On December 31, 2020, Precious Company sold an equipment with carrying amount of P2,000,000 and received a noninterest-bearing note requiring payment of P500,000 annually for ten years. The first payment is due December 31, 2021. The prevailing rate of interest for this type of note at date of issuance is 12%. Present value of 1 at 12% for 10 periods Present value of ordinary annuity of 1 at 12% for 10 periods 0.322 5.650
On December 31, 2020, Precious Company sold an equipment with carrying amount of P2,000,000 and received a noninterest-bearing note requiring payment of P500,000 annually for ten years. The first payment is due December 31, 2021. The prevailing rate of interest for this type of note at date of issuance is 12%. Present value of 1 at 12% for 10 periods Present value of ordinary annuity of 1 at 12% for 10 periods 0.322 5.650
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Present value of 1 at 12% for 10 periods
Problem 6-12 (AICPA Adapted)
On December 31, 2020, Precious Cómpany sold an equipment
with carrying amount of P2,000,000 and received a
noninterest-bearing note requiring payment of P500,000
annually for ten years. The first payment is due December
31, 2021.
The prevailing rate of interest for this type of note at date of
issuance is 12%.
Present value of 1 at 12% for 10 periods
Present value of ordinary annuity of 1 at 12% for 10 periods
0.322
5.650
Transcribed Image Text:3. What anmount of interest income should be recognized
for 2021?
a. 600,000
b. 339,000
c. 319,800
d. 300,000
4. What is the carrying amount of the note receivable on
December 31, 2021?
a. 2,325,000
b. 4,500,000
c. 2,825,000
d. 2,664,000
183
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