On December 31,2019, Innovation Company sold a machinery costing P5,200,000 which had a carrying amount of P2,200,000
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Question:
On December 31,2019, Innovation Company sold a machinery costing P5,200,000 which had a carrying amount of P2,200,000 for P3,000,000. The terms of the sales were P600,000 down payment and P1,200,000 payable on December 31 of the next two years.
The sale agreement made no mention of interest. However, 9% would be a fair rate for this type of transaction. The present value of an ordinary annuity of 1 at 9% for two years is 1.76.
Required:
1. Journal entries for 2019, 2020 and 2021.
2. What is the carrying amount of the note receivable on December 31,2019, December 31,2020 and December 31,2021?
3. What is the interest income for 2019,2020 and 2021?
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