Cash Flow, Interest, Long term Investments

Ayayai Corp. had the following long-term receivable account balances at December 31, 2016.

Notes receivable - Sale of division $1,779,000

Notes receivable - Employees 380,000

Transactions during 2017 and other information relating to Ayayai's long-term receivables were as follows:

1. The $1,779,000 note receivable is dated May 1, 2016, bears interest at 8%, and represents the balance of the consideration received from the sale of Ayayai's electronics division to Blossom Company. Principal payments of $593,000 plus appropriate interest are due on May 1, 2017, 2018, and 2019. The first principal and interest payment was made on May 1, 2017. Collection of the note instalments is reasonably assured.

2. The $380,000 note receivable is dated December 31, 2016, bears interest at 7%, and is due on December 31, 2019. The note is due from Marcia Cumby, president of Ayayai Corp., and is secured by 10,000 Ayayai's common shares. Interest is payable annually on December 31, and the interest payment was made on December 31, 2017. The quoted market price of Ayayai's common shares was $40 per share on December 31, 2017.

3. On April 1, 2017, Ayayai's sold a patent to Sunland Company in exchange for a $180,000 noninterest-bearing note due on April 1, 2019. There was no established exchange price for the patent, and the note had no ready market. The prevailing rate of interest for a note of this type at April 1, 2017, was 11%. The present value of $1 for two periods at 11% is 0.81162 (use this factor). The patent had a carrying amount of $38,000 at January 1, 2017, and the amortization for the year ended December 31, 2017 would have been $7,000. The collection of the note receivable from Sunland is reasonably assured.

4. On July 1, 2017, Ayayai's sold a parcel of land to Kingbird Inc. for $180,000 under an instalment sale contract. Kingbird made a $50,000 cash down payment on July 1, 2017, and signed a four-year, 11% note for the $130,000 balance. The equal annual payments of principal and interest on the note will be $41,902, payable on July 1, 2018, through July 1, 2021. The land could have been sold at an established cash price of $200,000. The cost of the land to Ayayai's was $140,000. Collection of the instalments on the note is reasonably assured.

5. On August 1, 2017, Ayayai's agreed to allow its customer, Saini Inc., to substitute a six-month note for accounts receivable of $200,000 it owed. The note bears interest at 6% and principal and interest are due on the maturity date of the note.

Describe the relevant cash flows in terms of amount and timing.

Cash inflows from notes

2017

2018

2019

2020

2021

8% Note receivable

Principal:

Interest:

7% Note receivable

Principal:

Interest:

Non-interest-bearing note receivable

Payment:

Instalment contract receivable

Down Payment:

Payment:

6% Note receivable

Principal:

Interest:

Total:

B) Determine the amount of interest income that should be reported in 2017. (Do not round intermediate calculations. Round answers to 0 decimal places, e.g. 8,971.)

8% Note Receivable (Sale of Division) $___________

7% Note Receivable (Employees) $____________

Non-interest bearing note (Patent) $_____________

Instalment contract (Sale of Land) $______________

6% Note Receivable (Saini) $_______________

Total long-term investment $______________

C) Prepare the long-term receivables section of Ayayai's statement of financial position at December 31, 2017. (Round answers to 0 decimal places, e.g. 8,971.)

________________Ayayai Corp._______________ Long-Term Receivables Section of Statement of Financial Position

D) Prepare a schedule showing the current portion of the long-term receivables and accrued interest receivable that would appear in Ayayai's statement of financial position at December 31, 2017. (Round answers to 0 decimal places, e.g. 8,971.)

_____________Ayayai Corp.___________ Selected Statement of Financial Position

Current portion of long-term receivables:

___________________ $

___________________ $

____________________ $

Accrued interest receivable:

_____________________ $

_____________________ $

______________________ $

______________________ $

E) Determine the total interest income from the long-term receivables that would appear on Ayayai's income statement for the year ended December 31, 2017. (Round answer to 0 decimal places, e.g. 8,971.)

Total interest income for year ended 12/31/17 $________________-