CPL E of a a NE ‘\ er BD sansa IB wentarts EDUCATION & as ‘ACC 106: Intermediate Accounting 4 ‘Student Activity Sheet Module #8 Class number: Pept conscte SE Sa ne a Soe faterials: |Calculator, Reviewer Notebook, Textbook the end ofthe leaming sesion, | shoud be abet: [Mla Zeus Vernon B.; Intermediate Determine the Inilal measurement of horeterm and ing. | [Accouning . Understand the concept of ime value of money |. Discover the financial statement presentation and subsequent measurement of Notes receivable {-bearing and non-interest bearing note |... Try doing a Picture Walk before starting this module. Take a quick look at the captions, activities, diagrams, etc. This is to give your brain an idea of what's coming - it's like watching a trailer of a movie. Doing this for a minute will help your brain organize your thoughts before studying. A. LESSON PREVIEW/REVIEW 4) Activity 1 : Pretest (2 mins) Let's have your eight day in Intermediate Accounting by starting a new topic on Notes receivables. Learn new things by first answering the pretest below. Encircle the correct answer: 1. Present value is a. the value now of a future amount. b. the amount that must be invested now to produce a known future value. always smaller-than the future value. EZ all of these. 2. Which of the following factors would show the largest value for an interest rate of 12% for six periods? a. Present value of 1 b. Present value of an ordinary annuity of 1 © Present value of an annuity due of 1 d. Answer cannot be determined 3. What factor should you use if you want to determine the value now of a 1,000 payment due in three years’ time? Future value of 1 Present value of 1 Present value of an ordinary annuity of 1 d. Present value of an annuity due of 1 ACC 106- Intermediate Accounting 1 ‘SAS Day8 Scanned with CamScanner‘ACC 106: student Activity Sheet Moga 4 2) Activity 2 (LO1, Loz, & LO3): What I Know Chart, part 4 (3 mins) G Intermediate Ace, Class number: ate: ___ _ Alright! Let's see what you already kr ‘the first column (What I know). Leave the third column (What | Leamed) blank at te ees ‘What | Know ‘Questions ‘What [Leamed (Activity 5) Audurb pueivable of auth | 1 HowAccounts Receivable [fuoumly pacevabe W dhe cal deal cise frm ter ably hk Pifferent from Notes Receivable? | fig te Rigavt aur inte pale plea a cinta er gayle he yma gemie pou lafhan onan o . [RRR 70 & aalom maul, What does the Une value of hen money mean? Hae vole: of monn Ue HE phe: yall of yom lover hme. 3. How will He aa . How will you distinguish between) Jattgesl—be ‘ace y the ident J dant hare anny, interest-bearing and Non-interest ak w awk ond in kept pon ee ‘len earing note receivables? She cub kong ol Ye pila Ado- mont wk aon “lenctnot oe nh a Spuiyiee bud ye bal inkratt 41) Activity 3 (LO1, LO2, & LO3): Content Notes (15 mins) aroun} | dhduckd on aduany. ) ‘Make sure to highlight or underline the important parts! Receivables are initially recognized at fair LO1: Determine the initial measurement of short-term and long term notes receivables. © Notes receivable is a claim supported by a formal promise to pay a certain sum of money at a specific future date usually in the form of a promissory note. /alue plus transaction costs. [Type of Receivable Initial Measurement [Subsequent Measurement 1. Short-term Fac Transaction price (for trade 1ce amount/ Present value! [Recoverable Historical Cost! lAmortized cost/ PFRS 15 interest receivables) [2. Long-term Face amount Recoverable historical cost [3. Long-term w/ zero interest __|Present value [Amortized cost 4. Long-term w/ unreasonable [Present value |Amortized cost [interest [ACC 206- Intermediate Accousiting 1 SAS Day 8 Scanned with CamScannerAEN PHINMMA EDUCATION a ef ACC 108: Intermediate ACCOUNIEY g ‘Student Activity Sheet Mi W = Name: ‘Section: number: y —___— Shade: as Los: 04: Distinguish interest-bearing and non-interest bearing notes. The notes receivable are of two types: 1._Interest-bearing Notes ‘The interest-bearing note receivable is a note on which interest rate is quoted and interest is paid on the due date along with the principal amount. This note receivable is also called non-discounted notes receivable. 2. Non-interest bearing Notes ‘Anote receivable on which interest in advance is called non-interest bearing notes recei discounted note receivables because the payment mat the interest amount from the agreed principal amount. the agreed principal amount. interest amount is deducted ist bearing notes also called 'scounting or deducting jient should pay rate is not specified but the total i ivable, Non-intere: de to the client by di "And on the due date, the cl 2) Activity 4: Skill-building Activities (13 mins +2 mins checking) Score: se Let's ty to practice what you have leamed! Check your answers against the Key to Corrections found at the end of this SAS. Write your score on the space provided. MULTIPLE CHOICE. ENCIRCLE THE LETTER OF YOUR CHOICE. 4, At the beginning of 2009; Gannon Company received a three-year: zero-interest-bearing 1,000 fade note. The market rate for equivalent notes was 6% at that ime. Gannon reported this note as 2 1,000 trade note receivable on its 2009 year-end statement of financial position and 1,000 as gales revenue for 2009. What effect did this accounting for the note have on Gannon's net earnings far 2009, 2010, 2011, and its retained earings at the end of 2011, respectively? a. Overstate, overstate, understate, zero 2 b. _ Overstate, understate, understate, understate c. Overstate, overstate, overstate, overstate © _ Overstate, understate, understate, zero. e. 2. What is imputed interest? 2. Interest based on the stated interest rate. © __ Interest based on the implicit interest rate. © _ Interest based on the average interest rate. d. Interest based on the coupon raté. ‘ACC 106- Intermeciate Accounting 1 SAS Day8 Scanned with CamScanner. Intermediate Account, INMA EDUCATION ACC 106: intetvity Sheet Module’ sent SATION. 5 Student Class number: Date: Section: Schedule: 3.Lester Company received a it ing note on February 22, 2010, in exchange for property sold te Pony Oocnann There was no Betablished exchange price for this Property and the note has no ready market, The prevailing rate of interest for a note of this type ‘was 7% on February 22, 2010, 7.5% on December 31, 2010, 7.7% on February 22, 2011, and 8% on December 31, 2011. What interest rate should be used to calculate the interest revenue from this transaction for the years ended December 31, 2010 and 2011, respectively? a. 0% and 0% ® T%and7% c 7% and 7.7% d. 7.5% and 8% 4.On December 31, 2010, Flint Corporation sold for $75,000 an old machine having an original cost of $135,000 and a book value of $60,000. The terms of the sale were as follows: * 45,000 down payment © 30,000 payable on December 31 each of the next two years ‘The agreement of sale made no mention of interest; however, 9% would be a fair rate for this type of transaction. What should be the amount of the notes receivable net of the unamortized discount on December 31, 2010 rounded to the nearest dollar? (The present value of an ordinary annuity of 1 at 9% for 2 years is 1.75911.) © 52,773. 67,773. c. 60,000. dg. 105,546. 5. Assume Royal Palm Corp., an equipment distributor, sells a piece of machinery with a list price of ‘$800,000 to Arch’Inc. Arch Inc. will pay 850,000 in one year. Royal Palm Corp. normally sells this of equipment for 90% of list price. How much should be recorded as revenue? | 720,000, 765,000. c. 800,000. . a 850,000. Equestrain Roads sold 50,000 of goods and accepted the customer's 50,000 10% 1-year note receivable in exchange. Assuming 10% approximates the market rate of return, what would be the debit in this journal entry to record the sale? a. No journal entry until cash is collected. Debit Notes Receivable for 50,000. Debit Accounts Receivable for 50,000. d. Debit Notes Receivable for 45,000. ‘ACC 106- Intermediate Accounting 1 ‘SAS Day8 Scanned with CamScannera ecounting 1 ate oe Module # 8 AGC 106: Intermed! ‘Student Activity S! Class number: Schedule: ae 7B questrain Roads sold 50,000 of goods and accopied the customers 60,000 10% t-year note how much interest ayable it i ay ea ‘exchange, Assuming 10% approximates the market rate of return, would be recorded for ne year ending December 3 the sale wes made on June 30? b. 4,250. © 2,500. 5,000 3) Activity 5: What | Know Chart, part 2(3 mins) : Tee tne roc the questions in the ‘What | Know Chart" in Activity 2. Write your answers ae “What | Learned” column. Let's see your improvement! 4) Activity 6 (LO1, LO2, & LO3): Check for Understanding (17 mins) in each item the best answer To better test your knowledge on the topic, writ at all times. Your teact tein the space provided i ‘her will provide you the key answer in without looking in your content notes. Be honest this activity. MULTIPLE CHOICE. ENCIRCLE THE LETTER OF YOUR CHOICE. iment basis. On January 1, 20x1, ‘er on a cash basis or on a 6-month install 75,000. Which of the following were sold at an installment price o! 41. An entity sells goods eith goods with a cash price of 50,000 statements is correct? a. Net receivable of P75,000 is recognized on the b. Net receivable of P50,000 is recognized upon full paym c. The 20,000 difference between the cash price and installment income on the date of sale. © ‘Net receivable of 50,000 is recognized on the date of sale, date of sale. yent of the total price. price is recognized as interest 2. An enfity sells goods for 160,000 to a customer who was granted a special credit period of 1 year. Fi entity normally sells the goods for 120,000 witha credit period of one ‘month or with a 10,000 Tecant Yor outright payment in cash. How much is the initial measurement of the receivable? a. 150,000 b. 120,000 c. 130,000 (4)110,000 Use the following information for the next two questions: a cianusry 1, 20x, ABC Co. sod a transportation equipment with ahistorical cost of P1,000,000 and or atuated depreciation of 300,000 in exchange for cash of P100,000 and a noninterest-bearing ate receivable of 00,000 due on January 1, 20x4. The prevailing rate of interest for this type of note Is 12%. How much is the interest income in 20x1? 88.331 b. 76,532 6. 85,714. 96,000 4, How much is the carrying amount of the receivable on December 31, 20x27 ‘ACC 406- Intermediate Accounting 1 AS Day Scanned with CamScannerPHINMA EDUCATI 406: Intermediate Accounting\ ‘arena tON A eudent Activity Sheet Module # Class number: ‘Schedule: Date: Use the following information for the next three questions: On January 1, 20x1, ABC Co, sold transportation equipment with a historical cost of 20,000,000 and accumulated depreciation of 7,000,000 in exchange for cash of P500,000 and a noninterest-bearing note receivable of 8,000,000 due in 4 equal annual installments starting on December 31, 20x1 and every December 31 thereafter. The prevailing rate of interest for this type of note is 12%. 5. How much is the interest income in 20x1? 8, 728,946 b. 678,334 (@)728,964 —d. 704,236 6. How much is the current portion of the receivable on December 31, 20x1? a. 1,271,036 (6) 1,423,560. 3,380,102 d. 1,594,388 7. How much is the carrying amount of the receivable on December 31, 20x2? a. 4,803,663 6)3,380,102 c. 6,074,699. 6,000,000 8. Equestrain Roads accepted a customer's 50,000 zero-interest-bearing six-month note payable in a sales transaction. The product sold normally sells for 46,000. If the sale was made on June 30, how much interest revenue from this transaction would be recorded for fe year ending December 317 & oO. b. 2,000 .c, 4,000, d. 5,000. 9. Assuming the market interest rate is 10% per annum, how much would Green Co. record as a note payable if the terms of the loan with a bank are that it would have to make one 60,000 payments in two years? 60,000. Bb. 54,422. c. 54,545. d. 49,587 40. On January 1, 2010, West Co. exchanged equipment for a 400,000 zero-interest-bearing note due on January 1, 2013. The prevailing rate of interest for a note of this type at January 1, 2010 was 10%, The present value of 1 at 10% for three periods is 0.75, What amount of interest revenue should be included in West's 2011 income statement? ® $0,000 c, 33,000 40,000 ‘ACC 106- Intermediate Accounting 1 SAS Day Scanned with CamScannerIBD mansurtoucation i eee ; r ACC 106: Intermediate Accounting ud ‘Student Activity Sheet Module # 8 Name: Section: Scheduler Se a c. 4) Activity 7: Think i, Wor Trenking about Learning (5 mins) fou apse completed.” with this session! Let's track your progress. Shade the session number you just 2. Think about your Leaming From a rating of 1-10, determine if you have leamed all the learning objectives. What is the reason for your rating? Lome 0 trou) deol jaw tym 4 vndkastond th have funk ‘What part of the module gave you a hard time to comprehend? [eR Any other questions or concems you want to raise? Abr 2) Assignment To enhance your knowledge regarding the topic, answer Problems 1, 2, and 3 in your book. Your teacher will provide the key answers later on. FAQs When is a note receivable considered a non - current asset? -Ifts due date is more than a year in the future, it is considered a non-current asset. The interest income on notes receivable is recognized on the income statement. Therefore, when payment is made on a note receivable, both the balance sheet and the Income statement are affected. ee KEY TO CORRECTIONS, Activity 4: Pre-test: MULTIPLE CHOICE 4.0 2¢ 3. B- When you ask, "What is the present value (PV) of $12", it means that you want to know the present value of the future amount of $1. This concept states that an amount of money today is worth more than that same amount in the future. ‘ACC:106- Intermediate Accounting 1 SAS Day Scanned with CamScanner