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Notes Receivable

This document provides examples and information to help with accounting problems related to notes receivable. There are 25 multiple choice questions covering topics like calculating gain/loss on sale of assets, recording notes receivable, measuring interest income, and presenting notes receivable on financial statements.

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jemmaserrano1220
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7 views

Notes Receivable

This document provides examples and information to help with accounting problems related to notes receivable. There are 25 multiple choice questions covering topics like calculating gain/loss on sale of assets, recording notes receivable, measuring interest income, and presenting notes receivable on financial statements.

Uploaded by

jemmaserrano1220
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Republic of the Philippines

Tarlac State University


College of Business and Accountancy

INTEGRATION: Financial Accounting and Reporting Review – Notes Receivable

Use the following information for numbers 1-3

On January 1, 2021, DC Company sold land costing P850,000 and received in exchange a four-year note
with a face amount of P1,300,000 bearing a rate of 19% which approximates the current interest rate in
the market. DC Company uses the calendar year for reporting purposes.
1. Gain on sale of the land is
2. Carrying value of the note December 31, 2021
3. Interest income for 2022

Use the following information for numbers 4-6

On October 1, 2021, Marvel Company sold land costing P3,000,000 and received in exchange a note with
a face amount P4,250,000 and a maturity date of October 1, 2021. It bears an interest rate of 8% which
approximates the current interest rates in the market. Marvel Company uses the calendar year for
reporting purposes.

4. Selling price of the land


5. Note receivable amount reported in the current asset section of the 2021 statement of financial
position
6. Interest income to be reported in 2022

Use the following information for numbers 7-9

On August 1, 2021, Superman Company sold an equipment with a carrying amount of P750,000 and
received as payment a 9%, P1,000,000 face value note. Equal principal payments plus interest are due
every August 1, from 2022 to 2025. The first principal payment was may on August 1, 2022. Superman
Company uses the calendar year for reporting purposes.

7. Gain (loss) on the sale of the equipment


8. Interest income for 2022
9. Carrying value of the note receivable account on December 31, 2022

Use the following information for numbers 10-12

Captain America Company sold an equipment on January 2, 2021. The agreed price was P3,000,000. A
P1,000,000 down payment was received and Captain America Company accepted a mortgage note for the
balance. The note shall carry a 10% interest (computed on the unpaid balance) for a 5-year period. Equal
payments are to be made at the end of each year beginning December 31,2021. Captain America
Company’s accounting period ends on December 31.

10. Annual collection


11. Interest income for 2021 and 2022
12. Note receivable reported in the current asset section of the December 31, 2022 statement of financial
position

Use the following information for numbers 13-15

On April 1, 2021, Batman Company sold a machine to Bruce Enterprises in exchange for a P525,000 non-
interest bearing note due on April 1, 2025. There was no established exchange price for the equipment
and the note has no ready market. The prevailing rate of interest for a note of this type at April 1, 2021
was 12%. The equipment had a carrying value of P170,000 at the time of sale. The collection of the note
from Bruce Enterprises is reasonably assured. Bat Company uses the calendar year for reporting purposes.

13. The initial measurement of the notes receivable


14. Interest income for 2022
15. Unearned interest at December 31, 2023

Use the following information for numbers 16-18

On January 1, 2021, Iron Man Company sold a parcel of land which it has acquired previously for P300,000
and received in exchange a non-interest bearing note whose face value amounted to P900,000. The note
shall be collected every December 31 as follows: P200,000 in 2021; P300,000 in 2022; and P400,000 in
2023. The effective interest rate for a similar note was 6%. Iron Man Company uses the calendar year for
reporting purposes.

16. Gain (loss) on the sale of the land


17. Note receivable reported in the non-current asset section in the December 31, 2021 statement of
financial position
18. Interest income for 2023

Use the following information for numbers 19-21

On January 1, 2021, Flash Company sold used equipment to Barry Company and received a non-interest
bearing note requiring payment of P40,000 annually for 8 years. The first payment is due on December
13, 2021 and the prevailing rate of interest for this type of note at date of issuance was 8%. The
equipment’s carrying amount on January 1, 2021 was P185,000. Flash Company uses the calendar year
for reporting purposes.

19. The gain (loss) on the sale of the equipment


20. The amount credited to notes receivable account to record the collection on December 31, 2021
21. Interest income for 2023

Use the following information for numbers 22-23

On January 1, 2021, Thor Company sold to Asgard Company goods costing P110,000 and received a note
having a face amount of P250,000. The note requires Asgard Company, the buyer to pay five equal annual
instalment starting January 1, 2021. No interest rate was stipulated in the note. A note of a similar
characteristic would bear a market rate of 8%. Collection of the note is reasonably assured. Thor Company
uses the calendar year for reporting purposes.

22. The initial recording of the notes receivable on January 1, 2021


23. Interest income for 2022

Use the following information for numbers 24-25

On January 1, 2021, Aqua Man Company sold goods costing P275,000 to Atlantis Company. As payment,
Atlantis Company gave Aqua Man Company a P700,000 face value note. The note bears an interest rate
of 4% and shall be repaid in 4 annual installments of P175,000, plus interest based on the outstanding
balance. The first payment is due on December 31, 2021. The market price of the land is not reliably
determinable. Prevailing interest rate for a note of this type is 12%.

24. Amount recorded as sales


25. Interest income for 2022

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