@Mscfisher Thanks for the tip! I will try that out on my next research sim!
I also have a question about including interest receivable in notes. I am working sim #4 in Ninja MCQ and notice that interest is included in a LT receivable on a noninterest bearing note but is not included in another note. Why is interest part of some receivables and not others? Here are the examples. You're to find LT receivable on 2013 BS:
The $750,000 note receivable is dated May 1, 20X2, 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, 20X3. Able made its first principal and interest payment on May 1, 20X3. Collection of the remaining note installments is reasonably assured.
~~The answer is 250,000. I understand this because it is 750,000 less the 2013 payment and current receivable for 2014.
The $200,000 note receivable is dated December 31, 20X0, bears interest at 8%, and is due on December 31, 20X5. The note is due from Frank Black, president of Kern, Inc., and is collateralized by 5,000 shares of Kern's common stock. Interest is payable annually on December 31, 20X3. The quoted market price of Kern's common stock was $45 per share on December 31, 20X3.
~~The answer is 200,000 because payment is not due until 2015 even though interest payments are due.
On April 1, 20X3, Kern sold a patent to Frey Corp. in exchange for a $100,000 noninterest-bearing note due on April 1, 20X5. 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% on April 1, 20X3. The present value of $1 for two periods at 10% is 0.8264. The patent had a carrying amount of $40,000 on January 1, 20X3, and the amortization for the year ending December 31, 20X3, would have been $8,000. Kern is reasonably assured of collecting the note receivable from Frey.
~~The answer is 100,000 x .8264 = 82,640 + (82,640 x 10% x (9/12)) = 88,838. I understand discounting the note and I can understand why the interest is added back to it to reach face value by the time it is due. But I don't understand why the interest is added to the LT receivable in this case but not the two examples listed above?
I'm obviously confused about this so I'm hoping someone can help me understand. I apologize for asking so many questions on here!!!
.