On December 31, 20x1, DEF Company purchased a machine in exchange for a non-interest bearing note requiring eight payments of ₱200,000. The first payment was made on December 31, 20x1 and the others are due annually on December 31. At the date of issuance, the prevailing rate of interest for this type of note was 12%. PV of an ordinary annuity of 1 at 12% for 8 periods 4.968 PV of an annuity of 1 in advance at 12% for 8 periods 5.564 Required: 1. What amount should be recorded as initial cost of the machine? 2. What is the discount on note payable on December 31, 20x1? 3. What amount should be reported as interest expense for 20x2?
On December 31, 20x1, DEF Company purchased a machine in exchange for a non-interest bearing note requiring eight payments of ₱200,000.
The first payment was made on December 31, 20x1 and the others are due annually on December 31. At the date of issuance, the prevailing rate of interest for this type of note was 12%.
PV of an ordinary annuity of 1 at 12% for 8 periods 4.968
PV of an annuity of 1 in advance at 12% for 8 periods 5.564
Required:
1. What amount should be recorded as initial cost of the machine?
2. What is the discount on note payable on December 31, 20x1?
3. What amount should be reported as interest expense for 20x2?
4. What is the carrying amount of note payable on December 31, 20x2?
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