On December 31, 2019, the entity sold an equipment in exchange for a noninterest bearing note requiring five annual payments of P500,000

Kaku Company is a dealer in equipment. On December 31, 2019, the entity sold an equipment in exchange for a noninterest bearing note requiring five annual payments of P500,000. The first payment was made on December 31, 2020. The market interest for similar notes was 8%. The relevant present value factors were: PV of 1 at 8% for 5 periods 0.68 PV of an ordinary annuity of 1 at 8% for 5 periods 3.99 REQUIRED: Prepare journal entries for 2019 and 2020. Determine the carrying amount of the note receivable on December 31, 2020. Determine the interest income for 2021.

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