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Kaku Company is a dealer in equipment. On December 31, 2019, the entity sold an equipment in exchange for a noninterest bearing note requiring five annual payments of P500,000.
The first payment was made on December 31, 2020. The market interest for similar notes was 8%. The relevant present value factors were:
PV of 1 at 8% for 5 periods
0.68
PV of an ordinary annuity of 1 at 8% for 5 periods
3.99
REQUIRED:
Prepare
Determine the carrying amount of the note receivable on December 31, 2020.
Determine the interest income for 2021.
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