Question

In: Accounting

On Jan 1, 2016, Zahid sold a truck to Othaim in exchange for a $200,000, 6%...

On Jan 1, 2016, Zahid sold a truck to Othaim in exchange for a $200,000, 6% (payable annually), 5 year, notes payable. On Jan 1, 2016, the market rate was 8%.

Date

Cash Received

Int. Revenue

Pre Amrt.

Carrying Value

1-Jan-16

1-Jan-17

1-Jan-18

1-Jan-19

1-Jan-20

1-Jan-21

Requirements:

(1)

What is the sale revenue that Zaid should recognize on Jan 1, 2016?

(2)

What is the interest revenue that Zaid should recognize on Dec 31, 2016?

(3)

What is the Pre Amrt. that Zaid should recognize on Dec 31, 2018?

(4)

What is the carrying value of the notes on Dec 31, 2019?

(5)

What is the interest receivable related to the notes on Dec 31, 2020?

Solutions

Expert Solution

Sales revenue=Carrying value at the beginning:
Cash received=Face value of interest*stated rate=200000*6%=$ 12000
Discount rate=market rate=8%
Life of the note=5 years
Present value of cash received=Cash received*Discount factor at 8% for 5 years=12000*3.99271=$ 47912.52
Present value of principal repayment of notes=maturity value*Discount factor at 8% for 5th year=200000*0.68058=$ 136116
Sales revenue=Carrying value at the beginning=47912.52+136116=$ 184028.52=$ 184029
Date Cash received Int. revenue Pre Amrt Carrying value
01-Jan-16 184029
01-Jan-17 12000 14722 2722 186751
01-Jan-18 12000 14940 2940 189691
01-Jan-19 12000 15175 3175 192867
01-Jan-20 12000 15429 3429 196296
01-Jan-21 12000 15704 3704 200000
Int. revenue=Beginning carrying value*market rate
Pre amrt=Int. revenue-Cash received
Ending carrying value=Beginning carrying value+Pre amrt
1 Sales revenue=$ 184029
2 Interest revenue on Dec 31,2016=$ 14722
3 Pre amrt on Dec 31,2018=$ 3175
4 Carrying value as on Dec 31,2019=$ 192867 (carrying value changes on Jan 1)
5 Interest receivable on Dec 31,2020=$ 15704

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Premium Group names: On Jan 1, 2016, Zahid sold a truck to Othaim in exchange for...
Premium Group names: On Jan 1, 2016, Zahid sold a truck to Othaim in exchange for a $200,000, 6% (payable annually), 5 year, notes payable. On Jan 1, 2016, the market rate was 8%. Amortization Table Date Cash Received Int. Revenue Pre Amrt. Carrying Value 1-Jan-16 1-Jan-17 1-Jan-18 1-Jan-19 1-Jan-20 1-Jan-21 Requirements: What is the sale revenue that Zaid should recognize on Jan 1, 2016? What is the interest revenue that Zaid should recognize on Dec 31, 2016? What is...
Discount Group names: On Jan 1, 2016, Zahid sold a truck to Othaim in exchange for...
Discount Group names: On Jan 1, 2016, Zahid sold a truck to Othaim in exchange for a $200,000, 6% (payable annually), 5 year, notes payable. On Jan 1, 2016, the market rate was 8%. Amortization Table Date Cash Received Int. Revenue Dis Amrt. Carrying Value 1-Jan-16 1-Jan-17 1-Jan-18 1-Jan-19 1-Jan-20 1-Jan-21 Requirements: What is the sale revenue that Zaid should recognize on Jan 1, 2016? What is the interest revenue that Zaid should recognize on Dec 31, 2016? What is...
On Dec. 31, 2019: Sold a truck that was purchased at $25,000 on Jan. 1, 2017....
On Dec. 31, 2019: Sold a truck that was purchased at $25,000 on Jan. 1, 2017. (5 year life, salvage value $5,000, straight-line method). The truck was sold for $5,000. Which of the following is correct? Gain on disposal, $4,000 Loss on disposal, $4,000 Gain on disposal, $8,000 Loss on disposal, $8,000
Swann Company sold a delivery truck on April 1, 2016. Swann had acquired the truck on...
Swann Company sold a delivery truck on April 1, 2016. Swann had acquired the truck on January 1, 2012, for $39,500. At acquisition, Swann had estimated that the truck would have an estimated life of 5 years and a residual value of $4,000. At December 31, 2015, the truck had a book value of $11,100. Required: 1. Prepare any necessary journal entries to record the sale of the truck, assuming it sold for: a. $11,025 b. $7,525 2. How should...
Swann Company sold a delivery truck on April 1, 2016. Swann had acquired the truck on...
Swann Company sold a delivery truck on April 1, 2016. Swann had acquired the truck on January 1, 2012, for $44,000. At acquisition, Swann had estimated that the truck would have an estimated life of 5 years and a residual value of $3,000. At December 31, 2015, the truck had a book value of $11,200. Required: 1. Prepare any necessary journal entries to record the sale of the truck, assuming it sold for: a. $10,600 b. $7,600 2. How should...
2016 Jan. 1 Paid $20,515 cash plus $1,935 in sales tax for a new delivery truck...
2016 Jan. 1 Paid $20,515 cash plus $1,935 in sales tax for a new delivery truck estimated to have a five-year life and a $2,150 salvage value. Delivery truck costs are recorded in the Trucks account. Dec. 31 Recorded annual straight-line depreciation on the truck. 2017 Dec. 31 Due to new information obtained earlier in the year, the truck’s estimated useful life was changed from five to four years, and the estimated salvage value was increased to $2,700. Recorded annual...
2016 Jan. 1 Paid $23,515 cash plus $1,785 in sales tax for a new delivery truck...
2016 Jan. 1 Paid $23,515 cash plus $1,785 in sales tax for a new delivery truck estimated to have a five-year life and a $2,450 salvage value. Delivery truck costs are recorded in the Trucks account. Dec. 31 Recorded annual straight-line depreciation on the truck. 2017 Dec. 31 Due to new information obtained earlier in the year, the truck’s estimated useful life was changed from five to four years, and the estimated salvage value was increased to $2,550. Recorded annual...
1.) What is the Net Sales amount? Jan. 6 Sold goods for $1,500 to S. Green...
1.) What is the Net Sales amount? Jan. 6 Sold goods for $1,500 to S. Green and billed that amount subject to terms 2/10, n/30. 6 Sold goods to M. Munoz for $850 and billed that amount subject to terms 2/10, n/30. 14 Collected cash due from S. Green. Feb. 2 Collected cash due from M. Munoz. 28 Sold goods for $400 to R. Reynolds and billed that amount subject to terms 2/10, n/45. Required: Assuming that Sales Discounts is...
Steven, Inc., acquired a truck on January 1, 2016 for $40,000 cash. The truck was estimated...
Steven, Inc., acquired a truck on January 1, 2016 for $40,000 cash. The truck was estimated to have a useful life of 10 years with no residual value, and the firm decided to use straight-line amortization. On January 1, 2017, management determined that the remaining useful life was actually only 6 more years. On June 30, 2018, the truck was sold for $25,000. How much would Steven record as the value of the truck when it is acquired on January...
On Jan 1, 2018, Rising Star purchased a crane for $ 1,200,000 and paid $200,000 as...
On Jan 1, 2018, Rising Star purchased a crane for $ 1,200,000 and paid $200,000 as a downpyament while the balance will be paid over the next five years in installments of $100,000 every six months , starting July 1, 2018. The market rate on Jan 1, 2018 was 9%. Requirements: a.   For the how much the company should recognize the crane on Jan 1, 2018? Show your calculation along with your accounting entry to recognize the purchase of the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT