QUIZ NO.

1 AUDIT OF LIABILITIES
Write your answers on a ONE WHOLE yellow paper. NO SOLUTION, NO CREDIT.
Each item is worth 5 points. If your answer is wrong but your solution is well
structured you will be given 3 points for each corresponding item. In your paper,
write also your Name, Subject, Section Code and TITLE OF THE UNIT.

The following notes payable were presented to you by your client Kupido Company in
the year end December 31, 2020:

• On January 31, 2019, KUPIDO Company acquired a machine from HI BESH Co. In lieu of
cash payment, KUPIDO gave HI BESH a 3-year, P1,000,000, 3% note payable. Principal is
due on January 31, 2022 but interest is due annually every December 31.

• On February 28, 2020, the company acquired a machine from GOODBYE Co. In lieu of
cash payment, KUPIDO gave GOODBYE a 3-year, P700,000, 2% note payable. Principal
is due on December 31, 2023 but interest is due annually every December 31. The
prevailing interest rate for this type of note is 12%.

• On June 1, 2018 KUPIDO Corp. acquired a land from GHOSTED Inc. In lieu of cash
payment, the company gave GHOSTED a 5-year P800,000 non-interest bearing note
payable. The prevailing rate of interest for this type of note is 13%.

• On January 1, 2019, KUPIDO acquired a building from OIL Co. In lieu of cash payment,
KUPIDO gave OIL a 6-year, P6,000,000 non-interest bearing note payable. Principal is
due in equal payments every December 31 beginning on December 31, 2020. The
prevailing rate of interest for this type of note is 10%.

• On January 1, 2020, Kupido acquired inventory with a list price of P800,000 and a cash
price of P497,380 by issuing a 3-year P600,000 noninterest bearing note payable.
Principal is due in equal payments every December 31 beginning on December 31,
2020. The effective rate of interest interpolated for the cash is 10%.

REQUIREMENTS:

1. Interest Expense for 2021.

2. Interest Payable for 2020.
3. Carrying amount of notes payable to be presented as current liability on December 31,
2020.
4. Carrying amount of notes payable to be presented as non-current liability on December
31, 2020.
5. Carrying amount of notes payable to be presented as non-current liability on December
31, 2021.