The Vigan Company included the following in its notes receivable as of December 31, 2022: Note receivable from sale of land Note receivable from consultation P 880,000 1,200,000 1,600,000 Note receivable from sale of equipment In connection with your audit, you were able to gather the following transactions during 2022 and other information pertaining to the company's notes receivable: • On January 1, 2022, Vigan Company sold a tract of land. The land, purchased 10 years ago, was carried on Vigan Company's books at a value of P500,000. Vigan received a noninterest- bearing note for P880,000. The note is due on December 31, 2023. There is no readily available market value for the land, but the current market rate of interest for comparable notes is 10%. • On January 1, 2022, Vigan Company finished consultation services and accepted in exchange a promissory note with a face value of P1,200,000, a due date of December 31, 2024, and a stated rate of 5%, with interest receivable at the end of each year. The fair value of the services is not readily determinable and the note is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of interest of__ 10%. • On January 1, 2022, Vigan Company sold equipment with a carrying amount of P1,600,000 to X Company. As, payment, X gave Vigan Company a P2,400,000 note. The note bears an interest rate of 4% and is to be repaid in three annual installments of P800,000 (plus interest on the outstanding balance). The first payment was received on December 31, 2022. The market price of the equipment is not reliably determinable. The prevailing rate of interest for notes of this type is 14%.
The Vigan Company included the following in its notes receivable as of December 31, 2022: Note receivable from sale of land Note receivable from consultation P 880,000 1,200,000 1,600,000 Note receivable from sale of equipment In connection with your audit, you were able to gather the following transactions during 2022 and other information pertaining to the company's notes receivable: • On January 1, 2022, Vigan Company sold a tract of land. The land, purchased 10 years ago, was carried on Vigan Company's books at a value of P500,000. Vigan received a noninterest- bearing note for P880,000. The note is due on December 31, 2023. There is no readily available market value for the land, but the current market rate of interest for comparable notes is 10%. • On January 1, 2022, Vigan Company finished consultation services and accepted in exchange a promissory note with a face value of P1,200,000, a due date of December 31, 2024, and a stated rate of 5%, with interest receivable at the end of each year. The fair value of the services is not readily determinable and the note is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of interest of__ 10%. • On January 1, 2022, Vigan Company sold equipment with a carrying amount of P1,600,000 to X Company. As, payment, X gave Vigan Company a P2,400,000 note. The note bears an interest rate of 4% and is to be repaid in three annual installments of P800,000 (plus interest on the outstanding balance). The first payment was received on December 31, 2022. The market price of the equipment is not reliably determinable. The prevailing rate of interest for notes of this type is 14%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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2. What is the gain on sale of machinery on December 20?
Transcribed Image Text:The Vigan Company included the following in its notes receivable as of December 31, 2022:
Note receivable from sale of land
Note receivable from consultation
P 880,000
1,200,000
1,600,000
Note receivable from sale of equipment
In connection with your audit, you were able to gather the following transactions during 2022 and
other information pertaining to the company's notes receivable:
•
On January 1, 2022, Vigan Company sold a tract of land. The land, purchased 10 years ago,
was carried on Vigan Company's books at a value of P500,000. Vigan received a noninterest-
bearing note for P880,000. The note is due on December 31, 2023. There is no readily
available market value for the land, but the current market rate of interest for comparable
notes is 10%.
• On January 1, 2022, Vigan Company finished consultation services and accepted in exchange a
promissory note with a face value of P1,200,000, a due date of December 31, 2024, and a
stated rate of 5%, with interest receivable at the end of each year. The fair value of the
services is not readily determinable and the note is not readily marketable. Under the
circumstances, the note is considered to have an appropriate imputed rate of interest of__
10%.
• On January 1, 2022, Vigan Company sold equipment with a carrying amount of P1,600,000
to X Company. As, payment, X gave Vigan Company a P2,400,000 note. The note bears an
interest rate of 4% and is to be repaid in three annual installments of P800,000 (plus interest
on the outstanding balance). The first payment was received on December 31, 2022. The
market price of the equipment is not reliably determinable. The prevailing rate of interest for
notes of this type is 14%.
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