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    INTACC2 Liabilities Questions ARALJPIA

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    Kiba Yuuto
    The document provides examples and questions related to accounting for liabilities, provisions, bonds, and notes payable. It discusses when items would be classified as liabilities, provisions, or contingent liabilities on a company's statement of financial position. It also provides examples of accounting entries related to bond and note issuances and calculations of interest expense for notes and bonds payable.

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    INTACC2 Liabilities Questions ARALJPIA

    Uploaded by

    Kiba Yuuto
    2K views3 pages
    The document provides examples and questions related to accounting for liabilities, provisions, bonds, and notes payable. It discusses when items would be classified as liabilities, provisions, or contingent liabilities on a company's statement of financial position. It also provides examples of accounting entries related to bond and note issuances and calculations of interest expense for notes and bonds payable.

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    Intacc 2

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    The document provides examples and questions related to accounting for liabilities, provisions, bonds, and notes payable. It discusses when items would be classified as liabilities, provisions, or contingent liabilities on a company's statement of financial position. It also provides examples of accounting entries related to bond and note issuances and calculations of interest expense for notes and bonds payable.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    2K views3 pages

    INTACC2 Liabilities Questions ARALJPIA

    Uploaded by

    Kiba Yuuto
    The document provides examples and questions related to accounting for liabilities, provisions, bonds, and notes payable. It discusses when items would be classified as liabilities, provisions, or contingent liabilities on a company's statement of financial position. It also provides examples of accounting entries related to bond and note issuances and calculations of interest expense for notes and bonds payable.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    Mga fellow Accounting Students,,, now this is my side. Listen, look, listen, and LEARN.

    INTACC2 – LIABILITIES
    By: Dan Andrew Millano

    Nature of Provision

    I. Papasa Tayo Corp. is evaluating whether each of the following would be a liability, a
    provision or a contingent liability, or none of these, in the financial statements of Papasa
    Tayo Corp. as of 30 June 2019. Assume that Papasa Tayo Corp.’s financial statements
    are authorized for issue on 24 August 2019:

    § An amount of P350,000 owing to Di Tayo Susuko Company for services


    rendered during May 2019.
    § Long service leave, estimated to be P5,000,000 owing to employees in respect to
    past services.
    § Costs of P260,000 estimated to be incurred for relocating employee D from
    Papasa Tayo Corp’s head office location to another city. The staff member will
    physically relocate during July 2019
    § Provision of P500,000 for the overhaul of a machine . The overhaul is needed
    every 5 years and the machine was 5 years as at 30 June 2019
    § Damages awarded against Papasa Tayo Corp. resulting from a court case
    decided on 26 June 2019. The judge has announced that the amount of
    damages will be set at a future date. expected to be in September 2019. Papasa
    Tayo Corp. has received advice from its lawyers that the amount of the damages
    could be anything between P50,000 and P8 million.

    How much should be reported as Provision in Papasa Tayo Corp.’s statement of


    financial position as of 30 June 2019?

    II. During current year, Kaya Natin To Corp. won a litigation award for P2,000,000 which
    was tripled to P6,000,000 to include punitive damages. The defendant, who is
    financially stable, has appealed only the P4,000,000 punitive damages. Kaya Natin To
    Corp. was awarded P1,000,000 in an unrelated suit it filed, which was being appealed
    by the defendant. Counsel is unable to estimate the outcome of the appeals. In its
    current year income statement, Kaya Natin To Corp. should report what amount
    of liability?

    III. In May 2019, Tiwala Lang Corp. relocated an employee from the company’s head
    office to an office in another city. As of June 30,2019, the company’s period end, the
    relocation costs are estimated as follows:

    § Cost of shipping goods P30,000


    § Airfare P60,000
    § Temporary Accomodation costs for May and June P80,000
    § Temporary Accomodation costs for July and August P90,000
    § Reimbursement for lease break cost paid in July. The
    lease was terminated in May P20,000
    § Reimbursement for costs of living increase for the
    § period May2019 to April 2020 P120,000

    TOTAL P400,000

    How much is the provision for relocation costs as of June 30,2019?

    BONDS and NOTES PAYABLE

    If silent always recognized @AC

    IV. On March 1, 2019, Listen Look & Listen & Learn Company issued 10,000 of its
    P1,000 face value bonds at 95 plus accrued interest. Listen Look & Listen & Learn
    Company paid bond issue cost of P1,000,000. The bonds were dated November 1 ,
    2018, mature on November 1, 2028 and bear interest at 12% payable semiannually on
    November 1 and May 1.

    1. The net amount that Listen Look & Listen & Learn receive from the bond
    issuance is

    2. Give the entry in the books of Listen Look & Listen & Learn (issuer)

    V. On January 1, 2019, Daybors Comapany issued 12%, P1000 face value 5-year
    bonds @ 105. Interest on the bonds is payable annually every December 31. In
    connection with the sale of these bonds, Daybors paid the following expenses

    § Promotion Cost. P100,000


    § Engraving and printing 400,000
    § Underwriter’s commissions 500,000

    Using the straight line method, what amount should Marimar report as bond
    interest expense for the year 2019?

    VI. The Truth Will Set Be Free Company floated a serial bond issue in 2017. Details of
    the issue are as follows

    § Total amount P5,000,000


    § Date of issue October 2, 2017
    § Proceeds from issue P4,900,000
    § Interest rate 5% per annum
    § Interest payment date October 1
    § Maturity date P1,000,000 annually, starting October 1, 2019

    Using the bond outstanding method of amortizing discount, compute the interest
    expense to be recognized for the year ended December 31, 2019

    VII. On December 31, 2018, No Katsing issued P200,000 of 8% serial bonds, to be


    repaid in the amount of P40,000 each year. Interest is payable annually on December
    31. The bonds were issued to yield 10% a year. In its December 31, 2019 statement of
    financial position, at what amount should No Katsing report the carrying amount of
    the bonds?

    VIII. On July 1, 2019. ETC purchased a noncash asset with a list price of P260,000 by
    issuing a five-year noninterest bearing note, The market or “going” rate of interest for
    this note was 12%. The note will be paid in five annual P64,000 installments each June
    30,2020 through 2024. The amount that should be recorded for the net liability on
    July 1, 2019, is:

    IX. Silver Company purchased merchandise for resale on January 1, 2019, for P5,000
    plus a P20,000, two year note payable. The principal is due on December 31, 2020; the
    note specified 8 percent interest payable each December 31. Silver’s going rate of
    interest for this type of debt was 15%. How much is the carrying amount of the note
    payable on December 31, 2019?

    X. On December 31, 2019, Park Company purchased equipment from Ott Corp. and
    issued a non-interest bearing note requiring payment of P50,000 annually for 10 years/
    The first payment is due December 31, 2019, and the prevailing rate of interest for this
    type of note at date of issuance is 12%. The interest expense to be reported by Park
    in its 2020 income statement is?

    XI. Funan Industries purchases new specialized manufacturing equipment on July 1,


    2018. The equipment cash price is P79,000. Funan signs a deferred payment contract
    that provides for a down payment of P10,000 and an 8 yr. note for 103,472. The note is
    to be paid in 8 equal annual payments of P12,934. the payments include 10% interest
    and are made on June 30 of each year, beginning June 30, 2019

    a) What is the carrying amount of the note payable on December 31, 2019?
    b) What is the total interest expense for the year ended December 31, 2019?

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