Answer
For notes receivable, Kimmel should report the face amount of the interest-bearing notes receivable and the related interest receivable for the period from October 1 through December 31 on its balance sheet as noncurrent assets. Both assets are due on September 30, 2014, which is more than one year from the date of the balance sheet.
For interest revenue, Kimmel should report interest revenue from the notes receivable on its income statement for the year ended December 31, 2014. Interest revenue is equal to the amount accrued on the notes receivable at the appropriate rate for the three months.
Work Step by Step
It is also important to note that revenue is realized with passage of time and as well, interest revenue should e accounted for as an element of income spread over the life of notes receivable.
