Find what is carrying amount of note receivable on december

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Reference no: EM132838227

On December 31, 2015, African Company sold an equipment with carrying amount of P2,000,000 and received a noninterest-bearing note requiring payment of P500,000 annually for ten years. The first payment is due December 31, 2016.

  • The prevailing rate of interest for this type of note at date of issuance is 12%.
  • Present value of 1 at 12% for 10 periods 0.322
  • Present value of ordinary annuity of 1 at 12% for 10 periods 5.650

Problem 1. On December 31, 2015, what is the carrying amount of the note receivable?

a. 5,000,000

b. 2,175,000

c. 1,610,000

d. 2,825,000

Problem 2. What is the gain on sale of equipment to be recognized in 2015?

a. 3,000,000

b. 2,175,000

c. 825,000

d. 0

Problem 3. What amount of interest income should be recognized for 2016?

a. 600,000

b. 339,000

c. 319,800

d. 300,000

Problem 4. What is the carrying amount of the note receivable on December 31, 2016?

a. 2,325,000

b. 4,500,000

c. 2,825,000

d. 2,664,000

Reference no: EM132838227

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