Preparing Entries and Interest Schedule for Long-Term Note Receivable; Effective Interest Method On January 1 of Year 1, Stealth Company sold a machine (classified as inventory) that had a list price of $21.600. The customer paid $3,600 cash and signed a three-year. $18.000 note that specified a stated rate of 3%. Annual interest on the full amount of the principal is payable each December 31. The principal is payable on December 31, three years later. The market rate for a note of this risk is 10%. Required a. Compute the present value of this note. b. Prepare an effective interest schedule for this note. c. Prepare entries required by Stealth for this note on January 1 of Year 1, and December 31 of Year 1, Year 2, and Year 3. • Note: Round answers to the nearest whole dollar. a. Present value of note: $ 25,301 b. Date Jan. 1. Year Dec. 31, Year 1 $ Dec. 31, Year 2 Dec. 31, Year 3 Total 5 Cash (Stated Interest) Oxs 0x 0x 05 x Interest Revenue (Market Interest) Discount on N.R. Amortization 0x $ 0 x 0x OS 0x 0 x 0x 0 Note Receivable, Net (Carrying Value) ox 0 x 0 0

Preparing Entries and Interest Schedule for Long-Term Note Receivable; Effective Interest Method On January 1 of Year 1, Stealth Company sold a machine (classified as inventory) that had a list price of $21.600. The customer paid $3,600 cash and signed a three-year. $18.000 note that specified a stated rate of 3%. Annual interest on the full amount of the principal is payable each December 31. The principal is payable on December 31, three years later. The market rate for a note of this risk is 10%. Required a. Compute the present value of this note. b. Prepare an effective interest schedule for this note. c. Prepare entries required by Stealth for this note on January 1 of Year 1, and December 31 of Year 1, Year 2, and Year 3. • Note: Round answers to the nearest whole dollar. a. Present value of note: $ 25,301 b. Date Jan. 1. Year Dec. 31, Year 1 $ Dec. 31, Year 2 Dec. 31, Year 3 Total 5 Cash (Stated Interest) Oxs 0x 0x 05 x Interest Revenue (Market Interest) Discount on N.R. Amortization 0x $ 0 x 0x OS 0x 0 x 0x 0 Note Receivable, Net (Carrying Value) ox 0 x 0 0

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 22MC: A company collects an honored note with a maturity date of 24 months from establishment, a 10%...

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A company collects an honored note with a maturity date of 24 months from establishment, a 10% interest rate, and an initial loan amount of $30,000. Which accounts are used to record collection of the honored note at maturity date? A. Interest Revenue, Interest Expense, Cash B. Interest Receivable, Cash, Notes Receivable C. Interest Revenue, Interest Receivable, Cash, Notes Receivable D. Notes Receivable, Interest Revenue, Cash, Interest Expense
Jain Enterprises honors a short-term note payable. Principal on the note is $425,000, with an annual interest rate of 3.5%, due in 6 months. What journal entry is created when Jain honors the note?
On June 1, Phillips Corporation sold, with recourse, a note receivable from a customer to a bank. The note has a face value of 15,000 and a maturity value (principal plus interest) of 15,400. The discount is calculated to be 385, and the accrued interest income is 100. The recourse liability is estimated to be 1,000. Prepare the journal entry of Phillips to record the sale of the note receivable.
Entries for installment note transactions On January 1, 20Y2, Hebron Company issued a 175,000, five-year, 8% installment note to Ventsam Bank. The note requires annual payments of 43,830, beginning on December 31, 20Y2. Journalize the entries to record the following:
Notes Receivable On September 1, 2016, Dougherty Corp. accepted a six-month, 7%, $45,000 interest-bearing note from Rozelle Company in payment of an account receivable. Doughertys year-end is December 31. Rozelle paid the note and interest on the due date. Required Who is the maker and who is the payee of the note? What is the maturity date of the note? Prepare all necessary journal entries that Dougherty needs to make in connection with this note.
On December 1 of the current year, Jordan Inc. assigns 125,000 of its accounts receivable to McLaughlin Company for cash. McLaughlin Company charges a 750 service fee, advances 85% of Jordans accounts receivable, and charges an annual interest rate of 9% on any outstanding loan balance. Prepare the related journal entries for Jordan. Refer to RE6-10. On December 31, Jordan Inc. received 50,000 on assigned accounts. Prepare Jordans journal entries to record the cash receipt and the payment to McLaughlin.
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Chemical Enterprises issues a note in the amount of $156,000 to a customer on January 1, 2018. Terms of the note show a maturity date of 36 months, and an annual interest rate of 8%. What is the accumulated interest entry if 9 months have passed since note establishment?
Arvan Patel is a customer of Banks Hardware Store. For Mr. Patels latest purchase on January 1, 2018, Banks Hardware issues a note with a principal amount of $480,000, 13% annual interest rate, and a 24-month maturity date on December 31, 2019. Record the journal entries for Banks Hardware Store for the following transactions. A. Note issuance B. Subsequent interest entry on December 31, 2018 C. Honored note entry at maturity on December 31, 2019.
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