Determines the effective interest on the transactions

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Problem 1: Statement 1. R Co. receives a 3-year, noninterest-bearing note of P1,000,000. R Co. determined that the effective interest rate on the transaction is 10%. The initial carrying amount of the note receivable is computed as P1,000,000 x PV of 1 @10%, n=3/

Statement 2. Wet Co. received a noninterest-bearing note of P3,000,000. The note is collectible in three equal annual installments of P1,000,000, due at the end of each year. Wet Co. determines that the effective interest on the transactions is 10%. The initial carrying amount of the note receivable is computed as P1,000,000 x PV of 1 @ 10%, n=3.

A. FALSE; FALSE

B. TRUE; FALSE

C. TRUE; TRUE

D. FALSE; TRUE

Reference no: EM132615295

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