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Intermediate Accounting 2 (Notes Payable) - Problem 6

The document contains 4 problems involving accounting for noninterest-bearing notes and loans payable. Problem 1 requires entries for a noninterest-bearing note payable of P1.6 million due as a lump sum in 2 years with an effective interest rate of 17%. Problem 2 requires similar entries for a P1.2 million noninterest-bearing note payable in 3 equal annual installments over 3 years at 17% interest. Problem 3 provides details of a P1.2 million noninterest-bearing note payable in 3 equal annual installments beginning immediately and calculates interest expense and carrying amount after 1 year at 10% interest. Problem 4 calculates the carrying amount and effective interest rate for a P3 million bank loan due

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336 views2 pages

Intermediate Accounting 2 (Notes Payable) - Problem 6

The document contains 4 problems involving accounting for noninterest-bearing notes and loans payable. Problem 1 requires entries for a noninterest-bearing note payable of P1.6 million due as a lump sum in 2 years with an effective interest rate of 17%. Problem 2 requires similar entries for a P1.2 million noninterest-bearing note payable in 3 equal annual installments over 3 years at 17% interest. Problem 3 provides details of a P1.2 million noninterest-bearing note payable in 3 equal annual installments beginning immediately and calculates interest expense and carrying amount after 1 year at 10% interest. Problem 4 calculates the carrying amount and effective interest rate for a P3 million bank loan due

Uploaded by

DM Montefalco
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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PROBLEM 6: FOR CLASSROOM DISCUSSION

Noninterest-bearing note-lump sum

1. On January 1,20x1, an entity issues a noninterest-bearing note payable of P1,600,000 in


exchange for land. The note is due on December 31,20x3. The effective interest rate is 17%.

Requirement: Provide all the entries during the term of the notes payable.

Noninterest-bearing note - Installments

2. On January 1,20x1, an entity issues a noninterest-bearing note of P1,200,000 in exchange for


land. The note is due in three equal annual installments every December 31. The effective interest rate is
17%.

Requirements:

a. Provide all the entries during the term of the note.

b. Compute for the current and noncurrent portions of the note on December 31,20x1 and the
amount of “Discount on notes payable" allocated to each portion.

Noninterest-bearing note-installment in advance

3. On January 1,20x1, Otters Co. issued a 3-year, noninterest bearing note of P1,200,000 in
exchange for equipment. The note is due in three equal annual installments beginning on January 1,20x1
and every January 1 thereafter. The effective interest rate is 10%.

Requirements:

a. Prepare the amortization table.

b. How much is the interest expense in 20x1?

c. How much is the carrying amount of the note on Dec.31,20x1?

Loans payable-Origination fees

4. On January 1,20x1, Jaco Co. obtains a P3,000,000 bank loan which is maturing on December
31,20x3. The loan requires payment of 10% interest annually every December 31. The bank charges Jaco
Co. a 4.8037% nonrefundable loan origination fee.

Requirements: Compute for the following:

a. Carrying amount of the loan-on January 1,20x1

b. Effective interest rate on the loan


c. Carrying amount of the loan on December 31,20x1

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