On January 1, 2022, Colorado Company sold a machinery with an acquisition cost of P1,000,000 and accumulated depreciation as of this date of P550,000. As a consideration, it received a 5-year, P500,000, 12% noted from Alabama Company. The note requires the interest to be paid annually every December 31 starting December 31, 2022 until the maturity on December 31, 2026. The prevailing interest rate for a note of this type is 10%.

Round off present value factors to four decimal places.

QUESTION:

1. At what amount shall the note be initially measured on January 1, 2022? a. P543,920 b. P496,720 c. P500,000 d. P537,898

2. What amount should be reported as gain/loss on sale of machinery? a. P50,000 gain b. P87,898 loss c. P87,898 gain d. P50,000 loss

3. What amount of interest income should be reported for the year of 2023? a. P60,000 b. P64,002 c. P50,000 d. P53, 169

4. What is the carrying amount of the note receivable on December 31, 2023? a. P524,857 b. P537,898 c. P531,688 d. P500,000