ACME Incorporated has a $3.1 million dollar, 9% loan, annual interest payments, with BMO maturing on December 31, 2025. Due to decrease revenues caused by the pandemic, the company is experiencing solvency and cash flow issues that have negatively impacted the its ability to make its interest and principal payments. ACME's year end is December 31, and the company reports under IFRS. On January 01, 2021, the bank agreed to reduce the interest rate to 7.5% and extend the maturity date to 2028 (The current market rate is 8%). Required: Round interim calculations to four decimals and final answers to the nearest dollar. 1. Conclude on the appropriate accounting treatment and show calculations to support your conclusion. (5 marks) 2. Prepare the required entry on January 01, 2021 (if any). (2 marks) 3. Prepare the required entry on December 31, 2021 (if any). (3marks)

Answers

Answer 1

Answer:

The appropriate accounting treatment for this situation is debt modification accounting.

This accounting treatment should be used when there is a modification or exchange of debt that results in a concession from the creditor. Under this accounting treatment, the original loan is derecognized and a new loan is recognized at the modified terms.

Calculation for the Carrying Amount of the Loan on January 1, 2021:

Carrying Amount of Loan on December 31, 2020 = $3,100,00

Interest Payments from December 31, 2020 to January 1, 2021 = $38,666.6

Carrying Amount of Loan on January 1, 2021 = $3,100,000 - $38,666.67 = $3,061,333.33

Question 2:

The entry on January 1, 2021 would be as follows:

Debt Modification Expense 38,666.67
Interest Receivable 38,666.67

Question 3:

The entry on December 31, 2021 would be as follows:

Interest Expense (7.5% of 3,061,333.33) 229,595.00
Interest Payable 229,595.00

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Answers

The cost of the company production that was included in U.S. GDP is $12 million.

Using this formula

Cost of production=Cost of producing cans of sardines- Purchase

Where:

Cost of producing cans of sardines=$14 million

Purchase=$2 million

Let plug in the formula

Cost of production=$14 million- $2 million

Cost of production=$12 million

Inconclusion the cost of the company production that was included in U.S. GDP is $12 million.

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Answer:

$12 million

Explanation:

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contribution to GDP = value of final good - value of intermediate good

14 = 2 = 12

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Answers

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Answers

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