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By December 31, 2020, Bramble Corp. had performed a significant amount of environmental consulting services for...

By December 31, 2020, Bramble Corp. had performed a significant amount of environmental consulting services for Cullumber Ltd. Cullumber was short of cash, and Bramble agreed to accept a $131,000, non–interest-bearing note due December 31, 2022, as payment in full. Cullumber is a bit of a credit risk and typically borrows funds at a rate of 12%. Bramble is much more creditworthy and has various lines of credit at 8%. Bramble Corp. reports under IFRS. The tables in this problem are to be used as a reference for this problem. 1. Prepare the journal entry to record the transaction on December 31, 2020, for Bramble Corp. 2.Assuming Bramble’s fiscal year end is December 31, prepare the journal entry required at December 31, 2021. 3. Assuming Bramble’s fiscal year end is December 31, prepare the journal entry required at December 31, 2022 4.What are the amount and classification of the note on Bramble Corp.’s statement of financial position as at December 31, 2021? (Round answer to 0 decimal places, e.g. 58,971.) The balance of the note at December 31, 2021 $enter The balance of the note at December 31, 2021 in dollars rounded to 0 decimal places The note would be classified as a select an option on the balance sheet

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Expert Solution

Discount rate=Interest rate for Cullumber=12%
Present value of note=Face value*Present value of $1 at 12% for 2 years=131000*0.79719=$ 104432
Date Account Titles and Explanation
 Debit Credit
1 Dec 31,2020 Notes receivable 131000
Discount on notes receivable (Plug) 26568
Sales revenue 104432
(Sales revenue recorded)
2 Dec 31,2021 Discount on notes receivable (104432*12%) 12532
Interest revenue 12532
(Interest revenue recorded)
3 Dec 31,2022 Discount on notes receivable (104432+12532)*12% 14036
Interest revenue 14036
(Interest revenue recorded)
4 The balance of the note at December 31, 2021=Note receivable-Unamortized discount
Unamortized discount=Discount on notes receivable-Discount amortized in 2021=26568-12532=$ 14036
The balance of the note at December 31, 2021=131000-14036=$ 116964
It should be classified as current asset since it will be matured next year (Dec 31,2022)

ekkarill92 answered 2 years ago
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