Reference no: EM132680503

Questions -

Q1. On September 1, 2021, Confused Company purchased a machine. The purchase agreement required Confuse to pay an initial fee payment of P700,000 plus four P300,000 payments due every four (4) months, the first payment due December 31, 2021. The market interest rate is 12%. The present and future value tables at 4% for four (4) periods were as follows:

Present value of P 1, 0.85;

Present value of an ordinary annuity of P1, 3.63;

Future value of P 1, 1.17,

Future value of an ordinary annuity of P1, 4.25.

What is the fair value of the note on December 31, 2021.

Q2. GREENTREE COMPANY acquires a new manufacturing equipment on January 1, 20x6, on installment basis. The deferred payment contract provides for a down payment of P300,000 and an 8-year note for P3,104,160. The note is to be paid in 8 equal annual instalment payments of P388,020, including 10% interest. The payments are to be made on December 31 of each year, beginning December 31, 20x6. The equipment has a cash price equivalent of P2,370,000. GREENTREE's financial year-end is December 31. Determine the amount of interest expense to be recognized in 20x6.