CASHANDRECEIVABLES幻灯片.ppt

Illustration: How does Morgan record the receipt of the note? Interest-Bearing Note LO 6 Explain accounting issues related to recognition of notes receivable. Illustration 7-13 Notes Receivable 9,520 Cash 9,520 Illustration 7-14 LO 6 Explain accounting issues related to recognition of notes receivable. Interest-Bearing Note Journal Entries for Interest-Bearing Note LO 6 Explain accounting issues related to recognition of notes receivable. Interest-Bearing Note Cash 1,000 Notes receivable 142 Interest revenue 1,142 Notes Receivable Notes Received for Property, Goods, or Services LO 6 Explain accounting issues related to recognition of notes receivable. In a bargained transaction entered into at arm’s length, the stated interest rate is presumed to be fair unless: No interest rate is stated, or Stated interest rate is unreasonable, or Face amount of the note is materially different from the current cash sales price. Notes Receivable LO 6 Explain accounting issues related to recognition of notes receivable. Illustration: Oasis Development Co. sold a corner lot to Rusty Pelican as a restaurant site. Oasis accepted in exchange a five-year note having a maturity value of ￡35,247 and no stated interest rate. The land originally cost Oasis ￡14,000. At the date of sale the land had a fair market value of ￡20,000. Oasis uses the fair market value of the land, ￡20,000, as the present value of the note. Oasis therefore records the sale as: Notes Receivable 20,000 Land 14,000 Gain on Sale of Land 6,000 Interest revenue over the five year life of the note:(￡35,247 - ￡20,000) = ￡15,247 Notes Receivable LO 7 Explain accounting issues related to valuation of notes receivable. Short-Term reporting parallels that for trade accounts receivable. Long-Term - impairment tests are often done on an individual assessment basis. Impairment losses are measured as the difference between the carrying value of the receivable and the present value of the estimated futur