On January 1, 2019, A Company purchased equipment. There was no established market price for the equipment which has an 8-year life and no residual value. The entity gave a P5,250,000 noninterest bearing note payable in three equal annual installments of P1,750,000 with the first payment due on December 31,2019. The prevailing rate of interest for a note of this type is 8%. The present value of the note at 8% was P4,509,950. What amount should be reported for interest expense in 2019?
On January 1, 2019, A Company purchased equipment. There was no established market price for the equipment which has an 8-year life and no residual value. The entity gave a P5,250,000 noninterest bearing note payable in three equal annual installments of P1,750,000 with the first payment due on December 31,2019. The prevailing rate of interest for a note of this type is 8%. The present value of the note at 8% was P4,509,950. What amount should be reported for interest expense in 2019?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2019, A Company purchased equipment. There was no established market price for the equipment which has an 8-year life and no residual value. The entity gave a P5,250,000 noninterest bearing note payable in three equal annual installments of P1,750,000 with the first payment due on December 31,2019. The prevailing rate of interest for a note of this type is 8%. The present value of the note at 8% was P4,509,950.
What amount should be reported for interest expense in 2019?
a. 360,796
b. 420,000
c. 220,796
d. 0
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