1.On January 1, 2020 share options were granted to employees where they can purchase 100,000 ordinary shares of P80 par value at P100 per share. The fair value of the share options on this date was P25 per share. The officers are entitled to the share options only after completing two years of service. The options can be exercised starting January 1, 2022 and shall expire on December 31, 2022. The amount of compensation expense to be reported in 2020 is?

a. P0

b. P1,250,000

c. P2,500,000

d. P8,000,000

2.On September 1, 2020, SMD Company borrowed P5,000,000, 10% interest-bearing note due in five years. On December 31, 2020, the fair value of the note is determined to be P4,350,000. The entity elected irrevocably the fair value option in measuring the note payable. What amount of gain/loss from change in fair value of the note payable should be reported for 2020?

a. P1,250,000 gain

b. P1,250,000 loss

c. P650,000 gain

d. P650,000 loss

3.Lax Company at the end of 2019, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income P900,000; Estimated litigation expense P1,200,000; Extra depreciation for taxes (P1,800,000); Taxable income P400,000. The estimated litigation expense of P1,200,000 will be deductible in 2020 when it is expected to be paid. Use of the depreciable asset will result in taxable amounts of P600,000 in each of the next three years. The income tax rate is 30% for all years. Income tax payable is?

a. P0

b. P120,000

c. P180,000

d. P270,000

4.An entity computed its pre-tax income in its GAAP compliant books at P2,450,000 while its income per income tax return properly computed at P2,850,000. There has been a temporary difference causing the discrepancy between the two amounts. The tax rate is 30%. How much is the Deferred Tax Liability of the company to be presented in its statement of financial position?

a. P120,000

b. P855,000

c. P735,000

d. P0

5.Faye Company leases computer equipment to customers under direct financing lease. The equipment has no residual value at the end of the lease and the leases do not contain bargain purchase options. Faye wishes to earn 8% interest on a five-year lease of equipment with a fair value of P323,400. The present value of an annuity due of P1 at 8% for five years is 4.312. What is the total amount of interest that Faye will earn over the life of the lease?

a. P51,600

b. P75,000

c. P60,000

d. P55,000

Can you provide the solutions. Thank you so much!