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Liability Quiz 5

The document presents financial scenarios involving different companies acquiring loans and equipment, detailing the terms of the loans and the calculation of carrying amounts on initial recognition. It includes multiple-choice questions for determining the carrying amounts and effective interest rates based on given conditions. The scenarios involve non-interest bearing notes, loan origination fees, and compensating balances.

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18 views2 pages

Liability Quiz 5

The document presents financial scenarios involving different companies acquiring loans and equipment, detailing the terms of the loans and the calculation of carrying amounts on initial recognition. It includes multiple-choice questions for determining the carrying amounts and effective interest rates based on given conditions. The scenarios involve non-interest bearing notes, loan origination fees, and compensating balances.

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18. On January 1, 20x1, SCRUPULOUS EXACT Co., acquired a piece of


equipment by issuing a
₱12,000,000, non-interest bearing note that is payable in three equal annual
installments starting
January 1, 20x4. The current market rate of interest on January 1, 20x1 is 12%. How
much is the
carrying amount of the note on initial recognition?
a. 7,124,844 c. 7,658,901
b. 7,740,084 d. 7,412,769
(Hint: Mind the payment dates.)
19. On January 1, 20x1, SUBDUE Co. borrowed 10%, ₱4,000,000 loan from
CONQUER Bank.
Principal is due on January 1, 20x4 but interests are due annually starting
January 1, 20x2.
SUBDUE was charged by the bank a 3% nonrefundable loan origination fee
representing service
fee. How much is the carrying amount of the note on initial recognition?
a. 3,947,608 c. 3,880,000
b. 3,840,234 d. 3,720,00
20. On January 1, 20x1, SUNDER BREAK APART Co. obtained a ₱4,000,000, 180-day
bank loan at an
annual rate of 10%. The loan agreement requires SUNDER to maintain a ₱400,000
compensating
balance in its bank account at the lending bank. SUNDER would otherwise maintain
a balance of
only ₱200,000 in this account. The bank account earns interest at an annual rate of
2%. Based on a
360-day year, what is the effective interest rate on the borrowing?
a. 5.21% c. 13.67%
b. 10.42% d. 12.33%

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