On January 1, 20x1, BLATANT NOISY Co. acquired a piece of equipment...

On January 1, 20x1, BLATANT NOISY Co. acquired a piece of equipment by paying cash of ₱400,000 and issuing a noninterest-bearing note of ₱4,000,000 due on January 1, 20x4. There is no cash price equivalent for the equipment.

 

 

On January 1, 20x1, Sunday Calm Co. issued a ₱4,800,000, 3-year, noninterest-bearing note due in equal semi-annual payments starting July 1, 20x1. The effective interest rate is 10%.

 

On January 1, 20x1, DWINDLE DECREASE Co. acquired a vehicle in exchange for cash of ₱400,000 and a noninterest-bearing note of ₱4,000,000 due in 4 equal annual installments starting on December 31, 20x1. The prevailing rate of interest for this type of note is 12%.

 

The effective interest rate on the note is 12%. How much is the carrying amount of the note on initial recognition?

A. 2,847,120
B. 3,247,120
C. 2,000,000
D. 2,786,309
E. None of these

How much interest expense should Sunday Calm Co. recognize in 20x1?

A. 203,028
B. 350,780
C. 279,830
D. 376,207
E. None of these

How much is the current portion of the note on December 31, 20x1?

A. 711,780
B. 613,409
C. 814,342
D. None of these
E. 718,324