Question

Problem 7-9 Sheffield Inc. had the following long-term receivable account balances at December 31, 2016. Note receivable from sale of division $1,800,000 Note receivable from officer 421,000 Transactions during 2017 and other information relating to Sheffield's long-term receivables were as follows The $1,800,000 note receivable Company. Principal payments of $600,000 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 installments is reasonably assured. dated May 1, 2016, bears interest at 9%, and represents the balance of the consideration received from the sale of Sheffield's electronics division to New York 1 2. The $421,000 note receivable is dated December 31, 2016, bears interest at 8%, and is due on December 31, 2019. The note collateralized by 10,525 shares of Sheffield's common stock. Interest is payable annually on December 31, and all interest payments were paid on their due dates through December 31, 2017. The quoted market price of Sheffield's common stock wa s due from Sean May, president of Sheffield Inc. and is $45 per share on December 31, 2017. On April , 2017, Seeld sold a patent einsylvania Company thi rest-bearing onApril 1, 2019. Tmere Was ho establilsleie 73 e 3. the factor). The patent had a carrying value of $52,400 at January 1, 2017, and the amortization for the year ended December 31, 2017, would have been $10,480. The collection of the note receivable from Pennsylvania is reasonably assured. 4. On July 1, 2017, Sheffield sold a parcel of land to Splinter Company for $206,500 under an installment sale contract. Splinter made a $61,950 cash down payment on July 1, 2017, and signed a 4-year 12% note for the $144,550 balance. The equal annual payments of principal and interest on the note will be $45,555 payable on July 1, 2018, through July 1, 2021. The land could have been sold at an established cash price of $206,500. The cost of the land to Sheffield was $156,500. Circumstances are such that the collection assured F the installments on the note is reasonably Prepare the long-term receivables section of Sheffield's balance sheet at December 31, 2017. (Round answers to 0 decimal places, e.g. 5,125.) SHEFFIELD INC. Long-Term Recelvables Section of Balance Sheet 4 Prepare a schedule showing the current portion of the long-term receivables and accrued interest receivable that would appear in Sheffield's balance sheet at December 31, 2017. (Round answers to 0 decimal places, e.g. 5,129.) SHEFFIELD INC. Selected Balance Sheet Balances S LINK TO TEXT Prepare a schedule showing interest revenue from the long-term receivables that would appear on Sheffield's income statement for the year ended December 31, 2017. (Round answers to 0 decimal places, e.g. 5,125.) Interest Revenue from LoS T n Recelvables

Answer 1

Part A

SHEFFIELD INC. Long-Term Receivables Section of Statement of Financial Position December 31, 2017
9% note receivable from sale of division, due in annual installments of $600,000 to May 1, 2017, less current installment	600000
8% note receivable from officer, due Dec. 31, 2017, collateralized by 10,000 shares of Braddock, Inc., common stock with a fair value of $473625	421000
Zero-interest-bearing note from sale of patent, net of 13% imputed interest, due April 1, 2017	112574
Installment contract receivable, due in annual installments of $45,555 to July 1, 2019, less current installment	116341
Total long-term receivables	1249915

Part B

SHEFFIELD INC. Partial Statement of Financial Position Balances December 31, 2017
Current portion of long-term receivables:
Note receivable from sale of division	600000
Installment contract receivable	28209
Total current portion of long-term receivables	628209
Accrued interest receivable:
Note receivable from sale of division	72000
Installment contract receivable	8673
Total accrued interest receivable	80673

Part C

SHEFFIELD INC. Interest Revenue from Long-Term Receivables For the year Ended December 31, 2017
Interest Income:
Note receivable from sale of division	126000
Note receivable from sale of patent	10001
Note receivable from officer	33680
Installment contract receivable from the sale of land	8673
Total interest income for the year ended.	178354

Explanations of Amounts:

1) Long-term Portion of 9% Note Receivable at December 31, 2017

Face amount, 5/1/16	1800000
Less installment received, 5/1/17	600000
Balance, 12/31/17	1200000
Less Installment due 5/1/18	600000
Long-term portion, 12/31/17	600000

2) Zero interest bearing note, Net of imputed interest at 12/31/17

Face amount, 4/1/17	131000
Less Imputed interest [$131,000 – ($131,000 X 0.783)]	24827
Balance, 4/1/16	102573
Add: Interest earned to 12/31/17 ($102573 X 13% X 9/12)	10001
Balance, 12/31/17	112574

3) Long-term Portion of Installment Contract

Receivable at 12/31/17

Contract selling price, 7/1/17	206500
Less: Down payment, 7/1/17	61950
Balance, 12/31/17	144550
Less: Installment due, 7/1/19 [$45,555 – ($144550 X 12%)]	28209
Long-term portion, 12/31/18	116341

4) Accrued Interest—Note Receivable, Sale of Division at 12/31/17 Interest accrued from 5/1 to 12/31/17

$(1800000-600000) X 9% X 8/12 = $72000

5) Accrued Interest—Installment Contract At 12/31/17 Interest accrued from 7/1 to 12/31/17

$144550 X 12% X 1/2 = $8673

6) Interest Revenue—Note Receivable, Sale of Division, for 2017

Interest earned from 1/1 to 5/1/2017 ($1,800,000 X 9% X 4/12)	54000
Interest earned from 5/1 to 12/31/17 ($1,200,000 X 9% X 8/12)	72000
Interest income	126000

7) Interest Revenue—Note Receivable, Officer, For 2017 Interest earned 1/1/ to 12/31/17

$421,000 X 8% =33680