Problem 6-4 (IAA) Gullible Company is a dealer in equipment. On December 31. 2020, the entity sold an equipment in exchange for a noninterest bearing note requiring five annual payments of P500,000. The first payment was made on December 31, 2021. The market interest for similar notes was 8%. The relevant present value factors are: PV of 1 at 8% for 5 periods PV of an ordinary annuity of 1 at 8% for 5 periods 0.68 3.99 Required: 1. Prepare journal entries for 2020 and 2021. 2. Determine the carrying amount of the note receivable on December 31, 2021. 8. Determine the interest income for 2022.
Problem 6-4 (IAA) Gullible Company is a dealer in equipment. On December 31. 2020, the entity sold an equipment in exchange for a noninterest bearing note requiring five annual payments of P500,000. The first payment was made on December 31, 2021. The market interest for similar notes was 8%. The relevant present value factors are: PV of 1 at 8% for 5 periods PV of an ordinary annuity of 1 at 8% for 5 periods 0.68 3.99 Required: 1. Prepare journal entries for 2020 and 2021. 2. Determine the carrying amount of the note receivable on December 31, 2021. 8. Determine the interest income for 2022.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 6-4 (IAA)
Gullible Company is a dealer in equipment. On December
31, 2020, the entity sold an equipment in exchange for a
noninterest bearing note requiring five annual payments of
P500,000. The first payment was made on December 31, 2021.
The market interest for similar notes was 8%. The relevant
present value factors are:
PV of 1 at 8% for 5 periods
PV of an ordinary annuity of 1 at 8% for 5 periods
0.68
3.99
Required:
1. Prepare journal entries for 2020 and 2021.
2. Determine the carrying amount of the note receivable on
December 31, 2021.
8. Determine the interest income for 2022.
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