Question

PRELIMINARY EXAMINATION
INTERMEDIATE ACCOUNTING 2
October 2020
TESTI: SOLVING PROBLEMS: SHOW YOUR SOLUTION
1. Faith Company entered into the following transactions:
At the beginning of current year, the entity purchased a machine for P2,000,000 in exchange for a
noninterest. bearing note requiring four payments of P500,000. The first payment was made at the end
of current year
The rate of interest for this note at date of issuance was 10%. The present value of an ordinary annuity of
1 at 10% is 3 17 for four periods. The present 'value of an annuity of 1 in advance at 10% is 3.49 for four
periods.
* At the beginning of current year, the entity acquired a machine by issuing a four-year, noninterest-
bearing note for P2,000,000. The entity has a 10% interest for this type of note. The present value of 1 at
10% for 4 years is 0.68.
*The entity exchanged an old machine, costing P3,000,000 and 50% deprecated, for a used machine and
paid a cash difference of P500,000. The fair value of the old machine was determined to be P1,800,000.
During the year, the entity acquired a machine with an invoice price of P3,000,000, subject to a cash
discount of 10% which was not taken.
The entity incurred cost of P50,000 in removing the Old machine prior to the Installation of the new one.
Machine supplies were acquired at a cost of P150,000
1. What is the total cost of machinery acquired?
a 7.945,000
b. 8,245,000
C. 8,100,000
d.7.995,000
2 What amount of interest expense should be reported for the current year as a result of machinery
acquisition?
a 310,000
b. 263,750
c. 294,500
d. 0​

Answer 1

Explanation:

310.000

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Answer 2

1.c

2.a

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