On July 1, 2021, Kiko Company (a calendar-year company) sold a tract of land that originally cost P400,000. Kiko received a P600,000 note as payment for the land. The note is payable in three annual installments of P200,000 beginning June 30, 2022 plus interest at the rate of 13% based on the outstanding balance. At July 1, 2021, the prevailing rate of interest for a similar obligation is 10%; thus, the stated interest was deemed as unrealistic. The fair value of the note is derived by discounting all future collections using the prevailing interest rate, amounting to P630,790. How much is the amortized cost (carrying value) of the notes receivable at December 31, 2021?
On July 1, 2021, Kiko Company (a calendar-year company) sold a tract of land that originally cost P400,000. Kiko received a P600,000 note as payment for the land. The note is payable in three annual installments of P200,000 beginning June 30, 2022 plus interest at the rate of 13% based on the outstanding balance. At July 1, 2021, the prevailing rate of interest for a similar obligation is 10%; thus, the stated interest was deemed as unrealistic. The fair value of the note is derived by discounting all future collections using the prevailing interest rate, amounting to P630,790. How much is the amortized cost (carrying value) of the notes receivable at December 31, 2021?
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
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 10MC: On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major...
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50.On July 1, 2021, Kiko Company (a calendar-year company) sold a tract of land that originally cost P400,000. Kiko received a P600,000 note as payment for the land. The note is payable in three annual installments of P200,000 beginning June 30, 2022 plus interest at the rate of 13% based on the outstanding balance. At July 1, 2021, the prevailing rate of interest for a similar obligation is 10%; thus, the stated interest was deemed as unrealistic. The fair value of the note is derived by discounting all future collections using the prevailing interest rate, amounting to P630,790.
How much is the amortized cost (carrying value) of the notes receivable at December 31, 2021?
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