Beautiful, Inc. Balance Sheet December 31, 2018 $ 425,621 $ 1,654,887 Cash Accounts Receivable Note Receivable $ 900,000 Building (net) Construction Equipment (net) Idle Equipment (net) $ $ $ $ 1,800,000 600,000 637,000 107,000 Received on 2/1/2018 in return for a large service contract Terms = no interest - 3 payments of 300,000 each Feb Being used for normal operations Weighted Average expenditures 375000 to add in capitalized interest - started and completed in 2018 No change in use Used equipment dealer quoted $82,000 - original cost $450,000 10 year remaining life but changes to the broadcast spectrum Company saves on royalties for using the broadcast spectrum on contract without the broadcast license the royalties would be 126,000 per year Broadcast License (net) $ 1,423,000 Total Assets $ 7,547,508 $ Accounts Payable $ 1,067,450 Line of credit for construc $ 300,000 Interest rate is 7% Note Payable $ 432,370 Borrowed 500,000 on January 1, 2016 with monthly payments for 15 years at 5% Bond payable 500,000 sold on January 1, 2010 at face value - interest only payments Coupon rate of 5.5% paid semi annually until January 1, 2030 Total Liabilities $ 2,299,820 Paid In Capital $ 4,000,000 Retained Earnings $ 1,247,688 $ 7,547,508 Beautiful wants to report all possible amounts using fair value as possible under U.S. GAAP - that means the note and bond payable The current interest rate for Beautiful is 7%. Required: 1. Show all journal entries needed to adjust to fair value where necessary. 2. Show the new balance sheet with fair value as indicated. 3. Show the journal entry to record the trade in of the idle equipment for new equipment (sticker price $105,000) plus payment of $10,000 to the equipment dealer. So you gave up the old equipment and cash for new equipment on March 1, 2019 Beautiful, Inc. Balance Sheet December 31, 2018 $ 425,621 $ 1,654,887 Cash Accounts Receivable Note Receivable $ 900,000 Building (net) Construction Equipment (net) Idle Equipment (net) $ $ $ $ 1,800,000 600,000 637,000 107,000 Received on 2/1/2018 in return for a large service contract Terms = no interest - 3 payments of 300,000 each Feb Being used for normal operations Weighted Average expenditures 375000 to add in capitalized interest - started and completed in 2018 No change in use Used equipment dealer quoted $82,000 - original cost $450,000 10 year remaining life but changes to the broadcast spectrum Company saves on royalties for using the broadcast spectrum on contract without the broadcast license the royalties would be 126,000 per year Broadcast License (net) $ 1,423,000 Total Assets $ 7,547,508 $ Accounts Payable $ 1,067,450 Line of credit for construc $ 300,000 Interest rate is 7% Note Payable $ 432,370 Borrowed 500,000 on January 1, 2016 with monthly payments for 15 years at 5% Bond payable 500,000 sold on January 1, 2010 at face value - interest only payments Coupon rate of 5.5% paid semi annually until January 1, 2030 Total Liabilities $ 2,299,820 Paid In Capital $ 4,000,000 Retained Earnings $ 1,247,688 $ 7,547,508 Beautiful wants to report all possible amounts using fair value as possible under U.S. GAAP - that means the note and bond payable The current interest rate for Beautiful is 7%. Required: 1. Show all journal entries needed to adjust to fair value where necessary. 2. Show the new balance sheet with fair value as indicated. 3. Show the journal entry to record the trade in of the idle equipment for new equipment (sticker price $105,000) plus payment of $10,000 to the equipment dealer. So you gave up the old equipment and cash for new equipment on March 1, 2019
