MGA BEH MAY KWIS NA GOODLUCK!!!!!!!!

Stephen Corporation is authorized to issue P10,000,000 of 5-year bonds dated June

30, 2020 with a stated interest rate of 9%. Interest on the bonds is payable
semiannually on June 30 and December 31. The company uses the effective interest
method of amortization. The bonds were sold to yield 8%.

Present value factor of P1 lumpsum using 4% for 10 periods is .6756

Present value factor of P1 ordinary annuity using 4% for 10 periods is 8.1109

Determine the nominal interest for 2020.

a. P400,000

b. P450,000 (tama b) eto rin aq

c. P468,266

d. P416,236

Determine the interest expense to be recognized in 2020.

a.P468,266
b.P416,236
c.P450,000
d.P400,000

What is the carrying value of the bonds at December 31, 2020?

a. P9,955,905

b. P10,372,141

c. P10,439,669

d. P9,627,859

Determine the bond issue price.

a. P10,405,905 (Same ba kau) ou

b. P9,604,080

c. P10,000,000

d. P14,055,810
-----------------------------------
When a corporation issues bonds, the price that buyers are willing to pay for the
bonds does not depend on which of the following below
a. Denominations the bonds are sold

b. Market rate of interest

c. Face value of the bonds

d. Periodic interest to be paid on the bonds

-----------------------------------
Which of the following shall generally be classified as current even if they are due to
be settled more than twelve months after the end of the reporting period?
a. Trade payables and accrued operating expenses

b. Notes payable to Bank

c. Bonds payable

d. Deferred revenues
-----------------------------------
The Rushmore Company issued 10-year bonds on January 1, 2021. The 15% bonds
have a face value of P1,000,000 and pay interest every January 1 and July 1. The
bonds were sold for P1,172,050 based on the market interest rate of 12%.
Rushmore uses the effective-interest method to amortize bond discounts and
premiums. On July 1, 2021, Rushmore should record interest expense (round to the
nearest peso) of
a. P87,900

b. P75,000

c. P140,650

d. P70,323 eto ba tama ba??? ye

-----------------------------------
The balance in premium on bonds payable
- Would be added….

-----------------------------------
Elton Company has an overdue note payable to Pringle Finance Company with face
value of P1,000,000. Accrued interest on the note is P100,000. Because of financial
difficulty, Elton negotiates with Pringle Finance Company to exchange a group of
equipment costing P1,500,000 but with carrying amount of P800,000. These
equipment had a fair value of P900,000 in the most advantageous market.

How much should Elton Company recognize as gain on debt restructuring? (

Answers should not contain commas or peso signs and should be rounded-off to the
nearest peso) 200000 Pacheck nalang hehe same

How much should Elton Company recognize as gain on disposal of equipment? (

Answers should not contain commas or peso signs and should be rounded-off to the
nearest peso) 100000 Pa check nalang rin same
------------------------------------

In the latter part of 2020, Hamilton Company experienced severe financial pressure
and was in default of meeting interest and principal payments on notes of
P1,000,000. Accrued interest on this note at December 31, 2020 is P100,000 based
on an annual interest rate of 10%.

Hamilton Company obtained an acceptance of a change in the terms of the note, as

follows:
?9? Accrued interest on the note is forgiven
?9? Maturity date has been extended by four years.
?9? Interest rate has been changed to 12%, which is the prevailing rate at the
time of restructuring. Interest is payable annually on December 31.

Present value factor of P1 lumpsum using 10% for 4 periods is .6830

Present value factor of P1 ordinary annuity using 10% for 4 periods is 3.1699
Present value factor of P1 lumpsum using 12% for 4 periods is .6355
Present value factor of P1 ordinary annuity using 12% for 4 periods is 3.0373

How much should Hamilton Company recognize as gain on debt restructuring?

a. P0 = ito sagot ko kasi less than 10% eh.. Tama ba? Uu same

b. P36,612

c. P63,388

d. P100,000
Ano ung less than 10%
Yung cocompare mo old liab and new liab
-----------------------------------
Bernie Company is unable to meet interest payments on its P5,000,000 bonds
payable. Accrued interest at this date is P45,000. In order to prevent bankruptcy,
Bernie entered into an agreement to exchange ordinary share for the debt. Bernie is
issuing 125,000, P20 par value ordinary shares, which currently sell at P25 on this
date. How much should Bernie Company recognize as gain on debt restructuring?
a. P1,920,000

b. P1,875,000

c. P2,545,000

d. P0
st
1 Statement: A bond is simply a form of an interest bearing note.

nd
2 Statement: Bondholders are creditors of the issuing corporation.
a. True; True

b. False;
False

c. True; False

d. False; True

st
1 Case: Under the terms of the financing agreement, Watson has the discretion to
roll over the obligation for at least twelve months. In July 2020, management decides
to exercise its discretion to extend the maturity date of its obligation to December 31,
2022.

nd
2 Case: The existing loan agreement does not carry a provision to refinance. In
July 2020, Watson was experiencing financial difficulty and was unable to pay the
maturing obligation. On February 1, 2021, House has agreed not to demand
payment for at least twelve months as a consequence of the breach of payment on
the principal of the loan. The financial statements were authorized for issue on
March 31, 2021.
a. st nd
1 Case: Current; 2 Case: Non-current

b. st nd
1 Case: Non-current; 2 Case: Non-current (ito q)

c. st nd
1 Case: Non-current; 2 Case: Current - tama baito
 d. st nd
1 Case: Current; 2 Case: Current

Bonds maturing on a single date is called:

a. Term bonds

b. Debenture bonds

c. Serial bonds

d. Callable bonds
The market interest rate related to a bond is also called the
a. Stated interest rate

b. Contract interest rate

c. Straight-line rate

d. Effective interest
rate
st
1 Statement: When the effective interest method of amortization is used, the
amount of interest expense for a given period is calculated by multiplying the face
rate of interest by the bond’s carrying value at the beginning of the given period.

nd
2 Statement: The effective interest method produces a constant peso amount of
interest expense to be reported each interest period.
a. True; True

b. False;
False

c. True; False

d. False; True
st
1 Statement: The market rate of interest is affected by a variety of factors,
including investors’ assessment of current economic conditions.

nd
2 Statement: A concept of present value is that an amount of cash to be received
at some date in the future is the equivalent of the same amount of cash held at an
earlier date.
 a. False;
False

b. True; False

c. False; True

d. True; True

On July 1, 2020 Rosary Corporation issued P10,000,000 of its 12%, 5-year bonds
with detachable share warrants at 110. Each P5,000 bond carried a detachable
share warrant for the purchase of 5 shares of P25 par value ordinary shares at P30
per share. The market value of the bonds ex-warrants is 106.

Assuming that all the warrants were subsequently exercised, how much is credited
to the Corporation’s share premium account upon the issuance of shares?
a. P50,000

b. P650,000

c. P1,050,000

d. 450,000 = ito nacompute q

The balance in Discount on Bonds Payable that is applicable to bonds due in 2025
would be reported on December 31, 2023, balance sheet in the section entitled
a. Current liabilities

b. Current assets

c. Long-term liabilities

d. Intangible assets

Rocketman Company
 - Interest expense 870,714

Rocketman Company issued P8,000,000 bonds on bond issue date, December 31,
2020. The bonds pay interest annually at 8% on the outstanding bond balance. The
face value of the bonds is payable in installments of P1,600,000 every December 31,
starting December 31, 2021. The bonds were sold at a price that yields 12%.

PV factor of P1 lumpsum using 12% for 1 period is .8929

PV factor of P1 lumpsum using 12% for 2 period is .7972
PV factor of P1 lumpsum using 12% for 3 period is .7118
PV factor of P1 lumpsum using 12% for 4 period is .6355
PV factor of P1 lumpsum using 12% for 5 period is .5674

Determine the issue price of the bonds on December 31, 2020.

a. P9,277,792

b. P8,000,000

c. P6,846,272

d. P7,255,949

Determine the carrying value of the bonds payable as of December 31, 2022.
a. P6,103,949
 b. P81,062 ?? 4,481,062 to diba
ou yung 4m

c. P5,678,835

d. P6,422,887

How much interest expense must Rocketman Company recognize in December 31,
2021?
a. P870,714

b. P960,000

c. P640,000

d. P580,476

1 st Statement: The amount of interest expense reported on the income statement will
be more than the interest paid to bondholders if the bonds were originally sold at a
discount.

2 nd Statement: The amortization of a premium on bonds payable decreases bond

interest expense.
TRU TRU

On July 1, 2020, the Hawking Company issued 1,000, 10% P5,000 bonds at 102.
The holder of each bond is entitled to convert the bond into 50, P100 par ordinary
shares of Hawking Company, at anytime up to bond maturity. When the bonds were
issued, the prevailing market rate for similar instruments without the conversion
option is 12%. The bonds pay interest annually at June 30 and mature on June 30,
2025.

On June 30, 2022, after receiving the annual interest, holders of 400 bonds
exercised their conversion privilege. Remaining bonds were retired on maturity date.
The Hawking Company closes its books annually on June 30.

Present value factor of P1 lumpsum using 12% for 5 periods is .5674

Present value factor of P1 ordinary annuity using 12% for 5 periods is 3.6048
What is the bond carrying value as of June 30, 2022 before the exercise of the bond
conversion privilege? ( Answers should not contain commas or peso signs and
should be rounded-off to the nearest peso)
4759663 SAGOT KO! SAME BA

How much of the proceeds from the bond issuance is allocated to the equity
component? ( Answers should not contain commas or peso signs and should be
rounded-off to the nearest peso)
460600

What amount of share premium is credited on June 30, 2022 due to the exercise of
the conversion privilege of 400 bondholders? ( Answers should not contain commas
or peso signs and should be rounded-off to the nearest peso)
88105 sagot ko. Same ba???

On July 1, 2020 Rosary Corporation issued P10,000,000 of its 12%, 5-year bonds
with detachable share warrants at 110. Each P5,000 bond carried a detachable
share warrant for the purchase of 5 shares of P25 par value ordinary shares at P30
per share. The market value of the bonds ex-warrants is 106.

How much of the proceeds is allocated to the equity component (or the detachable
share warrants)?
a. P1,000,000

b. P400,000

c. P600,000

d. P0

How should the issue price of bonds with non-detachable share warrants be
accounted for?
a The proceeds shall be allocated to the bonds and to the warrants based
.
on relative fair values.

b The proceeds shall be assigned first to the warrants, at their market value
.
and the remainder to the bonds

c. The proceeds are fully assigned to bonds

d The proceeds shall be assigned first to the bonds, at their market

.
value if sold without the warrants; then the remainder of the issue
price is assigned to the warrants as part of equity.
When the maturities of a bond issue are spread over several dates, the bonds are
called
a. Debenture bonds

b. Term bonds

c. Serial bonds

d. Bearer bonds

If the market rate of interest is 8%, the price of 6% bonds paying interest
semiannually with a face value of P1,000,000 will be
a Greater than or less than P1,000,000, depending on the maturity date of
. the bonds

b Greater than P1,000,000

.

c Less than P1,000,000

.

d Equal to P1,000,000
.
When the effective-interest method is used, the amortization of the bond premium
a. Increases interest expense in some periods and decreases interest
expense in other periods

b. Decreases interest expense each period

c. Has no effect on the interest expense in any period

d. Increases interest expense each period

Any unamortized premium should be reported on the balance sheet of the issuing
corporation as
a. An addition to the face amount of the bonds in the liability section

b. As paid-in capital

c. A direct deduction from retained earnings

d. A direct deduction from the face amount of the bonds in the liability
section
A corporation issues for cash P8,000,000 of 8%, 30-year bonds, interest payable
semiannually. The amount received for the bonds will be
 a. Present value of 30 annual interest payments of P640,000

b. Present value of 30 annual interest payments of P640,000, plus present

value of P8,000,000 to be repaid in 30 years

c. Present value of P8,000,000 to be repaid in 30 years, less present value

of 60 semiannual interest payments of P320,000

d Present value of 60 semiannual interest payments of P320,000, plus

.
present value of P8,000,000 to be repaid in 30 years
A bond indenture is
a. A contract between the corporation issuing the bonds and the bond
trustee, who is acting on behalf of the bondholders

b. The amount due at the maturity date of the bonds

c. The amount for which the corporation can buy back the bonds prior to the
maturity date

d. A contract between the corporation issuing the bonds and the underwriters
selling the bonds
When the bonds are sold for more than their face value, the carrying value of the
bonds is equal to
a. Face value

b. Face value plus the unamortized premium

c. Face value minus the unamortized premium

d. Face value plus the unamortized discount

st
1 Statement: If the bondholder has the right to exchange a bond for shares of
common stock, the bond is called a convertible bond.

nd
2 Statement: The prices of bonds are quoted as a percentage of the bonds’
market value.
a. True; True

b. False; True

c. False; False

d. True; False ?? same

Which of the following statements is incorrect regarding troubled debt restructuring?
a In a modification of terms, when the total discounted cash flows under the
.
new terms exceed the carrying value of the debt, a gain on debt
restructuring is recognized in profit or loss if the discounted present value
of the new terms is at least 10% different from the carrying value of the old
obligation.

b In a modification of terms, where the total amount of the discounted cash

.
flows under new terms is less than the total carrying amount of the debt,
and said difference is less than 10% of the total carrying amount of the
debt, the difference shall not be taken to the profit or loss.

c Any difference between the carrying value of the debt settled and the
.
carrying value of the asset transferred shall be taken to profit or loss
during the period of the debt settlement. - e2 ba ??

d In debt restructuring where shares of equity instruments are granted to

.
settle an obligation, the excess of the carrying value of the debt settled
over the fair value of the shares issued shall be taken to profit or loss
during the period of debt settlement.

In July 2018, Watson Corporation acquired land from House, Inc. by paying
P10,000,000 down and signing a note with a maturity value of P14,000,000 due July
2020. Determine whether the note payable in the following cases should be
classified as current or non-current at December 31, 2020.

st
1 Case: Under the terms of the financing agreement, Watson has the discretion to
roll over the obligation for at least twelve months. In July 2020, management decides
to exercise its discretion to extend the maturity date of its obligation to October 31,
2021.

nd
2 Case: The loan agreement does not carry a provision to refinance. In July 2020,
Watson was experiencing financial difficulty and was unable to pay the maturing
obligation. On December 31, 2020, House signed an agreement to provide Watson a
grace period of 15 months from that date, during which period, House will not
demand immediate payment in order to give Watson the chance to rectify the
breach. The financial statements were authorized for issue on March 31, 2021.
a. st nd
1 Case: Non-current; 2 Case: Current - eto ????
 b. st nd
1 Case: Current; 2 Case: Current

c. st nd
1 Case: Current; 2 Case: Non-current

d. st nd
1 Case: Non-current; 2 Case: Non-current

On March 1, 2020, Blue Corporation issued 103 plus accrued interest, 1,000 of its
9%, P1,000 bonds. The bonds are dated January 1, 2020 and mature of January 1,
2030. Interest is payable semi-annually on January 1 and July 1. Blue paid
transaction costs of P5,000. Based on the given information, how much would Blue
realize as net cash receipts from the bond issuance?
a. P1,045,000

b. P1,025,000

c. P,1040,000 same ba???

d. P,1030,000