Pampanga Company is a dealer in equipment. On December 31, 2021, the entity sold an equipment in exchange for a non-interest-bearing note requiring five annual payments of 500,000. The first payment was made on December 31, 2022. The market interest for similar notes was 8%. The PV of 1 at 8% for 5 periods is 0.68 and the PV of an ordinary annuity of 1 at 8% for 5 periods is 3.99. On December 31, 2021, what is the carrying amount of the note receivable? a. 2,500,000 b. 1,995,000 c. 1,700,000 d. 1,495,000
Pampanga Company is a dealer in equipment. On December 31, 2021, the entity sold an equipment in exchange for a non-interest-bearing note requiring five annual payments of 500,000. The first payment was made on December 31, 2022. The market interest for similar notes was 8%. The PV of 1 at 8% for 5 periods is 0.68 and the PV of an ordinary annuity of 1 at 8% for 5 periods is 3.99. On December 31, 2021, what is the carrying amount of the note receivable? a. 2,500,000 b. 1,995,000 c. 1,700,000 d. 1,495,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Pampanga Company is a dealer in equipment. On December 31, 2021, the entity sold an equipment in exchange for a non-interest-bearing note requiring five annual payments of 500,000. The first payment was made on December 31, 2022.
The market interest for similar notes was 8%. The PV of 1 at 8% for 5 periods is 0.68 and the PV of an ordinary annuity of 1 at 8% for 5 periods is 3.99.
On December 31, 2021, what is the carrying amount of the note receivable?
a. 2,500,000
b. 1,995,000
c. 1,700,000
d. 1,495,000
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