Chapter 12
1. Under the effective interest method of amortization, the bond issue cost should be aggregated
to the discount on bonds payable and netted against the premium on bonds payable. True
2. According to GAM for NGAs, an entity shall measure subsequently a financial liability at
amortized cost using the effective interest method. True
3. According to GAM for NGAs, an entity shall measure initially a financial liability at amortized cost
using the effective interest method. False
4. For financial liability measured at amortized cost, transaction costs are included in the initial
measurement. True
5. For financial liability measured at amortized cost, transaction costs are expensed immediately.
False
6. Legal obligation may arise from which of the following? Both Contracts and Law
7. A legal obligation to restructure exists if, at the reporting date…The entity has entered into a
binding agreement to sell or transfer an operation.
8. On January 1, 20x1, the BTr issues a 5-year, 6%, ₱2,000,000 bonds for ₱1,900,000. Transaction
costs on the issuance (bond issue costs) amount to ₱59,708. Interest payments are due every
December 31 but the principal is due only at maturity date. The bonds are subsequently
