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(solution) Illustration (Zero-Interest-Bearing Note): On March 1, Landscape


This homework question is regarding current liabilities in ACCOUNTING 310

The homework is on the attachments along with an example.




Illustration (Zero-Interest-Bearing Note): On March 1, Landscape issues

 

[sells] a $102,000, four-month [due July 1], zero-interest-bearing note to Castle

 

National Bank. The present value of the note is $100,000. Landscape if market

 

rate = 6%; records this transaction as follows.

 

Excel 1

 

1-Mar

 

Note :

 

$

 

Rate/APR

 

term-months

 

Simple interest

 

Discounted for interst $

 

Simple interest $

 

Straight line interest $ JE 102,000

 

6%

 

4 = Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest 100,000 without Present value calculation

 

2,000

 

500 per month 1-Mar

 

$ Cash

 

Notes payable

 

Discount on Notes [contra liability] JE 0.50%

 

per month DR

 

100,000 $ CR 2,000 $ 30-Jun DR Interest expense

 

Discount on Notes [contra liability] 102,000 CR $ 2,000

 

$ 2,000 Balance = -0- JE 1-Jul

 

Notes payable

 

Cash DR

 

102,000 $ CR

 

$ 102,000 Excel 2 Note :

 

$

 

Rate/APR

 

term-months Rate: 81,000

 

8.000%

 

12 = 0.6666667%

 

per month 8.00%

 

+RATE(1,81000,-75000,) Simple interest

 

Oct. 1 - Borrowed $75,000 from the Shore Bank by

 

Discounted for interst $

 

75,000 without Present value calculation

 

signing a Simple interest $ zero-interest-bearing $81,000

 

12-month, 6,000

 

Straight line interest $

 

500 per month

 

note. [to 12/31] JE 10/1/2xx2 DR Cash $

 

Notes payable

 

Discount on Notes [contra liability] JE 12/31/2xx2 CR

 

75,000

 

$ $ DR 8%

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

Not discounted // Simple interest

 

75000 Not discounted // Simple interest

 

Not discounted // Simple interest CR Interest expense

 

Discount on Notes [contra liability] $ Discount on Notes [contra liability] JE 81,000 6,000 3 months = 1/4 yr Excel Rate function three of 12 months 1,500 Balance = $4500 $ 1,500 $ 76,500 10/1/2xx3 assumimg no other entries during 2013

 

Interest expense

 

$

 

Discount on Notes [contra liability]

 

Notes payable

 

$

 

Cash

 

Discount on Notes [contra liability]

 

Balance = -0- DR CR

 

4,500

 

$ 4,500 $ $ 81,000 81,000 81,000 BE13-5: Sports Pro Magazine sold 12,000 annual subscriptions on

 

August 1, 2xx2, for $18 each. Prepare Sports Pro?s August 1, 2xx2, journal entry

 

and the December 31, 2xx2, annual adjusting entry. Monthly issues staring Sept.1. No sales tax

 

Excel 3

 

Subscriptions

 

each $

 

Total

 

$

 

Normal: ??? 1-Aug $

 

08/30/12

 

09/30/12

 

10/31/12

 

11/30/12

 

12/31/12

 

01/31/13 12000

 

18.00

 

216,000

 

Debit

 

(Credit)

 

Cash

 

216,000

 

0

 

0

 

0

 

0

 

0

 

0 Credit

 

(Debit)

 

Sales

 

0

 

0

 

$18,000

 

$18,000

 

$18,000

 

$18,000

 

$18,000 Credit

 

(Debit)

 

Unearned revenue

 

$

 

216,000 CR

 

0

 

$

 

(18,000) DR

 

$

 

(18,000)

 

$

 

(18,000)

 

$

 

(18,000) YE

 

$

 

(18,000) 02/28/13

 

03/31/13

 

04/30/13

 

05/31/13

 

06/30/13

 

07/31/13

 

08/31/13

 

$

 

August JE Dec. JE Dec JE 8/1/2012

 

Cash

 

$

 

Unearned revenue 12 12/31/20

 

Unearned revenue

 

Sales $ Dr

 

216,000 $18,000

 

$18,000

 

$18,000

 

$18,000

 

$18,000

 

$18,000

 

$18,000

 

216,000 $ $

 

$

 

$

 

$

 

$

 

$

 

$

 

$ (18,000)

 

(18,000)

 

(18,000)

 

(18,000)

 

(18,000)

 

(18,000)

 

(18,000)

 

- Excel 3 CR

 

$ 216,000 Dr

 

72,000 CR

 

$ 13 12/31/20

 

Sales

 

Sales 0

 

0

 

0

 

0

 

0

 

0

 

0

 

216,000 $ 4 months

 

72,000 Dr

 

144,000 CR

 

$ 8 months

 

last mo. = August 144,000 Wage payable Excel 4 Payroll is paid on Tuesday for wages earned through the prior week Wednesday

 

The months ends on Monday

 

Each workday costs the the company in wages:

 

$5,300

 

Workdays are M-T-W-Th-F -- 5 days per week

 

Workdays owed to employees

 

Amount owed to employees $

 

The Account balance in Wage payable prior to this adjusting JE is $

 

Month end JE

 

Wages expense

 

Wages payable [ Accrued wages] PV of Contigency Dismatling & removal $

 

Years

 

Rate $ pay

 

work

 

vacation

 

holidays 8 work

 

pay 42,400.00

 

4,650.00

 

Dr Cr

 

37,750.00

 

$ work

 

Vac.Hol 37,750.00 Excel 5 1,000,000

 

5

 

10% Present Value Cash flow

 

1

 

0

 

2

 

0

 

3

 

0

 

4

 

0

 

5 $

 

1,000,000 Table $

 

$

 

$

 

$

 

$ 620,921.32

 

$620,921.32 $ 620,921.32

 

=+NPV(D130,D133:D137)

 

Imputed Interest Interest: rate X beginning BV

 

1

 

2

 

3

 

4

 

5 $379,078.68 $ 1,000,000 Interest Expense = Dr.

 

$

 

$

 

62,092.13 CR. Asset retirement obligation

 

$

 

$

 

68,301.35 CR. Asset retirement obligation

 

$

 

$

 

75,131.48 CR. Asset retirement obligation

 

$

 

$

 

82,644.63 CR. Asset retirement obligation

 

90,909.09 CR. Asset retirement obligation

 

$1,000,000.00 $ Asset retirement liability = $ $620,921.32

 

683,013.46

 

751,314.80

 

826,446.28

 

909,090.91 $

 

379,078.68

 

1,000,000 by end year 5 $50 hr

 

40

 

3 weeks

 

2 weeks 10 47 weeks

 

52 weeks $94,000

 

$10,000

 

10.64% 10K/$p4K

 

Ea. Work week $ 212.77 $10K / 47

 

Dr. Benefit expense [ or Wage expnse]

 

Cr. Accrued benefits [ ior vacation / holiday] IBM

 

Liabilities & Shareholders' Equity

 

2009

 

ST Debt & Current Portion LT Debt

 

Short Term Debt

 

Current Portion of Long Term Debt

 

Accounts Payable

 

Income Tax Payable

 

Other Current Liabilities

 

Dividends Payable

 

Accrued Payroll

 

Miscellaneous Current Liabilities

 

Total Current Liabilities 4.17B

 

1.95B

 

2.22B

 

7.44B

 

3.83B

 

20.57B

 

4.51B

 

16.07B

 

36B $ billions 2010

 

6.78B

 

2.76B

 

4.02B

 

7.8B

 

4.22B

 

21.76B

 

5.03B

 

16.74B

 

40.56B 2011

 

8.46B

 

4.16B

 

4.31B

 

8.52B

 

3.31B

 

21.83B

 

5.1B

 

16.73B

 

42.12B 2012

 

9.18B

 

3.59B

 

5.59B

 

7.95B

 

4.95B

 

21.54B

 

4.75B

 

16.8B

 

43.63B 2014

 

9.31B

 

0

 

9.31B

 

6.87B

 

2.25B

 

22.64B

 

3.66B

 

18.97B

 

41.06B 5-year

 

trend ACC 310

 

HCT

 

HW

 

Ch.13

 

Current Liabilities A.

 

On December 31, 2012,ClassCo had $25,000,000 of short-term debt in the form of its notes payable on June 12, 2013.

 

ClassCo had in place @ 12/31/12 provisions to issue $10,000,000 of stock to settle some of that debt; ClassCo had a

 

firm commitment from Big Bank to close on February 1, 2013 a bank loan for $11,000,000 to be repaid on 11/20/2012

 

and to use those proceeds to retire some of he $25illion debt and had a firm commitment from Bank2 to close on

 

Jan26 2013 for $5,000,000 of long term Note payable in full on 7/1/2015.

 

If ClassCo has no other debt how Should Current & Long term Debt be show on the Balance Sheet of !2/31/2012 B

 

ClassC0 signed a $100,000 Zero-face rate Note with Big Bank on 10/31/2012 payable TEN MONTHS FROM THAT DATE;

 

the imputed interest was 12%.

 

What was the Current liability for this note at 12/31/2012

 

Explain or show calculations as to how answer determined C

 

ClassCo sold 1200 subscription to its theater series

 

each purchaser can attend 1 show per month

 

series runs for 6 months beginning April & ending September

 

Show is last Thursday of each month

 

a subscription is $300 each

 

Subscription were sold & paid for 1/4 in each month of JAN_FEB_MAR_APril

 

Complete the Table

 

Sales or

 

Debit

 

Revenue

 

to Cash

 

credited

 

in Month in the Month

 

Jan

 

Feb

 

Mar

 

Apr

 

May

 

Jun

 

Jul

 

Aug

 

Sep

 

Oct ME Balance

 

Unearned

 

Revenue

 


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