Problem 7-9 Sheffield Corp. had the following long-term receivable account balances at December 31, 2016. Notes receivable - Sale of division $1,785,000 Notes receivable - Employees 412,500 Transactions during 2017 and other information relating to Sheffield's long-term receivables were as follows: 1. The $1,785,000 note receivable is dated May 1, 2016, bears interest at 8%, and represents the balance of the consideration received from the sale of Sheffield's electronics division to Oriole Company. Principal payments of $595,000 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 $412,500 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 Sheffield Corp., and is secured by 10,500 Sheffield'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 Sheffield's common shares was $40 per share on December 31, 2017. 3. On April 1, 2017, Sheffield's sold a patent to Ivanhoe Company in exchange for a $211,500 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 12%. The present value of $1 for two periods at 12% is 0.79719 (use this factor). The patent had a carrying amount of $41,300 at January 1, 2017, and the amortization for the year ended December 31, 2017 would have been $8,000. The collection of the note receivable from Ivanhoe is reasonably assured. 4. On July 1, 2017, Sheffield's sold a parcel of land to Sage Hill Inc. for $217,000 under an instalment sale contract. Sage Hill made a $68,500 cash down payment on July 1, 2017, and signed a four-year, 11% note for the $148,500 balance. The equal annual payments of principal and interest on the note will be $47,865, 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 Sheffield's was $154,500. Collection of the instalments on the note is reasonably assured. 5. On August 1, 2017, Sheffield'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. Click here to view the factor table present value of 1 Click here to view the factor table present value of an annuity of 1 The tables in this problem are to be used as a reference for this problem. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
Problem 7-9 Sheffield Corp. had the following long-term receivable account balances at December 31, 2016 Notes receivable -Sale of division $1,785,000 Notes receivable Employees Transactions during 2017 and other information relating to Sheffield's long-term receivables were as follows: 1, The $1,785,000 note receivable is dated May 1, 2016, bears interest at 8%, and represents the balance of the consideration received from the sale of Sheffield's electronics division to 412,500 Oriole Company. Principal payments of $595,000 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 $412,500 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 Sheffield Corp., and is secured by 10,500 Sheffield'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 Sheffield's common shares was $40 per share on December 31, 2017 3. On April 1, 2017, Sheffield's sold a patent to Ivanhoe Company in exchange for a $211,500 non-interest-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 12%. The present value of $1 for two periods at 12% is 0.79719 (use this factor). The patent had a carrying amount of $41,300 at January 1, 2017, and the amortization for the year ended December 31, 2017 would have been $8,000 The collection of the note receivable from Ivanhoe is reasonably assured 4. On July 1, 2017, Sheffield's sold a parcel of land to Sage Hill Inc. for $217,000 under an instalment sale contract. Sage Hill made a $68,500 cash down payment on July 1, 2017, and signed a four-year, 11% note for the $148,500 balance. The equal annual payments of principal and interest on the note will be $47,865, 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 Sheffield's was $154,500. Collection of the instalments on the note is reasonably assured 5. On August 1, 2017, Sheffield'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 The tables in this problem are to be used as a reference for this problem. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Describe the relevant cash flows in terms of amount and timing Cash inflows from notes 2017 2018 2019 2020 2021 800 Note receivable Principal Interest 790 Note receivable Principal Interest Non-interest-bearing note receivable Payment Instalment contract receivable Down payment Payment 690 Note receivable Principal 595000 595000 595000 142800 95200 47600 412500 28875 28875 28875 211500 68500 47865 47865 47865 47865 200000 6000 972940 Interest Total 835175 1343340 47865 47865 Determine the amount of interest income that should be reported in 2017. (Do not round intermediate calculations. Round answers to O decimal places, e.g. 8,971.) 8% Note Receivable (Sale of Division) 7%Note Receivable (Employees) $ Non-nterest bearing note (Patent) Instaliment contract (Sale of Land) 696 Note Receivable (Saini) Total Interest Income reported in 2017 s Determine the portion of the note and any interest that should be reported in current assets at December 31, 2017. (Round answers to O decimal places, e.g. 9,871.) 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 current notes and interest Determine the portion of the note that should be reported as a long-term investment at December 31, 2017. (Round answers to O decimal places, e.g. 8,971.) 8% Note Receivable (Sale of Division) 796 Note Receivable (Employees) Non-interest bearing note (Patent) s Instalment contract (Sale of Land) 6% Note Receivable (Saini) Total long-term investment Prepare the long-term receivables section of Sheffield's statement of financial position at December 31, 2017. (Round answers to O decimal places, e.g. 8,971.) Sheffield Corp. Long-Term Receivables Section of Statement of Financial Position Prepare a schedule showing the current portion of the long-term receivables and accrued interest receivable that would appear in Sheffield's statement of financial position at December 31, 2017. (Round answers to 0 decimal places, e.g. 8,971. Sheffield Corp Selected Statement of Financial Position Current portion of long-term receivables: Accrued interest receivable: Problem 7-9 Sheffield Corp. had the following long-term receivable account balances at December 31, 2016 Notes receivable -Sale of division $1,785,000 Notes receivable Employees Transactions during 2017 and other information relating to Sheffield's long-term receivables were as follows: 1, The $1,785,000 note receivable is dated May 1, 2016, bears interest at 8%, and represents the balance of the consideration received from the sale of Sheffield's electronics division to 412,500 Oriole Company. Principal payments of $595,000 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 $412,500 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 Sheffield Corp., and is secured by 10,500 Sheffield'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 Sheffield's common shares was $40 per share on December 31, 2017 3. On April 1, 2017, Sheffield's sold a patent to Ivanhoe Company in exchange for a $211,500 non-interest-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 12%. The present value of $1 for two periods at 12% is 0.79719 (use this factor). The patent had a carrying amount of $41,300 at January 1, 2017, and the amortization for the year ended December 31, 2017 would have been $8,000 The collection of the note receivable from Ivanhoe is reasonably assured 4. On July 1, 2017, Sheffield's sold a parcel of land to Sage Hill Inc. for $217,000 under an instalment sale contract. Sage Hill made a $68,500 cash down payment on July 1, 2017, and signed a four-year, 11% note for the $148,500 balance. The equal annual payments of principal and interest on the note will be $47,865, 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 Sheffield's was $154,500. Collection of the instalments on the note is reasonably assured 5. On August 1, 2017, Sheffield'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 The tables in this problem are to be used as a reference for this problem. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Describe the relevant cash flows in terms of amount and timing Cash inflows from notes 2017 2018 2019 2020 2021 800 Note receivable Principal Interest 790 Note receivable Principal Interest Non-interest-bearing note receivable Payment Instalment contract receivable Down payment Payment 690 Note receivable Principal 595000 595000 595000 142800 95200 47600 412500 28875 28875 28875 211500 68500 47865 47865 47865 47865 200000 6000 972940 Interest Total 835175 1343340 47865 47865 Determine the amount of interest income that should be reported in 2017. (Do not round intermediate calculations. Round answers to O decimal places, e.g. 8,971.) 8% Note Receivable (Sale of Division) 7%Note Receivable (Employees) $ Non-nterest bearing note (Patent) Instaliment contract (Sale of Land) 696 Note Receivable (Saini) Total Interest Income reported in 2017 s Determine the portion of the note and any interest that should be reported in current assets at December 31, 2017. (Round answers to O decimal places, e.g. 9,871.) 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 current notes and interest Determine the portion of the note that should be reported as a long-term investment at December 31, 2017. (Round answers to O decimal places, e.g. 8,971.) 8% Note Receivable (Sale of Division) 796 Note Receivable (Employees) Non-interest bearing note (Patent) s Instalment contract (Sale of Land) 6% Note Receivable (Saini) Total long-term investment Prepare the long-term receivables section of Sheffield's statement of financial position at December 31, 2017. (Round answers to O decimal places, e.g. 8,971.) Sheffield Corp. Long-Term Receivables Section of Statement of Financial Position Prepare a schedule showing the current portion of the long-term receivables and accrued interest receivable that would appear in Sheffield's statement of financial position at December 31, 2017. (Round answers to 0 decimal places, e.g. 8,971. Sheffield Corp Selected Statement of Financial Position Current portion of long-term receivables: Accrued interest receivable
