Reference no: EM132579159
On January 1, 2020, Batonica Limited issued a $1.2-million, five-year, zero-interest-bearing note to Northern Savings Bank. The note was issued to yield 8% annual interest. Unfortunately, during 2020 Batonica fell into financial trouble due to increased competition. After reviewing all available evidence on December 31, 2020, Northern Savings Bank decided that the loan was impaired and that there was a significant change in credit risk. Batonica will probably pay back only $800,000 of the principal at maturity. For simplicity, assume that this reflects the probability-weighted amount. Both Batonica and Northern Savings Bank prepare financial statements in accordance with IFRS 9.
Instructions
Question a. Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, prepare journal entries for both Batonica and Northern Savings Bank to record the issuance of the note on January 1, 2020. Use the result from the financial calculator or Excel function PV and round amounts to the nearest dollar. (Hint: Refer to Chapter 3 for tips on calculating.)
Question b. Assuming that both Batonica and Northern Savings Bank use the effective interest method to amortize the discount, prepare the amortization schedule for the note.
Question c. How would Northern Savings Bank determine the impairment loss for Batonica's note?
Question d. Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, estimate the loss that Northern Savings Bank will suffer from Batonica's financial distress on December 31, 2020. (Hint: Refer to Chapter 3 for tips on calculating.) What journal entries should be made to record this loss?
|
The legal environment
: David Perkins left a successful career in the NFL after two head injuries. David's claim is that the woman were fired because the image of Wing Shack,
|
|
Carbohydrate fermentation results
: Carbohydrate fermentation results must be observed within 24 hours to generate accurate results.
|
|
Patty plaintiff really bad
: Patty Plaintiff is shopping at her favorite store, Cash Mart. She is looking for a new laptop, but she can't find one she likes.
|
|
What we called the risk involved in this case example
: The auditor checks the company's financial statements using sampling. What we called the risk involved in this case example? Explain your answer
|
|
Prepare the amortization schedule for the note
: Batonica and Northern Savings Bank use the effective interest method to amortize the discount, prepare the amortization schedule for the note.
|
|
How many external nodes would phylogenetic
: You are working with 6 different bacteria: A, B, C, D, E and F. Based on genetic sequencing data, you determine that they all share
|
|
Why are bryophytes
: Why are Bryophytes (the first land plants)always found close to moisture?
|
|
How does the qwerty keyboard demonstrate path dependence
: How do the expectations of future interest rates impact an investor's willingness to pay for a stock, ceteris paribus? Justify your answer.
|
|
Advise board of directors on three practical consideration
: Advise the Board of Directors on three practical considerations that should be taken into account when setting a dividend policy.
|