Quizzer - Accounting For Notes Receivable

FINANCIAL ACCOUNTING AND REPORTING
ACCOUNTING FOR NOTES RECEIVABLES - QUIZZER
1. On January 1, 2019, DC Company sold land costing P900,000 and received in exchange a four-
year note with a face amount of 11,400,000 bearing a rate of 9% which approximates the
current interest rate in the market. DC Company uses the calendar year for reporting purposes.
Prepare all the relevant entries for the period 2019 – 2020
2019 2020
2. On January 1, 2019, Superman Company sold land costing P400,000 and received in exchange a
3-year note with a face amount of P960,000 bearing a rate, of 10% which approximates the
current interest rate in the market. Principal payments of P320,000 plus interest are due every
December 31 starting December 31, 2019. Superman Company uses the calendar year for
reporting purposes.
2019 2020
3. On January 1, 2019, Batman Company sold land costing P750,000 and received in exchange a 3-
year note with a face amount of P1,200,000. The note shall carry a rate of 8% which
approximates the current interest rate in the market. Annual collections of P465,640 (including
interest computed on the unpaid amount) shall be made at the end of each year starting
December 31, 2019. Batman Company uses the calendar year for reporting purposes.
2019 2020
4. On January 1, 2019, Green Lantern Company sold land costing P350,000 and received in
exchange a P720,000 non-interest-bearing note due on December 31, 2021. There was no
established exchange price for the land and the note has no ready market. The prevailing rate
for a note of this type at exchange date was 12%. Green Lantern Company uses the calendar
year for reporting purposes.
2019 2020
5. On January 1, 2019, Flash Company sold land costing P400,000 and received in exchange a
P1,860,000 non-interest-bearing note. The note shall be collected as follows: P200,000 on
December 31, 2019; P300,000 on December 31, 2020; P350,000 on December 31, 2021. There
was no established exchange price for the land and the note has no ready market. The prevailing
rate for a note of this type at exchange date was 8% Flash Company uses the calendar year for
reporting purposes.
2019 2020
6. On January 1, 2019, Aquaman Company sold land costing P1,750,000 and received in exchange a
P3,000,000, non-interest bearing note. The note shall be collected in four equal amounts of
P750,000 every December 31 starting on December 31, 2019. There was no established
exchange price for the land and the note has no ready market. The rate for a note of this type at
exchange date was 9%. Aquaman Company uses the calendar year for reporting purposes.
2019 2020
7. On January 1, 2019, Wonder Woman Company sold land costing P650,000 and received in
exchange a P1,400,000 non-interest bearing note. The contract requires 5 annual collections of
P280,000 starting January 1, 2019. There was no established exchange price for the land and the
note has no ready market. The prevailing rate for a note of this type at exchange date was 8%.
Wonder Woman Company uses the calendar year for reporting purposes.
2019 2020
8. On January 1, 2016 Robin Company sold land costing P600,000 and V received in exchange a
four-year note with a face amount of P900,000 bearing a rate of 4%. The stated rate on the note
was determined to be substantially Tow compared to the prevailing rate for a similar transaction
being at 12%. Robin Company uses the calendar year for reporting purposes.
2019 2020
Use the following for numbers 9 – 11
On August 1, 2019, Marvel Company sold land costing P2,200,000 and a received in exchange a
note with a face amount of P3,400,000 maturing on August 1, 2022. It bears an interest rate of
8% which approximates the current interest rates in the market. Marvel Company uses the
calendar year for reporting purposes.
9. Gain (loss) reported arising from the sale
10. Interest income for 2019
11. Note receivable amount reported in the December 31, 2019 statement of financial position
Use the following information for numbers 12 – 14
On May 1, 2019, Iron Man Company sold an equipment with a carrying amount of P450,000 and
received as payment a 9% P700,000 note. Equal principal payments plus interest are due every
May 1, from 2020 to 2023. Iron Man Company uses the calendar year for reporting purposes
12. Gain (loss) on the sale of the equipment

14. Note receivable amount reported in the noncurrent asset section on Company's December 31,
2021 statement of financial position
Thor Company sold an equipment on January 2, 2019 and received in exchange a note for
P3,500,000. The note shall carry a 9% rate of interest (computed on the unpaid balance) for a 5-
year period. Equal collections (principal and interest) are to be received at the end of each year
starting December 31, 2019. Thor Company's accounting period ends on December 31.
15. Annual collection (instalment)
17. Note receivable reported in the current asset section of the December 31, 2021 statement of
financial position
On April 1, 2019, Hulk Company sold a machine to Banner Enterprises in exchange for a
P450,000 non-interest-bearing note due on April 1, 2023. There was no established exchange
price for the equipment and the note has no ready market. The prevailing rate of interest for a
note of this type at April 1, 2019 was 7%. The equipment had a carrying value of P275,000 at the
time of sale. The collection of the note from Stark Company is reasonably assured. Hulk
Company uses the calendar year for reporting purposes.
18. Initial measurement of the notes receivable
20. Unearned interest as of December 31, 2020
On January 1, 2019, Hawkeye Company sold a parcel of land which it has acquired previously for
P285,000 and received in exchange a non-interest bearing note whose face value amounted to
P420,000. The note shall be collected every December 31 as follows: P120,000 in 2019;
P150,000 in 2020 and P220,000 in 2021. The effective interest rate for a similar note was 12%.
Hawkeye Company uses the calendar year for reporting purposes
21. Gain (loss) on the sale of the land
23. Note receivable reported in the non-current asset section in the December 31, 2019 statement
of financial position

On January 1, 2019, Captain America Company sold used equipment to Banner Company and
received a non-interest-bearing note requiring payment of P65,000 annually for ten years. The
first payment is due on December 31, 2019 and the prevailing rate of interest for this type of
note at date of issuance was 7%. The equipment's carrying amount on January 1, 2019 was
P200,000. Captain America Company uses the calendar year for reporting purposes
24. The initial measurement of the notes receivable is
25. The amount credited to notes receivable account to record the collection on December 31, 2020

On January 1, 2019, Black Widow Company sold to Shield Company goods costing P210,000 and
received a note having a face amount of P343,750. The note requires Shield Company, the buyer
to pay five equal annual instalment starting January 1, 2019. No interest rate was stipulated in
the note. A note of a similar characteristic would bear a market rate of 12%. Collection of the
note is reasonably assured. Black Widow Company uses the calendar year for reporting
purposes.
27. Gross profit on the sale of the goods
28. The initial recording to notes receivable on January 1, 2019
On January 1, 2019, Scarlet Witch Company sold goods costing P400,000 to Quicksilver
Company. As payment, Quicksilver Company gave Scarlet Witch Company a P900,000 face value
note. The note bears an interest rate of 5% and is to be repaid in 3 annual installments of
P300,000, plus interest based on the outstanding balance. The first payment is due on
December 31, 2019. The market price of the land is not reliably determinable. Prevailing interest
rate for a note of this type is 9%.
30. Amount recorded as sales

Quizzer - Accounting For Notes Receivable

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Quizzer - Accounting For Notes Receivable

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FINANCIAL ACCOUNTING AND REPORTING

ACCOUNTING FOR NOTES RECEIVABLES - QUIZZER

Use the following for numbers 9 – 11

Use the following information for numbers 12 – 14

12. Gain (loss) on the sale of the equipment

Use the following information for numbers 15 – 17

Use the following information for numbers 21 – 23

Use the following information for numbers 21 – 23

Use the following information for numbers 27 – 28

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