Decision Case 7-5, “Notes Receivable” on page 391.
Patterson Company is a large diversified business with a unit that sells commercial real estate. As a company, Patterson has been profitable in recent years with the exception of the real estate business, where economic conditions have resulted in weak sales.
The vice president of the real estate division is aware of the poor performance of his group and needs to find ways to ‘‘show a profit.’’
During the current year, the division is successful in selling a 100-acre tract of land for a new shopping center. The original cost of the property to Patterson was $4 million.
The buyer has agreed to sign a $10 million note with payments of $2 million due at the end of each of the next five years. The property was appraised late last year at a market value of $7.5 million.
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