Patrick Company had purchased equipment for P5,000,000 on January 1, 2020. The equipment had a 10-year life and salvage value of 10%. Patrick Company depreciated the equipment using the straight method. On December 31, 2023, Irene questioned the recoverability of the carrying amount of this equipment. On December 31, 2023, the undiscounted expected net future cash inflows related to the continued use and eventual disposal of the equipment total P3,500,000. The equipment's fair value on December 31, 2023 is P2,800,000.

After any loss on impairment has been recognized, what is the carrying value of the equipment?

a.

3,200,000

b.

3,500,000

c.

2,700,000

d.

2,800,000

Patricia Company had purchased equipment for P10,000,000, on January 1, 2022. The equipment had a 5-year life and a salvage value of 10%. Nerissa Company depreciated the equipment using the straight-line method. On December 31, 2024, Patricia had doubts on the recoverability of the carrying amount of this equipment. On December 31, 2024, the undiscounted expected net future cash inflows related to the continued use and eventual disposal of the equipment totaled P4,500,000. The equipment's fair value on December 31, 2024 is P4,000,000.

After any loss on impairment has been recognized, what is the carrying amount of the equipment?

a.

5,000,000

b.

4,500,000

c.

4,000,000

d.

4,600,000

On January 1, 2021, Labas Muna Company sold property to Abo Bukas Company which originally cost Labas Muna P380,000. There was no established exchange price for this property. Abo Bukas gave Labas Muna a P600,000 zero-interest-bearing note payable in three equal annual installments of P200,000 with the first payment due December 31, 2021. The note has no ready market. The prevailing rate of interest for a note of this type is 10%. The present value of a P600,000 note payable in three equal annual installments of P200,000 at a 10% rate of interest is P497,400.

What is the amount of interest income that should be recognized by Labas Muna in 2021, using the effective interest method?

a.

0

b.

20,000

c.

49,740

d.

60,000

What is the balance of note payable that should be recognized by Labas Muna Co. in 2022, using the effective interest method?

a.

347,140

b.

200,000

c.

381,854

d.

181,854