Reference no: EM132855746
Problem 1 - On January 1, 2018, Mid Company acquired an equipment for P600,000 payable in two annual equal installments every December 31 of each year. Mid Company signed an interest bearing note for P600,000. Interest of 12% is payable annually on the unpaid balance.
Required: Prepare necessary entries for 2018 and 2019.
Problem 2 - On January 1, 2018, OLAH Company acquired a tract of land for P1,000,000. OLAH paid P100,000 down and signed a two-year promissory note for the balance plus 10% interest compounded annually. The note matures and paid in full on January 1, 2020.
Required: Prepare necessary entries from 2018 to 2020.
Problem 3 - On January 1, 2018, LIFE Company acquired a machinery with cash price of P1,000,000 for P1,250,000. LIFE Company paid P400,000 and signed a noninterest bearing note for the balance which is payable in 4 equal annual installment payments every December 31 of each year.
Required: Prepare necessary entries from 2018 up to the last installment payment.
Problem 4 - On January 1, 2018, TIME Company acquired a building for P10,000,000. TIME Company paid P1,000,000 down and signed a noninterest bearing note for the balance which is payable in 3 equal annual installment payments every December 31 of each year. The prevailing interest 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 necessary entries from 2018 up to the last installment payments.
Problem 5 - On January 1, 2018, MALDITA Company acquired a tract of land for P5,250,000. MALDITA Company paid P1,250,000 down and signed a noninterest bearing note for the balance which is due on January 1, 2021. There was no established exchange price for the land and the note had no ready market. The prevailing interest rate on this type of note was 12%. The present value of 1 at 12% for 3 periods is .7118. Required: Prepare necessary entries from 2018 to 2021.
Problem 6 - On January 1, 2020, Origano Company was authorized to issue 6% bonds with face amount of P5,000,000 maturing on December 31, 2021. Interest payable is semi-annually on June 30 and December 31. On January 1, 2020, the entity issued all of the bonds for P4,818,500 with an effective rate of 8%. The fiscal year of the entity is the calendar year and the effective interest method of amortization is used.
Required: A. Prepare table of amortization for the discount. B. Prepare journal entries from 2020 and 2021.
Problem 7 - On January 1, 2020, COVIDPAMORE Company issued bonds with a face amount of P4,000,000 and stated interest rate of 12%. The interest is payable semiannually on June 30 and December 31. The bonds mature on every December 31 at the rate of P2,000,000 per year for 2 years.
Required: A. Compute for the market price of the bonds on January 1, 2020.
B. Prepare table of amortization using the effective interest method.
C. Prepare journal entries for 2020 and 2021.
Problem 8 - On January 1, 2020, Catalina Company issued at par 5,000 10% bonds with face amount of P1,000 per bond. The bonds have five-year term, and pay interest annually every December 31 each year. The entity elected the fair value option in measuring the bonds payable. On December 31, 2020 and 2021, the risk factors indicated that the rate of interest applicable to the borrowings was 8% and 12% effectively.
Required: Prepare journal entries for 2020 and 2021.
Problem 9 - On March 1, 2020, Lazuna Company issued 10% bonds with face amount of P7,000,000 to yield 8%. Interest is payable semiannually on March 1 and September 1. The bonds mature in 10 years.
Required: A. Determine the market price or issue price of the bonds.
B. Prepare effective interest amortization table for the first two interest periods.
C. Prepare journal entries for 2020 and 2021.