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    Chapter 6

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    El Agriche
    The document contains journal entries for recording transactions related to notes receivable for multiple years. In 2022, a note receivable for $6 million was recorded along with accrued interest of $720k. In 2023 and 2024, journal entries were made to record the accrued interest of $806k and $903k respectively. The final entry in 2024 collects the full $6 million note receivable along with all accrued interest, totaling $8.43 million in cash received.

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    Chapter 6

    Uploaded by

    El Agriche
    32 views8 pages
    The document contains journal entries for recording transactions related to notes receivable for multiple years. In 2022, a note receivable for $6 million was recorded along with accrued interest of $720k. In 2023 and 2024, journal entries were made to record the accrued interest of $806k and $903k respectively. The final entry in 2024 collects the full $6 million note receivable along with all accrued interest, totaling $8.43 million in cash received.

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    The document contains journal entries for recording transactions related to notes receivable for multiple years. In 2022, a note receivable for $6 million was recorded along with accrued interest of $720k. In 2023 and 2024, journal entries were made to record the accrued interest of $806k and $903k respectively. The final entry in 2024 collects the full $6 million note receivable along with all accrued interest, totaling $8.43 million in cash received.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    32 views8 pages

    Chapter 6

    Uploaded by

    El Agriche
    The document contains journal entries for recording transactions related to notes receivable for multiple years. In 2022, a note receivable for $6 million was recorded along with accrued interest of $720k. In 2023 and 2024, journal entries were made to record the accrued interest of $806k and $903k respectively. The final entry in 2024 collects the full $6 million note receivable along with all accrued interest, totaling $8.43 million in cash received.

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    © All Rights Reserved
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    Required:

    Prepare journal entries for 2022, 2023, 2024.


    2022
    Jan. 1 Cash 1,000,000
    Note receivable 6,000,000
    Land 5,000,000
    Gain on sale of land 2,000,000
    To record down payment.

    Accrued Interest receivable 720,000


    Interest Income 720,000
    To record accrued interest for the year.

    2023
    Accrued Interest receivable 806,400
    Interest Income 806,400
    To record accrued interest for the year.

    Face amount 6,000,000


    Interest accrued for first year 720,000
    Total 6,720,000
    Interest for second year 806,400

    2024
    Cash 8,429,568
    Note Receivable 6,000,000
    Accrued interest receivable 1,526,400
    Interest income 903,168
    To record cash collected.

    Face amount 6,000,000


    Interest accrued:
    First year 720,000
    Second year 806,400 1,526,400
    Total 7,526,400
    Interest for third year 903,168
    Cash received 8,429,568
    Required:
    Prepare journal entries for the current year.
    Face amount of note 600,000
    Present value - cash sale price 540,000
    Unearned interest income 60,000

    Cash sale price 540,000


    Cost of equipment 400,000
    Gross income 140,000

    Journal Entries
    Jan. 1 Notes Receivable
    Sales
    Unearned interest income
    To record the sale.

    Dec. 31 Cash
    Notes Receivable
    To record first intallment collection.

    Unearned interest income


    Interest income
    To record unearned interest income over the term of the note.

    Note Receivable Fraction


    2022 600,000 3/6
    2023 400,000 2/6
    2024 200,000 1/6
    1,200,000
    600,000
    540,000
    60,000

    200,000
    200,000

    30,000
    30,000

    Interest Income
    30,000
    20,000
    10,000
    60,000
    Required:
    Prepare journal entries for the current year.
    Face amount of note 900,000
    Present value of note 720,540
    Unearned interest income 179,460

    Present value of note 720,540


    Cash received - down payment 100,000
    Sale price 820,540
    Cost of equipment 700,000
    Gain on sale of equipment 120,540

    Journal Entries
    2022
    Jan. 1 Cash 100,000
    Note Receivable 900,000
    Equipment 700,000
    Gain on sale of equipment 120,540
    Unearned interest income 179,460
    To record the sale of equipment.

    Dec. 31 Cash 300,000


    Note receivable 300,000
    To record first installment collection.

    Unearned interest income 86,465


    Interest inome 86,465
    To record interest income.

    Date Annual Collection Interest Income Principal Present Value


    Jan. 1, 2022 720,540
    Dec. 31, 2022 300,000 86,464.80 213,535 507,005
    Dec. 31, 2023 300,000 60,841 239,159 267,845
    Dec. 31, 2024 300,000 32,141 267,859
    2023
    Dec. 31 Cash 300,000
    Note receivable 300,000
    To record second annual collection.

    Unearned interest income 60,841


    Interest inome 60,841
    To record interest income.

    2024
    Dec. 31 Cash 300,000
    Note receivable 300,000
    To record third annual collection.

    Unearned interest income 32,141


    Interest inome 32,141
    To record interest income.
    Required:
    Prepare journal entries for 2022 and 2023
    Face amount of note 2,500,000
    Present value of note 1,995,000
    Unearned interest income 505,000

    2022
    Jan. 1 Note Receivable 2,500,000
    Sales 1,995,000
    Unearned interest income 505,000
    To record the sale of equipment.

    Date Annual Collection Interest Income Principal Present Value


    Jan. 1, 2022 1,995,000
    Dec. 31, 2023 500,000 159,600.00 340,400 1,654,600
    Dec. 31, 2024 500,000 132,368.00 367,632 1,286,968
    Dec. 31, 2025 500,000 102,957.44 397,043 889,925
    Dec. 31, 2026 500,000 71,194.04 428,806 461,119
    Dec. 31, 2027 500,000 36,889.56 463,110 (1,991)

    2023
    Dec. 31 Cash 500,000
    Note Receivable 500,000
    To record first installment collection.

    Unearned interest income 132,368


    Interest income 132,368
    To record interest income.

    Determine the carrying amount of the note receivable on December 31, 2023.
    The carrying amount of the note receivable on December 31, 2023 is P1,654,600.

    Note Receivable 1,995,000


    Unearned interest income 340,400
    Carrying Amount 1,654,600
    Determine the interest income for 2024.
    The interest income on December 31, 2023 is P132,368.

    Interest income (1,654,600*8%) 132,368


    Required:
    Prepare journal entries for 2022, 2023, 2024, and 2025.
    Face amount of note 400,000
    Present value 284,720
    Unearned interest income 115,280

    Computation
    Present value of note 284,720
    Cash received 125,000
    Sale price 409,720
    Carrying amount of equipment 350,000
    Gain on sale of equipment 59,720

    2022
    Jan. 1 Cash 125,000
    Note Receivable 400,000
    Accumulated Depreciation 150,000
    Equipment 500,000
    Gain on sale of equipment 59,720
    Unearned interest income 115,280
    To record sale of equipment.

    Dec. 31 Unearned interest income 34,166


    Interest income 34,166
    To record interest income.

    Date Interest Income Unearned Interest Income Present Value


    Jan. 1, 2022 115,280 284,720
    Dec. 31, 2022 34,166 81,114 318,886
    Dec. 31, 2023 38,266 42,847 357,153
    Dec. 31, 2024 42,858 (11) 400,011
    Dec. 31, 2025 48,001 (48,012) 448,012

    2023
    Dec. 31 Unearned interest income 38,266
    Interest income 38,266
    To record interest income.

    2024
    Dec. 31 Unearned interest income 42,858
    Interest income 42,858
    To record interest income.

    2025
    Jan. 1 Cash 400,011
    Note Receivable 400,011
    To record collection of note receivable.

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