1. What amount should be reported as gain or loss on the sale of equipment in 2020?
On January 1, 2020, Allure Company sold an equipment with a carrying amount of P800,00, receiving a noninterest bearing note due in three years with a face amount of P1,000,000. There os no established market value for the equipment.
The interest rate on similar obligations is 12%. The present value of 1 at 12% for three periods is .712.
1. What amount should be reported as gain or loss on the sale of equipment in 2020?
a. 200,000 gain
b. 200,000 loss
c. 88,00 gain
d. 88,00 loss
2. What amount should be reported as interest income for 2020?
a. 288,000
b. 120,000
c. 96,000
d. 85,440
3. What is the carrying amount of note receivable on December 31, 2020?
a. 559,600
b. 712,000
c. 797,440
d. 800,000
4. What amount should be reported as interest income for 2021?
a. 95,693
b. 96,000
c. 75,000
d. 60,000
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