Problem 1

On December 1, 2019, BIR acquired a computer software for P1,000,000 and incurred the following costs:

• Non-refundable purchase taxes of P30,000 not included in the purchase price
• Professional fees incurred in the installation of the software, P100,000
• Modifications to the software before it was brought to the condition intended by management for use P60,000
• Costs of testing the software P10,000
• Training costs of staff who will be using the software, P200,000
• Costs of updating the software after it was available for use in the condition originally intended by management P5,000
• Administrative and other general overhead costs incurred on the acquisition and installation of the software P15,000

Additional information:

1. The software's useful life is 5 years
2. The entity assesses on December 31, 2020, an indication that the asset is impaired and estimated the following values:

FV less costs to sell P700,000

Value in use 800,000

Required: Provide all indicated entries. Show all solutions.

Problem 2

On January 1, 2019, the BTr issues a 5-year, 6% P2,000,000 bonds for P1,900,000. Transaction costs on the issuance (bond issue costs) amount to P59,708. Interest payments are due every December 31 but the principal is due only at maturity date. The effective interest rate adjusted for both the bond discount and bond issue costs is 8%.

Required:

1. Provide entries for year 1 and 2
2. Amortization schedule
3. Show solutions