Problem 2

On January 1, 2020, Lindsy Company sold equipment costing P500,000 which had a carrying amount of P350,000, receiving a P125,000 down payment and, as additional consideration, a P400,000 noninterest-bearing note due on December 31, 2023. There was no established exchange price for the equipment and the note had no ready market.

The prevailing rate of interest for a note of this type on January 1, 2020, was 12%. The present value of 1 at 12% for three periods is 0.7118.

Required:

1. Prepare a amortization table (5 points)
2. Prepare journal entries for the year 2020 (3 points)
3. Compute the notes receivable net of unearned interest income to be presented as noncurrent assets on the financial statements for the year ended 2020.