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    317 views215 pages

    Intermediate Accounting 2 Valix Answer Key Compress

    Uploaded by

    Maria Belen Carrillo

    Copyright:

    © All Rights Reserved
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    INTERMEDIATE ACCOUNTING VOLUME TWO. Valix Peralta Valix 2019 Edition SOLUTION MANUAL. 1 CHAPTER 1 1,000,000 280.000 1,000,000 200,000 1,000,000 130,000 ooo cow 5,000,000 2.000.000, 500,000 4.00000 500,000 1,000,000, 100,000 300,000 Estimted waranty Usb 00.000 sumated dages payable 700,000 Accrued abilies 00,000 stmted premium lability ime Toul eure libilities oe Problers 1-3 Employee income tases wield yoo Cath overdeit 1.300,000, “Accor receivable wit ced balance 750.000 estate waranty aiity $00,000 Tatimaed damages payable 1500,000, Account payable 3,000,000 ‘Accred incest on Bonds payable from October 1 December 31,2020, {500,000 x 12% 012) —se000 Total curentUnbilaies Hoo ‘The bonds will be paid ove $ years because the sriannual payment is PS0,000. Since the lst bod will te pd on Octaber 1, 2026, theft ond wil be pid on Ape 1, 2022 Accordingly thre 0 creatly smatering bondi 2031, ‘The stock dividend payable isnot an accounting ably but presented as prt of sharholles equity as an ‘addition 0 share capita. Problem 1-5 ‘Current lability: P3,000,000 ‘The dt snl be roped os « cue lity because i pyable a the epg year and wl at be ‘since wh ope aon ‘Current labitity: 6,000,000 The requirement to reclassify cremly matring da 2 cure abil incades db ht i alte by the ‘seo i ugg yea! —even te et a Ape oe ald ‘Noncurrent lability: P4,000,000 ‘The carat laity clamificaton cae atte whch the era he ght eae payment cae st easing volt of «pois fhe det gerne kes cla wales i proba evan il Sevrecedwain the pace eri I this ane te cuting vali i expecied wo be creed within ct and ‘Seti she ayshnld cased a oe ‘Current labity:P5,000,000 ‘The note payable wae eircom» log his on nuary 3, 2021 afer heen of he cron opering peel Tn then ya bun tlhe led tne ah Problem 1-6 1. Cumea iabitis Accoums payable 7.000:900 Note payable bank 12,500.00 Accrued expose main 23,000,000 ‘Noncaren abs: Morgage pape 4.000.000 ‘Note payable due 2022 oom zona Tonal ities Eu 2. Thenete pupal to ban pid om the prc f the nunc fsa capital 80 on Jeary, 2 andthe avait of facing grement om Febru 15,2021 wi aca capable comer ik oe Apel I, 2021 i he arma af PR GNNIND. Neve the mate pple shold enn to be ‘med ar caret Problem 1 Accounts payable 600.000 Note payable ~ bank 5.000.000 fetes payable 130.000 Mortgage note payable 2,000.00 Bonds payable foouaae Problem 148 Answer A Accoums payable (4,000,000 + 100,000) ‘Accred experies (Cre tlances in customers accounts Entmated habit for coupons “ola curen abiies Problem 1.9 Answer © Accoums payable 1900.00 ‘Dwvidenis payable “0.000 Income ax payable ‘00.000 ote payable a0, “Total cent abilies i Problem 1-10 Answer D 14 note payable de 2021 30.000 {6 note payable maturing December 31,2021 preven Tolal amen matures pen} Problem 1-11 Answer B 12% note payable refinanced on January 31, 20201, soos Problem 1-12 Answer © Accounts payable and accrued intrest 1,000,000 ‘Debentures payable ~ current potion perry ‘Tota current ities Tom I he refinancing cccurs on or before the end of the reporting period, tbe refinancing isan adjusting ‘vent meaning the aiption is casi ws noun baby Accordingly he 12% note payable shall be classified as moncurrent because the refrancing s made 0 ‘December 31,2020, Problem 1-13 Answer A. ‘The ene amount of 7750.00 i shown as cure laity cause the note payable de wo be sted ‘within one yar regardless ofthe isiance of bonds payable Problem 1-14 Anawer C Note payable 2,000,000 ‘efinanced on December 31, 2020 noncuent postion (80% x 1500.00) Loew. [Not payable not refinanced, cusrent portion =m Problem 1-18 Answer B oe Problem 1-16 Answer C ‘Unarmed revene~ January 650,000 AGE Git cericaes sd 220.000 Tout 900.000 Less: Git eriticates redeemed 1.980.000 Unredcemed gi cerfials ton = 20sn.000 ‘Unarmed revense = December 31 sam 750,000 sono 3250.00 « 2s0,000) azso0u) um Fis comrat year (40% x 600,000) 240,000 ‘Seean contract year (6% x 600,000) iam “ola contracts soldi 2020 ‘sonoma ‘Since the contracts te so evenly, only oneal ofthe 40% i arnd in 2020 and one-half wil be eamed {in 2021, One-half ofthe 6? wll be earned in 2021 and one-half wl be cared in 2022 Question 1 Answer A Question 2 Answer B “Tota contracts 014 (1,000 x 40) £0,000 Les: Contacts earned in 2020 (240,000 12) soo Deferred service revemae ~ December 31,2020 aa Question 3 Answer C ‘Remaining one-half of fit contrat year (240,000 x 12) 120,000 stone half ofthe second contac eat (340,000 sa000 “otal service contac revenue earmed i 2021 om Question 4 Answer © Remaining one-half f second cooiact yea (340,00 x 1/2) asome Summary ‘Contac revenue fn 2020 120.00 Contract revene in 2021 300,000 Cootractrevenue in 2022 sa000 ‘om Problem 1-19 Question 1 Answer A Question 2 Answer B 2020 sales 40% x $0,000 equals P200,00, This amount i earned ome hal in 2020 or P10, 000 and one-balin 2021 o£ P100,000, (4% x 50,000 equals P300,00, This amount is earned ome half in 2621 or P8000 and oneal in 2022 ‘P150,000, “Tota contracts old in 2020 00,000 Contest revenue in 2020 aseoo Uneared contract rvenve ~ December 31, 2020 auom ‘Question 3 Answer © Question 4 Answer D 2021 sales 40% 600,00 equals P2$0.000 This amount is came one-half ia 2021 or P120,00 and one-half in 2022 oe P20000. {60% 60,00 equals P3400. This amount is ened one-half in 2022 and oneal in 2023, Remaining one-half of fist contract year 2020 sales (200.00 x12) on.000 First one ha fseood contrat year ~ 2020 sales 300,00 x 12) 130.000 First one-half f fist contact year 2021 sales (240,000 x 1/2) age Total contact revenue for 2021 aoe Tou contrats in 2020 and 2001 1.100.000 ‘Teal weaned subscription revenue - December 31,2020, ‘Timo ‘Tre abore subscriptions wl be served inthe net publication in 2021 Problem 1-21 Answer B cae Problem 122 ‘Question | Answer © ‘Question 2 Answer © Subscriptions wecived in 2020 that will expire in 2022 125000 Subvctptions ett in 2021 that will expire in 2022 200.000 ‘Subacriptions received in 2021 tht wil expire in 2023 pent Uncared sbscripionrevenoe = December 31,2021, 00 ‘Subsriptonrevene for 2021 (185,000 + 130,000) uu Problem 1-23 Answer C ‘Containers deposit on January , 2020 applicable wo 2018 deliveries ‘Les: Containers returned in 2020 applicable wo 2018 dives Balance exped and no ngs rfondable Containers’ deposit = January 1, 2020 [Add Containers” deposit in 2020, Toul Less: Containers returned in 2020 313.000 Containers not tured a expired — Containers deposi December 31, 2020 Problem 1:24 Answer C Adeances— January | [Advances received Toul ‘Advances applied ‘Advances canceled ‘Advances December 31 Problem 1-28 Answer C xcrow acount ability January 1 [Add Escrow payment feceived 1sw0000, Ineret erento fens 080 Tout Less: Real ett tas paid 70.000 ‘Service fee (10% x $0,000) ma Escrow accounts Habilty - December 3 Problem 1-26 Answer B Escrow lability, January 1, 2020 sero deposit recived fom January 1 September 30, 2020 (250,00 «9 mans) Tou Leas: Payment for rea estat tax rom January 110 September 30, 2020 onthe quarters (2.300.000 x34) scr lability, September 30, 2020, Problem 1.27 1. Bonus (3% x $250,000) 2 B= .05(5.250,000- B) 242.500 058, B+ osB= 262,500 05H ~ 262.500 2621300/ 1.08 2s0.000 EE EE: EE: 1.140.00 20.000 (1,440,000) 300,00 200 25,000 Proof came bere hom and before tax onus Income after boas before “Mokipiy by Rone 3 B = 0545.250,000-B-1) 30(5250.000 -B) 105 [5 250,000 -B- 30,5 250,000~ 8) 195 (5.250.000 B 1,575,000 + 308) 4 B = 845,280,000. 1) T= 30(5250,000-B) B= (08[5.250,000 ~ 30 (5.280.000 By) B= .08(5 28,000 - 1.575.000 + 308) B= 2021800. 78,780 +0158 B-01sB = 183730 SSB = 183780 B= 183750/ 985 B= ines Proof Income before Homa an efor tax ‘Tax (5,250,000 Inf S48» 30%) Income after ax and before bos Matipty by Bonus Problem 1-28 Answer B 10(1,650.000 ~ 8) 145,00 108 165,00 165.0 i 000 710 280000 HL 5.280000 cme So7za68 usa 3380735 5280000 cae S706 Problem 1-29 Answer A. Income afer bonus and ax (280,00 / 10%) Income before ax (280,000 70%) Income before bonus and x (400,000 + 280,000) Less: Tax (0% x 4,00, 000) coe afer bons and ts Problem 1-30 Answer A Income afer bos before as (60,00 / 125%) Blows (25% x 480,00) Problem 1-31 Answer Problem 1-32 Problem 1-35. Lp 1K 28 2¢ 3B XA ae ac sD sD 6B TA we 2D me Problem 1-58 Problem 1-36 me Le ic 28 LA xe aD 4B SA 3D 68 ha a D we ee>on 2.800.000 “$000,000 4.280,000 4.281.000 EE TEE Problem 1-34 Problem 2-1 2020 1 Cash Sales 2 remus ‘cab 3. Cash (5,000 10) Premium expense (S.000 x 40) Premium (8,00 x50) 4. Premium expense (5.00 x 20) ‘Cash Premium expense (2.000 x 60) stimted prem aby 021 1 Estimated peti aii, ‘romnum expemse Reversing erry ca Sales 2 Premioms ‘Cash 3. Cash 9.0008 10) ‘Premium expense (9.000 x40) Premiums (9.000 x $0) 4. Promium expense (9,000 x20) Cash 5. Premium expense (3.000 x 60) Estimated premium abity Problem 2-2 2020 1 Cas ‘Sales 2. Premiums -towels ‘Cosh 3. Cas (1.000420) Prem expense Premiums towels (1,000 100) 4. Premium expense (1,00 x5) ‘Ca 5. Prema expente Estimated pcm habiey (0 8) 0.000 100.000 120.000 20.000 +4200,000 $80.00) ‘6000 360.000 2.500,000 175000 20.000 $000) $1900) $3,600,000 0.000 180,000 2.500.000 173.000 5.00 ‘31000 201 1. Estimated premium lis Premium expense cu ‘Sales 2 Premiums -towele Cash 4. Cash (1.4008 20) Premium expense Premiums sowels (1,80 x 100) 4. Premium expense (1.800 x5) ‘Cash S. Memium expense ‘Estimated premian ibiity (800 85) ‘Statement classification 1. Cash 400,000. 9), ‘Sales 2 Premiums ‘Cash 3 Premium expense ‘Cash 4 Cash 00045) ‘Premium expense (8,000 x $5) Premives (000 x 90) 5. Premium expense (2.000 x 5) stad premium ibility Bost cmps to be redeemed (28% x 00,000) Less: Bote aps redeemed (4,00 pens x 10) ore cape aneanding ‘Premiums tobe dstbued oe the balance of bate eps (20,000/10) (6 Premium expeme ‘Cash (30x 5,00) 3:128,.000 36.000 4.000 9.000 2018 75000 si,000 136.00 30.000 40000 0,000 70,000 10,000 1000 128.000, 180.0 720.000 10,000 100.00 150,000 Problem 2-4 1. Rae expense stimaed rebate Hib (80% x 20.000 x PSO) 2 Fatima rebate ability Cash Problem 2-5 2020 ‘Cash 7,000,000 / 8,000,000 7,000,000) ‘Sales (1,000 8,000,000» 7,000,000) Uaearne revenue - pints neared revene points ‘Seles Points tobe redeemed (8076 30.000) Revenae to be ecopized in 2020 (15,00 / 40.000 x $75,000) 2001 neared revenue points ‘Sales Pins tobe redeemed (55% x 0.000) ‘Toa pins redeemed wo 1231/2021 (15,000 + 7,980) ‘Camulaive revenue - 12/31/2021 (2.980 42,500 x 67,000), Pints to be redeemed (85% x 50,000) Total pois redeemed to 1231/2022 (15,000 + 7.980 + 2,550) ‘Cumulative revenue ~ 12/31/2022 (25,500 42,500 75,000), Revense recognized in 2021 Revemae tobe recognized it 2022 2028 neared revemie points Sales Pins oe redeemed (90% x $0,000) Total pois edeemed wo 12/31/2023 (15,00 + 7.980 + 2,850 1,000) ‘Camulaive revenae~ 12/31/2025 (40.500 / 45,000 75,600), 500.000 00,000 7,900,000 s24.i2s 4aars 52500 eon) KS 1 Problem 246 ‘Coupons o be redeemed (160,000 x 66) 96,000 {Les Coupons redeemed 2000 Balance om Question | Answer B Premium expense (6,000/5 = 19.200 x20) ao ‘Question 2 Answer B Nurber of premiums (6,000 / 5) ie ‘Amount of ability (11200.x20) a0 Probiems 2.7 ‘Coupons ob redeemed (80% x $00,000) 400.000 {ese Coupons edema a (Coupons ouatanding done Question 1 Answer A. Premium expense (400,000 x 18) Penny ‘Question 2 Answer B bility for unredcemed coupons (100,000 x15) sooo Problem 2-8 Answer B Premium expense (6,000 x 750) sooo 6.000 ering Basketballs o be distebute (100,000 6% 10) askethalle dst Balance “Muley by cont of basketball (4,125,000 5.500) 1 stated bi Tam Problem 29 Answer A ‘Coupons expeied wo be redeemed 12.00 “Multiply by payment fr each coupon (5 +5) —2 Total ibility for coupons “cone Payments a of December 31,2020, nom Liability for coupons, December 31,2029, sau ‘The coupon lability on December 31, 2020 is nat reduced by the $,000 coupons on hand because the ‘coupons had not been proces for payment Problem 2-10 ‘Question 1 Answer Question 2 Answer Total cowpeas issue an tobe redeemed (00,000 5 70% 110%) ‘Less Tota payments wo reiler abit for redeemed coupons 1231/2020, EEE Problem 211 Answer B Problem 212 Ammer B Problem 2-13, Quettion 1 Answer A (405,000 3 x15) ‘outops wo Be redered (678,000 676) Boxtops redeemed Boxtops oustanding Question 2 Answer B stimated ibility ~ December 3, 2020 (78,00 3x 18) Problem 2-14 Answer C ‘Box tops tobe redeemed (80% « 100,00) ‘Box ops redeemed Ousanding Estimate ibility at yet (10.000 /2 = 5,000 x 180) Problem 2-15, Question 1 Answer D. Con of towel ‘Remrlance from caster Distribution com ‘Net premium cost Premiun expense for 2020 (600,000 / 10 45) Question? Answer D estimated ibility ~ 12312020 (200,000 / 10 45) Question 3 Answer € Coupons tobe redeemed in 2021 (250,000 x 3086) Premium expense for 2021 (750,000 / 10% 45) ‘Question 4 Answer Coupons outstanding December 31,2020 Coupoas tobe rederned i 202 (280,000 x 086) ‘otal ccupons tobe redeemed Gogo tedeetes in 2021 Cogpons outstanding December 31,2021 Esti ibility —12/312021 (250,000 / 1045) iE EE. bees E EE EE E EEE... Question 2 Answer timated Hability ~ 1273172030 5,000 x 40) Question 3 Answer D Premium tributed in 2021 Premiums bedstead in 2021 Tout Premiums arising trom 2020 sales dsributed in 2021 Premivns applicable to 2021 Premium expense fot 2021 (48,000 x40) Question 4 Answer © stmt Hinbility 12/91/2021 (3,000 x 40) Problem 2:17 Answer B Problem 2-18 Answer C Problem 2:19 Question 1 Answer C Pints -stand atone selling pice (,000 x 20) Sales Tout Allocated pice of points (1,200 / 00 x 680,000), Question? Answer B Pins to be redeemed in 2020 (100% x 6,000) Revenue to be recognized in 220 28,80 / 0,000 « 1,020,000) Question 3 Answer A Points to be redeemed in 2021 (9% x 60,000) Pins rodcemed in 2020, Pins redemed in 2021 ‘Total points redeemed to December 31,2021 ‘Cumulative revenve December 3, 2021 (37,00 / $8.00 x 120,000) Revente recognized in 2020 Revenue tobe recognized in 2021 “ Problem 2-20 Question 1 Answer Question 2 Answer B Problem 2-21 eopo> 1s 600,000 200,000 2 Waray expense timated waranty ibility (4x 200 = 180 » 800) 3. ated waranty lability ‘Cau 2021 1 Cah (S00 « 15,00) ‘Salet 2 Warranty expense estimated warranty ibility (46 $00 ~300 x 800) 3. Estimated waranty ability ‘Cas Requirement 3 Warranty expense 2020 2 Actal warranty payments 20 2011 Pstimated waranty ibility 1231/2021 ‘Requirement 4 ~ Warranty expense related to 2020 sales 2020 Fis contat year of 1/1/2020 sales (150 x 20% x POO) Fir const Sear of 7/1/2020 sale (150x208 x PRO x 6/12) 500,000 700,000 130,000 400,000 14000 700,000 240,000 10,000 14.000 40000 16 71500,000 150.00 44500,000 40.000 71500.000 240.000 130,00 384.000 12.000 2028 as conmact year of 7/1/2020 sales (180 x 20% x POO x 6/12) ‘Second contract yar of 1/1/2020 cals (150 x 40% x PRO) ‘Seeand comract yar of 71/2020 sale (150 40% x PAOO x 6712) 22 ‘Seoond comet year of 7/1/2020 sales (180 x 40% x PAO 6712), Warranty expense fr 2020 ‘Warranty expense related to 2021 sales 2001 Fi contrat year of 1/1/2021 sales (250 x 20% x P00) Fist coitat Year of 71/2021 Sales (250 x 20% x PROD x 6/12) 202 ies contrat year of 71/2021 sales (250 «20% x P00 x 6/12) /2021 Sales (250 x 40% x PSOD x 62) ‘Second contract year of 7/1/2021 sales (250 40% x PAD0 x 6/12) Warranty expen for 2021 Requirement $ 2020 sales sil under warranty afer 12/31/2021 ‘Second contract yar of 7/1/2020 sales 2021 sas sill under warranty after 12/31/2021 Fist contat yer of 71/202 sles Second contact yar of 1/1/2021 sales Second contract year of 71/202 sale (40,000 + 0,000) stad waranty labiiy~ 1231/2021 Estimated waranty lability per book Increase m warranty habla ‘Waray expense stinatd waranty baby Problem $2 Requirement I~ “Expense” approach 2020 1. Sales 2. Warranty expense coh 2021 1c Sales 2. Warranty expense Cah 10.000 $900,000 9.000.000 : BREE G EE SE G2 ER HE _ i 9.00000 : 2021 ony Sales 2. Warranty expense tinted waaay laity (14% x 9,000,000) 3. stmt warranty airy ‘Cash Requirement 3 Warrany expense: 2020 aon Aca waranty rep 220) ami atin warany ity 1231/2021, ‘Requirement 4 Warranty expense elated 692020 sles 2020 Fit contract yer of 1/1/2020 sles (2 $00,000 x 496) Ft cottact Sea of 71/2020 sles (2, $0,000 45 6/12) 2011 Fst contract yer of 7/1/2020 sales (2 $00,000 46x 6/12) ‘Second cortit yea of 1/1/2020 nae (250,000 x 10%) ‘Second content ea of 7/1/2020 eae (250,000 10% x62) aon Sevond emtract yar of 71/2020 sas (2,500,000 x 1046 x 6/12) Warranty expense fr 2020 000,00 9,900,000 1260000, 10000, be $00,000 200,000 9.000.000 1.260.000 10.000 to0.000 50.0 250.000 125,000 Warranty expense related (0 2021 sales on Fit contrat yer of 1/1/2021 sales (4 $00,000 x 498) Fit contest Sea of 71/2021 sles (4, $0,000 4% 612) 2022 Fist contract year of 71/2021 sales 4,500,000 «4% x 612), ‘Second contract year of 1/1/2021 sles (4500.00 108) ‘Second sort ea f 7/1/2021 sales (500000 x WP x 6/12) ams ‘Second coos year of 7/1/2021 sales (450,000 10% x 6/12) Warranty expense for 2021 ‘Requirement $ 2020 sales il under waranty afer 12/31/2021 ‘Second coact year of 7/1/2020 sales 2021 sakes sil wer waranty afer 12/31/2021 ‘Sevan contract Yer of 7/1201 sales atnaed waranty liability ~ 12/31/2021, Estimated waranty lai per book DDecreane waranty aby Estimated warany lability ‘Waray expense Problem 5-3 2 Warranty expense stmt waranty lability (S.00,000 x 12%) 3. Fatima warranty ability Cash 2021 Cas Sales 2 Warany expense stimated waranty laity (7:00,000 125) 4. Estimatd warranty ability Cash 7.000.000 840.000 250.00 19 0.00 ‘9.000 0.000 30,00 128.000 9.060 450,00 0000 iris 15.00 ‘Requirement 2 Warranty expense for 2020 and 3021 (6,000 + 84,000) 1440 900 Act waranty repairs (18,000 + 250,000) eon stimaed waranty Hibiity~ 1231/2031 prey ‘Warranty expense related (0 2020 sales 2020 Fit conract year of 01/01/2020 sales (2,500,000 396) 75000 Fit contacter of 07012020 sales (2500.00 x 3 6/12) 300 2021 Fit contract year of 0701/2020 sales (2500.00 » 3%x 6/12) 37300 Second contact year Of 0L01/2000 sales (2500000 6) 225000 Second comrct Year of 0701/2030 sales (2500.0 x 96x 612) 112500 2022 Second contract yar of 0701/2020 sale (2500.0 x 96x 6/12) ase Warranty expose for 2020 pony Warranty expense elated to 2021 sales 2021 Fit contract yer of 01/01/2021 sales (3,500.00 396) 105060 Fist conrat jer of 071012021 sales (3,500,000 3% 6/12) 22300 2022 Fit contact year of 0701/2021 sales 52300 Second mac yar of 01/2031 sales (3.50.00 x $6) 315.000 Secund cont year oF 0701/2021 sales (3.300,000 4 94612) 157300 3023 Secundconroct year of 07/01/2021 sales (3.500.000 x 94x 6/12) 10 Warranty expense for 2021 oe 2020 sales sill under waranty afer 12/31/2021 ‘Second contact year of 0701/2020 sales 112500 2021 sales sill under waranty afr 12/31/2021 Fir cna jer of 0701 2021 sles 32300 ‘Second contact Jet of 01/01/2021 sales 315:000 ‘Second comet year of 07/01/2021 sales see simaed waranty iby 1230/2021 795.00 sma waranty bilty per book ceo Decrease in waranty ai peor) stunoted waranty tbiay 295,00 ‘Warranty expense 295,000 Problem 3-4 ‘Requirement 1 2019 1 Cash 000,000 Sales 2. Warranty expense 450,000 Estimated waranty ability (1,000 x 450) 200 1 Cash 32.000 Sales 2 Warranty expense 405,000 Estimated waranty ability (900x450) 3. Estimated warranty ibility 190,000 Cash 2021 1 Estimated watranty labiy (280,000 + 190,000) 470,000 Cash Requirement 2 ‘Warranty expense related to 2019 sales 200 Fest contrat year of 12/3/2019 sales (450,000 406) 2021 Second contract year of 12/1/2019 sles ($50,000 x 6074) ‘Warranty expense for 2019) ‘Warranty expense related to 2020 sales 201 Fis comrat year f 12/31/2020 sales (405,000 40%) 22 ‘Secand coract year of 12/31/2020 sales (405,000 x 604) ‘Waranty expense fo 2020 2019 sols still under warranty after 12/31/2021, 2020 als sill under warranty afer 12/31/2021 ‘Second contract year of 1231/2020 sles stmt waranty lity ~ 1231/2028 Estimated warrant lability pt book crease waranty lability Estimated waranty aby 38000 Warrany expense a 9.000.000 325,000 190,000 470,000 190.00 162.000 EEE 43 EE 34.000 Problem 3-5 ‘Total Returns after Sales Percent returns 06/302020 Amount Saray 2000 De 0 wm 2400 Febrary toa B Rasp00 aoe a0 Mach .yano00 mm Thee som 0 Apa 32000 mms sm T89 May 20.000 Wom 2aan00 fom 00 ane io. Wom 00 wor, sou Sales January February March April May Saeuey : We Lam ie » » » = ge Requted estnated waranty lability 06/30/2020 (64,880 x 65%) stated waranty ast po bk Increase warranty lbity Requirement 3 Ware expense so1ass ama waranty ali Problem 3.6 Warner expense 12300 Problem 3-7 Requirement 1 2020 Cash 298,000 ‘Sales ‘nea warany revenue 2001 reamed warranty revere 1.000 "Warranty revenue (243,000 3) Warnty expense 0.000 Tseatry Ca Requirement 2 Cameo abies ‘Uncarned warmer revene Noncuren abi: ‘Unearned warranty revenue Probleen 4 Answer B Probleen 39 Answer A. Problem 3:10 Answer C Problem 5-11 Question 1 Answer D Warranty expense (2.400 x 300) Question 2 Answer A Warranty libity (720.000 ~ 17,000) Problem 3-12 Question 1 Answer € Question 2 Answer D Warrenty tibity ~ Anuary 1, 2020 Ad Warns epene 20803 4200.00 less: Warany payments during 2020 Warranty lbity~ December 31, 2020 23 200.000 145.00 20000 1000 ‘81000 1.700.000 Problem 3-13, ‘Question | Answer A Warranty expense (30,00 x 0) Question? Answer Warrang expense Actaal waranty cost ‘Warn ability June 30,2020 Problem S14 Anwer A. Net sales (640,000 / 895) Problem 3-15 ‘Question 1 Answer A Warranty expense (5,000,000 x 7%) Question? Answer B Warranty expense fr 2020 ‘Warranty coat a 2020 Warranty labity~ December 31,2020 Question 3 Answer Warranty expense (7,000,000 x 7%) Question 4 Answer B Waranty lability December 31,2020, _Wamanty expense for 2021 Tout Warany ost in 2021 ‘Waranty hailey December 31,2021 Problem 516 pasos 24 B EE CHAPTER 4 Problem 1 1. With respect wo the it lawsuit the tty would recognize shows and accrue ibility of PI,000,000 a8 SI%s would be viewed probable 2 Inrelaton to the secon lawsuit, the entity woul recognize and accra ability forthe midpoint of ‘the range 4,000,000, 1. With respect the thd lawsuit, the entity would consider the time valu of money an so would secs hws and acerca ibility for the midpit ofthe range 2.000, 00, 4 Inelation 1 the fourth lawsuit, the entity woold make mo acral as 28% would not be viewed as ‘rokable Only a schnure nse appr: Problem 42 1. Los fom iipation 500,000 ‘Litiation hiblity 4,500,000, 2 No etry, The labor dispute isa os contingency and cant be acerved unes itis both probable ae ‘reasonably estimable. Costs cannot be adequately predicted. A disclosure note is apprprae. 2. No ctr, The lawsuit filed by Accond Company isa os contingency and canot be accrcd because it ‘Sony reasonably possible that a oss wll sul A disclosure notes appropriate 44 No ctry The environmental iolatn it an unassred assume mast frst probable tht an assesment will be made a cannol be ard ues it oth probable and reaonabl estimable tha ‘he msessment wil eal wa as Problem 43 1. Only a disclosure x necouaryhocause it smo probable hat the company wil be Hble, bough the ‘amour canbe measured reliably. 2 Retined camings 200,000 Estimated laity for taceme as 200,000 4. Accouns receivable Sunset, ‘0000 ‘son guaranty en.000 ‘Note payable bank 200,000 Problem 44 1. Loss on lawsuit 800,000 Estimated ibility or nwsuit (50% 1,600.00) 00.000 2 Feviunmentl cost 1,500,000 Estimated bility for environmental cost 1,300,000 3. No provision is recognized forthe yarany because ther is only a remote likelihood that fare ‘payment wil be made 4. Contamination cleanup cost 500,000 estimated ibility for clean up cost, 00,000 5. Lost. on lawsuit 300,000 stated iit for lawsuit 300.000 26 Problem +5 ‘The shiping company shall ecognize provision for PS,008,00 becouse the claim of the international freight forwarding company is probate [No provision or disclosure would be needed forthe 72,000,000 claim of the international fight Jewarding company hecause there 16 fem possibly forthe payment ‘The shipping company shall lo recognize a contingent asst of F450, 000 (x PS,000,000,becmse ‘he amounts vinualy cena of collection Problem 46 Restractuig costs 1.730,0 ‘estimated abit For resiratunng costs 17M.000 Unpaid entement of retenched 200 employees 1.500.000 ‘Unpaid retechment package of ne exvutive tasked 1 complete ‘ior of Mindanao branch 200,000 app nyo aoe come Minas ch 6% 30900) ‘Total provision for eseucturing secidiiani gael nc iaced sce emalama NeNoieiRe ‘in he resting provision because they flat ongoing operations (Only 6% ofthe January salary ofthe executive i incladed inthe rescuing provision because the ‘remainder relates tothe transfer ofthe SO employees to Manila and general ministration Problem 47 ‘Lease temination penalty 4.000.000 Gon of tng eatpacemen en 6.000.000, Employ termination cost jam “otal estuctunng prowsion ‘momen Problem 48 1, ube accounts 900,000 ‘Allowance for doulafl accounts (3% x P30,00,000) 90,000 2 Warranty expense 250,000 Estimated warranty ability (2% x P30,00,000 ~P380.000) 250,000 3. Los from product recall 1,500,000 ‘Estimated Habit ~ product recall, 1.300.000 4. Loss fon tation 420000 Litigation ibility 4.200.000 '. No ear. The lawseit agains customer isa gain contingency. Contingent gain is at accrued even the ins peboble and resorably etmable: The gain should be recognized omy when realized. A Ahsclosure notes appropiate Problem 49 1 No disclosures required because a claim by the city goverament a yet unasered and an assessment ‘nat prble 2 The lawsuit against Faye Company ia pain contingency. Contingent gain mot accrued even ifthe tins probable ad reasonably eximable The gin shook be recogni nly wea realized Baron ‘ll aco information in he pcs othe franca statment 27 3. The cae withthe provincial government i lows contingency. Baron can we the information occuring afer the ed of the year in determing appropiate disclosure. Baron shouk axe the P2,000,000 loss ‘enue the wtimat etcome appears set and the lows is probable Litigation toss 2.000.000 gation abil 2.000.000, 4 The dispute with a customer is loss comingency Baron can use the information eccuring afer the nd ofthe yearn determining appropri closure. Wis likely that Haron woul chose to accrue ‘he P0000 fos because the Jaden! wil be appealed and that the outcome swoceai. A “Shelosre not is ape Problem 4-10 Requirement 1 2020 Jan 1 Oil tanker depot 6,000,000 ‘Cash 6000000 1 Oil tanker depot ‘930.000 ‘Decormisioning Ubi (1 $0,000 x 42) 930,000 ‘Doe. 31 Depreciation 1.386.000 "Accurolate depreciation (6,930,000 /8) 1386.00 31 Interest expense 93.000 ‘Decormisioning Hbility (1096 x 930,000) 93,000 Requirement 2 20m ‘Dec. 31. Accumulated deprecation 6930000 ‘Oitanker dept 930.000 31 Devomenaioing tabiy 1,500,000 {Los on settlement of decommissioning hbilty 200.000 Cash 1,700,000 Problem 4-11 Requirement 1 2020 Jan. 1 Mining site 000,000 ‘Cah 14000,000, 1 Mining site 926.400 ‘Decommissioning Hailey (2,000,000 x 4632) 926,400 Dee. 31 Interest expense 72 ‘Decommissioning Hability (26400 96) rau Requirement 2 2029 Dee 31. Decommissioning ability 2.000.000 ‘Cah $300,000 (Gain on setemen of decomensicoing sity 200,000 Problems 4-12 200 Tan. 1 Detoritication facility ‘Cash 1 Detanfication facility ‘Decommissioning Wabi (100,000 x $6) Dee. 31 Depreciation ‘Accumulated depreciation (9.840,00 / 10) 31 Inrest expense ‘Decommissioning Hbility (6% x 40,000) am Jan. 1 Detoxification facility ‘Decommissioning ability (200,000 x 63) Dec. 31 Depreition "Accumulated depreviation Oxia cost ‘Aitonal est (126.00 8) Total depreciation ‘Dee. 31 merest expense ‘Decommissioning Hai ‘Original aiity Tenet for 2020 64 x 40,000) ‘Carrying amount 12/3/2020 Tenet for 2021 (6% x 390.400) Garying amount = 12/30/2821 Ietrest for 2022 6% x 883.824) {nastest fr 2022 on addon ability (6% x 126,000) ‘ota terest fo 2032 Dee, 31 Accumlited deprecation DDetouiiation fi Purchase price Ongial decermssining cast ‘Adtivanaldevornmasioning cot Total cost 31 Decommissioning ability Uns om sctlrnt of decenmisshnig ibility ‘cai Problem 413 Answer A. ‘Nowa defect (00 x 10,000 x 25%) Significant defect (00 x F30,000x 159%) 9,000,000 p 126.000 999.280 9.968900 9.000.000 : i : 126.000 999.730 Eke ae Eke ERIE: 996,000 9,000,000 [Es 2.0004 2 HE 3 Problem 4-14 Answer © “Mojo defect (3% x P5.00,000) “Minor defect (3% x P300.000) ‘Total waranty provision Problem 415: Question | Answer D Question 2 Answer D Weighted probabiiticn 20% x 20,000 «70% or x 10,000 70% Weighed cash lows ‘Multiply by sk adjustment ctr (100% +794) ‘Adjuted eh ows ‘Matiply by PY of | a 8% Frome pei Prost aue of csh Rows Problem 416 Question 1 Answer A ‘Question 2. Answer C Weighted probabilities: (4x 2.00000 « 80% 30751 00,000 «80%. Weighted ea ows Risk adjstnent fcr (8% x 1,280,000) Adjusted cash ows Presa vac of cash lows (1.382.400 x89) Problem 417 Question 1 Answer C Question 2 Answer B Cost of minor rep Cost of major repair Total cont, ‘Malupy by ‘otal oh flow fr ik adjustment Expedite fo 2020 ($3,000 S06) ‘Expire i 2021 (530,000 - 268,000 = 265,000 x 0.94) ‘Warrany expense in 2020 ‘Warranylibiity — December 31,2020, EEE FLeksbe : noo Ta2x0.000 30 Problem 4-18 Answer © ‘The decision ofthe Supreme Court was made on February 15,2021 which is before the issuance of the stalements on February 20, 2021- Accordingly, the accrued provision should be equal 1 the amount of 00,000 decid bythe Supreme Cour. ‘The date of isu of financial statements isthe date when the boul of directors approved the Fnac Problem 4-19 Answer D ‘The provision shouldbe acraedbecats its probable and measoable. The accrued amount is P3S0,000 ‘hich is the midpoint ofthe angen the absace ofthe Best estimate within the rang Problem 4:20 Answer A The guaranice should be accrued as a provision because the los & prouble andthe amount ean be reasonably estimated. Problem 421 Answer C “The best estimate is reonded, The accepted BIR offer isnot recorded because it was made ater the statement ae na. Problem 4.22 Answer D ‘The lows is acme as a provision because it Problem 425, Question 1 Anewer C Question 2 Anvwer A probable and the amount canbe reasonably estimated Estimate of hab 3.500.000 Extent of lability deductible clause soa.000) Insurance cla relmbursement asset amon ‘The amount of losis PS00,000 aly because isthe extent of lability of Res wer the comprehensive insorance plicy However the amount of liability to be report is gus othe foal estimated amount. PAS 37 paragraph 53, provides thatthe reimbursement claim sal tate a a separate asset. ‘The amount of oss may be presented net ofthe amount recognized for a reimbursement, Problem 424 Answer B Problem 428 Answer B “The probs seconded bu the possible os is nly dachsed Problem 426 Answer A Hae can reper gin of PI 00,00 i its 2020 ine statement because this amour already sete ‘98 December 31,2020. Howcver. the remainder of 300,000 is aly diclosed because the defendant as ppeaed the said amount 31 Problem 4.27 Answer D Contingent assets ace no recognized in financial statements since this may result inthe recognition of Income tht may never be realized. A contingent aset andthe related contingent ain ate disclosed only sshere the milow of cconenic benefits probable Problem 428 Answer D Problem 429 Answer D ‘The contingent asset is closed only because te cate is unveslved on December 31, 2020. The issue is ‘what amoust of aset will be daclosed. Since the case sted a March 2021 ater te issuance ofthe 2020 feaneal statements, the amount PISOQIG0 should be diclsed. However, ifthe case i setled before the issuance ofthe statements, the actual award of P,000,00 should be disclosed. Problem 430 Answer © ‘The enwy on December 31,2019 is: Los await 400,000 Estimated bility for lawsuit 00,000 ‘The ery on December 31,2020 js: ata bility or awit 400,000 ‘Cosh 280.000 Copyright 0,000 ‘Gammon sctlement 90.000 Problem 4-31 Problem 432 Problem 433 Bersaveene an>arenees ennes peveceonce CHAPTER $ Problem $1 Requirement 1 2020 ‘Apa | Cash (7,000,000 x 106%) ‘Bends payable Prema ow fads payable (Oct 1 ntrest expense (7,00,000 1256 x 6/2) Cash ‘Dec. 31 laterest expense (7,000,000 1264/12) nero payable 31 Premiam bonds payable Tneret expen (420,000 / 10x 9/12) 20 an. Acceucd attest payable Totes expeme April 1 later expense Cah (Oot 1 Interest expense Ca Dec. 31 Interest expense ‘Accred incres payable 31 Premium om bonds payable Toverest expense (420,000 / 10) Requirement 2 ‘Noncurrent ables Bonds payable ‘Promar om bond payable Carying amount Problem 5-2 Requirement 1 200 Jan. 1 Unissued bonds payable “Autheried bends pa Jan. 1 Cash (5,000,000 x 98%) ‘acount on nde payable Unianued bonds payable June 30 laters expose (3,000,000 x 12% 6/12) Cash 720,000 210,000 31,500 210.000 15000,000 4780.00 "0.000 700.000 210,000 31500 210.000 210,000 42.000 790.000 $000,000 2020 De. 31 Imerest expense Cash 1 eres expense (250,00 / 10) ‘Dacount om tnd payable 2021 Sane 30 Tors expense Cash Sere 1 Cash Unis bonds payable Premium on bonds payable Imre expense (2,000,00 1296x212) Dec. 31 ere expense Cash (700,000 « 12% x 612) 31 Interest expense ‘Dacia on bonds poyable 51 Premium on bonds payable Titers expense 120 months 20 = 100 months maining {000 100. = 640 monthly ond = 2400 Oct 1 erent expense ‘Cash (5,000,000 x 12% x 6/2) ec. 31 etre expense ‘Accra intrest payable (5,000,000 x 12% x 3/12) 3 nee expense ‘Discount on bonds payable (10,000 5x 9/12) ‘Bond sue cost (30000 / $x 9/12) 300000 2,100,000 420,000 25.00 2400) 480,000 100.000 50,000 150.000 250 33 300,000 25.00 2,000,000 PEER 00.100 008 Tas.500 $00,000 10.000 15.000 7500 2021 San. 1 Accra intrest payable Interest expose (ptt pon can ‘ty 1 tons npn " Discount on bonds payable (20,000 x 6/12) end mae nt 00x12) Reinet ie (2.000.000 x 9%) 130.0 15.00 ‘Ad Accrucisrest fom Api to Jy 1, 2024 (2,000,000 x 12% x 3/12), ‘Texa payment Bonds payable retired Less Applicable discount (2 «75,000 Applicable issue cost (8 x 37,500) Caring amount of bods retired Less Retirement price oan early retnomcnt July 1 Bonds payable Iesereat expense Loss ox early retirement of bonds ‘Cash Draco on horde payable ond tue con Oct 1 Ines expense ‘Cash (3,000,000 12% x 6/12) (Doc. 31 Inert expen Accroed interest payable (3,000,000 12% x 312) Dee 31 Interest expeme ‘iacount on bonds payable (12.000 x 6/12) ‘Bond sve cost (6,000 x 6/12) Revised annual amortization Discount (5 « 20,000) Issue cos 5 x 10,000) Requirement 2 Noncurent abies ‘nds payable acount on bonds payable Bond one com Canying amount 30.00 A000 2,000,000, 6.000 25,000 19,00 130,00 —sso0 Toss.00 2,040.00 15.900 180,000 9.000 ‘Requirement 1 200 Jan 1 Cash Bonds payable ‘Premium on bods payable ‘Dee. 31 later expense ‘Ca 4,000,00 x 12%) 21 Preminm on bonds payee Theres expense (20,000 / 5) 31 Bloods payable ‘Premisen on band payable ‘Cash Gain on catty retirement of bods Face of nds payable retired ‘Ad: Applicable premio (14x 160,000) Carrying amount {Las Retirement price 1,000,00 » 95%) Gain on retirement Doe. nteret expense ‘Cash (3,000,000 x 1256) 11 Premium on ond pyabie Theres expense (40,000 x 34) Requirement 2 ‘Noncurrent tables: ‘Boos payable Premirn on bond payable Carying amount Problem 5-5 1, Tota bonds payable sued Lest Face value bonds payable etieed Bonds payable = December 31,2020 Drscaant om bars payable ‘se: Amortization fom 20139 2019 (30,000 / 10x 7) ‘Balance ~Sanary 1.2020 ‘Less: Discount applicable to bands ried (6 x 90,000) ‘Adjusted balance ‘ess: Amorization for 2020 (45,000 /3) Discount on bonds payable ~ December 32020, 2 Invest (3,000,000 « 12%) ‘Amonization of discount for 2020, Interest expense for 2020 200,000 35 2. Adating entries om Desember 31,2020: 1. Rewind camings Discount on bonds payable |b Bonds payable [Dcount on bors payable Gain om carly esiremen of bonds Bods payable rtrd ‘Less: Applicable dicount Caring amount ‘Less Retirement price (Gain on ery verement © eres expense ‘Dracount om hans payable Amoxization for 2020, erst expense “Accrued ines payable (3,000,000 x 12% 1/2) Problem $6 1. Cash Discount on bonds payable ‘Hoods payable new 2. Bonds pyable- od Promium os bonds payable ‘Accocd inten payable oss am cay reement of bods ‘Cosh Bonds payable «ob Premium on bonds payable (Canying amount Lest: Retirement pric (300,000 x 102) ons on cal retirment Retreat pice [Ad Accrued itret payable ‘Tota payment Bond Year outatapding Fraction amortization 740 210,000 301.00 15.00 190,000 3.900.000, 100,000 5.000.000 0,000 180,000 19.000 Discount Interest paid 64000 940.000 64000 94.000 56000 $50.00 48000 720,000 40010 600.000 32000 480.000 team anon Tamm imo ‘000,000 ‘000,00 “70,900 00,000 202s ‘000.000 or 2026 400,00 pereerry TTT 210.000 4.000.000 1 Journal entries 200 Dee 31 Cash Discount on bons payable Bonds payable 20 Dec. 31 tnteret expense Cah 31 Inerest expense Discount on bonds payable mo Dee 81 Interest expense Cah 31 Inert expense Discount on bands payable 31 Bloods payable ‘cash ‘Dee. 31 tenerest expense ‘Cah 31 lena expense ‘ascot ce honds payable 31 Bonds payable ‘Cah Dee. 31 Cash payable ‘roma on bons payable Fraction ms or 50 28 Pet 758000 320,000 2ao000 1sooo 120.000 im io 7420500 37 4000 960,000 4000 1.000.000 il 235.00 840.000 40,000 105.00 105.000 1,000,000 1,000,000 720000 720000 90.000 90,000 000,00 $060,000 000,000 30.000 20.000 1030,000 420,000 28,000,000 = 015 per year To0n.00 x.018x2 = saga Problem $9 Answer D Me debentces 3.300.000, 11% Collateral wus bonds Lowo.ean ‘ota ens Bod mom Problem $10 Question 1 Answer A Question 2 Answer A Serial bonds _Debenture bond Registered nds 2,780,000 2,780,000 4 Convertible bunds 125000 10% Commodity backed bonds ooo. Tout om io Problem S-11 Answer A Issue pice (500,000 110) $300,000 ‘Accrued interest fm Jly Ito Oxtohe 2020 (5,000,000 x 12% 9/12) om Toul Tes0.000 Lee: Bond ase cost iia Neteashreveied econ Problem 5-12 Answer © Ianue pice (4,000,000 99%) “Accved interes fram January | to April 1, 2020 (400,000 x 8% x W12) Toul eas: Bond ise cast Neteath received Problem $-13 Answer B Bonds payable Premium on ood payable (9% x5,00.000) ond sue cout ‘ond aby Problem 5-14 Answer BL All cost inure Problem $18 Answer B Cash received ‘Accred ines from June 30 to Nove , 2020 (5,000,000 x 6% x 4/12) Issue pice of bonds payable Face value ‘Premium on boods payable Problem $-16 Answer Accrued erst payable fom Ostbet Ito Decerber 31,2020 (4.900.000 x 84x 012), ‘The nomial intrest of 95s used in detrnining the acerod interes payable Problem $17 Answer D Accrued iret payable from July 1 to Sepember 30,2020 (3,000,000 «12% 3/12) Problem S-18 Answer B ‘Bonds payable AG: Premum on bonds payable Tou Lear acount on nds payable Carrying amount ‘Less Retirement price (5,000,000 x 98%) (ain on retiemert Problem $-19 Answer D Hoods payable Les Discount on bonds payable Carrying sent Caying amount retired (4,000,000 | 000,00 x 7.574.000) Less Retirement price 4,000.00 + ‘Lac early extlngushrent 5.180.000 Coo ‘Fosa000 5.000.000, ue Fosa000 Problem $20 Question | Answer A. Interest expense 6% x 4,000,000), Hoo Question 2 Answer D Bonds payable 1/1/2020 3.677.600 Fair vale ~ 1231/2020 (4,000,000 » 95%) so0.000 Increase tn hie value of band payable ~ oat co Loss from change in fir value 12.40 onds payable 122400 Question 3 Answer B Question + 2020 Jan 1 Cah S67 60 Bonds payable 3677600 ‘Dee 31 Interest expense 240.000 ‘Cah 240000 31 Lose fr ehange in fe vale 122400 ‘Bonds payable 122.400 Problem $21 Question | Answer A. ‘ovina interes: (129% P,000,00) power Question 2 Answer A. ‘Canying amount — 11/2020 $385,000 ‘Caryn umount — 12/31/2020 som Deccan in iabilty gin oon Question 5 Answer uso Question + 200 Jan | Cash 5.385.000 ‘Bonds payable 5.385.000, me 30 etre expense 300.0 ‘Cah 300,000 Dee. 31 Imrest expense 300.000 ‘Cash 100.000 31 Bonds payable 260.000 ‘Gian fom change tm ae value 240,000 a Problem $22 Question 1 Anwwer A Question? Anvwer B Question 3 Answer © CCanying amount 11/2020 400.000 CCanying amount ~ 1231/2020 sgon.000 Increase in lablitylose ‘00.000 Loe oo cre isk erry ‘Los fm change in fi vale ae Questions 2020 Jan. 1 Cash 7.00.00 ‘Boos payable 700.000 1 Transaction cost 10,000 Caan 180,000 Doc, 31 ltrs expense se.i00 Cas 00,000 31 Los om ee isk 130.000 ‘Los from change in fir vale 60.000 ‘Bonds payable 800,000 Problem $25, Question | Anwwer B Canying amount —Jnuary 1, 2020, some Question? Answer A Interest expense for 2020 (12% x 100,000) oom Under the far value option, the ners expenses computed using the nominal rate Question 3 Answer € Fair value famary 1, 2020 tor1200 Fair value ~ December 31,2020 pireriny (Gain rom change fi ale pe PERS 9, paragraph 422, slows the measurement of financial isi Fi va Under the fale value option the bond payable i measured ta Yala at every yeatcod and any change in fir valve is recognized generally in prot or loss. The accouming rules for discount ce perm tmonizatice ne longer apply. Question 4 Answer A Canying amount - December 3, 2030 sou Under the fi vale opi, the carrying amount ofthe bonds payable is always the fale value at every yearend. Question $ 2020 Jan 1 Cash Bonds payable July 1 terest expense cash Dee. 31 Interest expense Problem 5.24 penworeere payable ‘Ga fr chang i fr vale (1,077.20 1,068 60) Problem 5.25 Interest payable Hons ry ze 3A 40 SA GA 7D A aD we 1077200 12.400 1977200 6000 a3 CHAPTER 6 Problem 6-1 ‘Requirement Jan, 1 Cos 37000 ‘Boos payable 690m 000 Premium on Bonds payable 737.000 Dee 31 terest expense 6,000» 1296) 720000 Cosh 72000 31 Premio bonds payable 46300 Tmcrest expemne 46300 Aeteret pad 72000 Inert expense (10% x 6,737,000) am Premurt aorta ere Requirement 2 oncuret abies Bond payable 000.000 Premium on bonds payable (737,000 $6,300) ez Canyiag amount Sema Problem 62 Requirement t Anwerest ——Anterest Dae ald epense 2020 «som 192.740 w1200 194450 ‘sort 196328 12312021 198002 Requirement 2 2020 San 1 Cosh 4814500 aco on hones payable 30 ‘Bond payable son 000 Jone 30 ttre expense 192740 Cosh 10.000 ‘Discount om bonds payable 22740 ee 31 Ire expense 194480 Cash 150.000 ‘Discount on nds payable 44480 20n1 Sane 30 loterst expec Cah ‘Discount on bonds payable Des. 3 Interest expense ‘Cah Dacor on bonds payable 31 Bands payable ‘Cah Problem 63 42 Amortization table Interest Date ald virz020 3072020 240,000 12312020 240,000 30201 240,000 avant 240.000 307022 340,000 Wasim 240,000 ‘6 Journal entries 200 Jan. 1 Cash Discount on bons payable ‘Bonds payable Je 30 Interest expense ‘Cah ‘Diacount on bonds payable 202 Des. 31 Ines expense Cas ‘racount on bonds payable 2028 Jan. 1 Bonds payable ‘Cash Problem 6-4 | Amortization table Aaterest Date paid 4172020 1001/2020 120,00 ‘4/2021, 120,00 wo 2021 120,000 ‘4am 20.000 wo1/2022 120,00 “aaa 120.000 Interest amass amass 2s0'980 2asore 239.586 294351 03.076 104.330 103.546 12.724 101360 004 196228 19k 082 000.000 a8 37255 40.980 4507" 49.586 4551 273862 261.318 a7aos 294581 33,900,000 130.000 46208 1so.000 48082 900,000 3.000.000 240,000 SRS 240,000 ‘34551 33,900,000 Carrying amount 2101520 2.086396 2070926 2084472 2037.196 20191086 2.000.000 2 Journal entries 2020 ‘Ape 1 Cash Bonds payable Prema ot on payable Oct tees expense 105076 Prem on bonds payable laos Cah Dee 31 meres expense 00 “Acctoed intrest payable 1 Premiam on bonds payable ras Tees expense (15.870 1/2) 2021 Jan. 1 Acrucd interest puyable 00 Imerest expense Ape Interest expense 20.000 Cal 1 Premium ca hoods payable ns Inert expense Oct Interest expense tose Prema on tons payable tease Ca De. 31 Increst expense 00 “Aceru rst payable 1 Premiam oo bands payable sess Tetetet expense (17.276 06) Problem 65 Requirement 1 Intret expense for 2021 (3,805,500 x 10%) Interest po for 2021 ‘scout amortization Bonds payable Isso pice - proceeds fom sane Discount on bonds payable ~ 12/31/2020 Amortization fe 2021, Discoust on band puyable 12/31/2021, Bonds payable Payer om 123172021 oods payable ~ 1231/2021 ‘racount on bonds payable ‘Caryn nnount 1231/2021 7838 120,000 one FETE: bt 4,000,000 200.000 December 31, 2020 (2.360.000 x 9259) December 31,2021 (2.240000 x 8873) December 31,202 (21120000 % 793K) Total present value 2. Cah Dracount on bons payable ‘Bonds payable Insc cxpemse ‘Cash (ox 6,000,000) Inserent expense Discour on bonds payable Iniret expense (896 x 5,788,332) lnserest pa Dseountamertraton Bonds payable ‘Cah 3. Bonds payable 1/1/2020 Dracount on bom payable Pacpal payment 1231/2020 Carrying amount 123172020 24.805,600 194400 520000 asa s7ssa 211658 40.000 03.067 2,000,000 4900.00 320000 (0.560 2uKs.t26 i920 a 6.000.000 340.00 103.067 463.067 2,000,000 900.000 108.01) Problem 67 1, terest (00,000 x 11.47) Pipa (P20,000,.000 x 031180) 2 Cash ‘Discount on bonds payable ‘Bonds payable 3 Interest expense (6% 17,706,000) ‘ascot on boos payable Cash (3% » 20,000,000) 4 Inerest expense ‘aco on bond payable cash (Canying som — Saray 1, 2000 ‘amwriation of cur ary ane Carrying amount ~ Sune 30, 2020, Interest expense uly to Dasember 2020 6% x 17,768,360) Problem 6 1. terest (1,000,000 x 12.46) Pcp (P20,000,00 x 0.372) 2 Cah Premium os bonds payable Bonds payable 2 Interest expense (3% x 22492.000) Prem eon sable ‘Cash (6% x 20,000,000) 4 Ices expense Premium te fonds payable Cash ‘Caryn soa Say 1.2020 rem aati ay to ame Carrying amount ~June 30, 2020 Interest expense ly to December 2020 ($% x 22:416,600) Problem 69 Requirement 1 DP of interest payment on 6302020 240.000 x. 9615) 17706000 1002360 100102 22.492,000 1124.00 75,400 Lana 79.170 PV of principal and interest payment on 1231/2020 (2,000,000 + 240,000 x 9246) PV of rest payment on 6/3012021 (120,000 5.8890) PV of principal and interest payment on 1231/2021 (2,000,000 + 120,000 8548) Total present vale a7 11470900 20,00,000 30 1.000700, 4102 1.000000 17706000 14982000 2.294.000 20,000,000 1200.00 23070 2.071.108 106680 FETE aa Requirement 2 Date pal vi200 302020 1231200 30am 231201 Requirement 3 2020 Cas ‘Bonds pa rea asia ‘Sat sas able Premirmom bonds payable (302020 Interest expense Cah ‘romain on bs payable Imerest expense 12/81/2020 terest expemse ‘Cash Premium om fad payable Interest expense Bonds payable ‘Cash 6/30/2021 nee expense ‘Cas Prem on bands py Ieterest expense 1312021 teres expec ‘Cah Promam on bonds payable Tetees expemse Bonds payable Cah Problem 6-10 PV of principal (700,000 46) PV of tcerest (350,000 x 13.59) Total issu price Interest Date ald sino Sum 30.000 uma 380,000 Incerest si sees 34582 240.000 nan roe 36979 29.000 ass 2.000.000 32960 338 2078381, 2038382 74018 2.900.000 120,000 10,000 34582 Dee. 31 Imerest expense “Accrued incest payable (700,000 x 108x412) Premium ot oad payable Interest expense 3.32 x 416) Problem 611 FY of principal 6.000.000 x 7) PY of fntrest (600,000 3.60) “Tal sue pice Interest Interest Date ‘paid ‘expense evo 12m 00,000 60,600 eae ‘0.000 eo1982 2020 ne 1 Cash ‘iacount on bonds payable ‘Bonds payable Dew 31 Interest expense “Accra ners payable (60,000 x 7/12) 31 terest expense ‘Discount on bons payable (69,500 x 7/12) 2021 Jan. 1 Accra interes payable Tntcrest expense June 1 ftretexpcmse Cash Ieterest expense ‘iacoun on bonds payable (69,600 x $/12) Dee. 31. Interest expense "Asso rest payable Ietcreat expense ‘Discount on bonds payable (7.982. 7/12) 7.948.500 317900 32.060 an ll T1982 S0,000 “2600 380,000 380,000 asanz 7000.00 380.000 2338 Carrying amount 30.000 $559,400 som se 380.000 380,000 29.0900 330.00 san Problem 6-12 2020 Jan 1 Cash ‘ond payable Dec 31 eters expense ‘Cash 31 Loss fom change in ae value ‘Bonds payable 2021 ‘Dee. 31- Interest expense ‘Cash 231 Bonds payable ‘Gai rom change in fair value (Carrying amount ~ 12/3/2020 Faievale— 12312020 Present yale of intrest (500,000 x 3.312) Present vale of principal (3.000.000 0.738) ‘Loss fom change mfr value ‘Carrying amount — 12/31/2021 Fairealoe 123172021 Preset Yale of interest ($00,000 x 2.402) Present vale of principal 5,000.00 x 712) ‘Gain om change fa value Problem 6-13 Answer B Interest expense fom January Io June 30, 2020(.316,000 x 12% 6/12) Problem 6-14 Answer D Interest expense (3.50400 x 10% x 6/12) Interest pad (4000.00 x 94x 6/12) Dacouotamoization for six mothe Problem 615 Anawer B Interest expense fom January 1 June 30,2020 (1,987,000 x 1294 6/12) Problem 6-16 ‘Question | Answer A. Interest expense (10% «3.756:00) Interest paid (9% x 4.000,000) Discount ameruraion Discount on bons payable ese Amortization for 2020 Balance ~ December 31,2020 ‘Question 2 Answer € (4000.00 ~ 224,400) $.200,000, 331,000 $000,000 331,000 E Problem 6-17 Question 1 Answer B Interest expense (5,676,000 x 8%) eres pad (5:00.00 x 10%) Premium amass Prom om bende payable Lise: Amortization fr 2020 lance Decembe 31, 2020, ‘Question 2 Answer B (5.000.000 + 622,000) Problem 6-18 Question 1 Answer € Interest expense (5,250,000 x 6%) ‘terest pat (500.000 75) ‘Premium amonizatn fr 2020 ‘Premium om bonds payable January 1, 2020 Les: Premiam amartzation for 2020 Balance ~ December 31,2020 Question 2 Answer C (5,000:K0+215,000) Problem 6-19 Question 1 Answer B teres expense (4,595.00 x 10%) eet pa (500.000 94) ‘Amonization of discount for 2020, Question? Answer € ‘oo payable ‘Discount om bonds payable (305,000 ‘Carrying amount ~ December 31,2020 Problem 6-20 Answer B use pric (500,000 98) ‘Boos payable ‘acount om bonds payable ‘Bloods payable ‘ond discount and ise cost (240,000 ~71,200) (Carrying amount ~ 1231/2030 ‘Note hat under the efeciveiterest method the dicount on nds payable and and csc cost ste “amped” gether. 32 Problem 621 Question | Answer A, ‘Question? Answer € owerese Amncrest, Discount Carrying Dae aid expense amortization amount wy3020 4340.00 Tiza0 ——2s0.000 274.500 240 4404300 van) 250,000 Dae 262884531 088 ory Problem 622 Anewer © ase pie (,000.000 x 110) sone ‘ond payable $000,000 ‘rem om bonds payable ‘00.000 fo ae cm sow Carving amount Tm Invrest expense (64 x $420,000) 325,200 Interest pi (8 x 5,000,000) pron Amodtation of scout and sue east erry Bonds payable 090.000 Premio om Bods payable (42,000 ~ 74,800) peri (Carying amount ~ 1231/2020 Dike [Note that under the effective intrest mcs, the bond ssa cost must be “need” against the premise fon bonds payable Problem 623 Anewer B Interest expense (1094 x 4,757,00) 475700 Intret expose (8% x $00,000) aeuoe acount mizatn am ‘ov payable 500.000 Payment on December 31,2020 (1.900.000) Discoult o bons payable (243,000 75.700) 1300) ‘Canying amount ~ December 31,2020 im Problem 624 Answer Interest expense (3,680,000 » 10%) 368,000 Interest pad (4. 00,00 x 95) sauuun ‘Anaad anda of ect ie Amoatiation foes January | to July 1, 2020 000 x 6/12) ue ‘onds payable 4000,000 Discount oo bonds panable (320,000 - 4.000) Caring amount — Sly 1.2020 Retiement price (4,000,000 x 103) Lom on retrement AE Problem 6-25 Question | Answer B Question 2 Answer Interest expen (1296 x $70,000 « 612) Increst pon (10% «608,000» 4/12) Dracut amatizatn| Carging amount ~ 11/2020 Caring amount — uly 1, 2020, Retire pie (600,000 102) Lows om retirement Problem 6-26 Problem 6-27 Lp Le 2D 28 ay xa ae aD SD SA 6D TA aR 2 WA Problem 6:28 Seenavavrs eooneesso7 33 Problem 7-1 1. ash (5,000,000 120) ‘Bonds payable Premire on bonds payable Shave warts toning Iss price with warants (5,000,000 x 120) Marke price of bonds without warans(,000,000 x 1.147) Eig component 2 Inerest expense (6,000,000 x 886) Cah 3. Premium on bonds payable 400,00 — 348.100) Interest expense (6 » 5,738,000 ~ 344,100) 4. Cash (20,00 stares x30) ‘Share warrants outstanding ‘Share cpt (2,000 x28) ‘Share prema ‘Problem 7-2 Jam. 1 Cash acount on hoods payable Bonds payable ‘Share warans outstanding Dec. 31 ners expense (5,000,000 x 126) Cail 231 laters expense ‘acon on bonds payable Aoserest paid Interest expense (14% 4,657,000) Discount amortvation 31 Cash (25,000 (00) ‘Stine warrants ctstanding ‘Share capital (25,000 x $0) Share premiam $5900 00,000 268,000 5.100.000 2.500.000 “443,000 5.00,000, 735,000 245.000 5.000 00 55.900 00.000 365,00 $900,000 453.000 si9%0 00,000 1280000 1993.00 Problem 7-3 Jan. 1 Cash ‘Hoods payable remem on bonds payable ‘Share warns cutstanding (sxFW Interest Date ald i020 6302020 480.00 12312000 480,00 PY of principal (8,00,000 x. 61) PV of tetret (480,000 772) “Total PV of bonds payable June 30 nerest expense ‘Prem on bods payable Cash Doe 31 etrest expense Premium on bonds payable Cas 31 Cash (16,000 150) ‘Stare warns outand ‘Share capital (16.00 » 100) Share premium Problem 7-4 Present vale of principal (2,000.00 x 077) Present vale of icrest payments (12,000 283) ‘Total preset vale ace rave ‘Discount on bonds payable cu Discount om hon payable ‘Bonds payable ‘Share premium - omsersionpislege Interest expense ‘Cash (0 2,000,000) Interest expense Discount on bonds payable Iaterest pd Ioterest expense (6x 1,843,800) Discount smorraon ‘Bonds payable Share pretium conversion pavilege ‘Discount en hands payable ‘Share capital (30,00 x20) ‘Share premium ~ stance (xa) 429280 e7u4 267 2.400.000 No15.400, 2.200.000 ‘84.00 som 22900,000 ‘86.400 1,500,000, Nstes0o 1.540.000 a0 Taaio0o 386.400 120.000 45904 120.000 ni0s76. 1.00000 Nas924 Problem 7-5 1. Cash (5,000,000 108%) Discs on bors payable ‘Bonds payable ‘Share premum - conversion poviese 2 Inerest expense (14% x 4.700.000) ‘Discount cn bade Cash (129 $,000,000) 3. Bonds payable Share pretium conversion privilege ‘Discount on bonds payable Share cial Share premium issuance Bonds payable Discount on bors payable Share prtum —converson pslege Total conaneraen Share capital sued (40,000 shares 100) Share premium nance Problem 7-6 Bands payable ‘Share remy conversion pepe Premium om band pyable ‘Share capital (30,00 x $0) Share premium saree ‘Share pretium - issuance ‘Cah Problem 7.7 PY of iacpa (4.000.000 x 79) PV of fteret (240,000 x 258) lasue pice of bonds without conversion privilege Face vale Diacoust on boods payable Tasue pice of ond with conversion opion (000,00 x 105) Issue pre of enc without comers oti Equity component 1 Cash Dracount on bonds payable Bonds payable ‘Share peru - conversion privilege 2 Bonds payable Ietret expense (6% x 400,000) ‘Cash Share pcmium _eeerson privilege ‘Share premium ~suance $280,000 500,000 550,000 $000,000, 250,000 4.200.000 400,000 240,000 420800 ‘$0,000 4.240.000 Problem 7-8 1. Cash Bonds payable Premium oe bonds payable Share premium -comerum plese 2 ‘Bonds payable ‘rom vi ee payable ‘Share prem conversion peeps sso extngushicet ‘Cab Total payment Liability component gui component ‘Carving amount of bonds payable ‘Payment applicable to bonds payable {Los on extinguishment Interest expense (1094 x 5,000,000) ‘cab ‘Share premium conversion pivilege ‘Shire pretium = isuance (60,700 ~ 180,00) Problem 7-9 Question 1 Answer B ‘Present vale of principal (5,000,00 x 0.52) ‘Present val of ners payments (60,000 « 3.43) Iusve price of bonds Face vai Discount oa bonds payable Question 2 Answer © nave price of bonds (5,000,000 103) Preset vale of bond Egy component Question 3 Answer A. ash rceved (180,00 x 0) ‘Shae warrants oustanding ‘oral consideration Parva of shares (150,000 x 25) ‘Shae prem 00,000 175,300 130.000 221,70 450,700 7 00,000 ‘9.300 ‘00.700 Problem 7-1 Question L Answer 1B PV of principal (5.000.000 x $7) PV of htret (380,00 3.60) PV of bonds payable ‘Question? Answer A Discount o bonds payable (5,100,000 ~ 480,000) Question 3 Answer € las pice (5,00.000 x 109) PV of bonds poyable Share warrants outstanding Question 4 Anvwer DB {Cash (.000 4 10 120) (000,000 Share warrants outstanding ‘620.000 ‘Shae capil ($0,000 100) ‘Share prema Problem?-11 Question | Answer B Question? Answer D Issue of price of bonds with warrant (500,000 103%) Marke ale of bonds without warrants (5,000,000 x 98%) Randal amount aleat to warrants cay component Question 3 Anewer Cash ($000 30x 50) 700,000 Share warrants obtanding “400.000 ‘Shae capital 150,000» 25) ‘Share premium Problem 7-12 Answer A Issue pie of bord with conversion pigs (,000,00 x 110) Markt vale of bonds without conversion privieu (5,000,000 x 103) Residual amount allocated to conversion prilepe Problem 7-13 Answer © PV of principal (500,000.77) PV of iret (900,000 4283) PV of bonds payable fssve price (5,000.08 x 110) PV of bonds payable Share premium 5.000.000 1820.00 5.130.000 Problem 7-14 Answer B. Face value rerum vs hood payable Caryn amount Camying aan converted (2.000 / 500 x $300,000) Par value of share capa (2.000% $0 10) Conversion expenses Shore prem Problem 7-15 Answer D ‘Caryn amount of bonds convened (9, 00,000 « 10) “Apical share premium ~ conversion riven (2,000,00 x 510) ‘Total consideration Par vale af shares sued (200,000 x20) ‘Shae primase Problem 7-16 ‘Question 1 Answer € Question? Answer D Question 3 Answer B Fair value of bonds with conversion option (4,000,000 » 108) Fair vale of bonds without conversion tan (4,000,000 x 95) Equty component Bonds payable Discount on bonds payable Caryn smcont Payment equa to fat value of bonds w thou converse option ons on extinguishment Fair vale of hands with coaverin option Interest expense (sx 4,000,000) Total payment o bondholders Problem 7-17 o>gencouze 9 5.000.000 2.120.000 Looo.een 1120.00 44280000 Logo. S750.000 CHAPTER & Problem #1 1. Ca ‘000,000 ‘Note payable 2 Interest expense (000,000 x 12% 2/12) 1ea.000 ‘terest payable 3. Interest expense (000,000 x 12%x 712) 60,000 Interest payable ‘0.000 Note payable 000,000 Cah Problem #2 1 cash 320,000 yscount on mote payable (00,0005 12% 9/12) “0,000 ‘Nate payable 2 Imterest expense 180.000 ‘scout on not payable (40,000 3) 13 The pote payables presented as current ability on December 31, 2020, Note payable Drscmnt on aoe payable Carrying amount 4: Interest expense (480,000 x $5) 300.000 ‘Discount on note payable Nate payable {000,000 Cash 5 cash (000.000 ‘Note pyable 6 Interest expense 6.000.000» 12% 1: 110,000 "Acero interest payable 7 Increst expense (6,000,000 x 129% x 8/12) 300,000 Nate payable 6.00,000 ‘Cosh Problem &5 1. Cash 24.00.00 ‘Note payable 2 Interest expense (24,00,000 x 12% x 412) 960,000 "Acero meres payable 3 Inrst expense (24,00,000 x 12% x 5/12) 1.200000 ‘Acercd interest payable ‘0.000 ‘Note payable 24000000 ‘Chh 160.00 720,000 000,000 180,000 24,000.00 26,160.00 Problem 4 61 12,000,000 12240000 20,000,000 200,000 2020 Feb 1 Nocoy ie made fora in of cred unis oan i made. This would be described ea in clone ne. AApsil | Cash 12,000,000 ‘Nate payable July 1 eterest expense (12.00,000 «8% x 312) 240,000 Nate payable 12000.000 ‘Cah Now 1 Cash 19,100.00 Discount on not payable (20,00, 000 » 6 x 912) 00,000 Note payable ‘Deo 31 Imerest expense (900000 x 29) 2,00 ‘acount on nate payable 2021 ‘Aug 1 Inerext expense (900000 7°) 700,000 ‘Discount o nae payable Nate payable 20,00,000 cx Problem 8-5 1. Land 100,00 Cush Nate payable 2% eres expense (10% x 900,00) ‘9.000 “Acer crest payable 3. ntrest expense 7.000 Acer inerest payable (900,00 + 9,000 10%) 4. Note payable 90,000 ‘Accra erst payable 183,00 Cash Problem 46 1. Machinery 730.000 isco! on mote payable 250,000 Cu ‘Note payable 2 Note payable 200,000 ‘Cah 3 terest expense 100,00 itu Year [Note payable 2000 $00,000 ami 20,000 2022 400,000 203 00.8 ‘Zameen Problem 87 1. Bailing (0,000 + 3,602,700) Discount on note poyable ‘Cash Note payable Face of note ‘Present sale (1,500,000 x 2.4018) Impure teres 2 Note payable ‘cauh 3 Incest expense Discount moe payable (1296 x 3,602,700) Problem 8:4 1. Land (1.280000 + 2,847,200) Disco on note payable ‘Cah Nate payable Face valu of note payable Prescot vale (4,000,000 x.7118) Impure ies 2 Interest expense ‘rscour on moe payable (1299 x 2.847.200) 5 Note payable ‘coh Problem 9 Requirement 2020 Tan. 1 Accrucd intrest payable Ioerest expense Reversing entry for acre ntrest on December 31 (2.800.000 + 12563912) Api Ivers expense (12% x 2.800.000) Note payable bank cha Fraction 8888 410270 897,300 anna a1 64 22200 336.000 700.00 100,000 75.000) sooo son $00,000 4500.00 400.000 1.300.000 sane sai 8 400,000 252000 1.036.000 2020 Sly 1 Cash 1.774000 Discount on note payable 226.00 ‘Noe payable ~ shareholder ee. 31 Interest expense 189,000 ‘Accrued interest payable (2,100.00 x 1295 9/12) 31 Ioterest expense 113.000) ‘Dacount on note payable (226,000 12) Requirement b ‘Note payable — bank ‘Note payable -sharholder 2,0,000 Dacamt om note payable a [Acsroed intrest payable ‘oval caren bilities Requirement ¢ Note payable — bank “anuary I~ Ape 1, 2020 (2.800.000 «1294 x V1.2) ‘54000 Api ~ December 31,2020 2,100,000» 129% x 9/12) 2.000 Note payable. sharcholder “Ammorzation af discount fom July 1 December 31,2020 (236000 6/12) ‘Total interest expense Problem 8-10 ‘Question 1 Answer B Present vale (61,000 3.60) Question 2 Answer A. Interest expense (12963 2,160,000) Problem 8:11 Answer B [Note payable, October 1.2018 Payment on Ocober Balance, October 1, 2019 Accred interest payable fom October 1, 2019 ume 30,2020 (2.4000 106 x 9/12), Problem #12 Answer D PV of note payable (200,000 x $712) Payment on 1231/2020 alance 1231/2020 Problem #13 Angwer C Interest expense (12963 2:350,000) 2,900,000 113,000 1.887,00 1.142.400 64 Problem #14 Answer B. Note payable ooo Although the interest the notes lower than the prevailing market te, the note payables shown a ace ‘ale Because short and ma nthe wala oe Problem #15 Answer B. Note payable, September 1, 2019 1.300.000, Less: Payment on Sepemiber 1.2020, sou. Balance, September 1, 2020, mom Accrued interest payable from September | to December 31,2020 (1.20000 124x412) 0 Problem 8:16 Answer © Accred incest from March 1, 201910 February 28 2020 (100,000 x 12%) 120.000 ‘Accrued inerest from March Ito December 31,2020 1.000000 + 20.0005 12%¢x102) 42.000 Total accrued interest payable, December 31,2020 ow 1 he ioterest is compounded annually, it means that the accrued intrest fr one year wil alo earn Problem #17 Answer © Note payable 2.400.000 Present tale pesermy Discount on note payable “0400 ‘Amotzation fr 2030 10% x1 989.600) ase Discount on nee payable 12/31/2020 au Nove payable ~ 11/2020, 2.400.000 ‘Anal pyenet nc) Note pajable~ 1231/2020, Teon.o%0 Disco! on rts payable us Canying sunt nia Problem &18 Answer A ‘ote payable, October 2019 1.200000 ‘Leas: Payment on Ostber 1, 2020 Balance, Octobe 1, 2020 Interest pi from January | te September 30,2020 (1,200.00 x 15% x 9/12) Interest Served foe October | December 31, 2026 (00,000 x 188x312) Interest expense for 2020 Problem #19 Question | Answer B Question 2 Anewer A Sanary | —Octobee 31, 2020 ($00,000 x 12% x 1012) etary | ~ July 31, 2030(1.S00,00 x 1296 x 6/12) December 31, 2020 (80000 1296 x /12) Eke i I bittss 6s Problem #20 Question 1 Answer B Question 2 Answer € Question 3 Answer he fae valve option is let fr reporting financial ibility, the Habit is reported tf vale a ‘very year-end with eating changes in ave sched in proto oss, 1 Cash 4,000,000 ‘Note payable 000,00 2. Note payable 25.000 ‘Gai on note payable (1000,00 - 975,00) 25,0) Interest expense (10% x 1,00,000 x 6/12) 50.00 ca $0,000 Under the fir vale option. any discount or premium oe the mote payable Is mot recognized. Therefore, any ‘incon or prem dos at act he tere pose Problem 8:21 Question 1 Answer C 08,150 Question 2 Answer A. (0,000 9 8%) 40.000 Question 3 Answer © Question 4 Answer D 1 te ta vale option let fr reporang # financal , the acest res fr rept dco ‘ert no longer apt. Ths the ate pate should reported on Deceiber 31,2020 athe fai ale OF F030 and et un of POU mus P4085 PY RSO peed in 320. Problem #22 Question Answer A Question 2 Answer D Question 3 Answer A Note payable - 1/1/2020 1,000,000 Fairy 1/1/2020 (1, 000,00 x 781) oe Decrease nf val ~ ain Bem Fir valve 1/1/2020 (1,000,000 x 281) 751,00 Fair vale - 1231/2020 (1,000,000 882) oe Increase ine vale hose perry Ne gain (249,000 91,000) ue Another computation [Note payable 1/1/2030 1.000.000 Fairvalue~ 1231/2020 0 Net aio ae Problem 8:25 vme

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