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    IA 1 - Chapter 6 Notes Receivable Problems Part 2

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    John Centino

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    IA 1 - Chapter 6 Notes Receivable Problems Part 2

    Uploaded by

    John Centino
    130 views11 pages

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    IA 1 _ Chapter 6 Notes Receivable Problems Part 2

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    130 views11 pages

    IA 1 - Chapter 6 Notes Receivable Problems Part 2

    Uploaded by

    John Centino

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 11

    November (500,000 x 1%) 5,000

    December (500,000 x 1%) 5,000


    Total accrued interest receivable 10,000 C

    1. 1,500,000 – 500,000 payment on July 01, 2022 = 1,000,000 B

    2. N/R as of June 30, 2023 1,000,000


    X interest rate 8%
    Accrued interest receivable 80,000 C
    Receivable from Maxx Company:
    Principal 1,000,000
    Interest (1,000,000 x 3% x 5 years) 150,000
    Maturity Value 1,150,000
    X PV factor 0.68
    Present value 782,000
    Carrying amount = 1,000,000 + 782,000 = 1,782,000 D
    1. Total payments (500,900 x 5) 2,504,500
    Less: PV of note receivable 1,948,500
    Total interest revenue 556,000 B
    2. Interest revenue for current year (1,948,500 x 9%) = 175,365 A

    PV of note = 4,000,000 x 0.75 = 3,000,000


    Date Interest income Unearned Int. Income Present Value
    01/01/2021 1,000,000 3,000,000
    12/31/2021 300,000 700,000 3,300,000
    12/31/2022 330,000 (D) 370,000 3,630,000
    12/31/2023 370,000 0 4,000,000
    1. PV of N/R, 01/01/2021 (6,000,000 x 0.75) 4,500,000
    X interest rate 10%
    Interest income 450,000 C
    2. PV of N/R 4,500,000
    Less: Carrying amount of equipment 4,800,000
    Loss on sale 300,000 D
    1. The question is for year 2022
    Interest receivable 190,000
    Less: interest receivable for 3,000,000 N/R (3,000,000 x 8% x 9/12) 180,000
    Interest receivable for 1,000,000 N/R 10,000

    *10,000 interest is for 2 months (November and December), or 5,000 per month. The annual
    interest for this N/R is 60,000 (5,000 x 12 months).

    Interest income for 3,000,000 N/R for year 2022 (3,000,000 x 8% x 3/12) 60,000
    Interest income for 1,000,000 N/R for year 2022 (5,000 x 10 months) 50,000
    Total interest income for the year 2022 110,000 A
    2. The question is for the year 2022
    A/R, Ending, 2022 = 5,100,000 + 21,000,000 – 18,000,000 – 600,000 = 7,500,000
    Required ending balance of Allowance account = 7,500,000 x 10% = 750,000
    Ending = beginning + expense – write-off
    750,000 = 500,000 + Expense – 600,000
    Expense = 850,000 B
    1st payment, 01/01/21 600,000
    PV of N/R (600,000 x 4.36) 2,616,000
    Total sales revenue 3,216,000A

    PV of N/R (600,000 x 4.36) 2,616,000B


    2,616,000 x 10% = 261,600 C
    Unearned interest income = 3,600,000 – 2,616,000 = 984,000

    Face value of note, 12/31/2021 (600,000 x 6) 3,600,000


    Less: unearned interest income (984,000 – 261,600 interest income for 2021) 722,400
    Carrying amount/ present value of note 2,877,600 D
    PV of note (500,000 x 3.99) = 1,995,000

    Date Collection Interest income Principal Present Value


    12/31/2021 1,995,000
    12/31/2022 500,000 159,600 340,400 1,654,600
    12/31/2023 500,000 132,368 367,632 1,286,968
    12/31/2024 500,000 102,957 397,043 889,925
    1. 500,000 X 5.65 = 2,825,000 D
    2.
    PV of note 2,825,000
    Less: carrying amount of equipment 2,000,000
    Gain on sale 825,000 C
    3. 339,000 B
    4. 2,664,000 D
    Date Collection Interest Principal Present Value
    12/31/2021 2,825,000
    12/31/2022 500,000 339,000 161,000 2,664,000
    1. Down payment 1,000,000
    Add: PV of note (1,000,000 x 6.25) 6,250,000
    Total sales revenue 7,250,000 A
    2. 6,250,000 C
    3. 500,000 C
    4. 5,750,000 D

    Date Collection Interest Principal Present Value


    12/31/2021 6,250,000
    12/31/2022 1,000,000 500,000 500,000 5,750,000
    1. PV of note (1,000,000 x 0.712) 712,000
    Less: carrying amount of equipment 800,000
    Loss on sale 88,000 D
    Unearned interest income = 1,000,000 – 712,000 = 288,000
    2. 85,440 D
    3. 797,440 C
    4. 95,693 A

    Date Interest income Unearned Int. income Present value


    01/01/2021 288,000 712,000
    12/31/2021 85,440 202,560 797,440
    12/31/2022 95,693 106,867 893,133

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