PROBLEM 1
On September 1, 2024, Pine Company issued a note payable to National Bank in the amount of
P1,800,000, bearing interest at 12%, and payable in three equal annual principal payments of
P600,000. On this date, the bank’s prime rate was 11%. The first interest and principal payment was
made on September 2025.
On December 31, 2025, what amount should be reported as accrued interest payable?
PROBLEM 2
Mann Company reported on June 30, 2024 a 10% note payable in the amount of P3,600,000.
The note dated October 1, 2022 and is payable in three equal payments of P1,200,000 plus interest.
The first interest and principal payment was made on October 1, 2023.
On June 30, 2024, what amount should be reported as accrued interest payable?
PROBLEM 3
On December 31, 2024, Boston Company purchased a machine from Helix Company in exchange for
noninterest bearing note requiring eight payments of P200,000.
The first payment was made on December 31, 2024 and the others are due annually on December 31.
At the date of issuance, the prevailing rate of interest for this type of note was 11%.
1. On December 31, 2024, what is the carrying amount of the notes payable?
2. What amount should be reported as interest expense for 2025?
PROBLEM 3
On January 1, 2024, Elmer Company sold land to Jake Company. There was no established market price
for the land.
Jake gave Elmer a P2,400,000 noninterest bearing notes payable three equal annual installments of
P800,000 with the first payment due December 31, 2024.
The note has no ready market. The prevailing rate of interest for a note of this type is 10%. The
present value of a P2,400,000 in 3 equal installments of P800,000 at a 10% rate of interest is
P1,989,600.
What is the carrying amount of the note payable on December 31, 2024.
PROBLEM 4
On January 1, 2024, Lizelle Company signed a P1,000,000 noninterest-bearing note due in 3 years at a
discount rate of 10%.
The entity elected the fair value option for reporting the note payable
On December 31, 2024, the credit rating and risk factors indicated that the rate of interest applicable
to borrowing was 9%.
1. What is the carrying amount of the note payable on January 1, 2024?
2. What is the carrying amount of the note payable on December 31, 2024?
PROBLEM 5
The unadjusted trial balance of Job Company at December 31, 2021 included the following:
P1,500,0
Accounts Payable 00
P600,00
Bank Note Payable 0
P1,200,0
Mortgage Note Payable 00
The bank note, issued August 1, 2021, is due on July 31, 2022 with interest rate of 10%
payable at maturity.
The mortgage note is due on March 1, 2022. Interest at 9% has been paid up to December 31,
2021. The entity intended on December 31, 2021 to refinance the mortgage note on due date
with a new 10-year mortgage note.
On March 1, 2022 the entity has paid P250,000 in cash on the principal balance of the balance
of the mortgage note and refinanced the remaining P950,000.
On November 1, 2021, the entity rented a portion of its factory to a tenant for P300,000 per
year payable in advance. The payment for the 12 months ended October 31, 2022 was
received as required and was credited to rent revenue.
What amount should be reported as total current liabilities on December 31, 2021?