Title: EXERCISES – Notes Receivable
Instructions:
1. Write your answers and solutions on a clean paper. (HAND
WRITTEN)
2. Make sure to indicate your NAME, COURSE & YEAR, SCHEDULE and
TITLE of the exercise in every paper used.
Sample:
Juan Cruz, BSA-2
MWF 1:00-2:00pm
Exercises-Notes Receivable
3. Take photos of your answers and solutions, must be
consolidated in order and convert it to PDF file. (All answers
and solutions must be in one PDF file.)
4. Deadline: On or before October 30, 2021, Saturday at 10:00am.
Problem 1
Red Company sold to another entity a
P5,000,000 for P7,000,000 on January 1, 2021.
tract
of
land
costing
The buyer paid P1,000,000 down and signed a two-year promissory
note for the remainder of the purchase price plus 12% interest compounded
annually. The note matures on January 1, 2023.
Requirement: Prepare journal entries for 2021, 2022, and 2023.
Problem 2
Blue Company manufactures and sells computers. On January 1, 2021,
the entity sold a computer costing P400,000 for P600,000.
The buyer signed a noninterest bearing note for P600,000 payable
in three equal installments every December 31. The cash selling price
of the computer is P540,000.
Requirement: Prepare journal entries for the current year.
Problem 3
Yellow Company is a dealer in equipment. On December 31, 2021, the
entity sold an equipment in exchange for a noninterest bearing note
requiring five annual payments of P500,000.
The first payment was made on December 31, 2022. The market interest
for similar notes was 8%. The relevant present value factors are:
PV of 1 at 8% for 5 periods = 0.68
PV of an ordinary annuity of 1 at 8% for 5 periods = 3.99
Requirements:
1. Prepare journal entries for 2021 and 2022.
2. Determine the carrying amount of the note receivable on December
31, 2022.
3. Determine the interest income for 2023.
Problem 4
On January 1, 2021, Orange Company sold and equipment costing
P500,000 which had a carrying amount of P350,000, receiving a P125,000
down payment and, as additional consideration, a P400,000 noninterest
bearing note due on January 1, 2024.
There was no established exchange price for the equipment, and the
note had no ready market.
The prevailing rate of interest for a note of this type at January 1,
2021 was 12%. The present value of 1 at 12% for three periods is 0.7118.
Requirement: Prepare journal entries for 2021, 2022, 2023 and 2024.