Question

On December 31,2018, Chang Company sold a machine in the ordinary course of business to Door Company in exchange for a noninterest bearing note requiring ten annual payments of P1,000,000. The entity made the first payment on December 31,2018. The market interest rate for similar notes at date of issuance was 8%. PV of an ordinary annuity of 1 at 8% for 9 periods 6.25 PV of an ordinary annuity of 1 at 8% for 10 periods 6.71 1. What is the amount of sales revenue? Sales revenue = 1,000,000 1,000,000 x 6.25 = 6,250,000 2. On December 31,2018, what is the carrying amount of the note receivable? 1,000,000 x 6.71 = 6,710,000 3. What is the interest income for 2019? Interest revenue for 2019 6.25 Notes receivable at the end 2019 1,000,000 Payment on note for 2019 1,000,000 Note receivable at the beginning of 2019 (6,710,000) Interest income for 2019 580,000 4. What is the carrying amount of the note receivable on December 31,2019? Carrying value of note receivable at the end of 2019 6.25 x 1,000,000 = 6,250,000 6,250,000 x 8% = 500,000 6,250,000 + 500,000 = 6,750,000

          On December 31,2018, Chang Company sold a machine in the ordinary course of business to Door Company in exchange for a noninterest bearing note requiring ten annual payments of P1,000,000. The entity made the first payment on December 31,2018. The market interest rate for similar notes at date of issuance was 8%. PV of an ordinary annuity of 1 at 8% for 9 periods 6.25 PV of an ordinary annuity of 1 at 8% for 10 periods 6.71 1. What is the amount of sales revenue? Sales revenue = 1,000,000 1,000,000 x 6.25 = 6,250,000 2. On December 31,2018, what is the carrying amount of the note receivable? 1,000,000 x 6.71 = 6,710,000 3. What is the interest income for 2019? Interest revenue for 2019 6.25 Notes receivable at the end 2019 1,000,000 Payment on note for 2019 1,000,000 Note receivable at the beginning of 2019 (6,710,000) Interest income for 2019 580,000 4. What is the carrying amount of the note receivable on December 31,2019? Carrying value of note receivable at the end of 2019 6.25 x 1,000,000 = 6,250,000 6,250,000 x 8% = 500,000 6,250,000 + 500,000 = 6,750,000

On December 31,2018, Chang Company sold a machine in the ordinary course of business to Door Company in exchange for a noninterest bearing note requiring ten annual payments of P1,000,000. The entity made the first payment on December 31,2018. The market interest rate for similar notes at date of issuance was 8%. PV of an ordinary annuity of 1 at 8% for 9 periods 6.25 PV of an ordinary annuity of 1 at 8% for 10 periods 6.71 1. What is the amount of sales revenue? Sales revenue = 1,000,000 1,000,000 x 6.25 = 6,250,000 2. On December 31,2018, what is the carrying amount of the note receivable? 1,000,000 x 6.71 = 6,710,000 3. What is the interest income for 2019? Interest revenue for 2019 6.25 Notes receivable at the end 2019 1,000,000 Payment on note for 2019 1,000,000 Note receivable at the beginning of 2019 (6,710,000) Interest income for 2019 580,000 4. What is the carrying amount of the note receivable on December 31,2019? Carrying value of note receivable at the end of 2019 6.25 x 1,000,000 = 6,250,000 6,250,000 x 8% = 500,000 6,250,000 + 500,000 = 6,750,000

Added by Cristian W.

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