On January 1, 2021, Lorry Manufacturing Company purchased equipment from Wales Inc. There was no established market price for the equipment which has an 8 year life and no salvage value. Lorry gave Wales a P105,000 zero-interest-bearing note payable in 3 equal annual installments of P35,000, with the first payment due December 31, 2021. The prevailing rate of interest for a note of this type is 8%. The present value of the note at 8% was P90,199. What amount will be reported in the company’s 2021 income statement for interest expense? a.) P7,216 b.) P8,400 c.0 P1,750 d.) P0
On January 1, 2021, Lorry Manufacturing Company purchased equipment from Wales Inc. There was no established market price for the equipment which has an 8 year life and no salvage value. Lorry gave Wales a P105,000 zero-interest-bearing note payable in 3 equal annual installments of P35,000, with the first payment due December 31, 2021. The prevailing rate of interest for a note of this type is 8%. The present value of the note at 8% was P90,199. What amount will be reported in the company’s 2021 income statement for interest expense? a.) P7,216 b.) P8,400 c.0 P1,750 d.) P0
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 14RE: On January 1, 2019, Boater Company issues a 20,000 non-interest-bearing, 5-year note for equipment....
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On January 1, 2021, Lorry Manufacturing Company purchased equipment from Wales Inc. There was no established market price for the equipment which has an 8 year life and no salvage value. Lorry gave Wales a P105,000 zero-interest-bearing note payable in 3 equal annual installments of P35,000, with the first payment due December 31, 2021. The prevailing rate of interest for a note of this type is 8%. The present value of the note at 8% was P90,199. What amount will be reported in the company’s 2021 income statement for interest expense?
a.) P7,216
b.) P8,400
c.0 P1,750
d.) P0
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