Reference no: EM133078554

Questions -

Q1. On October 1, 2020, ABC Manufacturing sold a tract of land that originally cost P400,000. ABC received a P600,000, 6% note as payment for the land. The principal amount of the note is payable on September 30, 2023. Interest is payable every anniversary dates - September 30, 2021, September 30, 2022 and September 30, 2023. On October 1, 2020, the prevailing rate of interest for a similar obligation is 10%. On this date, there is no available cash price for the land. PV of a single payment at 6%- 0.8396; PV of a single payment at 10%- 0.7513; PV of ordinary annuity at 6%- 2.6730; PV of ordinary annuity at 10%- 2.4869. ABC's accounting period ends on December 31.

How much is the amortized cost/carrying value of the note receivable reported in ABC's statement of financial position at December 31, 2021?

a. P573,215

b. P558,339

c. P563,298

d. P578,173

Q2. On December 31, 2018, Cavite Company sold equipment to Bulacan Company for P380,000. Cavite accepted a 10% note receivable for the entire sales price. This note is payable in two equal installments of P190,000 plus accrued interest on December 31, 2019 and December 31, 2020.

On July 1, 2020, Cavite discounted the note at a bank at a discount rate of 12%. Cavite Company's proceeds from the discounted note were?

a. P183,920

b. P191,330

c. P196,460

d. P187,530