roblem #1 Accrual Of Royalties Elisa Diaz Company produces computer software that Batangas Company sells. Diaz receives a royalty of 15% of sales. Batangas Company pays royalties to Diaz Company on a semi-annual basis - on May 1 for sales made in July through December of the previous year and on November 1 for sales made in January through June of the current year. Royalty expense for Batangas Company and royalty income for Diaz Company in the amount of P600,000 were accrued on December 31, 2010. Cash in the amounts of P600,000 and P1,000,000 was paid and received on May 1 and Nov 1, 2011, respectively. Software sales during the July to December 2011 period totaled P15,000,000. Required: 1. Calculate the amount of royalty expense for Batangas Company and royalty income for Diaz during 2011. 2. Record the adjusting entry that each company made on December 31, 2011 Problem #2: Accrual of Interest Expense Florenda Quino Forwarders borrowed P600,000 from the bank on Sept 1, 2011. The note carried an 8% annual rate of interest and was set to mature on Feb 28, 2012. Interest and principal were paid in cash on the maturity date. Required: 1. What was the amount of interest expense paid in cash in 2011? 2. What was the amount of interest expense recognized on the 2011 income statement? 3. What was the amount of total liabilities shown on the 2011 balance sheet? 4. What was the total amount of cash that was paid to the bank on Feb 28, 2012 for principal and interest? 5 . What was the amount of interest expense shown on the 2012 income statement? Problem #3: Accrual of Interest Revenue Reynaldo San Mateo, an investor, decided to invest P1,200,000 excess cash in a certificate of deposit on April 1, 2010. The certificate carried an 8% annual rate of interest and a 1-year term to maturity. Interest will be withdrawn monthly (disregard tax effects). Required: 1. What amount of income will be recognized for the year ending Dec 31, 2010? 2. What amount of cash will be collected for interest revenue in 2010? 3. What is the amount of interest receivable as of Dec 31, 2010? 4. What amount of cash will be collected for interest revenue in 2011? 5. What amount of interest revenue will be recognized in 2011? 6. What is the amount of interest receivable as of Dec 31, 2011