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Balance Sheet
Cash	425,621
AR	1,654,887
Notes Receivable	900,000	received on 2/1/18 in return for service contract term: no interest-3 payments of $300,000 each Feb
Building (net)	1,800,000	normal operations
Construction	600,000	weighted average expenditures $375,000 add in capitalized interest-started and finished in 2018
Equipment (net)	637,000	no change in use
Idle Equipment (net)	107,000	used equipment quoted at $82,000-original cost $450,000
Broadcast License (net)	1,423,000	10 year remaining life but company saves on royalties with contract-without contract royalties would be $126,000 per year
Total Assets	7,547,508
AP	1,067,450
Line Of Credit	300,000	7% interest rate
Notes Payable	432,370	borrowed $500,000 Jan 1 2016 -monthly payments for 15 years at 6%
Bond Payable	500,000	sold Jan 1 2010 at face value-interest only payments-coupon rate 5.5% paid semi annually until jan 1 2030
Total Liabilities	2,299,820
Paid in Capital	4,000,000
RE	1,247,688
	7,547,508
This company wants to report all amounts using fair value under GAAP-the note and bond payable
the current interest rate is 7%
1) What journal entries are needed to adjust for fair value?
2) Show new balance sheet with fair value as indicated.
3) Show to JE to record the trade in of the idle equip for new equip (sticker price $105,000) plus payment of $10,000 to the equip dealer. So you gave the old equip and cash for new equip on 3/1/19.

Beautiful, Inc. Balance Sheet December 31, 2018 425,621 $ 1,654,887 Cash Accounts Receivable Note Receivable $ 900,000 Building (net) Construction Equipment (net) Idle Equipment (net) $ $ $ $ 1,800,000 600,000 637,000 107,000 Received on 2/1/2018 in return for a large service contract Terms = no interest - 3 payments of 300,000 each Feb Being used for normal operations Weighted Average expenditures 375000 to add in capitalized interest - started and completed in 2018 No change in use Used equipment dealer quoted $82,000 - original cost $450,000 Broadcast License (net) $ 1,423,000 10 year remaining life but changes to the broadcast spectrum Company saves on royalties for using the broadcast spectrum on contract Without the broadcast license the royalties would be 126,000 per year Total Assets $ 7,547,508 Accounts Payable $ Line of credit for construt $ Note Payable $ 1,067,450 300,000 432,370 Interest rate is 7% Borrowed 500,000 on January 1, 2016 with monthly payments for 15 years at 6% Bond payable $ 500,000 Sold on January 1, 2010 at face value - interest only payments Coupon rate of 5.5% paid semi annually until January 1, 2030 Total Liabilities $ 2,299,820 Paid In Capital $ 4,000,000 Retained Earnings $ 1,247,688 $ 7,547,508 Beautiful wants to report all possible amounts using fair value as possible under U.S. GAAP that means the note and bond payable The current interest rate for Beautiful is 7%. Required: 1. Show all journal entries needed to adjust to fair value where necessary 2. Show the new balance sheet with fair value as indicated. 3. Show the journal entry to record the trade in of the idle equipment for new equipment (sticker price $105,000) plus payment of $10,000 to the equipment dealer. So you gave up the old equipment and cash for new equipment on March 1, 2019 Beautiful, Inc. Balance Sheet December 31, 2018 425,621 $ 1,654,887 Cash Accounts Receivable Note Receivable $ 900,000 Building (net) Construction Equipment (net) Idle Equipment (net) $ $ $ $ 1,800,000 600,000 637,000 107,000 Received on 2/1/2018 in return for a large service contract Terms = no interest - 3 payments of 300,000 each Feb Being used for normal operations Weighted Average expenditures 375000 to add in capitalized interest - started and completed in 2018 No change in use Used equipment dealer quoted $82,000 - original cost $450,000 Broadcast License (net) $ 1,423,000 10 year remaining life but changes to the broadcast spectrum Company saves on royalties for using the broadcast spectrum on contract Without the broadcast license the royalties would be 126,000 per year Total Assets $ 7,547,508 Accounts Payable $ Line of credit for construt $ Note Payable $ 1,067,450 300,000 432,370 Interest rate is 7% Borrowed 500,000 on January 1, 2016 with monthly payments for 15 years at 6% Bond payable $ 500,000 Sold on January 1, 2010 at face value - interest only payments Coupon rate of 5.5% paid semi annually until January 1, 2030 Total Liabilities $ 2,299,820 Paid In Capital $ 4,000,000 Retained Earnings $ 1,247,688 $ 7,547,508 Beautiful wants to report all possible amounts using fair value as possible under U.S. GAAP that means the note and bond payable The current interest rate for Beautiful is 7%. Required: 1. Show all journal entries needed to adjust to fair value where necessary 2. Show the new balance sheet with fair value as indicated. 3. Show the journal entry to record the trade in of the idle equipment for new equipment (sticker price $105,000) plus payment of $10,000 to the equipment dealer. So you gave up the old equipment and cash for new equipment on March 1, 2019

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