PROBLEM 2

During the course of your audit of the notes receivables of Megatron Corporation, you were able
to gather the following information regarding the transactions that transpired for the whole year
ended December 31, 2016:

 The entity sold a parcel of land on January 1, 2016 for a note with a face value of
P1,500,000. The rate is 12%, and interest is payable semiannualy every July 1 and
January 1. The note is due on January 1, 2019. The carrying value of the land as of the
date of sale is P1,200,000.
 Another tract of land was sold on July 1, 2016 and Megatron received a note in exchange.
The face value of the note is P2,000,000 with a rate of 12%, and is due on June 30, 2017.
The carrying value of the land as of the date of sale is P1,900,000
 The entity is following up on its plan to expand and relocate in 2017, so the entity sold
its plant in Marikina last October 1, 2016 for a P5,000,000 note with a rate of 11%. The
note is payable on September 30, 2019. The prevailing market rate is 12%. Present value
factor of 1 at 12% for 3 years is 0.7118, and the present value factor of an ordinary
annuity of 1 at 12% for 3 years is 2.4018. The carrying value of the building as of
December 31, 2015 is P5,600,000, which is 80% depreciated. The remaining useful life
of the building is 2 years.
 An equipment was sold by the entity on January 1, 2016 for a noninterest bearing note
with a face value of P800,000. The note is payable on December 31, 2017. The prevailing
market rate is 12%. Present value factor of 1 at 12% for 2 years is 0.7972, and the present
value factor of an ordinary annuity of 1 at 12% for 3 years is 1.6901. The carrying value
of the equipment as of December 31, 2015 is P640,000.

Requirements:
1. What is the total balance notes receivable as of December 31, 2016?
2. What is the net gain/loss from sale from the transactions?
3. What is the interest income to be recognized for 2016?
4. How much should be presented as accrued interest receivable as of December 31, 2016?