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What amount should be reported as interest expense

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Reference no: EM132880999

On July 1, 2016, Jamelia Company borrowed P1,000,000 on a 10%, five-year note payable. On December 31, 2016, the fair value of the note is determined to be P975,000 based on market and interest factors. The entity has elected the fair value option for reporting the financial liability.

Problem 1: What amount should be reported as interest expense for 2016?

a. 100,000

b. 97,500

c. 50,000

d. 48,750

Problem 2: What is the carrying amount of the note payable on December 31,2016?

a. 1,000,000

b. 975,000

c. 500,000

d. 900,000

Problem 3: What is the gain or loss to be recognized in 2016 as a result of the fair value option

a. 25,000 gain

b. 25,000 loss

c. 12,500 gain

d. 0

Reference no: EM132880999

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