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1. LEMON Co. was indebted to LIME Street Company on a P2M, 10% note. Only interest had been paid to date. Due to its financial difficulties LEMON has negotiated a restructuring of its notes payable. The parties agree that LEMON would settle the debt on the following terms: 0 Settle one half ofthe note by transferring land with a recorded value of P800,000, and a fair value of P900,000. o Settle one fourth of the note by transferring 200,000 shares of P1 par ordinary shares with a fair value of P180 per share. 0 Modify the terms ofthe remaining one fourth of the note by reducing the interest to 5%, extend the due date three years from the date of restructuring and reducing the principal to P300,000. Total gains on the settlement of debt to be recognized in profit or loss is: A. P437,306 B. P337,306 C. P340,000 D. P577,306 E. PO 2. Maryland Co. purchased 10% P700, 000 bonds at 95 when the prevailing market interest rate is at 11%. The bonds mature after 5 years and pay interest beginning January 1, 2021. Commission paid on the acquisition amounted to P9, 129. The effective interest rates as of the end of 2020 and 2021 are 10% and 12%, respectively. If the debt securities are classified as FVOCI, how much is the cumulative gain (loss) to be recognized in the 2021 statement of financial position? A. Zero B. (P38,237) C. P21,717 D. (P16,520) 3. On January 1, 2016, MARYLAND Corp. issued a 10% convertible bonds with a face value of P4M maturing on December 31, 2025. Each P1,000 bond is convertible into ordinary shares of MARYLAND at a conversion price of P25 per share. Interest is payable half-yearly in cash. At the date of issue, MARYLAND could have issued nonconvertible debt with a ten-year term bearing a coupon interest rate of 11%. On January 1, 2021, the convertible bond has a fair value of P4.4M. MARYLAND makes a tender offer to the holders to repurchase the bonds for P4.4M. The holders ofthe P2M bonds accepted the offer. At the date of repurchase, MARYLAND could have issued non-convertible debt with a 5-year term bearing a coupon rate of 8%. The purchased of the bonds on January 1, 2021 decreased equity by A. PO B. P37,710 C. P76,63O D. P439,530 4. Maryland Davids (MD) Company's accounts payable per general ledger amounted to P5,440,000, net of P240,000 debit balances in suppliers' accounts. The unpaid voucher file included the following items that had not been recorded as of December 31, 2021: 0 Lime Company P224,000 merchandise shipped on December 31, 2021, FOB destination; received on January 10, 2022. 0 Lemon Inc. P192,000 merchandise shipped on December 26, 2021, FOB shipping point; received on January 16, 2022. Citrus Services -P144,000 janitorial services for the three-month period ending January 31, 2022. Lily Electric Corp. - P67,200 electric bill covering the period December 16, 2021 to January 15, 2022. On December 28, 2021, a supplier authorized MD to return goods billed at P160,000 and shipped on December 20, 2021. The goods were returned by MD on December 28, 2021, but the P160,000 credit memo was not received until January 6, 2022. What is the correct balance of Accounts Payable on December 31, 2021? A. P5,923,200 B. P5,841,600 C. P5,601,600 D. P5,712,000 5. The balance in Davids Co.'s accounts payable account on December 31, 2021 was P400,000 before any necessary year-end adjustments relating to the following: . On December 28, 2021, Davids purchased and received goods for P40,000, terms 2/10, n/30. Davids records purchases and accounts payable at net amounts. The invoice was recorded and paid January 3, 2022. Goods were in transit to Davids from a vendor on December 31, 2021. The invoice cost was P50,000. The goods were shipped f.o.b. shipping point on December 29, 2021 and were received on January 4, 2022. Goods shipped f.o.b. destination on December 21, 2021 from a vendor to Davids were received on January 6, 2022. The invoice cost was P25,000. Goods shipped to Davids, f.o.b. shipping point on December 20, 2021 from a vendor were lost in transit. The invoice price was P20,000. On January 5, 2022, Davids filed a P20,000 claim against the common carrier. In Davids's December 31, 2021 statement of financial position, the accounts payable should be A. P489,200 P534,200 C. P439,200 D. P509,200 6. MTD Inc. owned three properties which are classified as investment property. The following are the data about the initial cost, fair value on December 31, 2020 and fair value on December 31, 2021, respectively: Property 1- P2,700,000; P3,200,000; P3,500,000 Property 2- P3,450,000; P3,050,000; P2,850,000 Property 3- P3,300,000; P3,850,000; P3,600,000 Each property was acquired three years ago with a useful life of 25 years. The accounting policy is to use the fair value method for investment property. What amount of gain or loss should be recognized for 2021? A. P150,000 loss B. P189,000 gain C. P300,000 gain D. P450,000 loss
