On January 1, 2021, South Company acquired a building for P5,000,000. The entity paid P500,000 down and signed a noninterest bearing note for the balance which is payable in 3 equal annual installments every December 31 of each year. The prevailing interest rate for a note of this type is 12%. The present value of an ordinary annuity of 1 for three periods is 2.4018. Required: Prepare journal entries to record purchase of building on January 1, 2021, first installment payment'on December 31, 2021 and interest expense for 2021.
On January 1, 2021, South Company acquired a building for P5,000,000. The entity paid P500,000 down and signed a noninterest bearing note for the balance which is payable in 3 equal annual installments every December 31 of each year. The prevailing interest rate for a note of this type is 12%. The present value of an ordinary annuity of 1 for three periods is 2.4018. Required: Prepare journal entries to record purchase of building on January 1, 2021, first installment payment'on December 31, 2021 and interest expense for 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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7. Answer what is required of the problem.
Transcribed Image Text:On January 1, 2021, South Company acquired a building for
P5,000,000. The entity paid P500,000 down and signed a
noninterest bearing note for the balance which is payable in
3 equal annual installments every December 31 of each year.
The prevailing interest rate for a note of this type is 12%.
The present value of an ordinary annuity of 1 for three
periods is 2.4018.
Required:
Prepare journal entries to record purchase of building on
January 1, 2021, first installment payment'on December 31,
2021 and interest expense for 2021.
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