Question

Culver Corporation had the following long-term receivable account balances at December 31, 2019.

Notes receivable		$1,850,000
Notes receivable - Employees		500,000

Transactions during 2020 and other information relating to Culver's' long-term receivables were as follows:

1.		The $1,850,000 note receivable is dated May 1, 2019, bears interest at 9%, and represents the balance of the consideration received from the sale of Culver's's electronics division to Sunland Company. Principal payments of $616,667 plus appropriate interest are due on May 1, 2020, 2021, and 2022. The first principal and interest payment was made on May 1, 2020. Collection of the note instalments is reasonably assured.
2.		The $500,000 note receivable is dated December 31, 2019, bears interest at 8%, and is due on December 31, 2022. The note is due from Marcia Cumby, president of Culver Corporation, and is secured by 10,000 Culver's common shares. Interest is payable annually on December 31, and the interest payment was made on December 31, 2020. The quoted market price of Culver's's common shares was $45 per share on December 31, 2020.
3.		On April 1, 2020, Culver's sold a patent to Blossom Company in exchange for a $200,000 non–interest-bearing note due on April 1, 2022. There was no established exchange price for the patent, and the note had no ready market. The prevailing rate of interest for a note of this type at April 1, 2020, was 12%. The present value of $1 for two periods at 12% is 0.79719 (use this factor). The patent had a carrying amount of $38,000 at January 1, 2020, and the amortization for the year ended December 31, 2020 would have been $7,000. The collection of the note receivable from Blossom is reasonably assured.
4.		On July 1, 2020, Culver's sold a parcel of land to Splish Brothers Inc. for $220,000 under an instalment sale contract. Splish Brothers made a $62,000 cash down payment on July 1, 2020, and signed a four-year, 11% note for the $158,000 balance. The equal annual payments of principal and interest on the note will be $50,927, payable on July 1, 2021, through July 1, 2024. The land could have been sold at an established cash price of $200,000. Culver's had paid $155,000 for the land when it purchased it. Collection of the instalments on the note is reasonably assured.
5.		On August 1, 2020, Culver's agreed to allow its customer, Saini Inc., to substitute a six-month note for accounts receivable of $200,000 it owed. The note bears interest at 6% and principal and interest are due on the note’s maturity date.

Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.

The tables in this problem are to be used as a reference for this problem. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Describe the relevant cash flows in terms of amount and timing.

Cash inflows from notes
				2020		2021		2022		2023		2024
1.		9% Note receivable
		Principal		$		$		$		$		$
		Interest
2.		8% Note receivable
		Principal
		Interest
3.		Non-interest-bearing note receivable
		Payment
4.		Instalment contract receivable
		Down payment
		Payment
5.		6% Note receivable
		Principal
		Interest
		Total		$		$		$		$		$

  

  

Determine the amount of interest income that should be reported in 2020. (Round answers to 0 decimal places, e.g. 8,971.)

Note Receivable		$
Note Receivable—Employees		$
Zero-interest-bearing Note—Patent		$
Instalment Contract—Sale of Land		$
Note Receivable - Saini		$
Total Interest Income reported in 2020		$

  

  

Determine the portion of the note and any interest that should be reported in current assets at December 31, 2020. (Round answers to 0 decimal places, e.g. 9,871. Do not leave any answer field blank. Enter 0 for amounts.)

Current portion of 9% notes receivable		$
Current portion of 8% notes receivable		$
Non-interest-bearing note receivable		$
Current portion of instalment contract		$
Note receivable from customer		$
Total current notes and interest		$

  

Determine the portion of the note that should be reported as a long-term investment at December 31, 2020. (Round answers to 0 decimal places, e.g. 8,971.)

Note receivable		$
Note receivable—Employees		$
Zero-interest-bearing Note—Patent		$
Instalment Contract—Sale of Land		$
Total long-term investment		$

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Prepare the long-term receivables section of Culver's statement of financial position at December 31, 2020. (Round answers to 0 decimal places, e.g. 8,971.)

Culver Corporation Long-Term Receivables Section of Statement of Financial Positon December 31, 2020
9% note receivable from sale of division		$
8% note receivable from employees
Zero-interest-bearing note from sale of patent
Instalment contract receivable
Total long-term receivables		$

  

  

Prepare a schedule showing the current portion of the long-term receivables and accrued interest receivable that would appear in Culver's's statement of financial position at December 31, 2020. (Round answers to 0 decimal places, e.g. 8,971.)

Culver Corporation Selected Statement of Financial Positon Balances December 31, 2020
Note receivable from customer		$
Current portion of long-term receivables:
Note receivable from sale of division		$
Instalment contract receivable
Total current portion of long-term receivables		$
Accrued interest receivable:
Note receivable from sale of division		$
Instalment contract receivable
Note receivable from customer
Total accrued interest receivable		$

  

Answer 1