PROBLEM 3: EXERCISES (Page 88)

No. 1 JOURNAL ENTRIES

Date Particulars Debit
20x1 Equipment ₱1,281,316.00
Jan. 1 Discount on Notes Payables 718,684.00
Notes Payable
to record the note payable.
*
Dec. 31 Interest Expense 205,011.00
Discount on Notes Payable
to record interest expense.
*
20x2
Dec. 31 Interest Expense 237,812.00
Discount on Notes Payable
to record interest expense.
*
20x3
Dec. 31 Notes Payable 2,000,000.00
Cash
to record the settlement of notes payable.
*

SOLUTION
Lump Sum PV = 1 / (1 + i)ⁿ x FA
= 1 / (1 + 0.16)³ x P 2,000,000.00
= 0.640658
= P 1,281,316

Date Interest Expense Discount on Present Value

Notes Payable
Jan. 1, 20x1 ₱ 718,684.00 ₱ 1,281,316.00
Dec. 31, 20x1 ₱ 205,011.00 513,673.00 1,486,327.00
Dec. 31, 20x2 237,812.00 275,861.00 1,724,139.00
Dec. 31, 20x3 275,861.00 - 2,000,000.00
 Credit

₱ 2,000,000.00

205,011.00

237,812.00

2,000,000.00