Problem 6-6 (AICPA Adapted) On January 1, 2021, Remarkable Company had the following account balances: Note receivable from sale of an idle building Note receivable from an officer 7,500,000 2,000,000 The P7,500,000 note receivable is dated May 1, 2020, bears interest at 9% and represents the balance of the consideration received from the sale of an idle building to Solid Company. Principal payments of P2,500,000 plus interest are due annually beginning May 1, 2021. Solid Company made the first principal and interest payment on May 1, 2021. The P2,000,000 note receivable is dated December 31, 2018, bears interest at 8% and is due on December 31, 2023. The note is due from the president of Remarkable Company. Interest is payable annually on December 31 and all interest payments were made through December 31, 2021. On July 1, 2021, Remarkable Company sold a parcel of land to Boom Company for P4,000,000 under an installment sale contract. Boom Company made a P1,200,000 cash down payment on July 1, 2021, and signed a 4-year 10% note for the P2,800,000 balance. The equal annual payments of principal and interest on the note totaled P880,000, payable on July 1 of each year from 2021 through 2025. The fair value of the land at the date of sale was P4,000,000 and the cost of the land was P3,000,000. Required: 1. Determine the amount of notes receivable including accrued interest that should be classified as current asset on December 31, 2021. 2. Determine the amount of notes receivable that should be classified as noncurrent asset on December 31, 2021.
Problem 6-6 (AICPA Adapted) On January 1, 2021, Remarkable Company had the following account balances: Note receivable from sale of an idle building Note receivable from an officer 7,500,000 2,000,000 The P7,500,000 note receivable is dated May 1, 2020, bears interest at 9% and represents the balance of the consideration received from the sale of an idle building to Solid Company. Principal payments of P2,500,000 plus interest are due annually beginning May 1, 2021. Solid Company made the first principal and interest payment on May 1, 2021. The P2,000,000 note receivable is dated December 31, 2018, bears interest at 8% and is due on December 31, 2023. The note is due from the president of Remarkable Company. Interest is payable annually on December 31 and all interest payments were made through December 31, 2021. On July 1, 2021, Remarkable Company sold a parcel of land to Boom Company for P4,000,000 under an installment sale contract. Boom Company made a P1,200,000 cash down payment on July 1, 2021, and signed a 4-year 10% note for the P2,800,000 balance. The equal annual payments of principal and interest on the note totaled P880,000, payable on July 1 of each year from 2021 through 2025. The fair value of the land at the date of sale was P4,000,000 and the cost of the land was P3,000,000. Required: 1. Determine the amount of notes receivable including accrued interest that should be classified as current asset on December 31, 2021. 2. Determine the amount of notes receivable that should be classified as noncurrent asset on December 31, 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Question
Transcribed Image Text:Problem 6-6 (AICPA Adapted)
On January 1, 2021, Remarkable Company had the following
account balances:
Note receivable from sale of an idle building
Note receivable from an officer
7,500,000
2,000,000
The P7,500,000 note receivable is dated May 1, 2020, bears
interest at 9% and represents the balance of the consideration
received from the sale of an idle building to Solid Company.
Principal payments of P2,500,000 plus interest are due
annually beginning May 1, 2021. Solid Company made the
first principal and interest payment on May 1, 2021.
The P2,000,000 note receivable is dated December 31, 2018,
bears interest at 8% and is due on December 31, 2023.
The note is due from the president of Remarkable Company.
Interest is payable annually on December 31 and all interest
payments were made through December 31, 2021.
On July 1, 2021, Remarkable Company sold a parcel of land
to Boom Company for P4,000,000 under an installment sale
contract.
Boom Company made a P1,200,000 cash down payment on
July 1, 2021; and signed a 4-year 10% note for the P2,800,000
balance.
The equal annual payments of principal and interest on the
note totaled P880,000, payable on July 1 of each year from
2021 through 2025.
The fair value of the land at the date of sale was P4,000,000
and the cost of the land was P3,000,000.
Required:
1. Determine the amount of notes receivable including
accrued interest that should be classified as current
asset on December 31, 2021.
2. Determime the amount of notes receivable that should be
classified as noncurrent asset on December 31, 2021.
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