Explanation: Interest is calculated by multiplying the principal times the time period the note is redeemable. It is important to bear in mind that all interest are annual unless it is stated differently. This note renders 12 % annually. At December 31 two months of interests are payable and must be recognized as interest expense. Having said that the calculation is as follows:
Is the Venetian’s casino marker signed by Nehme a negotiable instrument under the Nevada Uniform Commercial Code?
Yes, this is a negotiable instrument because Nehme applied for it voluntarily and negotiated the terms with the Venetian casino. This is an actual case that occurred in 2011.
Casino markers have been deemed as valid negotiable instruments by the Nevada Supreme Court in <em>Nguyen vs. State, 116 Nev. 1171, 14 P.3d 515. 516 - 17 (2000)</em>.
Assuming it is a Negotiable Instrument, even if you do not believe it is one, what arguments can the Venetian use to enforce the Negotiable Instrument?
The negotiable instrument is a valid contract which grants the person or entity that possesses it the right to request performance by the other party. In this case, the marker is a type of IOU or promissory note.
Effect of the Bond Issuance on Megginson, Inc.'s accounting equation:
(The account equation states that Assets = Liabilities + Equity.)
With the bond issuance, the Assets (Cash) will increase by $290,000 and the Liabilities (Bonds Payable) will increase by $300,000, and there will be a loss (Equity - Retained Earnings) of $10,000 in the form of Discount on Bonds. This discount on bonds is usually amortized over the bonds' life, thus increasing the interest payable.
The issuance of bonds is one of the means of obtaining finance for business operations. It is a long-term borrowing, which entities use to finance the activities when funds cannot be sourced from other sources or when it is considered cheaper to borrow from outside sources.