User Account

All Pages

Interest-bearing and non-interest-bearing notes

Assignment Help Financial Accounting
Reference no: EM132420732

(Interest-Bearing and Non-interest-Bearing Notes) Little Crop. Was experiencing cash flow problem and was unable to pay its $105,000 account payable to big Crop. when it fell due on September 30, 2020. Big agreed to substitute a one year note for the open account. The follong two options were presented to little by Big Crop:

Option1: A one year note for $105,000 due September 30, 2021. Interest at a rate of %8 would be payable at maturity.

Option 2: A one -year non- interest-bearing note for $113,400. The implied rate of interest is 8%. Assume the Big Crop . has a December 31 year end.

Instructions

a. Assuming little Crop. Chooses option1,prepare the entries required on big crops books on september 30,2020 desember 31,2020 and september 30,2021.

b. . Assuming little Crop. Chooses option2,prepare the entries required on big crops books on September 30,2020 December 31,2020 and September 30,2021.

c. Compare the amount of interest income entered by big crop. in 2020 and 2021 under both options. Comment briefly.

d. Digging deeper from management perspective does one option provide better liquidity for big at December 31 2020? Does one option provide better cash flow than the other?

Reference no: EM132420732

Questions Cloud

What is the estimated value of stock today : The company will increase the dividend by 4% per year in the future. The required return is 12%. What is the estimated value of this stock today?
Calculate the value of ending inventory : You are provided with the following information for Sunland Inc. Sunland Inc. Uses the Periodic method of Accounting for its inventory Transactions.
Create an annotated bibliography of research : Create an annotated bibliography of research related to this problem. In your annotated bibliography, include the following: Six to eight resources.
Apply indirect costs to goods and services : How is cost accounting information used to control a business organization
Interest-bearing and non-interest-bearing notes : Little Crop. Was experiencing cash flow problem and was unable to pay its $105,000 account payable to big Crop. when it fell due on September 30, 2020
Record the general journal entry to record the acquisition : A.) Record the general journal entry to record the acquisition of the equipment on June 1st.
Same contribution margin percentage for all products : This is a task related to a retail store selling movie DVDs so, can you assume that the store sells just or only movie DVDs?
Difference between ARM10 and ARM11 processor pipelines : Question - Give the main difference between ARM10 and ARM11 processor pipelines
What is the intrinsic value of bond : Problem: Verizon bond with an October 2025 maturity, a 5.15% coupon bond (paid semi-annually), and a current selling price of $1135.55.

Reviews

Write a Review

Financial Accounting Questions & Answers

  Prepare an analysis showing whether the big bart line

Lisah, Inc., manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $3,600 from sales $201,000, variable costs $175,000, and fixed costs $29,600. If the Big Bart line is eliminated, $19,100 of fixed costs will rema..

  Prepare a tabular analysis of the transactions

Prepare a tabular analysis of the transactions using the following column headings: Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable, Owner's Capital, Owner's Drawings, Revenues, and Expenses.

  Which of the happens with respect to the transfer

Teri transferred land worth $200,000 (basis of $40,000) to Angle Corporation, an existing entity, for 300 shares of its stock. Angle Corporation has two other shareholders, Stuart and Carl, each of whom holds 50 shares. Which of the following happens..

  Capitalized or expensed as repairs and maintenance

Your supervisor has come to you with the following list of expenditures for the year and is asking you whether they should be capitalized or expensed as repairs and maintenance. Indicate all of the expenditures that would most appropriately be capita..

  Consider a federal government coupon bond

Consider a Federal Government coupon bond with a $1,000 face value and a coupon rate of 1%. If the bond matures in 25 years, pays semi-annual coupons, and the yield to maturity is 5%, then what will the bond sell for?

  What rate of interest will patricia investment be earning

What rate of interest will Patricia's investment be earning for her? (Hint: Use Table 4.) (Round answer to 0 decimal places, e.g. 25%.)

  Asset cost allocation straight line depreciationin january

asset cost allocation straight line depreciationin january 2013 mitzu co. pays 2600000 for a tract of land with two

  Compute the break-even point in total sales dollars

Compute the break-even point in total sales dollars and in units for 2014 and what effect would Paul's plan have on the profits and the break-even point in dollars of the partnership?

  Compute the components of pension expense

Develop the plan status as of December 31, 2013 showing the PBO, Plan Assets, over/under funded status, unamortized prior service cost and the (accrued)/prepaid recorded on the books.

  Standard costs when producing a tire

ZZ Tire Company has the following standard costs when producing a tire: They have gotten a special order for 30,000 custom tires that increase direct materials by $5 per tire and direct labor by $8 per tire. If they sell at the same price, should the..

  How much is lee companys accounts receivable balance

LEE Company had the information relating to its Accounts Receivable. How much is LEE Company's Accounts Receivable balance?

  Require relative to documentation

What does the Sarbanes-Oxley Act of 2002 require relative to documentation?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd