You are auditing the 2014 liabilities of Tyrion Inc. which follows the calendar year financial statements reporting. The following information were available with regard to its currently maturing obligations: a. On Dec. 31, 2014, Tyrion had PIM of short-term notes payable due February 7, 2015. On January 15, 2015, the company issued bonds with face value of P900,000 at 96; brokerage fees and other costs of issuance were P3.450, On January 22, 2015, the proceeds from bond issue plus additional cash held by the company on December 31, 2014 were used to liquidate the PIM of short-term notes. b. Another short-term debt in the form of notes payable totaling to P500,000 were due on June 1, 2015. On February 2, 2015, Tyrion entered an agreement with National Life Insurance Co. whereby National will lend Tyrion P400,000 payable in 5 years at 14%, the proceeds of which is intended to be used to partly refinance the said notes. The money will be available to the company on May 20, 2015. C. Another P500,000 notes payable is due on June 15, 2015. At the financial statement date December 31, 2014, Tyrion signed an agreement to borrow up to P500,000 to refinance the notes payable on a long-term basis. The financing agreement called for borrowings not to exceed 80% of the value of the collateral Tyrion was providing. At the date of issue of the December 31, 2014 financial statements the value of the collateral was P600,000 and was not expected to fall below this amount during 2015. d. Tyrion Inc. also have a P1,000,000, 10%%, outstanding 5-year bonds payable due on December 31, 2018, Interest on the bonds is payable every December 31. By the end of 2014 however, due to shortage of working capital, Tyrion Inc. was not able to pay the interest due on December 31, 2014. As a result, the liability became demandable by the bond holder. On December 31, 2014, Tyrion Inc. was able to obtain a waiver (grace period) from the bond holder up to March 31, 2015 since by then Tyrion Inc. expects to have enough cash to settle the interest due. The bondholder will not be demanding the payment of the bond during the said grace period. Assuming that the financial statements of Tyrion were authorized to be issued on March 31, 2015.PROBLEM 4 Arya Corp. began operation on January 2, 2013 with 250 employees. The company provides its employees 2 weeks paid sick leave and 2 weeks paid vacation leave for every operating year. The company's policy on sick leave and vacation leave allows each employee to carry over accumulated leaves for the current period over the next year only. The same shall be forfeited if not availed of over the said period allowed. On December 31, 2013, records show that there are $5 employees who are yet to avail of any leaves, while there are 25 employees who have remaining 2 weeks unused vacation and sick leaves combined. Employees had an average daily wage rate of P250 for a 5-day weekly operation in 2013. On December 31, 2014, records show that 925 days' vacation and sick leaves carried over from the last operating period were exercised and paid in 2014. In addition, there are 30 employees who have 6 weeks accumulated unused sick leaves and 2 weeks unused vacation leaves; 30 employees who have accumulated 3 weeks unused sick leave and vacation leaves combined; 10 employees who have accumulated 1-week unused sick leaves and 1-week unused vacation leaves. Employees had an average daily wage rate of P275 for a 5-day weekly operation in 2014. You have observed that there has been no accrual made by the client to accrue salaries payable for the unused leaves at the end of 2013 and 2014. Based on the information above, answer the following:PROBLEM & On January 1, 2014, Stark Corp. issued 2,000 of its January 1, 2008, 8%, 10-year, P1,000 face value bonds with detachable stock warrants at P2,250,000. Each bond, which pays semiannual interests every January 1 and July 1, carried 5 detachable warrants which entitle the holder to acquire one share of Star Corp., PSO par, ordinary shares for every warrant at a specified option price of P55 per share up to July 31, 2014. Immediately after the issuance, the prevailing market rate of interest on similar bonds without the warrant is at 10% and the market value of the warrants was P30. The company recorded the transaction by debiting cash and crediting bonds payable at the total cash consideration received. Interests paid during the period are charged to interest expense, while accrual is yet to be made at the end of the period. Based on the information above, answer the following:Adelaida Inc, had the following unadjusted liability balances as of December 31, 2014: Accounts payable P540,000 Premiums payable 140,000 Deferred taxes (42,000] 10% Bonds payable 5,500,000 Audit notes: Accounts payable is net of a P50.000 debit balance in one of the company's suppliers accounts due to an overpayment made. The agreement with the supplier simply calls for the supplier to deliver additional merchandise to Adelaida Inc. to offset the overpayment. No deliveries were made as of the balance sheet date. b. The company started a promotional program in 2013 where an eco-friendly tote bag shall be given to customers upon presenting 6 product labels plus PS cash. The following information are deemed relevant in relation to the program: 2013 2014 Sales P7.200,000 P8,400.000 Total cost of tote bags purchased (P25 per tote bag] 375,000 500,000 Tote bags actually distributed 9,000 19.000 Estimated tote bags to be distributed the following 7.000 5.000 year The balance of the premiums liability account reflects the accrual at the end of the previous year (2013), no entry had been made during the current year affecting the said account. C. Deferred tax balance appearing above is the result of the deferred tax created by the premiums liability in the previous year which is tax deductible upon settlement. Adjustments are yet to be made to the said account to reflect the movement in the account balance during the year. Moreover, another temporary difference arising during the year created by the company's excess tax depreciation over financial depreciation for the period amounted to P150,000. The income tax rate is at 30%%. d. The balance of the bonds payable account was the total proceeds from its issuance on January 1, 2014. The bonds which shall mature on December 31, 2018 have a total face value of P5,000,000 and are convertible into ordinary shares at the rate of P1,000 bond to 10, P50 par value ordinary shares. On the issuance date the effective yield rate on similar securities without the convertibility option was at 8% while each ordinary share were selling at P75 per share. The only other entry made by the client in relation to the bonds was the payment of interest on December 31. as interest are payable annually every December 31. Based on the information above, answer the following