Answer
Corrs’s should increase the carrying amount of the note receivable by the effective interest revenue earned for the period February 1 to May 1, 2012. Corrs should also account for the sale of the note receivable without recourse by increasing cash for the proceeds received, therefore, eliminating the carrying amount of the note receivable, and recognizing a loss for the resulting difference.
Work Step by Step
This reporting is appropriate since the note’s carrying amount is correctly recorded at the date it was sold and the sale of a note receivable without recourse has occurred. Thus, the difference between the cash received and the carrying amount of the note at the date it is sold is reported as a loss (gain).
