On January 1, 2021, Bambam Company sold an equipment to Lucas Company which had a carrying value on Bambam’s books of P100,000. Lucas gave Bambam a P600,000, non-interest bearing note, payable in five equal annual installment of P120,000 with the first payment due on December 31, 2021. There was no established price for the equipment and the note has no ready market value. The prevailing rate of interest for a similar note at January 1, 2021 was 12%. Present value (PV) factors for 5 periods at 12% are:PV of P1 - 0.5674PV of an ordinary annuity of P1 – 3.6048How much is the carrying amount (amortized cost) of the notes receivable at December 31, 2021?
On January 1, 2021, Bambam Company sold an equipment to Lucas Company which had a carrying value on Bambam’s books of P100,000. Lucas gave Bambam a P600,000, non-interest bearing note, payable in five equal annual installment of P120,000 with the first payment due on December 31, 2021. There was no established price for the equipment and the note has no ready market value. The prevailing rate of interest for a similar note at January 1, 2021 was 12%. Present value (PV) factors for 5 periods at 12% are:PV of P1 - 0.5674PV of an ordinary annuity of P1 – 3.6048How much is the carrying amount (amortized cost) of the notes receivable at December 31, 2021?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2021, Bambam Company sold an equipment to Lucas Company which had a carrying value on Bambam’s books of P100,000. Lucas gave Bambam a P600,000, non-interest bearing note, payable in five equal annual installment of P120,000 with the first payment due on December 31, 2021. There was no established price for the equipment and the note has no ready market value. The prevailing rate of interest for a similar note at January 1, 2021 was 12%. Present value (PV) factors for 5 periods at 12% are:
PV of P1 - 0.5674
PV of an ordinary annuity of P1 – 3.6048
How much is the carrying amount (amortized cost) of the notes receivable at December 31, 2021?
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