Problem 6-16 (AICPA Adapted) On December 31, 2021, Precious Company sold an equipment with carrying amount of P2,000,000 and received a noninterest-bearing note requiring payment of P500,000 annually for ten years. The first payment is due December 31, 2022. The prevailing rate of interest for this type of note at date of issuance is 12%. Present value of 1 at 12% for 10 periods 0.322 5.650 Present value of ordinary annuity of 1 at 12% for 10 periods 1. On December 31, 2021, what is the carrying amount of the note receivable? a. 5,000,000 b. 2,175,000 c. 1,610,000 d. 2,825,000 2. What amount should be recognized as gain on sale of equipment in 2021? a. 3,000,000 b. 2,175,000 C. 825,000 d. 0 3. What amount of interest income should be recognized for 2022? a. 600,000 b. 339,000 c., 319,800 d. 300,000 4. What is the carrying amount of the note receivable on December 31, 2022? a. 2,325,000 b. 4,500,000 c. 2,825,000 d. 2,664,000
Problem 6-16 (AICPA Adapted) On December 31, 2021, Precious Company sold an equipment with carrying amount of P2,000,000 and received a noninterest-bearing note requiring payment of P500,000 annually for ten years. The first payment is due December 31, 2022. The prevailing rate of interest for this type of note at date of issuance is 12%. Present value of 1 at 12% for 10 periods 0.322 5.650 Present value of ordinary annuity of 1 at 12% for 10 periods 1. On December 31, 2021, what is the carrying amount of the note receivable? a. 5,000,000 b. 2,175,000 c. 1,610,000 d. 2,825,000 2. What amount should be recognized as gain on sale of equipment in 2021? a. 3,000,000 b. 2,175,000 C. 825,000 d. 0 3. What amount of interest income should be recognized for 2022? a. 600,000 b. 339,000 c., 319,800 d. 300,000 4. What is the carrying amount of the note receivable on December 31, 2022? a. 2,325,000 b. 4,500,000 c. 2,825,000 d. 2,664,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 6-16 (AICPA Adapted)
On December 31, 2021, Precious Company sold an
equipment with carrying amount of P2,000,000 and received
a noninterest-bearing note requiring payment of P500,000
annually for ten years. The first payment is due December
31, 2022.
The prevailing rate of interest for this type of note at date of
issuance is 12%.
Present value of 1 at 12% for 10 periods
0.322
Present value of ordinary annuity of 1 at 12% for 10 periods
5.650
1. On December 31, 2021, what is the carrying amount of
the note receivable?
a. 5,000,000
b. 2,175,000
c. 1,610,000
d. 2,825,000
2. What amount should be recognized as gain on sale of
equipment in 2021?
a. 3,000,000
b. 2,175,000
C.
825,000
d.
0
3. What amount of interest income should be recognized
for 2022?
a. 600,000
b. 339,000
c., 319,800
d. 300,000
4. What is the carrying amount of the note receivable on
December 31, 2022?
a. 2,325,000
b. 4,500,000
c. 2,825,000
d. 2,664,000
Instructions: Apart from showing your complete
solutions to the requirements, please prepare all
journal entries up to December 31, 2022.
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