Valix Finacc vol 1 Problem 6-26

Financial Accounting Volume 1 2008 Valix-Peralta

Chapter 1 Problem 6-26

1/1/2008       Note receivable                                                          9,000,000

                     Loss on sale of land                                                       250,000

                           Land                                                                                            7,000,000

                           Unearned interest income                                                           2,250,000

                      PV of note (9,000,000 x .75)                                                               6,750,000

                      Carrying amount of land                                                                7,000,000

                      Loss on sale                                                                                     (   250,000)

12/31/2008    Unearned interest income                                            675,000

                           Interest income (10% x 6,750,000)                                                   675,000

12/31/2009    Unearned interest income                                            742,500

                           Interest income (10% x 7,425,000)                                                   742,500

12/31/2010    Unearned interest income                                            832,500

                           Interest income (2,250,000 – 1,417,500)                                           832,500

1/1/2011        Cash                                                                         9,000,000

                           Note receivable                                                                          9,000,000