On January 1, 20x9, Fairness Company sold a tract of land that was acquired years ago for P 3,000,000. Fairness received a three year non-interest bearing note for P 6,000,000 in exchange for the land, but the current market rate of interest for comparable notes is 10%. The note is payable in equal annual instalments of P 2,000,000 every December 31 starting December 31, 20x9. a. Compute for the carrying value of the note on January 1, 20x9 b. Compute for the gain or loss on sale c. Compute for the interest income recognized in 20x11. d. Compute for the carrying value of the note in December 31, 20x10 e. Prepare all entries.
On January 1, 20x9, Fairness Company sold a tract of land that was acquired years ago for P 3,000,000. Fairness received a three year non-interest bearing note for P 6,000,000 in exchange for the land, but the current market rate of interest for comparable notes is 10%. The note is payable in equal annual instalments of P 2,000,000 every December 31 starting December 31, 20x9. a. Compute for the carrying value of the note on January 1, 20x9 b. Compute for the gain or loss on sale c. Compute for the interest income recognized in 20x11. d. Compute for the carrying value of the note in December 31, 20x10 e. Prepare all entries.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 20x9, Fairness Company sold a tract of land that was acquired years ago for P
3,000,000. Fairness received a three year non-interest bearing note for P 6,000,000 in exchange for the land,
but the current market rate of interest for comparable notes is 10%. The note is payable in equal
annual instalments of P 2,000,000 every December 31 starting December 31, 20x9.
a. Compute for the carrying value of the note on January 1, 20x9
b. Compute for the gain or loss on sale
c. Compute for the interest income recognized in 20x11.
d. Compute for the carrying value of the note in December 31, 20x10
e. Prepare all entries.
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