Problem 6-3 (ACP) Innovative Company manufactures and sells electricai generator costing P700,000 for P1,000,000. ‘ generators. On January 1, 2020, the entity sold an electri! P= PMT « iG rr) ———_—— r The buyer paid P100,000 down and signed a P900,000 noninterest bearing note payable in three equal installments every December 31. ‘The prevailing interest rate for a note of this type is 12%. The present value of an ordinary annuity of 1 for three periods is 2.4018, Required: Prepare journal entries for the current year. Face value of the note Present value of the note (900 000 xX 2.401939 1263) ager 00 st es rap 0.12 = 300000 © 2. 40/89/268 = 720849. 38 900 000 (720549) UVaearned Interest income 199951 Present Value of Note 720549 Cash Recerved as downpayment _!0° 000 | vales Price 820599 2020 Jan 1 Cash 100 000 Notes Receivable 700 000 Sales 820599 Unearned Interest Income 199951 bal Dec 31 Cash 300000 Unearned Interest come 36.166 Motes Receivable 300 000 Jaterest Income eevee #Date Annual Collection |_ Interest Income Principal Present Value Jan 1, 2020 720549, Dec 31, 2020 300000 86466 213534 507015, Dec 31, 2021 300000 60842 239158 267857 Dec 31, 2022 300000 32143 267857 0 pe pur > '* (cary) Problem 6-4 (IAA) . r srongn, tenga ilealer in equipment. On December et noninterest bearing net pa, ctuiPment in exchange for a—-® F80@00".1 were) 500,000. The first, Tequiring five annual payments of pei chal SEZ Y ‘St Payment was made on December 31, 2021 9.08 ‘The market interest for si 2 [00000 * 3.9927/00: prevent value factaeg’ Similar notes was 8%, The relevant wieeae 0037 = 17763: PVof 1 at 8% for 5 periods os PV ofan ordinary annuity of 1 at 8% for 5 periods 3.99 Required: 1, Prepare journal entries for 2020 and 2021. Face value of the note (s00 000 Xs) 2500000 Present value of the note ($00 000 K 3.9923/0033) 19960355 Yaearned Interest Income 503045 2020 Dec 31 Notes Receivable 200 000 Sales 1996955 Unearned interest income 50964S *202) Occ 9! = Cash S00 000 Unearned Interest Income BIFOL Motes Receivable £00 000 Jatercst Income 159 703 # Date Annual Collection | Interest Income | Principal | Present Value Dec 31, 2020 1996355 Dec 31, 2021 500000) 159708] 340292 1656063 Dec 31, 2022 500000) 132485| _ 367515 1288548 Dec 31, 2023 500000) 103084] 396916 891632 Dec 31, 2024 500000) 71331| 428669 462963 Dec 31, 2025 500000) 37037| 462963 0 2, Determine the carrying amount of the note receivable on December 81, 2021. 202) Notes Receivable £000 000 Less: vaearned Interest Income C 2 482) 2298578 3. Determine the interest income for 2022, 2022 Interest Income ———