Intermediate Accounting 2 Assignment PDF

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Summary

Garcia, Devi V. BSAOn January 1, 2020, West Company acquired a tract of land for P1,000,000. The entity paid P100,000 down and signed a two-year promissory note for the balance of 10% interest compounded annually. The note matures on January 1, 2022.Required: Journal entries to record. Purchased of ...

Description

Garcia, Devi V. BSA On January 1, 2020, West Company acquired a tract of land for P1,000,000. The entity paid P100,000 down and signed a two-year promissory note for the balance of 10% interest compounded annually. The note matures on January 1, 2022. Required: Journal entries to record. 1. Purchased of land on January 1, 2020. ₱1,000,000

Land

₱100,000 ₱900,000

Cash Notes Payable 2. Accrued interest on December 31, 2020. ₱90,000

Interest Expense (900,000×10%) Accrued Interest Payable

₱90,000

3. Accrued interest on December 31, 2021. Interest Expense (900,000+90,000) ×10% Accrued Interest Payable

₱99,000 ₱99,000

4. Full payment of the note on January 1, 2022. Notes Payable Accrued Interest Payable (90,000+99,000) Cash

₱900,000 189,000 ₱1,089,000

On January 1, 2020, Lizelle Company received P1,000,000 on a noninterest-bearing note due in three years. The market rate of interest on such date is 10%. The entity irrevocably elected the fair value option in measuring the note payable. On December 31, 2020, the risk factors indicated that the rate of interest applicable to the borrowing was 9%. The present value factors at 10% and 9% are:

PV factors 10%, 3 periods .751

PV factors 9%, 3 periods .772

PV factors 10%, 2 periods .826

PV factors 9%, 2 periods .842

PV factors 10%, 1 period .909

PV factors 9%, 1 period .917

1. What is the initial carrying amount of the note payable on January 1, 2020? a. 751,000 b. 772,000 c. 826,000 d. 909,000 1,000,000×.751=751,000 2. What is the carrying amount of the note payable on December 31,2020? a. 751,000 b. 772,000 c. 917,000 d. 842,000 1,000,000×.842=842,000 3. What amount of net gain or loss from the change in fair value of the note payable should be reported for 2020? Note Payable 1/1/2020 Fair Value 12/31/2020 Net Gain

₱1,000,000 (842, 000) ₱158,000...