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Prepare the liability section of the classified statement

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Reference no: EM132792321

Morrison Co. follows IFRS and has a Dec 31 year end. The following transactions occurred during 2020:

1) On January 1, 2020, Morrison purchased a piece of land by issuing a note for $500,000 plus 5% interest. Interest payments are due annually on January 1 and the note matures on January 1, 2023. (5% is the market rate of interest on this type of loan.)

2) Morrison issued a $900,000, three-year, zero-interest-bearing note to Williams Corp. on July 1, 2020, and received $790,000 cash.

Required:

Problem a) Prepare all of the 2020 journal entries related to the above scenarios. Show all calculations.

(For #2, you will need to calculate the effective interest rate. Use Excel RATE formula. Type out the factors that you used in your formula (ie. PV, FV, n). Round your percentage to two decimal places (ie. X.XX%.))

Problem b) Prepare the Liability section of the CLASSIFIED statement of financial position of Morrison Co. in good form at December 31, 2020 reflecting the above scenarios. Show the two notes separately.

Reference no: EM132792321

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