Clippers Company began operation on January 1, 2017. The accountant prepared the following:

Statement of Financial Position

Jan. 1, 2017

AssetsLiabilities and Equity

CashP 49,600AP28,000

Parts Share capital, P 100 par 265,600

Invty.24,000

Equipment220,000

TotalP 293,600Total293,600

The company has developed plans to expand its business is in the process of negotiating a bank loan to finance the expansion. The bank is requesting 2017 financial statements prepared on the accrual basis of accounting. As the company's external auditor, you were called upon to assist in preparing the financial statements. During the course of your engagement, you obtained the following information:

Transactions for 2017

Cash salesP 232,000

Collections from credit customers80,000

Payments on account for parts80,800

Wages paid to employees124,000

Payments to the utility company22,000

Uncollected customer's bills totaled P 69,800 at December 31, 2017.

On March 1, 2017, a supplier advanced the company P 40,000 on a 1-year, 12% note payable with semiannual interest payments to be made on September 1, 2017 and at maturity on March 1, 2018.

Unpaid bills to suppliers totaled P 11,200 at December 31, 2017.

Parts costing P 8,000 were on hand at year - end.

Wages owed at year-end were P 5,600.

Utility expense of P 1,950 was unpaid at year end.

The P 18,000 insurance premium was paid for a 1-year policy effective Feb. 1, 2017.

The rent of P 3,000 was paid on the first day of every month.

The company's equipment, purchased at the time the company was founded, should be depreciated over its useful life of 10 years using the straight line depreciation with no residual value.

The effective tax rate is 40%. No taxes have been paid.

Based on the above and the result of your engagement, you are asked to provide the following information under the accrual basis:

Q1. The net income for 2017 was

a.P 69,750

b.P 55,050

c.P 46,380

d.P 41,850

Q2. Current assets at year end is

a.P 220,000

b.P 198,000

c.P197,700

d.P 196,200

Q3. Total assets at year end

a.P 417,700

b.P 395,700

c.P 307,450

d.P 197,700

Q4. Total equity at year end

a.P 395,700

b.P 335,350

c.P 307,450

d.P 265,600

Q5. Current liabilities at year end

a.P 90,650

b.P 88,250

c.P 60,350

d.P 48,250

Q6. Sunset Company has bonds payable with face value of P 5,000,000 and a carrying amount of P 4,800,000. In addition, unpaid interest on the bonds has been accrued in the amount of P 250,000. The creditor has agreed to the settlement of the bond payable in exchange for 50,000 shares of P 50 per value. The shares have no reliable measure of fair value. However, the bonds are quoted at P 3,500,000.

What is the gain on the extinguishment of the bonds payable?

a.P 1,500,000

b.P 1,300,000

c.P 1,550,000

d.P 0

Q7. Based on the preceding number, what is the share premium from the issuance of bonds?

a. P 2,300,000

b. P 1,000,000

c. P 1,500,000

d. P 0

Q8. Granada Company has an overdue 8% note payable to First bank at P 8,000,000 and accrued interest of P 640,000. As a result of a restructuring agreement on January 1, 2011, First Bank agreed to the following provisions:

The principal obligation is reduced to P 7,000,000.

The accrued interest of P 640,000 is forgiven.

The date of maturity is extended to December 31, 2014.

Annual interest of 10% is to be paid for 4 years every December 31.

What is the gain on extinguishment of debt to be recognized for 2011?

a.P 1,000,000

b.P 1,178,000

c.P 1,640,000

d.P 538,000

Q9. What is the interest expense to be recognized for 2011?

a. P 746,200

b. P 700,000

c. P 596,960

d. P 640,000