On April 1, 2021, Leni Company (a calendar-year company) sold a tract of land that originally cost P400,000. Leni received a P600,000 note as payment for the land. The note is payable in three annual installments of P200,000 beginning March 31, 2022 plus interest at the rate of 4% based on the outstanding balance. At April 1, 2021, the prevailing rate of interest for a similar obligation is 10%. The fair value of the note is derived by discounting all future collections using the prevailing interest rate, thus, amounting to P538,424. How much is the interest revenue for the year ended December 31, 2021?
On April 1, 2021, Leni Company (a calendar-year company) sold a tract of land that originally cost P400,000. Leni received a P600,000 note as payment for the land. The note is payable in three annual installments of P200,000 beginning March 31, 2022 plus interest at the rate of 4% based on the outstanding balance. At April 1, 2021, the prevailing rate of interest for a similar obligation is 10%. The fair value of the note is derived by discounting all future collections using the prevailing interest rate, thus, amounting to P538,424. How much is the interest revenue for the year ended December 31, 2021?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
7.On April 1, 2021, Leni Company (a calendar-year company) sold a tract of land that originally cost P400,000. Leni received a P600,000 note as payment for the land. The note is payable in three annual installments of P200,000 beginning March 31, 2022 plus interest at the rate of 4% based on the outstanding balance. At April 1, 2021, the prevailing rate of interest for a similar obligation is 10%. The fair value of the note is derived by discounting all future collections using the prevailing interest rate, thus, amounting to P538,424.
How much is the interest revenue for the year ended December 31, 2021?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education