Question
On April 1, 2020, the Wendy's Catering Service (WCS) purchased three units of baking equipment by issuing a four-year non-interest bearing P3,200,000 note. The note
On April 1, 2020, the Wendy's Catering Service (WCS) purchased three units of baking equipment by issuing a four-year non-interest bearing P3,200,000 note. The note is payable in annual installments of P800,000 with the first installment due on March 31, 2021. The equipment has an equivalent cash price of P2,591,760. Effective interest on this note was computed at 9%, which approximates Wendy's incremental borrowing rate. Wendy paid for P100.000 freight for this equipment and installation charges of 160,000. WCS has a constructive obligation to dismantle the equipment at the end of its 8-year useful life at an estimated cost of P200,000. What is the initial cost assigned to this baking equipment?
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