LAND

Cost 5,000,000.00
Selling price 7,000,000.00
Interest rate 12% Compounded Annually
Term 2 years

First year
Cash 1,000,000.00
Notes receivable 6,000,000.00
Land 5,000,000.00
Gain on sale 2,000,000.00

Interest receivable 720,000.00

Interest income 720,000.00

Second year
Interest receivable 806,400.00
Interest income 806,400.00

Cash 6,806,400.00
Notes receivable 6,000,000.00
Interest receivable 806,400.00
Cost 400,000.00
Installement price 600,000.00
Cash price 540,000.00
Term Payable in 3 equal installments every December 31

To record te sale
Notes receivable 600,000.00
Sales 540,000.00
Unearned interest income 60,000.00

To record 1st installment

Cash 200,000.00
Notes receivable 200,000.00

To recognize unearned interest as income

Unearned interest income 30,000.00
Interest income 30,000.00

Note receivable Fraction Interest income

2020 600000 30,000.00
2021 400000 20,000.00
2022 200000 10,000.00
TOTAL 60,000.00
Face value of note 600000
Present valule 540000
Unearned interest income 60000

Cash sale price 540000

Cost of computers 400000
Gross income 140000
Cost 700,000.00
Installment Price 1,000,000.00
Downpayment 100,000.00
Term 3 equal installments every December 31
Prevailing interest rate 12%

To Record Sale
Cash 100,000.00
Notes receivable 900,000.00
Electrical generators 700,000.00
Gain on sale 120,540.00
Unearned interest income 179,460.00

To record the 1st installment

Cash 300,000.00
Notes receivable 300,000.00

To recognize interest income

Unearned interest income 86,464.80
Interest income 86,464.80
PV ordinary annuity of = (1-(1/1+i)^n)/i
PV 2.4018

FA of N/R 900,000.00
PV of N/R 720,540.00
Unearned INT. INC 179,460.00

Downpayment 100,000.00
PV of te note 720,540.00
Sales price 820,540.00
Cost 700,000.00
Gain on sale 120,540.00

amortization table using effective interest method

DATE COLLECTION INT. INC PRINCIPAL PV

1/1/2020 720,540.00
12/31/2020 300,000.00 86,464.80 213,535.20 507,004.80
300,000.00 60,840.58 239,159.42 267,845.38
300,000.00 32,154.62 267,845.38 -
Date Collection INT INC Principal PV

500000
500000
500000
500000
500000
Date of Sale January 1, 2020
Cost 500,000.00
Accumulated depreciation 150,000.00
Downpayment 125,000.00
Term 400,000 payable on January 1, 2023

To record Sale
Cash 125,000.00
Notes receivable 400,000.00
Accumulated depreciation 150,000.00
Equipment
Gain on sale
Unearned interest income

To recognize interest income

2020 Unearned interest income 34,116.40

Interest income

2021 Unearned interest income 38,266.37

Interest income

2022 Unearned interest income 42,847.23

Interest income

2023 Cash 400,000.00

Notes receivable
 PV of 1=1/(1+i)^n
PV Factor 0.7118

Face Amount 400,000.00

Present Value 284,720.00
Unearned interest income 115,280.00

Present Value 284,720.00

500,000.00 Depreciation 150,000.00
84,720.00 Sales Price 434,720.00
115,280.00 Carrying Amount 350,000.00
Gain 84,720.00

34,116.40 Amortization Table

Date Interest Income Unearned

38,266.37 Jan-01 115,280.00
2020 34,166.40 81,113.60
2021 38,266.37 42,847.23
42,847.23 2022 42,847.23

400,000.00
PV
284,720.00
318,886.40
357,152.77
400,000.00