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Fittoniya [83]
2 years ago
10

Antique Company has notes receivable that have a fair value of $920,000 and a carrying amount of $710,000. Antique decides on De

cember 31, 2014, to use the fair value option for these recently-acquired receivables. The adjusting entry to record this change will include a:a. debit to Unrealized Holding Gain or Loss⎯Income for $210,000.b. credit to Notes Receivable for $210,000.c. credit to Unrealized Holding Gain or Loss⎯Income for $210,000.d. debit to Notes Receivable for $920,000.
Business
1 answer:
ale4655 [162]2 years ago
4 0

Answer:

c. credit to Unrealized Holding Gain or Loss⎯Income for $210,000.

Explanation:

We know that the notes receivable have a debit balance as it is shown on the assets side under the balance sheet.

Since the fair value of the notes receivable is $920,000 and its carrying value is $710,000 so, the difference would be $210,000 ($920,000 - $710,000) as in the given question, it is said that the fair value option is to be used. So, we take the difference of both the amounts.  

Moreover, the notes receivable balance is increased by $210,000 so we debited it and credit the Unrealized Holding Gain or Loss⎯Income

And, the journal entry would be  

Notes receivable A/c Dr $210,000

     To unrealized holding gain or loss - income $210,000

(Being gain or loss adjusted)

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1. The company's shareholders and management are the stakeholders in this circumstance.

2-a. The president's request is unethical.

2-b. Zoe's action is unethical.

3. It is possible for Zoe to accrue revenues and defer expenses while remaining ethical.

4. Again, it is possible for Zoe to accrue revenues and defer expenses while remaining ethical.

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1. Who are the stakeholders in this situation?

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2. What are the ethical considerations of (a) the president’s request and (b) Zoe dating the adjusting entries December 31?

2-a. The president's proposal goes against sound accounting practices. This will be interpreted as an attempt to window dress and manipulate accounting entries by the management in order to present a profit figure that is higher than reality. This is unethical behavior.

2-b. Zoe's decision to date the adjusting entries December 31 rather than January 17 was carried out with the explicit intention of distorting accounting figures, and inflating revenues by incorrectly accruing certain revenues and deflating expenses by incorrectly deferring some expenses. This is not only unethical, but also unlawful behavior.

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5. Who do you think can discover Zoe’s accrued revenues and deferred expenses?

The person that can discover Zoe’s accrued revenues and deferred expenses is the auditor when he is reviewing the books of accounts of the company.

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