Professional Documents
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Installment Examples
Installment Examples
12/28/09 Cash
557,933
Interest revenue
Notes receivable
475,000
82,933
59,928
59,928
557,933
Interest Revenue
Note receivable
12/31/10 Deferred gross profit (18% * 91,227)
Gain on installment sale of land
466,707
91,227
16,421
16,421
Homework Problem:
2.
RVO Corp. sold a piece of real estate on January 2, 2009 for $10,000,000. It had
purchased the property in 2001 for $6,500,000 in cash. At that time the land was
worth $500,000. At the time of the sale, the carrying value of the building was
$4,500,000.
The terms of the sale were as follows:
Downpayment
$ 500,000
Note Receivable
$ 9,500,000
Interest rate
12%
Length of mortgage
20 years
Annual payment
$ 1,115,866 due at end of each year
The sale has been consummated, the seller's receivable is not subject to future
subordination, and the seller has no continuing involvement with the property. However,
because the initial investment is inadequate, the seller must use the installment method to
account for this sale.
REQUIRED: Journal entries needed in 2009, and 2010