PROBLEMS

PROBLEM $1$: TRUE OR FALSE

Interest expense is incurred due to passage of time and is

computed by multiplying the carrying amount of a note with

the effective interest rate. $T$

Notes payable are obligations supported by creditor

promissory notes.

According to current standards, all short$-$term notes payable

are initially measured at face amount.

Financial liabilities are initially recognized at fair value minus

transaction costs, except for FVPL liabilities.

According to PFRS $13,$ fair value is the price that would be

paid to buy an asset or received to issue a liability in an

orderly transaction between market participants at the

measurement date.

Interest payable is recognized on noninterest$-$bearing notes.

If the cash flows on a note payable are due in lump sum, the

most appropriate present value factor is $"$PV of $1."$

On Jan. $1,20$x$1,$ Crybaby Co$.$ issued a noninterest$-$bearing note

with face amount of P $2$ M and appropriately recognized it at

P$1,241,843.$ The note matures in lump sum on Dec. $31,205.$

The effective interest is $10\%.$ The unamortized discount on

Dec. $31,202$ is $8497,370.$

Transaction costs of issuing financial liabilities are generally

expensed outright.

Origination fees incurred on a loan payable are deducted from

the carrying amount of the loan and subsequently amortized

using the effective interest method.