Question Assignment description
On July 1, 2015, Moresan Firm offered particular order merchandise on credit score and obtained in return an
interest bearing observe receivable from the buyer. Moresan will obtain interest at the prevailing price for
a observe of this sort. Each the principal and interest are due in a single lump sum on June 30, 2016.
On September 1, 2015, Moresan offered particular order merchandise on credit score and obtained in return a zero-
interest bearing observe receivable from the buyer. The prevailing price of interest for a observe of this sort is
determinable. The observe receivable is due in a single lump sum on August 31, 2017.
Moresan additionally has important quantity of accounts receivable on account of credit score gross sales to its prospects. On
October 1, 2015, some accounts receivable have been assigned to Indigo Finance Firm on a non-
notification foundation (Moresan handles collections) for an advance of 75% of their quantity at an interest
cost of eight% on the stability excellent.
On November 1, 2015, different accounts receivable have been offered on a with out assure (recourse) foundation. The
issue withheld 5% of the accounts receivable factored as safety in opposition to gross sales returns and allowances
and adjustments a finance change of three%.
Directions
(a) How ought to Moresan decide the interest income for 2015 on the:
1. Interest bearing observe receivable? Why?
2. Zero-interest bearing observe receivable? Why?
(b) How ought to Moresan report the interest bearing observe receivable and the zero-interest bearing observe
receivable on its assertion of monetary place on December 31, 2015?
(c) How ought to Moresan account for subsequent collections on the accounts receivable assigned on
October 1, 2015 and cost to Indigo Finance? Why?
(d) How ought to Moresan account for the accounts receivable factored on November 1, 2015? Why?
