Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 16, Problem 16.13BE
To determine
Journal entries required on the date of acquisition and at the end of the first year after acquisition assuming that company N uses the equity method to account for its investment in company M
Given information:
Company N acquired 30% of the shares of company M
The total worth of the shares is $4,295,000
Net loss of company M is $630,000
No dividend will be paid by the company.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Karen Company discounted its own Php 250,000 one year note at a bank at a discount rate of 12% when the prime rate was 10%.
Required: Based on the above data, answer the following:
1. In reporting the note in Karen Company statement of financial position, prior to maturity what rate should Karen Company use for the recording of interest expense?
2. What is the journal entry?
Max Corp. sold goods for $36,000 on July 17, 2020, and accepted a 12%, 90-day note. On August 1, the note was sold to a bank at a 15% discount rate.
Required:
a. Compute the proceeds. Assume a 360-day year.
b. If the maker dishonored the note at maturity, prepare the entry for Max Corp. assuming $75 of bank protest fees. If an amount box does not require an entry, leave it blank.
Financial statement effects of notes payable
issued at discount. On January 1, 2004,
Mason lent $40,000 to BillyBob Corp.,
accepting a $48,400, 2-year, non-interest-
bearing note in exchange, with the principal
due January 1, 2006.
Required: what is the present value of the
note on January 1, 2004? How much interest
expense does BillyBob record in 2004 and in
2005? What is the value of the note payable
on BillyBob's December 31, 2004, balance
sheet? What is the amount of interest payable
on BillyBob's December 31, 2004, balance
sheet?
Chapter 16 Solutions
Intermediate Accounting (2nd Edition)
Ch. 16 - Prob. 16.1QCh. 16 - Is reporting an investment at its cost considered...Ch. 16 - Prob. 16.3QCh. 16 - Prob. 16.4QCh. 16 - Prob. 16.5QCh. 16 - Prob. 16.6QCh. 16 - What categories can managers use to classify...Ch. 16 - When is the equity method of accounting for...Ch. 16 - Prob. 16.9QCh. 16 - Can companies apply the fair value option to all...
Ch. 16 - What is the fair value hierarchy for investment...Ch. 16 - Prob. 16.12QCh. 16 - Prob. 16.13QCh. 16 - Prob. 16.14QCh. 16 - Prob. 16.15QCh. 16 - Prob. 16.16QCh. 16 - Prob. 16.17QCh. 16 - Deutsch Imports has three securities in its...Ch. 16 - Prob. 16.2MCCh. 16 - Prob. 16.3MCCh. 16 - Prob. 16.4MCCh. 16 - Prob. 16.5MCCh. 16 - Prob. 16.6MCCh. 16 - Prob. 16.7MCCh. 16 - Prob. 16.1BECh. 16 - Prob. 16.2BECh. 16 - Debt Investments, Trading. Using the information...Ch. 16 - Prob. 16.4BECh. 16 - Prob. 16.5BECh. 16 - Prob. 16.6BECh. 16 - Prob. 16.7BECh. 16 - Prob. 16.8BECh. 16 - Prob. 16.9BECh. 16 - Prob. 16.10BECh. 16 - Prob. 16.11BECh. 16 - Prob. 16.12BECh. 16 - Prob. 16.13BECh. 16 - Notes Receivable. Aaron Anatole accepted a...Ch. 16 - Prob. 16.15BECh. 16 - Prob. 16.16BECh. 16 - Prob. 16.17BECh. 16 - Debt Investments. Impairments. IFRS. For each debt...Ch. 16 - Prob. 16.19BECh. 16 - Prob. 16.1ECh. 16 - Prob. 16.2ECh. 16 - Prob. 16.3ECh. 16 - Prob. 16.4ECh. 16 - Prob. 16.5ECh. 16 - Prob. 16.6ECh. 16 - Prob. 16.7ECh. 16 - Debt and Equity Investments, Available-for-Sale...Ch. 16 - Prob. 16.9ECh. 16 - Equity Investments without a Readily Determinable...Ch. 16 - Prob. 16.11ECh. 16 - Prob. 16.12ECh. 16 - Prob. 16.13ECh. 16 - Equity-Investments, Equity Method. Book Value of...Ch. 16 - Prob. 16.15ECh. 16 - Prob. 16.16ECh. 16 - Notes Receivable. Each of the following three...Ch. 16 - Notes Receivable. On January 1, 2018, Racine...Ch. 16 - Debt Investment, Held to Maturity, Impairments....Ch. 16 - Debt Investment, Impairments, IFRS. Repeat E16-19...Ch. 16 - Prob. 16.21ECh. 16 - Prob. 16.22ECh. 16 - Prob. 16.23ECh. 16 - Prob. 16.24ECh. 16 - Prob. 16.25ECh. 16 - Prob. 16.1PCh. 16 - Debt Investments, Trading. Freder Software Group...Ch. 16 - Prob. 16.3PCh. 16 - Equity Investments, Readily Determinable Fair...Ch. 16 - Prob. 16.5PCh. 16 - Prob. 16.6PCh. 16 - Prob. 16.7PCh. 16 - Prob. 16.8PCh. 16 - Prob. 16.9PCh. 16 - Prob. 16.10PCh. 16 - Prob. 16.11PCh. 16 - Equity Investments, Equity Method, Fair Value...Ch. 16 - Prob. 16.13PCh. 16 - Prob. 16.14PCh. 16 - Prob. 16.15PCh. 16 - Prob. 16.16PCh. 16 - Prob. 16.17PCh. 16 - Prob. 16.18PCh. 16 - Prob. 16.19PCh. 16 - Prob. 1JCCh. 16 - Prob. 2JCCh. 16 - Prob. 1SSCCh. 16 - Prob. 1BCCCh. 16 - Prob. 2BCC
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- On December 31, 2010, Chelsea Co. provides a service for its customer Villas Boas Co. inexchange for a promissory note requiring five annual payments of $1,000 each. The paymentsare to occur on December 31 of each year beginning on December 31, 2011. The note does notspecify any interest, and there is no market for the note. Based on the credit worthiness of VillasBoas Co. and the length of the note, it is estimated that Villas Boas Co. would have to pay 10%interest if it borrowed a similar amount from a bank. The carrying value of the note on Chelsea’sbalance sheet on December 31, 2011?a. $4,041b. $3,737c. $3,170d. $2,992arrow_forwardDuring your review of the records of X factor corporation for the year 20A, you noticed that X factor sold a machine with a carrying amount of 640,000 (cost is 1,600,000) on June 30,20A. X Factor received an 800,000 non-interest bearing note due in 3 years. There is no established market value for the machine. The yield rate for this type of note is 12%. X factor recorded the transaction by debiting Note Receivable for 800,000 and crediting machinery for 640,000 and gain on sale for the difference. The transaction has resulted to a gain or loss on sale of (indicate gain or loss in your answer after the amount)arrow_forwardOn January 1, 20X1, Tractor Sales Co. financed the sale of equipment and recorded a note receivable for the sale. The accountant inappropriately recorded the sale at the face value and coupon rate in the below income statement. Notes receivable (Face value ) 430,000 Tax rate 30% Note receivable information: Term of the note 4 years Coupon rate 1.5% Market rate 6.2% The note is due in equal annual payments of principle and interest. Incorrect income statement, for the year ended December 31, 20X1: Sales $1,832,200 Interest revenue 6, 450 Cost of goods sold 826, 300 Expenses 657,800 Pretax income 354, 550 Tax expense 106,365 Net income $248, 185 What is the correct amount of interest revenue? Multiple Choice 6,450 23,858 26,660 19,579arrow_forward
- 6. On December 31, 2010, Chelsea Co. provides a service for its customer Villas Boas Co. inexchange for a promissory note requiring five annual payments of $1,000 each. The paymentsare to occur on December 31 of each year beginning on December 31, 2011. The note does notspecify any interest, and there is no market for the note. Based on the credit worthiness of VillasBoas Co. and the length of the note, it is estimated that Villas Boas Co. would have to pay 10%interest if it borrowed a similar amount from a bank. The amount of interest revenue recognizedby Chelsea for the year ended December 31, 2013 is:a. $174b. $249c. $317d. $347arrow_forwardA private enterprise sold some merchandise for $160,000 on January 1, 2020. The customer paid $20,000 in cash and issued a note for the remainder. The principal will be due in 2 years, and a 5% interest is due every December 31st. The customer’s borrowing rate is unknown. Assume that the customer’s borrowing rate is unknown and that the merchandise cash price is $150,000 (everything else holds true). Calculate the imputed interest rate and the interest revenue to be recorded on December 31, 2020 under IFRS.arrow_forwardA company received in payment for the merchandise sold an interest bearing note with a face amount of 100,000, an annual interest rate of 12%, and a term of 6 months. The company sold this note to bank, at discount rate of 15%, when the note had 90 days remaining to maturity. How much interest expense should the company report as a result of discounting, assuming the discounting is accounted for as a secured borrowing?arrow_forward
- On July 1, 2023, Babalon Inc. made the following sale. 1. It rendered services in exchange for a 3%, 8-year promissory note having a face value of $404,520 (interest payable annually). The customer has a credit rating that requires them to borrow money at 12%. The journal entry to record the note on Babalon's book would require: A debit to Notes Receivable for $ type your answer... for: $ type your answer... ; a credit to Service Revenue for $ type your answer... and a credit to Discount on Notes Receivablearrow_forwardBencorp issues a $90,000, 6-month, noninterest-bearing note that the bank discounted at a 10% discount rate. Required: 1. Prepare the appropriate journal entry to record the issuance of the note. 2. Determine the effective interest rate. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate journal entry to record the issuance of the note. (If no entry is required for a tr journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 Record the issuance of $90,000, 6-month, non-interest-bearing note issued at a 10% discount rate. Note: Enter debits before credits.arrow_forwardRoseland Design borrowed $700,000 on a 90-day note from CorpOne Funding Company. CorpOne discounts the note at 8%. (Assume a 360-day year is used for interest calculations.) Required: 1. Journalize Roseland's entries to record: a. The issuance of the note. b. The payment of the note at maturity. If an amount box does not require an entry, leave it blank. а. b. 2. Journalize CorpOne's entries to record: a. The receipt of the note. b. The receipt of the payment of the note at maturity. If an amount box does not require an entry, leave it blank. а. b.arrow_forward
- Presley Supply Co. has the following transaction related to notes receivable during the last 2 months of 2020. Nov. 1 Loaned $30,000 cash to Logan Ransey on a 1-year, 10% note. Dec. 11 Sold goods to be Joe Noland, Inc., receiving a $9,000, 90-day, 8% note. 16 Received a $4,000, 6-month, 9% note in exchange for Jane Brock's outstanding accounts receivable. 31 Accrued interest revenue on all notes receivable. (a) Your Answer Correct Answer (Used) Your answer is partially correct. Journalize the above transactions for Presley Supply Co. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round interest to the nearest dollar.) (b) Date Account Titles and Explanation Nov. 1 Notes Receivable Cash Dec. 11 Notes Receivable Sales Revenue 16 Notes Receivable Accounts Receivable 31 Interest Receivable Interest Revenue eTextbook and Media Solution List of Accounts Debit 30000 9000 4000 667 Credit 30000 9000 4000 667 Attempts: 3 of 3 used Record the…arrow_forwardInstructions Prepare all journal entries necessary to reflect the transactions above. P6.7 (LO 4) (Notes Receivable with Realistic Interest Rate) On October 1, 2025, Arden Farm Equipment Company sold a pecan-harvesting machine to Valco Brothers Farm, Inc. In lieu of a cash payment, Valco Brothers Farm gave Arden a 2-year, $120,000, 8% note (a realistic rate of interest for a note of this type). The note required interest to be paid annually on October 1. Arden's financial statements are prepared on a calendar- year basis.arrow_forward1. Riverbed Company sells goods to Danone Inc. by accepting a note receivable on January 2, 2020. The goods have a sales price of $630,700 (cost of $500,000). The terms are net 30. If Danone pays within 5 days, however, it receives a cash discount of $10,700. Past history indicates that the cash discount will be taken. On January 28, 2020, Danone makes payment to Riverbed for the full sales price. a)Prepare the journal entry(ies) to record the sale and related cost of goods sold for Riverbed Company on January 2, 2020, and the payment on January 28, 2020. Assume that Riverbed Company records the January 2, 2020, transaction using the net method. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) b)Prepare the journal entry(ies) to record the sale and related cost of goods sold for Riverbed Company on January 2, 2020, and the payment on…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
7.2 Ch 7: Notes Payable and Interest, Revenue recognition explained; Author: Accounting Prof - making it easy, The finance storyteller;https://www.youtube.com/watch?v=wMC3wCdPnRg;License: Standard YouTube License, CC-BY