Accounting 2nd May

Abstract

Question 2 Watson Cox, a newly hired loan analyst is examining the current liabilities of a corporate loan applicant. He observes that unearned revenues have declined in the current year, compared to the prior year. Is this good or bad? What does this indicate about the client’s liquidity? Explain Unearned revenues occur when a company receives payment for products and subscriptions that it will provide in the future. A decrease in the levels of unearned revenues is a bad indicator to the company. A decrease in the level of the unearned revenues means that the company is not doing well in terms of sales and performance. Decline in unearned revenue also means a decline in the liquidity of the company. A decline in the liquidity or the working capital, because unearned revenue is recorded as a current liability which is part of the liquidity of the company. Question 9 A callable debt has a maturity of 8 years is this debt considered to be a long-term debt or short-term debt? Why? This callable debt is long term in nature because it is payable in a duration of more than one year. A callable debt is not affected by the call option; hence it will still be classified as a long-term debt. The existence of a call option gives a borrower a chance to pay off the debt before the maturity period, but it does not interfere with the loan repayment period. Question 2 On October 1, Eder Fabrication borrowed $85 million and issued a ten-month, 9 percent promissory note, interest was payable at maturity. Prepare the journal entry for the note at December 31st, the end of the reporting period. October 1st 2013 December 31st, 2013 Interest Expense= 85000000*0.09*3/12= Question 3 Samson corporation issued a 4 year $90900, zero note...