Financial Accounting and Reporting
Notes and Loans Receivables
Gregorio, Wynona Jean C.
BACC1A
1) During the year 2016, Van Company had the following selected transactions:
June 30 - Received a 12%, 2-year ₱400,000 promissory note from Jack Company for services rendered. Payments
of P200,000 in principal plus accrued interest are due annually on June 30, 2017 and June 30, 2018.
Solutions:
September 30 - Received a 9%, 6-month ₱200,000 principal promissory note dated August 30, 2016 from Queen
Company for services rendered. Principal plus accrued interest is payable upon maturity date. The fair market
value of services rendered amounted to ₱201,500.
Problem#1
Q1 Jun-30 Principal Amount 400,000 Q2 Jun-30 Principal Amount 400,000
Multiply: Interest Rate 12% Multiply: Interest Rate 12%
October 31 - Received a 15%, 1-year P100,000 promissory note from King Company for services rendered. The
principal and accrued interest will be paid in full on October 31, 2017.
Accrued Interest -48,000- Accrued Interest -48,000-
Multiply: 6/12 -24,000- Multiply: 6/12 -24,000-
Sep-30 Principal Amount 200,000 Annual Payments 200,000
Q1. What is the total amount of interest receivable to be reported in the 2016 Statement of Financial Position?
Multiply: Interest Rate 9% Multiply: Interest Rate 12%
Accrued Interest -18,000- Accrued Interest 24000
a. P31,034 Multiply: 4/12 -6,000- Multiply: 6/12 -12,000-
b. P31,000
c. P32,500 Oct-31 Principal Amount 100,000 Sep-30 Principal Amount 200,000
d. P35,500 Multiply: Interest Rate 15% Multiply: Interest Rate 9%
Accrued Interest 15000 Accrued Interest -18,000-
Q2. Van Company should report interest income for 2017 amounted to Multiply: 2/12 -2,500- Multiply: 2/12 -3,000-
a. P51,500 Total Interest Receivables
-
32,500-
b. P54,500 Oct-31 Principal Amount 100,000
c. P65,000 Multiply: Interest Rate 15%
d. P48,500 Accrued Interest 15000
Multiply: 10/12 -12,500-
Total Interest Receivables
-
51,500-
2) On December 31, 2016, Byakugan Inc. received two P100,000 notes receivable from customers in exchange for
services rendered. On both notes, interest is calculated on the outstanding principal balance at the annual rate
of 3% and payable after maturity. The note from Sharingan Corporation, made under customary trade terms, is
due in nine months and the note from Rinnegan Company is due in five years. The market interest rate for
similar notes on December 31, 2016 was 12%. Information on present value factors is as follows:
Problem# 2
Short-term notes receivable shall be measures at face value. On the other hand, Noninterest bearing long term notes shall be
measured at present value which is the discounted value of the future cash flows using the effective interest rate.
Sharingan, short-term therefore, NR should be measured at face value.
Periods PV of 1 at 12% PV of 1 at 3% PV of ordinary annuity
of 1 at 12%
9 months 0.9185 0.9781 0.679 Rinnegan Face Value -115,000-
5 years 0.5674 0.8626 3.6048 Multiply: PV of 1 at 12% 0.5674
Present Value of Notes Receivable
-
65,251-
At what amount should these two notes receivable be reported in Byakugan's December 31, 2016 Statement of
Financial Position?
PV of 1: (1 + i) ^ -n used for lump sum payment
Sharingan Rinnegan
a) P91,850 P56,740 PV of OA of 1: 1 - [(1 + i) ^-n] Regular payment/installment
b) P93,917 P65,251 n
c) P100,000 P65,251 where in:
d) P100,000 P67,554 i= eddective interest rate
n= period
3) On June 1, 2016, Jasmine Company, a dealer in computer equipment, sold computer to Justine Company for
P100,000. The terms of the sale were as follows: Problem# 3 Journal Entry: Cash 20,000
Q1 Face Value of Note 80,000 Notes Receivable 80,000
• P20,000 down payment Multiply: PV of 1 at 8% 0.7938 Unearned Interest Income -16,496-
• P80,000 payable in full on June 1, 2019 evidenced by non-interest bearing note Carrying Amount of NR- June 1, 2016
-
63,504-
Sales -83,504-
The prevailing market interest rate for this type of note is 8%. The perpetual inventory record shows that the
cost of the computer sold amounted to P70,000. PV of 1 at 8% for 3 periods is .7938. Q2 Carrying Amount of NR- June 1, 2016 -63,504- Gain on Sale should not
be presented since the
company is the dealer
of computer equipment
Add: Down Payment 20,000
Q1. What is the carrying amount of the Notes receivable on June 1, 2016? Sale Price -83,504-
a. P83,504 Less: Cost of Computer 70,000
b. P63,504 Gain on Sale
-
13,504-
c. P79,380
d. P66,468 For Q3 & Q4:
Date
Interest Income
Unearned Interest
Present Value
Q2. What is the amount of gain on sale to be reported in the 2016 Statement of Comprehensive Income? June 1, 2016 36,496 -63,504-
