On December 31, 2015, Vaughn Manufacturing is in financial difficulty and cannot pay a note due...
On December 31, 2015, Vaughn Manufacturing is in financial
difficulty and cannot pay a note due that day. It is a $3200000
note with $320000 accrued interest payable to Cullumber, Inc.
Cullumber agrees to accept from Vaughn equipment that has a fair
value of $1460000, an original cost of $2500000, and accumulated
depreciation of $1140000. Cullumber also forgives the accrued
interest, extends the maturity date to December 31, 2018, reduces
the face amount of the note to $1240000, and reduces the interest
rate to 7%, with interest payable at the end of each year.
Vaughn should recognize a gain or loss on the transfer of the
equipment of
| $200000 gain. |
| $1040000 loss. |
| $100000 gain. |
| $0. |
Homework Answers
| Calculation of gain or loss on transfer of equipment | ||||
| Fair value of equipment | 1460000 | |||
| less: book value (2500000-1140000) | 1360000 | |||
| Gain on sale | 100000 | |||
| Option $100000 gain is CORRECT | ||||
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On December 31, 2015, Vaughn Manufacturing is in financial
difficulty and cannot pay a note due...
On December 31, 2015, Vaughn Manufacturing is in financial difficulty and cannot pay a note due...
On December 31, 2015, Vaughn Manufacturing is in financial difficulty and cannot pay a note due that day. It is a $2900000 note with $290000 accrued interest payable to Cullumber, Inc. Cullumber agrees to accept from Vaughn equipment that has a fair value of $1440000, an original cost of $2410000, and accumulated depreciation of $1150000. Cullumber also forgives the accrued interest, extends the maturity date to December 31, 2018, reduces the face amount of the note to $1250000, and reduces...
NEXT Testbank Multiple Choice Question 104 On December 31, 2018, Crane Company is in financial difficulty...
NEXT Testbank Multiple Choice Question 104 On December 31, 2018, Crane Company is in financial difficulty and cannot pay a note due that day. It is a $3100000 note with $310000 accrued interest payable to Wildhorse, Inc. Wildhorse agrees to accept from Crane equipment that has a fair value of $1450000, an original cost of $2410000, and accumulated depreciation of $1140000. Wildhorse also forgives the accrued interest, extends the maturity date to December 31, 2021, reduces the face amount of...
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Tamarisk Corp. owes $251,000 to Vaughn Trust. The debt is a 10-year, 12% note due December 31, 2017. Because Tamarisk Co...
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Current Attempt in Progress On December 31, 2020, Vaughn Company signed a $1,105,800 note to Bramble...
Current Attempt in Progress On December 31, 2020, Vaughn Company signed a $1,105,800 note to Bramble 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, Vaughn's financial situation worsened. On December 31, 2022, Bramble Bank determined that it was probable that the company would pay back only $663,480 of the principal at maturity. However, it was considered...
Bonita Industries is indebted to Carla Vista under a $1040000, 13%, three-year note dated December 31,...
Bonita Industries is indebted to Carla Vista under a $1040000,
13%, three-year note dated December 31, 2016. Because of Bonita's
financial difficulties developing in 2018, Bonita owed accrued
interest of $135200 on the note at December 31, 2018. Under a
troubled debt restructuring, on December 31, 2018, Carla Vista
agreed to settle the note and accrued interest for a tract of land
having a fair value of $920000. Bonita's acquisition cost of the
land is $718000. Ignoring income taxes, on...
Exercise 7-27 On December 31, 2017, Cullumber Company signed a $1,054,800 note to Riverbed Bank. The...
Exercise 7-27
On December 31, 2017, Cullumber Company signed a $1,054,800 note
to Riverbed 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,
Cullumber’s financial situation worsened. On December 31, 2019,
Riverbed Bank determined that it was probable that the company
would pay back only $632,880 of the principal at maturity. However,
it was considered likely that...
*Exercise 5-12 Presented below is the trial balance of Vaughn Corporation at December 31, 2020. Credit...
*Exercise 5-12 Presented below is the trial balance of Vaughn Corporation at December 31, 2020. Credit Debit $ 201,970 $ 8,104,060 $ 157,060 4,800,000 303,970 281,970 94,060 459,060 2,004,060 66,860 264,060 1,044,970 140,970 100,060 439,060 Cash Sales Debt Investments (trading) (at cost, $145,000) Cost of Goods Sold Debt Investments (long-term) Equity Investments (long-term) Notes Payable (short-term) Accounts Payable Selling Expenses Investment Revenue Land Buildings Dividends Payable Accrued Liabilities Accounts Receivable Accumulated Depreciation-Buildings Allowance for Doubtful Accounts Administrative Expenses Interest Expense...
The following balances were taken from the books of Vaughn Corp. on December 31, 2020. Con-...
The following balances were taken from the books of Vaughn Corp. on December 31, 2020. Con- Interest revenue $87,700 Cash 52,700 Sales revenue 1,381,700 Accounts receivable $41,700 29,700 156,700 195,700 171,700 101,700 port Accumulated depreciation equipment Accumulated depreciation-buildings Notes receivable Selling expenses Accounts payable Bonds payable Administrative and general expenses Accrued liabilities Prepaid insurance 151,700 21,700 151,700 8,700 46,700 Sales returns and allowances Allowance for doubtful accounts Sales discounts 98,700 33,700 Land 61,700 101,700 201,700 Interest expense Notes payable Equipment...
7. On December 31, 2015, Thompson Bank restructures an $800,000, 12% note receivable with $192,000 of...
7. On December 31, 2015, Thompson Bank restructures an $800,000, 12% note receivable with $192,000 of accrued interest so that the new principal is $750,000, payable in four years at 10% Present value factors for n = 4 years are: Discount rate PV of $1 PV of an annuity 3.169865 10% 0.683013 12% 0.635518 3.037350 Required: a. Prepare the journal entry to record the loss on restructuring b. Prepare the journal entry to record the 2015 interest revenue. c. Compute...
On December 31, 2015, Vaughn Manufacturing is in financial difficulty and cannot pay a note due that day. It is a $2900000 note with $290000 accrued interest payable to Cullumber, Inc. Cullumber agrees to accept from Vaughn equipment that has a fair value of $1440000, an original cost of $2410000, and accumulated depreciation of $1150000. Cullumber also forgives the accrued interest, extends the maturity date to December 31, 2018, reduces the face amount of the note to $1250000, and reduces...
NEXT Testbank Multiple Choice Question 104 On December 31, 2018, Crane Company is in financial difficulty and cannot pay a note due that day. It is a $3100000 note with $310000 accrued interest payable to Wildhorse, Inc. Wildhorse agrees to accept from Crane equipment that has a fair value of $1450000, an original cost of $2410000, and accumulated depreciation of $1140000. Wildhorse also forgives the accrued interest, extends the maturity date to December 31, 2021, reduces the face amount of...
Current Attempt in Progress On December 31, 2020, Vaughn Company signed a $1,105,800 note to Bramble 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, Vaughn's financial situation worsened. On December 31, 2022, Bramble Bank determined that it was probable that the company would pay back only $663,480 of the principal at maturity. However, it was considered...
Bonita Industries is indebted to Carla Vista under a $1040000,
13%, three-year note dated December 31, 2016. Because of Bonita's
financial difficulties developing in 2018, Bonita owed accrued
interest of $135200 on the note at December 31, 2018. Under a
troubled debt restructuring, on December 31, 2018, Carla Vista
agreed to settle the note and accrued interest for a tract of land
having a fair value of $920000. Bonita's acquisition cost of the
land is $718000. Ignoring income taxes, on...
Exercise 7-27
On December 31, 2017, Cullumber Company signed a $1,054,800 note
to Riverbed 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,
Cullumber’s financial situation worsened. On December 31, 2019,
Riverbed Bank determined that it was probable that the company
would pay back only $632,880 of the principal at maturity. However,
it was considered likely that...
*Exercise 5-12 Presented below is the trial balance of Vaughn Corporation at December 31, 2020. Credit Debit $ 201,970 $ 8,104,060 $ 157,060 4,800,000 303,970 281,970 94,060 459,060 2,004,060 66,860 264,060 1,044,970 140,970 100,060 439,060 Cash Sales Debt Investments (trading) (at cost, $145,000) Cost of Goods Sold Debt Investments (long-term) Equity Investments (long-term) Notes Payable (short-term) Accounts Payable Selling Expenses Investment Revenue Land Buildings Dividends Payable Accrued Liabilities Accounts Receivable Accumulated Depreciation-Buildings Allowance for Doubtful Accounts Administrative Expenses Interest Expense...
The following balances were taken from the books of Vaughn Corp. on December 31, 2020. Con- Interest revenue $87,700 Cash 52,700 Sales revenue 1,381,700 Accounts receivable $41,700 29,700 156,700 195,700 171,700 101,700 port Accumulated depreciation equipment Accumulated depreciation-buildings Notes receivable Selling expenses Accounts payable Bonds payable Administrative and general expenses Accrued liabilities Prepaid insurance 151,700 21,700 151,700 8,700 46,700 Sales returns and allowances Allowance for doubtful accounts Sales discounts 98,700 33,700 Land 61,700 101,700 201,700 Interest expense Notes payable Equipment...
7. On December 31, 2015, Thompson Bank restructures an $800,000, 12% note receivable with $192,000 of accrued interest so that the new principal is $750,000, payable in four years at 10% Present value factors for n = 4 years are: Discount rate PV of $1 PV of an annuity 3.169865 10% 0.683013 12% 0.635518 3.037350 Required: a. Prepare the journal entry to record the loss on restructuring b. Prepare the journal entry to record the 2015 interest revenue. c. Compute...
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