ACTG 2P32 Lecture Notes - Lecture 1: Callable Bond, Effective Interest Rate, Promissory Note
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Usually under gaap we show long-term financial liabilities at pv discounted at historical market rate this is amortized cost method. If firm chooses to report its long-term financial liabilities under fair market value option (fmv), then it will use current market rate at reporting date. Pe gaap firm can choose either method. Ifrs firm can use fmv only if it will provide more relevant info e. g. if liabilities were issued to purchase an investment that is being reported at fmv. After 2015 unrealized gains and losses from own credit risk recognized through oci under ifrs. On jan 1, 2013, when the market rate was 8%, reel co. purchased equipment in exchange for a note payable due jan 1, 2015. Prepare journal entries under each of the following assumptions: the note is ,000 with 8% interest paid each dec 31. Cash (1,600: the note is ,328 and non-interest bearing. Pv of 23,328 back 2 periods @ 8% (. 85734) = 20,000.
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1. Make all adjustments on the "Adjusting Journal Entries". Remember to include a description under each journal entry.
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| 13. | ABC Corporation prepares an aging schedule on 12/31/14 that estimates total uncollectible accounts at $25,000. Assuming that the allowance method is used, | ||||||||
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| 14 | On 1/1/14, ABC Corporation signed a 5-year noncancelable lease for a delivery vehicle. The terms of the lease called for ABC to Corporation to make | ||||||||
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| 15 | ABC Corporation provides a defined benefit pension plan for its employees. A combination adjusting entry should be made to correctly account for this type of pension | ||||||||
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| Pension asset/liability (January 1) | $0 | ||||||||
| Actual return on plan assets | $40,000 | ||||||||
| Expected return on plan assets | $20,000 | ||||||||
| Contributions (funding) in 2014 | $37,000 | ||||||||
| Fair value of plan assets (December 31) | $75,000 | ||||||||
| Settlement rate | 10% | ||||||||
| Projected benefit obligation (January 1) | $0 | ||||||||
| Service cost | $60,000 | ||||||||
| Benefits paid in 2014 | $0 | ||||||||
| *For purposes of financial statement presentation, consider Pension Expense as an operating item and any resulting Pension Asset/Liability as long-term in nature. | |||||||||
| 16 | On December 31, 2014, ABC Corporation issued 1,000 shares of restricted stock to its Chief Financial Officer. ABC stock had a fair value (closing market price) of | ||||||||
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| b. Vesting occurs if the CFO stays with the company for a two-year period. | |||||||||
| c. The par value of the common stock is $3 per share. | |||||||||
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