Long_Term_Receivable_Problem_Solution

Long_Term_Receivable_Problem_Solution - Question 1 Suppose...

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Question 1 Suppose that CJJ, Inc. received a note with a face value of $2,000,000. The note has a face interest rate of 11% and pay interest quarterly. The term of the note is 5 years. Asssume the market rate of interest is 12%: 1 Provide the journal entry at the time of receipt 2 Provide the journal entry at the time of the first interest collection. 3 Provide the journal entry at the time of the second interest collection. 4 Provide an amortization schedule for the discount and note. Solution 1 n = 5 * 4 = 20 I = 12%/4 = 3% $2,000,000 0.55 $1,107,352 $55,000 14.88 $818,261 Total $1,925,613 Discount = $74,387 ANSWER Long Term Note Receivable $2,000,000 Sales Revenue $1,925,613 Discount on LT Note Receivable $74,387 2 Face Value $2,000,000 Discount $(74,387) Book Value $1,925,613 Interest Rate 12% Quarterly 1/4 Interest Revenue $57,768 ANSWER Cash $55,000 Discount on LT Note Receivable $2,768 Interest Revenue $57,768 3 Discount Beginning Balance $74,387 Decrease $(2,768) Ending Balance
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Long_Term_Receivable_Problem_Solution - Question 1 Suppose...

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