Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 2, 2014, Sparky Company performed consultation services for Wildcat Corporation and agreed to allow Wildcat to pay over time. Sparky is considering several

On January 2, 2014, Sparky Company performed consultation services for Wildcat Corporation and agreed to allow Wildcat to pay over time. Sparky is considering several different note options below. Wildcat's normal borrowing rate is 8%. For each option listed below, determine Service Revenue Sparky can record at Jan. 2, 2014, Interest Revenue to be recorded at December 31, 2015, and the Carrying Value of the Note Receivable on their Balance Sheet at December 31, 2015 (after interest has been accrued.)

Scenarios:

1. Sparky will require Wildcat to make an initial cash down payment of $30,000 on Jan. 2, 2014 (this is NOT a PVAD...simply a cash down payment so that Wildcat will not finance 100% of the services.) The remainder will be financed in the form of a $250,000, 5% note due December 31, 2017. Interest will be remitted each June 30 & Dec. 31, with principal due at maturity.

2. Sparky will provide the service in exchange for a non-interest-bearing note with a face value of $285,000. Terms of the note require Principal & Interest (P&I) payments be made each June 30 & Dec 31 for the next 4 years.

3. Sparky will provide the service in exchange for a four-year, $252,140, 8% note with P&I payments made each Jun 30 & Dec 31. The first payment will be received on Jun 30th.

From Scenario (1) above, determine how much Service Revenue Sparky can record on January 2, 2014:

Using the information presented above in Scenario (1), Determine how much Interest Revenue Sparky can report on their Income Statement dated December 31, 2015:

Using the information presented above in Scenario (1), Determine the Carrying Value that Sparky will report on their Balance Sheet dated December 31, 2015:

Using the information presented above in Scenario (2), Determine how much Service Revenue Sparky can report on their Income Statement for the sale on January 2, 2014:

Using the information presented above in Scenario (2), Determine how much Interest Revenue Sparky can report on their Income Statement dated December 31, 2015:

Using the information presented above in Scenario (2), Determine the Carrying Value of the Note that Sparky will report on their Balance Sheet dated December 31, 2015:

Using the information presented above in Scenario (3), Determine how much Service Revenue Sparky can report on their Income Statement dated January 2, 2014:

Using the information presented above in Scenario (3), Determine how much Interest Revenue Sparky can report on their Income Statement dated December 31, 2015:

Using the information presented above in Scenario (3), Determine the Carrying Value of the Note that Sparky will report on their Balance Sheet dated December 31, 2015:

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing And Assurance Services

Authors: Timothy Louwers, Robert Ramsay, David Sinason, Jerry Strawser

2nd Edition

0073128244, 9780073128245

More Books

Students also viewed these Accounting questions