Note Payable

Problem 8-13 (AICPA Adapted) At the beginning of current year, Pares Company borrowed P3,600,000 from a major customer evidenced by a noninter e8f bearing note payable due in three years. The entity agreed to supply the customer's inventory needs for the loan period at an amount lower than market price. At the 12% imputed interest rate for this type of loan, the present value of the note is P2,550,000 at the date of issuance. What amount of interest expense should be reported for the current year? a. 432,000 b. 350,000 c. 306,000 d. 0