Part A Alien Inc. sells $100,000 of their accounts receivable to Predator Inc. Predator charges Alien a 5% finance charge, and an amount equal to 4% of the accountants receivable for probable adjustments.

| June 19, 2015

Part A
Alien Inc. sells $100,000 of their accounts receivable to Predator Inc. Predator charges Alien a 5% finance charge, and an amount equal to 4% of the accountants receivable for probable adjustments. Predator also requires a recourse amount with a fair value of $2,000.
Required: Prepare the journal entries on the books of Alien Inc. and Predator Inc. to record the sale and purchase of the accounts receivable.

 

Part B
On December 31, 2013, Dexter Company finished consultation services and accepted in exchange a promissory zero-interest bearing note receivable with a face value of $600,000, and a due date of December 31, 2016. The fair value of the services is not readily determinable and the note is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of interest of 10%. Dexter does not use the fair value option of accounting for note receivable.
The following interest factors are provided:

Table Factors For Three Periods Interest Rate
10%
Future Value of 1 1.33100
Present Value of 1 .75132
Future Value of Ordinary Annuity of 1 3.31000
Present Value of Ordinary Annuity of 1 2.48685
Required:
(a) Determine the present value of the note and round to the nearest whole dollar.
(b) Prepare the journal entry for Dexter on December 31, 2013 and December 31,2014 and round to the nearest whole dollar.
(c) What is the carrying value of the note receivable on 12/31/2014?
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