Documente Academic
Documente Profesional
Documente Cultură
1. Interest-Bearing Note
Feasible Company sold to another entity a tract of land costing P5,000,000 for P7,000,000 on January
1, 2016. The buyer paid P1,000,000 down and signed a two-year promissory note for the remainder of
the purchase price plus 12% interest compounded annually. The note matures on January 1, 2018.
The prevailing interest rate for a note of this type is 12%. The present value of ordinary annuity of 1
for three periods is 2.4018.
Required:
a. Prepare journal entries for 2016 and 2017.
b. Determine the carrying amount of the note receivable on December 31, 2017.
c. Determine the interest income for 2018.
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, 2016 was 12%. The present value of
1 at 12% for three periods is 0.7118.