The balance sheet of DWARF CORP. reported the following long-term receivables as of December 31, 2013: Note receivable from sale of plant Note receivable from officer P4,500,000 1,200,000 In connection with your audit, you were able to gather the following transactions during 2014 and other information pertaining to the company's long-term receivables: a. The note receivable form sale of plant bears interest at 12% per annum. The note is payable in 3 annual installments of P1,500,000 plus interest on the unpaid balance every April 1. The initial principal and interest payment was made on April 1, 2014. b. The note receivable from officer is dated December 31, 2013, earns interest at 10% per annum, and is due on December 31, 2016. The 2014 interest was received at year-end. c. The corporation sold a piece of equipment to SNOW INC. on April 1, 2014, in exchange for an P600,000 non interest bearing note due on April 1, 2016. The note had no ready market, and there was no established exchange price for the equipment. The prevailing interest rate for a note of this type at April 1, 2014 was 12%. The present value factor of 1 for two periods at 12% is 0.797 while the present value factor of ordinary annuity of 1 for two periods at 12% is 1.690. d. A tract of land was sold by the corporation to WHITE CO. on July 1, 2014, for P3,000,000, under an installment sale contract. White signed a 4-year 11% note for P2,100,000 on July 1, 2014, in addition to the down payment of P900,000. The equal annual payments of principal and interest on the note will be P676,875 payable on July 1, 2015, 2016, 2017, and 2018. The land had an established cash price of P3,000,000, and its cost to the corporation was P2,250,000. The collection of the installments on this note is reasonably assured. Requirements: 1. How much is the total noncurrent notes receivables as of December 31, 2014? 2. How much is the total current portion of long-term notes receivable as of December 31, 2014? 3. What is the accrued interest receivable as of December 31, 2014?
The balance sheet of DWARF CORP. reported the following long-term receivables as of December 31, 2013: Note receivable from sale of plant Note receivable from officer P4,500,000 1,200,000 In connection with your audit, you were able to gather the following transactions during 2014 and other information pertaining to the company's long-term receivables: a. The note receivable form sale of plant bears interest at 12% per annum. The note is payable in 3 annual installments of P1,500,000 plus interest on the unpaid balance every April 1. The initial principal and interest payment was made on April 1, 2014. b. The note receivable from officer is dated December 31, 2013, earns interest at 10% per annum, and is due on December 31, 2016. The 2014 interest was received at year-end. c. The corporation sold a piece of equipment to SNOW INC. on April 1, 2014, in exchange for an P600,000 non interest bearing note due on April 1, 2016. The note had no ready market, and there was no established exchange price for the equipment. The prevailing interest rate for a note of this type at April 1, 2014 was 12%. The present value factor of 1 for two periods at 12% is 0.797 while the present value factor of ordinary annuity of 1 for two periods at 12% is 1.690. d. A tract of land was sold by the corporation to WHITE CO. on July 1, 2014, for P3,000,000, under an installment sale contract. White signed a 4-year 11% note for P2,100,000 on July 1, 2014, in addition to the down payment of P900,000. The equal annual payments of principal and interest on the note will be P676,875 payable on July 1, 2015, 2016, 2017, and 2018. The land had an established cash price of P3,000,000, and its cost to the corporation was P2,250,000. The collection of the installments on this note is reasonably assured. Requirements: 1. How much is the total noncurrent notes receivables as of December 31, 2014? 2. How much is the total current portion of long-term notes receivable as of December 31, 2014? 3. What is the accrued interest receivable as of December 31, 2014?
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:The balance sheet of DWARF CORP. reported the following long-term receivables as of
December 31, 2013:
Note receivable from sale of plant
Note receivable from officer
P4,500,000
1,200,000
In connection with your audit, you were able to gather the following transactions during 2014
and other information pertaining to the company's long-term receivables:
a. The note receivable form sale of plant bears interest at 12% per annum. The note is
payable in 3 annual installments of P1,500,000 plus interest on the unpaid balance
every April 1. The initial principal and interest payment was made on April 1, 2014.
b. The note receivable from officer is dated December 31, 2013, earns interest at 10%
per annum, and is due on December 31, 2016. The 2014 interest was received at
year-end.
c. The corporation sold a piece of equipment to SNOW INC. on April 1, 2014, in exchange
for an P600,000 non interest bearing note due on April 1, 2016. The note had no
ready market, and there was no established exchange price for the equipment. The
prevailing interest rate for a note of this type at April 1, 2014 was 12%. The present
value factor of 1 for two periods at 12% is 0.797 while the present value factor of
ordinary annuity of 1 for two periods at 12% is 1.690.
d. A tract of land was sold by the corporation to WHITE CO. on July 1, 2014, for
P3,000,000, under an installment sale contract. White signed a 4-year 11% note for
P2,100,000 on July 1, 2014, in addition to the down payment of P900,000. The equal
annual payments of principal and interest on the note will be P676,875 payable on July
1, 2015, 2016, 2017, and 2018. The land had an established cash price of
P3,000,000, and its cost to the corporation was P2,250,000. The collection of the
installments on this note is reasonably assured.
Requirements:
1. How much is the total noncurrent notes receivables as of December 31, 2014?
2. How much is the total current portion of long-term notes receivable as of December
31, 2014?
3. What is the accrued interest receivable as of December 31, 2014?
4. What is the correct interest income for the year 2014?
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