Answer to Question #207367 in Accounting for Kkkk

Question

On January 1,2021, Jimar Co. acquired an equipment by issuing two-year, noninterest bearing note amounting to ₱1,000,000. The prevailing interest rate of the note is 12%.

Questions:

1. Assuming the equipment has cash price equivalent of ₱800,000, how much is the cost of the equivalent?

a. ₱800,000

2. Assuming the equivalent has no cash price equivalent, how much is the cost of the equivalent?

b. ₱797,200

Answer 1

Solution:

1.). The cost of the equivalent will be ₱608,000.

Interest = 800,000 x 0.12 x 2 = 192,000

Cost of the equivalent = 800,000 – 192,000 = 608,000

The cost of the equivalent will be = ₱608,000.

 

1.). The cost of the equivalent will be ₱760,000.

Interest = 1,000,000 x 0.12 x 2 = 240,000

Cost of the equivalent = 1,000,000 – 240,000 = 760,000

The cost of the equivalent will be = ₱760,000.