NOTES RECEIVABLE

PROBLEM 3
Francisco & Mamalac
Solid Company
The 7,500,000 note receivable is dated May 1, 2019, 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 2,500,000 plus interest are due annually beginning May 1, 2020.
Solid Company made the first principal and interest payment on May 1, 2020.

05/01/20 Cash 3,175,000

Notes Receivable 2,500,000
Interest Income 225,000
Accrued Interest Receivable 450,000

12/31/20 Accrued Interest Receivable 300,000

Interest Income 300,000
Solid Company
The 7,500,000 note receivable is dated May 1, 2019, bears interest at 9% and represents the
balance of the consideration received from the of an idle building to Solid Company.
Principal payments of 2,500,000 plus interest are due annually beginning May 1, 2020.
Solid Company made the first principal and interest payment on May 1, 2020.

5/1/19 Notes Receivable 7,500,000

Land xx

12/31/19 Accrued interest receivable ( 7,500,000 x 9% x8/12) 450,000

Interest Income 450,000

Remaining 4 months Jan 1 - May 1

7,500,000 x 9% x 4/12 = 225,000
Solid Company

Notes Receivable remaining 5,000,000

Due next year 2,500,000 CA
Due on May 1, 2022 2,500,000 NCA
Accrued Interest Income 300,000 CA
President
The 2,000,000 note receivable is dated December 31, 2017, bears interest at 8%
and is due on December 31, 2022.
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, 2020.

12/31/20 Cash 160,000

Interest Income 160,000
2,000,000 x 8%
President

Note Receivable due on 12/31/22 2,000,000 NCA

BOOM COMPANY
Boom Company made a 1,200,000 cash down payment on July 1, 2020 and signed a 4-
year 10% note for the 2,800,000 balance.
The equal annual payments of principal and interest on the note totaled 880,000, payable
on July 1 of each year from 2020 through 2024.
The fair value of land at the date of sale was 4,000,000. The cost of the land was 3,000,000

07/01/20 Cash 1,200,000

Notes Receivable 2,800,000
Land 3,000,000
Gain on sale of land 1,000,000

12/31/20 Accrued Interest Receivable 140,000

Interest Income 140,000
2,800,000 x 10% x 6/12
BOOM COMPANY

Notes Receivable 2,800,000

Due on 07/01/21 600,000 CA
Annual payment of 880k - interest 280k
Remaining on Note 2,200,000 NCA
Accrued Interest Receivable 140,000 CA
 Requirement 1: Determine the amount of notes receivable
including accrued interest that should be classified as current
asset on Dec. 31, 2020

Solid
Due next year, 2021 2,500,000
Accrued interest receivable 300,000
Boom
Due on July 1, 2021 600,000
Accrued interest receivable 140,000
Current Asset 3,540,000
Requirement 2: Determine the amount of notes receivable that
should be classified as noncurrent asset on Dec. 31, 2020

Solid
Due on May 1, 2022 2,500,000
President
Note receivable due on 12/31/22 2,000,000
Boom
Note receivable due future years 2,200,000
Noncurrent Notes Receivable 6,700,000
THANK YOU