On December 31, 2018. TAN Co. signed a 4 year noncancelable lease for a new machine requiring P 120, 000 annual payments beginning December 31,2018. The machine has a useful life of 8 years, with no salvage value. The rate implicit on the lease is 12%. TAN has a bargain purchase option amounting to P20, 000. It is certain that the company will exercise this option. The fair value of the machine at the inception of the lease amounted P447,794.

1. How much is the amount to be capitalized as machinery (leases asset) on December 31, 2018?

a. 420,926

b. 474,660

c. 480,000

d. 500,000

2. How much is the interest expense in 2019?

a. Nil

b. 36,111

c. 57,600

d. 60,000

3. How much is the lease-related liability to be shown as current in the statement of financial position on December 31,2018?

a. 300,926

b. 217,037

c. 83,889

d. 36,111

4. How much is the lease-related liability to be shown as non-current in the statement of financial position on December 31,2018?

a. 300,926

b. 217,037

c. 83,889

d. 36,111

Use the following data for questions 5 and 6:

Information with respect to cost of goods sold of MagHIRAP Company for 2015 is as follows:

Historical cost --- Units

Inventory, January 1 1,060,000 ----- 20,000

Purchases during the year 5,580,000 --------- 90,000

Goods available for sale 6,640,000 ---------110,000

Inventory, December 31 (2,520,000)---- (40,000)

Cost of goods sold 4,120,000-------- 70,000

MagHIRAP estimates that the current cost per unit of inventory was P58 on January 1, 2015 and P72 on December 31, 2015. 5. In the income statement for 2015 restated to current cost, what should be reported as cost of goods sold?

a. 4,550,000

b. 4,410,000

c. 4,060,000

d. 5,040,000

6. In the income statement for 2015 restated to current cost, what should be reported as realized holding gain from inventory sold?

a. 920,000

b. 560,000

c. 980,000

d. 430,000