ANSWER IS B

Bonds payable - 12% converti

Premium on bonds payable
Carrying amount of bonds

Carrying amount converted (

par value of the shares issued
Share premium
Conversion expenses
Share premium arising from

error in paragraph 4
it should be P2,000,000 bonds

ANSWER:
ANSWER IS B

Bonds payable - 12% convertible 5,000,000.00

Premium on bonds payable 300,000.00
Carrying amount of bonds 5,300,000.00

Carrying amount converted (2,000,000/5,000,000)x5,300,000) 2,120,000.00

par value of the shares issued (2,000,000/1,000=2,000x50x10) 1,000,000.00
Share premium 1,120,000.00
Conversion expenses (20,000.00)
Share premium arising from bond conversion 1,100,000.00
ANSWER: D

Bonds payable
Discount on bonds payable
Carrying amount

Carrying amount converted (5/10 x 9,50

Applicable share premium from convers
Total Consideration
Less: Par Value of Shares issued (5,000,0
Share premium
 10,000,000.00
on bonds payable (500,000.00)
9,500,000.00

amount converted (5/10 x 9,500,000) 4,750,000.00

e share premium from conversion previlege (5/10 x 2,000,000 ) 1,000,000.00
5,750,000.00
Value of Shares issued (5,000,000/1,000x40x20) 4,000,000.00
1,750,000.00
ANSWER: A

Bonds payable 600,000.00

Premium Bonds payable 12,000.00
Carrying amount 612,000.00
Less: Ordinary shares issued at par value (6,000 shares x 50) 300,000.00
Share premium 312,000.00

Bonds payable 600,000.00

divided by 1,000.00
convertible bonds 600.00
ordinary shares 10.00
number of shares issued 6,000.00
 ANSWER: D

Bonds payable
Premium on bonds payable
Carrying amount

Carrying amount converted (2/10x13,00

Applicable share premium from convers
Total considertation
Less: Par value of the shares issued (2,0
Share premium from conversion

ANSWER:
 10,000,000.00
on bonds payable 3,000,000.00
13,000,000.00

amount converted (2/10x13,000,000) 2,600,000.00

e share premium from conversion previlege (2/10x 1,500,000) 300,000.00
2,900,000.00
value of the shares issued (2,000x50=100,000x20) 2,000,000.00
mium from conversion 900,000.00
ANSWER:
1C
2B
3B

SOLUTION 1

Bonds payable
Discount on bonds payable
carrying amount of bonds at Dec. 31, 2

SOLUTION 2

Total amount paid for bonds

Less: Carrying amount of bonds
loss on extuingishment of bond payable

SOLUTION 3

Amount paid for bonds

Add: accrued interst (4,000,000x.06)
total amount paid to the bondholder
 4,000,000.00
on bonds payable (500,000.00)
mount of bonds at Dec. 31, 2022 3,500,000.00

ount paid for bonds 4,200,000.00

ying amount of bonds 3,500,000.00
tuingishment of bond payable 700,000.00

aid for bonds 4,200,000.00

ued interst (4,000,000x.06) 240,000.00
unt paid to the bondholder 4,440,000.00
ANSWER:
ANSWER IS A

should be interest expense 204,000.00

recorded interest expense 150,000.00
understated interest expense 54,000.00

500,000.00 0.12 60,000.00 0.833333 50,000.00

1,500,000.00 0.12 180,000.00 0.5 90,000.00
800,000.00 0.12 96,000.00 0.666667 64,000.00
should be interest expense 204,000.00
ANSWER IS B

Face value of note payable. 12/31/2022 1,000,000.00

Current portion due on 1/31/2023 50,000.00
Non-current portion of notes payable 950,000.00
less: Discount 531,750.00
Note payable contestant 12/31-2022 418,250.00
No. 1 ANSWER IS B

Interest Expense (1,000,000x.09x3/12) 22,500.00

NO. 2 ANSWER IS A

Total amount paid 264,200.00

Payment on interest expense 22,500.00
Amount allocated for principal 241,700.00

Bond payable 1,000,000.00

Less: payment on principal 241,700.00
Carrying amount December 31, 2023 758,300.00
NO. 1 ANSWER IS B

Interest Expense for 2022 (2,000,000 x 10%) 200,000.00

NO. 2 ANSWER IS B

The carrying amount equal to fair value on December 31, 2022 1,900,000.00

NO. 3 ANSWER IS A

FACE AMOUNT 2,000,000.00

FAIR VALUE - DECEMBER 2022 1,900,000.00
NET GAIN FROM CHANGE IN FAIR VALUE DURING 2022 100,000.00

PREPARE JOURNAL ENTRIES FOR 2022

DEBIT CREDIT
JAN 1. CASH 2,000,000.00
NOTE PAYABLE
GAIN FROM CHANGE IN FAIR VALUE

Dec. 31 INTEREST EXPENSE 200,000.00

CASH 200,000.00

Dec. 31 LOSS FROM CHANGE IN FAIR VALUE

NOTE PAYABLE
NO. 1 ANSWER IS B A

Interest Expense for 2022 (5,000,000 x 10%)

NO. 2 ANSWER IS

Face amount
fair-value - December 2022
Net gain from change in fair value

January 1 loss/gain from change in fair value

December 31 loss/gain from change in fair value
net loss/gain from change in fair value

NO. 3 ANSWER IS
2022 (5,000,000 x 10%) 500,000.00

e in fair value

rom change in fair value

ain from change in fair value
hange in fair value

A
ANSWER IS A

Note payable 5,000,000.00

accrued interest payable 600,000.00
Total Liability 5,600,000.00
Carrying amount of land (3,600,000.00)
GAIN ON EXTINGUISHMENT 2,000,000.00
ANSWER IS B

Carrying amount of liability 1,500,000.00

Carrying amount of real estate (1,000,000.00)
Gain on extinguishment 500,000.00
ANSWER IS A

Note payable 5,000,000.00

Accrued interest payable 750,000.00
Total Liability 5,750,000.00
Cash settlement (4,100,000.00)
Gain on exchange on debt 1,650,000.00
no. 1 A
no. 2 B
no. 3 C
1. C
2. B
3. A
4. A
ANSWER IS C

Accounting income /Financial Income 6,200,000.00

Interest Revenue on government bonds (200,000.00) subject to final tax
Tax Depreciation in excess of financial depreciaiton (600,000-500,000) (100,000.00) temporary difference
Taxable income (income tax return) 5,900,000.00

current tax expense (5,900,000 x 25%) 1,475,000.00

subject to final tax
temporary difference
NO. 1 ANSWER IS B

Current tax expense (25% x 5,100,000) 1,275,000.00

NO. 2 ANSWER IS C

Accounting Income 6,000,000.00

Permanent Difference (500,000.00)
Taxable Income 5,500,000.00
multiply by income tax rate 0.25
Total Income tax expense 1,375,000.00
ANSWER IS D

Refer page 502 of the book

No. 1ANSWER IS A

No. 2 ANSWER IS A

NO. 3 ANSWER IS B

No. 4 answer is
Accounting income before tax 9,700,000.00

Interest income on tax-exempt municipal bond (350,000.00) permanent difference

depreciaiton claimed on the tax return in excess of fin (500,000.00) temporary
Waranty expense as reported in the income statemen 200,000.00 temporary
Actual warranty expenditure (50,000.00) temporary
Taxable Income (income tax return) 9,000,000.00
income tax rate 0.25
Current tax Expense 2,250,000.00

Accounting income before tax 9,700,000.00

Interest income on tax-exempt municipal bond (350,000.00) permanent difference
Taxable income 9,350,000.00
0.25
income tax expense 2,337,500.00

Carrying amount of deprecialble asset (800,000x.25) 200,000.00

Beginning Deferred tax liability 75,000.00
Total Deferred tax liability 275,000.00

150,000.00
asset liability

500.00
200.00
50.00

1,350,000.00
337,500.00

87,500.00
NO. 1 ANSWER IS A

Pre tax accounting income

Premium on life insurance of key officer
tax exempt interest income
Depreciaiton on tax Return in excess of
Estimated Warranty Expense
Actual warranty repairs
doubtful account expense
written off of uncollectible account
Rent revenue in advance
Taxable Income
Tax Rate
Current tax Expense

NO. 2 ANSWER IS B

Pre tax accounting income

Premium on life insurance of key officer
tax exempt interest income
Taxable Income (accounting income)
Tax Rate
Total tax Expense

NO. 3 ANSWER IS

NO. 4 ANSWER IS
 counting income 5,000,000.00
on life insurance of key officer 150,000.00 permanent
pt interest income (50,000.00) permanent final tax
ton on tax Return in excess of book depreciaiton (200,000.00) temporary
Warranty Expense 90,000.00 temporary
rranty repairs (30,000.00) temporary
account expense 60,000.00 temporary
ff of uncollectible account (20,000.00) temporary
nue in advance 300,000.00 temporary
5,300,000.00
0.25
1,325,000.00

counting income 5,000,000.00

on life insurance of key officer 150,000.00
pt interest income (50,000.00)
ncome (accounting income) 5,100,000.00
0.25
1,275,000.00