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  • Liabilities Reviewer

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    Tessie Gonzales
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    1. The document discusses accounting methods for accounts payable including the gross and net methods. It also presents several problems related to accounts payable balances, adjusting entries, and notes payable. 2. Problem E and F address non-interest bearing notes payable. They show the annual interest expense calculation, reduction of the premium or discount on the notes payable, and payment of principal and interest each year until the notes reach their face value. 3. The notes provide that non-interest bearing notes include interest in the face value, and must be recorded at present value with the difference treated as a premium or discount that is amortized over the life of the note through annual interest expense.

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    1. The document discusses accounting methods for accounts payable including the gross and net methods. It also presents several problems related to accounts payable balances, adjusting entries, and notes payable. 2. Problem E and F address non-interest bearing notes payable. They show the annual interest expense calculation, reduction of the premium or discount on the notes payable, and payment of principal and interest each year until the notes reach their face value. 3. The notes provide that non-interest bearing notes include interest in the face value, and must be recorded at present value with the difference treated as a premium or discount that is amortized over the life of the note through annual interest expense.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    113 views4 pages

    Liabilities Reviewer

    Uploaded by

    Tessie Gonzales
    1. The document discusses accounting methods for accounts payable including the gross and net methods. It also presents several problems related to accounts payable balances, adjusting entries, and notes payable. 2. Problem E and F address non-interest bearing notes payable. They show the annual interest expense calculation, reduction of the premium or discount on the notes payable, and payment of principal and interest each year until the notes reach their face value. 3. The notes provide that non-interest bearing notes include interest in the face value, and must be recorded at present value with the difference treated as a premium or discount that is amortized over the life of the note through annual interest expense.

    Copyright:

    © All Rights Reserved
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    of 4

    Hello Everyone

    Welcome

    ACCOUNTS PAYABLE:
    1. GROSS METHOD (Silent)
    Inventory.....xx
    AP..................xx

    AP.............xx
    Purch. disc..xx
    Cash......... xx

    AP..........xx
    Cash......... xx

    2. NET METHOD

    Inventory.......xx (net)
    AP.............xx (net)

    AP..................xx
    Cash............xx

    AP (net)............xx
    Puch disc lost.. xx
    Cash ...............xx

    Problem A
    Unadj.........P2,160,000
    A. 150,000
    b. ----
    c. -------
    Adjusted ba. P2,310,000

    What if, included in AP balance as f December 31:


    2,160,000 -100,000 - 30,000 = 2,030,000.

    Problem B
    GL SL
    4,450,000 4,020,000
    - 400,000
    - (300,000)
    (520,000) -
    200,000 -
    (50,000) -
    40,000 -
    4,120,000 4,120,000

    Problem C

    460,000
    (42,000)
    (30,000)
    55,000
    443,000

    Problem D
    3,600,000
    (192,000)
    (160,000)
    3,248,000

    NOTES PAYABLE

    Interest Bearing Notes


    FV + Interest
    1. STATED = EFFECTIVE (FACE = FAIR)
    2. STATED > EFFECTIVE (PREMIUM, FAIR>FACE)
    3. STATED < EFFECTIVE (DISCOUNT, FAIR < FACE)

    *NEW CV = Previous CV x 1 + effective int - cash paid


    ** Cash paid = Principal + Interest

    Non-Interest Bearing - interest is included on the face value

    Problem E
    1/1/19 2,834,290
    12/31/19 324,000 283,429 40571 2,793, 719
    12/31/20 324,000 279,372 44628 2,749,091
    12/31/21 324,000 274,909 49091 2,700,000

    Jan. 1, 2019
    Building............. 2,834,290
    Notes Payable.............. 2,700,000
    Premium on NP............ 134,290

    Dec. 31, 2019


    Interest Expense..........283,429
    Premium on NP.............40,571
    Cash...........................................324,000

    Dec. 31, 2020


    Interest Expense..........279,372
    Premium on NP.............44,628
    Cash...........................................324,000

    Dec. 31, 2021


    Interest Expense...........274,909
    Premium on NP..............49,091
    Cash...........................................324,000

    Notes Payable.............2700000
    Cash .......................................2700000

    Problem F
    1/1/19 2,905,035
    12/31/19 324,000 261,453 62,547 2,842,488
    12/31/20 324,000 255,824 68,176 2,774,312
    12/31/21 324,000 249,688 74 312 2,700,000

    Jan. 1, 2019
    Building................ 2,905,035
    Notes Payable..................2,700,000
    Premium on NP..........205,035

    December 31, 2019


    Interest expense.......261,453
    Premium...................62,547
    Cash................................324,000

    December 31, 2020


    Interest expense.......255,824
    Premium...................68,176
    Cash................................324,000
    December 31,2021
    interest expense........249,688
    Premium on NP...........74,312
    Cash.................................324,000

    NP........................2,700,000
    Cash................................2,700,000

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