On December 31, 2020, Shawn Company acquired a piece of equipment from Hailey Company by issuing a P1,200,000 note, payable in full on December 31, 2024. Shawn’s credit rating permits it to borrow funds from its several lines of credit at 10%. The equipment is expected to have a 5-year life and a P150,000 salvage value. The present value of 1 at 10% for 4 periods is 0.68301. 1. What is the equipment’s book value on December 31, 2022? 2. What is the carrying value of the note at December 31, 2022?
On December 31, 2020, Shawn Company acquired a piece of equipment from Hailey Company by issuing a P1,200,000 note, payable in full on December 31, 2024. Shawn’s credit rating permits it to borrow funds from its several lines of credit at 10%. The equipment is expected to have a 5-year life and a P150,000 salvage value. The present value of 1 at 10% for 4 periods is 0.68301. 1. What is the equipment’s book value on December 31, 2022? 2. What is the carrying value of the note at December 31, 2022?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On December 31, 2020, Shawn Company acquired a piece of equipment from Hailey Company by issuing a P1,200,000 note, payable in full on December 31, 2024. Shawn’s credit rating permits it to borrow funds from its several lines of credit at 10%. The equipment is expected to have a 5-year life and a P150,000 salvage value. The present value of 1 at 10% for 4 periods is 0.68301.
1. What is the equipment’s book value on December 31, 2022?
2. What is the carrying value of the note at December 31, 2022?
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