Topic: Acquisition on Installment Basis of PPE

MILO Company purchased equipment on January 1 2020 under the following terms:

a. P200,000 down payment

b. Five annual payments of P100,000, the first installment note to be paid on December 31, 2020.

The same equipment was available at a cash price of P580,000.

Required:

1. Prepare the journal entry for the acquisition of the equipment.

2. Determine the amount that will be capitalized as the cost of the equipment.