Please help with these 5 parts. Frankfurt Company has a 5 year $1,000,000, 5% no
ID: 2473364 • Letter: P
Question
Please help with these 5 parts.
Frankfurt Company has a 5 year $1,000,000, 5% note payable to Deutsches Bank International. The note was issued at par and interest was paid regularly. On January 1, 2015, the date the note came due, Frankfurt notified the bank that they could not make the $1,000,000 payment. A restructuring deal was struck. The interest rate was reduced to 3% and the note extended to January 1, 2018 when $900,000 will be paid to complete the loan. The fair value of money is still 5%. Record any restructuring of the loan on the books of Frankfurt Company. Record the restructured loan on the books of Deutsches Bank International. Schwartzwald Company estimates that its liability 8 years from now will be $3,000,000 to provide restoration of land it uses in its mining operation. Their financing rate is 8%. Determine the amount of the Asset Recovery Obligation they must record today. Rotterhosen Company has 100 employees. A summary of their employees is as follows: Current Payroll (gross) 70 employees whose salaries are less than $118,000 to date but more than $7,000 to date $400,000 20 employees whose salaries are in excess of $118,000 to date 70,000 10 new employees who salaries are yet to exceed $7,000 to date 10,000 $480,000 Federal withholding taxes amount $61,000 while state withholding taxes are $8,000 Union dues was withheld amounting to $3,000. Social Security taxes are 6.2% on the first $118,000, and MediCare is 1.45%. The federal unemployment tax is.8% on the first $7,000 earned, and state unemployment is 6% on the first $7,000 earned. However, due to Rotterhosen's little turnover of employees, they have been given a credit of 4.2%. Record the Payroll Entry using Salaries Payable as the residual amount. Record the employer's payroll tax expense.Explanation / Answer
Account Head
Debit
Credit
1a
5% Note payable
$1,000,000
Gain on Note restructuring
$100,000
3% note payable
$900,000
1b
3% Note Receivable
$900,000
Loss on Note restructuring
$100,000
5% Note Receivable
$1,000,000
2a. Asset Recovery Obligation today:
Estimate liability after 8 year is $3,000,000
Financing rate = 8%
PVF @ 8% for 8th year = 1 / (1+0.08) 8 = 0.5401
Today obligation = $3,000,000 * 0.5401 = $1,620,807
Asset Recovery Obligation today = $1,620,807
Account Head
Debit
Credit
3a
salaries earned
480,000
Payroll taxes payable
95,215
Federal withholding taxes payable
61,000
State withholding taxes payable
8,000
Union dues withheld payable
3,000
Social security tax payable ($70,000 * 6.2%)
4,340
Medicare tax payable ($70,000 * 1.45%)
1,015
Federal unemployment tax (8%-6%) * $470,000
9,400
State unemployment tax (6%-4.2%) * $470,000
8,460
Salaries Payable
480,000
3b
Payroll tax expenses
95,215
Salaries payable
480,000
Cash
575,215
Account Head
Debit
Credit
1a
5% Note payable
$1,000,000
Gain on Note restructuring
$100,000
3% note payable
$900,000
1b
3% Note Receivable
$900,000
Loss on Note restructuring
$100,000
5% Note Receivable
$1,000,000