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Presented below are independent situations related to the notes receivable of

GARGANTUA Company. Answer the following questions relating to each of the

independent situations as requested. (Round-off present value factors to four
decimal places)
1. GARGANTUA Company has P6,000,000 note receivable from sale of plant
bearing interest at 12% per annum. The note is dated April 1, 2012. The note
is payable in 3 annual installments of P2,000,000 plus interest on the unpaid
balance every April 1. The initial principal and interest payment was made on
April 1, 2013.
How much is the interest receivable as of December 31, 2013?
a. P360,000
b. P540,000
c. P180,000
d. P120,000
2. GARGANTUA Company sold a tract of land to AB Co. on July 1, 2013, for
P4,000,000 under an installment sale contract. AB Co. signed a 4-year 11%
note for P2,800,000 on July 1, 2013, in addition to the down payment of
P1,200,000. The equal annual payments of principal and interest on the note
will be P902,500 payable on July 1, 2014, 2015, 2016,and 2017. The land had
an established cash price of P4,000,000, and its cost to the company was
P3,000,000. The collection of the installments on this note is reasonably
How much is the noncurrent portion of the note receivable as of December 31,
a. P2,800,000
b. P1,897,500
c. P2,205,500
d. P2,051,500
3. On January 1, 2013, GARGANTUA Company sold a tract of land to three
doctors as an investment. The land, purchased 10 years ago, was carried on
GARGANTUA Companys books at a value of P125,000. GARGANTUA
received a noninterest-bearing note for P220,000 from the doctors. The note
is due on December 31, 2014. There is no readily available market value for
the land, but the current market rate of interest for comparable notes is 10%.
The carrying amount of the note receivable on December 31, 2013 is
a. P220,000
b. P199,989
c. P181,819
d. P186,219
4. On December 31, 2012, GARGANTUA Company finished consultation
services and accepted in exchange a promissory note with a face value of

P300,000, a due date of December 31, 2015, and a stated rate of 5%, with
interest receivable at the end of each year. The fair value of the services is not
readily determinable and the note is not readily marketable. Under the
circumstances, the note is considered to have an appropriate imputed rate of
interest of 10%.
How much is the interest income in 2013?
a. P26,269
b. P15,000
c. P22,539

d. P26,624

5. On January 1, 2013, GARGANTUA Company sold land that originally cost

P400,000 to Z Company. As payment, Z gave GARGANTUA Company a
P600,000 note. The note bears an interest rate of 4% and is to be repaid in
three annual installments of P200,000 (plus interest on the outstanding
balance). The first payment is due on December 31, 2013. The market price
of the land is not reliably determinable. The prevailing rate of interest for
notes of this type is 14%.
The gain on sale of land is
a. P5,000
b. P64,320

c. P103,105

d. P82,893