Reference no: EM132963411
Question - ABC Co. sold an equipment purchased at P1,250,000 with recorded accumulated depreciation at P375,000 to one of its constituents for P1,150,000 last Jan 5, 2021.
The buyer signed a non interest bearing note for the P1,150,000 payable in 5 equal annual installments every January 5 and paid immediately the 1st installment upon sale.
The prevailing market rate of interest for this type of note is 12%.
*Round off your PV factors into 4 decimal places
* In computing the interest income, round off your answers to the nearest whole number.
Required -
1. Compute the unearned interest income.
2. Compute the gain on sale of equipment.
3. Prepare the journal entries from the year 2021 to 2025.