On December 31, 2019, Magnet company sold for P 3,000,000 an old equipment having an original cost of P 5,400,000 and carrying amount of P 2,400,000. The term of the sale were P 600,000 down payment and P 800,000 payable each year on December 31of the next three years. The sale agreement made no mention of interest. However, 10% would be a fair rate for this type of transaction, PV of an ordinary annuity of 1 at 10% for 3 years- 2.48685 PV of 1 for years- 0.75132

On December 31, 2019, Magnet company sold for P 3,000,000 an old equipment having an original cost of P 5,400,000 and carrying amount of P 2,400,000. The term of the sale were P 600,000 down payment and P 800,000 payable each year on December 31of the next three years. The sale agreement made no mention of interest. However, 10% would be a fair rate for this type of transaction, PV of an ordinary annuity of 1 at 10% for 3 years- 2.48685 PV of 1 for years- 0.75132

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

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On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910
On October 1, 2019, Ball Company issued 9% bonds dated October 1, 2019, with a face amount of 200,000. The bonds mature in 10 years. Interest is paid semiannually on March 31 and September 30. The proceeds from the bond issuance were 205,294.53 to yield 8.6%. Ball Company has a December 31 fiscal year-end and does not use reversing entries. Required: 1. Prepare journal entries to record the issuance of the bonds and the interest payments for 2019 and 2020 using the effective interest method. 2. Prepare journal entries to record the issuance of the bonds and the interest payments for 2019 and 2020 using the straight-line method.
On December 31,2021, PAUL Corporation sold for P480,000 an old machine having an original cost of P800,000 and a book value of P60,000, the term of the sale were as follows: P120,000 down payment P120,000 payable on December 31 each of the next three years The agreement of sale made no mention of interest; however, 9% would be a fair rate for this type of Transaction. What should be the amortized cost of the note receivable on December 31,2022? P211,093 P110,092 P303,755 P360,000
On January 1, 2020, Pedro Company sold land that originally cost P400,000 to Buyer Company. As payment, Buyer gave Pedro Company a P600,000 note. The note bears an interest rate of 4% and is to be repaid in three annual installments of P200,000 (plus interest on the outstanding balance). The first payment is due on December 31, 2020. The market price of the land is not reliably determinable. The prevailing rate of interest for notes of this type is 14% on January 1, 2020 and 15% on December 31, 2020. Pedro made the following journal entries in relation to the sale of land and the related note receivable: January 1, 2020 Notes receivable. P600,000 Land P400,000 Gain on sale of land 200,000 December 31, 2020 Cash P224,000 Notes receivable P200,000 Interest income 24,000 Pedro reported the notes…
PROBLEM: On December 31, 2019, FJ Company sold for P2,400,000 an old equipment having an original cost of P4,320,000 and carrying amount of P1,920,000. The terms of the sale were P480,000 down payment and P960,000 payable on December 31 of the next two years. The sale agreement made no mention of interest. However, 9% would be a fair rate for this type of transaction. Compute for the following: a) Gain/Loss on sale of equipment (Specify if gain or loss.) b) Interest income for 2020 c) Carrying amount of the note receivable on December 31, 2020.
On January 1, 2020, Pedro Company sold land that originally cost P400,000 to Buyer Company. As payment, Buyer gave Pedro Company a P600,000 note. The note bears an interest rate of 4% and is to be repaid in three annual installments of P200,000 (plus interest on the outstanding balance). The first payment is due on December 31, 2020. The market price of the land is not reliably determinable. The prevailing rate of interest for notes of this type is 14% on January 1, 2020 and 15% on December 31, 2020. Pedro made the following journal entries in relation to the sale of land and the related note receivable: January 1, 2020 Notes receivable. P600,000 Land P400,000 Gain on sale of land 200,000 December 31, 2020 Cash P224,000 Notes receivable P200,000 Interest income 24,000 Pedro reported the notes…
On December 31, 2019, Univ Corporation sold for 50,000 an old machine having an original cost of 90,000 and a book value of 40,000. The terms of the sale were as follows: 10,000 down payment 20,000 payable on December 31 each of the next two years The agreement of sale made no mention of interest; however, 9% would be a fair rate for this type of transaction. What should be the amount of the notes receivable net of the unamortized discount on December 31, 2020 rounded to the nearest dollar? (Round your present value factor to 5 digits).
On January 1, 2021, Hornets Company sold land that originally cost P400,000 to Egi Company. As payment, Egi gave Hornets a P600,000 note. The note bears an interest rate of 8% and is to be repaid in three annual installments of P200,000 plus interest on the outstanding balance. The first payment is due on December 31, 2021. The market price of the land is not reliably determinable. The prevailing interest rate for notes of this type is 8%. How much is the interest revenue for the year 2022?
On January 1, 2023, Hornets Company sold land that originally cost P400,000 to the Egi Company. As payment, Egi gave Hornets a P600,000 note. The note bears an interest rate of 8% and is to be repaid in three annual installments of P200,000 plus interest on the outstanding balance. The first payment is due on December 31, 2023. The market price of the land is not reliably determinable. The prevailing interest rate for notes of this type is 8%. Question:32. Using the assumption of No. 30 (which is 12% interest rate for notes instead of 8%), what is the amortized cost of the note receivable at December 31, 2023? A. P600,000B. P400,000C. P379,355D. P290,003
On January 1, 2023, Hornets Company sold land that originally cost P400,000 to the Egi Company. As payment, Egi gave Hornets a P600,000 note. The note bears an interest rate of 8% and is to be repaid in three annual installments of P200,000 plus interest on the outstanding balance. The first payment is due on December 31, 2023. The market price of the land is not reliably determinable. The prevailing interest rate for notes of this type is 8%. Question:28. How much is the gain on the sale of land? A. P400,000B. P200,000C. P103,105D. P66,667
On January 1, 2023, Hornets Company sold land that originally cost P400,000 to the Egi Company. As payment, Egi gave Hornets a P600,000 note. The note bears an interest rate of 8% and is to be repaid in three annual installments of P200,000 plus interest on the outstanding balance. The first payment is due on December 31, 2023. The market price of the land is not reliably determinable. The prevailing interest rate for notes of this type is 8%. Question:30. Assume the same facts given in the problem, but change the prevailing interest rate for notes of this type to 12% (instead of 8%). At how much should the note be recorded on January 1, 2023? A. P600,000B. P560,138C. P480,360D. P427,080
On January 1, 2020, ABC Company sold property to the DEF Company. There was no established exchange price for the property, and DEF gave ABC a P2,000,000 non-interest bearing note payable in 5 equal annual installments of P400,000, with the first payment due December 31, 2020. The prevailing rate of interest for a note of this type is 9%.What should be the balance of the Discount on Notes Payable account on the books of DEF at December 31, 2021 after adjusting entries are made assuming that the effective interest method is used? A. P-0- B. P 444,139.49 C. P 187,482.13 D. P 304,112.05