Innovative Company manufactures and sells electrical generators. On January 1, 2019, the entity sold
an electrical generator bearing note payable in three equal installments every December 31.
The buyer paid Php100,000 down and signed Php900,000 noninterest bearing note payable in three
equal installments every December 31.
The prevailing interest rate for a note of this type is 12%. The present value of an ordinary annuity of 1
for three periods is 2.4018.
Required: Prepare journal entries for the current year.
Journal Entries
Account Titles
Date
2019
Jan 1 Cash
Notes Receivable
Sales
Unearned Interest Income
Face Value of note
Less: PV of note (300,000 x 2.401831268)
Date
01-01-2019
12-31-2019
12-31-2020
12-31-2021
Debit
100,000
900,000
820,549
179,451
900,000
(720,549)
179,451
Collection
Interest
Principal
300,000
300,000
300,000
86,466
60,842
32,142
213,534
239,158
267,857
Cash
Notes Receivable
#
Unearned Interest Income
Interest Income
Credit
PV
720,549
507,015
267,857
-----
300,000
300,000
86,466
86,466
Partial Balance Sheet
December 31, 2019
Current Assets:
Trade and Other Receivables
Notes Receivable
300,000
Less: Unearned Interest Income (60,842)
239,158
Non-Current Assets:
Other Non-Current Assets
Notes Receivable
300,000
Less: Unearned Interest Income (32,143)
168,767