Problem 1: TRUE OR FALSE 1. Interest payable is computed by multiplying the carrying amount of a note by the effective interest rate. _2. On Jan. 1, 20x1, Crybaby Co. issued a noninterest-bearing note with face amount of P2M and approximately recognized it at P1,241,843. The note matures in lump sum on Dec. 31, 20x5. The effective interest is 10%. The unamortized discount on Dec 31, 20x2 is P497,370. _3. Raining Co. issued a 3-year, noninterest-bearing note of P1,000,000. Raining Co. determines that the effective interest rate on the transaction 10%. The initial carrying amount of the note payable is computed as: P1,000,000 x PV of 1 @ 10%, n=3. _4. Wet Co. issues a noninterest-bearing note if P3,000,000. The note is payable in three equal annual installments of P1,000,000, due at the end of each year. Wet Co. determines that the effective interest rate on the transaction is 10%. The 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 sale of a commodity. If the customer had paid in cash at the sale date, 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 from the sale 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 on the transaction is 10%. The interest expense in Year 1 is P50,000. _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% while the appropriate present value factor is 0.90. the interest expense in Year 1 is P9,000. _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.