Question

On December 31, 2017, Coronado Company borrowed $65,652 from Paris Bank, signing a 5-year, $115,700 zero-interest-bearing...

On December 31, 2017, Coronado Company borrowed $65,652 from Paris Bank, signing a 5-year, $115,700 zero-interest-bearing note. The note was issued to yield 12% interest. Unfortunately, during 2019, Coronado began to experience financial difficulty. As a result, at December 31, 2019, Paris Bank determined that it was probable that it would receive back only $86,775 at maturity. The market rate of interest on loans of this nature is now 13%.

Prepare the entry, if any, to record the impairment of the loan on December 31, 2019, by Paris Bank.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Dec 31 Bad debts expense 20589
Allowance for Doubtful accounts 20589
To record the impairment of the loan
Note: Answer might vary + 1 due to rounding off
Workings:
Note amortization schedule
Date Cash received Interest revenue(12%) Increase in carrying amount Carrying amount
12/31/2017 65652
12/31/2018 0 7878 7878 73530
12/31/2019 0 8824 8824 82354
Carrying amount of Loan 82354
Less:Present value of $86775 due in 3 years 61765 =86775*0.71178
Loss due to impairment 20589
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Impairment of zero-interest notes receivable, GAAP vs. IFRS On December 31, 2020, Firth Company borrowed $62,092...
Impairment of zero-interest notes receivable, GAAP vs. IFRS On December 31, 2020, Firth Company borrowed $62,092 from Paris Bank, signing a 5-year, $100,000 zero-interest note. The note was issued to yield 10% interest. Unfortunately, during 2022, Firth began to experience financial difficulty. As a result, at December 31, 2022, Paris Bank determined that it was probable that it would collect only $75,000 at maturity. The market rate of interest on loans of this nature is now 11%. 1,Instructions: On March...
Impairment of zero-interest notes receivable, GAAP vs. IFRS On December 31, 2020, Firth Company borrowed $62,092...
Impairment of zero-interest notes receivable, GAAP vs. IFRS On December 31, 2020, Firth Company borrowed $62,092 from Paris Bank, signing a 5-year, $100,000 zero-interest note. The note was issued to yield 10% interest. Unfortunately, during 2022, Firth began to experience financial difficulty. As a result, at December 31, 2022, Paris Bank determined that it was probable that it would collect only $75,000 at maturity. The market rate of interest on loans of this nature is now 11%. 1,Instructions: On March...
On December 31, 2017, Flint Company signed a $ 1,038,100 note to Buffalo Bank. The market...
On December 31, 2017, Flint Company signed a $ 1,038,100 note to Buffalo Bank. The market interest rate at that time was 11%. The stated interest rate on the note was  9%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Flint’s financial situation worsened. On December 31, 2019, Buffalo Bank determined that it was probable that the company would pay back only $ 622,860 of the principal at maturity. However, it was considered likely that interest...
On December 31, 2019, Bang Corporation borrowed $200,000 from SuperFlash Company and gives SuperFlash a $200,000,...
On December 31, 2019, Bang Corporation borrowed $200,000 from SuperFlash Company and gives SuperFlash a $200,000, five-year, non-interest bearing note with a face value of $200,000. The conditions of the note provide that SuperFlash can rent a warehouse from Bang Corporation at less than regular market price over the next five years. Bang normally has to pay an interest rate of 10% when it borrows money. Instructions: a) Prepare Bang’s journal entry to record the receipt of cash, the note...
On December 31, 2019, Bang Corporation borrowed $200,000 from SuperFlash Company and gives SuperFlash a $200,000,...
On December 31, 2019, Bang Corporation borrowed $200,000 from SuperFlash Company and gives SuperFlash a $200,000, five-year, non-interest bearing note with a face value of $200,000. The conditions of the note provide that SuperFlash can rent a warehouse from Bang Corporation at less than regular market price over the next five years. Bang normally has to pay an interest rate of 10% when it borrows money. Instructions: a) Prepare Bang’s journal entry to record the receipt of cash, the note...
Marigold Corporation borrowed $56,600 on November 1, 2017, by signing a $58,040, 3-month, zero-interest-bearing note. Prepare...
Marigold Corporation borrowed $56,600 on November 1, 2017, by signing a $58,040, 3-month, zero-interest-bearing note. Prepare Marigold’s November 1, 2017, entry; the December 31, 2017, annual adjusting entry; and the February 1, 2018, entry.
On December 31, 2020, Splish Company signed a $1,196,300 note to Blossom Bank. The market interest...
On December 31, 2020, Splish Company signed a $1,196,300 note to Blossom Bank. The market interest rate at that time was 12%. The stated interest rate on the note was 10%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Splish’s financial situation worsened. On December 31, 2022, Blossom Bank determined that it was probable that the company would pay back only $717,780 of the principal at maturity. However, it was considered likely that interest would...
On December 31, 2017, First Tennessee Bank extends a loan to Chicago Company and receives in...
On December 31, 2017, First Tennessee Bank extends a loan to Chicago Company and receives in exchange a 5 year, $100,000 note bearing interest at 10% annually. A similar loan would be issued for 12% in the market. Prepare the journal entry made by the bank on December 31, 2017 to record the issuance of the note. Prepare the journal entry made by the bank to record the interest on the note on December 31, 2018:
On December 31, 2020, Teal Company signed a $1,022,000 note to Flint Bank. The market interest...
On December 31, 2020, Teal Company signed a $1,022,000 note to Flint Bank. The market interest rate at that time was 11%. The stated interest rate on the note was 9%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Teal’s financial situation worsened. On December 31, 2022, Flint Bank determined that it was probable that the company would pay back only $613,200 of the principal at maturity. However, it was considered likely that interest would...
On November 30, 2016, ABC borrowed $40,000 from American National Bank by issuing an interest-bearing note...
On November 30, 2016, ABC borrowed $40,000 from American National Bank by issuing an interest-bearing note payable. This loan is to be repaid in three months (on February 28, 2017), along with interest computed at an annual rate of 9%.   The entry made on November 30 to record the borrowing was: Dr Cash 40,000 Cr Notes payable 40,000 On February 28, 2017 ABC must pay the bank the amount borrowed plus interest.   Assume the beginning balance for Notes Payable is...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT