26. Stark, Inc. has $1,000,000 of notes payable due June 15, year 2.
At the financial statement date of December 31, year 1, Stark signed
an agreement to borrow up to $1,000,000 to refinance the notes
payable on a long-term basis. The financing agreement called for
borrowings not to exceed 80% of the value of the collateral Stark was
providing. At the date of issue of the December 31, year 1 financial
statements, the value of the collateral was $1,200,000 and was not
expected to fall below this amount during year 2. On the December
31, year 1 balance sheet, Stark should classify
27. On October 1, year 1, a company borrowed cash and signed a 3year interest-bearing note on which both the principal and interest are
payable on October 1, year 4. The company did not elect to use the
fair value option for reporting financial liabilities. At December 31,
year 3, accrued interest should
28. On January 1, year 1, Jaffe Corporation issued at 95 five hundred
of its 9%, $1,000 bonds. Interest is payable semiannually on July 1
and January 1, and the bonds mature on January 1, year 11. Jaffe paid
bond issue costs of $20,000 which are appropriately recorded as a
deferred charge. Jaffe uses the straight-line method of amortizing
bond discount and bond issue costs. Assume Jaffe does not elect the
fair value option for reporting financial liabilities. On Jaffe’s
December 31, year 1 balance sheet, the bonds payable should be
reported at their carrying value of
29. In year 1, Jeremy Corporation issued 1,000 of its 8% $1,000
bonds for $1,040,000. The bonds were due on December 1, year 11.
Jeremy did not elect the fair value option for reporting financial
liabilities. On October 1, year 7, as part of its normal financing
management strategy, Jeremy Corporation redeemed the bonds at a
time when the carrying value of the bonds was $50,000 more than the
cash paid to retire the bonds. Jeremy should report the $50,000 gain
as
30. On December 31, year 1, Wall Corp. issued $100,000 maturity
value, 10% bonds for $100,000 cash. The bonds are dated December