Reference no: EM132663852
Questions -
Q1. Sage Inc. issues $2,500,000 of 7% bonds due in 15 years with interest payable at year-end. The current market rate of interest for bonds of similar risk is 12%.
What amount will Sage receive when it issues the bonds?
Q2. Find the present value of an investment in equipment if it is expected to provide annual savings of $29,000 for 10 years and to have a resale value of $64,000 at the end of that period. Assume an interest rate of 6% and that savings are realized at year end.
Q3. Stellar Co. provides for doubtful accounts based on 2% of gross accounts receivable, The following data are available for 2020.
Credit sales during 2020 $3,912,600
Bad debt expense 57,110
Allowance for doubtful accounts 1/1/20 16,250
Collection of accounts written off in prior years (customer credit was reestablished) 8,520
Customer accounts written off as uncollectible during 2020 28,190
What is the balance in Allowance for Doubtful Accounts at December 31, 2020?
Q4. On January 1, 2020, Sarasota Company issued a $1,051,950, 5-year, zero-interest-bearing note to Ivanhoe Bank. The note was issued to yield 9% annual interest. Unfortunately, during 2021 Sarasota fell into financial trouble due to increased competition. After reviewing all available evidence on December 31, 2021, Ivanhoe Bank decided that the loan was impaired. Sarasota will probably pay back only $701,300 of the principal at maturity.
Prepare journal entries for both Sarasota Company and Ivanhoe Bank to record the issuance of the note on January 1, 2020.
Q5.On December 31, 2020, Cheyenne Co. performed environmental consulting services for Hayduke Co. Hayduke was short of cash, and Cheyenne Co. agreed to accept a $287,800 zero-interest-bearing note due December 31, 2022, as payment in full. Hayduke is somewhat of a credit risk and typically borrows funds at a rate of 10%. Cheyenne is much more creditworthy and has various lines of credit at 6%.
a) Prepare the journal entry to record the transaction of December 31, 2020, for the Cheyenne Co.
b) Assuming Cheyenne Co.'s fiscal year-end is December 31, prepare the journal entry for December 31, 2021.
c) Assuming Cheyenne Co.'s fiscal year-end is December 31, prepare the journal entry for December 31, 2022.
Q6. Crane Incorporated sold $100,000 of accounts receivable to Gannon Factors Inc. on a with recourse basis. Gannon assesses a 2% finance charge of the amount of accounts receivable and retains an amount equal to 6% of accounts receivable for possible adjustments. Prepare the journal entries for Crane Incorporated and Gannon Factors to record the sale of the accounts receivable to Gannon assuming that the recourse liability has a fair value of $9,000.
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