In return for a plot of land on January 1st, 20x1, Diminished Co. made a cash down payment ofP400,000 and issued a P1,800,000 noninterest bearing note. The loan is payable on December31 in three equal yearly instalments.Case 1: The property is worth P2,000,000. On initial recognition, grant entrance.Case 2: It is impossible to estimate with accuracy what the land is worth. 9 percent is thecurrent market rate of interest for comparable debt securities. Give the journal entry for thenote's first acknowledgement as well as the entries for the note's subsequent payments.

A borrower pays interest on a loan based on a proportion of the principle (the amount borrowed). The…

In return for a plot of land on January 1st, 20x1, Diminished Co. made a cash down payment of P400,000 and issued a P1,800,000 noninterest bearing note. The loan is payable on December 31 in three equal yearly instalments. Case 1: The property is worth P2,000,000. On initial recognition, grant entrance.

In return for a plot of land on January 1st, 20x1, Diminished Co. made a cash down payment of P400,000 and issued a P1,800,000 noninterest bearing note. The loan is payable on December 31 in three equal yearly instalments. Case 1: The property is worth P2,000,000. On initial recognition, grant entrance.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question

In return for a plot of land on January 1st, 20x1, Diminished Co. made a cash down payment of
P400,000 and issued a P1,800,000 noninterest bearing note. The loan is payable on December
31 in three equal yearly instalments.
Case 1: The property is worth P2,000,000. On initial recognition, grant entrance.
Case 2: It is impossible to estimate with accuracy what the land is worth. 9 percent is the
current market rate of interest for comparable debt securities. Give the journal entry for the
note's first acknowledgement as well as the entries for the note's subsequent payments.

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