Reference no: EM132826326

Questions -

Q1. On October 1, 2021, Smash Company discounted its own note of $500,000 at 10% for 1 year. In its statement of financial position on December 31, 2021, what is the carrying amount of notes payable to be presented as current liability by Smash Company?

Q2. The information taken from the books of Lyle Co. as of December 31, 2021 are the following:

Trade accounts receivable - 2,000,000

Allowance for doubtful accounts - 100,000

Claim against shipper for goods lost in transit in November 2021 - 300,000

Selling price of unsold goods sent by Lyle Co. on consignment to Aly Co. at 150% of cost - 600,000

Security deposit on lease of warehouse - 200,000

How much should be shown as trade and other receivables at the current asset section of the statement of financial position on December 31, 2021?

Q3. On July 1, 2020, Bae Inc. sold equipment to Beau Inc. for $250,000. Bae Inc. accepted a 10% note receivable of the entire sales price. This note is payable in 2 equal installments of $125,000 plus accrued interest on December 31, 2020, and December 31, 2021. On July 1, 2021, Bae Inc. discounted the note at a bank at an interest rate of 12%. How much was Bae's proceeds from the discounted note?

Q4. Noel Bank loaned 9,000,000 to a borrower on January 1, 2017. The terms of the loan were payment in full on January 1, 2022, plus annual interest payment at 12%. The debtor paid interest on January 1, 2018 as scheduled. However, due to financial setbacks, the debtor was unable to pay interest on 2019. Noel Bank accrued interest on Dec. 31, 2018 but did not continue to accrue interest for 2019 due to considered impairment of the loan. On December 31, 2019, Noel Bank projected these cash flows:

December 31, 2020 - 1,500,000

December 31, 2021 - 2,000,000

December 31, 2022 - 3,000,000

December 31, 2023 - 2,500,000

The present value of 1 at 12% is as follows:

For 1 period - 0.8929

For 2 periods - 0.7972

For 3 periods - 0.7118

For 4 periods - 0.6355

a. How much is the impairment loss to be recognized on December 31, 2019?

b. How much should be recognized as interest income for 2020?

Q5. On January 2, 2021, BB Corporation sold equipment with a cost of $700,000 and accumulated depreciation of $220,000 in exchange for a $600,000 non-interest-bearing note due on January 2, 2024. There was no established exchange price for the equipment. The prevailing rate of interest for a note of this type on January 2, 2021 was 10%. How much is the gain (loss) on the sale of equipment?