Hot issue company sold its machine with a carrying amount of P2,000,000 in exchange for P2,500,000 non-interest-bearing note that requires five annual payment of P500,000 starting on January 1, 2022. The market interest for similar notes was 10% and the relevant present value factors are: Present value of a single payment at 10% for 5 periods 0.621 Present value of an ordinary annuity of 1 at 10% for periods 3.791 Present value of an annuity due of 1 at 10% for 5 periods 4.170 How much is the interest income for the year 2022?
Hot issue company sold its machine with a carrying amount of P2,000,000 in exchange for P2,500,000 non-interest-bearing note that requires five annual payment of P500,000 starting on January 1, 2022. The market interest for similar notes was 10% and the relevant present value factors are: Present value of a single payment at 10% for 5 periods 0.621 Present value of an ordinary annuity of 1 at 10% for periods 3.791 Present value of an annuity due of 1 at 10% for 5 periods 4.170 How much is the interest income for the year 2022?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Hot issue company sold its machine with a carrying amount of P2,000,000 in exchange for P2,500,000 non-interest-bearing note that requires five annual payment of P500,000 starting on January 1, 2022.
The market interest for similar notes was 10% and the relevant present value factors are:
| Present value of a single payment at 10% for 5 periods | 0.621 |
| Present value of an ordinary annuity of 1 at 10% for periods | 3.791 |
| Present value of an annuity due of 1 at 10% for 5 periods | 4.170 |
How much is the interest income for the year 2022?
a. 139,550
b. 158,500
c. 379,100
d. 189,550
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