Adobe Financial specializes in providing financing for commercial real estate purchases. The company€™s main source of income is the interest charged on these loans. At the end of 2011, the company had approximately $700 million of mortgages outstanding. To facilitate financial reporting, the company groups these mortgages according to the time to maturity (up to one year, 1-3 years, and 3-5 years). The following provides further information on these mortgages as at the year-end of December .31, 2011.

Adobe€™s standard policy for all mortgages is semi-annual payments of interest, which is compounded semi-annually; plus payment of principal upon maturity.
Required:
a. How should Adobe account for these mortgage receivables?
b. At what value should Adobe report its mortgage receivables at the end of 2011 ?
c. Considering only the mortgage receivables outstanding at the end of 2011, project the value of mortgage receivables that should be reported at the end of 2012 and 2013. For purposes of this projection, you can use the average maturity and ignore the fact that there is a range of maturities that form this average.

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p to one vear 1- years 3-5 vea Average maturity Scheduled semi-annual payments Average yield on loans at inception Principal amount outstanding as at Dec. 31, 201 S100m $200m Estimated market value, Dec. 31, 2011 6 months 2 yearsyears $5m S4m 6%/a $20m 8%/a $400m 6%/a S10 S203m $420m