Question on notes receivable

Assignment Help Auditing

Reference no: EM1354870

(Reporting of Notes Receivable, Interest, and Sale of Receivables) On July 1, 2007, Gale Sondergaard Company sold special-order merchandise on credit and received in return an interest-bearing note receivable from the customer. Sondergaard will receive interest at the prevailing rate for a note of this type. Both the principal and interest are due in one lump sum on June 30, 2008.

On September 1, 2007, Sondergaard sold special-order merchandise on credit and received in return a zero-interest-bearing note receivable from the customer. The prevailing rate of interest for a note of this type is determinable. The note receivable is due in one lump sum on August 31, 2009.

Sondergaard also has significant amounts of trade accounts receivable as a result of credit sales to its customers. On October 1, 2007, some trade accounts receivable were assigned to Irene Dunne Finance Company on a non-notification (Sondergaard handles collections) basis for an advance of 75% of their amount at an interest charge of 8% on the balance outstanding.

On November 1, 2007, other trade accounts receivable were sold on a without recourse basis. The factor withheld 5% of the trade accounts receivable factored as protection against sales returns and allowances and charged a finance charge of 3%.
Instructions

1. How should Sondergaard determine the interest revenue for 2007 on the:

1. Interest-bearing note receivable? Why?

2. zero-interest-bearing note receivable? Why?

2. How should Sondergaard report the Interest-bearing note receivable and the zero-interest-bearing note receivable on its balance sheet at December 31, 2007?

3. How should Sondergaard account for subsequent collections on the trade accounts receivable assigned on October 1, 2007, and the payments to Irene Dunne Finance? Why?

4. How should Sondergaard account for the trade accounts receivable factored on November 1, 2007? Why?

(AICPA adapted)

Reference no: EM1354870

Questions Cloud

Describe any bottleneck challenges you have witnessed : Describe any bottleneck challenges you have witnessed in that specific industry and Suggest two to four methods in which those challenges can be mitigated

Signaling in maintaining social organization : What is the role of signaling in maintaining social organization? Give an example.

Illustrate what two policies could you use to reduce : Illustrate what two policies could you use to reduce the total amount of emissions.

Explain how do cognitive biases affect learning : Explain how do cognitive biases affect organizational learning and the quality of decision making and what can be accomplished to reduce the negative impact?

Question on notes receivable : On July 1, 2007, Gale Sondergaard Company sold special-order merchandise on credit and received in return an interest-bearing note receivable from the customer. Sondergaard will receive interest at the prevailing rate for a note of this type. Both..

Find the market price of the stock : Executive Chalk is financed solely through common stock and has outstnading 25 million shares with a market price of $10 a share. It now announces that it intends to issue $160 million of debt & to use proceeds to buy back common stock.

Find the moment of inertia of this system : If the bullet has a mass of 21.5 and a speed of 310 , how high would the block rise into the air after the bullet becomes embedded in it.

Explain and contrast independent and dependent demand : Explain and contrast independent and dependent demand, and then provide three to four advantages and disadvantages that are evident in both

Evalute the shape of the indifference curves : Evalute the shape of the indifference curves of the following utility functions and find MRS for each function.

User Account

All Pages