Problem 1: (Long-term note that bears a reasonable interest rate)

Faith Company has an 8% note receivable dated July 1, 2018, in the original amount of P1,500,000.
Payments of P500,000

in principal plus accrued interest are due annually on July 1, 2019, 2020, and 2021. The market rate of
interest of this kind

of note is 8%.

1. How much is the interest income on the note for the year ended December 31, 2019?
40,000

2. How much is the carrying value of the note as of December 31, 2019?
1,040,000

3. What amount should be reported as current assets in relation to the note on December 31, 2019?
80,000

Principal 1,500,000

Less: Payment (500,000)

Note receivable - July 1,2018 1,000,000

Add: Accrued interest ( 1,000,000*8%*6/12 ) 40,000

Carrying amount of notes receivable 1,040,000