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Questions 4-8 USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (5) QUESTIONS: Pitchfork, Inc. sold merchandise...

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

Pitchfork, 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. Pitchfork’s year-end is December 31^st. Min’s normal cost to borrow is 8%.

Required:

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

(round your answer to the nearest whole dollar. Do not use commas or dollar signs when recording your answer.)

Question #5

Using the information presented in #4 above, determine the Interest Revenue that Pitchfork 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 $___________________

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.)

Expert Solution

Computation of EMIs
Date	EMI's	Principal	Interest	Interest	Outsranding
01-06-2019	27000	27000			108000
01-06-2020	27000	19000	108000*8/108	8000	81000
01-06-2021	27000	20520	81000*8%	6480	54000
01-06-2022	27000	22680	54000*8%	4320	27000
01-06-2023	27000	24840	27000*8%	2160	0
		114040		20960	135000

4	The Face Value of the note receivable Jun 1, 2019				$ 114,040
5	Interest Revenue recognized for the year ended Dec 31, 2020 (8000+(6480/2))				$ 11,240
5					$ 11,240	6	Balance Sheet as of Dec 31, 2019:
	Current Assets:
	Interest Receivable:		(8000/2)+(6280/2)		$ 7,140
	Note Receivable:		(27000/2)+19000/2		$ 23,000
	Long-Term Investments:
	Note Receivable		(9500+20520+22680+24840)		$ 77,540
	Balance in the Interest Receivable account as of Dec 31, 2019				$ 100,540
7	Note Receivable		(27000/2)+19000/2		$ 23,000
	Note Receivable		(9500+20520+22680+24840)		$ 77,540

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