Debt Classification

Unit 5 Assignment

Exercise 13-5 (Debt Classification) Presented are four different situations related Mckee plc debt obligations. Mckee’s next financial reporting date is December 31,2018. The financial statements are authorized for issuance on March 1, 2019.

Don't use plagiarized sources. Get Your Custom Essay on
Debt Classification
Get a plagiarism free paperJust from $13/Page
Order Essay
  1. Mckee has a debt obligation maturing on December 31, 2021. The debt is callable o n demand by the lender at any time.
  2. Mckee also has a long -term obligation due on December 1, 2020. On November 10, 2018, it breaches a covenant on its debt obligation and the loan becomes due on demand. An agreement is reached provide a waiver of the breach on December 8, 2018.
  3. Mckee has a long-term obligation of $400,000, which maturing over 4 years in the amount of $ 100,000 per year. The obligation is dated November 1, 2018, and the first maturity date is November 1, 2019.
  4. Mckee has a short-term ion due February 15, 2019. Its lender agrees to extend the maturity date loan to February 15, 2021. The Agreement for extension is sinigned on January 15, 2019.


Indicate how each of these debt obligations is reported on Mckee’s statement of financial position on December 31, 2018.

Exercise 13-13 (Warranties) Early in 2019, Sheryl Crow Equipment sold 500 Rollomatics during 2019 at $6,000 each. During 2019, Crow spent $ 20,000 servicing the 2year assurance warranties that accompany the Rollomatic. All applicable transaction are on a cash basis.


  1. Prepare 2019 entries Cow. Assume estimate the total cost servicing the warranties will be $55,000 for 2 years.
  2. Prepare 2019 entries for Crow assuming that the warranties are not an integral part of the sale (service-type warranty). Assume that of the sales total $56,000 relates to sales of warranty contracts. Crow estimates the total cost of servicing the warranties will be $55,000 for 2 years. Estimate revenues to be recognizes on a straight- line basis.

Exercise 14-5 (Entries for Bond Transactions) Assume the same information as in E14.4 except that the bonds were issued 84.95 to yield 12%.


  1. The issuance of the bonds.
  2. The payment of interest and related amortization on July 1, 2019.
  3. The accrual of interest and the related amortization on December 31, 2019.

Here is the E14.4 Foreman Cleaners issued $800,000 of 10%, 20year old bonds on January 1, 2019 at 119.792 to yield 8%. Interest is payable semiannually on July and January1.

Exercise 14-11 (Entries for Zero-Interest-Bearing Notes) On January 1, 2019 Mclean AG makes the the following acquisitions.

  1. Purchases land having a fair value of $300,000 by issuing a 5- year, zero interest bearing promissory note in the face amount of %505,518.
  2. Purchases equipment by issuing 6%, 8 year promissory note having a maturity value of $400,000 (interest payable annually).

The company has to pay 11% interest for funds from its bank.


  1. Record the two journal entries that should be recorded by Mclean AG for the purchases on January 1, 2019.
  2. Record the interest at the end of the first on both notes.

Exercise 15-6 (Share Issuances and Repurchase) Loxley Corporation is authorized to issue 50,000 s shares of $10 par value ordinary shares. During 2019, Loxley took part in the following selected the transactions.

  1. Issued 5,000 shares at $ 45 shares, less costs related to the issuance of the shares totaling $7,000.
  2. Issuance 1,000 shares for land appraised at $50,000. The shares were actively traded on a national securities exchange at approximately $46 per share on the date of issuance.
  3. Purchased 500 treasury shares at $44 per share. The treasury shares purchased were issued in 2018, at $40 per share.


  1. Prepare the journal entry to record item 1.
  2. Prepare the journal entry record item 2.
  3. Prepare the journal entry record item 3 using the cost method.

Exercise15-7 (Effect of Treasury Share Transactions on Financials) Goosen SA has outstanding 40,000 shares of $5 par ordinary shares which had been issued at $30 per share. Goosen entered into the following transactions.

  1. Purchased 5,000 treasury shares at $45 per share.
  2. Resold 500 of the treasury shares.
  3. Resold 2,000 of the treasury shares $49 per share.


Use the following code to indicate the effect of the three transactions has on the financial statement categories listed in the table below, assuming Goosen SA uses the cost method:1- increase: D= decrease; and NE= No effect.

Share                      Retained                                Net

#              Assets     Liabilities     Equity               Premium                Earnings                                 Income




Homework Valley
Calculate your paper price
Pages (550 words)
Approximate price: -

Our Advantages

Plagiarism Free Papers

All our papers are original and written from scratch. We will email you a plagiarism report alongside your completed paper once done.

Free Revisions

All papers are submitted ahead of time. We do this to allow you time to point out any area you would need revision on, and help you for free.


A title page preceeds all your paper content. Here, you put all your personal information and this we give out for free.


Without a reference/bibliography page, any academic paper is incomplete and doesnt qualify for grading. We also offer this for free.

Originality & Security

At Homework Valley, we take confidentiality seriously and all your personal information is stored safely and do not share it with third parties for any reasons whatsoever. Our work is original and we send plagiarism reports alongside every paper.

24/7 Customer Support

Our agents are online 24/7. Feel free to contact us through email or talk to our live agents.

Try it now!

Calculate the price of your order

We'll send you the first draft for approval by at
Total price:

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

We work around the clock to see best customer experience.


Flexible Pricing

Our prices are pocket friendly and you can do partial payments. When that is not enough, we have a free enquiry service.


Admission help & Client-Writer Contact

When you need to elaborate something further to your writer, we provide that button.


Paper Submission

We take deadlines seriously and our papers are submitted ahead of time. We are happy to assist you in case of any adjustments needed.


Customer Feedback

Your feedback, good or bad is of great concern to us and we take it very seriously. We are, therefore, constantly adjusting our policies to ensure best customer/writer experience.