On January 1, 2023, Hornets Company sold land that originally cost P400,000 to the Egi Company. As payment, Egi gave Hornets a P600,000 note. The note bears an interest rate of 8% and is to be repaid in three annual installments of P200,000 plus interest on the outstanding balance. The first payment is due on December 31, 2023. The market price of the land is not reliably determinable. The prevailing interest rate for notes of this type is 8%. Question: 28. How much is the gain on the sale of land? A. P400,000 B. P200,000 C. P103,105 D. P66,667
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On January 1, 2023, Hornets Company sold land that originally cost P400,000 to the Egi Company. As payment, Egi gave Hornets a P600,000 note. The note bears an interest rate of 8% and is to be repaid in three annual installments of P200,000 plus interest on the outstanding balance. The first payment is due on December 31, 2023. The market price of the land is not reliably determinable. The prevailing interest rate for notes of this type is 8%.
Question:
28. How much is the gain on the sale of land?
A. P400,000
B. P200,000
C. P103,105
D. P66,667
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Solved in 2 steps
- On January 1, 2023, Hornets Company sold land that originally cost P400,000 to the Egi Company. As payment, Egi gave Hornets a P600,000 note. The note bears an interest rate of 8% and is to be repaid in three annual installments of P200,000 plus interest on the outstanding balance. The first payment is due on December 31, 2023. The market price of the land is not reliably determinable. The prevailing interest rate for notes of this type is 8%. Question:31. How much is the interest revenue for the year 2023? A. P67,217B. P57,643C. P51,250D. P48,000On January 1, 2023, Hornets Company sold land that originally cost P400,000 to the Egi Company. As payment, Egi gave Hornets a P600,000 note. The note bears an interest rate of 8% and is to be repaid in three annual installments of P200,000 plus interest on the outstanding balance. The first payment is due on December 31, 2023. The market price of the land is not reliably determinable. The prevailing interest rate for notes of this type is 8%. Question:32. Using the assumption of No. 30 (which is 12% interest rate for notes instead of 8%), what is the amortized cost of the note receivable at December 31, 2023? A. P600,000B. P400,000C. P379,355D. P290,003On January 1, 2023, Hornets Company sold land that originally cost P400,000 to the Egi Company. As payment, Egi gave Hornets a P600,000 note. The note bears an interest rate of 8% and is to be repaid in three annual installments of P200,000 plus interest on the outstanding balance. The first payment is due on December 31, 2023. The market price of the land is not reliably determinable. The prevailing interest rate for notes of this type is 8%. Question:30. Assume the same facts given in the problem, but change the prevailing interest rate for notes of this type to 12% (instead of 8%). At how much should the note be recorded on January 1, 2023? A. P600,000B. P560,138C. P480,360D. P427,080
- On January 1, 2020, Pedro Company sold land that originally cost P400,000 to Buyer Company. As payment, Buyer gave Pedro Company a P600,000 note. The note bears an interest rate of 4% and is to be repaid in three annual installments of P200,000 (plus interest on the outstanding balance). The first payment is due on December 31, 2020. The market price of the land is not reliably determinable. The prevailing rate of interest for notes of this type is 14% on January 1, 2020 and 15% on December 31, 2020. Pedro made the following journal entries in relation to the sale of land and the related note receivable: January 1, 2020 Notes receivable. P600,000 Land P400,000 Gain on sale of land 200,000 December 31, 2020 Cash P224,000 Notes receivable P200,000 Interest income 24,000 Pedro reported the notes…On January 1, 2020, Pedro Company sold land that originally cost P400,000 to Buyer Company. As payment, Buyer gave Pedro Company a P600,000 note. The note bears an interest rate of 4% and is to be repaid in three annual installments of P200,000 (plus interest on the outstanding balance). The first payment is due on December 31, 2020. The market price of the land is not reliably determinable. The prevailing rate of interest for notes of this type is 14% on January 1, 2020 and 15% on December 31, 2020. Pedro made the following journal entries in relation to the sale of land and the related note receivable: January 1, 2020 Notes receivable. P600,000 Land P400,000 Gain on sale of land 200,000 December 31, 2020 Cash P224,000 Notes receivable P200,000 Interest income 24,000 Pedro reported the notes…On January 1, 2022, Jantzen Company sold land to Dansko Company. There was no established market price for the land. Dansko gave Jantzen a P2,400,000 Zero-interest-bearing note payable in three equal annual installments of P800,000 with the first payment due December 31, 2022. The note has no ready market. The prevailing rate of interest for a note of this type is 10%. The present value of a P2,400,000 note payable in three equal annual installments of P800,000 at a 10% rate of interest is P1,989,600. The note will be reported on Dansko’s 2022 statement of financial position at a carrying value of P2,400,000 P2,188,560 P2,126,400 P1,388,560
- On January 1,2021, ABC Corporation purchased a land for P 15,000,000. In exchange of the land, ABC issued a non-interest bearing note which is due on December 31,2025. There is no readily available market value for the building, but the current market rate of interest for comparable notes is 15%Assuming the notes was issued on June 1,2021, how much is the carrying value of the note as of December 31,2022?On January 1,2021, ABC Corporation purchased a land for P 15,000,000. In exchange of the land, ABC issued a non-interest bearing note which is due on December 31,2025. There is no readily available market value for the building, but the current market rate of interest for comparable notes is 15%At what amount should the note be recorded on January 1, 2021?On January 1, 2020, Billy Company sold equipment that originally cost $5,000,000 to Selecta Company. As payment, Selecta gave Crawford a $7,000,000 note. The note bears an interest rate of 4% and is to be repaid in three annual installments plus interest on the outstanding balance. The first payment is due on December 31, 2020. The market price of the land is not readily determinable. The prevailing rate of interest for notes of this type is 8%. Determine the unamortized premium/discount balance on December 31, 2021
- On January 1, 2020, Billy Company sold equipment that originally cost $5,000,000 to Selecta Company. As payment, Selecta gave Crawford a $7,000,000 note. The note bears an interest rate of 4% and is to be repaid in three annual installments plus interest on the outstanding balance. The first payment is due on December 31, 2020. The market price of the land is not readily determinable. The prevailing rate of interest for notes of this type is 8%. What Amount of Interest income, if any, should be included in Billy's 2020 income statement?On January 1,2021, ABC Corporation purchased a land for P 15,000,000. In exchange of the land, ABC issued a non-interest bearing note which is due on December 31,2025. There is no readily available market value for the building, but the current market rate of interest for comparable notes is 15%Assuming the notes was issued on June 1,2021, how much is the interest expense for year 2022?On January 1, 2020, Shamrock Inc. bought land that had an assessed value of $390,000 at the time of purchase. A $560,000, non–interest-bearing note due on January 1, 2023, was given in exchange. There was no established exchange price for the land, and no ready market value for the note. The interest rate that is normally charged on a note of this type is 15%.Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, determine at what amount the land should be recorded at January 1, 2020. (Hint: Refer to Chapter 3 for tips on calculating.) Determine the interest expense to be reported in 2020 related to this transaction. Please show how to calculate in Excel