1.

a. 12/01 Interest Expense P 15,000

Notes P ayable P 15,000
To record the issuance of notes.

b. January 31, on the following year is the maturity date of the notes.

c. Principal P 15,000
Accrued interest (15,000 x 12% x 60 / 360) 300
Maturity value of notes P 15,300

d. 12/31 Interest Expense (300 x 30/60) P 150

Interest Payable P 150
To record accrued expense.

e. 01/31 Notes Payable P15,000

Interest payable 150
Interest Expense 150
Cash P15,300
To record settlement of notes payable.

2.
a. total amount. of interest to be paid
25,000 x 6% x 120 / 360
Interest = 500

b. 06/01 Notes Payable P 25,000

Accounts Payable P 25,000
To record the payment
of notes with accounts payable.

c. 9/29 Notes Payable P 25,000

Accrued Interest 500
Cash P 25,500
To record settlement of notes payable

3.
a. 01/01/x1 Cash P 70,000
Notes Payable P70,000
 To record issuance of note.

b. 12/31/x1 Notes Payable P 15,307

Interest Expense (70K x 9%) 6,300
Interest Payable P 21,607
To record 1st installment on the note
12/31/x2 Notes Payable P 16,684.63
Interest Expens e (54693K x 9%) 4,922.37
Interest Payable P 21,607
To record 2nd installment on the note

4. Amortization Table:
DATE PAYMENT DISCOUNT ON AMORTIZATION PRESENT VALUE
NOTE
Jan. 01, 20x1 - - - P 210,000
Dec. 31, 20x1 P 81,487 P 16,800 P 64,687 P 145,314
Dec. 31, 20x2 P 81,487 P 11,625 P 69,862 P 75,451
Dec. 31, 20x3 P 81,487 P 6,036 P 75,451 -

MULTIPLE CHOICE QUESTIONS

1. A
20,000 X 12% X 5/12 = 1,000
2. C
3. C
4. D
5. A
Interest Expense 25,000 X 8 % X 9/12 P 1,500
Less: Interest Expense (Oct.-Dec.) 500
Interest Expense (Jan-Jun) P 1,000
6. D
7. A
8. B
9. D
10. A
Notes Payable P 7,238
Interest Expense (100K x 7%) 7,000
Cash P 14,238