Joshua Company bought a new machine and agreed to pay in the equal annual installment of P600,000 at the end of each of the next five years. The prevailing interest for this type of transaction is 12%.

The present value of an ordinary annuity of 1 at 12% for five periods is 3.60. The future amount of an ordinary annuity of 1 at 12% for five periods is 6.35. The present value of 1 at 12% for five periods is 0.567.

What amount should be reported as a note payable if financial statements were prepared today?

What is the interest expense for first year?