Question

Please answer all parts as I cant post separatelty because they are connected

Questions 4-8 USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (5) QUESTIONS:

Ramsey, Inc. sold merchandise to Min Corporation on June 1, 2019 and accepted an interest-bearing note with an 8% APR.  Min agreed to make annual payments of P&I in the amount of $27,000 per year for 5 years with the first payment being made immediately.  The remaining payments are to be remitted each June 1^st.  Ramsey’s year-end is December 31^st. Min’s normal cost to borrow is 8%.

Required:

Question 4

Determine the Face Value of the note receivable that Ramsey would recognize on Jun 1, 2019: $____________________________

(round your answer to the nearest whole dollar

Question 5

Using the information presented in #4 above, determine the Interest Revenue that Ramsey will recognize for the year ended Dec 31, 2020 on their Income Statement: $________________________

Question 6

Using the information in #4 above, answer the next (3) questions by preparing the Balance Sheet as of Dec 31, 2019:

Current Assets:

Interest Receivable $___________________

Note Receivable $___________________

Long-Term Investments:

Note Receivable $___________________

Question #6:

Determine the balance in the Interest Receivable account as of Dec 31, 2019: $___________________

Question 7

Using the information presented in #4 above, determine the current maturity of the long-term note receivable. (I.e. how much principal will be repaid in 2020 and therefore should be classified as a current asset.)

Question 8

Using the information presented in #4 above, determine the balance of the Note Receivable that should be classified as a Long-Term Investment (I.e. the balance of the note receivable that will not be repaid within the next 12 months from the balance sheet dated Dec 31, 2019.)

Answer 1

EMI shall be calculated as follows
Since 27,000 is paid upfront, balance $108,000 is calculated for Principal & Interest portion
Now, How do we calculate
Take 108,000 & calculate interest portion as follows: (108000* 8/108),
$ similarly follow the pattern
Calculation of EMIs
Date	EMI's	Principal	Interest	Outsranding
01-06-2019	27000	27000		108000
01-06-2020	27000	19000	8000	81000	100540
01-06-2021	27000	20520	6480	54000
01-06-2022	27000	22680	4320	27000
01-06-2023	27000	24840	2160	0
		114040	20960	135000
Question 4
The Face Value of the note receivable that Ramsey would recognize on Jun 1, 2019: $114040
Question 5
The Interest Revenue that Ramsey will recognize for the year ended Dec 31, 2020 on their Income Statement: $11240 (8000+(6480/2))
Question 6
Balance Sheet as of Dec 31, 2019:
Current Assets:
Interest Receivable: $7140		(8000/2)+(6280/2)
Note Receivable: $23000		(27000/2)+19000/2
Long-Term Investments:
Note Receivable $77540		(9500+20520+22680+24840)
Question #6:
Balance in the Interest Receivable account as of Dec 31, 2019: $100540
Question 7
The current maturity of the long-term note receivable. (I.e. how much principal will be repaid in 2020 and therefore should be classified as a current asset.)
Note Receivable:$23000		(27000/2)+19000/2
Question 8
The balance of the Note Receivable that should be classified as a Long-Term Investment (I.e. the balance of the note receivable that will not be repaid within the next 12 months from the balance sheet dated Dec 31, 2019.)
$77540	(9500+20520+22680+24840)