QUIZ: Intangibles, CL/NCL, Accounts and Notes Payable

Use the following choice for the next ten (10) items.
A. Current Asset
B. Current Liability
C. Non-current Asset
D. Non-current Liability

1. Loan payable due 10/5/2023. The entity entered into an agreement with the creditor to extend payment on
January 10, 2022 and the new due date is 12/31/24. Classify the loan as of December 31, 2022.
2. Bonds payable due 2/14/23. As of 12/31/22, the debtor has unconditional right.
3. Loan Payable with a term of 10 years with a condition that the income of the company will not fall below
3,000,000. In its 5th year, the income of the company is 5,000,000. Classify the loan as of the end of its 5th year
of operations.
4. Loan payable due 10/5/2023. The entity entered into an agreement with the creditor to extend payment on
December 1, 2022 and the new due date is 12/31/24. Classify the loan as of December 31, 2023.
5. Loan payable due 10/5/2023. The entity entered into an agreement with the creditor to extend payment on
December 10, 2022 and the new due date is 12/31/24. Classify the loan as of December 31, 2022.
6. Loan payable due 10/5/2023. The entity entered into an agreement with the creditor to extend payment on
December 31, 2022 and the new due date is 12/31/23. Classify the loan as of December 31, 2022.
7. Loan Payable with a term of 10 years with a condition that the entity will not open any business during the
term of the loan. In the 3rd year, the entity opened another business. Classify the loan as of the end of the 3rd
year.
8. Loan Payable with a term of 10 years with a condition that the entity will not open any business during the
term of the loan. In the 3rd year, the entity opened another business. In its fourth year, a valid refinancing
agreement was entered. Classify the loan as of the end of the 4th year.
9. Deferred Tax Liability
10. Accounts Payable

11. Which of the following is one of the essential characteristics of an intangible asset?
A. used in business C. identifiable
B. subject to amortization D. monetary

12. At initial recognition, an intangible asset shall be measured

A. at cost C. at fair value plus direct acquisition costs
B. at fair value D. any of these

13. Goodwill should properly appear on the financial statements of an entity which:
A. has purchased another entity
B. consistently operates profitably
C. consistently reports above-normal profits
D. meets all of the conditions regarding legal goodwill.

14. Costs incurred by a company that developed its own goodwill internally should be :
A. capitalized and amortized as the company profits increased.
B. capitalized and amortized over the useful life of the goodwill.
C. expensed when incurred as a current operating expense.
D. capitalized and amortized over a period not to exceed 40 years.

15. Costs incurred internally to create intangibles are

A. capitalized. C. generally expensed as incurred.
B. capitalized if they have an indefinite life. D. expensed only if they have a limited life.

16. Once recognized, intangible assets can be carried at

A. Cost less accumulated amortization.
B. Cost less accumulated amortization and less accumulated impairment losses.
C. Revalued amount without deduction for accumulated amortization.
D. Cost plus a notional increase in fair value since the intangible asset is acquired.

17. According to PAS 38, the residual value of an intangible asset is presumed
A. equal to fair value in active market
B. equal to the amount the third party wants to buy
C. equal to a conservative estimation
D. zero

18. A newly set up dot-com entity has engaged you as its financial advisor. The entity has recently completed
one of its highly publicized research and development projects and seeks your advice on the accuracy of
the following statements made by one of its stakeholders. Which one is it?
A. Costs incurred during the “research phase” can be capitalized.
 B. Costs incurred during the “development phase” can be capitalized if criteria such as technical feasibility
of the project being established are met.
C. Training costs of technicians used in research can be capitalized.
D. Designing of jigs and tools qualify as research activities.

19. Which of the following is an example of activities that would typically be excluded in research and
development costs?
A. Design, construction, and testing of preproduction prototypes and modes.
B. Laboratory research aimed at discovery of new knowledge.
C. Quality control during commercial production, including routine testing of products.
D. Testing in search for, or evaluation of, product or process alternatives.

20. How should research and development costs be accounted for, according to PAS 38?
A. Must be capitalized when incurred and then amortized over their estimated useful lives.
B. Must be expensed in the period incurred.
C. May be either capitalized or expensed when incurred, depending upon the materiality of the amounts
involved.
D. Must be expensed in the period incurred unless development costs incurred qualify under the recognition
criteria set forth under PAS 38.

21. XYZ Company issued a note solely in exchange for cash. Assuming that the items listed below differ in
amount the present value of the note at issuance is equal to the
A. Face amount
B. Face amount discounted at the prevailing interest rote for similar notes
C. Proceeds received
D. Proceeds received discounted at the prevailing interest rate for similar notes

22. A company issued a short-term note payable with a stated 12 percent rate of interest to a bank. The bank
charged a .5% loan origination fee and remitted the balance to the company. The effective interest rate
paid by the company in this transaction should be
A. Equal to 12.5% C. Less than 12.5%
B. More than 12.5% D. Independent of 12.5%

23. Which of the following statements is correct?

A. A company may exclude a short-term obligation from current liabilities if the firm intends to refinance
the obligation on a long-term basis.
B. A company may exclude a short-term obligation from current liabilities if the firm can demonstrate an
ability to consummate a refinancing.
C. A company may exclude a short-term obligation from current liabilities if it is paid off after the balance
sheet date and subsequently replaced by long-term debt before the balance sheet is issued.
D. The company must both intend to refinance the obligation on a long-term basis and demonstrate the
ability to consummate the refinancing to exclude a short-term obligation from current liabilities.

24. Among the short-term obligations of Lani Company as of December 31, the balance sheet date, are notes
payable totaling P500,000 with National Bank. These are 90-day notes, renewable for another 90-day
period. These notes should be classified on the balance sheet of Lani Company as
A. Current liabilities C. Noncurrent liabilities
B. Deferred charges D. Intermediate debt

25. On September 1, 2023 a company borrowed cash and signed a one-year interest bearing note on which
both the principal and interest are payable on September 1, 2024. How will the note payable and the
accrued interest be classified in the December 31, 2023 balance sheet?
Note payable Accrued interest
A. Current liability Noncurrent liability
B. Noncurrent liability Current liability
C. Current liability Current liability
D. Noncurrent liability No entry

26. At issuance date, the present value of a promissory note will be equal to its face amount if the note
A. Bears a stated rate of interest which is realistic.
B. Bears a stated rate of interest which is less than the prevailing market rate for similar notes.
C. Is noninterest bearing and the implicit interest rate is less than the prevailing market rate for similar notes.
D. Is noninterest bearing and the implicit interest rate is equal to the prevailing market rate for simpler
notes.

27. A two-year note was issued in an arm's length transaction at face value for cash at the beginning of this
year. There were no other rights or privileges exchanged. The interest rate is specified at 12% per year.
Principal and interest are payable at maturity. The prevailing rate of interest for a loan of this kind is 15% per
year. What amount of interest rate should be used to record interest expense for this year and next year
respectively?
 A. 12 percent and 15 percent C. 12 percent and 12 percent
B. 15 percent and 15 percent D. 15 percent and 12 percent

28. XYZ Company sold and issued a P1,000,000, 6% bond at 94. Therefore, the bond was sold
A. P1,000,000 less accrued interest of P60,000
B. for P1,000,000 plus accrued interest of P60,000
C. at a discount because the stated interest rate was lower than the market rate of interest
D. at a discount because the stated interest rate was higher than the market rate of interest

29. If the present value of a note issued in exchange for a plant asset is less than its face amount, the
difference should be
A. Included in the cost of the asset
B. Amortized as interest expense over the life of the note
C. Amortized as interest expense over the life of the asset
D. Included in interest expense in the year of issuance

30. On September 1, 2021 a company borrowed cash and signed a two-year-interest-bearing note on which
both the principal and interest are payable on September 1, 2023. How many months of accrued interest
would be included in the liability for accrued interest at December 31, 2021 and December 31, 2022?
A. B. C. D.
December 31, 2001 4 months 4 months 12 months 20 months
December 31, 2002 16 months 4 months 24 months 8 months

Use the following information for the next five items:

You noted the following liability account balances as of December 31, 2022 of NARUTO:
12% Notes payable 2,800,000
10% Notes payable 2,000,000

Transactions during 2023 and other information relating to NARUTO’s liabilities were as follows:
§ The 12% note is dated May 1, 2022 and is payable in four equal annual installments of P700,000 beginning
May 1, 2023. The first principal and interest payment was made on May 1, 2023.
§ The 10%, P2,000,000 loan payable will mature on July 1, 2016. Interest on the loan is due every July 1 and
December 31. On December 1, 2023, The Co. entered into a refinancing agreement with a bank to
refinance the loan on a long-term basis. The refinancing and roll over transaction was completed on
December 31, 2023.
§ On January 1, 2023, The company purchased delivery equipment by paying cash of P200,000 and issuing
a noninterest-bearing note payable of P2,000,000 due in 4 equal annual installments starting December
31, 2023. The prevailing rate of interest of this type of note is 12%.

Based on the above data, determine the following:

31. How much is the carrying amount of the note issued for delivery equipment on initial recognition
A. 1,518,650 B. 2,000,000 C. 1,271,000 D. 2,200,000

32. Noncurrent portion of the notes payable as of December 31, 2023

A. 5,600,000 B. 4,244,995 C. 4,400,000 D. 3,627,987

33. Current portion of notes payable as of December 31, 2023

A. 1,100,000 B. 1,055,893 C. 988,974 D. 763,573

34. Accrued interest payable as of December 31, 2023

A. 0 B. 168,000 C. 224,000 D. 200,000

35. Total interest expense for the year 2023

A. 268,000 B. 618,238 C. 662,238 D. 352,327

Use the following information for the next five items:

You were able to obtain the following from the accountant of Tuguegarao Company related to the company's
liabilities as of December 31, 2015:
Current Liabilities:
Accounts payable 1,350,000
14% note payable issued October 1, 2014, maturing 1,250,000
September 30, 2016
16% note payable issued April 1, 2013, due on April 2016 3,000,000
Interest payable ?
Noncurrent liability:
10% 2-year, note payable issued on July 1, 2015 2,000,000

The following additional information pertains to these liabilities:

 § The accounts payable balance of P1,350,000 was before any necessary year-end adjustments relating
to the following:
o Goods were in transit to Tuguegarao from a vendor on December 31, 2015. The invoice cost was
P75,000. The goods were shipped FOB shipping point on December 29, 2015 and were received
on January 2, 2016.
o Goods shipped to FOB destination on December 21, 2015, from a vendor to Tuguegarao, were
received on January 6, 2016. The invoice cost was P37,500.
o On December 27, 2015, Tuguegarao wrote and -recorded checks totaling P60,000 which were
mailed on January 10, 2016.
§ The interest of the 14% note payable is payable every September 30.
§ On December 31, 2015, the company expects to refinance the P3,000,000 note by the issuance of. a
long-term· note payable in lump- sum. The refinancing of the P3,000,000 is at the discretion of the
enterprise.
§ Tuguegarao's December 3J, 2015 financial statements were issued on March 31, 2016. On January 15,
2016, the entire P3, 000,000 balance of the 16% note was refinanced by the issuance of a long-term
obligation payable. The interest is payable every April 1.
§ The note payable of P2,000,000 is payable to Baggao Corporation. The interest is payable quarterly. The
existing loan agreement does not carry a provision to refinance. During September, Tuguegarao was
experiencing financial difficulty and was unable to pay the periodic interest. Baggao Company agreed
at the reporting date to provide a grace period ending at least twelve months to rectify the breach.

Based on the above, answer the following:

36. In Tuguegarao's December 31, 2015 statement of financial position, how much should be the accounts
payable?
A. 1,410,000 B. 1,425,000 C. 1,462,500 D. 1,485,000

37. Total interest expense for the year 2015

A. 175,000 B. 480,000 C. 655,000 D. 755,000

38. Total interest payable as of December 31, 2015

A. 143,750 B. 2,423,750 C. 503,750 D. 2,380,750

39. Total current liabilities as of December 31, 2015

A. 5,158,750 B. 2,878,750 C. 3,238,750 D. 5,115,000

40. Total noncurrent liabilities as of December 31, 2015

A. 3,000,000 B. 2,000,000 C. 5,000,000 D. Nil

Use the following information for the next two items:

NARUTO, INC. is a manufacturer and retailer of household furniture. Your audit of the company's financial
statements for the year ended December 31, 2021, discloses the following debt obligations of the company at
the end of its reporting period. Naruto's financial statements are authorized for issuance on March 6, 2022.
§ A P150,000 short-term obligation is due on March 1, 2022. Its maturity could be extended to March 1, 2024,
provided Naruto agrees to provide additional collateral. On February 12, 2022, an agreement is reached
to extend the loan's maturity to March 1, 2024.
§ A short-term obligation of P3,600,000 in the form of notes payable due February 5, 2022. The company
issued 75,000 ordinary shares for P36 per share on January 25, 2022. The proceeds from the issuance, plus
P900,000 cash, were used to fully settle the debt on February 5, 2022.
§ A long-term obligation of P2,500,000 on December 1, 2021. On November 10, 2021, Naruto breached a
covenant on its debt obligation and the loan becomes payable on demand. An agreement is reached
to provide a waiver of the breach on December 11, 2021.
§ A long-term obligation of P4,000,000. The loan is maturing over 4 years in the amount of P1,000,000 per
year. The loan is dated September 1, 2021, and the first maturity date is September 1, 2022.
§ A debt obligation of P1,000,000 maturing on December 31, 2024. The debt is callable on demand by the
lender at any time.

41. What amount of current liabilities should be reported on the December 31, 2021, statement of financial
position?
A. P8,250,000 B. P5,750,000 C. P4,750,000 D. P3,750,000

42. What amount of noncurrent liabilities should be reported on the December 31, 2021, statement of financial
position?
A. P5,500,000 B. P3,000,000 C. P6,500,000 D. P7,500,000

Use the following information for the next two items:

SAKURA COMPANY has the following three loans payable scheduled to be repaid in February of next year. The
company's accounting year ends on December 31.
§ The company intends to repay Loan 1 for P100,000 when it comes due in February. In the following
October, the company intends to get a new loan for P80,000 from the same bank.
 § The company intends to refinance Loan 2 for P150,000 when it comes due in February. The refinancing
agreement, for P180,000, will be signed in April, after the financial statements for this year have been
authorized for issue.
§ The company intends to refinance Loan 3 for P200,000 before it comes due in February. The actual
refinancing, for P175,000, took place in January, before the financial statements for this year have been
authorized for issue.

43. As of December 31 of this year, the total current liabilities to be reported in the company's statement of
financial position should be
A. P100,000 B. P250,000 C. P450,000 D. P125,000

44. As of December 31 of this year, the total noncurrent liabilities to be reported in the company's statement of
financial position should be
A. P25,000 B. P 0 C. P175,000 D. P350,000

Use the following information for the next four items:

You were able to obtain the following from the accountant for Gaara Corp. related to the company's liabilities
as of December 31, 2020.
Accounts payable P 650,000
Notes payable - trade 190,000
Notes payable - bank 800,000
Wages and salaries payable 15,000
Interest payable ?
Mortgage notes payable - 10% 600,000
Mortgage notes payable - 12% 1,500,000
Bonds payable 2,000,000
The following additional information pertains to these liabilities:
§ All trade notes payable are due within six months from the end of the reporting period.
§ Bank notes-payable include two separate notes payable to Allied Bank. (1) A P300,000, 8% note issued
March 1, 2018, payable on demand. Interest is payable every six months. (2) A 1-year, P500,000, 11.5%
note issued January 2, 2020. On December 30, 2020, Gaara negotiated a written agreement with Allied
Bank to replace the note with a 2-year, P500,000, 10% note to be issued January 2, 2021. The interest was
paid on December 31, 2020.
§ The 10% mortgage note was issued October 1, 2017, with a term of 10 years. The terms of the note give
the holder the right to demand immediate payment if the company fails to make a monthly interest
payment within 10 days of the date the payment is due. As of December 31, 2020, Gaara is three months
behind in paying its required interest payment.
§ The 12% mortgage note was issued May 1, 2014, with a term of 20 years. The current principal amount
due is P1,500,000. Principal and interest were payable annually on April 30. A payment of P220,000 is clue
April 30, 2021. The payment includes the interest of P180,000.
§ The bonds payable is 10-year, 8%. bonds, issued June 30, 2025. Interest is payable semi-annually every
June 30 and December 31.
Based on the above, answer the following:

45. Interest payable as of December 31, 2020 is

A. P155,000 B. P203,000 C. P143,000 D. P215,000

46. The portion of the Note Payable-bank to be reported under current liabilities as of December 31, 2020 is
A. P300,000 B. P800,000 C. P500,000 D. P 0

47. Total current liabilities as of December 31, 2020 is

A. P3,950,000 B. P3,938,000 C. P4,138,000 D. P3,998,000

48. Total noncurrent liabilities as of December 31. 2020 is

A. P1,760,000 B. P3,960,000 C. P2,560,000 D. P1,960,000

Use the following information for the next two items:

The December 31 trial balance of the Itachi Corporation includes, among others, the following:
Long-term Notes – which are payable in annual installment
of P10,000 on February 1 of each year P 60,000
Rental income received in advance 16,000
Notes payable, which are trade notes, with the exception of P20,000
Notes payable to bank on June 30 of the following year 60,000
Accounts payable which include account with debit balance of P2,000 80,000
Notes Receivable which have been reduced by notes discounted of
P20,000 that are not yet due and on which the Corporation is
contingently liable 100,000
Accounts Receivable, which include accounts with credit balances
of P10,000 and past due accounts of P6,000 on which a loss
of 80% is anticipated 200,000
 Merchandise Inventory, which includes goods held for consignment,
P8,000, and goods received on December 31 of P12,000; neither
of these items having been recorded as a purchase 180,000

49. What is the amount of the current liabilities on December 31?

A. P 190,000 B. P 184,000 C. P 178,000 D. P 170,000

50. The long-term debt at year-end is

A. P 70,000 B. P 50,000 C. P 30,000 D. P 0

Use the following information for the next two items:

On January 1, 2023, KAGURA Company entered into a franchise agreement with a franchisor involving an initial
franchise fee of P2,000,000, to be paid in cash. The franchise agreement will end if the Company was able to
generate aggregate revenue from the franchise amounting to P16,000,000. The Company expects to reach this
aggregate revenue amount after eight years.

In addition, the Company is also required to pay additional franchise fee of 1% of the revenue arising from the
franchise. During the years 2023 and 2024, the Company earned revenues from the franchise amounting to
P2,400,000 and P2,800,000, respectively.

51. Total amount of expense to be included in the Company's 2023 profit or loss shall be
A. P24,000 B. P286,000 C. P324,000 D. P274,000

52. Carrying amount of the franchise as of December 31, 2024 shall be

A. P1,500,000 B. P1,350,000 C. P1,800,000 D. P1,650,000

On January 1, 2021, MOMOSHIKI Company acquired a trademark, with a nine-year remaining legal life, for
P2,600,000. The Company intends to renew the trademark in indefinite number of times in the foreseeable future.
As of December 31, 2021 and 2022, the trademark's fair value less costs of disposal and annual net cash inflows
are the following:
FVLCD Annual Net Cash Inflow Discount Rate
December 31, 2021 P2,300,000 P196,000 7%
December 31, 2022 1,850,000 189,000 9%
However, starting in early 2023, the demand for the product represented by the trademark suddenly declined,
prompting the Company to reassess not to renew the trademark and just use it during the remainder of its legal
life.

53. The carrying amount of the trademark as of December 31, 2023 shall be
A. P1,800,000 B. P1,700,000 C. P1,630,000 D. P1,580,000

Use the following information for the next two items:

At the beginning of 2023, BORUTO Company acquired a patent by issuing 100,000 ordinary shares with P23 fair
value per share, while the patent's fair value was P2,400,000. This patent had a remaining useful life and legal life
of 16 years and 17 years, respectively
On July 1, 2023, a competing patent with remaining legal life of 18 years was acquired for P1,860,000. On the
other hand, the Company incurred P300,000 legal costs in successfully defending the original patent against an
infringement case,

54. From the given information, determine the total amount of expense to be recognized in 2023 profit or loss
shall be
A. P203,750 B. P503,750 C. P210,000 D. P510,000

55. Total carrying amount of the patents as of December 31, 2023 shall be
A. P3,900,000 B. P3,956,250 C. P4,050,000 D. P4,300,000

Use the following information for the next two items:

On January 1, 2023, YAKONE Company had a patent with carrying amount of P3,168,000 and remaining useful
life and legal life of 10 years and 16 years, respectively. On July 1, 2023, another patent was acquired for
P2,430,900 to extend the remaining useful life of the patent by four years. In addition, on October 1, 2023, the
Company incurred legal costs of P200,000 in successfully prosecuting the competitor's patent in an infringement
case.

56. From the given information, determine the total amount of expense to be recognized in 2023 profit or loss
shall be
A. P559,900 B. P359,900 C. P749,900 D. P479,900

57. Total carrying amount of the patents as of December 31, 2023 shall be
A. P5,439,000 B. P5,239,000 C. P5,489,000 D. P5,789,000
Use the following information for the next two items:
At the beginning of 2023, SARADA Company started the development of one of its new computer software for
use in its operations:
Date Particulars Amounts
1/15/23 Costs of initial design and conceptualization P300,000
3/20/23 Salaries paid to graphical designers 600,000
4/20/23 Salaries paid to computer programmers 1,000,000
4/30/23 Costs of initial testing 450,000
5/31/23 Costs of adjustments made after the initial testing 850,000
7/1/23 Costs of final testing 350,000
For the first half of the year 2023, the depreciation and amortization of IT assets amounted to P750,000. Criteria
for the capitalization of development costs were achieved on May 1, 2023. The software is expected to be used
for five years after it was deployed for use starting on July 1, 2023.

58. The total amount of expenses to be recognized in the Company's 2023 profit or loss shall be
A. P2,850,000 B. P2,995,000 C. P2,650,000 D. P2,775,000

59. The carrying amount of the software as of December 31, 2023 shall be
A. P1,215,000 B. P1,360,000 C. P1,080,000 D. P1,305,000

On January 1, 2023, SAKURA Company was established. In connection with its start-up activities, it incurred the
following costs:
Professional fees paid to lawyers P500,000
Press Conference to announce the Company’s establishment P1,000,000
Hiring costs of some of the Company’s pioneer employees P1,500,000
Purchase Price of an Office Equipment P800,000
Purchase Price of office supplies P400,000

60. The total amount to be recorded as outright expense for 2023 shall be:
A. P1,000,000 B. P1,500,000 C. P3,000,000 D. P3,400,000

END