CPA REVIEW SCHOOL OF THE PHILIPPINES Manila FINANCIAL ACCOUNTING AND REPORTING — VALIX/SIY/VALIX/ESCALA/SANTOS/DELA CRUZ, CURRENT LIABILITIES An entity includes one coupon in each box of laundry soap it sells, A towel is offered as a premium to customers who send in 10 coupons and a remittance of P10. Distribution cost of premium is PS. Experience indicates that only 30% of the coupons will be redeemed, 2020 2021 Boxes of soap sold 2,000,000 2,500,000 ‘Number of towels purchased at P50 each 50,000 80,000 ‘Coupons redeemed 400,000 700,000 What is the premium expense for 2020? 2,500,000 . 2,400,000 . 1,800,000 . 2,700,000 aege 2, What is the estimated premium liability on December 31, 2020? a. 1,000,000 b. 1,100,000. c. 800,000 d. 900,000 3, What is the premium expense for 20217 a. 3,000,000 b. 3,750,000 c. 3,375,000 d. 4,000,000 s What is the estimated premium liability on December 31, 2021? a. 1,000,000 b. 1,250,000 c. 1,125,000 d. 1,375,000 . An entity, a grocery retailer, operates a customer loyalty program. The entity grants program members loyalty points when they spend a specified amount on groceries, Program members can redeem the points for further groceries. The points have no expiry date. During 2020, the sales amounted to P7,000,000 based on stand-alone selling price. During the year, the entity granted 10,000 points. But management expected that only 80% or 8,000 points will be redeemed. The stand alone selling price of each loyalty point is estimated at P100. On December 31, 2020, 4,800 points have been redeemed. In 2021, management revised its expectations and now expected that 90% or 9,000 points will be redeemed altogether. During 2021, the entity redeemed 2,400 points. 1, What amount should be reported as sales revenue including the revenue earned from points for 2020? a. 7,000,000 b. 6,125,000 c. 6,650,000 , 4. 7,525,000 2. What is the revenue eamed from loyalty points for 2021? a, 700,000 b. 175,000 ©, 210,000 4. 200,000 6754Page 2 During 2020, an entity introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to peso sales are 4% within 12 months following sale and 6% in the ‘second 12 months following sale. The entity reported sales of P5,000,000 for 2020 and P6,000,000 for 2021. The actual expenditures incurred and paid amounted to P150,000 for 2020 and P550,000 for 2021. 1, What is the warranty expense for 20217 a, 650,000 . 600,000 . 500,000 d, 550,000 2.. What is the estimated warranty liability on December 31, 2021? a. 260,000 b. 400,000 c. 240,000 d. 100,000 . During 2020, an entity is the defendant in a patent infringement lawsuit. The lawyers believe there is a 30% chance that the court will dismiss the case and the entity will incur no outflow of economic benefits, However, if the court rules in favor of the claimant, the lawyers believe that there is a 20% chance that the entity will be required to pay damages of P200,000 and an 80% chance that the entity will be required to pay damages of P100,000. Other outcomes are unlikely. The court is expected to rule in late December 2021. There is no indication that the claimant will settle out of court. A 7% risk adjustment factor to the probability-weighted expected cash flows is considered appropriate to reflect the uncertainties in the cash flow estimate. An appropriate discount rate is 5% per year. The present value of | at 5% for one period is 0.95. 1. What is the undiscounted provision before risk adjustment on December 31, 2020? a. 200,000 b. 100,000 ¢. 150,000 d. 84,000 2. What amount should be reported as provision for lawsuit on December 31, 2020? a. 79,800 b. 95,000 c. 89,880 d. 85,386 . On January 15, 2020, an explosion occurred at an entity plant causing extensive property damage to area buildings. By March 1, 2021, no claims had been asserted against the entity but management and counsel concluded that it is likely that claims will be asserted and that it is probable that the entity will be responsible for damages. Management believed that P1,250,000 would be a reasonable estimate of the liability. The entity's P5,000,000 comprehensive public would be a reasonable estimate of the liability. The comprehensive public liability policy has a P250,000 deductible clause. The financial statements for 2020 were issued on March 31, 2021. What amount of provision should be reported on December 31, 2020? a. 5,000,000 b. 2,500,000 ©. 1,250,000 4. 0 6754a Page 3 9. During 2020, an entity filed suit against another entity seeking damages for patent infringement. On December 31, 2020, the legal counsel believed that it was probable that the entity would be successful against the other entity for an estimated amount of 1,500,000. On March 31, 2021, the entity was awarded P1,000,000 and received full payment thereof. The 2020 financial statements were issued on March 1, 2021. How should this award be reported in the 2020 financial statements? a. As receivable and revenue P1,000,000 b. As receivable and deferred revenue P 1,000,000 ¢. As disclosure of contingent asset P1,000,000 d. As disclosure of contingent asset P1,500,000 . An entity sells magazine subscriptions for a 1-year, 2-year or 3-year period. Cash receipts from subscribers are credited to unearned subscription revenue and this account had a balance of P1,700,000 on January 1, 2020. The entity provided the following information for the year ended December 31, 2020: Cash receipts from subscribers 2,300,000 Subscription revenue credited on December 31, 2020 1,500,000 On December 31, 2020, what amount should be reported as unearned subscription revenue? . 1,100,000 b. 2,500,000 c. 1,500,000 4. 2,300,000 . An entity sells equipment service contracts that cover a two-year period. The sale price of each contract is P80. The entity sold 1,000 contracts evenly throughout 2020. The past experience is that, of the total pesos spent for repairs on service contracts, 40% is incurred evenly during the first contract year and 60% evenly during the second contract year. 1. What is the contract revenue for 20207 a, 320,000 b. 160,000 ¢. 400,000 . 640,000 2. What is the unearned contract revenue on December 31, 2020? a. 480,000 b. 640,000 ce. 240,000 d. 560,000 3. What is the contract revenue for 20217 a, 480,000 b. 240,000 c. 400,000 d. 500,000 4, What is the uneamed contract revenue on December 31, 2021? 400,000 200,000 240,000 160,000 aore END 6754CPA REVIEW SCHOOL OF THE PHILIPPINES Manila FINANCIAL ACCOUNTING AND REPORTING — VALIX/SIY/VALIX/ESCALA/SANTOS/DELA CRUZ 1 x > BONDS PAYABLE On March 1, 2020, an entity issued 5,000 of P1,000 face value bonds at 110 plus accrued interest. The entity paid bond issue cost of P400,000, The bonds were dated November 1, 2019, mature on ‘November 1, 2029, and bear interest at 12% payable semiannually on May | and November 1. What net amount was received from the bond issuance? a, 5,500,000 b. 5,700,000 c, §,300,000 d, 5,100,000 During the current year, an entity issued 5,000,000 9% face value bonds at 110 at interest date. In connection with the issue of the bonds, the entity paid the following costs: Promotion cost 100,000 Engraving and printing cost 200,000, Underwriter commission 400,000 Legal fees 350,000 Fees paid to accountants for registration 50,000 ‘What amount should be recorded initially as discount or premium on bonds payable? a. 500,000 premium b. 500,000 discount ©. 600,000 premium 4. 600,000 discount - On January 1, 2020, an entity issued 9% bonds in the face amount of P5,000,000 which mature on January 1, 2030. The bonds were issued for P4,695,000 to yield 10%. Interest is payable annually on December 31. The entity used the interest method of amortizing bond discount. 1. What is the interest expense for 2020? a 469,500 b. 500,000 c. 450,000 d. 422,500 2. What is the carrying amount of the bonds payable on December 31, 2020? a. 4,695,000 b. 4,704,750 ©. 4,714,500 4. 5,000,000 On January 1, 2020, an entity issued 10-year bonds with face amount of PS,000,000 for 3,775,000. The entity paid bond issue cost of P100,000 on same date. The stated interest rate on the bonds is 10% payable annually every December 31. The bonds have an an 8% yield per annum after considering the bond issue cost, The entity used the effective interest method of amortizing bond premium. 1. What is the interest expense for 2021? a. 454,000 b. 458,960 ¥ ©. 500,000 d. 450,320 2. What is the carrying amount of the bonds payable on December 31, 20217 5,695,960 . 5,579,320 . 5,629,000 l. 5,737,000 aege 6755 isx Page 2 . An entity issued 5,000 of 8% 10-year P1,000 face amount bonds with detachable warrants at 110. Each bond carried a detachable warrant for 10 ordinary shares of P100 par value at a specified option price of P]20, Immediately after issuance, the market value of the bonds without warrants ‘was P4,800,000 and the market value of the warrants was P1,200,000, 1, What is the initial carrying amount of bonds payable? 5,500,000 . 4,800,000 4,400,000, . §,000,000 aegse 2. What is the increase in equity as a result of the bond issuance? a. 1,200,000 b. 1,100,000 c. $00,000 d. 700,000 3. What is the share premium from the subsequent exercise of all share warrants? a. 1,700,000 b. 1,000,000 ©. 2,100,000 4. 0 . An entity issued P5,000,000 face amount 5-year bonds at 120. Each P1,000 bond was issued with 20 nondetachable share warrants. Each warrant entitled the bondholder to purchase one share of P20 par value for P25. Immediately after issuance, the market value of each warrant was P5. The interest rate is 11% payable annually every December 31. The prevailing market rate of interest for similar bonds without warrants is 12%. The PV of | at 12% for 5 periods is 0.57 and the PV of an ordinary annuity of | at 12% for 5 periods is 3.60, What amount should be recorded as inerease in equity as. a result of the bond issuance? a. 1,170,000 b. 1,000,000 c. 2,000,000 d. 0 ‘An entity issued 5,000 convertible bonds with P1,000 face amount per bond. The bonds mature in three years and are issued at 110. Interest is payable annually every December 31 at a nominal 6% interest rate. Each bond is convertible at anytime up to maturity into 100 shares with par value of PS It is reliably determined that the bonds would sell only at P4,600,000 without the conversion privilege, What is the equity component of the original issuance of the convertible bonds? a. 500,000 b. 400,000 ce. 900,000 d. 0 After recording interest and amortization, an entity converted PS,000,000 of 12% convertible bonds into 50,000 shares of P50 par value. On the conversion date, the carrying amount of the bonds payable was P6,000,000, the market value of the bonds was P6,500,000, and the share was publicly trading at P150. The entity incurred P100,000 in connection with the conversion. When the bonds were originally issued, the equity component was recorded at P1,500,000, What amount of share premium should be recorded as a result of the conversion? a, $,000,000 b. 3,500,000 c. 4,900,000 d. 3,400,000 END 6755CPA REVIEW SCHOOL OF THE PHILIPPINES Manila FINANCIAL ACCOUNTING AND REPORTING —_ VALIX/SIY/VALIX/ESCALA/SANTOS/DELA CRUZ. FINANCE LEASE - LESSEE 1, Atthe beginning of current year, an entity leased a building from a lessor with the following pertinent information: Annual rental payable at the end of each year Initial direct cost paid Lease bonus paid to lessor before commencement of the lease Lease incentive received Cost of restoring building as required by contract Present value of restoration cost discounted at 8% for six periods Leasehold improvement — useful life 8 years Purchase option that is reasonably certain to be exercised Lease term Useful life of building Implicit interest rate PV of an ordinary annuity of 1 for 6 periods at 10% PV of an ordinary annuity of 1 for 10 periods at 10% Present value of I for 6 periods at 10% Present value of 1 for 10 periods at 10% Present value of 1 for 6 periods at 8% 1. What is the initial lease liability? 7,100,000 6,540,000 9,210,000. |. 9,600,000 pe se 2. What is the cost of the right of use asset? 8,750,000 8,700,000 9,255,000 7,755,000 Bese 3. What total amount of interest expense should be reported for the current year? a. 710,000 b. 785,600 c, 804,500 d. 830,000 4, What is the lease liability at year-end? 6,310,000 5,694,000 9,060,000 5,600,000 Bese 5. What is the depreciation of the right of use asset for current year? 1,450,000 1,550,000 870,000 875,000 eese 1,500,000 405,000 300,000 50,000 1,500,000 945,000 600,000 1,000,000 6 years 10 years 10% 436 6.14 0.56 039 036 6756| Page 2 2. On December 31, 2020, an entity leased two automobiles for executive use. The lease required, the entity to make five annual payments of P1,500,000 beginning December 31, 2020. At the end of the lease term, December 31, 2025, the entity had a residual value guarantee of the automobiles at 1,000,000. The interest rate implicit in the lease is 10% and present value factors at 10% for 5 periods are 4.17 for an annuity due, 3,79 for an ordinary annuity and 0.62 for present value of |. 1, What is the lease liability on December 31, 2021? 4,412,500 5,375,000 6,062,500 4,805,000 ees 2, What is the current portion of the lease liability on December 31, 2021? a. 1,500,000 b. 1,058,750 c. 962,500 d. 750,000 3. What is the interest expense for 20217 480,500 537,500 441,250 606,250 peor 3. On January 1, 2020, an entity entered into a 5-year lease with a lessor. Annual lease payments of 1,200,000 including annual executory cost of P200,000 are payable at the end of each year. The entity knows that the lessor expects an 8% implicit rate on the lease. The entity has a 10% incremental borrowing rate. The equipment is expected to have a useful life of 10 years. In addition, a third party has guaranteed to pay the lessor a residual value of P500,000 at the end of the lease. The present value of an ordinary annuity of 1 for 5 years is 3.99 at 8% and 3.79 at 10%. The present value of 1 at 8% for 5 periods is 0.68 and at 10% for 5 periods is 0.62. On December 31, 2020, what is the principal amount of the lease obligation? a. 3,990,000 b. 3,309,200 c. 3,676,400 4. 3,971,040 4, At the beginning of current year, an entity entered into an 8-year finance lease for an equipment. The entity accounted for the acquisition of the finance lease at P5,000,000 which included a P500,000 bargain purchase option that is reasonably certain to be exercised. The expected fair value of the equipment is P400,000 at the end of the 10-year useful life. What amount of straight line depreciation should be recognized for the current year? a. $75,000 b. 460,000 ©. 625,000 d. 450,000 5, At the beginning of current year, an entity entered into an 8-year lease for an equipment. The entity accounted for the acquisition as a finance lease for P6,000,000 which included a P600,000 residual value guarantee. At the end of the lease, the asset will revert back to the lessor. It is estimated that the fair value of the asset at the end of the 10-year useful life would be P400,000. What amount should be recognized as straight line depreciation on the leased asset for the current year? a. 675,000 b. 700,000 |. & 540,000 i d. 560,000 END 6756 Rd ithe a er ae Se SR ely— $$ CPA REVIEW SCHOOL OF THE PHILIPPINES Manila FINANCIAL ACCOUNTING AND REPORTING — VALIK/SIY/VALIX/ESCALA/SANTOS/DELA CRUZ OPERATING LEASE AND LEASEBACK 1, On January 1, 2020, an entity purchased a new machine for P6,000,000 for the purpose of leasing it. The machine had an estimated 10-year life. On April 1, 2020, the entity leased the machine to a lessee for three years at a monthly rental of P400,000, The lessee paid the rental for one year of 4,800,000 on April 1, 2020 and additionally paid P900,000 to the lessor as a lease bonus to obtain the three-year lease. On April 1, 2020, the entity paid P300,000 to a broker as a finder fee. What is the net rental income for 2020? a. 3,150,000 b. 4,350,000 ec. 3,200,000 d, 4,400,000 2, On July:1, 2020, an entity leased an equipment to @ lessee under a 3-year operating lease. Total rent for the lease term is P3,600,000, payable P50,000 monthly for the first lease year, P75,000 monthly for the second lease year and P175,000 monthly for the third lease year. All payments were made when due. On June 30, 2022, what amount should be reported as accrued rent receivable? a, 2,100,000 bd. 1,200,000 c. 900,000 4. 0 3. Attthe beginning of current year, an entity sold an equipment with remaining life of 10 years and immediately leased it back for 4 years at the prevailing market rental. Sale price at fair value 6,000,000 Carrying amount of equipment 4,500,000 Annual rental payable at the end of each year 800,000 Implicit interest rate 10% Present value of an ordinary annuity of | at 10% for four periods. 3.17 1. What is the initial lease liability? 2,536,000 3,200,000 3,000,000 0 aege 2; What is the cost of right of use asset? a, 1,902,000 b, 2,598,000 c. 2,536,000 da. 0 3. What is the gain on right transferred? a. 866,000 b. 634,000 ©. 750,000 4. 0 4, What is the annual depreciation of the right use asset? 475,500 190,200 634,000 253,600 po oP 6757Page 2 4, At the beginning of current year, an entity sold a building with remaining life of 20 years and immediately leased it back for 5 years, Sale price at above fair value 20,000,000 Fair value of building. 18,000,000 Carrying amount of building 10,800,000 Annual rental payable at the end of each year 1,500,000 Implicit interest rate 12% Present value of an ordinary annuity of I at 12% for five periods 3.60 1, What is the initial lease liability? a, 5,400,000 b. 3,400,000 ¢. 7,500,000 d. 7,400,000 2. What is the cost of right of use asset? a. 2,040,000 b. 4,000,000 2,000,000 4. 3,000,000 3. What is the gain on right transferred? a. 7,200,000 b. 1,500,000 10,000 «5 d. 5,840, 5. At the beginning of current year, an entity sold building with remaining useful life of 30 years and immediately leased it back for 5 years. Sale price at below fair value 18,000,000 Fair value of building 20,000,000 Carrying amount of building 24,000,000 Annual rental payable at the end of each year 1,000,000 Implicit interest rate 12% Present value of an ordinary annuity of 1 at 12% for 5 periods 3.60 1, What is the initial lease liability? a. 3,600,000 'b. 4,000,000 c, 4,800,000 d. 0 2. What is the cost of right of use asset? 1. 3,000,000 ». 4,320,000 . 5,760,000 a b. ©, d, 6,720,000 3. What is the loss on right transferred? 4,000,000 . 2,880,000 . $,760,000 6,720,000 aege 6757 ENDCPA REVIEW SCHOOL OF THE PHILIPPINES Ma nila FINANCIAL ACCOUNTING AND REPORTING —_VALIX/SIY/VALIX/ESCALA/SANTOS/DELA CRUZ FINANCE LEASE - LESSOR 1, An entity is a dealer in equipment. At the beginning of current year, an equipment was leased to another entity with the following provisions: Annual rental payable at the end of each year 1,500,000 Lease term and useful life of machinery 5 years Cost of equipment 4,000,000 Fair value of equipment on date of lease 6,000,000 Guaranteed residual value 500,000 Implicit interest rate 12% PV ofan ordinary annuity of 1 for 5 periods at 12% 3.60 PV of | for 5 periods at 12% 0.37 The equipment will revert to the lessor at the end of lense term. The fair value of the asset is 350,000 at the end of lease term. The perpetual inventory system is used, The lessor incurred initial direct cost of P200,000 in finalizing the lease agreement. 1, What is the gross investment in the lease? a. 7,500,000 b. 8,000,000 c. 4,000,000 d. 6,000,000 2. What is the net investment in the lease? a. 5,400,000 b. 5,685,000 ec. 4,000,000 d. 3,500,000 3. What is the total financial revenue? a, 2,315,000 b. 2,285,000 c. 2,000,000 d. 2,600,000 4, What amount of interest income should be recognized for the current year? 682,200 648,000 720,000 480,000 5. What amount should be reported as profit on sale for the current year? 1,485,000 1,685,000 1,800,000, 2,000,000 aege pe se 2. An entity acquired an asset costing P3,165,000, The asset is leased to another entity for 5 years, The five annual lease payments are due at the end of each year. The unguaranteed residual value of the asset at the end of the lease term is P500,000, The asset will revert to the lessor at the end of the lease term. The lessor’s implicit interest rate'is 12%, The PV of 1 at 12% for 5 periods is .57 and the PV of an ordinary annuity of 1 at 12% for § periods is 3.60, What is the annual rental payment? a. 879,166 b. 740,278 c. 800,000 d. 500,000 67583. 4. Page 2 ‘An entity is in the business of leasing new sophisticated equipment under a direct financing lease. The lessor expects a 12% return on net investment, At the end of the lease term, the equipment will revert to the lessor. At the beginning of current year, an equipment is leased to a lessee with the following information: Cost of equipment to the lessor 5,000,000 Residual value ~ unguaranteed 600,000 Annual rental payable in advance at the beginning of each year 900,000 Initial direct cost incurred by the lessor 250,000 Useful life and lease term 8 years 12% Implicit interest rate 1, What is the gross investment in the lease? 7,200,000 b. 7,800,000 ¢. 5,000,000 d. 5,250,000 2, What is the net investment in the lease? a. 5,000,000 b. 5,250,000 ¢. 4,400,000 d. 4,650,000 3. What is the total uneamed interest income? a. 2,550,000 b. 1,950,000 3,150,000 d. 1,500,000 4. What amount of interest income should be recognized for the current year? a. 594,000 ‘b. 522,000 c. 630,000 d. 450,000 ‘An entity decided to enter the leasing business. The entity acquired a specialized packaging machine for P2,300,000. At the beginning of current year, the entity leased the machine for a period of six years, afler which title to the machine is transferred to the lessee, The six annual lease payments are due in advance at the beginning of each year. The residual value of the machine is P200,000. The lease terms are arranged so that a return of 12% is eared by the lessor. The present value of 1 at 12% for six periods is 0.51, the present value of an annuity in advance of | at 12% for six periods is 4.60 and the PV of an ordinary annuity of 1 at 12% for six periods is 4.11. 1. What is the annual lease payment payable in advance required to yield the desired return? a. 500,000 b. 477,826 . 559,610 1. 460,000 ©. 4, 2. What is the total financial revenue? a. b. c. d. 1,057,660 1,257,660 700,000 900,000 END 6758CPA REVIEW SCHOOL FOF THE PHILIPPINES i Manila FINANCIAL ACCOUNTING AND REPORTING —_ VALIX/STY/VALIX/ESCALA/SANTOS/DELA CRUZ NOTE PAYABLE AND DEBT RESTRUCTURE 1, On September 1, 2020, an entity borrowed on a P5,400,000 note payable from a bank. ‘The note bears interest at 12% and is payable in three equal annual principal payments of P1,800,000. On this date, the bank’s prime rate was 11%. The first annual payment for interest and principal was made on September 1, 2021. 1. On December 31, 2020, what amount should be reported as accrued interest payable? a, 144,000 b. 216,000 ¢. 132,000 d, 198,000 2. What is the interest expense for 2021? 576,000 b. 432,000 c. 648,000 d. 594,000 2. On March 1, 2020, an entity borrowed P5,000,000 and signed a 2-year note bearing interest at 12% per annum compounded annually. Interest is payable in full at maturity on February 28, 2022. What amount should be reported as accrued interest payable on December 31, 2021? a. 1,200,000 b. 1,160,000 ©. 600,000 4. 600,000 3. An entity transferred land to a creditor pursuant to a debt restructuring in full liquidation of a note payable. Carrying amount of note payable liquidated 1,500,000 Carrying amount of land transferred 1,000,000 Fair value of land transferred 900,000 1. Under IFRS, what amount of gain on extinguishment of debt should be reported as component of income from continuing operations? a. 300,000 b. 500,000 c. 200,000 4. 0 2. Under US GAAP, what is the gain on restructuring? a. 600,000 b. 500,000 cc. 100,000 d. 0 3. Under US GAAP, what amount should be reported as gain or loss on transfer of land? 100,000 loss 100,000 gain 200,000 gain 0 eaege 6759{ i Page 2 4. Anentity showed the following information at year-end: ' Note payable 5,000,000 Accrued interest payable 500,000 The entity is threatened with a court sult if it could not pay the maturing debt. Accordingly, the entity entered into an agreement with the creditor for the issuance of share capital in full settlement of the note payable. The agreement provided for the issue of 50,000 ordinary shares with par value of PSO and quoted price of P70. The fair value of the note payable is P4,000,000. 1. What is the gain from extinguishment of debt if the equity swap is measured at the fair value of the shares? a, 2,000,000 1,500,000 ©. 3,000,000 4. 0 2. What is the gain from extinguishment of debt if the equity swap is measured at the fair value of the liability? a. 2,000,000 b. 1,500,000 ©. 3,000,000 d. 0 3. What amount should be recognized as share premium if the equity swap is measured at the carrying amount of liability? a, 3,000,000 b. 2,500,000 ©. 1,000,000 d. 1,500,000 5. Due to extreme financial difficulties, an entity negotiated a restructuring of a 10%, P5,000,000 note payable due on December 31, 2020. The unpaid interest on the note on such date is P500,000. The creditor agreed to reduce the face amount to P4,000,000, forgive the unpaid interest, reduce the interest rate to 8% and extend the due date three years from December 31, 2020. The present value of 1 at 10% for three periods is 0.75 and the present value of an ordinary annuity of | at 10% for three periods is 2.49. 1. Under IFRS, what is the gain on extinguishment for 2020? a. 1,703,200 b. 1,203,200 ¢. 2,000,000 d. 540,000 2, What is the discount or premium on the new note payable on December 31, 20207 a. 1,000,000 premium b. 1,000,000 discount ¢. 203,200 premium d. 203,200 discount 3. What amount should be reported as interest expense for 2021? a. 320,000 b, 379,680 c. 400,000 d. 303,680 4, What is the carrying amount of note payable on December 31, 2021? 4,000,000 5,000,000 3,856,480 3,737,120 pegs END 6759