Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Kern, Inc., which is a privately held company, had the following noncurrent receivable account balances at December 31, Year 4: Note receivable from the sale
Kern, Inc., which is a privately held company, had the following noncurrent receivable account balances at December 31, Year 4: Note receivable from the sale of an idle $750,000 building Note receivable from an officer 200,000 Transactions during Year 5 and other information relating to Kern's receivables follow: 1. The $750,000 note receivable is dated May 1, Year 4, bears interest at 9%, and represents the balance of the consideration Kern received from the sale of its idle building to Able Co. Principal payments of $250,000 plus interest are due annually beginning May 1, Year 5. Able made its first principal and interest payment on May 1, Year 5. Collection of the remaining note installments is reasonably assured. 2. On April 1, Year 5, Kern sold a patent to Frey Corp. in exchange for a $100,000 noninterest-bearing note due on April 1, Year 7. There was no established exchange price for the patent, and the note had no ready market. The prevailing interest rate for this type of note was 10% at April 1, Year 5. The present value of $1 for two periods at 10% is 0.826. The patent had a carrying amount of $40,000 at January 1, Year 5, and the amortization for the year ended December 31, Year 5, was $8,000. Kern is reasonably assured of collecting the note receivable from Frey. Complete Kern's December 31, Year 5, balance sheet using the information above. Enter the appropriate amounts in the designated cells below. Enter all amounts as positive values. Receivable Amount Noncurrent portion of 996 note receivable at 12/31/Year 5: Face amount, 5/1/Year 4 Minus installment received 5/1/Year 5 Balance, 12/31/Year 5 Minus installment due 5/1/Year 6 Noncurrent portion, 12/31/Year 5 Noninterest-bearing note, net of imputed interest at 12/31/Year 5: Face amount, 4/1/Year 5 Minus imputed interest Balance, 4/1/Year 5 Plus interest earned to 12/31/Year 5 Balance, 12/31/Year 5 Kern, Inc., which is a privately held company, had the following noncurrent receivable account balances at December 31, Year 4: Note receivable from the sale of an idle $750,000 building Note receivable from an officer 200,000 Transactions during Year 5 and other information relating to Kern's receivables follow: 1. The $750,000 note receivable is dated May 1, Year 4, bears interest at 9%, and represents the balance of the consideration Kern received from the sale of its idle building to Able Co. Principal payments of $250,000 plus interest are due annually beginning May 1, Year 5. Able made its first principal and interest payment on May 1, Year 5. Collection of the remaining note installments is reasonably assured. 2. On April 1, Year 5, Kern sold a patent to Frey Corp. in exchange for a $100,000 noninterest-bearing note due on April 1, Year 7. There was no established exchange price for the patent, and the note had no ready market. The prevailing interest rate for this type of note was 10% at April 1, Year 5. The present value of $1 for two periods at 10% is 0.826. The patent had a carrying amount of $40,000 at January 1, Year 5, and the amortization for the year ended December 31, Year 5, was $8,000. Kern is reasonably assured of collecting the note receivable from Frey. Complete Kern's December 31, Year 5, balance sheet using the information above. Enter the appropriate amounts in the designated cells below. Enter all amounts as positive values. Receivable Amount Noncurrent portion of 996 note receivable at 12/31/Year 5: Face amount, 5/1/Year 4 Minus installment received 5/1/Year 5 Balance, 12/31/Year 5 Minus installment due 5/1/Year 6 Noncurrent portion, 12/31/Year 5 Noninterest-bearing note, net of imputed interest at 12/31/Year 5: Face amount, 4/1/Year 5 Minus imputed interest Balance, 4/1/Year 5 Plus interest earned to 12/31/Year 5 Balance, 12/31/Year 5
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started