Problem 7-9 (Part Level Submission) Sheridan Inc. had the following long-term re
ID: 2556279 • Letter: P
Question
Problem 7-9 (Part Level Submission)
Sheridan Inc. had the following long-term receivable account balances at December 31, 2016.
Transactions during 2017 and other information relating to Sheridan’s long-term receivables were as follows.
On July 1, 2017, Sheridan sold a parcel of land to Splinter Company for $191,400 under an installment sale contract. Splinter made a $57,420 cash down payment on July 1, 2017, and signed a 4-year 12% note for the $133,980 balance. The equal annual payments of principal and interest on the note will be $41,601 payable on July 1, 2018, through July 1, 2021. The land could have been sold at an established cash price of $191,400. The cost of the land to Sheridan was $141,400. Circumstances are such that the collection of the installments on the note is reasonably assured.
Prepare the long-term receivables section of Sheridan’s balance sheet at December 31, 2017.
Note receivable from sale of division $1,500,000 Note receivable from officer 418,000Explanation / Answer
a) Sheridan Inc. Long-Term Receivables Section of Statement of Financial Position December 31, 2017 10% note receivable from sale of division, due in annual installments of $500,000 to May 1, 2017, less current installment (Working Notes 1) $500,000.00 9% note receivable from officer, due Dec. 31,2019, collateralized by 10450 shares of Sheridan Inc., common stock with a fair value of $46 x 10,450 $418,000.00 Zero-interest-bearing note from sale of patent, net of 13% imputed interest, due April 1,2019 (Working note 2) $115,151.90 Installment contract receivable, due in annual of $41,601 to July 1, 2018, less current installment $108,456.60 Total long-term receivables $1,141,608.50 Working Notes (1) Long-term Portion of 10% Note Receivable at 12/31/17 Face amount, 5/1/16 $1,500,000.00 Less: Installment received 5/1/17 $500,000.00 Balance, 12/31/17 $1,000,000.00 Less: Installment due 5/1/18 $500,000.00 Long-term portion, 12/31/17 $500,000.00 (2) Zero-interest-bearing Note, Net of Imputed Interest at 12/31/17 Face amount 4/1/17 $134,000.00 Less: Imputed interest [$134,000 – ($134,000 X 0.783)] $29,078.00 Balance, 4/1/16 $104,922.00 Add: Interest earned to 12/31/17 ($134,000 X .783 X 13% X 9/12) $10,229.90 Balance, 12/31/17 $115,151.90 (3) Long-term Portion of Installment Contract Receivable at 12/31/17 Contract selling price, 7/1/17 $191,400.00 Less: Down payment, 7/1/17 $57,420.00 Balance, 12/31/17 $133,980.00 Less: Installment due, 7/1/18 [$41,601 – ($133,980 X 12%)] $25,523.40 Long-term portion, 12/31/18 $108,456.60