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On January 1, 2020, Laguna Company sold equipment costing P836,000 with accumulated depreciation of P352,000 on the date of sale.  Laguna received as consideration for the sale, a P880,000 noninterest-bearing note due January 1, 2023.  There was no established exchange price for the equipment and the note had no ready market.  The prevailing rate of interest for a note of this type at January 1, 2020 was 10%.  The present value of 1 at 10% for three periods is 0.75.     In Laguna Company's statement of comprehensive income, how much should be reported as interest income for 2020?

On January 1, 2020, Laguna Company sold equipment costing P836,000 with accumulated depreciation of P352,000 on the date of sale.  Laguna received as consideration for the sale, a P880,000 noninterest-bearing note due January 1, 2023.  There was no established exchange price for the equipment and the note had no ready market.  The prevailing rate of interest for a note of this type at January 1, 2020 was 10%.  The present value of 1 at 10% for three periods is 0.75.     In Laguna Company's statement of comprehensive income, how much should be reported as interest income for 2020?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2020, Laguna Company sold equipment costing P836,000 with accumulated depreciation of P352,000 on the date of sale.  Laguna received as consideration for the sale, a P880,000 noninterest-bearing note due January 1, 2023.  There was no established exchange price for the equipment and the note had no ready market.  The prevailing rate of interest for a note of this type at January 1, 2020 was 10%.  The present value of 1 at 10% for three periods is 0.75.  

 

In Laguna Company's statement of comprehensive income, how much should be reported as interest income for 2020?

 

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