NAME: DATE:

PROFESSOR: SECTION:
SUBJECT: QUIZ II

GENERAL INSTRUcTIONS:
1 Complete the INFO above.
2 Change the EXCEL FILE NAME from "SURNAME" to your actual surname.
3 Scan the quiz per sheet POINTS
P1 NOTE PAYABLE - issued for CASH 20
P2 NOTE PAYABLE - issued for PPE w/ Cash Price 45
P3 NOTE PAYABLE - BASKET PURCHASE 49
P4 EQUITY SWAP 22
P5 DEBT RESTRUCTURE - Modification of Terms 28
P6 DEBT RESTRUCTURE - Modification of Terms 23
P7 COMPOUND FINANCIAL INSTRUMENT - Bonds w/ Warrants 42
P8 COMPOUND FINANCIAL INSTRUMENT - Convertible Bonds 83
312

4 Start with the topic you are most comfortable with. Then answer as many problems
as possible.
5 Adjust your solutions to the answer sheet provided.
6 Submit the output through email by replying on the email from which the quiz was
provided.
7 Wait for the confirmation before signing out of the Google Meet.
8 NO OUTPUT will be considered after 12:00 PM.
GOOD LUCK
SET A

0
0
0
0
0
0
0
0
PROBLEM 1 NOTE PAYABLE - issued for CASH SETA JOURNAL ENTRIES
0 DATE ACCOUNT TITLE & EXP
On August 1, 2020, Starman Company borrowed cash to fund 2020
the extension of its building. 1-Aug
The loans were granted by Stardust Bank under a short-term
credit line. The fiscal period is the calendar year.
1 Starman issued an 8-month P2,000,000 12% promissory note
with interest payable at maturity. 1-Aug
2 Starman issued a 9-month promissory note for P1,000,0000
which was discounted at 10% by Stardust Bank

REQUIRED (RQ): 31-Dec

1 Prepare all journal entries related to the note. (10 points)
No reversing entries.
Computation (5 points)
2 Show the presentation of all items included in current
liabilities on Dec 31, 2018. (5 points) 2021
1-Apr
Statement of Financial Position - 2020

1-May

Total Current Liabilities

 JOURNAL ENTRIES COMPUTATIONS
ACCOUNT TITLE & EXPLANATION DEBIT CREDIT 8 months 2,000,000
9 months 1,000,000

To record issuance of an 8-mth 12% note

To record issuance of an 9-mth 10% discounted note

To record interest expense for the year

To record payment of 12% note

To record payment of 10% discounted note

NS
12%
10%

#REF!
 #REF!
#REF!
PROBLEM 2 NOTE PAYABLE - issued for PPE w/ Cash Price SETA JOURNAL ENTRIES
0 DATE ACCOUNT TITLE & EXP
On July 1, 2020, Mother Love Bone Company acquired a 2020
machinery from Temple of the Dog Company with a cash price of 1-Jul
P1,428,000 which include shipping cost of P12,000 and installation
cost of P16,000.
The cash price of P1,428,000 is inclusive of 12% VAT.
Mother Love Bone Company provided the following payment terms:
a Cash down-payment of P250,000
b P500,000 10% compound interest note; both principal
and interest are due on July 1, 2023
c 3-annual installment payments of P250,000 beginning 31-Dec
July 1, 2021.

REQUIRED (RQ):
1 Prepare all journal entries (14 points)
2 Necessary computations (12 points) 2021
3 Amortization Schedule (4 points) 1-Jul
4 Statement Presentation of Notes Payable for 2020, 2021 & 2022
(15 points)

Statement of Financial Position - 2020 31-Dec

Current Liabilities
Note Payable Installment - current portion
Less: Discount on NP
Carrying Amount
Noncurrent Liabilities 2022
Note Payable Installment - noncurrent portion 1-Jul
Less: Discount on NP
Carrying Amount
Note Payable- 10%
Interest Payable 31-Dec
TOTAL

Statement of Financial Position - 2021

2023
1-Jul
Statement of Financial Position - 2022
 JOURNAL ENTRIES COMPUTATIONS
ACCOUNT TITLE & EXPLANATION DEBIT CREDIT

Cost of Machinery

Note Payable - 10%

Note Payable - Installment
To record acquisition of machinery
IMPUTED INTEREST

To record interest expense for 2020 INTEREST EXPENSE - 2020

To record 1st installment payment

To record interest expense for 2021 INTEREST EXPENSE - 2021

To record 2nd installment payment

To record interest expense for 2022 INTEREST EXPENSE - 2022

INTEREST EXPENSE - 2023

To record payment of notes and interest

including amorization
ONS

Amortization Schedule
Year Outstanding Discount Discount on NP Carrying Amount
Jul-20 Balance Amortization
Dec -20
Jul-21
Dec -21
Jul-22
Dec -22
Jul-23
PROBLEM 3 NOTE PAYABLE - BASKET PURCHASE SETA JOURNAL ENTRIES
0 DATE ACCOUNT TITLE & EXP
Gilgamesh Company provided the following for the basket 2020
purchase of a group of assets for P5,200,000 on January 1, 2020: 1-Jan
a Cash down-payment of P800,000
b P2,400,000 12% note in four equal annual installments
beginning December 31, 2020. Interest is payable
every December 31.
c Balance in a non-interest bearing note due on Jan 1, 2024.
The prevailing interest rate for this type of note is P10%.
PV factor in 2 decimal places.

The assets purchased with the following fair values which were
disclosed by an appraisal: 31-Dec
ASSETS FAIR VALUE
Land 1,000,000
Building 1,500,000
Office Equipment 450,000
Delivery Equipment 1,050,000 31-Dec

REQUIRED (RQ):
1 Prepare all journal entries (20 points)
2 Necessary computations (18 points) 2021
3 Amortization Schedule (5 points) 31-Dec
4 Statement Presentation of Notes Payable for 2020 & 2021
(10 points)
Statement of Financial Position - 2020
Current Liabilities
31-Dec

Noncurrent Liabilities

2022
31-Dec

Statement of Financial Position - 2021 31-Dec

2023
31-Dec
31-Dec

2024
1-Jan
 JOURNAL ENTRIES COMPUTATIONS
ACCOUNT TITLE & EXPLANATION DEBIT CREDIT TOTAL CONSIDERATION

Imputed Interest

Note Payable - 12% ALLOCATION TABLE FAIR VALUE

Note Payable - NIB Land
To record acquisition of fixed assets Building
Office Equipment
Delivery Equipment
TOTAL

To record payment of principal and interest

To record amortization of discount INTEREST EXPENSE - 2020

To record payment of principal and interest

INTEREST EXPENSE - 2021

To record amortization of discount

To record payment of principal and interest

INTEREST EXPENSE - 2022

To record amortization of discount
To record payment of principal and interest

To record amortization of discount INTEREST EXPENSE - 2023

To record payment of noninterest bearing note

NS
AMORTIZATION SCHEDULE
Year Interest Discount Carrying
Expense on Note Payable Amount
1-Jan-20
31-Dec-20
31-Dec-21
31-Dec-22
31-Dec-23
ALLOCATION
PROBLEM 4 EQUITY SWAP SETA JOURNAL ENTRIES
0 DATE ACCOUNT TITLE & EX
Guardians Company is threatened with bankruptcy due to its 2020
inability to meet interest payments and fund requirements to retire 1
5,000 bonds with face amount of P1,000 each bond.
The carrying amount of the bonds payable is P5,285,000 with
accrued interest payable of P210,000.
The entity has entered into an agreement with the creditor to
exchange equity instruments for the financial liability. The terms
of the exchange are 50,000 ordinary shares with P25 par value and
P30 market value, and 25,000 preference shares with P100 par value
and P150 market value.
The fair value of the liability is P5,460,000.

REQUIRED (RQ): Prepare Journal Entries 2

1 if the fair value of the equity instruments is used. (8 points)
2 if the fair value of the liability is used. (8 points)
3 if the carrying amount of the liability is used. (6 points)

3
 JOURNAL ENTRIES COMPUTATIONS
ACCOUNT TITLE & EXPLANATION DEBIT CREDIT
QUEST COMPANY

Gain (Loss) of Extinguishment of Debt

Ordinary Shares
Preference Shares
To record extinguishment of debt

Gain (Loss) of Extinguishment of Debt

Ordinary Shares
Preference Shares

To record extinguishment of debt

To record extinguishment of debt

OMPUTATIONS

uishment of Debt

MV PAR Share Premium

uishment of Debt

MV Allocation PAR Share Premium

MV Allocation PAR Share Premium

PROBLEM 5 DEBT RESTRUCTURE - Modification of Terms SETA JOURNAL ENTRIE
0 DATE ACCOUNT TITLE & E
Winchester Company has an overdue 9% note payable to CitiFinancial 2020
at P 8,000,000 and recorded accrued interest of P720,000. 31-Dec
As a result of a settlement on December 31, 2020, CitiFinancial agreed
to the following restructuring agreement:
a Reduced the principal obligation to P7,200,000.
b Forgave the accrued interest.
c The prinicpal obligation is to be settled in three equal annual
installments beginning January 1, 2021.
d Annual interest of 10% is to be paid every January 1 2021
1-Jan
PV FACTOR in 2 Decimal Places.

REQUIRED (RQ): 31-Dec

1 Prepare all journal entries (12 points)
2 Show all the necessary computations (6 pts)
3 Prepare an amortization schedule. (5 pts)
4 Statement Presentation of Notes Payable for 2020 (5 points)
2022
1-Jan

Statement of Financial Position - 2021

Current Noncurrent
Note Payable
Less: Discount on NP 31-Dec
Carrying Amount

2023
1-Jan
 JOURNAL ENTRIES COMPUTATIONS
ACCOUNT TITLE & EXPLANATION DEBIT CREDIT
WHITE COMPANY

PRESENT VALUE OF NOTE

To record modification of terms

Discount / Premium on NP

To record payment of principal

Gain (Loss) of Extinguishment of Debt

To record interest expense for 2021

AMORTIZATION SCHEDULE
Year Principal
Payment

To record payment of principal and interest

To record interest expense for 2021

To record payment of principal and interest

ATIONS

nguishment of Debt

AMORTIZATION SCHEDULE
Interest Interest Premium Carrying
Paid Expense Amortization Amount
PROBLEM 6 DEBT RESTRUCTURE - Modification of Terms SETA JOURNAL ENTRIES
0 DATE ACCOUNT TITLE & EXP
Castiel Company has an overdue 10% note payable to CitiFinancial 2021
at P 4,000,000 and recorded accrued interest of P160,000. Jan 1
As a result of a settlement on January 1, 2020, CitiFinancial agreed
to the following restructuring agreement:
a Reduced the principal obligation by P150,000.
b Forgave the accrued interest.
c Extended the maturity date to December 31, 2021.
d Interest of 9% is to be paid every June 30 and December 31. Jun 30

The present value of 1 at 4.5% for four periods is 0.8386, and

the present value of an ordinary annuity of 1 at 4.5% for four
periods is 3.5875.
The present value of 1 at 5% for four periods is 0.8227, and Dec 31
the present value of an ordinary annuity of 1 at 5% for four
periods is 3.5460.

REQUIRED (RQ): 2022

1 Prepare all journal entries (12 points) Jun 30
2 Show all the necessary computations (6 pts)
3 Prepare an amortization schedule. (5 pts)

Dec 31

Dec 31
 JOURNAL ENTRIES COMPUTATIONS
ACCOUNT TITLE & EXPLANATION DEBIT CREDIT

Present Value - New Liability

To record modification of terms

Discount on Note Payable

To record payment of interest and amortization

Gain (Loss) of Extinguishment of Debt

To record payment of interest and amortization

AMORTIZATION SCHEDULE
Interest
Year Paid

To record payment of interest and amortization

To record payment of interest and amortization

To record payment of principal

ATIONS

hment of Debt

AMORTIZATION SCHEDULE
Interest Discount Carrying
Expense Amortization Amount
PROBLEM 7 COMPOUND FINANCIAL INSTRUMENT - Bonds w/ Warrants SETA JOURNAL ENTRIES
0 DATE ACCOUNT TITLE & EXP
On January 1, 2020, Mimicry Company was authorized to issue 2020
1,000 bonds of 8% P3,000 face value each with warrants to acquire 1-Jan
share capital at P40 per share.
Each bond contains one warrant which can be used to acquire
6 shares of P25 par value share capital and expires on April 1, 2021.
The interest on the bond is payable semi-annually every June 30
and December 31. The bonds mature on every December 31 at the rate
of P1,500,000 per year for 2 years. 30-Jun

The bonds with warrants were all issued on January 1, 2020 at 110.
The market value of the warrants is P300 each and the prevailing market
rate for the bonds is 10%. Present value of 1 @ 5% for one period is 0.9524,
two periods 0.9070, three periods 0.8638, four periods, 0.8227. 30-Sep
The market value of the warrant is 125.

On September 30, 2020, 250 warrants were exercised. During this

date, the market value of the warrant is P110.

On March 1, 2021, when the market value of the warrants was P140 31-Dec
220 warrants were exercised.
On July 1, 2021 the outstanding bonds were retired @ 99.75.

REQUIRED (RQ):
1 Prepare all journal entries from 2020 to 2021. (18 points) 31-Dec
2 Show the all necessary computations. (16 points)
3 Prepare an amortization schedule #3. (5 points)
4 Presentation of Bonds on Decemebr 31, 2020. (3 points)
2021
Statement of Financial Position - 2020 1-Mar
Current Liabilities
Bonds Payable
Less: Discount on NP
Carrying Amount

1-Apr

30-Jun
1-Jul
 JOURNAL ENTRIES COMPUTATIONS
ACCOUNT TITLE & EXPLANATION DEBIT CREDIT

Residual Amount allocated to warrants

To record issuance of 1,000 bonds with warrants

Discount on bonds Payable

AMORTIZATION SCHEDULE
To record payment of interest and amortization Year Principal Interest
Payment Paid

To record exercise of 250 warrants

Number of Warrants Exercised

To record payment of interest and amortization

Total Consideration

To record payment of bonds Share Premium - Issuance

Number of Warrants Exercised

To record exercise of 220 warrants

Total Consideration

Share Premium - Issuance

To record expiration of warrants

To record payment of interest and amortization

To record early retirement of bonds GAIN (LOSS) ON EARLY RETIREMENT OF BONDS
 TIONS

Principal Interest Total PV factor

ated to warrants

Market Value of Bonds ex-warrants

AMORTIZATION SCHEDULE
Interest Discount Carrying
Expense Amortization Amount

250

220
RETIREMENT OF BONDS
PV
 Sunshower Company issued 4-year P5,000,000 face value
14% convertible bonds at 108 on January 1, 2020, maturing on
January 1, 2024. The interest is payable annually every January 1.
It is reliably ascertained that the bonds would sell at P 5,303,500
without the conversion feature with an effective yield of 12%.
Each P1,000 bond is convertible into 10 shares of P75 par value
share capital.

On June 30, 2021, 500 bonds were converted into 5,000 shares.
The interest related to the 500 converted bonds was not paid.

On September 30, 2022, P2,000,000 face amount bonds were

retired @ P101.50. The fair value of the bonds without the conversion
privilege was P1,980,000.

On April 1, 2023, 1,500 bonds were converted and the interest

related to the 1,500 converted bonds were paid.

REQUIRED (RQ):
1 Prepare all journal entries 2020-2024 (34 points)
2 Show all necessary computations. (28 pts)
3 Prepare an amortization schedule. (5 pts)
4 Complete the TABLE for ease of analysis. (16 points)

Account BALANCES as of Dec 31, 2020 Dec 31, 2021

Bonds Payable 0 0
Add: Premium on Bonds Payable 0 0
Carrying Amount 0 0

Share Premium - Conversion Privilege 0 0

Account BALANCES as of Dec 31, 2022 Dec 31, 2023

Bonds Payable 0 0
Add: Premium on Bonds Payable 0 0
Carrying Amount 0 0

Share Premium - Conversion Privilege 0 0