Problem 9: Use the following information for the next five questions: On January 1, 2021, PITIFUL Co. sold transportation equipment with a historical cost of P8,000,000 and accumulated depreciation of P2,800,000. In consideration for the sale, PITIFUL Co. received cash of P400,000 and a noninterest-bearing note receivable of P4,000,000 due in 4 equal annual installments starting December 31, 2021. The prevailing rate of interest of this type of note is 12%. 24. How much is the carying amount of the note on initial recognition? 25. How much is the interest income for 2021? 26. How much is the carrying amount of the note on December 31, 2021?
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- On January 1, 2018, King Inc. borrowed $150,000 and signed a 5-year, note payable with a 10% interest rate. Each annual payment is in the amount of $39,569 and payment is due each Dec. 31. What is the journal entry on Jan. 1 to record the cash received and on Dec. 31 to record the annual payment? (You will need to prepare the first row in the amortization table to determine the amounts.)On January 1,2021, Gale Co. sold delivery equipment costing ₱1,000,000 with accumulated depreciation of ₱150,000 in exchange for a 3-year, ₱1,800,000 noninterest-bearing note receivable due as follows: Expected date of collection Amount of cash flow 31-Dec-2021 ₱1,000,000 31-Dec-2022 600,000 31-Dec-2023 200,000 ₱1,800,000 The prevailing rate of interest for this type of note is 12%. Based on the above data, answer the following: 1. How much is current portion of the note on December 31,2021? a. ₱600,000 c. ₱83,425 b. ₱516,575 d. ₱178,635 2. How much is the noncurrent portion of note on December 31,2021? a. ₱600,000 c. ₱83,425 b. ₱516,575 d. ₱178,635On January 1,2021, Fiona Co. sold an office equipment with cost of ₱1,000,000 and accumulated depreciation of ₱150,000 in exchange for a 3-year, 10%, ₱2,000,000 note receivable. Principal is due on December 31. The prevailing interest rate for this type of note is 12%. Based on the above data, answer the following: 1. How much is the gain or loss on sale of office equipment in 2021? a. ₱1,901,730 c. ₱901,730 b. ₱1,051,730 d. ₱1,053,960 2. How much is the interest income for 2021? a. ₱200,000 c. ₱215,847 b. ₱229,054 d. ₱232,643 3. How much is the carrying amount of the note on December 31,2021? a. ₱1,915,834 c. ₱2,000,000 b. ₱1,930,784 d. ₱1,963,395 4. How much is the current portion of the note on December 31,2021? a. Nil c. ₱1,963,395 b. ₱14,950 d. ₱1,930,784 5. How much is the noncurrent portion of the note on December 31,2021? a. Nil c. ₱1,915,834 b. ₱14,950 d. ₱1,930,784
- On January 1, 2023, ABC Company sold a office equipment with a cost of P5,400,000 and accumulated depreciation of P2,980,000. In consideration for the sale, ABC Company received cash of P220,000 and a noninterest-bearing note receivable of P3,500,000 due on December 31, 2026. The prevailing rate of interest for this type of note is 12%. On January 1, 2023, ABC Company sold an old machinery with a cost of P3,000,000 and accumulated depreciation of P2,000,000. In consideration for the sale, ABC Company received cash of P250,000 and a noninterest-bearing note receivable of P1,850,000 due in 5 equal annual installments starting December 31, 2023. The prevailing rate of interest of this type of note is 10%. 1. The total gain or loss on sale of office equipment and old machinery is A. Nil B. 600,000 C. 652,591 D. 676,904 2. The interest income to be recognized in 2023 is A. Nil B. 266,918 C. 407,177 D. 605,000 3. The carrying amount of the note as of December 31, 2023 is A. 3,256,904 B.…On January 1,2021, Gale Co. sold delivery equipment costing ₱1,000,000 with accumulated depreciation of ₱150,000 in exchange for a 3-year, ₱1,800,000 noninterest-bearing note receivable due as follows: Expected date of collection Amount of cash flow 31-Dec-2021 ₱1,000,000 31-Dec-2022 600,000 31-Dec-2023 200,000 ₱1,800,000 The prevailing rate of interest for this type of note is 12%. Based on the above data, answer the following: 1. How much is the gain or loss on sale of delivery equipment in 2021? a. Nil c. ₱513,580 b. ₱663,580 d. ₱1,513,580 2. How much is the interest income of 2021? a. Nil c. ₱83,425 b. ₱181,630 d. ₱188,728 3. How much is the carrying amount of the note on December 31,2021? a. ₱695,210 c. ₱178,635 b. ₱876,008 d. ₱512,399 4. How much is current portion of the note on December 31,2021? a. ₱600,000 c. ₱83,425 b. ₱516,575 d. ₱178,635 5. How much is the noncurrent portion of note on December 31,2021? a. ₱600,000 c. ₱83,425 b. ₱516,575 d. ₱178,635On January 1, 2021, Gee Company sold a machine with a cost of P500,000 and accumulated depreciation of P350,000 to Faye Company. In lieu of cash payment, Faye Company gave a 4-year, P100,000, 10% note. The note requires interest to be paid annually on December 31. The prevailing rate of interest for a note of this type is 16%. Required: Compute the following: (Round off PV factors to 4 decimal places before multiplying.) 1. Gain or loss on sale of machinery (place parenthesis if loss) 2. Interest income 3. Current portion of the notes receivable 4. Non current portion of the notes receivable
- On January 1, 2021, BB Company sold an equipment costing P10,000,000 and accumulated depreciation of P2,500,000. BB received a P1,000,000 cash and a 10%, 7 year. P7,000,000 note receivable every December 31 in equal annual installment of P1,000,000 plus interest starting December 31, 2021. Interest effective on this note when received is at 8% Statement 1: The amount of gain (loss) on sale should BB recognized on January 1. 2021 is P948,407. Statement 2 The interest income in BB's statement of comprehensive income for the period ending December 31, 2021 is P595,873. Only statement 1 is true Only statement 2 is true Both statements are true Both statements are falseOn January 1, 2021, Beauty Company sold a machine with a cost of P500,000 and accumulated depreciation of P350,000 to Gee Company. In lieu of cash payment, Gee Company gave Beauty Company a 4-year, P100,000, 10% note. The note requires interest to be paid annually on December 31. The 10% interest rate is a realistic rate of interest for a note of this type. Required: Compute the following as of December 31, 2021: (Round off PV factors to 4 decimal places before multiplying.) 4. Current portion of notes receivable Answer 5. Noncurrent portion of notes receivableOn January 1, 2021, Beauty Company sold a machine with a cost of P500,000 and accumulated depreciation of P350,000 to Gee Company. In lieu of cash payment, Gee Company gave Beauty Company a 4-year, P100,000, 10% note. The note requires interest to be paid annually on December 31. The 10% interest rate is a realistic rate of interest for a note of this type. Required: Compute the following as of December 31, 2021: (Round off PV factors to 4 decimal places before multiplying.) 1. Effective interest rate 2. Gain or loss on sale of machinery (place parenthesis if loss) 3. Interest income
- Bahag-Hari company provided you the following sales transactions as of December 31,2021:· On January 1,2020, Bahag-Hari Company sold a Machinery for P5,000,000 to Orange Company. Orange Company paid P500,000 down and signed a noninterest-bearing note for the balance which is payable in 3 equal annual installments every December 31 of each year. The carrying value of the machinery is P5,700,00.· A notes receivable of P1,000,000 with a coupon rate of 12% from Pula Company was received from sale of goods in the normal course of business. The note is dated May 1,2021 and due on May 1,2024. Interests are collectible every May 1.· A three-year note of P200,000 with contract rate of 10% received from Dilaw Corporation dated January 1,2021 was accepted in exchange for consultation services rendered. The note is considered to have prevailing market rate 12%. Interest are collectible every December 31. The prevailing rate of interest for the above type of notes was 12%.…Bahag-Hari company provided you the following sales transactions as of December 31,2021:· On January 1,2020, Bahag-Hari Company sold a Machinery for P5,000,000 to Orange Company. Orange Company paid P500,000 down and signed a noninterest-bearing note for the balance which is payable in 3 equal annual installments every December 31 of each year. The carrying value of the machinery is P5,700,00.· A notes receivable of P1,000,000 with a coupon rate of 12% from Pula Company was received from sale of goods in the normal course of business. The note is dated May 1,2021 and due on May 1,2024. Interests are collectible every May 1.· A three-year note of P200,000 with contract rate of 10% received from Dilaw Corporation dated January 1,2021 was accepted in exchange for consultation services rendered. The note is considered to have prevailing market rate 12%. Interest are collectible every December 31. The prevailing rate of interest for the above type of notes was 12%.…Bahag-Hari company provided you the following sales transactions as of December 31,2021:· On January 1,2020, Bahag-Hari Company sold a Machinery for P5,000,000 to Orange Company. Orange Company paid P500,000 down and signed a noninterest-bearing note for the balance which is payable in 3 equal annual installments every December 31 of each year. The carrying value of the machinery is P5,700,00.· A notes receivable of P1,000,000 with a coupon rate of 12% from Pula Company was received from sale of goods in the normal course of business. The note is dated May 1,2021 and due on May 1,2024. Interests are collectible every May 1.· A three-year note of P200,000 with contract rate of 10% received from Dilaw Corporation dated January 1,2021 was accepted in exchange for consultation services rendered. The note is considered to have prevailing market rate 12%. Interest are collectible every December 31. The prevailing rate of interest for the above type of notes was 12%.…