1. Smart Company has P3,000,000 note receivable from sale of plant bearing interest at 12% per annum. The note is dated June 1, 2008. The note is payable in 3 annual installments of P1,000,000 plus interest on the unpaid balance every June 1. The initial principal and interest payment was made on June 1, 2009.
The interest income for 2009 is
a. P300,000c. P210,000
b. P290,000d. P140,000
1. Trans Company sold a tract of land to Former Co. on July 1, 2009, for P8,000,000 under an installment sale contract. Former Co. signed a 4-year 11% note for P5,600,000 on July 1, 2009, in addition to the down payment of P2,400,000. The equal annual payments of principal and interest on the note will be P1,805,000 payable on July 1, 2010, 2011, 2012,and 2013. The land had an established cash price of P8,000,000, and its cost to the company was P6,000,000. The collection of the installments on this note is reasonably assured.
The current portion of the installment note receivable on December 31, 2010 is a. P1,805,000c. P1,319,790
b. P1,400,000d. P1,189,000
1. At the beginning of 2007, Marcos Company received a three-year non-interest-bearing P1,000,000 trade note. Marcos reported this note as a P1,000,000 trade note receivable on its 2007 year-end statement of financial position and P1,000,000 as sales revenue for 2007. What effect did this accounting for the note have on Marcos's profit for 2007, 2008, 2009, and its retained earnings at the end of 2009, respectively? a. Overstate, overstate, understate, no effect
b. Overstate, understate, understate, no effect
c. Overstate, understate, understate, understate
d. No effect, no effect, no effect, no effect
1. Pagudpud Company received a seven-year zero-interest-bearing note on February 22, 2009, in exchange for property it sold to Rear Company. There was no established exchange price for this property and the note has no ready market. The prevailing rate of interest for a note of this type was 7% on February 22, 2009, 7.5% on December 31, 2009, 7.7% on February 22, 2010, and 8% on December 31, 2010. What interest rate should be used to calculate the interest revenue from this transaction for the years ended December 31, 2009 and 2010, respectively? a. 0% and 0%c. 7% and 7%
b. 7% and 7.7%d. 7.5% and 8%
Use the following information for the next two questions.
On December 31, 2009, Wolfgang Corporation sold for P50,000 an old machine having an original cost of P90,000 and a carrying amount of P40,000. The terms of the sale were as follows: 1) P10,000 down payment; and 2) P20,000 payable on December 31 each of the next two years.
The agreement of sale made no mention of interest; however, 9% would be a fair rate for this type of transaction.
1. How much should be recognized as gain on sale of machine? a. P10,000c. P5,182
b. P14,818d. P 0
1. How much should be recognized as interest income in 2010 related to above transaction? a. P3,166c. P4,066
b. P2,415d. P 0
P30 Kieso TB 11th- AMP
1. On December 30, 2009, Chang Co. sold a machine to Door Co. in exchange for a noninterest-bearing note requiring ten annual payments of P10,000. Door made the first payment on December 30, 2009. The market interest rate for similar notes at date of issuance was 8%. Information on present value factors is as follows:
| |Present Value of 1 at 8%|Present Value of Ordinary Annuity of | |Period | |1 at 8% | |9 |0.50 |6.25 | |10 |0.46 |6.71 |
In its December 31, 2009 statement of financial position, what amount should Chang report as note receivable? a. P45,000c. P62,500