Balance in Discount Account Net Carrying Value 112014 64326 185674 12312014

# Balance in discount account net carrying value 112014

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Balance in Discount Account Net Carrying Value 1/1/2014 \$64,326 \$185,674 12/31/2014 \$15,000 \$20,424 \$5,424 58,902 191,098 12/31/2015 15,000 21,021 6,021 52,881 197,119 12/31/2016 15,000 21,683 6,683 46,198 203,802 12/31/2017 15,000 22,418 7,418 38,780 211,220 12/31/2018 15,000 23,234 8,234 30,546 219,454 12/31/2019 15,000 24,140 9,140 21,406 228,594 12/31/2020 15,000 25,145 10,145 11,261 238,739 12/31/2021 15,000 26,261 11,261 0 250,000 Total \$120,000 \$184,326 \$64,326 (b) 2. Interest Expense (NCV x mkt rate x time = \$185,674 X 11%/12 mo x 12 mo) ............ 20,424 Discount on Notes Payable ..................................................................... 5,424 Cash (FV x std rate x time = \$250,000 X 6%/12 mo x 12 mo) .......................... 15,000
ACCO 4020: Chapter 14 homework solutions (15 th edition) EXERCISE 14-19 (15 th edition) Year Ending Net Carrying Value Fair Value to report on the Balance Sheet Ending Balance in Fair Value Adjustment Account Unrealized Holding Gain or Loss – Income Recognized 12/31/2014 \$54,000 cr. \$54,000 cr. \$ 0 \$ 0 12/31/2015 44,000 cr. 42,500 cr. 1,500 dr. 1,500 12/31/2016 36,000 cr. 38,000 cr. 2,000 cr. (3,500) (a) 12/31/2014 No entry is required since Net Carrying Value = Fair Value to report on Balance Sheet. Notes Payable Fair Value Adjustment – N/P At 12/31/2014 54,000 0 (BB 12/31/2013) Note Payable balance \$54,000 cr. 0 AJE Required EB in FV Adj. a/c 0 cr. 0 (EB 12/31/2014) Fair Value to report \$54,000 cr. 12/31/2015 Fair Value Adjustment – Notes Payable ................................................................... 1,500 Unrealized Holding Gain or Loss — Income ............................................ 1,500 Notes Payable Fair Value Adjustment – N/P At 12/31/2014 0 (BB 12/31/2014) 44,000 (AJE) 1,500 Note Payable balance \$44,000 cr. Required EB FV Adj. a/c (1,500) dr. (EB 12/31/2015) 1,500 Fair Value to report \$42,500 cr. 12/31/2016 Unrealized Holding Gain or Loss—Income ............................................................... 3,500 Fair Value Adjustment - Notes Payable .................................................. 3,500 Notes Payable Fair Value Adjustment – N/P At 12/31/2014 (BB 12/31/2015) 1,500 44,000 3,500 (AJE) Note Payable balance \$36,000 cr. Required EB FV Adj. a/c 2,000 cr. 2,000 (EB 12/31/2015) Fair Value to report \$38,000 cr. (b) The fair value of \$42,500 is reported on the 2015 balance sheet. (c) An unrealized holding loss of \$3,500 is recognized on the income statement in 2016. (d) Fallen’s creditworthiness has improved during 2016 because bond investors are receiving a higher rate relative to other investors in similar-risk investments.
ACCO 4020: Chapter 14 homework solutions (15 th edition) *EXERCISE 14-21 (15 th edition) Troubled Debt Restructuring – Settlement : A transfer of noncash assets (real estate, receivables, or other assets) or the issuance of the debtor’s stock can be used to settle a debt obligation in a troubled debt restructuring. In these situations, the noncash assets or equity interest given should be accounted for at their fair market value. Debtor’s records : The debtor is required to recognize a gain on the restructuring equal to the excess of the pre-restructuring carrying amount of the debt over the fair value of the assets or equity transferred. In addition, the debtor also recognizes a gain or loss on disposition of assets to the extent that the fair value of those assets differs from their carrying amount (book value). Creditor’s records : The creditor is records the assets received at their fair market value and recognizes a loss on the restructuring equal to the excess of the pre-restructuring receivable over the fair value of those same assets or equity interests transferred. The creditor normally writes off the loss against an Allowance for Doubtful Accounts.

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