On January 2, 2019, Grey Company received an P800,000, 8%, 2 year note from Black Corporation as settlement for an outstanding past due account. The interest is payable every December 31 and the interest due in 2019 were collected on time. In 2020, Black Corporation was in financial crisis, and as a result of this development, Grey Company expects that the interest for 2020 will not be collected and that only P600,000 of the principal amount will be collected in equal annual installment over the next three years starting December 31, 2021. As of December 31, 2020, the market rate of interest for a similar instrument is 9% (PV of an annuity for 3 years at 9% is 2.577)

On January 2, 2019, Grey Company received an P800,000, 8%, 2 year note from Black Corporation as settlement for an outstanding past due account. The interest is payable every December 31 and the interest due in 2019 were collected on time. In 2020, Black Corporation was in financial crisis, and as a result of this development, Grey Company expects that the interest for 2020 will not be collected and that only P600,000 of the principal amount will be collected in equal annual installment over the next three years starting December 31, 2021. As of December 31, 2020, the market rate of interest for a similar instrument is 9% (PV of an annuity for 3 years at 9% is 2.577)

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter18: Accounting Periods And Methods

Section: Chapter Questions

Problem 18DQ

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