On January 1, 20x1, Diminished Co. paid cash down payment of P400,000 and issued a noninterest bearing note of P1,800,000 in exchange for a piece of land. The note is due in three equal annual installments every December 31. Case 1: The land has a fair value of P2,000,000. Provide entry on initial recognition. Case 2: The fair value of the land cannot be determined reliably. The prevailing market rate of interest for similar debt instruments in 9% . Provide the journal entry on initial recognition and the entries for the subsequent payments on the note
On January 1, 20x1, Diminished Co. paid cash down payment of P400,000 and issued a noninterest bearing note of P1,800,000 in exchange for a piece of land. The note is due in three equal annual installments every December 31. Case 1: The land has a fair value of P2,000,000. Provide entry on initial recognition. Case 2: The fair value of the land cannot be determined reliably. The prevailing market rate of interest for similar debt instruments in 9% . Provide the journal entry on initial recognition and the entries for the subsequent payments on the note
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 20x1, Diminished Co. paid cash down payment of P400,000 and issued a noninterest bearing note of P1,800,000 in exchange for a piece of land. The note is due in three equal annual installments every December 31.
Case 1: The land has a fair value of P2,000,000. Provide entry on initial recognition.
Case 2: The fair value of the land cannot be determined reliably. The prevailing market rate of interest for similar debt instruments in 9% . Provide the
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