Assignment #7: Notes and Debt Investments

1. On January 1, 2015, Siddhartha Inc. preformed services for a client in exchange for a non-interest bearing note that promises a single $600,000 at the end of two years. Notes issued by companies with the clients risk typically pay 5%. Record the issue of the note and the accrual of interest at the end of the first year.

2. On January 1, 2015, Ganesha Corp. purchased land, paying a down payment of $50,000 cash on the date of sale and signing a non-interest bearing note that obligates it to make four semiannual payments of $200,000 each on July 1 and December 31 for two years. Companies with Ganesha Corps risk profile typically pay 6% annual rates on these notes. Record the issue of the note, the accrual of interest at July 1, 2015 and December 31 2015 and the carrying value of the note on December 31, 2015.

3. Use the following information taken from Abrahams balance sheet to answer the questions that follow:

Balance Sheet Account Information
	12/31/15	12/31/14
Note Receivable, non-interest bearing	250,000	250,000
Discount on Note Receivable	???	59,276
Income Statement Information
	2015	2014
Interest Revenue from Note Receivable	13,351	12,477

i.Determine the market rate of interest of the note (calculate it without using a financial calculator and show how you arrived at your answer).

ii.Determine the discount remaining on the note on 1/1/15 (do this without using a financial calculator and show how you arrived at your answer).

iii.Determine the maturity date of the note (you may use your financial calculator to help you determine this).

4)McCoy Co. provided the following information with regard to its investments, all purchased on January 1, 2014. Use this schedule to answer the following questions.

		Market Value 12/31/14	Market Value 12/31/15
Trading Securities
Debt Security A, $800,000, 6% stated rate, 10-year maturity, annual compounding	$743,811	$750,000	Sold
Debt Security B, $350,000, 5% stated rate, 15-year maturity, annual compounding	$388,914	$385,500	$387,000
Available for Sale Securities
Debt Security C, $500,000, 7% stated rate, 30-year maturity, annual compounding	$568,824	$570,000	$569,000

5)Record the balance sheet value of each security on 12/31/14 and 12/31/15.

6)Record the accrual of interest on each security as well as the fair value adjustment for 12/31/14 and 12/31/15.

7)Record the sale of debt security A, assuming it was sold on June 1, 2015 for $760,000 (assume this amount does not include interest compensation).

Answer all the questions please.