Question

In: Accounting

Bento Corp took a $500,000 four-year 4% note receivable from a customer in connection with a...

Bento Corp took a $500,000 four-year 4% note receivable from a customer in connection with a major sale transaction. The note requires annual blended payment s to be paid at end of each year. The market interest rate is 4%.

1. Calculate the required blended payment. round to the nearest dollar.

2. Prepare a schedule that shows annual interest and the principal portion of the four payments.

3. Prepare journal entries to record the initial sale transaction and each payment.

Solutions

Expert Solution

1) Annual payment =Value of note /PVA 4%,4

                       = 500000/ 3.62990

                       = 137744.84    [rounded to 137,745]

2)

Year Payment [A] Interest [B] principal [A-B] Carrying value of note
0 500000
1 137745 20000 [500000*.04] 117745 500000-117745= 382255
2 137745 15290.2 [382255*.04] 122454.8 382255-122454.8= 259800.2
3 137745 10392.01 127352.99 259800.2-127352.99= 132447.01
4 137745 5297.99 132447.01 0

3)

Date Account Debit credit
year 1 -Beginning Note receivable 500000
Accounts receivable 500000
Year 1-end cash 137745
Note receivable 117745
Interest revenue 20000
Year 2 -end cash 137745
Note receivable 122454.8
Interest revenue 15290.2
year3-end cash 137745
note receivable 127352.99
Interest revenue 10392.01
year 4- end cash 137745
Note receivable 132447.01
Interest revenue 5297.99

Related Solutions

Cambria Limited took a $250,000 two-year note receviable from a customer in connection with a major...
Cambria Limited took a $250,000 two-year note receviable from a customer in connection with a major inventory sale transaction on 1 January 20X5. The note required annual end-of-year interest payments of 4%, and the principal was due at the end of 20X6. Requirement 1: Assume now that the market interest rate is 8%, Calculate the present value of the note, and prepare a schedule that shows the annual interest. (Round time value factor to 5 decimal places and final answers...
Epsilon Ltd. accepted a $600,000 two year note receivable from a customer in connection with a major inventory sale transaction on 1 January 20X5.
Epsilon Ltd. accepted a $600,000 two year note receivable from a customer in connection with a major inventory sale transaction on 1 January 20X5. The note required annual end of year interest payments of 2%, and the principal was due at the end of 20X6. Required:1. Assume that the market interest rate is 7%. Calculate the present value of the note, and prepare a schedule that shows the annual interest using the straight line method of amortization.2. Prepare journal entries...
MacWilliams Ltd. sold a $90,000 piece of machinery to a customer on 1 January 20X6, and took back a two year, 2% note receivable
MacWilliams Ltd. sold a $90,000 piece of machinery to a customer on 1 January 20X6, and took back a two year, 2% note receivable. The customer has to pay interest every 31 December, but the $90,000 principal is due only after two years. Market interest rates are 6%. Required:1. What is the present value of the note receivable?2. Record the sale/loan on 1 January 20X6, the interest each 31 December (two times) and the loan repayment on 31 December 20X7....
Selkirk Company obtained a $30,000 note receivable from a customer on January 1, 2018. The note,...
Selkirk Company obtained a $30,000 note receivable from a customer on January 1, 2018. The note, along with interest at 12%, is due on July 1, 2018. On February 28, 2018, Selkirk discounted the note at Unionville Bank. The bank’s discount rate is 14%. Required: Prepare the journal entries required on February 28, 2018, to accrue interest and to record the discounting for Selkirk. Assume that the discounting is accounted for as a sale. (If no entry is required for...
Stickleback performed services for a customer in exchange for a $18,000, 5 year, 10% note receivable...
Stickleback performed services for a customer in exchange for a $18,000, 5 year, 10% note receivable on January 1, 2020. Interest will be paid quarterly, with the first payment at the end of the first quarter. The customer’s normal borrowing rate is 12%. Determine the balance in the discount on note receivable as of December 31, 2023. $2,007 $334 None of the other answer choices is correct. $632 $1,130 $5,194 $17,665
please explain the nature of a note receivable? How is it different from an account receivable?...
please explain the nature of a note receivable? How is it different from an account receivable? How is interest calculated on a note receivable? What do we mean by the maturity value of a note receivable?
4. Vitron Corp. has a current accounts receivable balance of $483,810. Credit sales for the year...
4. Vitron Corp. has a current accounts receivable balance of $483,810. Credit sales for the year ended were $5,700,000. What is the receivables turnover? The days’ sales in receivables? (10 Points) (Use Excel and Excel Formulas)
Bosworth Corporation accepted a 5-year note receivable from Steelman Company on January 1, Year 1. The...
Bosworth Corporation accepted a 5-year note receivable from Steelman Company on January 1, Year 1. The maturity value of the note is $ 760,000. The note has a stated interest rate of 10%. However, the prevailing market interest rate is 12%. The note requires interest payments on June 30 and December 31. What is the present value of this note at inception ANSWER:$704, 063 ( I would like to know how to calculate) 2. Eagle Exporters purchased​ 80,000 of the​...
Martinez Corp.’s balance sheet at December 31, 2016, included the following. Note receivable $640,000 Interest receivable...
Martinez Corp.’s balance sheet at December 31, 2016, included the following. Note receivable $640,000 Interest receivable 32,000 Accounts receivable 1,410,000 Less: Allowance for doubtful accounts receivable 86,000 1,324,000 $1,996,000 The following occurred in 2017. 1. Martinez made sales of $10,560,000. All sales were credit sales. Martinez allows some discounts for early payment of receivables and uses the gross method to record sales. 2. Customer accounts of $85,250 were written off during the year. 3. Accounts receivable of $10,660,000 were collected....
Computing the Proceeds from the Sale of Notes Receivable Below are several customer notes receivable that...
Computing the Proceeds from the Sale of Notes Receivable Below are several customer notes receivable that were sold without recourse. An $8,000, 60-day, non-interest-bearing note sold after 15 days at 12%. A $10,000, 12%, 60-day note sold after 30 days at 14%. A $4,000, 10%, 90-day note sold after 30 days at 12%. A $10,000, 12%, 120-day note sold after 45 days at 15%. Required: Determine the proceeds from each of the preceding sales of customer notes receivable. (Assume a...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT