Reference no: EM132840398

Problem 1 - On January 2, 2020, Magsaysay Company sold equipment with a carrying amount of P400,000 in exchange for a P600,000 4-year non-interest-bearing note due January 2, 2024. There was no established exchange price for the equipment. The prevailing rate of interest for a note of this type at January 2, 2020 was 10%. What is the carrying value of the note receivable as of December 31, 2022 Statement of Financial Position?

Problem 2 - Red Co. owned 50,060 shares of another Blue Co.. These 50,000 shares were originally purchased for P100 per share. The investee distributed 50,000 rights to Red Co.. Red Co. was entitled to buy one new share for P140 and five of these rights. Each share had a market value of P150 and each right had market value of P10 on the date of issuance. Red Co. exercised all rights. The share rights are accounted for separately and measured initially at fair value. What total cost should be recorded for the new shares that are acquired by exercising the rights?

What is the carrying value of note receivable and what total cost should be recorded for the new shares? Please provide a good accounting form and explain each solution.