Problem 6-4 (IAA)

Required:
1. Prepare journal entries for 2020 and 2021.

Dec. 2020
Note receivable 2,500,000
Sales 1,995,000
Unearned interest income 505,000

Dec. 2021
Cash 500,000
Note receivable 500,000
Unearned interest income 159,600
Interest income 159,600

2. Determine the carrying amount of the note receivable on December 31, 2021.

Note receivable 2,000,000

Unearned interest income (345,500)
Carrying amount 1,654,000

3. Determine the interest income for 2022.

Interest income for 2021 (1,654,000 x .08) = 132,368

Problem 6-5 (AICPA Adapted)

Required:
1. Prepare journal entries for 2020, 2021, 2022, and 2023.

2020
Jan. 1
Cash 125,000
Notes receivable 400,000
Accumulated depreciation 150,000
Equipment 500,000
Gain on sale 59,720
Unearned interest income 115,280

Dec. 31
Unearned interest income 34,166
Interest income 34,166
 Dec. 31, 2021
Unearned interest income 38,266
Interest income 38,266

Dec. 31, 2022

Unearned interest income 42,848
Interest income 42,848

Jan. 1, 2023
Cash 400,000
Notes Receivable 400,000

Problem 6-6 (AICPA Adapted)

Required:
1. Determine the amount of notes receivable including accrued interest that should be
classified as current asset on December 31, 2020.

Interest receivable on the note on sale of an idle building 450,000

Add: Interest receivable on the note sale of land 280,000
Notes receivable including accrued interest on Dec. 31, 2020 730,000

2. Determine the amount of notes receivable that should be classified as noncurrent

asset on December 31, 2020.

Note receivable from sale of an idle building 5,000,000

Less: Current portion due on May 1, 2021 (2,500,000)
Noncurrent portion 2,500,000
Note receivable from an officer, due on Dec. 31, 2022 2,000,000
Present value on note sale of land, July 1, 2020 2,800,000
Less: Principal Payment due on July 1, 2021:
To be Collected 883,320
Interest on the note (280,000) (603,320)
Noncurrent portion 2,196,680
Notes receivable classified as noncurrent asset Dec. 31, 2020 6,696,680