Facts
· Mortgage Principal at origination 1/1/2020: $10,000,000
· Annual Interest Rate at origination: 6%
· Term of Mortgage from origination 1/1/2020: 20 years
· Purchase Price: $10,000,000 on 1/1/2020
· The mall owner has stopped paying principal beginning April, 2021, and anticipates being unable to pay even the interest portion beginning September, 2021 unless the CDC allows less strict mask and social distancing requirements.
· The mall had a fair market value of $20 million on 1/1/2020, and expects a current appraisal to be at about $16 million.
· Ignore refinancing costs.
· The securitizations do not qualify for sale accounting, and the creditor retains legal title to the mortgage as well as a 10% participation in the mortgage.
· Today is August 31, 2021.
1.Create an amortization table that allows for an input each period of the amount that the borrower actually pays. Using the facts of the case, use the amortization table structure to find the principal amount owed as of September 1, 2021.
2.Create a separate restructured loan that is a reasonable alternative to the current unaffordable mortgage.
3.Create an amortization table for the restructured loan with the modifications and expected mortgage payments. If the creditor and borrower would have different accounting treatments for the loan, create an amortization table for the creditor and the borrower.
In: Accounting
Facts
· Mortgage Principal at
origination 1/1/2020: $10,000,000
· Annual Interest Rate at
origination: 6%
· Term of Mortgage from
origination 1/1/2020: 20 years
· Purchase Price: $10,000,000
on 1/1/2020
· The mall owner has stopped
paying principal beginning April, 2021, and anticipates being
unable to pay even the interest portion beginning September, 2021
unless the CDC allows less strict mask and social distancing
requirements.
· The mall had a fair market
value of $20 million on 1/1/2020, and expects a current appraisal
to be at about $16 million.
· Ignore refinancing
costs.
· The securitizations do not
qualify for sale accounting, and the creditor retains legal title
to the mortgage as well as a 10% participation in the
mortgage.
· Today is August 31,
2021.
1.Create an amortization table that allows for an input each period
of the amount that the borrower actually pays. Using the facts of
the case, use the amortization table structure to find the
principal amount owed as of September 1, 2021.
2.Create a separate restructured loan that is a reasonable alternative to the current unaffordable mortgage.
3.Create an amortization table for the restructured
loan with the modifications and expected mortgage payments. If the
creditor and borrower would have different accounting treatments
for the loan, create an amortization table for the creditor and the
borrower.
In: Accounting
Cupid's Kiss Limited (“CK”) was founded in early 1980s focusing on the manufacturing and trading of baby food and snacks in Hong Kong. After years of development, CK is now one of the well-known baby food producers in Asia. You are the audit manager-in-charge of the audit of CK’s financial statements for the year ended 30 September 2020. The audit is substantially completed. After reviewing the audit documentation, you and your audit partner are satisfied with the audit. There are no significant issues or difficulties encountered in the audit. It has been agreed with CK that the auditor’s report for the year ended 30 September 2020 will be authorised and approved in mid-November 2020. Just a week before the planned approval date of the auditor’s report, you read a news headline: “A popular product of Cupid's Kiss is proven to contain toxic ingredients with a high risk of causing health problems as the raw materials were contaminated. Cupid’s Kiss announced an immediate product recall.”
Required:
(a) Determine and explain whether Cupid’s Kiss toxic ingredients
problem is an adjusting event or a non-adjusting event. Discuss its
implications to its financial statements for the year ended 30
September 2020.
(b) Suggest relevant audit procedures in response to Cupid’s Kiss toxic ingredients problem.
(c) Determine and explain the auditor’s obligation to follow up on the toxic ingredients problem if the news is only known by the auditor after the issuance of the auditor’s report and the financial statements.
In: Accounting
The following is the balance sheet of Korver Supply Company at
December 31, 2020 (prior year).
| KORVER SUPPLY COMPANY | |||
| Balance Sheet | |||
| At December 31, 2020 | |||
| Assets | |||
| Cash | $ | 175,000 | |
| Accounts receivable | 300,000 | ||
| Inventory | 250,000 | ||
| Furniture and fixtures (net) | 195,000 | ||
| Total assets | $ | 920,000 | |
| Liabilities and Shareholders’ Equity | |||
| Accounts payable (for merchandise) | $ | 300,000 | |
| Notes payable | 310,000 | ||
| Interest payable | 12,400 | ||
| Common stock | 140,000 | ||
| Retained earnings | 157,600 | ||
| Total liabilities and shareholders’ equity | $ | 920,000 | |
Transactions during 2021 (current year) were as follows:
| 1. | Sales to customers on account | $ | 960,000 | |
| 2. | Cash collected from customers | 940,000 | ||
| 3. | Purchase of merchandise on account | 650,000 | ||
| 4. | Cash payment to suppliers | 660,000 | ||
| 5. | Cost of merchandise sold | 600,000 | ||
| 6. | Cash paid for operating expenses | 320,000 | ||
| 7. | Cash paid for interest on notes | 24,800 | ||
Additional Information:
The notes payable are dated June 30, 2020, and are due on June 30,
2022. Interest at 8% is payable annually on June 30. Depreciation
on the furniture and fixtures for 2021 is $36,000. The furniture
and fixtures originally cost $460,000.
Required:
Prepare a classified balance sheet at December 31, 2021, by
updating ending balances from 2020 for transactions during 2021 and
the additional information. The cost of furniture and fixtures and
their accumulated depreciation are shown separately.
(Amounts to be deducted should be indicated by a minus
sign.)
In: Accounting
On January 1, 2018, Winn Heat Transfer leased office space under a three year operating lease agreement. The arrangement specified three annual rent payments of $90,000 each, beginning December 31, 2018, and at each December 31 through 2020. The lessor, HVAC Leasing calculates lease payments based on an annual interest rate of 8%. Winn also paid a $300,000 advance payment at the beginning of the lease in addition to the first $90,000 rent payment. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $390,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value.
1. Record the beginning of the lease Jan 2018
2. Record the lease payment Jan 2018
3. Record the lease and interest payment Dec 2018
4.Record the amortization of the right to use asset Dec 2018
5.Record the depreciation expense for Winn 2018
6.Record the lease and interest payment 2019
7. Record the amortization of the right to use asset Dec 2019
8. Record the depreciation expense for Winn 2019
9.Record the lease and interest payment 2020
10. Record the amortization of the right to use asset Dec 2020
11. Record the depreciation expense for Winn 2020
In: Accounting
Laura Leasing Company signs an agreement on January 1, 2020, to
lease equipment to Kingbird Company. The following information
relates to this agreement.
|
1. |
The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. |
|
|
2. |
The fair value of the asset at January 1, 2020, is $85,000. |
|
|
3. |
The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $5,000, none of which is guaranteed. |
|
|
4. |
The agreement requires equal annual rental payments of $27,911 to the lessor, beginning on January 1, 2020. |
|
|
5. |
The lessee’s incremental borrowing rate is 5%. The lessor’s implicit rate is 4% and is unknown to the lessee. |
|
|
6. |
Kingbird uses the straight-line depreciation method for all equipment. |
Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to 0 decimal places, e.g. 5,265.)
Prepare all of the journal entries for the lessee for 2020 and 2021 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee’s annual accounting period ends on December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,265. Record journal entries in the order presented in the problem.)
In: Accounting
Alternative Dividend Policies
Boehm Corporation has had stable earnings growth of 7% a year for the past 10 years, and in 2019 Boehm paid dividends of $2 million on net income of $5 million. However, net income is expected to grow by 30% in 2020, and Boehm plans to invest $3.5 million in a plant expansion. This one-time unusual earnings growth won't be maintained, though, and after 2020 Boehm will return to its previous 7% earnings growth rate. Its target debt ratio is 33%. Boehm has 1 million shares of stock.
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In: Finance
The following is the balance sheet of Korver Supply Company at December 31, 2020 (prior year). KORVER SUPPLY COMPANY Balance Sheet At December 31, 2020 Assets Cash $120,000 Accounts receivable 300,000 Inventory 200,000 Furniture and fixtures (net) 150,000 Total assets $770,000 Liabilities and Shareholders’ Equity Accounts payable (for merchandise) $190,000 Notes payable 200,000 Interest payable 6,000 Common stock 100,000 Retained earnings 274,000 Total liabilities and shareholders’ equity $770,000 Transactions during 2021 (current year) were as follows: 1. Sales to customers on account $800,000 2. Cash collected from customers 780,000 3. Purchase of merchandise on account 550,000 4. Cash payment to suppliers 560,000 5. Cost of merchandise sold 500,000 6. Cash paid for operating expenses 160,000 7. Cash paid for interest on notes 12,000 Additional Information: The notes payable are dated June 30, 2020, and are due on June 30, 2022. Interest at 6% is payable annually on June 30. Depreciation on the furniture and fixtures for 2021 is $20,000. The furniture and fixtures originally cost $300,000.
Required: Prepare a classified balance sheet at December 31, 2021, by updating ending balances from 2020 for transactions during 2021 and the additional information. The cost of furniture and fixtures and their accumulated depreciation are shown separately.
In: Accounting
Problem 16-4 Change in tax rate; record taxes for four years [LO16-1, 16-5]
Zekany Corporation would have had identical income before taxes
on both its income tax returns and income statements for the years
2018 through 2021 except for differences in depreciation on an
operational asset. The asset cost $130,000 and is depreciated for
income tax purposes in the following amounts:
| 2018 | $ | 42,900 | |
| 2019 | 57,200 | ||
| 2020 | 19,500 | ||
| 2021 | 10,400 | ||
The operational asset has a four-year life and no residual value.
The straight-line method is used for financial reporting
purposes.
Income amounts before depreciation expense and income taxes for
each of the four years were as follows.
| 2018 | 2019 | 2020 | 2021 | |||||||||
| Accounting income before taxes and depreciation | $ | 75,000 | $ | 95,000 | $ | 85,000 | $ | 85,000 | ||||
Assume the average and marginal income tax rate for 2018 and 2019
was 30%; however, during 2019 tax legislation was passed to raise
the tax rate to 40% beginning in 2020. The 40% rate remained in
effect through the years 2020 and 2021. Both the accounting and
income tax periods end December 31.
Required:
Prepare the journal entries to record income taxes for the years
2018 through 2021. (If no entry is required for a
transaction/event, select "No journal entry required" in the first
account field.)
In: Accounting
In: Physics