Practice Test with Solutions for Notes Payable

PIdo, Rea Lee Joy 19/04/21


A. KFC Delivery Service


a. Cash Price = P6,948,800
Non-interest-Bearing note = P9,000,000

P6,948,800 / P9,000,000 = 0.7721 – the effective interest is 9% because the
value is
under the rate of 9% of the present value factor
for
3 years


b.

Date Amortization Carrying Value of
Note
February 01, P6,948,800
2015
March 31, 2016 9% x P6,948,800 = P625, 392 P7,574,192
March 31, 2017 9% x P7,574,192 = P681,677 P8,255,869
March 31, 2018 9% x P8,255,869 = P744,131 - P9,000,000
adjusted


c.

Interest expense for Year 2015 P469,044
P625,392 x 9 = P5,628,


Carrying Value, April 01, 2015 P6,948,800
Amortization through December 31, P469,044
2015
P625,392 x 9 = P5,628,
Carrying value, December 31, 2015 P6,479,756


d.

Apr. 1 Land P6,948,800
2015
Discount on Notes Payable 2,051,200
Notes Payable P9,000,000

Dec. 31 Interest Expense P469,044
2015
Discount on Notes Payable P469,044

Mar. 31 Interest Expense P156,348
2016 P625, 392 - P469,044
Discount on Notes Payable P156,348

Dec. 31 Interest Expense P511,258
2016 P681,677 x 9 = P6,135,
Discount on Notes Payable P511,258