CHAPTER 7

Problem 7-1
1. A
6. B
2. B
7. C
3. B
8. A
4. D
9. C
5. C
10. B
6.
7. Problem 7-2
8. 2012
9. Jan. 1 Cash
1,000,000
10.
Notes receivable
6,000,000
11.
Land
5,000,000
12.
Gain on sale of land
2,000,000
13.
14. Dec. 31
Accrued Interest receivable
720,000
15.
Interest Income
720,000
16.
12% x 6,000,000
17.
18. 2013
19. Dec 31Accrued Interest receivable
806,400
20.
Interest Income
806,400
21.
12% x 6,720,000
22.
23. 2014
24. Jan. 1 Cash
7,526,400
25.
Note Receivable
6,000,000
26.
Accrued Interest Receivable
1,526,400
27.
28. Problem 7-3
29. 2012
30. Jan. 1 Notes receivable
600,000
31.
Sales
540,000
32.
Unearned Interest Income
60,000
33.
34. Dec. 31
Cash
200,000
35.
Notes Receivable
200,000
36.
37. Dec 31Unearned Interest income
30,000
38.
Interest Income
30,000
39.
12% x 6,720,000
40.
41. Y
42. Notes
43. F
44. Interes

e
a
r

Recei
vable

r
a
c
t
i
o
n
47. 6
/
1
2
51. 4
/
1
2
55. 2
/
1
2
59.

t
Incom
e

45. 2
46. 600,0
48. 30,000
0
00
1
2
49. 2
50. 400,0
52. 20,000
0
00
1
3
53. 2
54. 200,0
56. 10,000
0
00
1
4
57. T
58. 1,200,
60. 60,000
o
000
t
a
l
61.
62. Problem 7-4
63. Face value
900,000
64. Present value (300,000 x 2.4018)
720,540
65. Unearned Interest income
179,460
66.
67.
68. Present Value
720,540
Cash received
100,000
69. Sales price
820,540
70. Cost of generator
700,000
71. Gross Income
120,540
72.
73. Jan 1 Cash
100,000
74.
Notes receivable
900,000
75.
Sales
820,540
76.
Unearned interest income
179,460
77.
78. Dec 31Cash
300,000

79.

Notes receivable
300,000

80.
81. Dec 31Unearned interest income
82.
Interest income
86,465

83. D
a
t
e

88. J
a
n
.

86,465

84. C
o
l
l
e
c
t
i
o
n

85. I
n
t
e
r
e
s
t

86. P
r
i
n
c
i
p
a
l

89.

90.

91.

94. 3
0
0
,
0
0
0
99. 3
0
0
,
0
0
0
104.
300,
0
0
0

95. 8
6
,
4
6
5

96. 2
1
3
,
5
3
5
101.
239,
1
5
9

1
93. D
e
c
.
3
1
98. 2
0
1
3

103.
201
4
108.
109.
110.
111.
112.
113.
114.
115.

100.
60,8
4
1

105.
32,1
5
4

106.
267,
8
4
6

87. P
r
e
s
e
n
t
V
a
l
u
e
92. 7
2
0
,
5
4
0
97. 5
0
7
,
0
0
5
102.
267,
8
4
6
107.
-

Problem 7-5
Requirement 1
12/31/12 Notes receivable
2,500,000
Sales*
1,995,000
Unearned Interest
Income **
505,000

116.
*500,000 x 3.99
**2,500,0001,995,000
117.
118.
12/31/13 Cash
500,000
119.
Notes receivable
500,000
120.
121.
Unearned interest income
159,600
122.
Interest Income
159,600
123.
(1,995,000 x 8%)
124.
125.
Requirement 2
126.
Note receivable (2,500,000 500,000)
2,000,000
127.
Unearned interest income
128.
(505,000 159,600)
(345,400)
129.
Carrying amount
1,654,600
130.
131.
Requirement 3
132.
Interest Income for 2014
133.
(8% x 1,654,600)
132,368
134.
135.
Problem 7-6
136.
Face value
400,000
137.
Present value (400,000 x .7118)
284,720
138.
Unearned interest income
115,280
139.
Present value
284,720
140.
Cash received
125,000
141.
sales price
409,720
142.
Carrying amount
350,000
143.
Gain on sale
59,720
144.
145.
2012
146.
Jan 1 Cash
125,000
147.
Notes receivable
400,000
148.
Accumulated depreciation
150,000
149.
Equipment
500,000
150.
Gain on sale of equipment
59,720

151.

Unearned interest income

196.

115,280
152.
153.
154.

197.
Dec 31 Unearned interest income
34,166
Interest income
34,166

198.
199.
200.

155.

160.
Jan 1

161.

164.
Dec 31

165.
34,166

158.
Unearn
ed
Inc
om
e
162.
115,28
0
166.
81,114

168.
2013

169.
38,266

170.
42,848

172.
2014

173.
42,848

174.
-

156.
Date

176.
177.
178.
179.
180.
181.
182.
183.
184.
185.
186.

157.
Interest
Inc
om
e

159.
Present
val
ue
163.
284,72
0
167.
318,88
6
171.
357,15
2
175.
400,00
0

2013
Dec 31 Unearned interest income
38,266
Interest income
38,266
2014
Dec 31 Unearned interest income
42,848
Interest income
42,848
2015
Jan 1 Cash
400,000

187.

Notes receivable

201.
202.
203.
204.
205.
206.
207.
208.
209.
210.
211.
212.
213.
214.
215.

192.
193.
194.
195.

Dec. 31 Unearned interest income

675,000
Interest income
675,000
(10% x 6,750,000)
2013
Dec. 31 Unearned interest income
742,500
Interest income
742,500
(10% x 7,425,000)
2014
Dec. 31 Unearned interest income
832,500
Interest income
832,500
(2,250,000 1,417,500)
2015
Jan 1 Cash
9,000,000

216.

Notes receivable
9,000,000

217.
218.
219.
220.
221.
222.
223.
land
224.

400,000
188.
189.
190.
191.

PV of note (9,000,000 x .75)

6,750,000
Carrying amount of land
7,000,000
Loss on sale
250,000

Problem 7-8
1. Notes receivable from sale of building
2,500,000
Accrued interest on note receivable from
sale of building from May December
(5,000,000 x 9% x 8/12)
300,000
Principal payment on note from sale of
Annual Instalment
883,320

225.
Problem 7-7
2012
Jan 1 Notes receivable
9,000,000
Loss on sale of land
250,000
Land
7,000,000
Unearned interest income
2,250,000

226.

Interest from
July 2012-July2013

280,000

603,320
227.
Accrued interest receivable on note
228.
from sale of land (2.8M x 10% x 6/12)
140,000
229.
Total current receivable
3,543,320
230.
231.
2. NR from sale of building due 5/1/2014
2,500,000

232.
233.
234.
235.
236.
237.
238.
239.
240.
241.
242.
243.
244.
245.
246.

NR from officer
2,000,000
NR from sale of land noncurrent
Principal
2,800,000
Due July 1, 2013
(603,320)
2,196,680
Total noncurrent notes receivable
6,696,680
Problem 7-9

Problem 7-10 C
Problem 7-11 B
Problem 7-12 B
Problem 7-13 A

247.
248.
249.
250.
251.
252.
253.
254.
255.
256.
257.
258.
259.
260.
261.
262.
263.
264.

Problem 7-14 D
Problem 7-1

Problem 7-16 1. C
Problem 7-17 B
Problem 7-18 D
Problem 7-19 B

2. D