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What is the amount of interest income

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Question - On January 1, 2020, Garcia Company sold property to Magsaysay Company which originally cost Garcia P760,000. There was no established exchange price for this property. Magsaysay gave Garner a P1,200,000 zero-interest-bearing note payable in three equal annual installments of P400,000 with the first payment due December 31, 2020. The note has no ready market. The prevailing rate of interest for a note of this type is 10%. The present value of a P1,200,000 note payable in three equal annual installments of P400,000 at a 10% rate of interest is P994,800. What is the amount of interest income that should be recognized by Garcia in 2020, using the effective-interest method?

Reference no: EM133179498

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