Included in Kabayan Corporation's liability account balances at December 31, 2020, were the following: Note payable, bank
Question:
Included in Kabayan Corporation's liability account balances at December 31, 2020, were the following:
Note payable, bank 2,800,000
Liability under capital lease 430,000
Deferred income taxes 360,000
Transactions during Y2021 and other information relating to Kabayan's liabilities were as follows:
a) The principal amount of the note payable is Php 2.8M and bears interest at 15%. The note is dated April 1, 2020, and is payable in four equal annual installments of Php 700K beginning April 1, 2021. The first principal and interest payment was made on April 1, 2021.
b) The capitalized lease is for a ten-year period beginning December 31, 2018. Equal annual payments of Php 100K are due on December 31, of each year and the 14% interest rate implicit in the lease is known by Kabayan. The present value at December 31, 2020, of the seven remaining lease payments (due December 31, 2021, through December 31, 2027) discounted at 14% was Php 430K.
c) Deferred income taxes are provided in recognition of timing differences between financial statement and income tax reporting of depreciation. For the year ended December 1, 2021 depreciation per tax return exceeded book depreciation by Php 90K. KAbayan's effective income tax rate for Y2021 was 40%.
d) On July 1, 2021, Kabayan issued for Php 1,774,000, Php 2,000,000 face amount of its 10%, Php 1,000 bonds. The bonds were issued to yield 12%. The bonds are dated July 1, 2021, and mature on July 1, 2027. Interest is payable annually on July 1. Kabayan uses the interest method to amortize bond discounts.
QUESTIONS:
Provide the following balances as of December 31, 2021
Long-term liabilities:
1. 15% note payable, bank, due in annual installments of Php 700K less current installment.
2. Liability under capital lease, the net present value of lease payments, the less current installment.
3. 10% bonds payable due July 1, 2027, a less unamortized discount of Php 219,560 at an effective interest rate of 12% at the date of issue.
4. Deferred income taxes current Portion of long-term liabilities:
5. Note payable bank
6. Liability under capital least accrued interest payable
7. Note payable, bank
8. Bonds payable interest Expense:
9. Note payable, bank
10. Liability under capital lease
11. Bonds Payable
12. Deferred Income tax expense.
Accounting Principles
ISBN: 978-1119411482
13th edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso