On January 1, 2006, Mill Company sold a building and received asconsideration P1,000,000 cash and a P4,000,000 noninterest bearing note dueon January 1, 2009. There was no established exchange price for the building,and the note had no ready market. The prevailing rate of interest for a note ofthis type at January 1, 2006, was 10%. The present value of 1 at 10% for threeperiods is 0.75.19. What amount of interest revenue should be included in Mill's 2006 incomestatement?a. 370,000b. 400,000c. 300,000d. 330,000

Given,Book Value = P 1,000,000Face Value = P 4,000,000Rate = 10%Present Value = 0.75

Answered: On January 1, 2006, Mill Company sold a…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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On Jan. 1, 20x4, Bernie Bird Co. sold a building, which had a carrying amount of P350,000, receiving a P125,000 down payment and, as additional consideration, a P400,000 noninterest bearing note due on January 1, 20x7. There was no established exchange price for the building, and the note had no ready market. The prevailing rate of interest for a note of this type at January 1, 20x4, was 10%. What amount of interest income should be included in the entity’s 20x4, income statement? a. 0 b. 35,053 c. 30,053 d. 40,109
On January 01, 2021, Scottie Boo sold equipment costing P10,000,000 with accumulated depreciation of P5,500,000 in exchange for a P6,000,000 noninterest bearing note due in equal annual installments of P2,000,000 every December 31, 2021. There was no established exchange price for the equipment and the note had no ready market. The prevailing rate of interest for a note of this type at January 01, 2021 was 10%. What is the carrying amount of the note on December 31, 2021? (Round off the present value factors to 4 decimal places)
9
On January 1, 2019, DEXTER Company sold equipment with a carrying amount of P4,800,000 in exchange for a P6,000,000 non-interest bearing note due January 1, 2022. There was no established exchange price for the equipment. The prevailing rate of interest for a note of this type on January 1, 2019 was 10%. 1. What amount should be reported as gain or loss on sale of equipment? 2. What amount should be reported as interest income for 2019?
On December 31, 2020, Stellar Company signed a $ 1,022,000 note to Pearl Bank. The market interest rate at that time was 11%. The stated interest rate on the note was 9%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Stellar’s financial situation worsened. On December 31, 2022, Pearl Bank determined that it was probable that the company would pay back only $ 613,200 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $ 1,022,000 loan.
On December 31, 2021, Empoy Company has overdue notes payable of P5,000,000 with accrued interest of P500,000. The company is threatened with a court suit if it would not settle its debt. The company entered into an agreement with the creditor to transfer real estate carried in the books of Empoy at P3million. The real estate has a current fair market value of P4.5million. What was the total amount of gain reported by Empoy as a result of debt restructuring/ a.) 2,500,000 b.) 1,500,000 c.) 1,000,000 d.) 500,000
On December 31, 2021, Empoy Company has overdue notes payable of P5,000,000 with accrued interest of P500,000. The company is threatened with a court suit if it would not settle its debt. The company entered into an agreement with the creditor to transfer real estate carried in the books of Empoy at P3million. The real estate has a current fair market value of P4.5million. What was the total amount of gain reported by Empoy as a result of debt restructuring? 2,500,000 1,500,000 1,000,000 500,000
On January 1, Windsor, Inc. sold used equipment with a cost of $17,000 and a carrying amount of $2,300 to Swifty Corporation in exchange for a $5,100, three-year non-interest-bearing note receivable. Although no interest was specified, the market rate for a loan of that risk would be 7%. Assume that Windsor follows IFRS. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. (a) Prepare the entry to record the sale of Windsor's equipment and receipt of the note. (Round answers to O decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit Notes Receivable Accumulated Depreciation - Equipment Equipment 1700 Gain on Disposal of Equipment
On January 2, 2020, Magsaysay Company sold equipment with a carrying amount of P400,000 in exchange for a P600,000 4-year non-interest-bearing note due January 2, 2024. There was no established exchange price for the equipment. The prevailing rate of interest for a note of this type at January 2, 2020 was 10%. What is the carrying value of the note receivable as of December 31, 2022 Statement of Financial Position? Solutions must be in good accounting form.
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On December 30, Year 1, ABC Corporation sold a machine to DEF Corporation in exchange for a non-interest bearing note requiring ten annual payments of P10,000. DEF made the first payment on December 30, Year 1. The market interest rate for similar notes at date of issuance was 8%. Information on present value factors is as follows: For 9 periods, the present value of P1 at 8% is 0.50 while the present value of ordinary annuity of P1 at 8% is 6.25. Meanwhile, for 10 periods, the present value of P1 at 8% is 0.46 and the present value of ordinary annuity of P1 at 8% is 6.71. In its December 31, Year 1 balance sheet, what amount should ABC Corporation report as note receivable? *

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