On 1 January 2019, Martin Company purchased a 7-year bond issued by the Nelson Company with a coupon interest rate of 3%. At the accounting year end of 2022, the accountant (Lawson) of Martin Company found that the Nelson Company's earning ability was very low because of the loss of a major customer. The bond interest payments in 2022 were not punctual. The cash flow statement of Nelson Company showed a deficit cash balance for the two consecutive years of 2021 and 2022. The effective interest rate used by Martin Company is 5%.
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According to IFRS 9, explain how Lawson should deal with
(i) the expected credit loss and
(ii) the interest revenue in respect of the above mentioned bond investment held by Martin Company.
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- Marigold Company in its first year of operations provides the following information related to one of its available-for-sale debt securities at December 31, 2020. Amortized cost $51,100 Fair value 42,200 Expected credit losses 12,600 A. What is the amount of credit loss that marigold should report on this available-for-sale security at december 31, 2020? Amount of the credit loss $ 8,900 B. Prepare the journal entry to record the credit loss, if any ( and other adjustments needed), at December 31, 2020? date account titles and explanations debit credit 12/31/20 8,900 8,900 Please note that the answer is NOT Debit Loss on available for sale debt securities and Credit avilable for sale debt securities. These are the account titles I can choose from... Accumulated Other…On June 1, 2019, Hansen Company purchased ten $1,000 Francisco Company bonds at par and classified them as held-to-maturity. In 2020, Francisco experienced financial difficulties and on Dec 31, 2020, based on an evaluation of the investment, Hansen determined that expected credit losses are $4,000. In 2021, Francisco improved its financial condition, and, on Dec 31, 2021, Hansen believed that expected credit losses would only be $2,000. Required: Prepare the journal entries for Hansen to record the above events under U.S. GAAP.lake Tile Kaman Company paid $165,000 to purchase a portfolio of debt investments on March 1, 2020. Managemer intention is to hold them for less than one year. Management does not intend to hold any debt investment their maturity in this portfolio. Do not enter dollar signs or commas in the input boxes. For transactions with more than one debit or credit, enter the accounts in alphabetical order. Required a) Prepare the journal entry to record the purchase of these debt securities. Date Account Title and Explanation Debit Credit Mar 1 To record purchase of investments b) On March 15, 2020, Kaman Company received interest of $1,600 from the debt investments in this port Prepare the journal entry to record the receipt of interest. Debit Credit Date Account Title and Explanation W
- Rothschild Chair Company, Incorporated, was indebted to First Lincoln Bank under a $40 million, 10% unsecured note. The note was signed January 1, 2014, and was due December 31, 2027. Annual interest was last paid on December 31, 2022. At January 1, 2024. Rothschild Chair Company was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement Note: Use appropriate factor(s) from the tables provided. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) Required: Prepare all journal entries by First Lincoln Bank to record the restructuring and any remaining transactions, for current and future years, relating to the debt under each of the independent circumstances below: 1. First Lincoln Bank agreed to settle the debt in exchange for land having a fair value of $36 million but carried on Rothschild Chair Company's books at $33 million. 2. First Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b)…On December 31, 2023, Green Bank enters into a debt restructuring agreement with Windsor Inc., which is now experiencing financial trouble. The bank agrees to restructure a $2.9-million, 10% note receivable issued at par by the following modifications: 1. Reducing the principal obligation from $2.9 million to $2.76 million 2. Extending the maturity date from December 31, 2023, to December 31, 2026 3. Reducing the interest rate from 10% to 8% Windsor pays interest at the end of each year. On January 1, 2027, Windsor pays $2.76 million in cash to Green Bank. Windsor prepares financial statements in accordance with IFRS 9. Assume instead that Windsor follows ASPE. Using (1) a financial calculator or (2) Excel function Rate, calculate the rate of interest that Windsor should use to calculate its interest expense in future periods. (Hint: Refer to Chapter 3 for tips on calculating.) (Round answer to 4 decimal places, e.g. 1.2246%.) Rate of interest %On December 31, 2023, Green Bank enters into a debt restructuring agreement with Windsor Inc., which is now experiencing financial trouble. The bank agrees to restructure a $2.9-million, 10% note receivable issued at par by the following modifications: 1. Reducing the principal obligation from $2.9 million to $2.76 million 2. Extending the maturity date from December 31, 2023, to December 31, 2026 3. Reducing the interest rate from 10% to 8% Windsor pays interest at the end of each year. On January 1, 2027, Windsor pays $2.76 million in cash to Green Bank. Windsor prepares financial statements in accordance with IFRS 9. Prepare the interest payment entry for Windsor on December 31, 2025, and the entry on January 1, 2027. (Round answer to O decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries…
- On its December 31, 2024 balance sheet, Calhoun Company appropriately reported a $10,000 debit balance in its Fair Value Adjustment account. There was no change during 2025 in the composition of Calhoun's portfolio of debt investments held as available-for-sale debt securities. The following information pertains to that portfolio: Security XY N B) $0. OC) $40,000. Cost $130,000 OD) $30,000. 100,000 175,000 $405,000 The amount of unrealized loss reported as a component of comprehensive income for the year ending December 31, 2025 is OA) $20,000. Fair value at 12/31/25 $160,000 90,000 125,000 $375,000On December 31, 2023, Green Bank enters into a debt restructuring agreement with Teal Mountain Inc., which is now experiencing financial trouble. The bank agrees to restructure a $2.1-million, 10% note receivable issued at par by the following modifications: 1. Reducing the principal obligation from $2.1 million to $2.00 million Extending the maturity date from December 31, 2023, to December 31, 2026 3. Reducing the interest rate from 10% to 8% 2. Teal Mountain pays interest at the end of each year. On January 1, 2027, Teal Mountain pays $2.00 million in cash to Green Bank. Teal Mountain prepares financial statements in accordance with IFRS 9. (b) Prepare an entry at December 31, 2023, based on the results of your calculation. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry…At January 1, 2021, Rothschild Chair Company, Inc., was indebted to First Lincoln Bank under a $39 million, 10% unsecured note. The note was signed January 1, 2018, and was due December 31, 2024. Annual interest was last paid on December 31, 2019. Rothschild Chair Company was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Prepare all journal entries by Rothschild Chair Company, Inc., to record the restructuring and any remaining transactions relating to the debt under each of the independent circumstances below: 1. First Lincoln Bank agreed to settle the debt in exchange for land having a fair value of $35 million but carried on Rothschild Chair Company's books at $30.1 million. 2. First Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b) reduce the remaining four…
- Sheridan Company in its first year of operations provides the following information related to one of its available-for-sale debt securities at December 31, 2025. Amortized cost Fair value Expected credit loss (a) $50,800 41,600 12.450 Your answer is correct. What is the amount of the credit loss that Sheridan should report on this available-for-sale security at December 31, 2025? (Do not leave any answer field blank. Enter O for amounts.) Amount of the credit loss. $ 9200At January 1, 2021, Rothschild Chair Company, Inc., was indebted to First Lincoln Bank under a $20 million, 10% unsecured note. The note was signed January 1, 2018, and was due December 31, 2024. Annual interest was last paid on December 31, 2019. Rothschild Chair Company was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Prepare all journal entries by Rothschild Chair Company, Inc., to record the restructuring and any remaining transactions relating to the debt under each of the independent circumstances below: 1. First Lincoln Bank agreed to settle the debt in exchange for land having a fair value of $16 million but carried on Rothschild Chair Company’s books at $13 million. 2. First Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b) reduce the remaining four…Rothschild Chair Company, Incorporated, was indebted to First Lincoln Bank under a $20 million, 10% unsecured note. The note was signed January 1, 2014, and was due December 31, 2027. Annual interest was last paid on December 31, 2022. At January 1, 2024, Rothschild Chair Company was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement. Note: Use appropriate factor(s) from the tables provided. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: Prepare all journal entries by First Lincoln Bank to record the restructuring and any remaining transactions, for current and future years, relating to the debt under each of the independent circumstances below: 1. First Lincoln Bank agreed to settle the debt in exchange for land having a fair value of $16 million but carried on Rothschild Chair Company's books at $13 million. 2. First Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b)…