Problem 12

On January 1, GEN enters into a contract with LORD for the sale of a high-end security scanner for

P630,000. The contract includes a put option the obliges GEN to repurchase the scanner machine from

LORD for P567,000 on or before December 31. The market value is expected to be P495,000 on

December 31. LORD pays GEN P630,000 on January 1. The transaction should be accounted for as a:

A. Sale

B. Lease

C. No sale/lease

D. Cannot be determined

Problem 13

NOREEN INC, a truck dealer, sells a truck on January 1, 2019, to MENDOZA INC for P3,000,000.

NOREEN agrees to repurchase the truck on December 31, 2020 for P3,630,000.

13.1. Assuming a 10% is imputed in the agreement, how much is the liability of NOREEN on January

1, 2019?

A. 1,500,000

B. 1,815,000

C. 3,000,000

D. 3,630,000

13.2. Using the information above, what is the interest expense for 2019?

A. None

B. 300,000

C. 330,000

D. 630,000

13.3. How much should NOREEN INC record interest and retirement of its liability to MENDOZA

INC on December 31, 2020?

A. None

B. 300,000; 3,600,000

C. 330,000; 3,630,000

D. 630,000; 3,630,000