# Assume that last year (2011) A &A Products had a net operating loss of - 72339

Solution Posted by

## Ryan

Rating : (38)A+
Solution Detail
Price: \$12.00
• Posted on: Tue 12 Aug, 2014
• Request id: None
• Purchased: 2 time(s)
• Average Rating: No rating
Request Description

1. Assume that last year (2011) A &A Products had a net operating loss of \$50,000 and for this problem A & A Products reported tax expense for 2012 of \$70,000. Also assume that in 2010 A &A products had income of \$10,000 and tax rate of 20% (ignore any earlier years). This year A 7A products reported net income of \$70,000 and tax rate 20% . Prepare the entry that A & A should have made in 2011. Prepare an entry for 2012 recording the effect on A & A products books of the 2011 NOL.
2. On January 1 of 2012 P&P Products purchased \$1000000 of 8%, 5 year A7A Products bonds on the open market for \$960000. the bonds are dated and were issued by A7A Products on January 1,2010. The bond pay each January 1st and July 1st. The effective interest method is used. Make necessary entries for A &A Products.
3. On November 1,2012 P&P Products entered into an agreement whereby P&P products accepted a discounted note payable for \$2,000,000, (A7A Products received cash) the terms were 0% interest (market rate of interest is6%) and payable on May1 2013. Make all necessary entries on the books of A &A Products for 2012.
4A A&a Products entered into a lease agreement with P&P Products to purchase a piece of equipment on January 1, 2012. The terms of the lease are :8%, 5 years lease with a 6 year useful life. The machine has a fair value of \$600,000. The residual value is zero. A&A products does not know the interest rate that P&P product uses Assume the entries have not yet been made on the books of A &A Products
Prepared a 5 year amortization schedule. Make all necessary entries on the books of A & A Products for the first year.
4B Assume that the lessor (P&P Product) interest rate is also 8% and that the lease qualifies as a direct financing lease, using the above info in 4A. Prepare the lessor’s amortization table for the duration of the lease and make all necessary entries on the books of P&P Products for the first two years.

Solution Description

Attachments