15 Tips: 16 1) The present value of the note receivable should be calculated using the...

Transcribed Image Text:

15 Tips: 16 1) The present value of the note receivable should be calculated using the Excel PV formula in the journal entry 17 2) Amounts should all be rounded to the nearest dollar (no cents) 183) Amounts from the Amortization Table should be used to populate the journal entries when possible (otherwise use amounts in the Data provided). 19 4) If you get a yellow cell after entering data, be sure to look for the "tip" provided by the tool in the row at the top of your spreadsheet. Often this is a formatting issue. 20 21 22 Data Un December 31, 2025, ABC Farm Equipment Company sold an apple narvesting machine to Jonnson Brothers Farm, Inc. Jonnson Brothers Farm gave ABC a 2-year, $120,000, 8% note. Johnson Brothers had previously sought a bank loan for this purchase and was told the bank would charge 10% interest. The note required interest to be paid annually on December 31. ABC's financial statements are prepared on a calendar- 23 year basis. Solution ABC Farm Equipment General Ledger Account Title 24 25 26 27 28 29 Loan Amount Term of Loan (in years) $ 120,000 2 Stated rate 8% Effective rate Annual interest received 10% $ 9,600 30 Possible account titles and terms to be used (cell reference from here, some terms 31 (cell reference from here, some will be used more than once and some not at all) 32 Carrying Value N/R 33 Cash 34 Cash Interest Received 35 CR 36 Date 37 Discount Amortized 38 Discount on Note Receivable 39 DR Date 12/31/25 DR/CR DR CR CR Note Receivable Discount on Note Receivable Revenue To record interest revenue and amortize discount 12/31/26 DR DR CR Cash Discount Amortized Interest Revenue To record interest revenue and amortize discount 12/31/27 DR DR CR Cash Discount Amortized Interest Revenue To record interest revenue and amortize discount DR CR Cash Note Receivable To record principal repayment Amortization Table Amount 120,000 Date Cash Interest Interest Received Revenue Effective Discount Amortized 12/31/26 12/31/27 $ 9,600 $ 9,600 9,600 9,600 120,000 120,000 Carrying Value N/R 15 Tips: 16 1) The present value of the note receivable should be calculated using the Excel PV formula in the journal entry 17 2) Amounts should all be rounded to the nearest dollar (no cents) 183) Amounts from the Amortization Table should be used to populate the journal entries when possible (otherwise use amounts in the Data provided). 19 4) If you get a yellow cell after entering data, be sure to look for the "tip" provided by the tool in the row at the top of your spreadsheet. Often this is a formatting issue. 20 21 22 Data Un December 31, 2025, ABC Farm Equipment Company sold an apple narvesting machine to Jonnson Brothers Farm, Inc. Jonnson Brothers Farm gave ABC a 2-year, $120,000, 8% note. Johnson Brothers had previously sought a bank loan for this purchase and was told the bank would charge 10% interest. The note required interest to be paid annually on December 31. ABC's financial statements are prepared on a calendar- 23 year basis. Solution ABC Farm Equipment General Ledger Account Title 24 25 26 27 28 29 Loan Amount Term of Loan (in years) $ 120,000 2 Stated rate 8% Effective rate Annual interest received 10% $ 9,600 30 Possible account titles and terms to be used (cell reference from here, some terms 31 (cell reference from here, some will be used more than once and some not at all) 32 Carrying Value N/R 33 Cash 34 Cash Interest Received 35 CR 36 Date 37 Discount Amortized 38 Discount on Note Receivable 39 DR Date 12/31/25 DR/CR DR CR CR Note Receivable Discount on Note Receivable Revenue To record interest revenue and amortize discount 12/31/26 DR DR CR Cash Discount Amortized Interest Revenue To record interest revenue and amortize discount 12/31/27 DR DR CR Cash Discount Amortized Interest Revenue To record interest revenue and amortize discount DR CR Cash Note Receivable To record principal repayment Amortization Table Amount 120,000 Date Cash Interest Interest Received Revenue Effective Discount Amortized 12/31/26 12/31/27 $ 9,600 $ 9,600 9,600 9,600 120,000 120,000 Carrying Value N/R