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    Jawaban Kuis Akl2

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    Utami Ratnasari
    1. ABC recorded an investment at a cost of $400,000 that was expected to generate $350,002 in cash flows, resulting in an impairment loss of $49,997.90. 2. Since ABC will now receive the full $400,000 contractual cash flow, the impairment loss must be reversed by debiting the investment and crediting a recovery of impairment loss. 3. For a bond issue, a modification was determined to be non-substantial since the present value of cash flows only changed by 0.0304, so modification accounting was appropriate rather than extinguishment accounting.

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    Jawaban Kuis Akl2

    Uploaded by

    Utami Ratnasari
    82 views9 pages
    1. ABC recorded an investment at a cost of $400,000 that was expected to generate $350,002 in cash flows, resulting in an impairment loss of $49,997.90. 2. Since ABC will now receive the full $400,000 contractual cash flow, the impairment loss must be reversed by debiting the investment and crediting a recovery of impairment loss. 3. For a bond issue, a modification was determined to be non-substantial since the present value of cash flows only changed by 0.0304, so modification accounting was appropriate rather than extinguishment accounting.

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    kuis 2

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    jawaban kuis akl2

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    1. ABC recorded an investment at a cost of $400,000 that was expected to generate $350,002 in cash flows, resulting in an impairment loss of $49,997.90. 2. Since ABC will now receive the full $400,000 contractual cash flow, the impairment loss must be reversed by debiting the investment and crediting a recovery of impairment loss. 3. For a bond issue, a modification was determined to be non-substantial since the present value of cash flows only changed by 0.0304, so modification accounting was appropriate rather than extinguishment accounting.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    82 views9 pages

    Jawaban Kuis Akl2

    Uploaded by

    Utami Ratnasari
    1. ABC recorded an investment at a cost of $400,000 that was expected to generate $350,002 in cash flows, resulting in an impairment loss of $49,997.90. 2. Since ABC will now receive the full $400,000 contractual cash flow, the impairment loss must be reversed by debiting the investment and crediting a recovery of impairment loss. 3. For a bond issue, a modification was determined to be non-substantial since the present value of cash flows only changed by 0.0304, so modification accounting was appropriate rather than extinguishment accounting.

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    © All Rights Reserved
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    Download as xlsx, pdf, or txt
    of 9

    EXERCISE 17-20 (1015 minutes)

    (a) recorded investment 400,000


    expected cash flows
    35,000 0.90909 31,818.15
    35,000 0.82645 28,925.75
    385,000 0.75132 289,258.20 350,002.10
    impairment loss 49,997.90

    (b) Loss on Impairment 49,998


    Debt Investment 49,998

    (c)Since ABC will now receive the contractual cash flow (400,000 + 40,000 of annual interest paymen
    annual interest payment) there is no cash flow loss. Therefore ABC must reverse the Impairment loss by debitin
    pairment loss by debiting Debt Investments and crediting Recovery of impairment loss.
    expected cash flow:
    principal (10,600,000) 9,156,704
    interest year X4 285,714
    interest year X5 272,109
    interest year X6 259,152
    9,973,679
    plus: costs incurred 50,000
    total 10,023,679

    carrying value (1.1.X4) 9,727,675

    difference 0.0304

    not substantial --> modification accounting

    journal entry:
    1.1.X4 bonds payable 50000
    cash 50000

    9,727,675.00
    50,000.00
    9,677,675.00 100,000.00
    96.77675
    date cash effective amortization carrying
    interest interest of discount value of bond
    1/1/X4 9,677,675
    31/12/X4 300000 589,467.18 289,467.18 9,967,142
    31/12/X5 300000 607,098.63 307,098.63 10,274,241
    31/12/X6 300000 625,804.01 325,804.01 10,600,045

    new effective interest rate 0.06091


    see sheet 2

    interest expense 589,467.18


    bonds payable 289,467.18
    cash 300,000.00

    interest expense 607,098.63


    bonds payable 307,098.63
    cash 300,000.00

    interest expense 625,804.01


    bonds payable 325,804.01
    cash 300,000.00

    bonds payable 10,600,045


    cash 10,600,045
    0.06093706
    Settle
    1-Jan-04 ment
    date

    Maturit
    31-Dec-06
    y date

    Percent
    3.00%
    coupon

    96.77675 Price

    Redem
    $106 ption
    value

    Freque
    ncy is
    semian
    1
    nual
    (see
    above)
    30/360
    basis
    0
    (see
    above)
    31.12.X6 dr interest expense 104,394
    cr bonds payable 104,394

    31.12.X7 dr interest expense 115,866


    cr bonds payable 115,866

    31.12.X8 dr interest expense 128,598


    cr bonds payable 128,598

    31.12.X9 dr interest expense 142,729


    cr bonds payable 142,729

    31.12.X10 dr interest expense 158,413


    cr bonds payable 158,413

    31.12.X10 dr bonds payable 1,600,000


    cr cash 1,600,000
    1,600,000 0.48166 770,656
    50,000 4.71220 235,610
    1,006,266

    date cash effective amortization carrying


    interest interest of discount value of bond
    1/1/X6 1,006,266
    31/12/X6 50000 110,689.26 60,689.26 1,066,955
    31/12/X7 50000 117,365.08 67,365.08 1,134,320
    31/12/X8 50000 124,775.24 74,775.24 1,209,096
    31/12/X9 50000 133,000.51 83,000.51 1,292,096
    31/12/X10 50000 142,130.57 92,130.57 1,384,227
    31/12/X11 50000 152,264.93 102,264.93 1,486,492
    31/12/X12 50000 163,514.08 113,514.08 1,600,006

    31.12.X6 dr interest expense 110,689


    cr cash 50000
    cr bonds payable 60,689
    31.12.X7 dr interest expense 117,365
    cr cash 50000
    cr bonds payable 67,365
    31.12.X8 dr interest expense 124,775
    cr cash 50000
    cr bonds payable 74,775
    31.12.X9 dr interest expense 133,001
    cr cash 50000
    cr bonds payable 83,001
    31.12.X10 dr interest expense 142,131
    cr cash 50000
    cr bonds payable 92,131
    31.12.X11 dr bonds payable 152,265
    cr cash 50000
    cr bonds payable 102,265
    31.12.X12 dr bonds payable 163,514
    cr cash 50000
    cr bonds payable 113,514
    31.12.X12 dr bonds payable 1,600,006
    cr cash 1,600,006

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