Answers - Chapter 1 Vol 2rvsed

Loading.... (view fulltext now)

Loading....

Loading....

Loading....

Loading....

Full text

(1)

PROBLEMS 1-1. (Epson Company)

Accounts Payable, 12/31/07, before adjustments P

1,000,000

Unrecorded checks in payment to creditors (350,000)

Unrecorded purchases (150,000 x 98%) 147,000

Goods in transit purchased FOB destination but recorded (65,000)

Accounts Payable, 12/31/07, as adjusted P 732,000

1-2. (Gay Company)

Accounts Payable, 12/31/07, before adjustments P1,500,00 0 Goods purchased FOB shipping point, lost in transit 240,000

Returned to supplier (60,000)

Accounts Payable, 12/31/07, as adjusted P1,680,00

0 1-3. (Megabytes Corporation)

(a) (1) Gross Method Dec.

16 Purchases 66,000

Freight in 1,400

Accounts Payable – Intel Company 66,000

Cash 1,400

1 9

Purchases 72,000

Accounts Payable – Celeron Corporation

72,000

2

6 Accounts Payable- Intel Company 66,000

Purchase Discount (2% x 66,000) 1,320

Cash 64,680

3

1 Accounts Payable – Celeron Corporation 72,000

Purchase Discount (2% x 72,000) 1,440

Cash 70,560

(a) (2) Net Method Dec.

16

Purchases 64,680

Freight in 1,400

Accounts Payable – Intel Company 64,680

Cash 1,400

(2)

9

Accounts Payable – Celeron

Corporation 69,840

2 6

Accounts Payable – Intel Company 64,680

Cash 64,680

3

1 Accounts Payable – Celeron Corporation 69,840

Purchase Discounts Lost 720

Cash 70,560

(b) Dec. 31

Purchase Discounts Lost 720

Accounts Payable – Celeron Corporation

720

1-4. (Blue Bird Company) (a)

10/01/07 Automobiles (1,747,200 ÷ 112%) 1,560,000

Discount on Notes Payable 187,200

Notes Payable 1,747,200

12/31/07 Interest Expense 46,800

Discount on Notes Payable 46,800

1,560,000 x 12% x 3/12

10/01/08 Interest Expense 140,400

Discount on Notes Payable 140,400

187,200 – 46,800

Notes Payable 1,747,200

Cash 1,747,200

(b) At December 31, 2007: Current Liabilities:

Notes Payable, net of P140,400 Discount P1,606,800 1-5. (Matagumpay Corporation)

(a)

06/01/06 Cash 1,080,000

Discount on Notes Payable 120,000

Notes Payable 1,200,00

0

12/31/06 Interest Expense 70,000

Discount on Notes Payable 70,000

120,000 x 7/12

05/31/07 Interest Expense 50,000

Discount on Notes Payable 50,000

120,000 – 70,000

Notes Payable 1,200,000

Cash 1,200,00

(3)

(b) At December 31, 2007: Current Liabilities:

Notes Payable, net of P50,000 Discount P 1,150,000 1-6. (Goliath Company)

Amount to be accrued on 12/31/07 (the best estimate of the obligation) P800,000

No obligation is recognized for the suit filed in September 2007 nor for the suit filed in October. However, disclosure is necessary in the notes to the financial statements for the suit filed in October 2007 by Pasig City government since it is probable the Pasig City government will not be successful.

1-7. (Graphics Corporation)

a. Premium Inventory 225,00

0

Cash / Accounts Payable 225,00

0 b. Premium Expense 100,00 0 Cash (1,000 x 50) 50,000 Premium Inventory (1,000 x 150) 150,00 0 c. Premium Expense 300,00 0 Estimated Liability for Premium Claims

Outstanding 300,00 0 (40% x 1,000,000)/ 100 = 4,000 4,000 – 1,000 = 3,000; 3,000 x (150 – 50) = 300,000 1-8. (Alcatel Company)

(a) Premium Expense (300,000 x 30%)/20 x 28 P126,00

0

Cost of mugs already distributed (4,000 x 28) 112,000

Estimated liability for premium claims outstanding

P 14,000

(b )

Premium Expense for 2007 (see a) P126,00

0 1-9. (Adventure Company) 2005 2006 2007 Sale of product Accts. Receivable/Cash 1,000,000 2,500,000 3,500,000 Sales 1,000,0 00 2,500,000 3,500,000 Accrual of repairs Warranty Expense 60,000 150,000 210,000

(4)

000 00 00 6% x 1M 6% x 2.5M 6% x 3.5M Actual repairs Warranty Liability 8,000 38,000 112,500 Cash/ AP, etc. 8,

000 38,000 112,500

1-10. (Packard Company) (a)

2006 2007

Warranty Liability, January 1 P

0 P187,200 Warranty expense (8% x 4,200,000)/(8% x 6,960,000) 336,000 556,800

Actual repair costs incurred (148,800

)

(180,000 )

Warranty liability, December 31 P187,20

0 P564,000 (b)

On 2006 sales (4,200,000 x 5% x ½) P105,00

0

On 2007 sales [(1/2 of 3%) + 5%] x 6,960,000 452,400

Warranty Liability, December 31, 2007, as analyzed P557,40 0

1-11. (Smart Corporation)

Cash 2,000,00

0 Unearned Revenue from Gift Certificates

Outstanding 2,000,000

Unearned Revenue from Gift Certificates Outstanding 1,280,00 0

Sales 1,280,00

0 Note: The gift certificates estimated to expire will be recognized as revenues at the date of actual expiration.

1-12. (Robinson)

Cash 3,000,00

0 Unearned Revenue from Gift Certificates

Outstanding 3,000,000

Unearned Revenue from Gift Certificates Outstanding 2,750,00 0

Sales 2,750,00

(5)

Unearned Revenue from Gift Certificates Outstanding 150,000

Revenue from Forfeited Gift Certificates 150,000

1-13. (Francesca Royale)

Refundable Deposits, January 1, 2007 P250,00

0

Deposits received during 2007 200,000

Deposits refunded during 2007 (267,000

) Deposits forfeited during 2007 (100,000 – 82,000) (18,000)

Refundable Deposits, December 31, 2007 P165,00

0 1-14. (DOS Company)

(a) 2007 2008

Cash 720,000 864,00

0 Unearned Service Contract Revenue 720,00

0 864,000 Cost of Service Contract 25,000 100,00

0

Cash, Accounts Payable, etc. 25,000 100,00 0 Unearned Service Contract Revenue 72,000 266,40

0

Service Contract Revenue 72,000 266,40 0 2007: 720,000 x 20% x ½=72,000 2008: 720,000 x 20% x ½=72,000 720,000 x 30% x ½=108,000 864,000 x 30% x ½=86,400 72,000+108,000+86,400=266,40 0 (b ) 2007 2008

Unearned Service Contract Revenue,

Jan. 1 --- P648,000

Sale of contracts during the year P720,000 864,000 Service contracts earned during the

year (72,000) (266,400)

Unearned Service Contract Revenue,

Dec. 31 P648,000 P1,245,600

Unearned Service Contract Revenue at December 31, 2008 may also be computed as follows: 720,000 x 65% 468,000 864,000 x 20% x ½ 86,400 864,000 x 80% 691,200 Total 1,245,600 (c) 2007 2008

(6)

Revenue from service contracts P72,000 P266,400

Cost of service contracts 25,000 100,000

Profit from service contracts P47,000 P166,400

1-15. (Pioneer Publication) (a)

Subscriptions sold in 2005 and 2006

(5,000,000 + 4,500,000) P9,500,000

Expired subscriptions in

2005 P1,000,000

2006 (2,800,000 + 1,200,000) 4,000,000 5,000,000

Unearned subscriptions, Jan. 1,

2007 P4,500,000

(b )

2007

Cash 5,500,000

Unearned Subscription Revenue 5,500,000

Unearned Subscription Revenue 5,000,000

Subscription Revenue 5,000,000 1,200,000 + 2,000,000 + 1,800,000 (b ) 2008 Cash 7,000,000

Unearned Subscription Revenue 7,000,000

Unearned Subscription Revenue 5,700,000

Subscription Revenue 5,700,000

1,300,000 + 2,400,000 + 2,000,000

(c) 2007 2008

Unearned Subscription Revenue, January 1 P4,500,00 0

P5,000,00 0 Subscription received during the year 5,500,000 7,000,000

Subscription revenue for the year (5,000,00

0) (5,700,000) Unearned Subscription Revenue, December

31 P5,000,000 P6,300,000

1-16. (Ace Co.)

Property Taxes Payable

Property tax expense July 1 to Dec. 31 (72,000 x

6/12) P 36,000

Payment in 2007 (Nov. payment = 72,000/3) (24,000) P 12,000 Income Tax Payable

Income tax expense (1,629,000 x 35%) P 570,150 2007 payments for 2006 income tax (480,000 –

90,000) (390,000) 180,150

VAT Payable

Output VAT (12% x 9,000,000) P 1,080,000

2007 payments of VAT (725,000) 355,000

(7)

1-17. (Extreme Company) a. B = 8,000,000 x 8% = 640,000 b. B = 8% (8000,000 – B ) B = 640,000 - .08B B = 640,000/1.08 = 592,593 c. B = .08 (8,000,000 – T ) T = .35 (8,000,000 – B ) B = .08 {8,000,000 - .35 (8,000,000 – B ) } B = .08 {8,000,000 – 2,800,000 + .35B} B = 416,000 + .028B B = 416,000/0.972 = 427,984 d. B = .08 {8,000,000 – B – T } T = .35 (8,000,000 – B) B = .08{8,000,000 – B - .35 (8,000,000 – B)} B = .08 {8,000,000 – B – 2,800,000 + .35B} B = 416,000 - .052B B = 416,000/1.052 = 395,437 1-18. (San Roque Corporation)

a.

Bonus to sales manager = .08 x 3,000,000 = 240,000

Bonus to each sales agent = .06 x 3,000,000 = 180,000

b.

Total Bonus = .36 {3,000,000 – B – T ) T = .35 {3,000,000 – B } B = .36 {3,000,000 – B - .35 (3,000,000 – B)} B = .36 {3,000,000 – B – 1,050,000 + .35B} B = 702,000 - .234B B = 702,000/1.234 = 568,882 (total) B (Each): 568,882 / 3 = 189,627

c.

B = .32 {3,000,000 – B } B = 960,000 - .32B B = 960,000/1.32 = 727,273 (total) B (Sales Manager): 727,273 x 12/32 = 272,727

B (Each Sales Agent): 727,273 x 10/32 = 227,273 1-19. (Globe, Inc.) B = .06 {9,000,000 – B – T } T = .35 (9,000,000 – B) B = .06 (9,000,000 – B - .35 (9,000,000 – B ) } B = .06 { 9,000,000 – B – 3,150,000 + .35B } B = 351,000 - .039B B = 351,000 / 1.039 = 337,825 T = .35 (9,000,000 – 337,825) T = 3,031,761 1-20. (Desktop Company)

a. Vacation earned by employees in 2007 P 200,000 Adjustment in rate for unused vacation pay in previous periods

(8)

b. Unused vacation pay in previous periods, adjusted to

current rate (250,000 – 150,000) x 110% P110,000 Vacation pay earned by employees in 2007 unused 200,000 Liability for vacation pay, 12/31/07 P310,000

1-21. (Jim Corporation)

The full amount of P2,000,000 is classified as current liability because on December 31, 2007 (the balance sheet date), the enterprise has no unconditional right to defer the settlement of the obligation for a period of at least 12 months.

1-22. Current Non-current

Case 1 . James, Inc.

3,600,000 x 80% P2,880,000 3,000,000 – 2,880,000 P 120,000

Case 2. James, Inc. 2,000,000 0 Current Non-current Case 3. Sylvester Corporation

Situation A -0- 6,000,000 Situation B 6,000,000 0 Situation C -0- 6,000,000 Situation D -0- 6,000,000 1-23 (Trey Company) Current Liabilities

14% Notes Payable, refinanced on March 10, 2008 P2,500,000 Current portion of 16% notes payable 800,000

Total current liabilities P3,300,000

1-24. (Internet Company)

Current Liabilities:

Accounts Payable P 270,000 Mortgage Notes Payable 1,300,000 Bank Notes Payable due currently 100,000

Interest Payable 7,500

Value Added Tax Payable 288,000 Income Tax Payable 315,000 Withholding Tax Payable 120,000 Total Current Liabilities P2,400,500 VAT: 2,688,000 / 1.12 = 2,400,000; 2,400,000 x 12% = 288,000

The damages claimed by employees cannot be recognized since the amount is not reasonably estimable.

(9)

Figure

Updating...

References

Updating...

Related subjects :