Cathymae Company acquired two items of machinery as follows: • On January 1, 2020, Cathymae Company purchased a machine for P2,000,000 in exchange for a noninterest bearing note requiring four payments of P500,000. The first payment was made on December 31, 2020, and the others are due annually on December 31. The prevailing rate of interest for this type of note at date of issuance was 12%. The present value of an ordinary annuity of 1 at 12% is 3.04 for four periods. The new machine was damaged during its installation and the repair cost amounted to P30,000. • On January 1, 2020, Cathymae Company acquired a used machine by issuing the seller a four-year, noninterest-bearing note for P2,000,000. The note is due on January 1, 2024. In recent borrowing, Cathymae Company has paid a 12% interest for this type of note. The present value of 1 at 12% for 4 years is 0.64. What is the total cost of the two machines?
Cathymae Company acquired two items of machinery as follows: • On January 1, 2020, Cathymae Company purchased a machine for P2,000,000 in exchange for a noninterest bearing note requiring four payments of P500,000. The first payment was made on December 31, 2020, and the others are due annually on December 31. The prevailing rate of interest for this type of note at date of issuance was 12%. The present value of an ordinary annuity of 1 at 12% is 3.04 for four periods. The new machine was damaged during its installation and the repair cost amounted to P30,000. • On January 1, 2020, Cathymae Company acquired a used machine by issuing the seller a four-year, noninterest-bearing note for P2,000,000. The note is due on January 1, 2024. In recent borrowing, Cathymae Company has paid a 12% interest for this type of note. The present value of 1 at 12% for 4 years is 0.64. What is the total cost of the two machines?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Cathymae Company acquired two items of machinery as follows:
• On January 1, 2020, Cathymae Company purchased a machine for P2,000,000 in exchange for a
noninterest bearing note requiring four payments of P500,000. The first payment was made on
December 31, 2020, and the others are due annually on December 31. The prevailing rate of
interest for this type of note at date of issuance was 12%. The present value of an ordinary annuity
of 1 at 12% is 3.04 for four periods. The new machine was damaged during its installation and the
repair cost amounted to P30,000.
• On January 1, 2020, Cathymae Company acquired a used machine by issuing the seller a four-year,
noninterest-bearing note for P2,000,000. The note is due on January 1, 2024. In recent borrowing,
Cathymae Company has paid a 12% interest for this type of note. The present value of 1 at 12%
for 4 years is 0.64.
What is the total cost of the two machines?
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Cathymae Company acquired two items of machinery as follows:
• On January 1, 2020, Cathymae Company purchased a machine for P2,000,000 in exchange for a
noninterest bearing note requiring four payments of P500,000. The first payment was made on
December 31, 2020, and the others are due annually on December 31. The prevailing rate of
interest for this type of note at date of issuance was 12%. The present value of an ordinary annuity
of 1 at 12% is 3.04 for four periods. The new machine was damaged during its installation and the
repair cost amounted to P30,000.
• On January 1, 2020, Cathymae Company acquired a used machine by issuing the seller a four-year,
noninterest-bearing note for P2,000,000. The note is due on January 1, 2024. In recent borrowing,
Cathymae Company has paid a 12% interest for this type of note. The present value of 1 at 12%
for 4 years is 0.64.
What is the total cost of the two machines?
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