You are auditing the notes payable section of Nopass Co. and obtained the following accounts and information:

Bank Note Payable, P800,000

This includes three separate notes payable to Security Bank:

•A P200,000, 5% notes issued March 31, 2021, payable on demand. Interest is paid every six months.

•A P400,000, 8% notes issued January 1, 2021 due on January 1, 2022. On December 30, 2021, Nopass negotiated an agreement with Security Bank to replace the note with a 3-year P400,000, 8% notes payable to be issued on January 1, 2022. The interest for the year 2021 for this note was paid on December 31, 2021.

•A P200,000, 2-year non interest-bearing note was signed on April 1, 2021. The market rate of interest for this level of risk is 12%.

12% Notes Payable, P3,000,000

On January 1, 2020, Nopass Co. bought a machinery and issued a notes payable in equal annual installments of P500,000 at the end of each year. Interest is also payable at the end of each year based on outstanding balance of the note. On this date, Nopass recorded the transactionby recognizing premium on notes payable of P164,426.

At the end of 2021, Nopass recorded a debit to premium on notes payable for P37,913. On December 31, 2024, the balance of unamortized discount is P9,014.

8% Notes Payable, P2,000,000

On December 31, 2021, Nopass Co. was experiencing financial difficulties and entered into a debt restructuring agreement with the creditor. The creditor restructured the obligation as follows:

•The principal was reduced from P2,000,000 to P1,800,000.

•Forgave the accrued interest of P160,000

•Extended the maturity date from December 31, 2021 to December 31, 2024

•Reduced the interest rate from 8% to 7%payable starting December 31, 2022.

Determine the following as a result of your audit:

1.How much is the correct interest expense that Nopass Co. should recognize in its statement of comprehensive income for the period ending December 31, 2021?

2.How much isthe amount of gain (loss) on extinguishment should Nopass recognize in 2021?

3.How much is the correct balance of interest payablethat should be presented in the December 31, 2021 statement of financial position?

4.How much is the total carrying value of the notes payable at the end of 2021 reported as non-current?

5.How much is the total carrying value of the notes payable at the end of 2021 reported as current?

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