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 receivable in its statement of financial position at December 31, 2020 as part of trade and other receivables. Questions: 1. The correct gain on sale of land is? 2. The correct interest income for 2020 is? 3. Profit for 2020 is overstated by?
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
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 receivable in its
Questions:
1. The correct gain on sale of land is?
2. The correct interest income for 2020 is?
3. Profit for 2020 is overstated by?
4. The correct carrying amount of the notes receivable at December 31, 2020 is?
5. The entity's
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