PROBLEMS Problem 8-1 (IAA) Ontario Company, a natural energy supplier, borroveg | P8,000,000 cash on November 1, 2021 to fund a Beologica) survey. The loan was granted, by United Bank under , short-term credit line. Ontario Company issued a 9-mont} 12% promissory note with interest payable at maturity. Th fiscal period is the calendar year. Required: 1. Prepare the journal entry for, the issuance of the not, payable by Ontario Company. 2. Prepare the appropriate adjusting entry for the not, payable on’ December 31, 2021. 3. Prepare the journal entry for the payment of the -note payable at maturity. ? Problem 8-2 (IAA) On October 1,'2021, Home Company issued to Security Bank a P6,000,000, 8-month, noninterest-bearing note. The note payable was discounted by the bank at 12%. Required: 1, Prepare the appropriate journal entry by Home Company to record the issuance of the note. 2. Prepare the adjusting entry on December 31, 2021. Present the note payable on December 31, 2021. 4. Prepare the journal entry to record the discount amortization and payment of the note payable on June |, 2022, date of maturity. 5. Prepare the journal entry to record the following) assuming the note had been structured as a 12% note with interest and principal payable at maturity: » ~ a. Issuance of the note-payable on October 1, 2021 - b. Accrued’interest payable on December 31, 2021 _ _c. Payment of the note payable on the date of maturity : Scanned with CamScannerproblem 8-3 (IAA) On September 1, 2021, Trinoma FE; i P24 00,00 cash to find a new Fun Park ‘The loan wee ‘an\ nk un i i Cert Lirangoment ler a noncommitted short-term line ‘Trinoma issued a 9-month, 12% promissory note. Interest was payable at maturity. The fiscal period is the calendar year. Required: 1. Prepare the journal entry for the issuance of:the note by Trinoma. . Prepare the appropriate adjusti r 2 Eeerber 31 eae ‘i adjusting entry for the note on 3. Prepare the journal entry for the payment of the’note at maturity. Problem 8-4 (IAA) Rose Company provided the following selected transactions related to liabilities: 2021 Feb. 1 Negotiated a revolving credit agreement with Second Bank which can be renewed annually upon: bank approval. = : The amount available under the line of credit is P30,000,000 at the prime bank rate. April 1 Arrangeda 3-month bank loan of P12,000,000 with Second Bank under the line of credit agreement. ‘Interest at the prime rate of 8% was payable at maturity. E . July 1 Paid the 8% note at maturity. Nov. 1 Supported’ by the credit line, Rose Company issued P20,000,000 of commercial paper on a nine-month note. Interest was discounted at. issuance at a 6% discount rate. Dec. 31 Recorded any necessary adjusting entry. 2022 Aug. 1. Paid the commercial paper at maturity. Required: Prepare the appropriate journal entries through the maturity of each liability. Scanned with CamScannerProblem 8-5 (ACP) ‘Onn January 1, 2021, West Company acquired a tract of lang | for P1,000,000. s | The entity paid P100,000 down and signed a two-year promissory note for the balance plus 10% interest — compounded annually. The note matures on January 1, 2023, | Required: } Prepare journal entries to record: | 1. Purchase of land on January 1, 2021 9. Accrued interest on December 31, 2021 3. Accrued interest on December 31, 2022 4, Full payment of the note on January 1, 2023 Problem 8-6 (ACP) | On January 1, 2021, North Company acquired a machinery with cash price of P750,000 for P1,000,000. The entity paid P200,000 and signed a noninterest bearing promissory note for the balance which is payable in 4 equal installments every December 31 of each year. 5 Required: Prepare journal entries for 2021. Problem 8-7 (IAA) “ On January 1, 2021, South Company acquired a building for P5,000,000. The entity paid P500,000 down and signed a noninterest bearing note for the balance which is payable in 3 equal annual installments every December 31 of each year. The prevailing interest rate for a note of this type is 12%. The present value of an ordinary annuity of/1 for three | Periods is 2.4018. | Required: | Prepare journal entries to record purchase of building on | January 1, 2021, first installment paymient'on December 31, — 2021 and interest expense for 2021. | Scanned with CamScannerProblem 8-8 (IAA) On January 1, 2021, Manila Company acquired a tract of land for P6,250,000. The entity paid P1,250,000 down and signed a noninterest bearing note payable for the balance which is due on January 1; 2024, There was no established exchange price for the land and the note -had no ready: market. The prevailing interest rate for this type of note was 12%, The present value of 1 at 12% for 3 periods is 7118, Required: Prepare journal entries to record purchase of land on January 1, 2021, interest expense for 2021 and full payment of the note on January 1, 2024, q Problem 8-9 (AICPA Adapted) On January 1, 2021, Heritage Company had a note payable to bank in the amount P2,800,000. fees Transactions during 2021 and other information relating to liabilities are: a. Principal amount of the note payable to bank is P2,800,000 and bears a_12% interest. The note is dated April 1, 2020 and is payable in four equal annual installments beginning April 1, 2021. The first principal and interest_payment was made on April 1, 2021. b.. Onduly 1, 2021, the entity issued for P1,774,000 a P2,000,000 « face amount.note payable to a wealthy shareholder. The note was dated July 1, 2021 and matures on July 1, 2022. No explicit interest rate is stated in the note aad the entire face‘amount of the note is payable at maturity date. Required: a. Prepare journal entries for 2021. b. Compute the total current liabilities on December 31, 2021. c. Determine the interest expense for 2021. i Scanned with CamScanner™“ Problem 8-10 (IAA) Joshua Company bought a new machine’ and agreed to p in equal annual installment of P600,000 at the end of eg the. next five years. The prevailing interest rate for oak of transaction is 12%. , The present value of an ordinary annuity of 1 at 12% foy fi periods is 3.60. The future amount of an ordinary annuity ik 1 at 12% for five periods. is 6.35. The present value of la ie 12% for five periods is 0.567. 1. What amount should be reported as note payable ; financial statements were prepared today? t Scanned with CamScannerProblem 8-12 (AICPA Adapted) On December 31, 2021, Bart Company purchased a machine from Fell Company in exchange for a noninterest bearing note payable requiring eight payments of P200,000. The first payment was made on December 31) 2021 and the . others are due annually on December 31. At date of issuance, the prevailing rate of interest for this type of note was 11%. PV of an ordinary annuity of 1 at 11% for 8 periods 5.146 PV ofan annuity of 1 in advance at 11% for 8 periods 5.712 On December 31, 2021, what is the carrying amount of the note payable? Scanned with CamScannerProblem 8-14 (AICPA Adapted) At year-end, Roth Company issued a P1,000,000 face am, note payable in exchange for services rendered. Ling The note payable, made at usual trade terms, is due in j, months and bears interest, payable at maturity, at the ann? rate of 3%. al The market interest rate is 8%. The compound interest fact, of 1 due in nine months at 8% is .944. , gon ae At what amount should the note payable be reporteq a | year-end? It Scanned with CamScannerProblem 8-17 (IAA) On January 1, 2021, Solemn Company sold land to Glory Company: There was no established market price for the land. Glory Company gave Solemn Company a P2,400,000 noninterest bearing note payable in three equal annual installments of P800,000 with the first payment due December 31, 2021. The note had no ready market. The prevailing rate of interest for a note of this type is 10%. The present value of a P2,400,000 note payable in three equal annual 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, 2021? Scanned with CamScannerProblem 8-19 (AICPA Adapted) Loob Company frequently borrowed from the bank in ordey maintain sufficient operating cash..The loans were at a 125 interest rate, with interest payable at maturity. s The entity recorded interest expense when the loans are Tepaiq As a result, interest expense of P150,000 was recorded in 202] The entity repaid each loan on the scheduled maturity date," Date Amount Maturity Term 11/1/2020 500,000 10/31/2021 lyear 2/1/2021 1,500,000 7/31/2021 6 months 5/1/2021 800,000 1/31/2022 9 months If no correction is made, by what amount would interes, expense for 2021 be understated? | Scanned with CamScannerproblem 8-21 (AICPA Adapted) in September 30, 2022, World Company borrowed P 1,000,000 oF a 9% note payable. The entity paid the first of four quarterly payments of P264,200 when due on December 31, 2022. 1. What amount should be reported as interest expense for 2022? 7 Scanned with CamScanner™ On January 1, 2021, Jonathan Company borroweg P50 8% note payable due in four years. The present value oj 20,049 | | note payable on the date of issuance was P367,500, Ff the | Problem 8-23 (AICPA Adapted) The entity elected irrevocably the fair value ©Ption measuring the note payable. On December 31, 2021, the value of the note payable is P408,150. ete 1. What is the carrying amount of the note Payabl, December 31, 2021? Fo Scanned with CamScannerProblem 8-24 (AICPA Adapted) On January 1, 2021, Lizelle Company received P1,000,000 on a noninterest-bearing note payable due in three years. The market rate of interest on such date is 10%. The entity irrevocably elected the fair value option in measuring the note payable. On December 31, 2021, the risk factors indicated that the rate of interest applicable to the borrowing was 9%. The present value factors at 10% and 9% are: PV factor 10%, 3 periods .751 PV factor 10%, 2periods 826 PV factor 10%, 1lperiod 909 PV factor 9%, 3 periods 772 PV factor 9%, 2 periods 842 PV factor 9%, 1 period 917 1. What is the initial carrying amount of the note payable on January 1, 2021? Scanned with CamScannerProblem 8-11 (AICPA Adapted) Mann Company reported a 10% note payable of P3,600,000 n June 30, 2021. The note is dated October 1, 2019 and ayable in three equal annual payments of P1,200,000 plus erest.. first interest and principal payment was made on tober 1, 2020. June 30, 2021, what amount should be reported as ccrued interest payable for this note? Scanned with CamScannerProblem 8-13: (AICPA. Adapted) At the beginning of current year, Pareés Company borrowed P3,600,000 from a major customer evidenced by a noninterest bearing note payable due in three years. The entity agreed to supply the ‘customer's inventory needs for the loan period at an amount lower than market price. At the 12% imputed interest rate for this type of loan, the present value of the note is P2,550,000-at the date of issuance. What amount of interest expense should be reported for the current year? Scanned with CamScannerProblem 8-15 (AICPA Adapted) On September 1, 2020, Pine Company issued a note Payahy 2%, and in the amount of P1,800,000, bearing interest at 1 Payments of payable in three equal annual principal P600,000. On this date, the prime rate was 11%. The first interest and principal payment was made o September 1, 2021. On December 31, 2021, what amount should be reported as accrued interest payable? Scanned with CamScanner_ Problem 8-16 (AICPA Adapted) On March 1, 2020, Alpha Company borrowéd P 1,000,000 and igned a 2-year note payable bearing interest at 12% per nnum compounded annually. Interest is payable in full at aturity on February 28, 2022. at amount should be reported as accrued interest payable December 31, 2021? Scanned with CamScannerProblem 8-18 (AICPA Adapted) \On January 1, 2021, Easy Company reported a note payable of P1,200,000. The note is dated October-1, 2020, bears interest at 15%, and is payable in three equal annual payments.of P400,000. The first interest and principal payment was made on October 1, 2021. What amount should be reported as interest expense for 2021? Scanned with CamScannerProblem 8-20 (AICPA Adapted) Jason Company offered a contest in which the winner would receive P1,000,000 payable over twenty years. On December 31, 2021, Jason Company announced the winner of the contest and signed a note payable to the winner for P1,000,000 payable in P50,000 installments every January — 31. f ihe | On December 31,2021, Jason Company purchased an annuity | for P418,250 to provide the P950,000 prize remaining after the first P50,000 installment which was paid on January 31, 2022. ; _ On December 31, 2021, what amount should be reported as _ hote payable-contest winner, net of current portion’ Scanned with CamScannerProblem 8-22 (AICPA Adapted) On January 1, 1, 2021, Justine Company borrowed P2,000,000 on a 10% five-year interest- bearing note. On December 31, 2021, the fair value of the note is determined to be P1,900, 000: The entity irrevocably: elected the fair value option in measuring the note payable. 1 veeas amount should be reported as interest expense for Scanned with CamScanner