NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

PRACTICAL FINANCIAL ACCOUNTING

Problem 1

Darwin Company provided the following information at year-end:

Cash 1,500,000
Accounts receivable 1,200,000
Inventory, including inventory expected in the ordinary
Course of operation to be sold beyond 12 months
Amounting to P700,000 1,000,000
Financial asset held for trading 300,000
Equity investment at fair value through other
Comprehensive income 800,000
Equipment held for sale 2,000,000
Deferred tax asset 150,000

What amount should be reported as total current assets at year-

1,500,000
end?
1,200,000
1,000,000
ANSWER:
300,000
Cash
2,000,000
Accounts Receivable
0
Inventory
Financial asset held for trading

Equipment held for sale

TOTAL CURRENT ASSETS

Problem 2

Petite company reported the following current assets at year-end:

Cash 5,000,000
Account receivable 2,000,000
Inventory, including goods received on
consignment P200,000 800,000
Bond investment at fair value through other
Comprehensive income 1,000,000
Prepaid expenses, including a deposit of P50,000 made
On inventory to be delivered in 18 months 150,000
Total current assets 8,950,000

Cash in general checking account 3,500,000

Cash fund to retire 5-year bonds payable 1,000,000
Cash held to pay value added taxes 500,000
Total cash 5,000,000

What total amount of current assets should be 4,000,000 reported at year-end?

2,000,000
ANSWER: 600,000
Cash 300,000
Accounts Receivable 100,000
Inventory
0
Financial asset held for trading

Prepaid Expense
TOTAL CURRENT ASSETS

Problem 3
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Rice Company was incorporated on January 1, 2019 with P5,000,000 from the issuance of share
capital and borrowed funds of P1,500,000. During the first year, net income was P2,500,000.

On December 15, the entity paid a P500,000 cash dividend. On December 31, 2019, the
liabilities had increased to P1,800,000

On December 31, 2019, what amount should be reported as total assets?

ANSWER:
Accounting Equation (Assets=Liabilities + Equity) 1,800,000
5,000,000
Liabilities 2,000,000
Share Capital
0
Retained Earnings (2,500,000-500,000)
TOTAL LIABILITIES & SHAREHOLDER’S EQUITY

Therefore: Total Assets = 8,800,000

Problem 4

Mirr Company was incorporated on January 1, 2019 with proceeds from the issuance of
P7,500,000 in share capital and borrowed funds of P1,100,000.

During the first year, revenue from sales and consulting amounted to P8,200,000 , and operating
costs and expenses totaled P6,400,000.

On December 15, 2019, the entity declared a P300,000 dividend, payable to shareholders on
January 15, 2020. The liabilities increased to P2,000,000 by December 31, 2019.

On December 31, 2019, what amount should be reported as total assets?

ANSWER:
Accounting Equation (Assets=Liabilities + Equity) 2,000,000
7,500,000
Liabilities 1,500,000
Share Capital
0
Retained Earnings (*1,800,000-300,000)
TOTAL LIABILITIES & SHAREHOLDER’S EQUITY

Therefore: Total Assets = 11,000,000

(*) Sales Revenue 8,200,000

Operating Expense (6,400,000)

Net Income 1,800,000

Problem 5

Arabian Company reported the following current assets at year-end:

Cash 4,500,000
Account receivable 7,900,000
Notes receivable, net of discounted note P500,000 2,000,000
Inventory 4,000,000
Deferred charges 1,000,000
19,400,000
Accounts receivable comprised the following:

Trade accounts receivable 5,000,000

Allowance for doubtful accounts ( 500,000)
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Claim against shipper for goods lost in transit 400,000

Selling prices of Arabian company’s unsold goods sent
to Tar Company on consignment at 150% of cost
and excluded from Arabian’s ending inventory 3,000,000

7,900,000

What amount should be reported as total 4,500,000 current assets at year-

end? 5,000,000
-500,000
ANSWER: 6,000,000
Cash 0
Accounts Receivable 2,000,000
Allowance for Doubtful Accounts 0
Inventories
Claims Receivable
Notes Receivable
TOTAL CURRENT ASSETS

Problem 6

East Company reported the following current assets at year end:

Cash 3,500,000
Account receivable 3,000,000
Inventory 2,800,000
Prepaid insurance 200,000
Total current assets 9,500,000

The account receivable consisted of the following:

Customers’ account 1,400,000

Employees’ account collectable currently 200,000
Advances to subsidiary 500,000
Allowance for doubtful accounts ( 100,000)
Subscription receivable, not collectible currently 1,000,000
Total accounts receivable 3,000,000

What total amount should be reported as 3,500,000 current assets at year-

end? 1,400,000
-100,000
ANSWER: 200,000
Cash 0
Accounts Receivable 200,000
Allowance for Doubtful Accounts 0
Employees Account
Inventories
Prepaid Insurance
TOTAL CURRENT ASSETS

Problem 7
Ivan Company showed the following current assets at year-end:

Cash 3,200,000
Accounts receivable 2,500,000
Inventory 2,000,000
Total current assets 7,700,000

Cash on hand, including customer postdated check

P100,000 and employee IOU P50,000 500,000
Cash in bank per bank statement (outstanding check
At year-end P200,000) 2,700,000
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Total cash 3,200,000

What total amount should be reported as current assets?

2,850,000
ANSWER: 2,500,000
Cash 0
Accounts Receivable
0
Inventories
TOTAL CURRENT ASSETS

Problem 8

Gar Company reported the following liability account balances on December 31, 2019:

Accounts payable 1,900,000

Bonds payable, due December 31, 2020 3,400,000
Discount on bonds payable 200,000
Deferred tax liability 400,000
Dividends payable 500,000
Income tax payable 900,000
Note payable, due January 31,2021 600,000

On December 31, 2019, what total amount should be reported as

1,900,000
current liabilities? 500,000
ANSWER: 3,400,000
Accounts Payable -200,000
Dividends Payable 900,000
Bonds Payable
0
Discounts on Bonds Payable
Income Tax Payable
TOTAL CURRENT LIABILITIES

Problem 9

Brite Company provided the following information on December 31,2019:

Accounts payable 550,000

Note payable, 8% unsecured, due July 1, 2020 4,000,000
Accrued expenses 350,000
Contingency liability 450,000
Deferred tax liability 250,000
Bonds payable, 7%, due March 31, 2020 5,000,000
Premium on bonds payable 500,000

The contingent liability is an accrual for possible loss on a P1,000,000

Lawsuit filed against the entity.

The legal counsel expects the suit to be settled in 2020 and has estimated
that the entity will be liable for damages in the range of
P450,000 to P750,000.

The deferred tax liability is not related to an asset for financial reporting
and is expected to reverse in 2020.

What total amount should be reported as current liabilities on

550,000
December 31, 2019? 350,000
4,000,000
ANSWER: 5,000,000
Accounts Payable 500,000
Accrued Expenses
0
Notes Payable
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Bonds Payable
Premium Bonds Payable
TOTAL CURRENT LIABILITIES

Problem 10

Burma Company disclosed the following information:

Accounts payable, after deducting debit balances in

suppliers’ accounts amounting to P100,000 4,000,000
Accrued expenses 1,500,000
Credit balances of customers’ accounts 500,000
Share dividend payable 1,000,000
Claims for increase in wages and allowance by employees
of the entity, covered in a pending lawsuit 400,000
Estimated expenses in redeeming prize coupons 600,000

What amount should be reported as total 4,100,000 current liabilities?

ANSWER: 1,500,000
Accounts Payable 500,000
Accrued Expenses 600,000
Credit Balances of Customers Account 0
Estimated Expenses in Redeeming Prizes Coupons
TOTAL CURRENT LIABILITIES

Problem 11

Mazda Company reported the following liability balances on

December 31, 2019:

10% note payable issued on October 1, 2018 maturing

October 1, 2020 2,000,000
12% note payable issued on March 1, 2018, maturing on March 1, 2020. 4,000,000

The 2019 financial statements were issued on March 31, 2020.

Under the loan agreement, the entity has the discretion to refinance
the 10% note payable for a least twelve months after December 31, 2019.

On March 1, 2020, the entire P4,000,000 balance of the 12% note

payable was refinances through issuance of a long-term obligation
payable lump sum.

What amount of the notes payable should be classified as current on

December 31, 2019?

ANSWER: 4,000,000

Problem 12

Willem Company reported the following liabilities on December 31, 2019:

Account payable 2,000,000

Short-term borrowings 1,500,000
Bonds payable due December 31, 2021 3,000,000
Premium on bonds payable 500,000
Mortgage payable, current portion P500,000 3,500,000
Bank loan, due June 30, 2020 1,000,000
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

The P1,000,000 bank loan was portion was refinanced with a 5-year
loan on December 31, 2019. The financed were issued March 1, 2020.
2,000,000
What total amount should be reported as 1,500,000 current liabilities on
December 31, 2019? 3,000,000
ANSWER: 500,000
Accounts Payable 500,000
Short Term Borrowings 1,000,000
Bonds Payable 0
Premium Bonds
Mortgage Payable Current Portion
Bank Loan
TOTAL CURRENT LIABILITIES

Problem 13

Ronna Company provided the following information on December 31,2019:

Accounts payable, net of creditors’ debit balances P200, 000 2,000,000

Accrued expenses 800,000
Bonds payable due December 31, 2021 4,500,000
Premium on bonds payable 500,000
Deferred tax liability 500,000
Income tax payable 1,100,000
Cash dividend payable 600,000
Share dividend payable 400,000
Note payable- 6%, due March 1, 2020 1,500,000
Note payable-8%, due October 1, 2020 1,000,000

The financial statements for 2019 were issued on March 31, 2020.

On December 31, 2019, the 6% note payable was refinanced on a

long-term basis.

Under the loan agreement, the entity has the discretion to refinance the
8% note payable for at least twelve months after December 31, 2019
2,000,000
1) What amount should be reported as total current liabilities?
800,000
ANSWER:
1,100,000
Accounts Payable
600,000
Accrued Expenses
1,500,000
Income Tax Payable
0
Cash Dividend Payable
Notes Payable 6%
TOTAL CURRENT LIABILITIES

2) What amount should be reported as total 4,500,000 noncurrent liabilities?

ANSWER: 500,000
Bonds Payable 500,000
Premium Bonds 1,000,000
Deferred Tax Liability 0
Notes Payable 6%
TOTAL NONCURRENT LIABILITIES

Problem 14

Manchester Company provided the following information on December 31, 2019:

Employee income taxes withheld 900,000

NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Cash balance at First State Bank 2,500,000

Cash overdraft at Harbor Bank 1,300,000
Accounts receivable with credit balance 750,000
Estimated expenses of meeting warranties 500,000
Estimated damages as a result of unsatisfactory performance
on a contract 1,500,000
Accounts payable 3,000,000
Deferred serial bonds, issued at par and bearing interest at 12%,
payable in semiannual installments of P500,000 due April 1
and October 1, of each year, the last bond to be paid on
October 1, 2025. Interest is also paid semiannually. 5,000,000

What amount should be reported as total 900,000 current liabilities on

December 31, 2019? 1,300,000
750,000
ANSWER: 500,000
Employees Income Taxes Withheld 1,500,000
Cash Overdraft 150,000
Accounts Receivable with Credit Bal 0
Estimated Warranties Liability
Estimated Damages Payable
Accrued Interest

TOTAL CURRENT LIABILITIES

Problem 15

Charice Company provided the following information on December 31, 2019:

 Accounts payable amounted to P500,000 and accrued expenses totaled

P300,000 on December 31, 2019.
 On December 15, 2019, the entity declared a cash dividend of P7 per
share on 100,000 outstanding shares, payable on January 15, 2020.
 On July 1, 2019, the entity issued P5,000,000, 8% bonds for P4,400,000
to yield 10%. The bonds mature on June 30, 2024, and pay interest
annually every June 30.
 The pretax finance income was P8,500,000 and taxable income was
P6,000,000. The difference is due to P1,000,000 permanent difference
and P 1,500,000 of taxable temporary difference to reverse in 2020.
The income tax rate is 30%. The entity made estimated income tax
payments during at the year of P1,000,000.
500,000
What amount should be reported as total current liabilities on
300,000
December 31, 2019? 700,000
ANSWER: 200,000
Accounts Payable 800,000
Accrued Expense
0
Dividend Payable
Accrued Interest
Income Tax Payable
TOTAL CURRENT LIABILITIES

Problem 16

United Company provided the following current assets and shareholders’ equity at year-end:

Cash 600,000
Financial assets at fair value through profit or loss, including
Cost of P300,000 of United Company shares 1,000,000
Accounts receivable 3,500,000
Inventory 1,500,000
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Total current assets 6,600,000

Share capital 5,000,000

Share premium 2,000,000
Retained earning 500,000
Total shareholders’ equity 7,500,000

What amount should be reported as total shareholders’ equity?

5,000,000
ANSWER: 2,000,000
Share Capital 500,000
Share Premium -300,000
Retained Earnings 0
Treasury Shares at Cost
TOTAL SHARE HOLDERS EQUITY
Problem 17

Kalinga Company provided the following information at year-end:

Share capital 15,000,000

Share premium 5,000,000
Treasury shares, at cost 2,000,000
Actuarial loss on defined benefit plan 1,000,000
Retained earnings unappropriated 6,000,000
Retained earnings appropriated 3,000,000
Revaluation surplus 4,000,000
Cumulative translation adjustment- credit 1,500,000

What amount should be reported as total shareholders’ equity?

ANSWER:
Share capital 15,000,000
Share premium 5,000,000
Retained earnings unappropriated 6,000,000
Retained earnings appropriated 3,000,000
Revaluation surplus 4,000,000
Cumulative translation adjustment- credit 1,500,000
Treasury shares, at cost -2,000,000
Actuarial loss on defined benefit plan -1,000,000
TOTAL SHARE HOLDERS EQUITY 0

Problem 18

Silver Company provided the following at year-end:

Share premium 1,000,000

Accounts payable 1,100,000
Preference share capital, at per 2,000,000
Ordinary share capital, at per 3,000,000
Sales 10,000,000
Total expenses 7,800,000
Treasury shares at cost- ordinary 500,000
Dividends 700,000
Retained earnings- beginning 1,000,000

What amount should be reported as total shareholders’ equity at year-end?

ANSWER:

Sales 10,000,000
Total Expenses -7,800,000
Net Income 0
Retained Earnings-Beginning 1,000,000
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Dividends -700,000
Retained Earnings-Ending 2,500,000

Share premium 1,000,000

Preference Share Capital, at Par 2,000,000
Ordinary Share Capital, at Par 3,000,000
Retained Earnings 2,500,000
Treasury shares, at cost -0
TOTAL SHARE HOLDERS EQUITY 0

Problem 19

Mont Company reported net assets totaling P8,750,000 at year-end which included the
following:

Treasury shares of Mont Company at cost 250,000

Idle machinery 100,000
Trademark 150,000
Allowance for inventory write down 200,000

What amount should be reported as net assets at year-end?

ANSWER: 8,750,000
Net Asset -0
Treasury Shares 0
TOTAL NET ASSETS TO BE REPORTED

Problem 20

Puzzle Company provided the following information at year-end:

Cash and cash equivalents 500,000

Accounts receivable, net of allowance P100,000 2,000,000
Inventory 6,000,000
Property, plant, and equipment at carrying amount 12,000,000
Accounts payable 4,400,000
Wages payable 1,500,000
Share capital 6,000,000
Share premium 4,000,000

The only asset not listed is short-term investment.

The only liabilities not listed are a P3,000,000 note payable due in
two years and related accrued interest of P100,000 due in four months.

The current ratio at year-end is 1.5 to 1.00.

1. What is the amount of current liabilities?

4,400,000
ANSWER:
1,500,000
Accounts Payable
100,000
Wage Payable
0
Accrued Interest
TOTAL CURRENT LIABILITIES

2. What is the amount of short-term investment?

ANSWER:
Current liabilities 6,000,000
Multiplied by current ratio x 1.50
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Total current assets 9,000,000

Cash and cash equivalents (500,000)
Accounts receivable (2,000,000)
Inventory (6,000,000)

Short-term investment 500,000

3. What is the balance of retained earnings at year-end?

ANSWER:

Current assets 9,000,000

Property, plant and equipment 12,000,000
Total assets 21,000,000
Current liabilities (6,000,000)
Notes payable – current (3,000,000)
Share capital (6,000,000)
Share premium (4,000,000)
Retained earnings 2,000,000

Problem 21

Kenya Company provided the following information on December 31, 2019:

Cash in bank, net of bank overdraft P500,000 5,000,000

Petty cash, unreplenished petty cash expenses P10,000 50,000
Notes receivable 4,000,000
Accounts receivable, net of customer’s with
credit balances P1, 500,000 6,000,000
Inventory 3,000,000
Bond sinking fund 3,000,000
Total current assets 21,050,000

Accounts payable, net of suppliers’ accounts with debit

balances of P1,000,000 7,000,000
Notes payable 4,000,000
Bond payable due June 30, 2020 3,000,000
Accrued expenses 2,000,000

Total current liabilities 5,500,000

16,000,000 40,000
1. What amount should be reported as total 4,000,000 current assets on
December 31, 2019? 7,500,000
ANSWER: 3,000,000
Cash in Bank 3,000,000
Petty Cash 1,000,000
Notes Receivable 0
Accounts Receivable
Inventory
Bonds Sinking Fund
Accounts Payable Debit Balance
TOTAL CURRENT ASSETS

8,000,000
2. What amount should be reported as total 4,000,000 current liabilities on
December 31, 2019? 2,000,000
ANSWER: 3,000,000
Accounts Payable 1,500,000
Notes Payable 500,000
Accrued Expenses 0
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Bond Payable
Credit Balances in Accounts Receivable
Bank Overdraft
TOTAL CURRENT LIABILITIES

Problem 22

Gold Company provided the following trial balance on December 31, 2019:

Cash overdraft 100,000

Accounts receivable 350,000
Inventory 600,000
Prepaid expenses 100,000
Land held for sale 1,000,000
Property, plant and equipment 950,000
Accounts payable 200,000
Accrued expenses 150,000
Ordinary share capital 1,500,000
Share premium 250,000
Retained earnings ________ 800,000
3,000,000 3,000,000

Checks amounting to P300,000 were written to vendors and recorded on December 29, 2019
resulting in a cash overdraft of P100,000. The checks were mailed on January 15, 2020.
200,000
1. What total amount should be reported as current assets?
350,000
ANSWER: 600,000
Cash 100,000
Accounts Receivable 1,000,000
Inventory
0
Prepaid Expenses
Land held for Sale
TOTAL CURRENT ASSETS

2. What total amount should be reported as current liabilities?

ANSWER: 200,000
Accounts Payable 150,000
Accrued Expenses 0
TOTAL CURRENT LIABILITIES

3. What is the total shareholders’ equity?

ANSWER:
Ordinary share capital 1,500,000
Share premium 250,000
Retained earnings 800,000
TOTAL SHAREHOLDER’S EQUITY 2,550,000

Problem 23

Trey Company provided the following trial balance at year-end which had been adjusted except
for income tax expense:

Cash 1,250,000
Account receivable 1,650,000
Prepaid taxes 500,000
Accounts payable 200,000
Share capital 1,000,000
Share premium 500,000
Retained earnings-beginning
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Foreign currency translation adjustment 1,500,000

Revenue 800,000
Expenses 4,000,000
3,000,000

7,200,000 7,200,000

During the current year, estimated tax payments of P500,000 were charged to prepaid taxes.
The entity has not yet recorded income tax expense.

There were no differences between financial and taxable income. The tax rate is 30%

Included in accounts receivable is P500,000 due from a customer. Special terms granted
to this customer require payment in equal semiannual installments of P125,000 every
April 1 and October 1.

1. What amount should be reported as total current assets at

year-end? 1,250,000
ANSWER: 1,400,000
Cash 0
Accounts Receivable
TOTAL CURRENT ASSETS

2. What amount should be reported as retained earnings at year-end?

ANSWER:
Revenue 4,000,000
Expenses -3,000,000
Net Income before Tax 0
Tax Base * Tax Rate(1,000,000*30%) -300,000
Net Income after Tax 0
Retained Earnings-Beginning 1,500,000
Total Retained Earnings 2,200,000

Problem 24

Mint Company provided the following account balance at year-end which had been adjusted
excepted for income tax expense:

Cash 600,000
Accounts receivable 3,500,000
Cost in excess of billings on long-term contracts 1,600,000
Billings in excess of cost on long-term contracts 700,000
Prepaid taxes 450,000
Property, plant, and equipment, at carrying amount 1,510,000
Note payable – noncurrent 1,620,000
Share capital 750,000
Share premium 2,030,000
Retained earnings unappropriated 900,000
Retained earnings restricted for note payable 160,000
Earnings from long-term contracts 6,680,000
Costs and expenses 5,180,000

All receivable on long-term contracts are considered to be collectible within 12 Months.

During the year, estimated tax payments of P450,000 were charged to prepaid taxes.
The entity has not recorded income tax expense. The tax rate is 30%.
At year-end, what amount should be reported as

1. Total retained earnings?

ANSWER:
Earnings from long-term contracts 6,680,000
Cost & Expenses -5,180,000
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Net Income before Tax 0

Tax Base * Tax Rate(1,500,000*30%) -450,000
Net Income after Tax 0
Retained Earnings unappropriated 900,000
Retained Earnings appropriated 160,000
Total Retained Earnings 2110000

2. Total noncurrent liabilities?

ANSWER:
Note payable Noncurrent = 1,620,000

3. Total current assets?

600,000
ANSWER:
3,500,000
Cash
1,600,000
Accounts Receivable
0
Cost in excess of billings on long term contracts
TOTAL CURRENT ASSETS
4. Total shareholders’ equity?
ANSWER:
Share capital 750,000

Share premium 2,030,000

Retained earnings 2,110,000
TOTAL SHAREHOLDER’S EQUITY 4,890,000

Problem 25

Shaw Company provided the following trial balance on December 31, 2019 which
had been adjusted except for income tax expense:

Cash 600,000
Accounts receivable 2,800,000
Inventory 2,000,000
Property, plant and equipment (net) 10,000,000
Accounts payable and accrued liabilities 1,800,000
Income tax payable 1,500,000
Deferred tax liability 700,000
Share capital 2,500,000
Share premium 3,000,000
Retained earnings, January 1 3,500,000
Net sales and other revenue 15,000,000
Costs and expenses 10,000,000
Income tax expense 2,000,000 ________
28,000,000 28,000,000

The accounts receivable included P1,000,000 due from a customer and payable in
quarterly installments of P125,000. The last payment is due December 30, 2021.

During the year, estimated tax payment of P600,000 was charged to income
tax expense. The income tax rate is 30%

On December 31, 2019, what amount should be reported as

1. Total current assets?

600,000
ANSWER:
2,300,000
Cash
2,000,000
0
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Accounts Receivable (2,800,000-500,000)

Inventory
TOTAL CURRENT ASSETS

2. Total current liabilities?

ANSWER: 1,800,000
Accounts Payable 900,000
Income Tax Payable (1,500,000-600,000) 0
TOTAL CURRENT LIABILITIES
3. Retained earnings?
ANSWER:
Net Sales and Other Revenues 0
Less: Cost and Expenses -10,000,000
Net Income before Tax 0
Tax Base * Tax Rate(5,000,000*30%) -1,500,000
Net Income after Tax 0
Retained Earnings 3,500,000
Total Retained Earnings 7,02110000

Problem 26

Cara Company provided the following information for the current year:

Current assets
Property, plant, and equipment
Current liabilities
Noncurrent liabilities

Working capital of P600,000 remained unchanged.

Net income for the current year was P400,000.

No dividends were declared during the year and there were no other changes in shareholders’
equity.

1. What is the amount of current assets on December 31?

2. What is the shareholders’ equity on December 31?
3. What is the amount of noncurrent liabilities on December 31?

Problem 27

Dean Company acquired 100% of Morey Company in the prior year. During the current year, the
individual entities included in their financial statements the following:
Dean Morey
Key officers’ salaries 750,000 500,000
Officers’ expenses 200,000 100,000
Loans to officers 1,250,000 500,000
Intercompany sales 1,500,000

What total amount should be reported as related party disclosures in the notes to Dean
Company’s consolidated financial statements for the current year?
ANSWERS
Loans to Officers
Dean 1,250,000
Morey 500,000
Key Officer’s Salaries
Dean 750,000
Morey 500,000
TOTAL 3,000,000
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Problem 28

During the current year, Jane Company engaged in the following transactions:

Key management personnel compensation 2,000,000

Sales to affiliated entities 3,000,000

What total amount should be included as related party disclosures in

Jane Company’s separate financial statements for the current year?
ANSWERS
Key management personnel compensation 2,000,000
Sales to affiliated entities 3,000,000
5,000,000

Problem 29

The audit of Anne Company for the year ended December 31, 2019 was
completed on March 1, 2020

The financial statements were signed by the managing director on March 15, 2020
and approved by the shareholders on March 31, 2020.

* On January 15, 2020, a customer owing P900,000 to Anne Company filed

for bankruptcy.
The financial statements included an allowance for doubtful accounts pertaining
to this customer of P100,000
* Anne Company’s issued share capital comprised 100,000 ordinary shares
with P100 par value.
The entity issued additional 25,000 shares on March 1, 2020 at par value.
* Equipment with carrying amount of P525,000 was destroyed by fire on
December 15, 2019.
Anne Company had booked a receivable of P400,000 from the insurance
entity on December 31, 2019.
After the insurance entity completed an investigation on February 1, 2020, it was discovered
that the fire took place due to negligence of the machine operator. As a result, the
insurer’s liability was zero on this claim.

What total amount should be reported as “adjusting events” on December 31, 2019?
ANSWERS:
Bad Debts Expense (900,000-100,000) 800,000
Loss in Claim Receivable 400,000

Total Adjusting Events 1,200,000

Problem 30

Brock Company reported operating expenses in two categories, namely distribution and general
and administrative.

The adjustment trail balance at year-end included the following expenses and loss accounts for
current year:

Accounting and legal fees 1,200,000

Advertising 1,500,000
Freight out 800,000
Interest 700,000
Loss on sales of long-term investment 300,000
Officers’ salaries 2,250,000
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Rent for office space 2,200,000

Sales salaries and commissions 1,400,000

One-half of the rented premises is occupied by the sales department.

What amount should be reported as total distribution costs?

ANSWERS:
Advertising 1,500,000
Freight Out 800,000
Sales Salaries and Commissions 1,400,000
Rent for Office Space(2,200,000*1/2) 1,100,000
TOTAL DISTRIBUTION COST 0

Problem 31

Lee Company reported the following data for the current year:

Legal and audit fees 1,700,000

Rent for office space 2,400,000
Interest on inventory loan 2,100,000
Loss on abandoned data processing equipment 350,000
Freight in 1,750,000
Freight out 1,600,000
Officers’ salaries 1,500,000
Insurance 850,000
Sales representative salaries 2,150,000
Research and development expense 1,000,000

The office space is used equally by the sales and accounting departments.

What amount should be classified as general and administrative expenses?

ANSWERS:
Legal and Audit Fees 1,700,000
Rent for Office Space(2,200,000*1/2) 1,200,000
Office Salaries 1,500,000
Insurance 850,000
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES 06

Problem 32

Vigor Company provided the following information for the current year:

Net accounts receivable at January 1 900,000

Net accounts receivable at December 31 1,000,000
Account receivable turnover 5 to 1
Inventory at January 1 1,100,000
Inventory at December 31 1,200,000
Inventory turnover 4 to 1

What is the gross income for the current year?

ANSWERS:
Average Receivables 900,000+1,000,000
2
950,000

Average Inventory 1,100,000+1,200,000

2
1,150,000

Net Sales (950,000*5) 4,750,000

NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Cost of Sales (1,150,000*4) (4,600,000)

Gross Income 150,000

Problem 33

Hiligaynon Company provided the following information for the current year:

Beginning inventory 400,000

Freight 300,000
Purchase returns 900,000
Ending inventory 500,000
Selling expenses 1,250,000
Sales discount 250,000

The cost of goods sold is six times the selling expenses.

What is the amount of gross purchases?

Answers:
Beginning Inventory 400,000
Add: Gross Purchases (SQUEEZE) 8,200,000
Freight In 300,000
Less: Purchase Return (900,000)
Goods Available for Sale 8,000,000
Less: Ending Inventory (500,000)
Cost of Goods Sold 7,500,000

Problem 34

Thorpe Company reported net income of P7,500,000 for the current year which included the
following amounts:

Unrealized loss on foreign currency translation ( 500,000)

Gain on early retirement of bonds payable 2,200,000
Adjustment of profit of prior for error in
Depreciation, net of tax effect ( 750,000)
Loss from fire (1,400,000)

What amount should be reported as adjustment net income?

ANSWER:
Net Income 7,500,000

Add: Unrealized Loss of FCT 500,000

Adjustment of profit of prior for error in 750,000 1,250,000
Depreciation, net of tax effect

Adjusted Net Income 8,750,000

Problem 36

Pearl Company reported income before tax of P5,000,000 for the current year
which included the following amounts:

Equity in earnings of Cinn Company – 40% interest 1,600,000

Dividend received from Cinn Company 400,000
Adjustment of profit of prior year for arithmetical
error in depreciation ( 500,000)
Gain on sale of equity investment at FVOCI 1,000,000

What amount should be reported as income before tax?

ANSWER:
Net Income 5,000,000
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Add: Gain on Sale of Equity Investment 1,000,000

@FVOCI
Adjustment of profit of prior for error in 500,000 1,500,000
Depreciation, net of tax effect
TOTAL 3,500,000
Less: Dividend Received from Cinn 400,000
Company
Income Before Tax 3,100,000

Problem 37

Remy company had the following events and transactions during 2019:

* Depreciation for 2018 was discovered to be understated by P300,000.

* A litigation settlement resulted in a loss of P250,000.
* The inventory on December 31, 2017 was overstated by P200,000
* The entity disposed of a recreational division at a loss of P600,000
* The income tax rate is 30%

1. What is the effect of these events on the income from continuing operation for 2019?
ANSWER:
250,000*70%= 175,000
2. What is the effect of these events on net income for 2019?

Problem 38

Dana Company accounted for noncurrent assets using the cost model.
On October 1, 2019, the entity classified a noncurrent asset as for sale.

At that date, the carrying amount was P3,200,000, the fair value was estimated at P2,200,00 and
the cost of disposal at P200,000.

On December 31, 2019, the asset was sold for net proceeds of P1,850,000.

What amount be recognized as an impairment loss for 2019?

ANSWER:
Carrying Amount 3,200,000
Fair Values less Cost of Disposal (2,200,000-200,000) -2,000,000
Impairment Loss 0

Problem 39

Arlene Company accounted for noncurrent using the cost model.

On October 30,2019. The entity classified a noncurrent asset as held for sale.

At that date, the carrying amount was P1,500,000, the fair value was estimated
at P1,100,000 and the cost of disposal at P150,000.

On December 31, 2019, the asset was sold for net proceeds of P800,000.

1. What amount should be reported as impairment loss for 2019?

ANSWER:
Carrying Amount 1,500,000
Fair Values less Cost of Disposal (1,100,000-150,000) -950,000
Impairment Loss 0

2. What amount should be recognized as loss on disposal for 2019?

ANSWER:
Sales Price 800,000
Carrying Amount -1,500,000
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Loss on Disposal 0

Problem 40

On September 30, 2019, when the carrying amount of the net assets of a business segment was
P70,000,000, Young company signed a legally binding contract to sell the business segment.

The sale is expected to be completed by January 31, 2020 at a sale price of P60,000,000.

In addition, prior to January 31, 2020, the sale contract obliged Young Company to terminate the
employment of certain employees of the business segment incurring an expected termination cost
of P5,000,000 to be paid on June 30, 2020.

The segment revenue and expenses for 2019 were P40,000,000 and P45,000,000 respectively.
The income tax rate is 30%.

What amount should be reported as loss from discontinued operation for 2019?
ANSWER:
Revenue 40,000,000
Expenses (45,000,000)
Impairment Loss (10,000,000)
Termination Cost (5,000,000)
Loss from Discontinued Operation 0

Problem 41

During 2019, Orca Company decided to change from the FIFO inventory valuation to the
weighted average method. The income tax rate is 30%.

FIFO Weighted average

January 1 inventory 7,100,000 7,700,000
December 31 inventory 7,900,000 8,200,000

What amount should be reported as the cumulative effect of the accounting

change for 2019?
ANSWER:
FIFO January 1 inventory

7,100,000

Weighted average January 1 inventory 7,700,000

CUMULATIVE EFFECT 600,000

Problem 42

ABC Company provided the following net income and inventory:

2019 2020
Net income using LIFO 2,750,000 3,000,000
Year-end inventory- FIFO 1,400,000 2,000,000
Year-end inventory- LIFO 900,000 1,600,000

What amount should be reported as net income for 2020 using the FIFO cost flow?

Problem 43

Blue Company purchased a machine on January 1, 2016 for P6,000,000. At the date of
acquisition, the machine had a life of six years with no residual value. The machine was
depreciated on a straight line basis.
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

On January 1, 2019, the entity determined that the machine had a useful life of eight years
from the date of acquisition with no residual value.

What is the depreciation of the machine for 2019?

ANSWER:
Cost 6,000,000
Accumulated Depreciation 3,000,000
Carrying Amount as of January 1, 2019 3,000,000

Depreciation for 2019(3,000,000/5 years) 600,000

Problem 44

Effective January 1, 2019, King Company adopted the accounting policy of expensing
advertising and promotion costs when incurred.

Previously, advertising and promotion costs applicable to future periods were recorded in
prepaid expenses.

The entity can justify the change which was made for both financial statement and
income tax reporting purposes.

The prepaid advertising and promotion costs totaled P600,000 on December 31, 2019. The
income tax rate is 30%.

What is the net change against income for 2019 as a result of the changes?
ANSWER: 0
There’s an error in deferring advertising and promotion cost.

Problem 45

Harbor Company reported the following events during 2019:

* Is was decided to write off P1,000,000 from inventory which was over two year old
as it was obsolete.
* Sales of P1,500,000 had been omitted from the financial statements for the year ended
December 31, 2018.

What pretax amount should be reported as prior period error in the financial
statements for 2019?
ANSWER:
1,500,000

Problem 46

Samar Company reported the following events during the year ended December 31, 2020:

* A counting error relating to the inventory on December 31, 2019 was discovered.
This required a reduction in the carrying amount of inventory at that date of P2,000,000.

* The provision for uncollectible accounts receivable on December 31, 2019

was P500,000.
During 2020, P800,000 was written off related to the December 31, 2019
account receivable
* The income tax rate is 30%.

What adjustment is required to restate earnings on January 1, 2020?

ANSWER:
A reduction in the carrying amount of inventory dated December 31, 2019 of
2,000,000 prior to the period error to be presented in the retained earnings for year 2020.
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Problem 47

In the income statement for the current year, Grum company reported revenue P50,000,000.
Excluding intersegment sales P10,000,000, expenses P47,000,000 and net income P3,000,000.

Expenses included payroll costs of P15,000,000.

The combined identifiable assets of all operating segments at year-end totaled P40,000,000.

1. What is the minimum amount of sales to a major customer?

ANSWER: 5,000,000

2. What is the minimum amount of external revenue to be disclosed by reportable

segment?

ANSWER: 37,500,000

Problem 48

Graf Company discloses supplemental operating segment information. The following

information is available for the current year:

Segment Sales Traceable expenses

X 5,000,000 3,000,000
Y 4,000,000 2,500,000
Z 3,000,000 1,500,000
12,000,000 7,000,000
Additional expenses are as follows:

Indirect expenses 1,800,000

General corporate expenses 1,200,000
Interest expense 600,000
Income tax expense 400,000

The interest expenses and income tax expense are regularly reviewed by the chief operating
decision maker as a measure of profit or loss.

Appropriate common expenses are allocated to segments based on the ratio of a segment’s
sales to total sales.

What is Segment Z’s profit for the current year?

ANSWER:
Segment 3,000,000
Expenses:
Traceable Expenses 1,500,000
Indirect Expenses (1,800,000*25%) 450,000
Interest Expenses (600,000*25%) 150,000
Income Tax Expenses (400,000*25%) -** Expression
100,000
is faulty **
PROFIT FOR THE CURRENT YEAR 00**
Expression is
faulty **

Problem 49

Farr Company had the following transactions during the first quarter:

Loss from typhoon 700,000

Loss from inventory 500,000
Loss from disposal of a business segment 1,000,000
Payment of fire insurance premium for calendar year 100,000
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

What total amount of expenses should be included in the income statement

for the first quarter?
ANSWER:
Loss from typhoon 700,000
Loss from disposal of a business segment 1,000,000
Insurance Expenses (100,000/4) 25,000
Total Expenses 0

Problem 50

Everest Company has historically reported bad debt expense of 5% of sales in each quarter. For
the current year, the entity followed the same procedure in the three quarters of the year.

However, in the fourth quarter, the entity determined that bad debt expense for the entire year
should be P450,000.

Sales in each quarter of the year were first quarter P2,000,000, second quarter P1,500,000, third
quarter P2,500,000 and fourth quarter P4,000,000.

What amount of bad debt expense should be recognized for the fourth quarter?

ANSWER:
Bad Debts Expenses for entire year 450,000
Bad Debts Expense:
1st Quarter (2,000,000*5%) 100,000
2nd Quarter (1,500,000*5%) 75,000
3rd Quarter (2,500,000*5%) 125,000
Bad Debt Expense for 4th Quarter 150,000

Problem 51

Davao Company prepares quarterly interim financial reports. The entity sells electrical goods
and normally 5% of customers claim on their warranty.

The provision in the first quarter was calculated at 5% of sales to date which amounted to
P10,000,000.

However, in the second quarter, a design fault was found and warranty claims were expected to
be 10% for the whole year. Sales for the second quarter amounted to P15,000,000.

1. What amount of warranty expense should be reported in the interim income

statement for first quarter?
ANSWER:
Warranty Expense for 1st Quarter (10,000,000*5%) 500,000

2. What amount of warranty expenses should be reported in the interim income

statement for the second quarter?
Warranty Expense for 1st Quarter & 2nd Quarter (25,000,000*10%) 2,500,000
Warranty ExpenseRecognized in 1st Quarter (10,000,000*5%) 500,000
nd
Total Warranty Expense for 2 Quarter 2,000,000

Problem 52

Mount Company operates in the travel industry and incurs costs unevenly throughout the year.
Advertising costs of P2,000,000 were incurred on March 1, 2019 and staff bonuses are paid at
year-end base on sales.
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Staff year-end bonuses are expected to be around P20,000,000 for the year.

What total amount of expenses should be included in the quarterly financial report
Ending March 31, 2019?
ANSWER:
Total Expenses 2,000,000

Problem 53

Tranvia Company had the following balances on December 31, 2019:

Cash in checking account 350,000

Cash in money market account 750,000
Treasury bill, purchased November 1, 2019
maturing January 31, 2019 3,500,000
Time deposit purchased December 1, 2019
maturing March 31, 2019 4,000,000

What amount should be reported as cash and cash equivalents on

December 31, 2019?
ANSWER:
Cash in checking account 350,000
Cash in money market account 750,000
TOTALCASH AND CASH EQUIVALENTS 0

Problem 54

Pygmalion Company had the following balances on December 31, 2019:

Cash in bank – current account 5,000,000

Cash in bank – payroll account 1,000,000
Cash on hand 500,000

Cash in bank – restricted account for building

construction expected to be disbursed in 2020 3,000,000
Time deposit, purchased December 15, 2019 and
due March 15, 2020 2,000,000

The cash on hand included a P200,000 check payable to Pygmalion,

dated January 15, 2020.

What total amount should be reported as cash and cash equivalents

on December 31, 2019?
ANSWER:
Cash in bank account-current account 5,000,000
Cash in bank account-payroll account 1,000,000
Cash on hand (500,000-200,000) 300,000
Time deposit 2,000,000
TOTALCASH AND CASH EQUIVALENTS 0

Problem 55

Thor Company provided the following data on December 31, 2019:

Checkbook balance 4,000,000

Bank statement balance 5,000,000
Check drawn on Thor’s account, payable to supplier,
dated and recorded on December 31, 2019 but not mailed
until January 15, 2020. 500,000
Sinking fund cash 2,000,000
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

On December 31, 2019, what amount should be reported as “cash”

under current assets?
ANSWER:
Check Book Balance 4,000,000
Undelivered Check drawn on Thor’s Account 500,000
TOTALCASH under CURRENT ASSETS 0

Problem 56

Yasmin Company provided the following information on December 31, 2019:

Petty cash fund 50,000

Current account – first bank 4,000,000
Current account – second bank ( 250,000)
Money market placement – Third bank 1,000,000
Time deposit – Fourth bank 2,000,000

* A check for P100,000 was drawn against First bank current account
dated and recorded December 29, 2019 but delivered to payee on
January 15, 2020.
* The fourth Bank time deposit is set aside for the land acquisition in
early January 2020.

What total amount should be reported as cash and cash equivalents on

December 31, 2019?
ANSWER:
Petty Cash Fund 50,000
Current Account-1st bank (4,000,000+100,000) 4,100,000
Money Market Placement-3rd bank 1,000,000
TOTALCASH under CURRENT ASSETS 0

Problem 57

In preparing the bank reconciliation for the month of August, Apex Company
provided the following information:

Balance per bank statement 1,805,000

Deposit in transit 325,000
Return of customer check for insufficient fund 60,000
Outstanding checks 275,000
Bank service charge for August 10,000

What is the adjusted cash in bank?

ANSWER:
Balance Per Bank 1,805,000
Deposit in Transit 325,000
Total 0
Less: Outstanding Checks -275,000
Adjusted Cash in Bank 1,855,000

Problem 58

In preparing the bank reconciliation for the month of December, Case Company
the following data:

Balance per bank statement 3,800,000

Deposit in transit 520,000
Amount erroneously credited by bank to Case’s account 40,000
Bank service charge for December 60,000
NSF check 275,000
Outstanding checks 10,000
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

1. What is the adjusted cash in bank?

ANSWER:
Balance Per Bank 3,800,000
Deposit in Transit 520,000
Total 0
Less: Outstanding Checks 10,000
Bank Error 40,000
Adjusted Cash in Bank 4,270,000

2. What is the unadjusted cash in bank balance per book?

ANSWER: 4,595,000
Balance Per Book(SQUEEZE) 0
Less: NSF Check 60,000
Bank Service Charge 275,000
Adjusted Cash Balance Per Book 4,270,000

Problem 59

Divine Company prepared the following bank reconciliation on December 31:

Balance per bank statement 2,800,000

Add: Deposit in transit 195,000
Checkbook printing charge 5,000
Error made by Divine in recording
Check issued in December 35,000
NSF check 110,000 345,000
Total 3,145,000

Less: Outstanding check 100,000

Note collected by bank including
P15,000 interest 215,000 315,000
Balance per book 2,830,000

The entity had cash on hand P500,000 and petty cash fund P50,000 on December 31.

1. What amount should be reported as cash in bank at year-end?

ANSWER:
Balance Per Bank 2,800,000
Deposit in Transit 195,000
Total 0
Less: Outstanding Checks -100,000
Adjusted Cash in Bank 0

Balance Per Book 2,830,000

Add: Note Collected 215,000
Total 0
Less: NSF Check 110,000
Checkbook Printing 5,000
Book Error 35,000
Adjusted Cash Balance Per Book 2,895,000

2. What amount of cash should be reported at year-end?

ANSWER: 550,000+2,895,000=3,445,000

Problem 60

Ron Company provided the following data for the month of January:

Balance per book, January 31 3,130,000

Balance per bank statement, January 31 3,500,000
Collections on January 31 but undeposited 550,000
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

NFS check received from a customer returned by the bank on

February 5 with the January bank statement 50,000
Checks outstanding on January 31 650,000
Bank debit memo for safety deposit box rental not
recorded by depositor 5,000
A creditor check for P30,000 was incorrectly
recorded in the depositor’s book as 300,000
A customer check for P200,000 was recorded by
the depositor as 20,000
The depositor neglected to make an entry for a check drawn
in payment of an account payable 125,000

What amount should be reported as adjusted cash in bank on January 31?

ANSWER:
Balance Per Bank 3,500,000
Deposit in Transit 550,000
Total 0
Less: Outstanding Checks 650,000
Adjusted Cash in Bank 3,400,000

Problem 61

Lazer Company had the following bank reconciliation on June 30:

Balance per bank statement, June 30 3,000,000

Deposit in transit 400,000
Total 3,400,000
Outstanding checks ( 900,000)
Balance per book, June 30 2,500,000

The bank statement for the month of July showed the following:

Deposits, including P200,000 note collected for lazer 9,000,000

Disbursements, including P140,000 NSF customer check
And P10,000 service charge 7,000,000

All reconciling items on June 30 cleared the bank in July. The

outstanding checks totaled P600,000 and the deposit in transit
amounted to P1,000,000 on July 31.

1. What is the adjusted cash in bank on July 31?

ANSWERS:
Balance Per Bank June 30 3,000,000
July Bank Deposits 9,000,000
Less: July Bank Disbursements 7,000,000
Balance Per Bank July 31 0
July Bank Deposits 1,000,000
Outstanding Checks 600,000
Adjusted Cash in Bank 0

2. What is the cash balance per book on July 31?

ANSWERS:
Balance Per Book July 31 (SQUEEZE) 5,385,000
Add: Note Collected 200,000
Total 0
Less: NSF Check 140,000
Service Charge 10,000
Book Error 35,000
Adjusted Cash Balance Per Book 5,400,000

3. What is the amount of cash receipts per book in July?

ANSWERS:
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Deposits per Bank Statement for July 9,000,000

Note Collected by Bank in KJuly (200,000)
Deposits in Transit-June 30 (400,000)
Deposits in Transit-July 31 1,000,000
Cash Receipts per Book for July 9,400,000

4. What is the amount of cash disbursements per book in July?

ANSWERS:
Disbursements per Bank Statement for July 7,000,000
NSF Check (140,000)
Service Charge (10,000)
Outstanding Checks-June 30 (900,000)
Outstanding Checks-July 31 600,000
Cash Disbursements per Book for July 6,550,000

Problem 62

Roxy Company provided the following information for the current year:

Accounts receivable on January 1,300,000

Credit sales 5,400,000
Collections from customers, excluding recovery 4,750,000
Collection of accounts written off in prior year 125,000
(customer credit was not reestablished) 25,000
Estimated uncollectible receivable per aging
of receivable at December 31. 165,0000

What is the balance of accounts receivable, before allowance for

doubtful accounts on December 31?
ANSWERS:
Accounts Receivable-January 1 1,300,000
Add: Credit Sales 5,400,000
Total 0
Collections from Customers (4,750,000)
Accounts Written Off (125,000)
Accounts Receivable-December 31 1,825,000

Problem 63

Jay Company provided the following data for the current year:

Accounts receivable, January 1 650,000

Credit sales 2,700,000
Sales returns 75,000
Accounts written off 40,000
Collections from customers 2,150,000
Estimated future sales return at December 31 50,000
Estimated uncollectible accounts at 12/31 per aging 110,000

What is the amortized cost of accounts receivable on December 31?

ANSWERS: There’s no amortization cost in Accounts Receivable. Amortization Cost
can only be applied to fixed assets.

Problem 64

Miami Company reported the following information at year-end:

Trade accounts receivable 930,000

Allowance for uncolletcible accounts ( 20,000)
Claim against shipper for goods lost in transit in November 30,000
Selling price of unsold goods sent by Miami on consignment at
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

130% of cost and not included in Miami’s ending inventory 260,000

Security deposit on lease of warehouse used for

Strong some inventories 300,000
Total 1,500,000

What total amounts should be reported as trade and other receivables

under current assets at year-end?
ANSWERS:
Trade accounts receivable 930,000
Allowance for uncolletcible accounts ( 20,000)
Claim against shipper for goods lost in transit in November 30,000
Total trade and other receivables 940,000

Problem 65

Orr Company prepared an aging of accounts receivable on December 31 and

determined that the net realizable value of the account receivable was P2,500,000.

Allowance for doubtful accounts on Januay1 280,000

Accounts written off as uncollectible 230,000
Accounts receivable on December 31 2,700,000
Uncollectible accounts recovery 50,000

What amount should be organized as doubtful accounts expense

for the current year?
ANSWERS: 100,000
Allowance for doubtful accounts on Januay1 280,000
Uncollectible accounts recovery 50,000
Doubtful Accounts Expense (SQUEEZE) 100,000
Total 430,000
Accounts Written Off (230,000)
Allowance for doubtful accounts on December 31 200,000

Problem 66

Roanne Company used the allowance method of accounting for uncollection accounts.

During the current year, the entity has charged P800,000 to bad debt expense and wrote off
accounts receivable of P900,000 as uncollectible.

What was the decrease in working capital?

ANSWERS: 800,000

Problem 67

Mill Company’s allowance for doubtful accounts was P1,000,000 at the end of 2020 and
P900,000 at the end of 2019.

For the year ended December 31, 2020, the entity reported doubtful accounts expense of
P160,000 in the income statement.

What amount was debited to the appropriate account to write off uncollectible
accounts in 2020?
ANSWERS: 100,000
Allowance for doubtful accounts 2019 900,000
Doubtful Accounts Expense 160,000
Total 0
Accounts Written Off (SQUEEZE) (60,000)
Allowance for doubtful accounts on December 31, 2020 1,000,000
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Problem 68

Horus Company provided for doubtful accounts expense monthly at 3% of credit sales.
The balance in the allowance for doubtful accounts was P1,000,000 on January 1, 2019.

During 2019, credit sales totaled P20,000,000. Interim provisions for doubtful accounts were
made at 3% of credit sales, P200,000 accounts were written off, and recoveries of accounts
previously written off amounted to P50,000.

An aging of accounts receivable was made on December 31, 2019.

1 - 60 days 6,000,000 10% uncollectible
61 - 180 days 2,000,000 20% uncollectible
181 - 360 days 1,500,000 30% uncollectible
More than one year 500,000 50% uncollectible
10,000,000

Based on the review of the “more than one year” category, additional accounts of P100,000
are to be written off on December 31, 2019.

1. What amount should be reported as doubtful accounts expense for the current year?
1 - 60 days 6,000,000*10%
61 - 180 days 2,000,000*20%
181 - 360 days 1,500,000*30%
More than one year 500,000*50%
10,000,000

2. What is the year-end adjustment to be allowance for doubtful accounts on

December 31, 2019?
3. What is the carrying amount of accounts receivable on December 31, 2019

Problem 69

Moon company assigned P3,000,000 of accounts receivable as collateral for a P2,000,000 loan
with a bank. The bank assessed a 4% finance fee and charged 6% interest on the note at maturity.

What would be the journal entry to record the transaction?

ANSWERS:
Dr Cr
Cash 1,920,000
Finance Charge 80,000
Note Payable 2,000,000

Problem 70

Zues company factored P6,000,000 of accounts receivable to a finance entity at the end of
current year. Control was surrendered by Zues Company.

The factor assessed a fee of 3% and retained a holdback equal to 5% of the accounts receivable.

In addition, the factor charged 15% interest computed on a weighted average time to maturity of
the accounts receivable of 54 days.

1. What is the amount of cash initially received from the factoring?

ANSWERS:
Accounts receivable 6,000,000
Factor’s holdback (6,000,000*5%) ( 300,000)
Factoring Fee (6,000,000*3%) (180,000)
Interest (6,000,000*15%*54/365) (133,150)
Cash Initially Received from Factoring 5,386,850
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

2. If all accounts are collected, what is the cost of factoring the accounts receivable?
ANSWERS:
Factoring Fee (180,000)
Interest (133,150)
TOTAL COST OF FACTORING 313,150

Problem 71

Roth Company received from a customer a one-year, P500,000 note bearing annual
interest of 8%.

After holding the note for six months, the entity discounted the note without recourse at 10%.

What amount of cash was received from the bank?

ANSWERS:
Principal 500,000
Add: Interest (500,000*8%) 40,000
540,000
Less: Discount(540,000 *10%*6/12) 27,000
Net Proceeds 513,000

Problem 72

On July 1, 2019, Lee Company sold goods in exchange for P2,000,000, 8-month, noninterest-
bearing note receivable.

At the time of the sale, the market rate of interest was 12%. The entity discounted the note at
10% on September 1, 2019?

1. What is the cash receivable from discounting?

ANSWERS:
Principal-Maturity Value 2,000,000
Less: Discount(2,000,000 *10%*6/12) 100,000
Net Proceeds 1,900,000

2. What is the loss on note receivable discounting?

ANSWERS:
Net Proceeds 1,900,000
Carrying Amount of Note Receivable (2,000,000)
Loss on Notes Receivable discounting (100,000)

Problem 73

Apex Company accepted from a customer P1,000,000 face amount 6-month, 8% note
dated April 1, 2019.

On the same date, the entity discounted the note without resource at a 10% discount rate.

1. What amount of cash was received from the discounting?

ANSWERS:
Principal 1,000,000
Add: Interest (1,000,000*8%*6/12) 40,000
Maturity Value 1,040,000
Less: Discount(1,040,000 *10%*6/12) 52,000
Net Proceeds 988,000

2. What is the loss on note receivable discounting?

ANSWERS:
Net Proceeds 988,000
Carrying Amount of Note Receivable 1,000,000
Loss on Notes Receivable discounting (12,000)
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Problem 74

Frame Company has an 8% note receivable dated June 30, 2019, in the original amount of
P1,500,000.

Payments of P500,000 in principal plus accrued interest are due annually on July 1, 2020,
2021 and 2022.

1. What is the balance of note receivable on July1, 2020?

ANSWERS:
Notes Receivable, June 30, 2019 1,500,000
Payment on July 1, 2020 (500,000)
Notes Receivable, July 01,2020 1,000,000

2. On June 30, 2021, what amount should be reported as accrued interest on

the note receivable?
ANSWERS:
ACCRUED INTEREST RECEIVABLE –JUNE 30, 2021 80,000

Problem 75

On January 1, 2019, Ott Company sold goods to Fox Company. Fox signed a noninterest-bearing
note requiring payment of P600,000 annually for seven years. The first payment was made on
January 1, 2019.

The prevailing rate of interest for this type of note at date of issuance was 10%.

PV of an ordinary annuity of 1 at 10% for 6 periods 4.36

PV of an ordinary annuity of 1 at 10% for 7 periods 4.87

1. What amount should be recorded as sales revenue in January 2019?

ANSWERS:
First Payment on January 1, 2019 600,000
Present Value of Remaining Six Payments (600,000*4.36) 2,616,000
Correct Sales Revenue 0

2. What is the carrying amount of the note receivable on January 1, 2019?

ANSWERS: 2,616,000
3. What is the interest income for 2019?
ANSWERS 2,616,000*10% =261,600
4. What is the carrying amount of the note receivable on December 31, 2019?

Problem 76
Appari Bank granted a loan to a borrowed on January1, 2019. The interest rate on the loan is
10% payable annually starting December 31, 2019. The loan matures in five years on December
31, 2023.

Principal amount 4,000,000

Original fee received from borrower 350,000
Direct origination cost incurred 61,500

The effective rate on the loan after considering the direct origination cost incurred and
origination fee received is 12%.

1. What is the carrying amount of the receivable on January 1, 2019?

2. What amount should be recognized as interest income for 2019?
3. What is the carrying amount of the loan receivable on December 31, 2019?

Problem 77
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

National Bank granted a loan to a borrower on January 1, 2019. The interest on the loan is 10%
payable annually starting December 31, 2019. The loan matures in three years on December 31,
2021.

Principal amount 4,000,000

Original fee charged against the borrower 342,100
Direct origination cost incurred 150,000

After considering the origination fee charged against the borrower and direct origination
cost incurred, the effective rate on the loan is 12%.

1. What is the carrying amount of the loan receivable on January 1, 2019?

2. What amount should be recognized as interest income for 2019?
3. What is the carrying amount of the loan receivable on December 31, 2019?
4. What amount should be recognized as interest income for 2020?

Problem 78

Beach Bank loaned Boracay Company P7,500,000 on January 1, 2017. The terms of the
loan were payment in full on January 1, 2021 plus annual interest payment at 11%. The
interest payment was made as scheduled on January 1, 2018. However, due to financial
setbacks Boracay Company was unable to make the 2019 interest payment.

Beach Bank considered the loan impaired and projected the cash flows from the loan on
December 31, 2019. The bank accrued the interest on December 31, 2018, but did not continue
to accrue interest for 2019 due to the impairment of the loan. The projected cash flows are:

Date of cash flow Amount projected

On December 31, 2019
December 31, 2020 500,000
December 31, 2021 1,000,000
December 31, 2022 2,000,000
December 31, 2023 4,000,000

The PV of 1 at 11% is 0.90 for one period, 0.81 for two periods, 0.73 for three periods, and 0.66
for four periods.

1. What is the loan impairment loss for 2019?

2. What amount should be reported as interest income for 2019?
3. What is the carrying amount of the loan receivable on December 31, 2020?

Problem 79

Aman Company provided the following data:

Item counted in the bodega 4,000,000

Items included in the count specifically segregated per sale contract 100,000
Items in receiving department, returned by customer, in good condition 50,000
Items ordered and in the receiving department 400,000
Items ordered, invoice received but goods not received, Freight is
on account of seller. 300,000
Items shipped today, invoice mailed. FOB shipping point 250,000
Items shipped today, invoice mailed, FOB destination 150,000
Items currently being used for window display 200,000
Items on counter for sale 800,000
Items in receiving department, refused because of damage 180,000
Items included in count, damaged and unsalable 50,000
Items in the shipping department 250,000

What is the correct amount of inventory?

Problem 80
NAME: CHRYSH ANNE KING COURSE & YR: BSA 4

Ram Company provided the following information at the end of current year.

Finished goods in storeroom, at cost, including overhead

of P4,000,000 or 20% 2,000,000
Finished goods in transit, including freight charge of P20,000,
FOB shipping point 250,000
Finished goods held by salesmen, at selling price, cost P100,000 140,000
Goods in process, at cost of materials and direct labor 720,000
Materials 1,000,000
Materials in transit, FOB destination 50,000
Defective materials returned to supplier 100,000
Shipping supplies 20,000
Gasoline and oil for testing finished goods 110,000
Machine lubricants 60,000

What is the correct amount of inventory?

Problem 81

Corolla Company incurred the following costs:

Materials 700,000
Storage costs of finished goods 180,000
Delivery to customers 40,000
Irrecoverable purchase taxes 60,000

Q. At what amount should the inventory be measured?

ANSWERS:
Materials 700,000
Irrecoverable purchase taxes 60,000
Total Cost of Inventory 0