University of Mindanao

Matina Campus, Davao City

ACCOUNTING 6 – GENERAL REVIEW

Intangible Assets
1. Which statement is correct concerning amortization of intangible assets?
I. Intangible assets with limited or finite life are amortized over their useful life.
II. Intangible assets with indefinite life are not amortized over their useful life.
a. I only c. Both I and II
b. II only d. Neither I nor II

2. During 2010, Pitt company incurred costs to develop and produce a routine, low-risk computer software
product, as follows:

Completion of detailed program design 1,300,000

Costs incurred for coding and testing to establish
technological feasibility 1,000,000
Other coding costs after establishment of technological feasibility 2,400,000
Other testing costs after establishment of technological feasibility 2,000,000
Costs of producing masters for training materials 1,500,000
Duplication of computer software and training materials
from product (1000 units) 2,500,000
Packaging product (500 units) 900,000

What amount should be reported as inventory on December 31, 2010?

a. 5,900,000 c. 2,300,000
b. 3,400,000 d. 5,700,000

3. Camp company purchased a patent on January 1, 2009 for 357,000. the patent was being amortized over its
remaining legal life of 15 years. During 2012, Camp determined that the economic benefits of the patent would
not last longer than ten years from the date of acquisition.

What is the amount of amortization for the year 2012?

a. 51,000 c. 35,700
b. 23,800 d. 40,800

Leasehold Improvement
4. On January 1, 2009, Normie company signed a 12-year lease for warehouse space. Normie has an option te
renew the lease for an additional 8-year period on or before January 1, 2012. During January 2011, Normie
company made substantial improvement to the warehouse. The cost of the improvement was 540,000 with an
estimated useful life of 15 years. On December 31, 2011, Normie company is uncertain as to the exercise of the
renewal option. Normie company has taken the full year’s depreciation on this leasehold improvement.

On December 31, 2011, what is the carrying amount of the leasehold improvement?
a. 504,000 c. 510,000
b. 486,000 d. 513,000
5. Erich company entered into a franchise agreement to sell the products of a franchisor for 20 years. The
agreement provides that Erich company shall pay an initial fee of 6,000,000 in cash upon the signing of the
agreement on January 11, 2010. The agreement further provides that Erich company shall pay a periodic fee of
5% based on the annual gross sales of Erich Company. During 2010, the entity realized gross sales of
25,000,000.

What is the amount of amortization of franchise at the end of the first year?
a. 1,250,000 c. 6,000,000
b. 300,000 d. 1,550,000

Current Liabilities
6. Las Palmas company includes one coupon in each package of cereal it sells. A towel is offered as a premium to
customers who send in 10 coupons. Data for the premium offers are:
2012 2013
Packages of cereal sold 500,000 800,000
Number of towels purchased at 40 each 30,000 60,000
Number of towels distributed as premiums 20,000 50,000
Number of towels to be distributed as
premium next period 5,000 3,000

What amount should be reported as premium expense on 2013?

a. 2,400,000 c. 2,120,000
b. 2,000,000 d. 1,920,000

7. On Sept. 1, 2010, Canque bank received a note from Efine company in the amount of 1, 800,000, bearing interest at
12%, and payable in three equal annual principal payments of 600,000. On this date, the banks prime rate was 11%.
The first interest and principal payment was made on Sept. 1, 2011. At December 31, 2011, Canque bank should
record accrued interest payable of
a. 44,000 c. 66,000
b. 48,000 d. Zero

8. In 2010, Bare company began selling a new calculator that carried a two-year warranty against defects.
Bare projected the estimated warranty (as a percent of sales) as follows:
First year of warranty 4%
Second year of warranty 10%
Sales and actual warranty repairs were:
2010 2011
Sales 5,000,000 9,000,000
Actual warranty repairs 200,000 560,000

How much is the amount of estimated liability for warranties on December 31, 2010?
a. 700,000 c. 500,000
b. 1,260,000 d. 560,000

9. Concord company sells motorcycle helmets. In 2010, Concord sold 4,000,000 helmets before discovering a
significant defect in their construction. By December 31, 2010, two lawsuits had been filed against Concord. The
first lawsuit, which Concord has little chance of winning, is expected to be settled out of court for 1,500,000 in
 January 2011. Concord’s attorney’s think the entity has a 50-50 chance of winning the second lawsuit which is for 1,
000,000. What is the accrued liability on December 31, 2010 as a result of the lawsuits?
a. 0 c. 1,000,000
b. 2,500,000 d. 1,500,000

10. Morning company operates a customer loyalty program. The entity grants loyalty points for goods purchased. The
loyalty points can be used by the customers in exchange for goods of the entity. The points have no expiry date.
During 2012, the entity issued 50,000 award credits and expects that 80% of these award credits shall be redeemed.
The fair value of the award credits is reliably measured at 2,000,000. In 2012, the entity sold goods to customers for
a total consideration of 9,000,000 including the fair value of the award credits. The award credits redeemed was
15,000, 7,950, 2,550 and 15,000 for the years 2012, 2013, 2014 and 2015 respectively. The estimated percentage of
redemption was 80% in 2012, 85% in 2013, 85% in 2014 and 90% in 2015.

What is the amount of revenue from points to be recorded in the redemption of the award credits on 2013?
a. 750,000 b. 330,000 c. 120,000 d. 600,000

11. Which of the following is incorrect concerning a contingent liability?

a. A contingent liability is either probable or measurable but not both.
b. An entity shall not recognize a contingent liability in the financial statements.
c. A contingent liability is disclosed only.
d. If a contingent liability is remote, disclosure is also required.

12. Strand, inc provides an incentive compensation plan under which its president receives a bonus equal to 10% of the
corporation’s income in excess of P600,000 befor income tax but after deduction of the bonus. If income before
income tax and bonus is P1,920,000 and the tax rate is 32%, the amount of the bonus would be
a. 120,000 b. 132,000 c. 174,360 d. 192,000

13. A long-term debt which is due to be settled within 12 months after the reporting period is classified as noncurrent
when
I - An agreement to refinance it on a long term basis is completed after the end of the reporting period and before
the financial statements are authorized for issue.
II - The entity has the discretion to refinance or roll over the obligation for at least twelve months after the
reporting period under an existing loan facility
a. I only c. Both I and II
b. II only d. Neither I nor II

Bonds Payable
14. On March 1, 2011, Normie Company issued at 103 plus accrued interest of 2,000 of its 9%, P1,000 face value
bonds. The bonds are dated January 1, 2011 and mature on January 1, 2021. Interest is payable
semiannually on January 1 and July 1. Normie paid bond issue cost of P50,000. Normie should realize net
cash receipts from the bond issuance of
a. 2,040,000 b. 2,010,000 c. 2,140,000 d. 2,090,000

15. On December 31, 2011, Vera Corporation issued P2,000,000, 105 bonds at 105. The bonds pay interest
annually on December 31, and mature on December 31, 2021. Each P1,000 bond has a detachable share
warrant that allows the bondholder to purchase 5 shares of Vera’s P50 par value ordinary share for 60.
Immediately after the sale of the securities, the bonds were quoted at 95 ex-warrants and the warrants
quoted at P30 each. Vera’s ordinary shares at that time were selling at P75 per share. On January 1, 2013, all
 the share warrants were exercised when the price of Vera’s shares were trading at P100, how much is the
share premium from issuance that will be recorded o this date?
a. 300,000 b. 100,000 c.700,000 d. 600,000

16. Mariah Company’s December 31,2010 statement of financial position contained the following items in the
long-term liabilities section:
10% registered bonds, callable into 2011, due 2011 secured by machinery P3,000,000
11% bonds, convertible into ordinary shares Beginning 2011, P500,000
Maturing annually, secured by realty P5,000,000
12% collateral trust bonds (due in 2015) P7,000,000

What is the total amount of Mariah’s term bonds and debenture bonds, respectively?
a. P15,000,000 and P15,000,000
b. P 8,000,000 and P 7,000,000
c. P 8,000,000 and P 0
d. P 10,000,000 and P 0

17. On January 1, 2007, Lacida company issued 7% long term bonds with face amount of 1,000,000 due January 1, 2015.
Interest is payable semiannually on January 1 and July 1. On the date of issue, investors were willing to accept an
effective interest of 6%. Assume the bonds were issued on July 1, 2007 for 1,062,809. Using the effective interest
amortization method, Lacida company recorded interest for the 6 months ended December 31, 2007, in the amount
of
a. 70,000 b. 63,769 c. 31,881 d. 31,791

18. On Jan. 1, 2007, Cobb company issued ten-year bonds with a face amount of 7,500,000 and a stated interest rate of
8% payable annually on Jan. 1. The bonds were priced to yield 10%. Present value factors are as follows:
Present value of 1 for 10 periods at 10% 0.3855
Present value of an ordinary annuity of 1 for
10 periods at 10% 6.145

The total issue price of the bonds was

a. 7,500,000 b. 2,891,250 c. 8,421,750 d. 6,578,250

19. Cash proceeds from the issuance of the convertible bonds shall be reported as
a. contributed capital for the entire proceeds
b. partly liability and partly contributed capital
c. a liability for the face amount of the bonds and contributed capital for the premium over the face amount
d. a liability for the entire proceeds

20. The issuer shall directly charge retained earnings for the market value of the shares issued in
a. Two for one share split
b. Share options
c. Ten percent stock dividend
d. Share appreciation right

Shareholder’s Equity
21. Presented below is the shareholder’s equity of Caper Company on January 1, 2012.
 Share capital, par value 20 Authorized 50,000 shares;
issued and outstanding, 22,500 shares 450,000
Share premium 112,500
Retained earnings 172,500

During 2012, the following transactions occurred relating to shareholder’s equity.

- 750 shares were reacquired at 28 per share.
- 675 shares were reacquired at 30 per share.
- 1,125 shares of treasury were sold at 32 per share.

For the year ended December 31, 2012, Caper reported net income of 82,500. What should the
entity report as total shareholder’s equity in the December 31, 2012 statement of financial position?
a. 803,250 b. 808,500 c. 812,250 d. 729,750

22. Capital accounts for the Sand company on December 31 of the current year are as follows:
Preference share capital, 100 par, 50,000 shares issued
and outstanding 5,000,000
Share premium – PS 500,000
Ordinary share capital, 50 par, 100,000 shares issued
And outstanding 5,000,000
Share premium – ordinary share 1,000,000
Retained earnings 2,000,000
Each preference share is convertible into 4 ordinary shares. During the year, 5,000 preference shares are
converted.

How much is the balance of the share premium – preference after the conversion?
a. 500,000 b. 450,000 c. 1,300,000 d. 950,000

23. The shareholders’ equity section of Glee Company revealed Company the following information on December 31,
2012.
Preference share capital, 100 par 920,000
Share premium - preference share 322,000
Ordinary share capital, 15 par 2,100,000
Share premium 1,100,000
Subscribed ordinary share capital 200,000
Retained earnings 760,000
Note payable 1,600,000
Subscriptions receivable – ordinary 160,000
Treasury shares at cost - 5,000 shares 100,000
How much is the legal capital?
a. 3,120,000 b. 3,145,000 c. 3,980,000 d. 3,220,000

24. On March 1, Ria company issued 10,000 ordinary shares of 20 par value and 20,000 convertible preference
shares of 20 par value for 800,000. At this date, the ordinary shares was selling for 27. What amount of the
proceeds should be allocated to the convertible preference shares?
a. 600,000 b. 540,000 c. 480,000 d. 440,000

25. The accumulated profits and losses account of Gabby company shows the following postings:
 Debit: Share Dividends 500,000
Uninsured fire loss 175,000
Prior year’s errors 214,000
Reserved for bond redemption 300,000

Credit: Beginning balance 1,120,000

Net income for the year 760,000
Excess of par value 250,000
Gain on sale of treasury shares 150,000

Ending balance 1,091,000

What is the correct balance of the accumulated profits amount to be reported in the company’s year
end financial statements?
a. 691,000 b. 2,091,000 c. 2,241,000 d. 2,910,000

26. Of the 125,000 shares issued by the Vey company, 25,000 shares were held as treasury at January 1, 2012. During
2012, transactions involving Vey’s share capital were as follows:

January 1 through October 31 – 13,000 treasury shares were distributed to officers as part of a share
compensation plan.
November 1 – A 3-for-1 stock split took effect.
December 1 – Vey purchased 5,000 of its own shares to discourage an unfriendly takeover. These shares were not
retired.

At December 31, 2012, how many shares were issued and outstanding?
Issued Outstanding
a. 375,000 334,000
b. 375,000 324,000
c. 334,000 334,000
d. 325,000 324,000

27. Adverse financial and operating circumstances warrant that Solid Company undergo a quasi-reorganization
at Dec. 31, 2007. The following information may be relevant in accounting for the quasi-reorganization.
- Inventory with a fair value of 2,000,000 is currently recorded in the accounts at its cost of
2,500,000.
- Plant assets with a fair value of 7,000,000 are currently recorded at 8,500,000 net of
accumulated depreciation.
- Individual shareholders contribute 4,000,000 to create additional capital to facilitate the
reorganization. No new shares are issued.
- The par value of the share is reduced from 25 to 5.
Immediately before those vents, the shareholder’s equity section appears as follows:
Share capital, 25 par value, 100,000 shares
Authorized and outstanding 2,500,000
Share premium 1,750,000
Retained earnings (deficit) (3,000,000)
1,250,000
After the quasi-reorganization, the share premium account should have a balance of
 a. 2,750,000 b. 3,250,000 c. 3,750,000 d. 1,750,000

28. The equity of Simplex Company on December 31, 2012 showed the following capital balances:
Preference share capital, 10% cumulative and
nonparticipating, 100 par, 20,000 shares 2,000,000
Ordinary share capital, 100 par, 40,000 shares 4,000,000
Subscribed ordinary share capital, 20,000 shares 2,000,000
Subscription receivable 500,000
Share premium 1,000,000
Retained earnings 2,400,000
Treasury ordinary shares, 10,000 at cost 800,000

The preference dividends are in arrears for 2010, 2011 and 2012. the book value per ordinary share on December
31, 2012 should be
a. 172 b. 200 c. 160 d. 150

29. Lone company reported the following on December 31, 2012:

Bonds payable – 10% 1,000,000

Ordinary share capital, 100 par, 50,000 shares 5,000,000
Net income 1,730,000

The bonds are convertible into ordinary shares in the ratio of 10 ordinary shares for each 1,000 bond. The income
tax rate is 30%. The diluted earnings per share is
a. 30 b. 34.6 c. 28.9 d. 36.0

30. Options and warrants are dilutive if

a. The option shares represent 20% of the ordinary shares actually outstanding.
b . The exercise price is higher than the average market price
c. The exercise price is equal to the average market price
d. The exercise price is lower than the average market price

Accounting for Income Tax

31. Wall company leased office premises to Fox, Inc. for a 4 year term beginning January 2, 2008. Under the terms of the
operating lease, rent for the first year is 216,000 and rent for years 2 through 4 is 337,500 per annum. However as an
inducement to enter the lease, Fox was allowed to use the leased asset rent free for the first three months. Income
tax rate for all years is 32%.
In its Dec. 31, 2008 balance sheet of Wall Company, what amount should be reported as deferred tax liability?
a. None b. 42,120 c. 51,840 d. 93,969

32. Hilton company reported pretax financial income of 6,200,000 for the calendar year 2007. Included in the other
income section of the income statement was 200,000 of interest revenue from government bonds held by the
company. The income statement also included depreciation expense of 500,000 for a machine that cost 3,000,000.
The income tax return reported 600,000 as depreciation on the machine. The enacted tax rate is 35% for 2007 and
future years. What is the current tax expense for the year 2007?
a. 2,170,000 b. 2,100,000 c. 2,065,000 d. 1,890,000

33. In its first year of operations, Gummy company reported the following results for the year ended Dec. 31, 2008:
 Income (per books before income tax) 1,125,000
Taxable income 1,800,000

The disparity between the book income and taxable income is attributable to a timing difference which
will reverse in 2009.
Income tax rate for 2008 and all future years is 32%.

What should Gummy record as a net deferred tax asset or liability for the year ended Dec. 31, 2008?
a. None
b. 216,000 deferred tax liability
c. 216,000 deferred tax assets
d. 675,000 deferred tax liability

Quasi-Reorganization
34. Due to extreme financial difficulties, Armada Company has negotiated a restructuring of its 10% 5,000,000 note
payable due on December 31, 2012. The unpaid interest on the note on such date is 500,000. The creditor has
agreed to reduce the face value to 4,000,000, forgive the unpaid interest, reduce the interest rate to 8% and extend
the due date three years from December 31, 2012. The present value of 1 at 10% for three periods is 0.75 and the
present value of an ordinary annuity of 1 at 10% for three periods is 2.49.
What is the gain on extinguishment for 2012?
a. 1,703,200 b. 1,203,200 c. 2,000,000 d. 540,000

35. Viking company’s income statement for the year ended December 31, 2012 shows pretax income of 1,000,000. The
following items are treated differently on the tax return and in the accounting records:
Tax return Accounting record
Rent income 70,000 120,000
Depreciation expense 280,000 220,000
Premiums on officers’ life insurance 90,000

Viking’s tax rate for 2012 is 30%. What is the amount of income tax payable for 2012?
a. 300,000 b. 327,000 c. 294,000 d. 273,000

Lease
36. White Company leased office premises to Fight Inc. for a five year term beginning January 2, 2011. Under
the terms of the operating lease, rent for the first year is 800,000 and rent for years 2 through 5 is 1,250,000
per annum. However, as an inducement to enter the lease, White granted Fight the first six months of the
lease rent-free.

In its December 31, 2011 income statement, what amount should White report as rental income?
A. 400,000 B. 1,080,000 C. 1,250,000 D. 680,000

37. On Jan 1,2011, Edelbert Company signed an eight year non cancelable lease for a new machine, requiring
P300,000 annual payments at the beginning of each year. The machine has a useful life of 12 years, with no
residual value. Title passes to Edelbert at the lease expiration date, Edelbert uses straight line depreciation
for all of its plant assets. Aggregate lease payments have a present value on Jan 1,2011 of P2,160,000 based
on an appropriate rate of interest. For 2011, Edelbert should record depreciation expense for the leased
machine at
A. 0 B. 180,000 C. 270,000 D. 300,000
38. Banda Leasing Company buys machinery for lease to its clients. On January 1,2010Banda leased a machinery
to UM Corporation for P100,000 per year, for 5 years, to be paid at the beginning of each year starting
January 1,2010. The cost of the machinery is equal to the present value of rentals.

The economic useful life of the machinery is 5 years with very nominal residual value. Title passes to the
lessee at the lease expiration.

Prerev is expecting a 12% return on this transaction. The present value of annuity of 1 at 12% for 5
periods is:
Annuity in advance 4.037
Ordinary annuity 3.605

In its December 31,2010 income statement, interest expense will be reported at

A. 36,444 B. 48,444 C. 28,817 D. 63,556

39. Esterlina Company leased a machine on January 1, 2011 with the following provisions.
Annual rental payable in advance at the beginning of each year,
starting January 1, 2010 1,000,000
Lease term 10 years
Useful life of machine 15 years
Implicit interest rate in the lease 12%
PV of an ordinary annuity of 1 at 12% for 10 periods 5.650
PV of an annuity of 1 in advance at 12% for 10 periods 6.328
PV of 1 at 12% for 10 periods 0.322

Esterlina has the option to purchase the machine on January 1, 2021 by paying P300,000 which is
sufficiently lower than the expected fair value of the machine on January 1, 2011. At the inception of the
lease, it is reasonably certain that the option will be exercised.
At the commencement of the lease, Esterlina shall record a finance lease liability of
A.6,392,400 B. 6,328,000 C. 6,628,000 D. 6,424,600

40. The sales revenue recognized at the commencement of the lease by a manufacturer or dealer lessor is equal
to the
A. Fair value of the leased asset
B. Present value of the minimum lease payments accruing to the lessor
C. Fair value of the leased asset or present value of the minimum lease payments accruing to the lessor,
whichever is lower
D. Fair value of the leased asset or present value of the minimum lease payments accruing to the lessor,
whichever is higher

41. Evelyn Company uses lease as the primary method of selling its products. The company’s main product is a
small helicopter that is very popular among government officials and corporate executives. Evelyn
constructed such helicopter for Water Corporation at a cost of P8, 000,000. Financing the construction was
at a 12% rate. The terms of the lease provided for annual rental of P3, 328,710 to be paid over 5 years
every December 31 each year with the ownership of the helicopter to be transferred to Water at the end of
the lease term. It is estimated that the helicopter will have a residual value of P500,000 after 5 years. Evelyn
incurred initial direct costs of P200,000.
 In finalizing the lease with the lessee, the present value of an ordinary annuity of 1 for 5 periods at 12%
is 3.605.
What is the total financial revenue to be reported by Evelyn Company?
A. 3,203,550 B. 4,643,550 C. 3,328,710 D. 3,800,000

42. Lugi Corporation has incurred losses from operations for many years. At the recommendations of the newly
hired president, the board of directors voted to implement a quasi-reorganization on June 30,2009. Lugi
Corporation’s statement of financial position is shown below:
Assets Liabilities & SHE
Current assets 2,750,000 Total liabilities 3,000,000
PPE 6,750,000 Ordinary shares, par 10 8,000,000
Other assets 1,000,000 Shares premium 1,500,000
Accumulated profits (2,000,000)
Total assets 10,500,000 Total 10,500,000
The shareholders approved the quasi-reorganization effective July 1, 2009, to be accomplished by a
reduction in PPE net of 1,750,000; a reduction in other assets of 750,000 and a reduction in par value by
5 per share.
What is the balance of the SHE after the quasi-reorganization?
A.4,000,000
B.5,000,000
C.8,000,000
D.9,500,000

43. Myla company has granted 100 share appreciation rights to each of its 1,000 employees on January 1, 2009.
The management feels that as of December 31, 2009, 90% of the awards will vest on December 31, 2011.
The fair value of each share appreciation right on December 31, 2009 is P10. What is the fair value of the
liability for the share appreciation rights on December 31, 2009?
a. P1,000,000 b. P900,000 c. P300,000 d. P450,000

44. At Dec. 31, 2011 and 2010, GowCompany had 100,000 ordinary shares and 10,000 cumulative preference
shares of 5%, 100 par value. No dividends were declared on either the preference or ordinary share in 2011
or 2010. Net income for 2011 was 1,000,000. The basic earnings per share amounted to
A. 10.00 B. 9.50 C. 9.00 D. 5.00

45. On January 1 , 2012, Doro company granted an employee an option to purchase 20,000 ordinary shares with
5 par value at 20 per share. The option became exercisable on December 31, 2013, after the employee
completed two years of service. The fair value of the share option is 15. The option was exercised on
January 10, 2014. The share prices are 30 on January 1, 2012, 50 on December 31, 2012, and 60 on January
10, 2014. What is the compensation expense for 2012?
A. 150,000 b. 100,500 c. 300,000 d. 400,000

46. Gross investment in the lease is the

a. aggregate of the minimum lease payments under a finance lease of the lessor and any
unguaranteed residual value accruing to the lessor.
b. the minimum lease payment under a finance lease of the lessor.
c. present value of minimum lease payments under a finance lease of the lessor and any unguaranteed
residual value
d. present value of the minimum lease payments under a finance lease of the lessor
47. What is the treatment of an unguaranteed residual value in determining the cost of sales under a sales type
lease?
a. the unguaranteed residual value is ignored
b. the unguaranteed residual value is added to the cost of the leased asset
c. the unguaranteed residual value is deducted from the cost of the leased asset at absolute amount.
d. the unguaranteed residual value is deducted from the cost of the leased asset at present value.

48. On Dec. 31, 2009, Love company sold equipment to Hate and simultaneously leased it back for 12 years.
Pertinent information on this date is as follows:
Sales price 360,000
Carrying amount 270,000
Estimated remaining economic life 15 years
At Dec. 31, 2009 how much should Love report as deferred revenue from the sale of the equipment?
a. 90,000 b. 84,000 c. 82,500 d. 0

49. On Dec. 31 of the current year, Manota Company purchased a machinery that it had been leasing under a
finance arrangement. The leased asset and lease liability were originally recorded at 2,400,000. At the time
of the purchase, the accumulated depreciation on the leased asset was 960,000 and the remaining balance
of the lease liability was 1,560,000. The leased asset was purchased for 1,728,000 cash. What amount is
debited as cost of the machinery on the date of purchase?
a. 1,608,000 b. 1,728,000 c. 1,440,000 d. 2,400,000

50. Quest Company is threatened with bankruptcy due to its inability to meet interest payments and fund
requirements to retire P5,000,000 note payable with accrued interest payable of P400,000. Quest Company
has entered into an agreement with the creditor to exchange equity instruments for the financial liability.
The terms of the exchange are 300,000 ordinary shares with P5 par value and P10 market value, and 25,000
preference shares with P10 par value and P60 market value. The fair value of the financial liability is
P5,100,000.

How much is the gain from extinguishment of debt arising from the debt restructuring considered as
“equity swap” if the 2nd priority will be used?
A. P600,000 B. P900,000 C. P0 D. P300,000