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1. MUSTY STALE Co. entered into a non-cancelable 10-year operating lease. Annual lease payments is P400,000. At inception of lease, MUSTY paid P800,000 deposit to the lessor to be applied to the last two years of the lease. In addition, MUSTY guarantees a 10% residual value of the leased property. On December 31, 20x1, MUSTY cancels the lease when the remaining lease term is 6 years. MUSTY is obligated to pay the rentals for the remaining term of the lease but is uncertain as to whether it will be held liable for the guarantee on the residual value. How much is the provision to be recognized? . 1,800,000 b. 1,600,000 . 2,400,000 d. 0 2. CANDID FRANK Co. launched a sales promotion in 20x1. For every five bottles returned to CANDID, customers will receive a T-shirt. The unit cost of T-shirt is P400. CANDID estimates that 80% of sales will be redeemed. Additional information is as follows: Units Sales in 20x1 500,000 Sales in 20x2 900,000 T-shirts distributed in 20x1 60,000 T-shirts distributed in 20x2 147,600 How much is the liability for premiums as of December 31, 20x2? a. 6,650,000 b. 7,860,000 C. 6,870,000 d. 6,560,000 3. GENESIS BEGINNING provides 2-year warranty for products sold. Estimated cost of warranty is 2% in the year of sale and 4% after the year of sale. Information on GENESIS's sales is shown below: Year Sales Actual warranty costs 20x1 40,000,000 1,600,000 20x2 48,000,0000 2,000,000 How much is the balance of the warranty obligation as of December 31, 20x2 assuming those pertaining to 20x1 sales have not yet expired as of 20x2 year-end? a. 5,280,000 b. 3,600,000 C. 240,000 1,680,000