On July 1, 20x1, Littleton Inc. loaned a key supplier of raw material $2,000,000 to construct a new processing facility. The loan is due on July 1, 20x3 and pays interest each December 31 and June 30. The supplier insisted on a variable rate loan. The controller of Littleton wants to avoid the risk of variable rate fluctuation and entered into an interest rate swap in which it will pay the variable rate on $2,000,000 in exchange for a fixed rate of 8.3%. The swap is settled on the interest payment dates. Variable interest rates and the value of the swap on selected dates are as follow:
Variable rate Value of the swap
July1, 20x1 7.9%
December 31, 20x1 7.75% 10,400
Prepare all journal entries to record this hedge through December 20x1.
Click here for the solution: On July 1, 20x1, Littleton Inc. loaned a key supplier of raw material $2,000,000 to construct a new processing facility
Showing posts with label 20X1. Show all posts
Showing posts with label 20X1. Show all posts
Tuesday, July 7, 2015
On January 1, 20X1, Prange Company acquired 80% of the common stock of Seaman Company for $500,000
On January 1, 20X1, Prange Company acquired 80% of the common stock of Seaman Company for $500,000. On this date Seaman had total owners' equity of $400,000. Any excess of cost over book value is attributable to patent, which is to be amortized over 20 years.
During 20X1 and 20X2, Prange has appropriately accounted for its investment in Seaman using the simple equity method.
On January 1, 20X2, Prange held merchandise acquired from Seaman for $30,000. During 20X2, Seaman sold merchandise to Prange for $100,000, of which $20,000 is held by Prange on December 31, 20X2. Seaman's gross profit on all sales is 40%.
On December 31, 20X2, Prange still owes Seaman $20,000 for merchandise acquired in December.
Required:
Complete the Figure 4-2 worksheet for consolidated financial statements for the year ended December 31, 20X2.
Click here for the solution: On January 1, 20X1, Prange Company acquired 80% of the common stock of Seaman Company for $500,000
During 20X1 and 20X2, Prange has appropriately accounted for its investment in Seaman using the simple equity method.
On January 1, 20X2, Prange held merchandise acquired from Seaman for $30,000. During 20X2, Seaman sold merchandise to Prange for $100,000, of which $20,000 is held by Prange on December 31, 20X2. Seaman's gross profit on all sales is 40%.
On December 31, 20X2, Prange still owes Seaman $20,000 for merchandise acquired in December.
Required:
Complete the Figure 4-2 worksheet for consolidated financial statements for the year ended December 31, 20X2.
Click here for the solution: On January 1, 20X1, Prange Company acquired 80% of the common stock of Seaman Company for $500,000
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