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# PROFESSIONAL REVIEW & TRAINING CENTER

## Management by EXCEL PROFESSIONAL SERVICES,INC.

OPEN FINAL PREBOARD APRIL 16-17, 2011
SOLUTION MANAGEMENT ADVISORY SERVICES
SET B Starts at No.41
SET A
1. D
7. B
2. B
8.D
3. A
9.C
4. D
10.B
5. D
11.B
6. B
12.D

13.A
14.D
15.A
16.D
17.D
18.B

19.B
20.C
21.B

Cash from Sale of:
April 0.7 x 60, 000
March 0.2 x 70, 000
February 0.08 x 50, 000

42, 000
14, 000
4, 000
60, 000

Fixed OH per unit P125, 000/12, 500
Cost of goods sold at standard:
11, 500 x (12 + 10)
CMR = (6M 3.9M) / 6M
BES = (1.4M / .35)

= 10
= 253, 000

35%
P4M

Contribution margin 50, 000 x (5 3.50)
Less: Additional profit (50, 000 x 5 x 0.07)
Selling price = P3.50/0.70

75, 000
17, 500
57, 500
= P5.00

A shorter calculation to find sales is to compute the profit margin. The profit margin
= Contribution
Margin ratio x margin of safety ratio
Profit margin = 20% x 40%
8%
Sales = Profit/Profit margin
Sales (60, 000/0.08)
750, 000

The total sales revenue per mix is (12 x P5.25) + (10 x P7.50) + (6 x P12.25), or
P211.50; the total variable cost per mix is (12 x P4.85) + (10 x P6.95) + (6x
P10.335), or P189.80; the total contribution margin per composite unit is P211.50
p189.50, or P21.70. The composite units are: P75, 950/P21.70 = 3, 500.
Revised contribution margin 20, 000 x 1.15 x (7-1)
138, 000
Fixed cost (105, 000 + 19, 200)
124, 200
Revised profit
13, 800
Prior profit
35, 000
Decrease in profit
21, 200
Breakeven sales
100, 000/ (9/15)
Margin of safety: (20, 000 x 15) 166, 667

166, 667
133, 333

At 160, 000 direct labor hours the variable cost is P5 per hour (800, 000/160, 000),
the same amount per hour as at 100, 000 hours.
The fixed costs will remain unchanged from 160, 000 hours to 200, 000 hours. Fixed
costs at 100% capacity are P1, 000, 000 (200, 000 x P5)
Fixed overhead per hour: 16 x 0.7
11.20
Annual fixed OH budget 5, 000 x 12 x 11.20672, 000
Budget at AH (9, 200 x 6.5)
Favorable spending variance

58, 880
59, 800
(920)

Monthly budgeted fixed overhead
(150, 000/12)
(2, 450 x 2 x 2.5)
Unfavorable volume variance
Absorption income
Less Fixed Overhead in decrease in inventory
(18, 000 15, 000) x 2.50
Income, Variance costing

12, 500
12, 250
250

65, 000
12, 500
52, 200

The division is operating at capacity (zero excess capacity). Any quantity of
production to be transferred to the Division Z must be at P13; Any price below P13,
as transfer price, would decrease its profit.
Final selling price by Compo
Less additional processing cost
Maximum material cost (transfer price)
Direct materials
Direct labor
Total relevant cost to make
CM Product A 36/2 x 1, 000
CM Product B 45/3 x 1, 000
Difference in contribution margin

300
100
200

64, 000
16, 000
8, 000
6, 000
94, 000

18,000
15, 000
3, 000

Sales
Less: Variable production cost
(1, 500 x 30)
Labeling cost
(1, 500 x 2.50)
750
Profit
Purchase price
20, 000 x 60
Required net savings
Total relevant cost make
Less:
Direct materials
120, 000
Direct labor
600, 000
240, 000
Avoidable fixed cost
180, 000
Savings on alternative usage of capacity

60, 000
45, 000
5, 000
3, 750

53,

6, 250

1, 200, 000
25, 000
1, 225,000

1, 140, 000
85, 000

The maximum decrease in regular sale = Contribution margin from special sale/Unit
contribution margin on regular sale
(400 x 0.20) / (2.00 1.50)
160

Expected payoff:
Sale of coffee during cold weather 2, 000 x 0.6
1, 200
Sale of soft drinks during hot weather
2, 500 x 0.4 1, 000
Total
2, 200
Dividend per share:
0.75 x 2.20
Market price:
10 x 2.20
Dividend yield:
1.65/22.00

1.65
22.00
7.5%

The inventory amount can be calculated as follows:
Current liabilities: Working Capital = current liabilities based on 2:1 current ratio
Inventory: Current liabilities x (Current ratio Acid test ratio)
1, 120, 000 x (2.0 1.25)
840, 000
Nominal cost foregoing the discount: d/ (100 d) x 360/N
2/98 x 360/ (70- 10)
12.25%
Inventory balance: Gross profit/ (Difference between 2 inventory turnovers)
360, 000/ (15 10.5)
80, 000
Expected dividend in the next period
Expected returns on retained earnings:
3.24/60 -0.08

3 x 1.08
D1/P0 + g

3.24
13.4%

Interest expense 1M x 0.12
120, 000
Less interest income on additional CA balance
(200, 000 x 0.03)
6, 000
Net interest cost
114, 000
Effective interest rate 114, 000/ (1, 000, 000 200, 000)
14.25%
P221, 000 is recovered in the first four years. The remaining P29, 000 is recovered
in year 5. The portion of the P73, 000 fifth-year cash flow that is required is .40
(P29, 000/P73, 000).
The payback is 4.40 years.

The average (accounting) rate of return determined by dividing the annual after-tax
net income by the average cost of the investment, 9begining book value of P66,
000 = ending book value of P16, 000) /2 = P41, 000. The after tax income is P5, 040
(P7, 200 x 30%).
The accounting rate of return is equal to P5, 040/P41, 000) = 12.3%.
PI Present value of annual cash inflows/Investment
(80, 000 + 36, 224)/ 80, 000

1.45

The amount of investment = the PV of annuity at IRR
4.355 x 6, 600
26, 130
PV of Annuity for 5 years, 12% 3.61 x 32, 000
115, 520
Investment
100, 000
Net present value
15, 520
After tax cash flow: (40, 000 x 0.6) + 20, 000 x 0.4)
32, 000
Investment (Total of present value @ IRR of 12%)
Less PV, year 1 & 2 (16, 074 + 17, 534)
PV of the 3rd cash flow
After-tax cash flow, third year
16, 392/0.712
Investment in:
Land and Building
Working
capital
Total cash outflow
Annual depreciation using 5 years
Tax shield
140, 000 x 0.4
Present value: 5 periods @ 11%
Cash flow before tax
Less depreciation
Taxable income
Less income tax

50, 000
33, 608
16, 392
23, 022

1, 200, 000
550, 000
1, 750, 000

700, 000/5
56, 000 x 3.69589
520, 000
140, 000
380, 000
152, 000

140, 000
56, 000
206, 970

Net income
After-tax cash flow

228, 000
140, 000
368, 000

## Present value of after-tax cash flow, year 1

368, 000 x 0.9009

331, 531

The company chose to use 5 years instead of 6 years in depreciating the property.
Therefore, there is no tax shield provided by depreciation in year 6.
After-tax cash revenue, 6th year: 520, 000 x 0.6
312, 000
Present value
166, 808
Working capital return
250, 000
Tax shield on loss on working capital 300, 000 x 0.4
120, 000
Total
370, 000
Present value:
370, 000 x 0.53464
197, 817
Salvage value:
Land
Depreciable property
Less applicable tax on gain, depreciable assets
50, 000 x 0.4
After-tax salvage value 530, 000 x 0.53464

500, 000
50, 000
(20, 000)
283, 359

Market premium 12% - 5% = 7%
Risk premium 7% x 2.2 = 15.4%
61.
62.
63.
64.
65.

D
D
A
D
D

66.
67.
68.
69.
70.

D
C
D
D
A

## EXCEL Professional Services Inc.

Management Firm of Professional Review and Trading Center (PTRC)
OPEN Final Preboard Examination on Auditing Problems Set A
PROBLEM NO.1
Question No. 2 B

## Acquisition cost of new equipment [(P80, 000/3 x 60)/ 8]

2, 000, 000

Question no.2 D
Revenues earned
21, 000,000
Less cost of sales (P21M/1.5)
14, 000, 000
Gross profit on sales
7, 000, 000
Less net income
1,200, 000
Total operating expenses
5, 800,000
Less depreciation expense [(P2M x .8 x 6/60) + P80, 000]
240, 000
Operating expenses paid
5, 560,000
Question no.3 A
Cash receipts:
Cash investment by owner
Proceeds of bank loan
Collections of revenues earned
000, 000
Less cash payments:
Acquisition of new equipment (see no. 1)
Payment of operating expenses (see no. 2)
Purchases of kitchen supplies (P18.5M P2.3M)
Payment of bank loan (P5M P2M)
760, 000
Cash balance, 12/31/11
000
Question No.4 D
Purchases
Less cost of sales (see no. 2)
Inventory, 12/31/11
Question No. 5 C
Current assets:
Cash (see no. 3)
Accounts receivable (P21M P19M)
Inventory (see no. 4)
740, 000
Noncurrent assets:
Equipment (P2M + P2M)
Less accumulated depreciation (see no. 2)
760, 000
Total assets
000
PROBLEM NO. 2 Bulls, Inc.
Question No. 6 D

3, 000, 000
5, 000,000
19, 000, 000 27,
2, 000, 000
5, 560,000
16, 200, 000
3, 000, 000 26,
240,

14, 000,000
4, 500, 000

240, 000
2, 000, 000
4, 500, 000 6,
4, 000, 000
240, 000

3,

10, 500,

## Unadjusted retained earnings, 1/1/11

Overstatement of 12/31/10 inventory
Cost of equipment charged to repairs
Depreciation on unrecorded equipment (P30, 000/5)
000)
Prepaid advertising 12/31/10 charged to expense in 2010
Adjusted retained earnings, 1/1/11

254, 000
(12, 000)
30, 000
(6,
25, 000
291, 000

Question No.7 A
211, 000
Unrealized loss on TS (P67, 000 - P78, 000)
(11,000)
Reduction in doubtful accounts expense (P1, 580, 000 x 1%)
15,
800
Overstatement of 12/31/10 inventory
12, 000
Overstatement of 12/31/11 inventory
(17, 500)
Depreciation on unrecorded gain sale of equipment (P30, 000/5) (6, 000)
Unrecorded gain sale of equipment
2, 500
Prepaid advertising 12/31/10 charged to expense in 2010
(25, 000)
Reversal of lawsuit liability
100, 000
281, 800
Question No.8 D
Cash
Trading securities (at fair value)
Accounts receivable
Allowance for doubtful accounts (P50, 000 P15, 800)
200)
Inventory (P425, 000 + P17, 500)
Total current assets, 12/31/11

275, 000
67, 000
487, 000
(34,
407, 500
1, 202, 300

Question No.9 B
Property and equipment [P310, 000 + P30, 000 (P21, 000 P2, 500)]
500
Accumulated depreciation (P150, 000 + P12, 000 P21, 000)
000
Carrying amount of property and equipment, 12/31/11
500
Question No.10 A
Share capital
Adjusted retained earnings, 1/1/11 (see no. 6)
000
Adjusted profit (see no. 7)

321,
414,
180,

260, 000
130, 000
291,
281, 800

962, 800

## PROBLEM NO.3 Heat Corporation

Question No. 11 A
Cash
Deposits at call
Allowance for doubtful debts
Sundry debtors
Raw materials
Work in progress
Finished goods
Prepayments
Current assets

175, 000
36, 000
1, 744, 000
(80, 000)
320, 000
490, 000
151, 000
1, 042, 000
141, 000
4, 019, 000

Question No. 12 D
Investments in listed companies (available for sale)
Land, at valuation
Buildings, at cost
Accumulated depreciation buildings
Plant and equipment
Accumulated depreciation plant and equipment
Leased assets
Accumulated depreciation leased assets
Goodwill
Patents
Noncurrent assets

52, 000
250, 000
1, 030, 000
(120, 000)
8, 275, 000
(3, 726, 000)
775, 000
(310, 000)
2, 530, 000
110, 000
8, 866, 000

Question no.13 B

1, 617, 000

## Sundry creditors and accruals

Bank overdrafts
Debentures
Lease liabilities
Provision for employment benefits
Provision for restricting
Provision for warranty (P42, 000 P20, 000)
Current tax payable
Current liabilities

715, 000
350, 000
300, 000
125, 000
192, 000
412, 000
22, 000
152, 000
3, 885, 000

Question No.14 A
Bank loans
Debentures (P675, 000 P300, 000)
Other loans
Lease liabilities (P350, 000 P125, 000)
000

2, 215,000
375, 000
575, 000
225,

## Provision for employment benefits

Provision warranty
Deferred tax
Noncurrent liabilities

83, 000
20, 000
420, 000
3, 913, 000

Question No.15 D
PROBLEM NO.4 Celtics Corporation
Question No. 16 C
Units
Raw materials, 1/1/11
Raw materials available for use
Less raw materials, 12/31/11 (squeeze)
000
Goods placed in process
Less work-in-process, 12/31/11
Goods manufactured
Finished goods, 1/1/11
Total goods available for sale
Less finished goods, 12/31/11
Goods sold
Raw materials, 12/31/11 (45, 000 units x P20.80)

35, 000
265, 000
300, 000
45,
255, 000
25, 000
230, 000
15, 000
245, 000
40, 000
205, 000
936, 000

Question No. 17 D
Work in process, 12/31/11 (25, 000 units)
- 80% complete for direct labor factory overhead
- 100% complete for direct materials
Raw materials [(15, 000 units x P20.80) + (10, 000 units x P20.40)]
516,
000
Direct labor (25, 000 units x 80% x P25.20*)
504, 000
Factory overhead (25, 000 units x 80% x P37.80**)
756, 000
Work in process, 12/31/11
1, 776, 000
Equivalent production for labor and Overhead
Started, finished and sold [(205, 000 units 15, 000 units)] 100%]
190,
000
Started, finished and on hand (40, 000 units x 100%)
40,
000
Started, and in process (25, 000 units x 80%)
20, 000
Total
250, 000
Labor unit cost (P6, 300, 000/250, 000 units)
25.20
Overhead units cost (P9, 450, 000/250,000 units) 37.80

Question No.18 B
Raw materials [(35, 000 units x P20.40) + (5, 000 units x P20)]
000
Direct labor (40, 000 units x P25.20*)
Factory overhead (40, 000 units x P37.80**)
Finished goods inventory, 12/31/11
Question No.19 A
Raw materials, 1/1/11
Raw materials available for use
Less raw materials, 12/31/11 (see no. 16)
Direct materials used
Direct labor
Total manufacturing cost
Work-in-process, 1/1/11
Total cost placed in process
Less work-in-process, 12/31/11 (see no. 17)
Cost of goods manufactured
Finished goods, 1/1/11
Total goods available for sale
Less finished goods, 12/31/09 (se no.18)
Cost of goods sold

814,
1, 008, 000
1, 512, 000
3, 334, 000
720, 200
5, 232, 800
5, 953,000
936, 000
5, 017,000
6, 300, 000
9, 450, 000
20, 767,000
20, 767, 000
1, 776, 000
18, 991,000
1, 240, 000
20, 231, 000
3, 334, 000
16, 897, 000

Question No.20 C
PROBLEM NO.5
Question No. 21 C
Fair value of Machine 1
500
Less carrying amount, 8/28/10:
Cost
43, 000
Accumulated depreciation (P40, 500 x 47/60)
11, 275
Gain on exchange
Question No.22 B
Buildings [(P185, 720 P5, 000)20]
Machinery:
Machine 1 (P40, 500 x 8/60)
Machine 2 (P45, 000/6)
Machine 3 (P55, 200/5)
940
Vehicles
Existing vehicles (P27, 144 x .4)

11,

(31, 725)
225

9, 036
5, 400
7, 500
11, 040
10, 858

23,

## New vehicle (P16, 200 x .4 x 6/12)

Office furniture (P10, 960/8 x 4/12)
Total depreciation -2010

3, 240

14, 098
457
47, 531

Question No.23 A
Sales proceeds
6, 600
Less carrying amount, 5/25/11
Cost
23, 400
Less accumulated depreciation:
Beginning (P19, 656 + P10, 858) = P30, 514 15, 257
Depreciation 2011
(P46, 800 P 30 514) = P16, 286/2 x 4 x 5/1 1, 35716, 614
6, 786
Loss on sale
(186)
Question No. 24 D
Buildings [(P185, 720 P5, 000)/20]
Machinery:
Machine 2 (P45, 000/6)
Machine 3 (P55, 200/5)
540
Vehicles
Remaining vehicles [(P8, 143 + P12, 960) x
Vehicle sold (see no.23)
Office furniture (P10, 960/8)
Land improvements (P5, 500/10 x 6/12)
Total depreciation -2011

9, 036
7, 500
11, 040

18,

8, 411
1, 357

9, 798
1, 370
275
39, 019

Question No.25 B
PROBLEM NO.6 West Corporation (MSE)
Question NO.26 C
Purchase price
000
Non-refundable transfer taxes
Legal costs
Total cost
Cost of owner occupied property (P221 million x 1/10)
100, 000
Depreciation -2011 (P22.1 million x 9/10)
Carrying amount, 12/31/11
Question No.27 A
Fair value of investment properties (P25, million x 9)
000, 000

200, 000,
20, 000,000
1, 000,000
221, 000,000
22,
(353, 600)
21, 764, 400

225,

## Cost of investment properties (P221 million x 9/10)

000

198, 900,
26, 100, 000

Question No.28 C
Property taxes for 2011
Opening function
Day-to-day repairs and maintenance
Depreciation of owner-occupied property (see no. 26)
600
Total expense in profit loss

20, 000
500, 000
200, 000
120, 000
353,
1, 193, 600

Question No.29 D
The fair value of the units cannot be determined reliably without undue cost or
effort on an ongoing basis. Therefore, the entity accounts for the units as property,
plant and equipment using the cost-depreciation-impairment model in Section 17.
However, in accordance with paragraph 17.31, it discloses investment property as a
separate class of property, plant and equipment.
Question No.30 B
Property taxes for 2011
Opening function
Day-to-day repairs and maintenance
Depreciation of properties (P221 million x 8 x 1/50)
Total expense in profit or loss

20, 000
500, 000
200, 000
120, 000
3, 536, 000
4, 376, 000

## PROBLEM NO.7 Spurs Corporation (SME)

Question No.31 D
B
Purchase price 10, 000, 000
Transaction
100, 000
costs
Total cost
10, 100, 000
Impairment
loss *
CA, 12/31/11
10, 100, 000

C
15, 000, 000
150, 000

D
28, 000, 000
280, 000

Total
53, 000, 000
530, 000

-

(14, 030, 000)

(14, 030, 000)

## *Impairment loss computation:

Total cost
10, 000, 000 15, 150, 000
28, 280, 000
FV less cost to sell (RA) 12, 350, 000 27, 550, 000
14, 250, 000
14, 030, 000
Question No.32 A
B
C
D
Total
Dividend
250, 000
2, 000, 000
2, 250, 000
income

Impairment
loss

250, 000

2, 000, 000

## (11, 780, 000)

Question No.33 B
Purchase price

B
10, 000, 000

C
15, 000, 000

Transaction costs
SOPA (SOLA)

100, 000
1, 250, 000

150, 000
4, 500, 000

Dividends

(250, 000)

## (2, 000, 000)

CA, 12/31/11
before impairment
Impairment loss

CA, 12/31/11

## *impairment loss computation:

CA, 12/31/11 before impairment
280, 000
FV les cost to sell (RA)
250, 000

D
280, 000,
000
280, 000
(5, 000,
000)
23, 280,
000
(9, 030,
000)
14, 250,
000

Total
53, 000,
000
530, 000
750, 000
(2, 250,
000)
52, 030,
000
(9, 030,
000)
43, 000,
000

23,

## 27, 550, 000

14,
9, 030, 000

Question No.34 A
SOPA (SOLA)
Impairment loss

B
1, 250, 000
1, 250, 000

C
4, 500, 000
4, 500, 000

D
Total
(5, 000, 000)750, 000
(9, 030, 000)(9, 030, 000)
(14, 030, 000)
(8,

280, 000)
Question No.35 A
B
Transaction
(100, 000)
costs
Dividend
250, 000
income
F V adjustment 3, 000, 000
gain (loss)
3,1 50, 000

C
(150, 000)

D
(280, 000)

Total
(530, 000)

2, 000, 000

2, 250, 000

4, 000, 000

(13, 280,000)

5, 720, 000

Fair value
13, 000, 000

3, 000, 000

14, 000, 000

(13, 000, 000)

## PROBLEM NO.8 Los Angeles Corporation

Question No.36 D
Computation of net investment in the lease
Fair value of asset
Initial direct cost (IDC)
Using 9%:
PV of rental payments
118
PV
of GRV
PV of MLP
PV of URV

34, 797
1, 000
35, 797

Cash flow
8, 000

PVF at 9%
3.8897

PV

3, 600

0.6499

3, 600

0.6499

2, 340
33, 475
2, 340
35, 797

31,

The interest rate implicit in the lease is the discount rate that, at the inception of
the lease, causes the aggregate present value of (a) the minimum lease payments
and (b) the URV to be equal to the sum of (i) the FV of the leased asset and (ii) any
initial direct costs of the lessor.
Question No.37 A
Profit under operating lease (As recorded)
Rent income
Depreciation [(P34, 797 P2, 000)/8]
IDC amortization (P1, 000/5)

8, 000
(4, 100)
(200)
3, 700

## Profit under finance lease (Should be)

Interest income (P35, 797 X 9%)
Over (under)

3, 222
478

Question No.38 B
Computation of present value of MLP
PV rental payments
8, 000
3.8897
31, 118
PV of GRV
3, 600
0.6499
2, 340
PV of MLP
33, 457
The PV of the MLP is 96% (P33, 475/P35, 797) of the fair value of the leased asset.
Amortization schedule (Lease)
Date
Payment
Interest (9%)
Principal
CA
1/1/11
33, 457
12/31/11
8, 000
3, 011
4, 989
28, 468
12/31/12
8, 000
2, 562
5, 438
23, 030

Question No.39 A
Cost
Guaranteed residual value
Depreciable amount
Lease term
Annual depreciation

33, 457
(3, 600)
29, 857
5
5, 971

Question No.40 D
Expenses under operating lease (As recorded)
Rent expense
8, 000
Expenses under finance lease (Should be)
Interest expense
3, 011
Depreciation
5, 971
8, 982
Over (under)
(982)
Therefore, profit is overstated
PROBLEM NO.9 mavericks Corporation
Question No.41 D
Category A employees [(32.5 days x P392.16**) + (32.5 days x P411.76**)]
26, 127
Category B employees [(200 x 6 days x P50, 000/2.55]
235, 294
Category C employees (non-accumulating and non-vesting)
Short term employee benefits (holiday leave)
261,
421
Working days for the year (225) = [(365/7 x5) 6]
*{[(9 x10) 25]/2
**P100, 000/225
***[(100, 000 x 1.05)/225]
Question No.42 C
To receive payments, 12/31/12 (Joined 12/31/12
(P51, 750* x 0.5 x 77** x 196 x 4/5 x 0.9524)
239

31,

## To receive payments, 12/31/13 (Joined 12/31/08)

(P55, 373* x 0.5 x .77 x 9 x 3/5 x 0.9009)
2, 909
Other long term benefits category A employees
148
*Computation of expected salary:

34,

For 2012:

50, 000

102, 500

52, 500

For 2013:

52, 500

## Jul-Dec (P52, 500 x 1.05)

55, 125

107,

625

Question No.43 B
To receive payments, 12/31/12 (Joined 12/31/07)
(P51, 750* x .05 x .77** x 196 x 4/5 x 0.9524)
297, 534
To receive payments, 12/31/13 (Joined 12/31/08)
(P55, 373* x .05 x .77 x 9 x 3/5 x 0.9009)
10, 731
To receive payments, 12/31/14 (Joined 12/31/09)
(P59, 250* x .05 x .77 x 10 x 2/5 x 0.8547)
To receive payments, 12/31/15 (Joined 12/31/10)
(P63, 398* x .05 x .77 x 11 x 1/5 x 0.8)
Other long term benefits Category B employees
000

7, 799
4, 296
320,

Question No.44 A
To receive payments, 12/31/12 (Joined 12/31/07)
(P26, 125* x .05 x 73** x 306 x 4/5 x 0.9524)
To receive payments, 12/31/13 (Joined 12/31/08)
(P28, 476* x.05 x .73 x 18 x 3/5 x 0.9009)
To receive payments, 12/31/14 (Joined 12/31/09)
(P31, 039* x .05 x 73 x 11 2/5 x 0.8547)
To receive payments, 12/31/15 (joined 12/31/10)
(P33, 833* x .05 x .73 x 15 x 1/5 x 0.8
Other long term benefits Category C employees
*Computation of expected salary:
For 2012:
Jan-Jun (P25, 000/2)
Jul-Dec (P25, 000/2 x 1.09)
125
For 2013:
Jan-Jul (P25, 000/2 x 1.09)
Jul-Dec (P13, 625 x 1.09)
For 2014:
Jan-Jun (P13, 625 x 1.09)
Jul-Dec (P14, 851 x 1.09)
For 2015:
Jan-Jul (P14, 851 x 1.09)
Jul-Dec (P16, 188 x 1.09)

222, 321
10, 113
4, 261
2, 964
239,659
12, 500
13, 625

13, 625
14, 851
14, 851
16, 188
16, 188
17, 645

26,
28, 476
31, 039
33, 833

**Estimated payment for a five-year cycle (saving of 27% due to employees leaving
before vesting) Computation of saving: {[66 + (66/4)] /306}
Question No.45 A
Short-term employee benefits (see no. 4)
261,
421
Other long term employee benefits (long service & wards
Category A employees (see no.42)
34, 148
Category B employees (se no.43)
320, 000
Category C employees (see no. 44)
239, 659
593,
807
Post-employment benefits defined contribution plus (pension)
100, 000
Termination benefits (see computation below)
1, 350, 000
Total
2, 305, 228
*Computation of termination benefits:
Category A employees (P100, 000 x 1)
Category B employees (P50, 000 x 10)
Category C employees (P25, 000 x 30)

100, 000
500, 000
750, 000
1, 350, 000

## PROBLEM NO.10 Thunder Corporation

Question No.46 A
Question No.47 B
Question No.48 C
2010
Retained earnings
total
equity
Issued 100, 000 ordinary shares at P272, 600, 000
2,
700, 000
Profit
250, 000
250, 000
Dividends
(28, 000)
(28, 000)
Balances, 12/31/10
2, 600, 000 222, 000
2, 922, 000
2011
1/2/11 Issued 10, 000 PS at par
1,
000,000
3/1/11 Issued 3, 000 OS for legal services 93, 000
96,
000
7/1/11 Issued 40, 000 OS at P42
1, 640, 000
1, 68,
000
10/1/11 Repurchased 16, 000 TS at P34
(544,
000)
12/1/11 Reissuance of 3, 000 TS at P29
(15, 000)
87, 000

## 12/30/11 OS dividend (P1M x .06)

000)
-OS dividend (13OT x P.20)
000)
Profit

(60, 000)

(60,

(26, 000)

(26,

380, 000
4, 333, 000 501, 000
(46)
(47)

380, 000
5, 535, 000
(48)

Question No.49 D
Profit for 2011
380, 000
Less PS dividend for 2011
60, 000
Profit to OS
320, 000
Divide by the WA outstanding OS (see below)
118, 750
Basic EPS for 2011
2.69
Computation of WA outstanding OS:
Shares
1/1/11
100, 000
3/1/11
3, 000
7/1/11
40, 000
000
10/1/11
(16, 000)
12/1/11
3, 000
Question No.50 D
Profit to OS (se no.49)
Add PS dividend for 2011
Adjusted profit to OS
Divide by the WA outstanding OS
Actual (see no.49)
Potential (10, 000 x 5)
Diluted EPS for 2011

6/12
3/12
1/12

WA
100, 000
2, 500
20,
(4, 000)
250
118, 750

320, 000
60, 000
118, 750
50, 000

Practical Accounting 2
Final pre-board Suggested Solutions
2011
SET A
1. D

Time O/s
12/12
10/12

168, 750
2.25

de Leon/de Leon
April 17,
SET B START NO.27

Direct materials

Conversion

## 8, 000 units x 60%

Total excess

8, 000 units
4, 800
12, 800 units

The difference will only be on the WIP Inventory @ beginning for prior work
excluded from FIFO but included in weighted average as shown above.
Equivalent units for direct materials and conversion on the 28, 0000 units
completed and 6, 000 units for direct still in process, both from currently
started units, will be identical under each of the methods.
2. B
Allowance before adjustment (P35, 000 + P144, 000) x 40%
P71, 600
Allowance required on the branch ending inventory from
The Home Office (40, 000 x 40%)
16,
000
Realized allowance
P55,
600
The entry is to decrease the unrealized allowance by P565, 600 to the
required amount of P16, 000 and to reflect in the books of the Home Office
the true result of the branch operations regardless of the amount reported by
the branch for its own operations.
3. D
Choice A is incorrect because the agency is just an extension of the home
office and not a separate investment account. Choices B and C are both
incorrect because the supplies area still unconsumed at the transferred and
reduces the supplies charged to the home office. This will allow greater
flexibility in determining the viability of the agency.
4. B
EUP (5, 000 x 1/5) + (14, 000 x 100%) + (8, 000 x )
000 units
Units Costs: Pre dept (110, 000 / 22, 000)
P5.00
This dept (30, 450 / 21, 000
1.45
C & T: IP, beg. Cost this month
P30, 610
Cost this month (1, 000 EUP x P1.45) 1, 450
Receive (14, 000 EUP x P6.45)
Total cost of completed units
Divide by units completed (5, 000 + 14, 000)
Units cost
P6.44
5. D
Set-up

## Side A (P100, 000 x

Side A
P20, 000

Side B

21,
P6.45
P32, 060
90, 300
P122, 360
19, 000

1/5)
B (P100, 000 x 4/5)
A (P400, 000 x 3/5)
B (P400, 000 x 2/5)
A (P50, 000 x )
B (P50, 000 x 3/4)

Machining
Inspection
Totals

P80, 000
240, 000
160, 000
12, 500
P272, 500

37, 500
P277, 500

6. C
Interest
Salary
Balance
Minimum guarantee
Totals

E
4, 000
10, 000
3, 500
(1, 500)
16, 000

F
3, 000
8, 000
3, 500
(1, 500)
13, 000

G
2, 500
6, 000
3, 500
3, 000
15, 000

Total
9, 500
24, 000
10, 500
44, 000

7. C
IP, beg
30, 000
Started IP
120, 000
Material AA Materials BB Conversion
Total
150, 000
W.D EUP W.D EUP W.D EUP
C & T: IP, beg.
30, 000
100% 30, 000
15, 000
Started IP
70, 000
100% 70, 000
100% 70, 000
70, 000
IP, end
50, 000
100% 50, 000
35, 000
Total
150, 000
120, 000
100, 000
120, 000
Units Costs: material AA (P1, 440, 000 / 120, 000 EUP)
P12.00
BB (P1, 500, 000 / 100, 000 EUP)
15.00
Conversion (P600, 000 / 120, 000 EUP)
5.00
Cumulative
P32.00
C&T

## IP, beg (cost last month)

P436, 000
Added (30, 000 x P15)
450, 000
(15, 000 x 5)
75, 000
P961, 000
Started in process (70, 000 x P32)
2, 240, 000
Total cost
P3, 201, 000

8. C
MI, beg (P34, 000 + P5, 000 + P8, 000)
P47, 000
Purchases
500, 000
MI, end (P31, 000 + P6, 600 + P7, 500 + P19, 900*)(65, 000)
Combined Cost of Goods Sold
P482, 000
9. B

50%
100%
70%

Please see item 8 above. The P19, 900* is the cost of the merchandise
shipments in transit derived as follows:
Total shipments to branch @ billed price [(73, 700 + P46, 200) x 110%]
P131, 890
Total recorded shipments from home office (P68, 200 + P41, 800)
110, 000
Merchandise in transit @ billed prices
P21,
890
Merchandise in transit at cost (P21, 890 / 110%)
P19, 900
10.A
IP, beg.
Started IP
Total

Started IP
IP, end
Total

1, 250
2, 000
3, 250
Equivalent Units
W.D
EUP
1, 250
20%
250
1, 500
100%
1, 500
500
50%
250
3, 250
2, 000

P132

## Total cost to be accounted for

P392, 000.
C & T: from the IP, beg.
Cost last month
P128, 000
Cost added this month (P250 xx P132)
From started (1, 500 x P132)
Total cost of completed units
IP, beg. (250 x P132)
Total accounted for

## Cost of Goods Sold: FG.beg (600 units)

C & T: from IP, beg (1, 250)
From started IP
(800)
Total

## 33, 000 P161, 000

198, 000
P359, 000
33, 000
P392, 000

P76, 800
161, 000
@P132
105, 600
P343, 400

11.B
Allowance before adjustment (P30, 000 + P12, 000 P750) x 20/120
P6, 875
Less allowance required on BEI (from HO) (16, 500 x 20/120)
2, 750
Realized allowance
125

P4,

## Reported branch net loss

True branch net income

(2, 600)
P1, 525

12.A
Actual profit, 2011 (P8, 400, 000 P7, 250, 000)
P1,
150, 000
Less recognized profit for prior years (P8, 400, 000 x 80%) P5, 800, 000
920, 000
Gross profit recognized I 2011
P230, 000
Year-end entry:
Construction cost (P7, 250, 000 20%)
1, 450, 000
CIP (as above)
230, 000
Construction revenue (8, 400, 000 xx 20%)
1,
680, 000
13.Unrecorded cost (P32, 000 P6, 400) x 60%
520
Less Fair Value of repossessed merchandise
600
Estimated gain is not recognized (is deferred to point of sale)
P (2,080)

P11,
13,

14.D
Total

Parent

NCI

FV of SM Corp

## P1, 800, 000

P550,

BV of net assets

(1,200, 000)

(960, 000)

(240,

Excess

1, 100, 000

(840, 000)

260,

Increase in N/A

(770, 000)

(616, 000)

(154,

000
000)
000
000)
Goodwill

P330, 000

P224, 000

P56, 000

15.A
Net profit (P1, 500, 000 800, 000 88, 000 35, 000 42, 000 25, 500 3,
750 + P505, 750
16.B
SHE 2 BV, 12/31/09 (P180, 000 + P120, 000 P50, 000)
P370,
000
Add Unamortized increase in net assets
(P60, 000 P20, 000)
40, 000
SHE @ FV, 12/31/09
P410, 000

## NCI in net assets

P102, 500

Or: NCI, 12/31/09 (P360, 000 x 25%) + (P120, 000 x 25%) (P50, 000 x 25%)

## (P20, 000 x 25%)

P102, 500
17.C
NCI in net assets, 12/31/09 P102, 500 + (P180, 000 x 25%) (P60, 000 x
25%)
(P20, 000 x 25%)
P127, 500
Therefore CI = (P3, 584, 000 P1, 024, 000 P127, 000) P2, 432, 500
18.C
Net income of Rizal Co. (2, 400, 000 + 1, 000, 000)
Net income of Andres from date of acquisition to end of year
000
Total to be reported

3, 400, 000
800,
4, 200,000

## In some cases the acquired company is kept as a separate division of the

acquiring entity
19.C
Realized gross profit on regular sales (385, 000 x 30%)
500
RGP on 2010 Installment sales = 40% (135, 000 15, 000 7, 800)
880
RGP on 2011 Installment sales = 38% (425, 000 200, 000)
500
Loss on repossession
Unpaid balance
7, 800
DGP (7, 800 x 40%)
(3, 120)
Unrecorded cost
4, 680
Value of repossessed merchandise
3, 000
Total RGP, net of loss on repossession
200
Computation of gross profit rate
2010 = 54, 000 / 135, 000 = 40%
2011 = 161, 500 / 425, 000 = 38%
Installment sales
Less: Cost of installment sales
MI, January 1
Purchases
Repossessions
MI, December 31

115,
44,
85,

1, 680
244,

425, 000
70, 000
555, 000
4, 000
(95, 000)

## Cost of regular sales (385, 000 x 70%)

500
Gross profit on installment sales
500

(269, 000)

263,
161,

20.A
Cost of the acquisition
P160, 000
Less of fair value of net assets (P80, 000 + P120, 000 P20, 000)
180, 000
Income from acquisition
P(20, 000)
Generally, the book value is the fair value if problem is silent.
21.D
If all partners receive a share in the cash distributions it means their balances
have been reduced to their P/L ratio so all sun subsequent cash distribution
will be in their P/L ratio
22.D
If no goodwill is recognized
Capital balances
Interest sold
Amount sold
Share in the gain (90, 000
84, 000)
Cash to be received
With goodwill
Capital balance
Goodwill (90, 000/20%)
420, 000
Interest sold
Amount sold

X
252, 000
20%
50, 400
3, 600

Y
126, 000
20%
25, 200
1, 800

Z
42, 000
20%
8, 400
600

54, 000

27, 000

9, 000

252, 000
18, 000

126, 000
9, 000

42, 000
3, 000

270, 000
20%
54, 000

135, 000
20%
27, 000

45, 000
20%
9, 000

23.D
Cost of goods available for sale
Less: _Cost of goods sold
Finished goods, June 30

190, 000
140, 000
50, 000

## Cost of goods manufactured

Work in process, June 30
Work in process, June 1
Total manufactured cost

120, 000
30, 000
(40, 000)
110, 000

Materials, June 1
Purchases

15, 000
33, 000

## Total available for use

Materials, June 1
Indirect materials used
Direct materials used

48, 000
(19, 000)
(1, 000)
28, 000

24.A
Loss spoiled units charged to all production
Original cost of order
90, 000
Less: Cost of spoiled units (90, 000/5, 000 = 18 x 200)
3, 600
Cost of remaining good units
86, 400
Cost per unit

## Loss on spoiled units charged to specific job

Original cost of the order (200x 15)

90, 000
3, 000

## Cost of remaining good units

Cost per unit
87, 000/4, 800 = 18.125

87, 000

25.C
Original cost of the order
Divide by
Cost per unit
Original cost
Additional cost defective units
Materials (4 x 100)
Labor (12 x 100)
Overhead (24 x 100 x 1/2)
200
Total cost of order
Divide by
Cost per unit

200, 000
1, 000 units
200.00
400
600
1, 200

2, 200
202,
1, 000 units
202.20

26.A
Goodwill, 12/31/10
(P100, 000 x P1.00)
P100,
000
Impairment loss
(20, 000 c P1.20)
(24, 000)
Net amount
P76, 000
Goodwill, 12/31/11
(P80, 000 x P1.25)
100, 000
Translation difference, gain
P24, 000
27.
Fair value of investment, 12/31/10
P29, 000
Less original cost of investment
Increase in fair value

15, 000
P14, 000

28.A
Cost model
Equity model

## (P15, 000 + P150)

P15, 150
(P15, 000 + P150 P2, 000 + P4, 500) 17, 650

29.D

Reclassification
Expenses
Net effect

Unrestricted
Revenues

Temp Restricted
Revenues

P35, 000
(35, 000)
P
-

P (35, 000)
P (35, 000)

30.D
Under NGAS, all obligations must be entered in the appropriate registry
(RAOs) when incurred
31.A
Equipment
P1, 428, 000
Accounts payable
P1, 431, 000
Forex loss
P (3, 000)
32.B
Forex gain
P4, 000 Asset
Cash settlement
P9, 000

P14.28

P14.31

P14.31 P14.28

(P14.32 P14.28)

## : Euro 100, 000

(P14.41 P14.32)

33.B
Net forex loss : Euro 100, 000
000)
Cost of hedging
: Euro 100, 000
P4, 000
34.B
FC 300, 000
P9, 000 gain

35.A
Machinery
000

FC 200, 000 x

(P14.32 P14.28)
x

P (4,

(P14.32 P14.28)

(P1.65 P1.62)

P0.34

P68,

A/P, 8/1/11
000
Forex gain
P4, 000
A/P, 10/1/11

FC 200, 000 x

P0.34

FC 200, 000 x

(P0.4 P0.32)

FC 200, 000 x

P68,

P0.32

P64, 000

36.C
Choice A is incorrect deferred discount is in because this is a premium
situation; the forward rate is bigger that the spot rate at inception. Choice
B is incorrect because if the time value component is taken out of fair
value measurement, as suggested in Choice A, the Forward Contract
Receivable at August 1 is P68, 000, i.e. F 200, 000 x P.034. Choice D s
incorrect because the Forward Contract Payable is peso-denominated and
its peso value (P68, 000)at August 1 is final its final settlement at October
1. Choice C is correct, forex gain of P6, 000, i.e. FC 200, 000 x (P0.34
P0.31) on the Accounts payable.
37.C
Net income, P102, 500
Salaries
Bonus*
Interests
Balance
500
Totals

A
P30, 000
2, 500
2, 000
6, 500

B
P45, 000
3, 500
13, 000

Total
P75, 000
2, 500
5, 500
19,

P41, 000

P61, 500

P102, 500

38.C
Partners interest
A
B
C
BBL
P20, 000
P50, 000
P90, 000
Divide by
2
4
4
Loss absorption capability
P10, 000
P12, 500
P22, 500
Allocation I
(10, 000) x 4 =P40,
000
Balances
P10, 000
P12, 500
P12, 500
39.A
Candys assets (P3, 875, 000 P375, 000)
P3, 500, 000
Candys share in Joint Venture assets
(P2, 100, 000 x 50%)
1,
050, 000
Proportionately consolidated assets reported by Candy (venture)
P4,
550, 000

40.D
Although substantial are required of the franchisor at December 31, 2010,
this is an exception to the general rule that no revenue can be recognized

## from the initial substantial performance is achieved. The down payment

maybe recognized as earned and only present value of the note is
unearned because the non-refundable down payment approximates the
initial costs already incurred by the franchisor.

## Excel Professional Services, Inc

OPEN first Preboard Examination on Practical Accounting 1 Set A
April 17, 2011

Question No.1 C
Revenue from sale of goods
964
Revenue from rending of services (P15, 000 x 1.5)
22, 500

125,

## Revenue from interest

1/1 to 6/30 (P125, 964 x .05)
6, 298
7/1 to 12/31 (P122, 964 + P6, 298 + P22, 500) x .05]
14, 036
Total revenue for the year ended 12/31/11
500

7, 738
162,

Question No.2 B
Commission expense 2010 (P36, 000 + P39, 000 + P43, 000 + P45, 000)
163, 000
Question No.3 D
Purchase price of raw materials
3, 000, 000
Import duty and other non-refundable purchase taxes
800, 000
Freight costs
300, 000
2, 000
Packaging
200, 000
Volume rebate
(53, 000)
Total costs of purchase
4, 249 000
Question No.4 D
Salary of the machine workers
500,
000
Salary of factory supervisor
300,
000
Depreciation of the factory building and equipment
60, 000
Consumables used
20,
000
Depreciation of vehicle
40,
000
Factory electricity usage charges
30,
000
Depreciation and maintenance vehicle used by the factory supervisor*
100, 000
[(P50, 000 + P15, 000 + P305, 000) x .2]
74,
000
Total costs of conversion
1,
144,000
*include the entire amount since the use car is part of total renumertion,
regardless of use.
Question No.5 D
Acquisition cost
Demolition of old building

320, 000
21, 000

## Legal fees title investigation

Landfill for building site
Clearing of trees from building site
Land survey
Proceeds from sale of salvage materials
Timber sold
Cost of land

Question No.6 B
Fair value of asset given up
Carrying amount, 4/1/11
Cost
480, 000
Acc. Dep. [P240, 000 + (P96, 000 x 3/12)]
000
Gain (loss) on exchange

4, 100
19, 300
9, 600
4, 000
(1, 800)
(3, 300)
372, 900

192, 000
264, 000

(24, 000)

Question No.7 B
Depreciation for 2011 (P450, 000 x .9 x .2)
Question No.8 A
Cost subject to depletion (P20M P4M)
Divide by total estimated reserves in 2010
000, 000
Depletion rate in 2010
Number of tons mined in 2010
Depletion for 2010

216,

81, 000
16, 000, 000
5,
3.20
500, 000
1, 600, 000

## Original cost subject to depletion

16, 000,000
Less depletion in 2010
1, 600, 000
Remaining cost to deplete 1/1/11
14, 400, 000
Remaining tons of ore, 1/1/11 (4, 500, 000 + 1, 500, 000)
6,
000, 000
Depletion rate in 2011
2.40
Number of tons mined in 2011
1, 500, 000
Depletion for 2011
3, 600, 000
Question No.9 D
Present value of note receivable (P300, 000 x 0.7118)
Less carrying amount of machine (P500, 000 P380, 000)
000
Gain on sale of machine
Interest total income for 2011 (P213, 540 x 12% x 6/12)
812
Total income to be recognized in 2011 profit or loss
352

213, 540
120,
93, 540
12,
106,

Question No.10 A
Journal entry for the payment
Interest expense (P20, 000 x .9a x .01)
Notes payable
Cash
Question No.11 B
FV of trading securities, 12/31/11
Less FV of trading securities
Unrealized holding gain (loss)- PL

180
8, 000
8, 180
155, 000
100, 000
55, 000

Question No.12 D
FV of AFS securities, 12/31/11
130, 000
Less cost of AFS securities
150, 000
Unrealized holding gain (loss) accumulated OCI
20, 000
Question No.13 C
Cost
1, 120, 000
Share of profit:
Unadjusted (P252, 000 x .2)
50, 400
Amortization of excess [(P1.12M P.84M/10] (28, 000)
22, 400
Dividends received (P56, 000 x .2)
(11, 200)
Carrying amount, 12/31/11
1, 131, 200
Question No.14 D
PV of principal (P2, 000, 000 x .6209)
PV of interest (P2, 000, 000x .12 x 3.7908)
792
PV, 1/1/11
Less premium amortization, 1/1 -2/1
Nominal interest (P2M x 12% x 1/12)
Effective interest (P2, 151 x 592 x 10% x 1/12)
Purchases price, 1/1/11
Accrued interest
Total amount paid

1, 241, 800
909,
2, 151, 592
20, 000
17, 930

2, 070
2, 149, 522
20, 000
2, 169,522

Question No.15 A
Sales proceeds
400, 000
Carrying amount investment sold [(P2, 000, 000 + P100, 000) x .1 210,
000
Gain disposal
190, 000
Question No.16 C
FV adjustment gain (loss) 2011 (P350, 000 P400, 000)
000

50,

Question No.17 B
PAS39 para 95 (b) states that ineffective portion (i.e. P24, 000 x .1) of the
gain or loss on the hedging instrument shall be recognized in profit or loss.
Question No.18 C
Annual deposit (P6, 000,000/6.34)

946, 372

Question No.19 C
Face value (P1, 000 x 1, 000)
1, 000, 000
Unamortized discount, 7/1/11 [(P1M P96OT) x 4/10] (16, 000)
Carrying amount, 7/1/11
984, 000
Retirement price (P1M x 1.0)
1, 010, 000
Gain (loss) on bond retirement
(26, 000)
Question No.20 C
Notes payable current portion
50, 000
Interest payable (P250, 000 x .1 x 6/12)
12, 500
Total amount to be reported as current liabilities, 12/31/11
62, 500
Question No.21 B
Cumulative income, 6/30/11 (P360, 000/3 x2)
240, 000
Less cumulative rent received, 6/30/11 (P60, 000 + P90, 000) 150, 000
Accrued rent receivable, 6/30/11
90, 000
Question No.22 C
Depreciation expense for 2011(35, 520/6)

5, 920

Question No.23 A
Current service cost (P105, 000 x 1.5209 x .01 x .9 x .7513)
Interest cost
PBO, 12/31/10 (P100, 000 x 1.2155 x .01 x .8 x .6830) 664
X discount rate
10%
Amount to be recognized in 2012 profit or loss

1, 080
66
1, 146

Question No.24 C
Revised PBO, 12/31/11 (P105, 000 x 1.2155 x .01 x .8 x 6830)2, 160
Recorded PBO, 12/31/11 (P664 + P1, 146)
1, 810
Actuarial loss to be recognized in 2012 OCI
350
Question No.25 A
B=1 (NI T) + .3B
T= .3 (NI B)
T= .3 (5, 000, 000 B)
T = 1, 500, 000 - .3B
B = 1 [5, 000, 000 (1, 500, 000 .3B)] +.3B

## B = 1 (5, 000, 000 1, 500, 000 + .3B) + .3B

B = 1 (3, 500, 000 + .3B) + .3B
B = 350, 000 + .03B + .3B
B = 350, 000 + .33B
67B = 350, 000
0.67
B = 522, 388
Question No. 26 B
Compensation expense -2011 [(60, 000 x P7)/2]
000
Question No.27 D
No defects (P0x .95)
Minor repairs (10M x .1 x .03)
Major repairs (10M x .09 x .02)
Total

210,

30, 000
180, 000
210, 000

## Warranty provision, 12/31/11 (P210, 000 x 1.06 x .05 x 0.95238)

000

106,

Question No.28 D
Taking account of all the available evidence, it is probable that the entity
will successfully defend the court case. Therefore, the entity has a
possible obligation and hence a contingent liability.
Question No.29 A
Question No.30 A
Deferred tax liability, 12/31/11 [(P1.5M + P.25M) x .35]
312, 500
Question No.31 D
Issuance of ordinary shares
Issuance of preference shares (6, 000 x P16)
000
Subscription for preference shares (2, 000 x P17_
34,000
Contributed capital, 12/31/11
Question No.32 B
Question No.33 C
Debit to retained earnings (50, 000/5 x P30)
000

1,

1, 200,000
96,

1, 330, 000

300,

Question No.34 C
Total equity
8, 250, 000
Less Preference shareholders equity
Liquidation value (20, 000 x P110)
2, 200, 000
Dividends (P2, 000, 000 x .12 x 3)
720, 000
2, 920, 000
Ordinary shareholders equity
5, 330, 000
Outstanding OS
200, 000
BV/share of ordinary
26.65
Question No.35 A
Date
Mos. O/S
W.A
1/1/11
(3, 000, 000 x 1.05 x 2) 6, 300, 000
12/12
6,
300, 000
4/1/11
(200, 000 x 1.05 x 2)
420, 000
9/12
315,
000
8/1/11
300, 000
5/12
125, 000
11/1/11
(24, 000)
2/12
(4, 000)
6, 736, 000
Question No.36 A
Number of share to compute basic EPS
Convertible PS still outstanding (500, 000 x 1.05 x 2)
Convertible PS converted (200, 000 x 1.05 x 2 x 3/12)
Number of shares to compute diluted EPS

6, 736,000
1, 050, 000
105, 000
7, 891, 000

Question No.37 C
2010 ending inventory-under
2011 ending inventory-over
2012 depreciation-under
2010 accrued salaries-under
2011accrued salaries-under
Net effect on 2011 profit

Effect on profit
Over (under)
10, 000
4, 000
6, 000
(8, 000)
12, 000
24, 000

Question No.38 C
Current assets (P17, 700 + P13, 600 + P81, 800 + P15, 200 + P36, 600)
164, 900
Question No.39 C
Current liabilities (P25, 600 + P14, 000 + P22, 800 + P24, 800)
87, 200
Question No.40 D
Current liabilities
Long-term liabilities
Total liabilities
Divide by debt-to-equity ratio

50, 000
150, 000
200, 000
0.32

Total equity
Total liabilities
Total assets
Less current assets (P80, 000 + P50, 000)
Long-term assets

625, 000
200, 000
825, 000
130, 000
695, 000

Question No.41 B
Question No.42 A
Increase in cash
Increase in accounts receivable
Decrease in inventory
Increase in equipment
Decrease in accounts payable
Increase in bank loan
Increase in interest payable
Proceeds from issuance of share capital (5, 000 x P8)
Donated capital
Dividends paid
Profit

21, 000
25, 000
(10, 000)
70, 000
5, 000
(50, 000)
(1, 000)
(40, 000)
(20, 000)
15, 000
15, 000

Question No.43 B
Accounts receivables, beg.
Sales on account
Accounts written off
Accounts receivable, end
Collections

100, 000
300, 000
(12, 000)
(168, 000)
220, 000

Question No.44 D
Net income
Depreciation expense
Decrease in accounts receivable
Increase in inventories
Increase in accounts payable
Decrease in income taxes payable
Cash provided by operating activities

396, 000
102, 000
126, 000
(90, 000)
24, 000
(16, 000)
542, 000

Question No.45 A
Sales
Cost of sales (P1, 400, 000 x )
Gross profit
Holding gain (P1, 400, 000 P1, 200, 000)
Net income current cost
Question No.46 D

1, 000, 000
(700, 000)
300, 000
200, 000
500, 000

If a defined benefit plan has been introduced or changed in the current period, the
entity shall increase or decrease its defined benefit liability to reflect the change,
and shall recognized the increase (decrease) as an expense (income) in measuring
profit or loss in the current period. (Section 28.21 PFRS for SMEs)
Question No.47 B
Sales
480, 000
Less cost of goods sold
Inventory, beginning
62, 400
Purchases
320, 000
Inventory, ending
(64, 000)
318, 400
Sales salaries expense (P40, 000 + P1, 920)
161, 600
Advertising expense (P5, 360 P560)
(41, 920)
(52, 000)
Office expense (P4, 000 P1, 200)
(2, 800)
Doubtful accounts expense [(33, 600 x .08) P2, 160]
(528)
Depreciation (P67, 200 x .2)
(13, 440)
Insurance expense
(2, 040)
Interest expense
(2, 688)
Profit
41, 384
Question No.48 C
Profit or loss threshold (P1, 200, 000 x .1)

120, 000

Question No. 49 D
Sales proceeds, net
Carrying amount after classification as HFS (P11M P1.5M)
Gain (loss) on disposal

9, 200, 000
9, 500, 000
300, 000

Question No.50 A
Income tax expense for the period ended, 9/30/11 (P5M x .35)

1, 750, 000