On January 1, 2023, ABC Company sold a office equipment with a cost of P5,400,000 and accumulated depreciation of P2,980,000. In consideration for the sale, ABC Company received cash of P220,000 and a noninterest-bearing note receivable of P3,500,000 due on December 31, 2026. The prevailing rate of interest for this type of note is 12%. On January 1, 2023, ABC Company sold an old machinery with a cost of P3,000,000 and accumulated depreciation of P2,000,000. In consideration for the sale, ABC Company received cash of P250,000 and a noninterest-bearing note receivable of P1,850,000 due in 5 equal annual installments starting December 31, 2023. The prevailing rate of interest of this type of note is 10%.
On January 1, 2023, ABC Company sold a office equipment with a cost of P5,400,000 and accumulated depreciation of P2,980,000. In consideration for the sale, ABC Company received cash of P220,000 and a noninterest-bearing note receivable of P3,500,000 due on December 31, 2026. The prevailing rate of interest for this type of note is 12%. On January 1, 2023, ABC Company sold an old machinery with a cost of P3,000,000 and accumulated depreciation of P2,000,000. In consideration for the sale, ABC Company received cash of P250,000 and a noninterest-bearing note receivable of P1,850,000 due in 5 equal annual installments starting December 31, 2023. The prevailing rate of interest of this type of note is 10%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![On January 1, 2023, ABC Company sold a office equipment with a cost of P5,400,000 and
accumulated depreciation of P2,980,000. In consideration for the sale, ABC Company received
cash of P220,000 and a noninterest-bearing note receivable of P3,500,000 due on December
31, 2026. The prevailing rate of interest for this type of note is 12%.
On January 1, 2023, ABC Company sold an old machinery with a cost of P3,000,000 and
accumulated depreciation of P2,000,000. In consideration for the sale, ABC Company received
cash of P250,000 and a noninterest-bearing note receivable of P1,850,000 due in 5 equal
annual installments starting December 31, 2023. The prevailing rate of interest of this type of
note is 10%.
1. The total gain or loss on sale of office equipment and old machinery is
A. Nil
B. 600,000
C. 652,591
D. 676,904
2. The interest income to be recognized in 2023 is
A. Nil
B. 266,918
C. 407,177
D. 605,000
3. The carrying amount of the note as of December 31, 2023 is
A. 3,256,904
B. 3,626,904
C. 3,664,081
D. 3,996,904
4. The current portion of the note on December 31, 2023 is
A. 252,715
B. 519,633
C. 1,172,850
D. 2,491,231
5. The noncurrent portion of the note on December 31, 2023 is
A. 3,664,081
B. 3,411,366
C. 3,511,366
D. None of the above](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8f7026a9-2237-4c7f-bdaa-a6066a1f4fc7%2Fe00c9663-d49f-4eea-af4d-1655595f2a61%2Fzrv9znn_processed.jpeg&w=3840&q=75)
Transcribed Image Text:On January 1, 2023, ABC Company sold a office equipment with a cost of P5,400,000 and
accumulated depreciation of P2,980,000. In consideration for the sale, ABC Company received
cash of P220,000 and a noninterest-bearing note receivable of P3,500,000 due on December
31, 2026. The prevailing rate of interest for this type of note is 12%.
On January 1, 2023, ABC Company sold an old machinery with a cost of P3,000,000 and
accumulated depreciation of P2,000,000. In consideration for the sale, ABC Company received
cash of P250,000 and a noninterest-bearing note receivable of P1,850,000 due in 5 equal
annual installments starting December 31, 2023. The prevailing rate of interest of this type of
note is 10%.
1. The total gain or loss on sale of office equipment and old machinery is
A. Nil
B. 600,000
C. 652,591
D. 676,904
2. The interest income to be recognized in 2023 is
A. Nil
B. 266,918
C. 407,177
D. 605,000
3. The carrying amount of the note as of December 31, 2023 is
A. 3,256,904
B. 3,626,904
C. 3,664,081
D. 3,996,904
4. The current portion of the note on December 31, 2023 is
A. 252,715
B. 519,633
C. 1,172,850
D. 2,491,231
5. The noncurrent portion of the note on December 31, 2023 is
A. 3,664,081
B. 3,411,366
C. 3,511,366
D. None of the above
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Step 1: Define note receivable
VIEWStep 2: Compute the total gain or loss on sale of assets
VIEWStep 3: Compute the interest income for 2023
VIEWStep 4: Calculate carrying amount of the note as on 31 December 2023
VIEWStep 5: Compute current portion of the note
VIEWStep 6: Compute the non-current portion of the note on 31 December 2023
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