PLEASE ANSWER ASAP Problem No. 4 AACA Corporation is a company engaged in buying and selling manufacturing equipment. On Jan. 1, 2020, AACA Corporation sold equipment, with a cash price of P1,500,000. The cost of the equipment is P750,000. The buyer signed a deferred payment contract that provides for a down payment of P300,000 and a 5-year note for P1,705,900. The note is to be paid in 5 equal annual payments of P341,180. The payments include interest and are made on Dec. 31 of each year, beginning on Dec. 31, 2020. AACA Corporation made the following entries in relation to the sale of the equipment and the related note receivable: Jan. 1, 2020 Cash 300,000 Notes receivable 1,705,900 Cost of goods sold 750,000 Sales 2,005,900 Inventory 750,000 Dec. 31, 2020 Cash 341,180 Notes receivable 341,180 Dec. 31, 2021 Cash 341,180 Notes receivable 341,180 AACA Corporation reported the notes receivable in its statement of financial position at Dec. 31, 2020 and 2021 as part of trade and other receivables. Based on the above and the result of your audit, answer the following: The interest rate on the note is? Profit for 2020 is overstated by? Retained earnings as of Dec. 31, 2021 is overstated by? The working capital as of Dec. 31, 2021 is overstated by?
PLEASE ANSWER ASAP
Problem No. 4
AACA Corporation is a company engaged in buying and selling manufacturing equipment. On Jan. 1, 2020, AACA Corporation sold equipment, with a cash price of P1,500,000. The cost of the equipment is P750,000. The buyer signed a deferred payment contract that provides for a down payment of P300,000 and a 5-year note for P1,705,900. The note is to be paid in 5 equal annual payments of P341,180. The payments include interest and are made on Dec. 31 of each year, beginning on Dec. 31, 2020.
AACA Corporation made the following entries in relation to the sale of the equipment and the related note receivable:
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Jan. 1, 2020 |
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Cash |
300,000 |
|
|
Notes receivable |
1,705,900 |
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|
Cost of goods sold |
750,000 |
|
|
Sales |
2,005,900 |
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|
Inventory |
750,000 |
|
|
Dec. 31, 2020 |
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|
Cash |
341,180 |
|
|
Notes receivable |
341,180 |
|
|
Dec. 31, 2021 |
||
|
Cash |
341,180 |
|
|
Notes receivable |
341,180 |
AACA Corporation reported the notes receivable in its
Based on the above and the result of your audit, answer the following:
- The interest rate on the note is?
- Profit for 2020 is overstated by?
Retained earnings as of Dec. 31, 2021 is overstated by?- The
working capital as of Dec. 31, 2021 is overstated by?
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