On January 1, 2021, Lorry Manufacturing Company purchased equipment from Wales Inc. There was no established market price for the equipment which has an 8 year life and no salvage value. Lorry gave Wales a P105,000 zero-interest-bearing note payable in 3 equal annual installments of P35,000, with the first payment due December 31, 2021. The prevailing rate of interest for a note of this type is 8%. The present value of the note at 8% was P90,199. What amount will be reported in the company’s 2021 income statement for interest expense? a.) P7,216 b.) P8,400 c.0 P1,750 d.) P0
On January 1, 2021, Lorry Manufacturing Company purchased equipment from Wales Inc. There was no established market price for the equipment which has an 8 year life and no salvage value. Lorry gave Wales a P105,000 zero-interest-bearing note payable in 3 equal annual installments of P35,000, with the first payment due December 31, 2021. The prevailing rate of interest for a note of this type is 8%. The present value of the note at 8% was P90,199. What amount will be reported in the company’s 2021 income statement for interest expense? a.) P7,216 b.) P8,400 c.0 P1,750 d.) P0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
On January 1, 2021, Lorry Manufacturing Company purchased equipment from Wales Inc. There was no established market price for the equipment which has an 8 year life and no salvage value. Lorry gave Wales a P105,000 zero-interest-bearing note payable in 3 equal annual installments of P35,000, with the first payment due December 31, 2021. The prevailing rate of interest for a note of this type is 8%. The present value of the note at 8% was P90,199. What amount will be reported in the company’s 2021 income statement for interest expense?
a.) P7,216
b.) P8,400
c.0 P1,750
d.) P0
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