CONCORD CO. purchased real property for P3,225,000 which included P67,500 for realty tax arrears for prior years. A mortgage of P1,500,000 was assumed by CONCORD CO. on the purchase. Twenty percent of the purchase price should be allocated to the land and the balance to the building.
In order to make the building suitable for the use of CONCORD CO., remodeling costs had to be incurred in the amount of P337,500. This however necessitated the demolition of a portion of the building, which resulted in recovery of salvage material sold for P11,250 cash.
Landscaping and parking lot cost the company a total of P120,000 while repairs in the main hall were P16,875.
1. The cost of the land was:
a.P631,500 b.P645,000 c.P765,000 d.P945,000 2. The cost of the building was:
a.P2,467,500 b.P2,923,125 c.P2,906,250 d.P4,123,125
3. On June 30, 2007, COLT INC. had outstanding 10% P250,000 face amount 15 year bonds maturing on June 30, 2017. Interest is paid on June 30 and December 31, and bond discount and bond issue costs are amortized on these dates. The unamortized balances on June 30, 2007 of bond discount and bond issue costs were P13,750 and P5,000 respectively. COLT INC. reacquired all of these bonds at 96 on June 30, 2007 and retired them.
Ignoring income taxes, compute for the gain or loss on bond retirement.
a. Loss of P3,750 b. Loss of P8,750 c. Gain of P1,250 d. Gain of P10,000 Items 4 to 6 are based on the following:
You are conducting an audit of the MART CORPORATION for the year ended December 31, 2008. The internal control procedures surrounding cash transactions were not adequate. Jane Quipit, the bookkeeper-cashier handles cash receipts, maintains accounting records and prepares the monthly reconciliations of the bank account. She prepared the following reconciliation at the end of the year:
Balance per bank statement P 315,000
Add : Deposit in transit P 157,725
Note collected by bank 13,500 171,225
Balance P 486,225
Less : Outstanding checks 222,075
Balance per general ledger P 264,150
In the process of your audit, you gathered the following:
a. At December 31, 2008, the bank statement and the general ledger showed balances of P315,000 and P264,150 respectively.
b. The cut off bank statement showed a bank charge on January 02, 2009 for P35,250 representing a correction of an erroneous bank credit.
c. Included in the list of outstanding checks were the following:
1. A check payable to a supplier, dated December 29, 2008, in the amount of P13,275, released on January 05, 2009.
2. A check representing advance payment to a supplier in the amount of P33,489, the date of which is January 04, 2009, and released in December 2008.
d. On December 31, 2008, the company received and recorded customer’s postdated check amounting to P45,000.
4. Compute the adjusted deposit in transit as of December 31, 2008.
a.P157,725 b.P112,725 c.P202,725 d.P112,500 5. Compute the adjusted outstanding checks as of December 31, 2008.
a.P222,075 b.P235,350 c.P255,564 d.P175,311
6. Compute the adjusted cash to be presented in the balance sheet as at Dec. 31, 2008.
a.P211,914 b.P225,414 c.P238,914 d.P279,414
7. You are reviewing the notes payable and interest expense accounts of Cole Manufacturing Co. as of December 31, 2007 and noted that the company regularly borrows from the bank in order to finance working capital. The following schedule shows loans with 12% interest rate, with interest payable at maturity. All loans are repaid at its scheduled maturity date and interest expense is 7recorded when the loans are repaid.
DATE OF LOAN AMOUNT MATURITY DATE TERM OF LOAN Nov. 01, 2006 P 500,000 Oct. 31, 2007 1 year Feb. 01, 2007 1,500,000 July 31, 2007 6 months May 01, 2007 800,000 Jan. 31, 2008 9 months
The client recorded interest expense of P150,000 for 2007. Compute for the correct amount of interest expense that should be reported in the 2007 income statement.
a. P204,000 b. P212,000 c. P222,000 d. P214,000 Use the following information for questions 8 to 9.
The balance sheet for the Dixie Corporation on December 31, 2007 includes the following receivables balances:
Notes Receivable P365,000
Less notes discounted 155,000 P210,000
Accounts Receivable P856,000
Less allowance for doubtful accounts 41,500 814,500 Selected ransactions during 2008 included the following:
a. Notes received in settlement of accounts totaled P825,000.
b. Notes receivable discounted as of December 31, 2007, were paid at maturity with the exception of one P30,000 note on which the company had to pay the bank P30,900, which included interest and protest fees. It is expected that recovery will be made on this note early 2009.
c. Customers’ notes of P600,000 were discounted with recourse during the year, proceeds from their transfer being P585,000. Of this total, P480,000 matured during the year without notice of protest.
h. Notes receivable collected during the year totaled P270,000 and interest collected was P24,500.
Determine the adjusted balances of the following accounts as of December 31, 2008:
8. Notes Receivable (including notes receivable discounted).
a. P320,000 b. P365,000 c. P165,000 d. P285,000 9. Notes Receivable Discounted
a. P155,000 b. P600,000 c. P120,000 d. P105,000
10. Voltron Inc. reported inventory of P360,000 at December 31, 2006. The following data were gathered to confirm the reported inventory figure.
Inventory, December 31, 2005 P 320,00
Purchases during 2006 1,410,000
Cash sales during 2006 350,000
Shipment received on December 26, 2006 included
in physical inventory but not recorded as purchases 10,000 Deposit made with suppliers, entered as purchased.
goods were not received during 2006 20,000 Collections on accounts receivable during 2006 1,800,000 Accounts receivable, December 31, 2005 250,000 Accounts receivable, December 31, 2006 300,000 Gross profit percentage on sales 40%
What is the estimated inventory shortage at December 31, 2006?
a.P60,000 b.P50,000 c.P40,000 d.P 5,000
CLINCHER
1. On October 01, 2006, Aguila Company consigned 50 computers at a unit cost of P15,000 to HP Company for sale at P20,000 each and paid P20,000 transportation cost. On December 31, 2006, HP Company reported the sales of 25 computers and returned 10 units. Cost paid by the consignee on the returned units was P4,000. Amount due to consignor was remitted on the same date. Commission rate as agreed upon was 15%.
What amount of inventory on consignment and net income related to the sold units respectively should Aguila Company report on December 31, 2006?
a.P225,000 and P36,000 b.P231,000 and P32,000 c.P235,000 and P40,000 d.P375,000 and P44,000