Reference no: EM133138944
Question - LOMI CORP. had the following long-term receivable account balances at December 31, 2019:
Note receivable from sale of division P4,500,000
Note receivable from officer 1,200,000
Transactions during 2020 and other information relating to LOMI's long-term receivables were as follows:
1. The P4,500,000 note receivable is dated May 1, 2019, bears interest at 9%, and represents the balance of the consideration received from the sale of LOMI's electronics division to Bahag Co. Principal payments of P1,500,000 plus appropriate interest are due on May1, 2020, 2021, and 2022. The first principal and interest payment was made on May 1, 2020. Collection of the note installments is reasonably assured.
2. The P1,200,000 note receivable is dated December 31, 2019, bears interest at 8%, and is due on December 31, 2022. The note is due from Epifania Barracuda, president of LOMI CORP. Interest is payable annually on December 31 and interest payments were paid on their due dates through December 31, 2020.
3. On April 1, 2020, LOMI sold a patent to Tambak, Inc. in exchange for a P400,000 non-interest bearing note due on April 1, 2022. 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 at April 1, 2020, was 12%. The present value of 1 for two periods at 12% is .797. The patent had a carrying value of P80,000 at January 1, 2020 and the amortization for the year ended December 31, 2020, would have been P16,000. The collection of the note receivable from Tambak is reasonably assured.
4. On July 1, 2020, LOMI sold a parcel of land to YAYO Company for P400,000 under an installment sale contract. YAYO made a P120,000 cash down payment on July 1, 2020, and signed a 4-year 11% note for the P280,000 balance. The equal annual payments of principal and interest on the note will be P90,250 payable on July 1, 2021, through July 1, 2024. The land could have been sold at an established cash price of P400,000. The cost of the land to LOMI was P300,000. Circumstances are such that the collection of the installments on the note is reasonably assured.
Required -
1. What is the total notes receivable as current and noncurrent assets?
2. What is the total cash collection relating to notes receivable?