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n January 1,2021, Davao Company bought a machine from Tagum Co.

In lieu of cash payment, Davao


gave Tagum a 4-year, P4,000,000, 15% note payable. Principal is due on December 31, 2023 but interest
is due annually every Decmber 31. The prevailing interest rate for this type of note is 10%

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