(a) On January 1, 2025, Splish Inc. purchased land that had an assessed value of $363,000 at the time of purchase. A $561,000, zero- interest-bearing note due January 1, 2028, was given in exchange. There was no established exchange price for the land, nor a ready fair value for the note. The interest rate charged on a note of this type is 12%. Determine at what amount the land should be recorded at January 1, 2025, and the interest expense to be reported in 2025 related to this transaction. (Round intermediate calculation to 5 decimal places, e.g. 0.23451 and final answers to O decimal places, e.g. 38,548.) Land to be recorded at January 1, 2025 $ Interest expense to be reported $

(a) On January 1, 2025, Splish Inc. purchased land that had an assessed value of $363,000 at the time of purchase. A $561,000, zero- interest-bearing note due January 1, 2028, was given in exchange. There was no established exchange price for the land, nor a ready fair value for the note. The interest rate charged on a note of this type is 12%. Determine at what amount the land should be recorded at January 1, 2025, and the interest expense to be reported in 2025 related to this transaction. (Round intermediate calculation to 5 decimal places, e.g. 0.23451 and final answers to O decimal places, e.g. 38,548.) Land to be recorded at January 1, 2025 $ Interest expense to be reported $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, 20x1, Diminished Co. paid cash down payment of P400,000 and issued a noninterest bearing note of P1,800,000 in exchange for a piece of land. The note is due in three equal annual installments every December 31. Case 1: The land has a fair value of P2,000,000. Provide entry on initial recognition. Case 2: The fair value of the land cannot be determined reliably. The prevailing market rate of interest for similar debt instruments in 9% . Provide the journal entry on initial recognition and the entries for the subsequent payments on the note.
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On October 1, 2020, ABC Manufacturing sold a tract of land that originally cost P400,000. ABC received a P600,000, 6% note as payment for the land. The principal amount of the note is payable on September 30, 2023. Interest is payable every anniversary dates - September 30, 2021, September 30, 2022 and September 30, 2023. On October 1, 2020, the prevailing rate of interest for a similar obligation is 10%. On this date, there is no available cash price for the land. PV of a single payment at 6%- 0.8396; PV of a single payment at 10%- 0.7513; PV of ordinary annuity at 6%- 2.6730; PV of ordinary annuity at 10%- 2.4869. ABC's accounting period ends on December 31. How much is the amortized cost/carrying value of the note receivable reported in ABC’s statement of financial position at December 31, 2021? A. P558,339 B. P563,298 C. P573,215 D. P578,173
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