(NOTE: PLEASE PROVIDE A CORRECT ANSWER)

84 PROBLEMS 8. Use the The inte 9. Bond payable amoun PROBLEM 1: TRUE OR FALSE 1. amount of a note with the effective interest rate. note d note a on 10. Pawn payat amou carry Dec 31, 20x2 is P497,370. then PROBL 1. Wh a. b. C. Interest payable is computed by multiplying the carrying 2. On Jan. 1, 20x1, Crybaby Co. issued a noninterest-bearing note with face amount of P2M and appropriately recognized it at P1,241,843. The note matures in lump sum on Dec. 31, 20x5 The effective interest is 10%. The unamortized discount 3. Raining Co. issues a 3-year, noninterest-bearing note of P1,000,000. Raining Co. determines that the effective interest the note payable is computed as: P1,000,000 x PV of 1 @10%, n=3. rate on the transaction is 10%. The initial carrying amount of 4. Wet Co. issues a noninterest-bearing note of P3,000,000. The note is payable in three equal annual installments of that the effective interest rate on the transaction is 10%. The P1,000,000, due at the end of each year. Wet Co. determines initial carrying amount of the note payable is computed as P1,000,000 x PV of 1 @10%, n=3. 5. Fold Co. issues a 2-year, noninterest-bearing note of P1,200,000 in exchange for the purchase of a commodity. If Fold Co. had paid outright in cash, the purchase price would have been P800,000. At initial recognition, Fold Co. records discount on note payable of P400,000. 6. Bind Co. issues a 2-year, noninterest-bearing note of P500,000 for the purchase of equipment with a cash price of P400,000. The note requires lump sum payment at maturity date. Bind Co. determines that the effective interest rate transaction is 10%. The interest expense in Year 1 is P50,000. on the 7. Cut Co. issues a long-term, noninterest-bearing note of P100,000. The note requires a lump sum payment at maturity date. Cut Co. determines that the effective interest rate on the transaction is 10% and the appropriate present value factor is 0.90. The interest expense in Year 1 is P9,000, d. 2. T t 3. 4. 85 8. Use the information in the preceding problem (i.e., Cut Co.). The interest expense in Year 2 is P9,900. 9. Bond Co. issues a P1,000,000, noninterest-bearing note that is payable in installments. On initial recognition, the carrying amount of the note was P900,000. If the amortization of the note during the period is P50,000, the carrying amount of the note at the end of the period must be P950,000. 10. Pawn Co. issues a P1,200,000, noninterest-bearing note that is payable in installments. On initial recognition, the carrying amount of the note was P900,000. At the end of Year 1, the carrying amount of the note was P800,000. The amortization of the note in Year 1 must be P100,000