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2011 NATIONAL CPA MOCK BOARD EXAMINATION

In partnership with the Professional Review & Training Center, Inc. and Isla Lipana & Co.
A U D I T I N G P R O B L E M
S
INSTRUCTIONS: Select the best answer for each of the follown! "#estons$ Mar%
onl& one answer for each te' on the answer sheet (ro)*e*$ A+OID ERASURES$
Answers wth eras#res 'a& ren*er &o#r e,a'naton answer sheet IN+ALID$ Use
PENCIL NO$- onl&$ GOODLUC./
PROBLEM NO$ 0
1o# were en!a!e* b& 2#e3on Cor(oraton for the
a#*t of the co'(an&4s fnancal state'ents for the
&ear en*e* Dece'ber 506 -707$ The co'(an& s
en!a!e* n the wholesale b#sness an* 'a%es all
sales at -89 o)er cost$
The follown! were !athere* fro' the clent4s
acco#ntn! recor*s:
S A L E S P U R C : A S E S D a t e
R e f$ A' o #n t D a t e R e f$ A ' o #n t
Broo%s Tra*n! Cor(oraton$ Broo%s rece)e*
the !oo*s6 whch were sol* on Sales In)oce No$
;<< ter's =OB Destnaton6 the ne,t *a&$
*> Enro#te to the clent on Dece'ber 50 was a
tr#c%loa* of !oo*s6 whch was rece)e* on
Rece)n! Re(ort No$ 07<?$ The !oo*s were
sh((e* =OB Destnaton6 an* fre!ht of P-6777
was (a* b& the clent$ :owe)er6 the fre!ht was
*e*#cte* fro' the (#rchase (rce of P@776777$
2UESTIONS:
Balance
forwar*e* P86-776777
Balance
forwar*e* P-6A776777
Base* on the abo)e an* the res#lt of &o#r a#*t6
*eter'ne the follown!:
Dec$
-A
Dec$
-@
Dec$
-@
Dec$
50
Dec$
50
Dec$
50
Dec$
50
SI No$
;<8 ?76777
SI No$
;<< 0876777
SI No$
;<A 076777
SI No$
;<; ?<6777
SI No$
;A7 <@6777
SI No$
;A0 0<6777
Closn!
entr& B8 6857 677 >
Dec$
-A
Dec$
-@
Dec$
-;
Dec$
57
Dec$
50
Dec$
50
Dec$
50
RR No$
078A 586777
RR No$
078@ <86777
RR No$
078; -?6777
RR No$
07<0 A76777
RR No$
07<- ?-6777
RR No$
07<5 <?6777
Closn!
entr& B5 6777 677 >
0$ Sales for the &ear en*e* Dece'ber 506 -707
a$ P86-876777 c$ P86?776777
b$ P860876777 *$ P865876777
-$ P#rchases for the &ear en*e* Dece'ber 506 -707
a$ P567776777 c$ P5670@6777
b$ P56A8?6777 *$ P56@0@6777
5$ In)entor& as of Dece'ber 506 -707
a$ P@<?6777 c$ P;<@6777
b$ P@776777 *$ P@0?6777
?$ Acco#nts rece)able as of Dece'ber 506 -707
P C P C
Note: SI D Sales In)oce RR D Rece)n! Re(ort
In)entor& P<776777
Acco#nts rece)able 8776777
Acco#nts (a&able ?776777
1o# obser)e* the (h&scal n)entor& of !oo*s n the
wareho#se on Dece'ber 50 an* were satsfe* that t
was (ro(erl& ta%en$
Ehen (erfor'n! sales an* (#rchases c#tCoff tests6
&o# fo#n* that at Dece'ber 506 the last Rece)n!
Re(ort whch ha* been #se* was No$ 07<5 an* that no
sh('ents ha* been 'a*e on an& Sales In)oces
whose n#'ber s lar!er than No$ ;<@$ 1o# also
obtane* the follown! a**tonal nfor'aton:
a> Incl#*e* n the wareho#se (h&scal n)entor&
at Dece'ber 50 were !oo*s whch
ha* been (#rchase* an* rece)e* on
Rece)n! Re(ort No$
07<7 b#t for whch the n)oce was not rece)e*
#ntl the follown! &ear$ Cost was P0@6777$
b> On the e)enn! of Dece'ber 506 there were two
tr#c%s n the co'(an& s*n!:
F Tr#c% No$ CPA 0-5 was #nloa*e* on Gan#ar& -
of the follown! &ear an* rece)e* on Rece)n!
Re(ort No$ 07<5$ The fre!ht was (a* b&
the )en*or$
F Tr#c% No$ ILU 0?5 was loa*e* an* seale* on
Dece'ber 50 b#t lea)e the co'(an& (re'ses
on Gan#ar& -$ Ths or*er was sol* for
P0776777 (er Sales In)oce No$ ;<@$
c> Te'(orarl& stran*e* at Dece'ber 50 at
the ralroa* s*n! were two *el)er& tr#c%s
enro#te to
a$ P5876777 c$ P5A76777
b$ P--76777 *$ P0-76777
8$ Acco#nts (a&able as of Dece'ber 506
-707
a$ P?0@6777 c$ P ?776777
b$ P58?6777 *$ P06-0@6777
PROBLEM NO$ -
The Bolnao Co'(an& )al#es ts n)entor& at the lower
of =I=O cost or net real3able )al#e BNR+>$ The
n)entor& acco#nts at Dece'ber 506 -77;6 ha* the
follown! balances$
Raw 'aterals P <876777
Eor% n (rocess 06-776777
=nshe* !oo*s 06<?76777
The follown! are so'e of the transactons
that affecte* the n)entor& of the Bolnao Co'(an&
*#rn!
-707$
Gan$ @ Bolnao (#rchase* raw 'aterals wth a lst
(rce of P-776777 an* was !)en a
tra*e *sco#nt of -79 an* 079H ter's
-I086 nI57$ Bolnao )al#es n)entor& at
the net n)oce (rce
=eb$ 0? Bolnao re(ossesse* an n)entor& te'
fro' a c#sto'er who was o)er*#e n
'a%n! (a&'ent$ The #n(a* balance on
the sale s P086-77$ The re(ossesse*
'erchan*se s to be refnshe* an* (lace*
on sale$ It s e,(ecte* that the te'
can be sol* for P-?6777 after est'ate*
refnshn! costs of P<6@77$ The nor'al
(roft for ths te' s
Pa!e 1 of 6
cons*ere* to be P56-77$
Mar$ 0 Refnshn! costs of P<6?77 were
nc#rre* on the re(ossesse* te'$
A(r$ 5 The re(ossesse* te' was resol* for
P-?6777 on acco#nt6 -79 *own$
)al#e>$ No char!es ha)e been 'a*e a!anst the
acco#nt before Gan#ar& 06 -77A$
Transactons between Gan#ar& 06 -77A an* Dece'ber
506 -7076 an* ther recor* n the le*!er were as
follows:
G#l& 06 -77A Tr#c% No$ 5 was tra*e* for lar!er one
A#!$
57
A sale on acco#nt was 'a*e of
fnshe* !oo*s that ha)e a lst (rce of
P8;6-77 an* a cost P5@6?77$ A re*#cton
of P@6777 off the lst (rce was !rante*
as a tra*eCn allowance$ The tra*eCn te'
s to be (rce* to sell at P<6?77 as s$ The
nor'al (roft on ths t&(e of n)entor& s
-89 of the sales (rce$
BNo$ 8>6 the a!ree* (#rchase (rce of
whch was P5?76777$ Bl#e Mf!$ Co$
(a* the a#to'oble *ealer
P0876777 cash on the transacton$ The
entr& was *ebt to Se'tr#c%s an* a
cre*t to cash6 P0876777$
Gan$ 06 -77@ Tr#c% No$ 0 was sol* for P586777 cashH
entr& *ebte* Cash an* cre*te*
2UESTIONS:
Base* on the abo)e an* the res#lt of &o#r
a#*t6 answer the follown!: BAss#'e the clent s
#sn! (er(et#al n)entor& s&ste'>
<$ The entr& on Gan$ @ wll ncl#*e a *ebt to Raw
Materals In)entor& of
a$ P-776777 c$ P0?060-7
b$ P0??6777 *$ P0;<6777
A$ The re(ossesse* n)entor& on =eb$ 0? s 'ost
l%el& to be )al#e* at
a$ P0?6777 c$ P0A6-77
b$ P-?6777 *$ P0?6?77
@$ The Jo#rnal entres on A(rl 5 wll ncl#*e a
a$ Debt to Cash of P-?6777$
b$ Debt to Cost of Re(ossesse* Goo*s Sol*
of
P0?6777$
c$ Cre*t to Proft on Sale of Re(ossesse*
In)entor& of P56<77$
*$ Cre*t to Re(ossesse* In)entor& of P-76?77$
;$ The tra*eCn n)entor& on A#!$ 57 s 'ost l%el&
to be )al#e* at
a$ P@6777 c$ P<6777
b$ P?6@77 *$ P<6?77
07$ :ow '#ch wll be recor*e* as Sales on A#!$ 57K
a$ P806-77 c$ P8A6-77
b$ P8<6777 *$ P8A6<77
PROBLEM NO$ 5
1o# re"#este* a *e(recaton sche*#le for
Se'tr#c%s of Bl#e Man#fact#rn! Co'(an&
shown! the a**tons6
retre'ents6 *e(recaton an* other *ata affectn!
the nco'e of the Co'(an& n the ?C&ear (ero*
-77A to -7076 ncl#s)e$ The Se'tr#c%s
acco#nt conssts of the follown! as of Gan#ar& 06
-77A:
Se'tr#c%s6 P586777$
G#l& 06 -77; A new tr#c% BNo$ <> was ac"#re* for
P5<76777 cash an* was char!e* at
that a'o#nt to Se'tr#c%s
acco#nt$ BAss#'e tr#c% No$ - was not
retre*$>
G#l& 06 -77; Tr#c% No$ ? was *a'a!e* n a wrec% to
s#ch an e,tent that t was sol* as
J#n% for PA6777 cash$ Bl#e
Mf!$ Co$ rece)e* P-86777 fro' the
ns#rance co'(an&$ The entr&
'a*e b& the boo%%ee(er was a
*ebt to cash6 P5-67776 an* cre*ts
to Mscellaneo#s Inco'e6 PA6777
an* Se'tr#c%s P
-86777$
Entres for *e(recaton ha* been 'a*e for the close of
each &ear as follows: -77A6 P-756777H -77@6
P-006777H -77;6 P-??6877H -7076 P-A@6777$
2UESTIONS:
Base* on the abo)e an* the res#lt of &o#r a#*t6
*eter'ne the follown!: BDsre!ar* ta, '(lcatons>
00$ The carr&n! a'o#nt of Se'tr#c%s as of Dece'ber
506 -707 s
a$ P@@86?77 c$ P-@?6777
b$ P87?6777 *$ P58?6777
0-$ The -707 *e(recaton e,(ense s
a$ P05@6777 c$ P0@?6777
b$ P07?6777 *$ P0?76777
05$ The -77A (roft s o)erstate* b&
a$ P;6777 c$ P-76777
b$ P506777 *$ P 7
0?$ The -77@ (roft s #n*erstate* b&
a$ P0<6777 c$ P806777
b$ P876777 *$ P 7
08$ The -77; (roft s #n*erstate* b&
Tr#c% No$ 0 (#rchase* Gan$ 06 -77?6
cost
Tr#c% No$ - (#rchase* G#l& 06 -77?6
cost
Tr#c% No$ 5 (#rchase* Gan$ 06 -77<6
cost
Tr#c% No$ ? (#rchase* G#l& 06 -77<6
cost
P 0@76777
--76777
5776777
-?7 677 7
P ;?7 677 7
a$ P-56877 c$ P;?6877
b$ P<?6877 *$ P 7
PROBLEM NO$ ?
On Dece'ber 506 -77;6 Probe Cor(oraton ac"#re*
the follown! three ntan!ble assets:
F A tra*e'ar% for P5776777$ The tra*e'ar% has A
The Se'tr#c%s L Acc#'#late* De(recaton
acco#nt (re)o#sl& a*J#ste* to Gan#ar& 06 -77A6
an* *#l& entere* to the le*!er6 ha* a balance on
that *ate of P57-6777 B*e(recaton on the ? tr#c%s
fro' res(ect)e *ate of (#rchase6 base* on f)eC&ear
lfe6 no sal)a!e
&ears re'ann! le!al lfe$ It s antc(ate* that the
tra*e'ar% wll be renewe* n the f#t#re6
n*efntel&6 wtho#t (roble'$
F Goo*wll for P068776777$ The !oo*wll s
Pa!e 2 of 6
assocate* wth Probe4s Ne,#s Man#fact#rn!
re(ortn! #nt$
F A c#sto'er lst for P--76777$ B& contract6 Probe
has e,cl#s)e #se of the lst for 8 &ears$
Beca#se of 'ar%et con*tons6 t s e,(ecte* that
the lst wll ha)e econo'c )al#e for J#st 5 &ears$
On Dece'ber 506 -7076 before an& a*J#stn! entres
for the &ear were 'a*e6 the follown! nfor'aton
was asse'ble* abo#t each of the ntan!ble assets:
a> Beca#se of a *eclne n the econo'&6 the
tra*e'ar% s now e,(ecte* to !enerate cash
flows of J#st P076777 (er &ear$ The #sef#l
lfe of tra*e'ar% stll e,ten*s be&on* the
foreseeable hor3on$
b> The cash flows e,(ecte* to be !enerate* b& the
Ne,#s Man#fact#rn! re(ortn! #nt s
P-876777 (er &ear for the ne,t -- &ears$ Boo%
)al#es an* far )al#es of the assets an* labltes
of the Ne,#s Man#fact#rn! re(ortn! #nt are as
follows:
B oo % ) a l # e s = a r ) a l # e s
I*entfable assets P-6A776777 P567776777
Goo*wll 068776777 K
Labltes 06@776777 06@776777
c> The cash flows e,(ecte* to be !enerate* b& the
c#sto'er lst are P0-76777 n -700 an* P@76777 n
-70-$
RE2UIRED:
Base* on the abo)e an* the res#lt of &o#r a#*t6
*eter'ne the follown!: BAss#'e that the a((ro(rate
*sco#nt rate for all te's s <9>:
0<$ Total a'ort3aton for the &ear -707
a$ P A56555 c$ P0?06808
b$ P00<60;7 *$ P @<6@8A
0A$ I'(ar'ent loss for the &ear -707
a$ P ;76?A< c$ P0A;68@?
b$ P0556555 *$ P 7
0@$ Carr&n! a'o#nt of Tra*e'ar% as of Dece'ber 506
-707
a$ P5776777 c$ P0<<6<<A
b$ P-8A60?5 *$ P0-76?0<
0;$ Carr&n! a'o#nt of Goo*wll as of Dece'ber 506
-707
a$ P068776777 c$ P06?506@0@
b$ P06?-86777 *$ P06?<-6877
-7$ Carr&n! a'o#nt of C#sto'er lst as of Dece'ber
506 -707
a$ P--76777 c$ P0A<6777
A**tonal nfor'aton:
a$ On Gan#ar& -6 -707 Thn% Post)e Co'(an&
starte* b#sness an* ss#e* share ca(tal6 A-6777
shares wth P077 (ar6 for the follown!
cons*eratons:
Cash P <776777
B#l*n! B#sef#l lfe6 08 &ears> 86?776777
Lan* 0 6@77 677 7
P A 6@77 677 7
b$ An anal&ss of the ban% state'ents showe* total
*e(osts6 ncl#*n! the or!nal cash n)est'ent6
of P?6-776777$ The balance n the ban% state'ent
on Dece'ber 506 -7076 was P57767776 b#t there
were chec%s a'o#ntn! to P<76777 *ate* n
Dece'ber b#t not (a* b& the ban% #ntl Gan#ar&
-700$ Cash on han* on Dece'ber 506 -707
was P0876777 ncl#*n! c#sto'ers4 *e(ost of
P;76777$
c$ D#rn! the &ear6 Thn% Post)e Co'(an&
borrowe* P<776777 fro' the ban% an* re(a*
P0876777 an* P576777 nterest$
*$ Dsb#rse'ents (a* n cash *#rn! the &ear
were as follows:
Utltes P0-76777
Salares 0-76777
S#((les -?76777
D)*en*s 0@7 677 7
P <<7 677 7
e$ An n)entor& of 'erchan*se ta%en on Dece'ber
506 -707 showe* P;7<6777 of 'erchan*se$
f$ Tc%ets for acco#nts rece)able totale* P067@76777
b#t P<76777 of that a'o#nt 'a& (ro)e
#ncollectble$
!$ Un(a* s#((lers n)oces for 'erchan*se
a'o#nte* to P?-76777$
h$ E"#('ent wth a cash (rce of P?@76777
was (#rchase* n earl& Gan#ar& on
a oneC&ear nstall'ent bass$
D#rn! the &ear6 chec%s for the *own (a&'ent
an* all 'at#rn! nstall'ents totale*
P85?6777$ The e"#('ent has a #sef#l lfe of 8
&ears$
2UESTIONS:
Base* on the abo)e an* the res#lt of &o#r a#*t6
*eter'ne the follown!: BDsre!ar* nco'e ta,es>
-0$ Pa&'ents for 'erchan*se (#rchases n -707
a$ P-68@<6777 c$ P-6<?<6777
b$ P-6?5<6777 *$ P56-?<6777
22. Collections from sales in 2010
b$ P0?<6<<A *$ P 7 a$ P56A-76777 c$ P567776777
b$ P?65-76777 *$ P?6;-76777
PROBLEM NO$ 8
1o#r a#*t of Thn% Post)e Co'(an& *sclose* that
&o#r clent %e(t )er& l'te* recor*s$ P#rchases of
'erchan*se were (a* for b& chec%6 b#t 'ost other
te's were o#t of cash rece(ts$ The co'(an&4s
collectons were *e(oste* wee%l&$ No recor* was %e(t
of cash n the ban%6 nor was a recor* %e(t of sales$
Acco#nts rece)able were recor*e* onl& b& %ee(n!
a co(& of the tc%et6 an* ths co(& was !)en to
the c#sto'er when he (a* hs acco#nt$
-5$ Net nco'e for the &ear en*e* Dece'ber 506 -707
a$ P06AA76777 c$ P068<76777
b$ P06<-76777 *$ P ;<76777
-?$ Sharehol*ers4 e"#t& as of Dece'ber 506 -707
a$ P;65;76777 c$ P;60@76777
b$ P;6-?76777 *$ P@68@76777
-8$ Total assets as of Dece'ber 506 -707
a$ P;68@56-77 c$ P;65;76777
b$ P;68?76777 *$ P;6?876777
Pa!e 3 of 6
PROBLEM NO$ <
In connecton wth &o#r e,a'naton of the fnancal
state'ents of Rn!o6 Inc$ for the &ear en*e*
Dece'ber 506 -7076 &o# were able to obtan certan
nfor'aton *#rn! &o#r a#*t of the acco#nts
rece)able an* relate* acco#nts$
F The Dece'ber 506 -707 balance n the Acco#nts
Rece)able control acco#nts s P@5A6;77$
F An a!n! sche*#le of the acco#nts rece)able as
of
Dece'ber 506 -707 s (resente* below:
Percenta!e to be
-;$ :ow '#ch s the net a*J#st'ent to the Do#btf#l
Acco#nts e,(ense acco#ntK
a$ P0?6;-7 cre*t c$ P-76@A8 cre*t
b$ P0?6<08 cre*t *$ P0860?7 *ebt
57$ All of the follown! are e,a'(les of s#bstant)e
tests to )erf& )al#aton of net acco#nts
rece)able e,ce(t the
a$ ReCco'(#taton of the allowance for ba* *ebts$
b$ Ins(ecton of acco#nts for c#rrent )ers#s nonC
c#rrent stat#s n the state'ent of fnancal
(oston$
c$ Ins(ecton of the a!n! sche*#le an* cre*t
recor*s of (ast *#e acco#nts$
*$ Co'(arson of the allowance for ba* *ebts
wth (ast recor*s$
A ! e
<7 *a&s M
Net *ebt
b a l a n c e
a((le* after
correctons ha)e bee n
' a * e PROBLEM NO$ A
#n*er P5@A6@77 0 (ercent
<0 to ;7
*a&s 57A6077 - (ercent
;0 to 0-7
*a&s @;6@77 8 (ercent
On Gan#ar& 06 -7076 Pe*ro Co'(an& sol* lan* that
or!nall& cost P?776777 to B#&er Co'(an&$ As
(a&'ent6 B#&er !a)e Pe*ro Co'(an& a P<776777
note$ The note bears an nterest rate of ?9 an* s
to be re(a* n three ann#al nstall'ents of
P-776777
O)er 0-7
*a&s 85 6-7 7
P @5A 6;7 7
Defntel& #ncollectble6
P;6777H the re'an*er
s est'ate* to be -89
#ncollectble$
B(l#s nterest on the o#tstan*n! balance>$ The
frst (a&'ent s *#e on Dece'ber 506 -707$ The
'ar%et (rce of the lan* s not relabl&
*eter'nable$ The
(re)aln! rate of nterest for notes of ths t&(e s 0?9
on Gan#ar& 06 -707 an* 089 on Dece'ber 506 -707$
F Two entres 'a*e n the Do#btf#l Acco#nts
E,(ense acco#nt were:
1. A *ebt on Dece'ber 50 for the a'o#nt of the
cre*t to the Allowance for Do#btf#l Acco#nts$
2. A cre*t for P<6077 on No)e'ber 576 -7076
an* a *ebt to Allowance for Do#btf#l Acco#nts
beca#se of a ban%r#(tc&$ The relate* sales
too% (lace on October 06 -707$
F The Allowance for Do#btf#l Acco#nts sche*#le
s (resente* below:
Deb t C r e * t B a l a n c e
Gan#ar& 06 -707 P0;6A77
Pe*ro 'a*e the follown! Jo#rnal entres n relaton
to the sale of lan* an* the relate* note rece)able:
G a n# a r & 0 6 -70 7
Notes rece)able P<776777
Lan* P?776777
Gan on sale of lan* -776777
D e c e ' b e r 5 0 6 -70 7
Cash P--?6777
Notes rece)able P-776777
No)e'ber 576
-707
Dece'ber 506
-707
BP@5A6;77 ,
89>
P<6077 056<77
P?06@;8 P886?;8
Interest nco'e -?6777
Pe*ro re(orte* the notes rece)able n ts state'ent
of fnancal (oston at Dece'ber 506 -707 as (art
of tra*e an* other rece)ables$
2UESTIONS:
F There s a cre*t balance n one acco#nt
rece)able B<0 to ;7 *a&s> of P006777H t
re(resents an a*)ance on a sales contract$
2UESTIONS:
Base* on the abo)e an* the res#lt of &o#r a#*t6
answer the follown!:
-<$ :ow '#ch s the a*J#ste* balance of Acco#nts
Rece)able as of Dece'ber 506 -707K
a$ P@5A6;77 c$ P@556@77
b$ P@5;6;77 *$ P@--6@77
-A$ :ow '#ch s the a*J#ste* balance of the Allowance
for Do#btf#l Acco#nts as of Dece'ber 506 -707K
a$ P-86?A8 c$ P-86-88
b$ P-86A@7 *$ P?06@;8
-@$ :ow '#ch s the Do#btf#l Acco#nts e,(ense for
the &ear -707K
a$ P-060@7 c$ P?06;@8
b$ P-76<88 *$ P-76@A8
Base* on the abo)e an* the res#lt of &o#r a#*t6
answer the follown!:
50$ The correct !an on sale of lan* s
a$ P0756078 c$ P0-767<0
b$ P ;?6@<@ *$ P-776777
5-$ The correct nterest nco'e for -707 s
a$ PA?6-57 c$ PA76?58
b$ PA-6@7; *$ P-?6777
55$ Proft for -707 s o)erstate* b&
a$ P876?<7 c$ P8?6;7-
b$ P506057 *$ P 7
5?$ The correct carr&n! a'o#nt of the notes
rece)able at Dece'ber 506 -707 s
a$ P?776777 c$ P5<@6@A7
b$ P5?867;@ *$ P5?;68?7
58$ The entt&4s wor%n! ca(tal at Dece'ber 506 -707
s o)erstate* b&
a$ P-586A<8 c$ P0@-6?A<
b$ P-5-6;5< *$ P 7
Pa!e 4 of 6
Ro&alt& re)en#e Be,e'(t fro' ta,aton> P @6777
PROBLEM NO$ @ Procee*s on sale of b#l*n! A86777
Entertan'ent e,(ense Bnon *e*#ctble> 06A77
1o# were able to obtan the follown! le*!er *etals of De(recaton e,(ense C b#l*n!s A6<77
Tra*n! Sec#rtes n connecton wth &o#r a#*t of the De(recaton e,(ense C (lant --6877
IMBC Cor(oraton for the &ear en*e* Dece'ber 506
-707:
D a t e P a r t c # l a r s D R C R
Gan$ 07 P#rchase of ?EARD
Co$ L <6777 shares P06??76777
=eb$ -7 P#rchase of BAC.
Co$ L A6-77 shares 06@776777
Mar$ 70 Sale of BAC. Co$ L
-6?77 shares 8?76777
Ma& 50 Rece(t of ?EARD
share *)*en*L
Offsettn! Cre*t
to retane*
earnn!s 05-6777
A#!$ 08 Sale of ?EARD
Stoc%s L ?6@77
shares 060A<6777
Se($ 70 Sale of ?EARD
Stoc%s L 06-77
shares -A<6777
=ro' the Phl((ne Stoc% E,chan!e6 the ?EARD
*)*en*s were anal&3e* as follows:
Nat #re D e cl are * Re co r* Pa&'e nt Rat e
Carr&n! a'o#nt of b#l*n! sol* A76777
Do#btf#l *ebts e,(ense ?6077
Ann#al lea)e e,(ense ?<6777
Ins#rance e,(ense ?6-77
De)elo('ent e,(ense 086777
The co'(an&Ns *raft balance sheet at 57 G#ne -707
showe* the follown! assets an* labltes:
Ass et s
Cash P -6877
Acco#nts rece)able -06877
Allowance for *o#btf#l *ebts B? 6077 > P 0A6?77
In)entor& 506<77
Pre(a* ns#rance ?6877
Lan* A86777
B#l*n!s 0A76777
Acc#'#late* *e(recaton B8; 6877 > 0076877
Plant 0876777
Acc#'#late* *e(recaton B<A 6877 > @-6877
Deferre* ta, asset6 Bo(enn!
balance> ; 6<7 7
555 6< 7 7
L a b l t e s
Acco#nts (a&able -86777
Cash
Share
Cash
70I7-I07
78I7-I07
7@I70I07
70I08I07
78I08I07
7@I57I07
70I50I07
78I50I07
7;I08I07
P-7Ishare
079
P57Ishare
Pro)son for ann#al lea)e 076777
Deferre* ta, lablt& Bo(enn!
balance> -A6-A7
Loan 0?7 67 77
At Dece'ber 506 -7076 ?EARD an* BAC. shares
were selln! at P-07 an* P-?7 (er share6 res(ect)el&$
A**tonal nfor'aton
-7- 6- A 7
2UESTIONS:
Base* on the abo)e an* the res#lt of &o#r
a#*t6 answer the follown!:
5<$ The !an or loss on sale of -6?77 BAC. shares on
March 06 -707 s
a$ P8?76777 !an c$ P<76777 loss
b$ P5776777 loss *$ P<76777 !an
5A$ The net !an or loss on sales of ?EARD shares n
-707 s
a$ P07@6777 !an c$ P0-6777 loss
b$ P0?-6;07 !an *$ P 067;7 loss
5@$ The total *)*en* nco'e to be reco!n3e* n -707
s
a$ P0;@6777 c$ P5<6777
b$ P0@76777 *$ P8?6777
5;$ The carr&n! a'o#nt of Tra*n! Sec#rtes as
of
Dece'ber 506 -707 s o)erstate* b&
a$ P--@6777 c$ P07-6777
b$ P <76777 *$ P 7
?7$ The #nreal3e* loss on Tra*n! Sec#rtes to
be reco!n3e* n -707 (roft or loss s
a$ P8-6;07 c$ P?@6777
b$ P?-6777 *$ P 7
PROBLEM NO$ ;
Ro& Lt* has *eter'ne* ts acco#ntn! (roft before ta,
for the &ear en*e* 57 G#ne -707 to be P-8<6A77$
Incl#*e* n ths (roft are the te's of nco'e
an* e,(ense shown below$
a$ 2#arterl& nco'e ta, nstall'ents (a* *#rn! the
&ear were:
-@ October -77; P0@6777
-@ Gan#ar& -707 0A6877
-@ A(rl -707 0@6777
wth the fnal balance *#e on -@ G#l& -707$
b$ The ta, *e(recaton rate for (lant Bwhch
cost P0876777 three &ears a!o> s -79$
De(recaton on b#l*n!s s not
*e*#ctble for ta,aton (#r(oses$
c$ The b#l*n! sol* *#rn! the &ear ha* cost
P0776777 when ac"#re* s, &ears a!o$ The
co'(an& *e(recates b#l*n!s at 89 ($a$6
stra!htClne$
*$ D#rn! the &ear6 the follown! cash a'o#nts were
(a*:
Ann#al lea)e P8-6777
Ins#rance 56A77
e$ Ba* *ebts of P56877 were wrtten off a!anst the
allowance for *o#btf#l *ebts *#rn! the &ear$
f$ The P086777 s(ent Ban* e,(ense*> on
*e)elo('ent *#rn! the &ear s not *e*#ctble for
ta, (#r(oses #ntl 57 G#ne -700$
!$ Ro& Lt* has ta, losses a'o#ntn! to
P0-6877 carre* forwar* fro' (ror &ears$
h$ The co'(an& ta, rate s 589$
Pa!e 5 of 6
RE2UIRED:
Co'(#te for the follown! as of an* for the fscal
(ero* en*e* 57 G#ne -707:
?0$ C#rrent ta, e,(ense
a$ P@;6?<7 c$ PAA6-07
b$ P@068@8 *$ P@867@8
?-$ C#rrent ta, (a&able
a$ P5068@8 c$ P-@67-8
b$ P-56A07 *$ P586;<7
?5$ Deferre* ta, lablt&
a$ P;6?87 c$ P?@60-8
b$ PA6@A8 *$ P 068A8
??$ Deferre* ta, asset
a$ P0?68<7 c$ P0760@8
b$ P006A<7 *$ P ;6507
?8$ Deferre* ta, e,(ense Bbeneft>
a$ BP--6A@7> c$ P-76-A7
b$ BP0;6;@7> *$ BP0@6?78>
PROBLEM NO$ 07
Re(ro*#ce* below s the *raft state'ent of fnancal
(oston of Gesse6 a (#blc lste* co'(an&6 as at 50
March -707$
P N77 7 P N77 7
N o n C c # rr e n t a ss e t s B n o t e B >>
=reehol* (ro(ert& 0-<6777
Plant 0076777
In)est'ent (ro(ert& at 0 A(rl -77;
Bnote B>> 08 677 7
-806777
C # rr e n t A ss e t s
In)entor& Bnote B>> <76?77
Tra*e rece)ables an* (re(a&'ents 506-77
Cash 05 6@7 7 078 6? 7 7
Total assets 58< 6? 7 7
E " # t & a n * l a b l t e s
C a ( t a l a n * R e s e r ) e s :
Or*nar& shares of P7$-8 each 0876777
Reser)es:
Share (re'#' 076777
Acc#'#late* (rofts C 0 A(rl -77; 8-6877
: 1ear to 50 March -707 ?A 687 7 007 67 7 7
-<76777
N o n C c # rr e n t l a b l t e s
Deferre* ta, C at 0 A(rl -77;
Bnote B)>> 0@6A77
C # rr e n t l a b l t e s
Tra*e (a&ables Bnote B>> ?A6?77
Pro)son for (lant o)erha#l
Bnote B)>> 0-6777
Inco'e ta, (a&able ? 6-7 7 <56<77
S#s(ense acco#nt Bnote B)>> 0? 607 7
Total e"#t& an* labltes 58< 6? 7 7
B> The nco'e state'ent has been char!e* wth P5$-
'llon ben! the frst of fo#r e"#al ann#al rental
(a&'ents for an te' of e,ca)atn! (lant$ Ths
frst (a&'ent was 'a*e on 0 A(rl -77;$ Gesse
has been a*)se* that ths s a fnance lease
wth an '(lct nterest rate of 079 (er ann#'$
The (lant ha* a far )al#e of P00$- 'llon at
the nce(ton of the lease$
None of the nonCc#rrent assets ha)e been
*e(recate* for the c#rrent &ear$ The freehol*
(ro(ert& sho#l* be *e(recate* at -9 on ts cost of
P057 'llon6 the lease* (lant s *e(recate* at
-89 (er ann#' on a stra!htClne bass an* the
nonClease* (lant s *e(recate* at -79 on the
re*#cn! balance bass$
B> Gesse a*o(ts the far )al#e 'o*el for ts
n)est'ent (ro(ert&$ Its )al#e at 50 March -707
has been assesse* b& a "#alfe* s#r)e&or at
P0-$? 'llon$
B> D#rn! an n)entor& co#nt on 50 March -707
te's that ha* cost P< 'llon were *entfe*
as ben! ether *a'a!e* or slow 'o)n!$
It s est'ate* that the& wll onl&
real3e P? 'llon n total6 on whch sales
co''sson of 079 wll be (a&able$ An
n)oce for 'aterals *el)ere* on
0- March -707 for P8776777 has been
*sco)ere*$ It has not been recor*e* n GesseNs
boo%%ee(n! s&ste'6 altho#!h the 'aterals
were ncl#*e* n the n)entor& co#nt$
B)> Gesse o(erates so'e hea)& e,ca)atn! (lant
whch re"#res a 'aJor o)erha#l e)er& three
&ears$ The o)erha#l s est'ate* to cost
P0@ 'llon an* s *#e to be carre* o#t n A(rl
-700$ The (ro)son of P0- 'llon
re(resents two ann#al a'o#nts of P< 'llon
'a*e n the &ears to 50 March -77; an* -707$
B)> The *eferre* ta, (ro)son re"#re* at 50 March
-707 has been calc#late* at P--$8 'llon$
B)> The s#s(ense acco#nt contans the cre*t entr&
relatn! to the ss#e on 0 October -77; of a P
08 'llon @9 loan note$ It was ss#e* at a
*sco#nt of 89 an* nc#rre* *rect ss#e
costs of P0876777$ It s re*ee'able after fo#r
&ears at a (re'#' of 079$ Interest s (a&able
s, 'onths n arrears$ The frst (a&'ent of
nterest has not been accr#e* an* s *#e
on 0 A(rl -707$ A((orton'ent of ss#e
costs6 *sco#nts an* (re'#'s can be 'a*e
on a stra!htClne bass$
2UESTIONS:
Base* on the abo)e an* the res#lt of &o#r
a#*t6 co'(#te for the follown!: BDsre!ar* effect
of the a*J#st'ents on c#rrent nco'e ta,>
?<$ A*J#ste* (roft for the fscal &ear en*e* 50 March
-707
a$ P0@6?@A6877 c$ P0-6?@A6877
b$ P0@65776777 *$ P0@6<A86777
?A$ Total nonc#rrent assets as of 50 March -707
a$ P-5-6-776777 c$ P--56@776777
b$ P-5<6-776777 *$ P-0;6@776777
?@$ Total c#rrent labltes as of 50 March -707
a$ P886?776777 c$ P886;776777
b$ P8860776777 *$ P8?68776777
?;$ Total nonc#rrent labltes as of 50 March -707
a$ P?-68776777 c$ P?-60-86777
b$ P??67776777 *$ P?-650-6877
87$ Total sharehol*ers4 e"#t& as of 50 March -707
a$ P-5A60A86777 c$ P--?6@776777
b$ P-5<6;@A6877 *$ P-5<6@776777
End of Exaination
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Pa!e 6 of 6

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