PROBLEMS PROBLEM 12-1: TRUE OR FALSE 1. Legal obligations arise only from law, 2. A financial liability cannot arise from constructive obligation, 3. Financial liabilities, except financial liabilities classified to be subsequently measured af fair value through surplus or deficit, are initially measured at fair value plus transaction costs Use the following information for the next three questions: Entity A issues 10-year, term bonds with face amount of P20 for 012 and incurs transaction costs of PI on the issuance. 4. The initial carrying amount of the bonds is P13. 5. The nominal rate of the bonds is higher than the effective interest rate. 6. If in Year 1, the interest payment is 21.50 while the interest expense is P2, the carrying amount of the bonds at the end of the period must be P11.50. 7. If one or more of the liability recognition criteria are not met, the item is a contingent liability. A provision is a liability of uncertain timing or amount. Provisions are never discounted to their present value. 12. The obligation under an onerous contract is recognized as a provision