Problem – Note Receivables

Remarkable Company had the following account balances on January 1, 2021:

Note Receivable from sale of an idle building 7,500,000

Note receivable from an officer 2,000,000

Transactions during the current year and other information relating to the receivables are as follows:

The P7,500,000 note receivables is dated January 1, 2020, bears interest at 9%, and represents the balance of the Remarkable Company received from the sale of its idle building to Solid Company. Principal payments of P2,500,000 plus interest are due annually beginning January 1, 2021. Solid Company made its first principal and interest payment on January 1, 2021. Collection of the remaining note is reasonably assured.

The P2,000,000 note receivable is dated December 31, 2019, bears interest at 8%, and is due on December 31, 2023. The note is due from the president of Remarkable Company, and is collateralized by 50,000 ordinary shares of Remarkable Company. Interest is payable annually on December 31, and all interest payment were made through December 31, 2021. The quoted market price of ordinary shares was P45 on December 31, 2021.

On January 1, 2021, Remarkable Company sold parcel of land to Boom Company for P4,000,000 under an installment sale contract. Boom Company made a P1,200,000 cash down payment on January 1, 2021 and signed a 4-year 10% note for the P2,800,000 balance. The equal annual payment of principal and interest on the note totaled P883,320, payable on January 1 of each year from 2022 through 2024. The fair value of the land at the date of sale was P4,000,000. The cost of the land was P3,000,000. Collection of the note installment is reasonable assured

Requirements:

1. Determine the total present value of the note receivable on December 31, 2021.

2. Determine the amount of accrued interest related to note receivables on December 31, 2021.

3. Determine the amount of note receivables that should be classified as noncurrent asset on December 31, 2021.

4. What is the gain/loss on sale of land on January 1, 2021 transaction?

5. Prepare the amortization table for note receivable on sale of lands on January 1, 2021 transaction.