £2,400,000. On January 1, 2029, Barkley pays£1,900,000 in cash to Sterling Bank for the principal.Instructionsa. Prepare the journal entries to record
E13.18 (LO 3) (Loan Modification) On December 31, 2025, Sterling Bank enters into a debt restructuring agreement with Barkley plc, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, £3,000,000 note receivable by the following modifications.1. Reducing
E13.17 (LO 3) (Settlement of Debt) Strickland Company owes $200,000 plus $18,000 of accrued interest to Moran State Bank. The debt is a 10-year, 10% note. During 2025, Strickland’s business deteriorated due to a faltering regional economy. On December 31, 2025, Moran State Bank agrees to accept
E13.16 (LO 1, 3) (Entries for Retirement and Issuance of Bonds) Kobiachi Group had bonds outstanding with a maturity value of ¥5,000,000. On April 30, 2026, when these bonds had an unamortized discount of ¥100,000, they were called in at 104. To pay for these bonds, Kobiachi had issued other
E13.15 (LO 1, 3) (Entries for Retirement and Issuance of Bonds) On June 30, 2017, Mendenhal plc issued 8% bonds with a par value of £600,000 due in 20 years. They were issued at 82.8414 to yield 10%and were callable at 104 at any date after June 30, 2025. Because of lower interest rates and a
E13.14 (LO 1, 3) (Entry for Retirement of Bond; Bond Issue Costs) On January 2, 2022, Prebish Corporation issued $1,500,000 of 10% bonds to yield 11% due December 31, 2031. Interest on the bonds is payable annually each December 31. The bonds are callable at 101 (i.e., at 101% of face amount), and
E13.13 (LO 2) (Imputation of Interest with Right) On January 1, 2025, Durdil A.Ş. borrowed and received 500,000 from a major customer evidenced by a zero-interest-bearing note due in 3 years.As consideration for the zero-interest-bearing feature, Durdil agrees to supply the customer’s inventory
E13.12 (LO 2) (Imputation of Interest) The following are two independent situations.Instructionsa. On January 1, 2025, Spartan Inc. purchased land that had an assessed value of $390,000 at the time of purchase. A $600,000, zero-interest-bearing note due January 1, 2028, was given in exchange. There
E13.11 (LO 2) (Entries for Zero-Interest-Bearing Notes) On January 1, 2025, McLean AG makes the two following acquisitions.1. Purchases land having a fair value of €300,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of €505,518.2. Purchases equipment by
E13.10 (LO 1) (Information Related to Various Bond Issues) Pawnee Inc. has issued three types of debt on January 1, 2025, the start of the company’s fiscal year.a. $10 million, 10-year, 13% unsecured bonds, interest payable quarterly. Bonds were priced to yield 12%.b. $25 million par of 10-year,
E13.9 (LO 1) (Entries for Bond Transactions) On January 1, 2025, Osborn plc sold 12% bonds having a maturity value of £800,000 for £860,651.79, which provides the bondholders with a 10% yield.The bonds are dated January 1, 2025, and mature January 1, 2030, with interest payable December 31 of
E13.4 (LO 1) (Entries for Bond Transactions) Foreman Cleaners issued €800,000 of 10%, 20-year bonds on January 1, 2025, at 119.792 to yield 8%. Interest is payable semiannually on July 1 and January 1.Instructions Prepare the journal entries to record the following.a. The issuance of the bonds.b.
E13.3 (LO 1) (Entries for Bond Transactions) Presented below are two independent situations.1. On January 1, 2025, Divac SA issued €300,000 of 9%, 10-year bonds at par. Interest is payable quarterly on April 1, July 1, October 1, and January 1.2. On June 1, 2025, Verbitsky AG issued €200,000 of
E13.2 (LO 1, 2) (Classification) The following items are found in the financial statements.a. Interest expense (credit balance).b. Bond issue costs.c. Gain on repurchase of debt.d. Mortgage payable (payable in equal amounts over next 3 years).e. Debenture bonds payable (maturing in 5 years).f.
E13.1 (LO 1) (Classification of Liabilities) Presented below are various account balances.a. Bank loans payable of a winery, due March 10, 2028. (The product requires aging for 5 years before sale.)b. Serial bonds payable, €1,000,000, of which €250,000 are due each July 31.c. Amounts withheld
BE13.17 (LO 4) At December 31, 2025, Hyasaki Corporation has the following account balances.Bonds payable, due January 1, 2033 $1,912,000 Interest payable 80,000 Show how the above accounts should be presented on the December 31, 2025, statement of financial position, including the proper
BE13.16 (LO 4) Shonen Knife Ltd. has elected to use the fair value option for one of its notes payable.The note was issued at an effective rate of 11% and has a carrying value of HK$16,000. At yearend, Shonen Knife’s borrowing rate has declined; the fair value of the note payable is now
BE13.15 (LO 3) Refer to the note issued by Coldwell AG in BE13.9. During 2025, Coldwell experiences financial difficulties. On January 1, 2026, Coldwell negotiates a modification of the terms of the note.Under the modification, Flint Hills Bank agrees to reduce the face value of the note to
BE13.14 (LO 3) Refer to the note issued by Coldwell AG in BE13.9. During 2025, Coldwell experiences financial difficulties. On January 1, 2026, Coldwell negotiates a settlement of the note by issuing to Flint Hills Bank 20,000 €1 par Coldwell ordinary shares. The ordinary shares have a market
BE13.13 (LO 3) On January 1, 2025, Henderson Corporation retired $500,000 of bonds at 99. At the time of retirement, the unamortized premium was $15,000. Prepare Henderson’s journal entry to record the reacquisition of the bonds.
BE13.12 (LO 2) Shlee SA issued a 4-year, €60,000, zero-interest-bearing note to Garcia Company on January 1, 2025, and received cash of €60,000. In addition, Shlee agreed to sell merchandise to Garcia at an amount less than regular selling price over the 4-year period. The market rate of
BE13.11 (LO 2) McCormick Corporation issued a 4-year, $40,000, 5% note to Greenbush Company on January 1, 2025, and received a computer that normally sells for $31,495. The note requires annual interest payments each December 31. The market rate of interest for a note of similar risk is 12%.
BE13.10 (LO 2) Samson plc issued a 4-year, £75,000, zero-interest-bearing note to Brown Ltd. on January 1, 2025, and received cash of £47,664. The implicit interest rate is 12%. Prepare Samson’s journal entries for (a) the January 1 issuance and (b) the December 31 recognition of interest.
BE13.9 (LO 2) Coldwell AG issued a €100,000, 4-year, 10% note at face value to Flint Hills Bank on January 1, 2025, and received €100,000 cash. The note requires annual interest payments each December 31. Prepare Coldwell’s journal entries to record (a) the issuance of the note and (b) the
BE13.8 (LO 1) Tan Ltd. issued HK$600,000,000 of 7% bonds on November 1, 2025, for HK$644,636,000.The bonds were dated November 1, 2025, and mature in 10 years, with interest payable each May 1 and November 1. The effective-interest rate is 6%. Prepare Tan’s December 31, 2025, adjusting entry.
BE13.7 (LO 1) Assume the bonds in BE13.6 were issued for $644,636 with an effective-interest rate of 6%. Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.
BE13.6 (LO 1) On January 1, 2025, JWS Corporation issued $600,000 of 7% bonds, due in 10 years.The bonds were issued for $559,224, and pay interest each July 1 and January 1. Prepare the company’s journal entries for (a) the January 1 issuance, (b) the July 1 interest payment, and (c) the
BE13.5 (LO 1) Devers plc issued £400,000 of 6% bonds on May 1, 2025. The bonds were dated January 1, 2025, and mature January 1, 2027, with interest payable July 1 and January 1. The bonds were issued at face value plus accrued interest. Prepare Devers’ journal entries for (a) the May 1
BE13.4 (LO 1) Assume the bonds in BE13.2 were issued at 92.6393 to yield 12%. Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31.
BE13.3 (LO 1) Assume the bonds in BE13.2 were issued at 108.11 to yield 8%. Prepare the journal entries for (a) January 1, (b) July 1, and (c) December 31.
BE13.2 (LO 1) The Colson Company issued €300,000 of 10% bonds on January 1, 2025. The bonds are due January 1, 2030, with interest payable each July 1 and January 1. The bonds are issued at face value.Prepare Colson’s journal entries for (a) the January issuance, (b) the July 1 interest
BE13.1 (LO 1) Whiteside Ltd. issues ¥500,000 of 9% bonds, due in 10 years, with interest payable semiannually.At the time of issue, the market rate for such bonds is 10%. Compute the issue price of the bonds.
27. Explain how a non-consolidated subsidiary can be a form of offbalance-sheet financing.
26. What are some forms of off-balance-sheet financing?
25. What is off-balance-sheet financing? Why might a company be interested in using off-balance-sheet financing?
24. What disclosures are required relative to long-term debt and sinking fund requirements?
23. Pierre SA has a 12% note payable with a carrying value of €20,000.Pierre applies the fair value option to this note; given a decrease in market interest rates, the fair value of the note is €22,600. Prepare the entry to record the fair value option for this note.
22. What is the fair value option? Briefly describe the controversy of applying the fair value option to financial liabilities.
21. What are the general rules for measuring and recognizing gain or loss by a debt extinguishment with modification?
20.a. In a debt modification situation, why might the creditor grant concessions to the debtor?b. What type of concessions might a creditor grant the debtor in a debt modification situation?
19. What are the general rules for measuring a gain or a loss by a debtor in a debt extinguishment?
18. Why would a company wish to reduce its bond indebtedness before its bonds reach maturity? Indicate how this can be done and the correct accounting treatment for such a transaction.
17. What is the “call” feature of a bond issue? How does the call feature affect the amortization of bond premium or discount?
16. Identify the situations under which debt is extinguished.
15. Differentiate between a fixed-rate mortgage and a variable-rate mortgage.
14. What are the considerations in imputing an appropriate interest rate?
13. When is the stated interest rate of a debt instrument presumed to be fair?
12. How is the present value of a non-interest-bearing note computed?
11. What is done to record properly a transaction involving the issuance of a non-interest-bearing long-term note in exchange for property?
10. Will the amortization of a bond discount increase or decrease bond interest expense? Explain.
9. Vodafone (GBR) recently issued debt. How should the costs of issuing these bonds be accounted for?
8. Zopf NV sells its bonds at a premium and applies the effectiveinterest method in amortizing the premium. Will the annual interest expense increase or decrease over the life of the bonds? Explain.
7. What is the required method of amortizing discount and premium on bonds payable? Explain the procedures.
6. Briefly explain how bond premium or discount affects interest expense over the life of a bond.
5. Under what conditions of bond issuance does a discount on bonds payable arise? Under what conditions of bond issuance does a premium on bonds payable arise?
4. Distinguish between the following values relative to bonds payable.a. Maturity value.c. Market (fair) value.b. Face value.d. Par value.
3. Distinguish between the following interest rates for bonds payable.a. Yield rate.d. Market rate.b. Nominal rate.e. Effective rate.c. Stated rate.
2. Novartis Group (CHE) has issued various types of bonds, such as term bonds, income bonds, and debentures. Differentiate between term bonds, mortgage bonds, collateral trust bonds, debenture bonds, income bonds, callable bonds, registered bonds, bearer or coupon bonds, convertible bonds,
1. (a) From what sources might a company obtain funds through long-term debt? (b) What is a bond indenture? What does it contain?(c) What is a mortgage?
CA12.7 (LO 2) Ethics (Ethics of Warranties) The Dotson Company, owner of Bleacher Mall, charges Rich Clothing Store a rental fee of $600 per month plus 5% of yearly profits over $500,000. Matt Rich, the owner of the store, directs his accountant, Ron Hamilton, to increase the estimate of bad debt
CA12.6 (LO 2) (Warranties and Litigation Provisions) The following two independent situations involve litigation provisions.Part 1: Benson plc sells two products, Grey and Yellow. Each carries a 1-year warranty.1. Product Grey—Product warranty costs, based on past experience, will normally be 1%
CA12.5 (LO 2) (Possible Environmental Liability) Presented below is a note disclosure for Matsui Group.Litigation and Environmental: Matsui has been notified or is a named or a potentially responsible party in a number of governmental and private actions associated with environmental matters.These
CA12.4 (LO 3) Writing (Contingencies) On February 1, 2025, a huge storage tank owned by Viking Manufacturing exploded. Windows in houses and other buildings within a one-mile radius of the explosion were severely damaged, and a number of people were injured. As of February 15, 2025 (when the
CA12.3 (LO 1) Writing (Refinancing of Short-Term Debt) Kobayashi Ltd. reports in the current liability section of its statement of financial position at December 31, 2024 (its year-end), short-term obligations of ¥15,000,000, which includes the current portion of 12% long-term debt in the amount
CA12.2 (LO 1) (Current vs. Non-Current Classification) Rodriguez Corporation includes the following items in its liabilities at December 31, 2024.1. Notes payable, $25,000,000, due June 30, 2025.2. Deposits from customers on equipment ordered by them from Rodriguez, $6,250,000.3. Salaries payable,
CA12.1 (LO 1) (Nature of Liabilities) Presented below is the current liabilities section of Micro SE (amounts in thousands).2025 2024 Current liabilities Notes payable € 68,713 € 7,700 Accounts payable 179,496 101,379 Compensation to employees 60,312 31,649 Accrued liabilities 158,198 77,621
P12.14 (LO 2) (Warranty and Coupon Computation) Schmitt Company must make computations and adjusting entries for the following independent situations at December 31, 2025.1. Its line of amplifiers carries a 3-year assurance-type warranty against defects. On the basis of past experience, the
P12.13 (LO 2, 3, 4) Groupwork Writing (Liability Errors) You are the independent auditor engaged to audit Millay Ltd.’s December 31, 2025, financial statements. Millay manufactures household appliances. During the course of your audit, you discover the following situations.1. Millay began
P12.12 (LO 2) (Warranties and Premiums) Garison Music Emporium carries a wide variety of musical instruments, sound reproduction equipment, recorded music, and sheet music. Garison uses two sales promotion techniques—warranties and premiums—to attract customers.Musical instruments and sound
P12.10 (LO 2, 3) Writing (Litigation Claim: Entries and Essay) On November 24, 2024, 26 passengers on Wong Airlines Flight No. 901 were injured upon landing when the plane skidded off the runway. Personal injury suits for damages totaling NT$9,000,000 were filed on January 11, 2025, against the
P12.9 (LO 2, 4) (Premium Entries and Financial Statement Presentation) Sycamore Candy offers an MP3 download (seven-single medley) as a premium for every five candy bar wrappers presented by customers together with £2.50. The candy bars are sold by the company to distributors for £0.30 each.The
P12.8 (LO 2) (Premium Entries) To stimulate the sales of its Alladin breakfast cereal, Loptien NV places one coupon in each box. Five coupons are redeemable for a premium consisting of a children’s hand puppet. In 2026, the company purchases 40,000 puppets at €1.50 each and sells 480,000 boxes
P12.7 (LO 2) (Warranties) Alvarado Company sells a machine for $7,400 with a 12-month warranty agreement that requires the company to replace all defective parts and to provide the repair labor at no cost to the customers. With sales being made evenly throughout the year, the company sells 600
P12.6 (LO 2) (Extended Warranties) Dos Passos SA sells televisions at an average price of R$900 and also offers to each customer a separate 3-year warranty contract for R$90 that requires the company to perform periodic services and to replace defective parts. During 2025, the company sold 300
P12.5 (LO 2) Groupwork (Warranties) Brooks Ltd. sells computers under a 2-year warranty contract that requires the company to replace defective parts and to provide the necessary repair labor. During 2025, Brooks sells for cash 400 computers at a unit price of £2,500. On the basis of past
P12.4 (LO 1) (Payroll Tax Entries) Below is a payroll sheet for Otis Import plc for the month of September 2025. Assume a 10% income tax rate for all employees and an 8% Social Security tax on employee and employer.Name Earnings to Aug. 31 September Earnings Income Tax Withholding Social Security
P12.3 (LO 1) (Payroll Tax Entries) Cedarville Company pays its office employee payroll weekly.Below is a partial list of employees and their payroll data for August. Because August is their vacation period, vacation pay is also listed.Employee Earnings to July 31 Weekly Pay Vacation Pay to Be
P12.1 (LO 1) Groupwork (Current Liability Entries and Adjustments) Described below are certain transactions of Edwardson AG. The company uses the periodic inventory system.1. On February 2, the company purchased goods from Martin Company for €70,000 subject to cash discount terms of 2/10, n/30.
E12.25 (LO 4) (Ratio Computations and Effect of Transactions) The following information is related to Leland AG.Leland AG Statement of Financial Position December 31, 2025 Equipment (net) €150,000 Share capital—ordinary (par €5) €260,000 Land 20,000 Retained earnings 141,000 Prepaid
E12.24 (LO 4) (Ratio Computations and Analysis) EAN Ltd.’s condensed financial statements provide the following information (amounts in thousands).EAN Ltd.Statement of Financial Position December 31, 2025 December 31, 2024 Property, plant, and equipment ¥ 897,000 ¥ 853,000 Current assets
E12.23 LO 4) (Ratio Computations and Discussion) Chen Group has been operating for several years, and on December 31, 2025, presented the following statement of financial position (amounts in thousands).Chen Group Statement of Financial Position December 31, 2025 Plant assets (net) ¥220,000 Share
E12.22 (LO 4) (Financial Statement Impact of Liability Transactions) Presented below is a list of possible transactions.1. Purchased inventory for €80,000 on account (assume perpetual system is used).2. Issued an €80,000 note payable in payment on account (see item 1 above).3. Recorded accrued
E12.21 (LO 2) (Provisions) The following situations relate to Bolivia Company.1. Bolivia Company provides a warranty with all products sold. It estimates that it will sell 1,000,000 units of its product for the year ended December 31, 2025, and that its total revenue for the product will be
E12.20 (LO 2) (Provisions) Presented below are three independent situations.1. Bruegger Transportation purchased a ship on January 1, 2025, for £20,000,000. The useful life of the ship is 40 years, but it is subject to a government-mandated major overhaul every 4 years with a total projected cost
E12.19 (LO 2) Groupwork (Premiums) The following are three independent situations.1. Hairston Stamp Company records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Hairston’s past experience indicates that only 80% of the stamps sold to

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