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Notes Receivable Sample Problems

The document contains a series of sample problems related to notes receivable, including both interest-bearing and noninterest-bearing scenarios. Each problem outlines a transaction involving the sale of land or equipment, detailing the purchase price, down payments, interest rates, and the required journal entries for specific years. The problems illustrate various accounting treatments for different types of notes and payment structures.

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23 views2 pages

Notes Receivable Sample Problems

The document contains a series of sample problems related to notes receivable, including both interest-bearing and noninterest-bearing scenarios. Each problem outlines a transaction involving the sale of land or equipment, detailing the purchase price, down payments, interest rates, and the required journal entries for specific years. The problems illustrate various accounting treatments for different types of notes and payment structures.

Uploaded by

siolpogi11
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Republic of the Philippines

Tarlac State University


College of Business and Accountancy

FAR 0 – Notes Receivable

SAMPLE PROBLEM 1 - INTEREST BEARING

Half Company sold to another entity a tract of land costing P5,000,000 for P7,000,000 on January 1,
2019. The buyer signed a three-year interest-bearing promissory note for the purchase with an
interest rate of 10%. Interest is collected every December 31.
Prepare the journal entries from 2019-2021

SAMPLE PROBLEM 2 – INTEREST BEARING WITH DOWN PAYMENT, COMPOUNDED INTEREST

Half company sold to another entity a tract of land costing P5,000,000 for P7,000,000 on December
31, 2019. The buyer paid P1,000,000 down and signed a two-year promissory note for the remainder
of the purchase price plus 12% interest compounded annually. The note matures on December 31,
2021.
Prepare the journal entries from 2019-2021

SAMPLE PROBLEM 3 – NONINTEREST BEARING, LUMP SUM

On January 1, 2020, Company A sold a tract of land costing P300,000 to another company for
P750,000. The buyer issued a 3-year noninterest bearing note. The prevailing market rate for a note
of this type is 10%
Prepare the journal entries from 2020-2022

SAMPLE PROBLEM 4 – NONINTEREST BEARING WITH CASH PRICE, INSTALLMENT COLLECTIONS

Quarter Company manufactures and sell computers. On January 1, 2020, the entity sold a computer
costing P400,000 for P600,000. The buyer signed a noninterest bearing note for P600,000 payable in
three equal installments every December 31. The cash selling price for the computer is P540,000.

Prepare the journal entries from 2020-2022

SAMPLE PROBLEM 5 – NONINTEREST BEARING, DEALER

Eighth Company manufactures and sells electrical generators. On January 1, 2020, the entity sold
an electrical generator costing P700,000 for P1,000,000. The buyer paid P100,000 down and signed
a P900,000 noninterest bearing note payable in three equal installments every December 31.

The prevailing interest rate for a note of this type is 12%.

Prepare the journal entries from 2020-2022


SAMPLE PROBLEM 6 – NONINTEREST BEARING, NON-DEALER

On January 1, 2020, Sixteenth Company sold an equipment costing P500,000 which had a related
accumulated depreciation of P150,000, receiving a P125,000 down payment and, as additional
consideration, a P400,000 noninterest bearing note due on January 1, 2023.
The prevailing interest rate for a note of this type is 12%.

Prepare the journal entries from 2020-2022

SAMPLE PROBLEM 7 - INTEREST BEARING, UNREALISTIC STATED RATE

On January 1, 2020, Company A sold a tract of land costing P300,000 to another company for P750,000. The
buyer issued a 10%, 3-year, interest bearing note. The stated rate is substantially low than the prevailing
market rate of interest for a note of similar kind. The prevailing market rate is 15%.
Prepare the journal entries from 2020-2022

SAMPLE PROBLEM 8 - INTEREST BEARING, UNREALISTIC STATED RATE, FAIR


VALUE OF ASSET IS GIVEN

On January 1, 2020, Company A sold a tract of land costing P300,000 to another company for P750,000. The
buyer issued a 10%, 3-year, interest bearing note. The fair value of the land is P712,300
Prepare the journal entries from 2020-2022

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