E7-26Solutions - $75,131 Less: Present value of $75,000 due...

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*EXERCISE 7-26 (15-25 minutes) (a) Journal entry to record issuance of loan by Paris Bank: December 31, 2010 Notes Receivable 100,000 Discount on Notes Receivable 37,908 Cash 62,092 $100,000 X Present value of 1 for 5 periods at 10% $100,000 X .62092 = $62,092 (b) Note Amortization Schedule (Before Impairment) Date Cash Received (0%) Interest Revenue (10%) Increase in Carrying Amount Carrying Amount of Note 12/31/10 $62,092 12/31/11 $0 $6,209 $6,209 68,301 12/31/12 0 6,830 6,830 75,131 Computation of the impairment loss: Carrying amount of investment (12/31/12). ................
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Unformatted text preview: $75,131 Less: Present value of $75,000 due in 3 years at 10% ($75,000 X .75132). ................................ 56,349 Loss due to impairment. ............................................... $18,782 The entry to record the loss by Paris Bank is as follows: Bad Debt Expense. ..................................................... 18,782 Allowance for Doubtful Accounts. .................. 18,782 Note : Iva Majoli Company, the debtor, makes no entry because it still legally owes $100,000....
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E7-26Solutions - $75,131 Less: Present value of $75,000 due...

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