Kervin Company acquired three items of machinery as follows: During 2021, the entity purchased a machine for P500, 000 down and four monthly installments of P1, 250, 000. The cash price of the machine was P4, 700, 000. On January 1, 2021, the entity purchased a machine for P2, 000, 000 in exchange for a noninterest bearing note requiring four payments of P500, 000. The first payment was made on January 1, 2021. The rate of interest for this note at date of issuance was 10%. The present value of an ordinary annuity of 1 at 10% is 3.17 for four periods. The present value of an annuity of 1 in advance at 10% is 3.49 for four periods. On January 1, 2021, the entity acquired a machine by issuing a four-year, noninterest bearing note for P2, 000, 000. The note is due on January 1, 2025. The entity has a 10% interest for this type of note. The present value of 1 at 10% for 4 years is 0. 68. What is the total cost of the three machines?
Kervin Company acquired three items of machinery as follows: During 2021, the entity purchased a machine for P500, 000 down and four monthly installments of P1, 250, 000. The cash price of the machine was P4, 700, 000. On January 1, 2021, the entity purchased a machine for P2, 000, 000 in exchange for a noninterest bearing note requiring four payments of P500, 000. The first payment was made on January 1, 2021. The rate of interest for this note at date of issuance was 10%. The present value of an ordinary annuity of 1 at 10% is 3.17 for four periods. The present value of an annuity of 1 in advance at 10% is 3.49 for four periods. On January 1, 2021, the entity acquired a machine by issuing a four-year, noninterest bearing note for P2, 000, 000. The note is due on January 1, 2025. The entity has a 10% interest for this type of note. The present value of 1 at 10% for 4 years is 0. 68. What is the total cost of the three machines?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Kervin Company acquired three items of machinery as follows:
- During 2021, the entity purchased a machine for P500, 000 down and four monthly installments of P1, 250, 000. The cash price of the machine was P4, 700, 000.
- On January 1, 2021, the entity purchased a machine for P2, 000, 000 in exchange for a noninterest bearing note requiring four payments of P500, 000. The first payment was made on January 1, 2021. The rate of interest for this note at date of issuance was 10%. The present value of an ordinary annuity of 1 at 10% is 3.17 for four periods. The present value of an annuity of 1 in advance at 10% is 3.49 for four periods.
- On January 1, 2021, the entity acquired a machine by issuing a four-year, noninterest bearing note for P2, 000, 000. The note is due on January 1, 2025. The entity has a 10% interest for this type of note. The present value of 1 at 10% for 4 years is 0. 68.
What is the total cost of the three machines?
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