Grouper Inc. had the following long-term receivable account balances at December 31, 2019. Note receivable from sale of division   $1,200,000 Note receivable from officer   489,100 Transactions during 2020 and other information relating to Grouper’s long-term receivables were as follows. 1.   The $1,200,000 note receivable is dated May 1, 2019, bears interest at 10%, and represents the balance of the consideration received from the sale of Grouper’s electronics division to New York Company. Principal payments of $400,000 plus appropriate interest are due on May 1, 2020, 2021, and 2022. The first principal and interest payment was made on May 1, 2020. Collection of the note installments is reasonably assured. 2.   The $489,100 note receivable is dated December 31, 2019, bears interest at 9%, and is due on December 31, 2022. The note is due from Sean May, president of Grouper Inc. and is collateralized by 12,228 shares of Grouper’s common stock. Interest is payable annually on December 31, and all interest payments were paid on their due dates through December 31, 2020. The quoted market price of Grouper’s common stock was $47 per share on December 31, 2020. 3.   On April 1, 2020, Grouper sold a patent to Pennsylvania Company in exchange for a $101,000 zero-interest-bearing note due on April 1, 2022. There was no established exchange price for the patent, and the note had no ready market. The prevailing rate of interest for a note of this type at April 1, 2020, was 13%. The present value of $1 for two periods at 13% is 0.783 (use this factor). The patent had a carrying value of $40,400 at January 1, 2020, and the amortization for the year ended December 31, 2020, would have been $8,080. The collection of the note receivable from Pennsylvania is reasonably assured. 4.   On July 1, 2020, Grouper sold a parcel of land to Splinter Company for $200,000 under an installment sale contract. Splinter made a $60,000 cash down payment on July 1, 2020, and signed a 4-year 12% note for the $140,000 balance. The equal annual payments of principal and interest on the note will be $45,125 payable on July 1, 2021, through July 1, 2024. The land could have been sold at an established cash price of $200,000. The cost of the land to Grouper was $150,000. Circumstances are such that the collection of the installments on the note is reasonably assured.   a. Prepare the long-term receivables section of Grouper’s balance sheet at December 31, 2020.   b. Prepare a schedule showing the current portion of the long-term receivables and accrued interest receivable that would appear in Grouper’s balance sheet at December 31, 2020.   c. Prepare a schedule showing interest revenue from the long-term receivables that would appear on Grouper’s income statement for the year ended December 31, 2020.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
Grouper Inc. had the following long-term receivable account balances at December 31, 2019.

Note receivable from sale of division   $1,200,000
Note receivable from officer   489,100

Transactions during 2020 and other information relating to Grouper’s long-term receivables were as follows.

1.   The $1,200,000 note receivable is dated May 1, 2019, bears interest at 10%, and represents the balance of the consideration received from the sale of Grouper’s electronics division to New York Company. Principal payments of $400,000 plus appropriate interest are due on May 1, 2020, 2021, and 2022. The first principal and interest payment was made on May 1, 2020. Collection of the note installments is reasonably assured.
2.   The $489,100 note receivable is dated December 31, 2019, bears interest at 9%, and is due on December 31, 2022. The note is due from Sean May, president of Grouper Inc. and is collateralized by 12,228 shares of Grouper’s common stock. Interest is payable annually on December 31, and all interest payments were paid on their due dates through December 31, 2020. The quoted market price of Grouper’s common stock was $47 per share on December 31, 2020.
3.   On April 1, 2020, Grouper sold a patent to Pennsylvania Company in exchange for a $101,000 zero-interest-bearing note due on April 1, 2022. There was no established exchange price for the patent, and the note had no ready market. The prevailing rate of interest for a note of this type at April 1, 2020, was 13%. The present value of $1 for two periods at 13% is 0.783 (use this factor). The patent had a carrying value of $40,400 at January 1, 2020, and the amortization for the year ended December 31, 2020, would have been $8,080. The collection of the note receivable from Pennsylvania is reasonably assured.
4.   On July 1, 2020, Grouper sold a parcel of land to Splinter Company for $200,000 under an installment sale contract. Splinter made a $60,000 cash down payment on July 1, 2020, and signed a 4-year 12% note for the $140,000 balance. The equal annual payments of principal and interest on the note will be $45,125 payable on July 1, 2021, through July 1, 2024. The land could have been sold at an established cash price of $200,000. The cost of the land to Grouper was $150,000. Circumstances are such that the collection of the installments on the note is reasonably assured.
 
a. Prepare the long-term receivables section of Grouper’s balance sheet at December 31, 2020.
 
b. Prepare a schedule showing the current portion of the long-term receivables and accrued interest receivable that would appear in Grouper’s balance sheet at December 31, 2020.
 
c. Prepare a schedule showing interest revenue from the long-term receivables that would appear on Grouper’s income statement for the year ended December 31, 2020.
Expert Solution
Introduction :

For entry 4 :

Installment due = $ 45125 - ($ 140000*12%)

= $ 28325

trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

Blurred answer
Knowledge Booster
Accounting for Notes
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education