On January 1, 2021, ABC Company acquired an equipment from DEF Company in lieu of cash payment, ABC Company gave DEF Company a 3-year, 3%, P2,000,000 interest-bearing note payable. The interest is payable every December 31 while the principal shall be payable as follows: December 31, 2021, P1,200,000; December 31, 2022, P400,000; and December 31, 2023, P400,000. The prevailing rate of interest for this type of note is 12%. How much is the cost of the equipment acquired on January 1, 2021? How much is the interest expense for 2021?
On January 1, 2021, ABC Company acquired an equipment from DEF Company in lieu of cash payment, ABC Company gave DEF Company a 3-year, 3%, P2,000,000 interest-bearing note payable. The interest is payable every December 31 while the principal shall be payable as follows: December 31, 2021, P1,200,000; December 31, 2022, P400,000; and December 31, 2023, P400,000. The prevailing rate of interest for this type of note is 12%. How much is the cost of the equipment acquired on January 1, 2021? How much is the interest expense for 2021?
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 1PA: On January 1, 2018, King Inc. borrowed $150,000 and signed a 5-year, note payable with a 10%...
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1.On January 1, 2021, ABC Company acquired an equipment from DEF Company in lieu of cash payment, ABC Company gave DEF Company a 3-year, 3%, P2,000,000 interest-bearing note payable. The interest is payable every December 31 while the principal shall be payable as follows: December 31, 2021, P1,200,000; December 31, 2022, P400,000; and December 31, 2023, P400,000. The prevailing rate of interest for this type of note is 12%.
How much is the cost of the equipment acquired on January 1, 2021?
How much is the interest expense for 2021?
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