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Practical Accounting 1 Reviewer

1. When an economy ceases to be hyperinflationary, an entity


shall discontinue the preparation and presentation of
financial statements under a condition of hyperinflationary
economy. Thus the amount expressed in the measuring unit
current at the end of the previous reporting period shall be
the
a. the present alue amount in the subse!uent
financial statement.
b. the carrying amount in the subse!uent financial
statement.
c. the fairvalue amount in the subse!uent financial
statement.
d. the historical alue amount in the subse!uent
financial statement.
". #rrespective of whether there is any indication of
impairment , an entity shall test a not tangible asset with an
indefinite useful life or an intangible asset not yet available
for use for impairment$
a. every three years$
b. annually
c. intangible assets not yet available for use,
annually and not tangible assets every three years
d. intangible assets not yet available for use, every
three years and not tangible assets Annually
%. &epreciation of an asset begins when
a. #t was ac!uired
b. #t is available for use
c. #t was assembled in its location
d. When the management decides to do so.
'. the initial direct cost in a direct financing lease are added to
the carrying amount of the leased asset and this would
effectively spread the initial direct cost over the lease term
and reduce the amount of
a. interest expense
b. interest income
c. lease expense
d. lease income
(. this is the recognition of a deferred tax asset or deferred tax
liability
a. intraperiod tax allocation
b. #nterperiod tax allocation
c. )one
d. both
*. The present value of the defined benefit obligation is the
present value, without deducting any plan assets, f expected
future payments re!uired to settle the obligation resulting
from employee service in the
a. +urrent periods
b. +urrent and prior periods
c. +urrent or prior periods
d. Prior periods
,. it is said that no entry is re!uired when share warrants are
issued to existing shareholders because these warrants are
issued usually
a. with consideration
b. without consideration
c. as bonus
d. as stoc- dividends
.. treasury shares may be reissued as dividends, in which
case the ///// of the shares be charged to retained earnings
a. historical value
b. cost
c. fair value
d. selling price
0. ordinary shares issued as a result of the conversion of a
debt instrument to ordinary shares are incuded from the
date
a. it was converted
b. interest ceases to accrue
c. as of the balance sheet
d. prior to the date of the balance sheet
11. in computation of cost of sales the basic rule is 2All
increases are added and all decreases are deducted except
the changes in
a. earned income
b. unearned income
c. withdrawals
d. expenses
11. PA3 . provides that an entity shall correct material prior
period errors retrospectively in the first set of financial
statements authori4ed for issue after the discovery by
a. Restating the comparative amounts for the latest
period presented in which the error was
discovered.
b. Restating the opening balances of asset liabilities
and e!uity for all prior period presented if the
error occurred before the earliest period presented
c. Restating the comparative amounts for the latest
period presented in which the error was
+orrected
d. Restating the opening balances of asset, liability
and e!uity for the earliest period presented if the
error occurred before the earliest period presented
1". preferred shares with specific redemption date and
ac!uired before the balance sheet date can !ualify as cash
e!uivalents
a. True
b. 5alse, if cannot !ualify as cash e!uivalents
c. 5alse, it should be ac!uired three months before
the balance sheet date
d. 5alse, it should be ac!uired three months before
the redemption date
1%. in which circumstances that a ban- overdraft is include as
component of cash and cash e!uivalent
a. when it s repayable on demand
b. when it is repayable on demand or form an
integral part of an entity6s cash management
c. when it is repayable on demand and form an
integral part in the entity6s cash financial
statement
d. when it is repayable on demand and form an
integral part of an entity6s cash management
1'. if the containers are not returnable, they are
a. +harged to loss
b. +harged to gain
c. +harged to the cost of the product
d. +harged as an out right expense
1(. developed goodwill is
a. recorded at fair value
b. recorded at historical value
c. recorded at present value
d. not recorded
1*. in a warranty liability any difference between estimate and
actual cost is a change in
a. accounting procedure
b. accounting principle
c. accounting entity
d. accounting estimate
1,. under the effective interest method, bond issue cots must be
lumped with the discount on bonds payable and netted
against the
a. selling price of the bond
b. present value of the bond
c. mar-et value of the bond
d. premium on bonds payable
1.. in the boo-s of the lessor, using a direct financing lease, the
net investment is e!ual to the
a. cost of the lease
b. fairvalue of the lease
c. fairvalue of the asset
d. cost of the asset
10. under the defined benefit plan the obligation of the entity is
to provide the
a. benefits to current employees
b. the benefits to current and former employees
c. the agreed benefit to current employees
d. the agreed benefit to current and former
employees.
"1. the revalued asset can only be carried at revalued amount
if there is
a. An inflation in the economy
b. A deflation in the economy
c. An mar-et value for the asset$
d. An active mar-et for the asset
"1. in tangible assets wth indefinite life are
a. Amorti4ed for its useful li-e
b. Amorti4ed for its legal life
c. )ot amorti4ed and not impaired
d. )ot amorti4ed but tested for impairment
"". in a patent, if the litigation is unsuccessful, the legal cost
and the remaining cost of the patent should be written off
as
a. expense
b. a deduction from the other patent
c. outright income
d. loss
"%. the immaterial cost of the leasehold shall be amorti4ed over
the life
a. of the lease
b. of the leasehold or lease which ever is shorter
c. of the leasehold
d. of none, it is charged to outright expense
"'. the basis of normal rate return is based on net assets
meaning
a. the exces of the total assets including goodwill
over total liabilities
b. the e!uity of the entity
c. the e!uity of the entity plus subsidiaries
d. total assets minus total liabilities minus goodwill
"(. if there is an indication that goodwill may be impaired,
recoverable amount is determined for the cash generating
unit to which
a. the impairement can be written off
b. the goodwill can be written off
c. the impairment belongs
d. the goodwill belongs
Selected records from the accounting records of Malakas Company are as follows:
Net accounts receivable at Dec. 3! "##$ !%##!###
Net accounts receivable at Dec. 3! "##& !###!###
'ccount receivable turnover $:
(nventory at Dec. 3! "##$ !##!###
(nventory at Dec.3! "##& !"##!###
(nventory turnover ):
*hat is the amount of gross margin+
a. $!###!### c.$!"##!###
b. $!$#!### d.$!3##!###

. ,he following information for "##& is provided by -uam Company:
Sales $#!###!###
Cost of Sales 3#!###!###
Selling ./penses $!###!###
-eneral and 'dministrative ./penses )!###!###
(nterest ./pense "!###!###
-ain on early e/tinguishment of long term debt $##!###
Correction of (nventory error! net of income ta/0credit !###!###
(nvestment (ncome0e1uity method 3!###!###
-ain on e/propriation "!###!###
(ncome ta/ e/pense $!###!###
Dividends declared "!$##!###
*hat is the amount of 2nance cost+
a. !"##!### c. !$##!###
b. "!###!### d. !3##!###
". Dakak Company issued bonds with a face value of 4)! ###!### and with a stated interest rate of #5 on 6an. #!
"##3. ,he interest is payable semiannually on 6une 3# and December 3. ,he bonds mature on every December
3 at a rate of 4"! ###!### per year for " years. ,he prevailing rate for the bonds is 35. ,he present value of at
)5 is as follows:
7ne period #.%&$
,wo periods #.%)"&
,hree periods #.3%%#
8our periods #.3$)3
*hat is the present value of the bonds on 6anuary ! "##3+
a. )!!)## c.)!#%%!&##
b. )!"&3!)## d.)!"$"!$3#
3. 7n 6anuary ! "##)! 9oyal Company purchased an e1uipment for 43! ###!###. ,he e1uipment is depreciated using
straight line method based on a useful life of 3 years with no residual value. 7n 6anuary ! "##:! after 3 years! the
e1uipment was revalued at a replacement cost of "!###!### with no change in residual value. 7n 6une 3#! "##:!
the e1uipment was sold for #!###!###. *hat is the e;ect of the 6une 3#! "##: transaction to the retained
earnings+
a."! $##!### increase c. $!###!### increase
b.3!"$#!### increase d. $!:$#!### increase
). ' natural resources property was purchased by Nge *ang Company for &!###!###. ,he output was estimated to be
!$##!### tons. Nge *ang Company purchased a mining e1uipment at a cost of 3!###!### and has a useful life of
# years but is capable of e/hausting the resource in3 years. 4roduction is as follows:

st
<ear $#!### tons
"
nd
<ear ""$!### tons
3
rd
<ear None
)
th
<ear ""$!### tons
*hat is the carrying amount of the mining e1uipment at the end of four years+
a. )!3##!### c. )!"##!###
b. )!###!### d. )!$##!###
(. Danhag Company has determined its "##3 Net (ncome is 43!###!###.(n the 2rst 2time audit of company 2nancial
statements! you determined he following errors:
4)##! ### revenue received in advanced during "##3was credited to revenue account.4##! ### was earned
in "##3! 4"##!## will be earned in "##% and the remainder will be earned in "##.
' 4$#! ### was recogni=ed as a loss resulting from a change in inventory valuation method during "##3.
*hat will be the ad>usted Net (ncome during "##3+
a."! 3##!### c.."! 3$#!###
b.3!$#!### d."!&##!###

&. 9athan Company was organi=ed on 6anuary !"##& with the following capital structures:
"5Cumulative preference share!4## par !with li1uidation value of 4"#!$#!### shares authori=ed! issued
and outstanding "#!### shares!4"!$##!###.
7rdinary Share Capital! par value 4$#! authori=ed 3#!### shares! issued and outstanding "#!### shares! 4!
"##!###.
,he net income for the years December 3! "##& and December 3! "##: were 4"! ###!### and 3!###!###!
respectively. No dividends were declared. *hat is the December 3! "##3 book value per ordinary share+
a."$& c."&#
c."% d."3$

:. Menin1iu= Company provided the following information for the "##3:
,otal 'ssets at December 3 )!$##!###
Share Capital at December 3 "!###!###
Share 4remium at December 3 "##!###
,reasury Stock ?at cost@ 3##!###
,he debt0to0e1uity ratio is "$5 at December 3! "##3. *hat is the retained earnings unappropriated on December 3!
"##3+
a.! )##!### c."! 3##!###
b.! ##!### d.! :##!###
3. 8elicia Co. owns "#5 royalty interest in an oil well. 8elicia receives royalty payments on 6anuary 3 for the oil sold
between 6une and November 3#! and 6uly 3# for oil sold between December and May 3 4roduction report
shows the following sales:
6une ! "##&0November 3#! "##& )!#$#!###
December! "##&0December 3! "##& &:$!###
December ! "##&0may 3! "##: $!)##!###
6une ! "##:0November 3#! "##: )!33:!$##
December ! "##:0December3! "##: %)$!###
*hat amount should 8elicia report as royalty revenue for "##:+
a.! 3%#!### c."! #!$##
b.! %))!### d."! )&!###
%. 'ssume the following balances at the end of the current year:
Capital 9i1uidated !3##!###
'ccumulated Depletion "!$##!###
Aetained .arnings !$##!###
Depletion based on $#!### units e/tracted B4"# per unit !###!###
(nventory of resource deposit $!### units
*hat is the ma/imum dividend that can be declared by the company+
a. "!##!### c."! "##!###
b."! ###!### d.! $##!###

#. Marie Company sells gift certi2cates redeemable only when merchandise is purchased. ,hese gift certi2cates have
an e/piration date of two years after issuance date. Cpon redemption or e/piration! Marie recogni=es the unearned
revenue as reali=ed. (nformation for "##: as follows:
-ift certi2cate payable "D3D"##& $"#!###
-ift certi2cate payable "D3D"##: &3#!###
-ift certi2cate redeemed !$&#!###
./pired gift certi2cates 3#!###
+ost of goods sold .17
Eow much -ift certi2cates sold during the year+
a. !3##!### c.. !&)# !###
b. !$##!### d. !:&#!###
. Fee Company provided the following informations concerning its de2ned bene2t plan in its memorandum records
on 6anuary ! "##:.
8air Galue of plant assets $!##!###
Cnamorti=ed past service cost "#!###
Cnrecogni=ed 'ctuarial 9oss &#!###
4ro>ected Hene2t 7bligation ?)!$##!###@
4repaidD'ccrued bene2t cost !)#!###
During the current year! the entity determined that its Current service cost was &##!### and the interest cost is #5.
,he e/pected return was #5 but the actual return was "5. 4ast service cost and any actuarial gain or loss
should be amorti=ed over # years. 7ther related information is as follows:
Contribution to the plan :"#!###
Hene2ts paid to retirees %##!###
&ecrease in P89 due to changes in actuarial assumptions 1"1,111
*hat is the balance of prepaidD accrue bene2t cost account on December 3! "##:+
a. !$3#!### c. !::#!###
b. 1,(*1,111 d. !&3#!###
". 4AC Company began selling a new calculator that carried a two year warranty against defects in "##:.
4AC pro>ected the estimated warranty cost ?as a percent of sales@ as follows:
8irst year warranty )5
Second year warranty #5
Sales and actual warranty repairs were:
"##: "##3
Sales $!###!### %!###!###
'ctual warranty repairs 3%#!### %##!###
*hat is the estimated warranty liability on December 3! "##:+
a. &:#!### c. :##!###
b. :%#!### d. &$#!###
3. 7n December 3! "##: Colt Company is e/periencing e/treme 2nancial pressure and is in default in meeting
interest payment on its long term note of 4&! ###!### due on December 3! "##%. ,he interest rate is "5
payable every December 3.
(n an agreement with the creditor! Colt obtained the following changes in the terms of note:
a. ,he accrued interest on December 3! "##: is forgiven.
b. ,he principal is reduced by $##!###.
c. ,he new interest rate is 35.
d. ,he new date of maturity is December 3! "#.
,he present value of at"5 for four periods is #.&3$$ and the present value of an ordinary annuity of at "5 for
four periods is 3.#3:3.
Eow much is the gain or loss on e/tinguishment+
a. "!$#)!:$# c. !333!333
b. !&3!333 d. #
). .ast Company leased machinery from Chin Company on 6anuary ! "##: for a #0year period ?useful life of "#
years@
.1ual annual payments under the lease are 4"##!### and are due on 6anuary of each year starting 6anuary ! "##:.
,he present value at 6anuary ! "##: of the lease payments over the lease term discounted at #5 was !3$"!###.
,he lease was appropriately accounted for as 2nance lease by .ast because there is a very nominal bargain
purchase option.
*hat is interest e/pense for "##3+
a. #&!:"# c. "##!###
b. $!"## d. #
$. ,he Cloak Corporation received the following report from its actuary at the end of the year:
11:11:1* 11:%1:1*

;nrecogni4ed past service cost (11,111 '(1,111
Accumulated benefit obligation *,111,111 *,'11,111
5air alue of pension plan assets (,.11,111 *,",*,111
Actuarial net gain .11,111 <
8enefits paid during the year *.1,111
+ontribution made during the year ("1,111
+urrent service cost '0(,111
=xpected rate of return 117
3ettlement rate 1"7
Ave. wor-ing lives of employees "1 years
What is the amount of net benefit expense to be charged against income for the year "11*<
a. *,(,111 c. ,1*,111
b. *.(,111 d. .,(,111
&. 8rancisco Company was organi=ed on 6anuary "! "##& with 3##!### ordinary shares with a 4& par value
authori=ed. During "##&! 8rancisco had the following stock transactions:
>anuary " #ssued *1,111 shares at P11 per share
?arch . #ssued "1,111 shares at P11 per share.
?ay 0 Purchased ,,(11 shares at P1" per share.
>uly " #ssued 1(,111 shares at P1% per share.
August 1, 3old (,111 treasury shares at P1' per share.
5rancisco uses the 5#59 method for purchase@sale purposes.
#f 5rancisco uses the cost method to record treasury stoc- transactions, how much would be the 3hare Premium at &ecember %1,"11*<
a. ''(,111 c. '*(,111
b. '((,111 d. '.(,111
:. -enius Company reported an 'ccumulated 4ro2ts balance of 43##!###at December 3!"##$. (n 6une "##&! -enius
discovered that merchandise costing 4##!### had not been included in the inventory in its "##$ 2nancial
statements. 'ssume -enius has 3$5 ta/ rate.
What amount should Aenius report as adBusted beginning Accumulated Profits and Cosses on >anuary 1, "11*<
a. "%(,111 c. %11,111
b. %*(,111 d. '11,111
3. (n "##)! 4ower Designs Corporation sold a layout design to Mass!(nc. and will receive royalties of future revenues
associated with the said layout design. 7n December 3!"##$! 4ower Designs reported royalties receivable of
4:$!### from Mass! (nc. During "##&! 4ower Designs received royalty payments of 4"##!###. Mass!(nc. reported
revenues of 4!$##!### in "##& from the layout design.
#n its "11* #ncome 3tatement, what amount should Power &esigns report as royalty revenue<
a. 1"(,111 c. "11,111
b. 1,(,111 d. %11,111
%. ,he following pertains to an operating sale and leaseback of e1uipment by Earbor Co. on December 3!"##$:
3ales price '"1,111
+arrying amount ("1,111
?onthly lease payment %,,%%'
Present value of lease payments:5air ?ar-et alue '"1,111
=stimated remaining life 1" years
Cease term 1 year
#mplicit rate 1"7
What amount of deferred loss should Darbor report at &ecember %1, "11(<
a. 1 c. 111,111
b. %,,%%' d. "11,111
"#. ,he 4uncher Co. launched a sales promotional campaign on 6une 3#! "##&. 8or every ten empty packs returned to
4uncher! customers will receive an attractive food container. ,he company estimates that only 3#5 of the packs
reaching the market will be redeemed. 'dditional information are as follows:
;nits Amount
3ales of food pac-s %,111,111 P0,111,111
5ood containers purchased *1,111 1.1,111
Pri4es distributed to customers %,,111
At the end of the year, Puncher recogni4ed a liability e!ual to the estimated cost of potential pri4es outstanding.
What is the amount of this estimated liability<
a. *0,111 c. 1(0,111
b. 01,111 d. 1.1,111
"1. -reen Company has "!###!### shares of ordinary shares outstanding on December 3! "##$. 'n additional
##!### shares are issued on 'pril ! "##& and ")#!### more on September . 7n 7ctober ! -reen issued
43!###!### of %5 convertible bonds. .ach bond is convertible into )# shares of ordinary shares. 't the time of
issue of the convertible bonds! the market rate of the bonds without conversion option is e1ual to its nominal rate.
No bonds have been converted.
The number of shares to be issued in computing basic earnings per share and diluted earnings per share on &ecember %1, "11* would beE
a. ",1((,111 F ",1((,111 c. ",1((,111
b. ".1((.111 F ",",(,111 d. ",('1,111
"". ,ar=ana Company reported total purchases of 43!"##!### in its accrual basis 2nancial statement on December
3!"##&. 'dditional information revealed the following:
Accounts Payable, &ecember %1,"11( P 011,111
Accounts Payable, &ecember %1,"11* 1,"(1,111
What is the amount of purchases under the cash basis on &ecember %1,"11*<
a. ",.(1,111 c. ',111,111
b. %,((1,111 d. ','(1,111
"3. 7n March 3! "##$ Mr. Aight .nterprise traded in an old machine having a carrying amount of 4!&##!### and paid
cash di;erence of 4&##!### for a new machine having a total cash price of 4"!###!###.
9n ?arch %1,"11(, what amount of loss should ?r. Right recogni4e on this exchange<
a. P 1 c. P'11,111
b. P"11,111 d. P*11,111
"). 7n 'pril 3#! "##$! Shark Corporation purchased for 4 3# per share all "##!### of 8ins CorporationIs outstanding
ordinary share. 7n this date! 8inIs balance sheet showed net assets of 4 $!###!###. 'dditionally! the fair value of
8inIs identi2able assets on the same date was 4&##!### in e/cess of their carrying amount.
What amount should 3har- report as goodwill in its April %1, "11( consolidated balance sheet<
a. P 1 c. P*11,111
b. P'11,111 d. P 1,111,111
"(. 9n 3eptember %1, C8+ &elivery service had a P".,111 debit balance in Accounts Receivable. &uring 9ctober, the company had sales of
P1%,,111, which included P01,111 in credit sales. 9ctober collections were P01,111, and write@offs of uncollectible receivables totaled P1,111.
9ther data includeE 3eptember %1 credit balance in allowance of uncollectible accounts, P1,1*1G ;ncollectible@account expense, estimated as "7
of the credit sales. &etermine the ending balances in Accounts Receivable, Allowance for ;ncollectible Accounts and )et Accounts Receivable
at 9ctober %1.
"*. HDA=, #nc. is a manufacturer of cosmetics, speciali4ing in products for sensitive s-in. &uring "11., ?ARH F IDA)= offered HDA=
products for the first time, so "11. was the HDA=6s best year ever. )et #ncome reached P1.? on sales of P'%1?, and HDA= collected P''1?
from customers. The increased volume sales and collections left HDA= w: excess cash during the year, so the company invested P1.? in 01@
day 83P Treasury 8ills. These were the first short term investments in the company6s history. HDA= cashed in P1*? of the T@8ills during the
year. At &ecember %1, "11., HDA=6s interest revenue for the year totaled P1.%?. of this amount, HDA= expects to collect P.%1? early in "110
when the T@bills mature. &etermine the cash provided by operating, financing F #nvesting Activities.
",. #n August "11., >P#A +orp. purchased a trading investment some )&?; stoc- for P%1",111. The stoc- headed down, and one month later,
>P#A sold the stoc- for P%10,111. 9n )ovember 1*, "11., >P#A purchased 01@day 83P Treasury bill for P%.1,111. >P#A intends to collect the T@
bill at its maturity value of P%..,111. Another cash excess developed in &ecember, and >P#A paid P"*%,111 for some )otes Receivable that it
will hold in the hope of selling them at a profit early in >anuary "110. the )otes Receivable is scheduled to mature in August "110. At &ecember
%1, "11., the mar-et value of these notes is P"*",111, not including the accrued interest of P",111 that was earned. Dow much is the interest
income F purchase price of short term investments<
".. Alitters +orp. is a newly organi4ed business for a medical practice to speciali4e in genecology. Transactions for the month first month areE
a. #nvested in the business of P"(,111 in exchange of common stoc-.
b. Paid cash for land costing P1(,111.
c. Purchased a medical supplies for P",111 on account.
d. Alitters treated patients and earned service revenue of P.,111, receiving cash for half the revenue earned.
e. 8usiness paid the following expensesE salaries P1,'11, office rent P1,111,;tilities P%11.
f. 8usiness sold the supplies to another physician for cost of P(11.
g. 8usiness borrowed P11,111 signing a note payable on the ban-.
h. Paid P1,(11 on account.
Re!uirementsE
1. Amount that business expects to collect from patients.
". Amount owed by the business. Amount of )et #ncome or )et Coss does business experienced.
%. The total assets of the business. Darrison 1@(
"0. #nformation regarding 56s portfolio of mar-etable e!uity securities as followsE
Aggregate cost as of 1":%1:1. P %'1,111
;nreali4ed gains@ 1":%1:1. .,111
;nreali4ed CossesG 1":%1:1. (",111
)et Reali4ed gains during "11. *1,111
At &ecember %1, "11,, 5 reported an allowance of P 1,(11 to reduce investments to lower cost or mar-et. #n its &ecember %1, "11.,
balance sheet, what allowance should 5 report<
%1. 8ased on physical inventory ta-en on &ecember %1, "11., Adobo +o. determined its chocolate inventory on a 5#59 basis at P"*,111 with a
replacement cost of P"1,111. Adobo estimated that, after further processing costs of P1",111, the chocolate could be sold as finished candy bars
for P'1,111. Adobo normal profit margin is 117 1f sales. ;nder the lower cost or mar-et rule, what amount should Adobo report as chocolate
inventory in its &ecember %1, "11. balance sheet<
%1. Ioo +o. determined that, due to obsolescence, e!uipment with an original cost of P 011,111 and accumulated depreciation at >anuary 1, "11, of
P'"1,111 had suffered permanent impairment, and as a result should have a carrying value of only P%11,111 as of beginning of the year. #n
addition, the remaining useful life of the e!uipment was reduced from . to % years. #n its &ecember %1, "11., balance sheet, what amount
should be report as accumulated depreciation<
%". 9n >anuary ., "11., Pagod +orp. established a noncontributory defined benefit plan covering all employees and contributed P 1,111,111 to the
plan. At &ecember %1, "11., Pagod determined that the "11. service and interest costs on the plan were P *"1,111. The expected and the actual
rate of return on plan assets for "11. was 117. There are no other components of Pagod pension expense. What amount should Pagod report in
its &ecember %1, %11., balance sheet as prepaid pension cost<
%%. 9n >uly 1, "11., after recording interest and amorti4ation, )ah +o. converted P ",111,111 of its 1"7 convertible bonds into (1,111 shares of P"
par value common stoc-. 9n the conversion date the carrying value of the bonds was P ",.11,111, and )ah common stoc- was publicly trading
at P*1 per share. ;sing the boo- value method, what amount of additional paid in capital should )ah record as a result of the conversion. (@0
from Cuis hidalgo
%'. The notes to an +orp.6s financial statements recently reported the following data on 3eptember %1, Iear 1 Jthe end of fiscal yearKE
Cong@Term debt at 3eptember %1, Iear 1, included the followingE
*7 debentures due year "1 with an effective interest rate of 0.**7, net of unamorti4ed discount of
P(.,*0(,111LLLLLLLLLLLLLLLLLLLLLL..P1**,%1(,111
9ther indebtedness with an interest rate of ..%17, due P1",11.,111 in year ( and P10,(",,111 in year
*LLLLLLLLLLLLLLLLLLLLLLLLLL.P%1,%*(,111
an amorti4es discount by the effective interest method. What should be the bond6s carrying amount< Darrison F Dorgren
%(. Huyaw +orp. entered into a 0 year lease on a warehouse on &ecember %1, "11,. Cease payments of P(",111, which includes real estate taxes of
P",111 are due annually beginning on &ecember %1, "11., and every &ecember %1 thereafter. Huyaw does not -now the implicit rate in the
lease. Huyaw6s incremental borrowing rate is 07. The rounded present value if an ordinary annuity for nine years at 07 is (.*. What amount
should -uyaw report as capitali4ed lease liability at &ecember %1, "11,<
%*. 9n >une 1, "11(, ?ardhex, #nc. issued P(11,111 of 117, 1(@year bonds at par. #nterest is payable semiannually on >une 1 and &ecember 1.
8ond issue costs were P*,111. 9n >une 1, "111. ?ardhex retired half of the bonds at 0.. What is the net amount that ?ardhex should use in
computing the gain or loss on retirement debt<
%,. 9n >anuary ", "11., ?arcfe +o. sold a used machine to ?ardhex #nc. for P011,111, resulting in a gain of P",1,111. 9n that date, ?ardhex paid
P1(1,111 cash and signed a P,(1,111 note bearing interest at 117. The note was payable in three annual installments of P"(1,111 beginning on
>anuary ", "110. ?arcfe appropriately accounted for the sale under the installment method. ?ardhex made a timely payment of the first
installment on >anuary ", "110, of P%"(,111, which included accrued interest of P,(,111. What amount of deferred gross profit should ?arcfe
report at &ecember %1, "110<
%.. H++ ?all made the following expenditures during "11,E
+osts to develop the computer software for internal
use in H++6s general management information
system P111,111
+osts of mar-et research activities ,(,111
What amount of these expenditures should H++ report in its "11, income statement as research and development expenses< until hereJ hidalgoK
%0. Red +ompany had the following balances at &ecember %1, "11.G +ash in ban- P","(1,111, +ash on hand P1"(,111 F cash legally restricted
for additions to plant Jexpected to be disbursed in "110K P1,*11,111. +ash in ban- includes P*11,111 compensating balance is not legally
restricted as to withdrawal by Red. #n the current assets section of Red6s &ecember %1, "11. balance sheet, total cash should be reported atE
'1. CC #nc. accepted from a customer a P'1,111, a 01 day 1"7 interest bearing note dated August %1, "111. 9n 3eptember %1, "111, CC discounted
the note at the &8P ban- at 1(7. Dowever, the proceeds were not received until 9ctober 1, "111. #n CC6s 3eptember %1, "111 balance sheet, the
amount receivable from the ban- based on a %*1@day year, includes accrued interest revenue ofE
'1. 9n >uly 1, "11(, PP +orp. sold e!uipment to 99 +o. for P111,111. PP accepted a 117 note receivable for the entire sales price. This note is
payable in " installments of P(1,111 plus accrued interest on &ecember %1, "11( and &ecember %1, "11*. 9n >uly 1, "11*, PP discounted the
note at the ban- at an interest rate of 1"7. PP6s proceeds from the discounted note wereE
'". +oca +ompany6s inventory at &ecember %1, "11, was P1,"11,111 based on physical count of goods priced at cost, and before any necessary
year@end adBustments relating to the followingE
#ncluded in the physical count were goods billed to a customer 598 shipping point on &ecember %1, "11,. The goods had a cost of
P"(,111 and were pic-ed up by the carrier on >anuary ,, "11..
Aoods shipped 598 shipping point on &ecember "., "11,, from a vendor to +oca were received on >anuary ', "11.. The invoice cost was
P*1,111
What amount should +oca report as inventory in its &ecember %1, "11, balance sheet<
'%. ?+ +orp. uses 5#59 retail method of inventory valuation. The following information is availableE
+ost Retail
8eginning inventory P1",111 P%1,111
Purchases *1,111 111,111
)et Additional ?ar-ups 11,111
)et ?ar-downs "1,111
3ales Revenue 01,111
#f the lower of cost or mar-et rule is disregarded, what would be the estimated cost of the ending inventory<
Problem "1@"1 is based on the followingE
&uring "11,, Pittoh +orp. incurred costs to develop and produce a routine, low@ris- computer software product, as followsE
+ompletion of detail program design P1%,111
+ost incurred for coding and testing to
=stablish technological feasibility 11,111
9ther coding costs after establishment
9f technological feasibility "',111
9ther testing costs after establishment
9f technological feasibility "1,111
+osts of producing product masters for training materials 1(,111
&uplication of computer software and training
?aterial from product masters J1,111 unitsK "(,111
Pac-aging product 0,111
''. #n Pittoh6s &ecember %1, "11, balance sheet, what amount should be reported in inventory<
'(. #n Pittoh6s &ecember %1, "11,, balance sheet, what amount should be capitali4ed as software cost, subBect to amorti4ation<
'*. ?arbel, #nc. purchased a machine for P'(1,111 1n >anuary ", "11,. The machine has an estimated useful life of four years and a salvage value
of P(1,111. The machine is being depreciated using sum@of@the@years6 digits method. The &ecember %1, "11. asset balance, net of accumulated
depreciation should be<
',. Among items reported on ;@Toh #nc.6s #ncome 3tatement for year ended &ecember %1, "11. were the followingE
Amorti4ation of goodwill P11,111
#nsurance premium on life of an officer
with ;@toh as owner and beneficiary (,111
Temporary differences amount to< 1
'.. 5or the year ended &ecember %1, "11,, >asmine +orp. has a loss carryforward of P1.1,111 available to offset future taxable income. At
&ecember %1, "11., reali4ation of the tax benefit is probable, but not assured beyond any reasonable doubt. #ncome tax rate is %(7. What
amount of the tax benefit should be reported in >amine6s "11. income statement< 1
'0. +PA +orporation owns an office building and normally charges tenants P%1 per s!uare foot per year for office space. 8ecause the occupancy
rate is low, +PA agreed to lease 11,111 s!uare feet to ?8A at P1" per s!uare foot for the first year of a three year operating lease. Rent for the
remaining years will be at the P%1 rate. ?8A moved into the building on >anuary 1, "11,, and paid the first year6s rent in advance. What
amount of rental revenue should +PA report from ?8A in its income statement for the year ended 3eptember %1, "11,< .1,111
(1. &uring "11,, ?er +orp. sold goods to its .17 subsidiary, Mer +orp. At &ecember %1, "11,, N of these goods were included in Mer6s ending
inventory. Reported "11, selling expenses were P 1,111,111 and P '11,111 for ?er and Mer, respectively. Pard6s selling expenses included
P(1,111 in freight out costs for goods sold to Mer. What amount of selling expenses should be reported in ?er6s "11, consolidated income
statement<
(1. 9n >anuary 1, "11., Pacman +orp. purchased '17 of the voting common stoc- of Alen, #nc and appropriately accounts for its investment by the
e!uity method. &uring "11., Alen reported earnings of P""(,111 and paid dividends of P,(,111. Pacman assumes that all of Alen6s
undistributed earnings will be distributed as dividends in the future periods when the enacted tax rate is %17. #gnore the dividend@received
deduction. Pacman uses the liability method to account for temporary differences. The increase in Pacman6s deferred income tax liability for this
temporary difference is<
52. The Goat Corp. is authorized to issue 100,000 shares at P20 par ordinary share. At the beginning of 2006, 18,000 ordinary shares
ere issued and outstanding. These shares had been issued at P2! per share. "uring 2006, the #o$pany entered into the
fo%%oing transa#tions&
'anuary ( )ssued 1,*00 ordinary shares at P28 per share
+ar#h 1, -.#hanged 12,000 ordinary shares for a $a#hine
The ordinary shares as se%%ing at P*0 per share.
+ay , /ea#0uired 500 ordinary shares at P2, per share.
'u%y 1, A##epted subs#riptions for 1,000 ordinary shares at P*1 per share. The
#ontra#t #a%%ed for 101 don pay$ent ith the ba%an#e due on "e#e$ber 1.
2epte$ber ( 2o%d 500 of treasury share at P*2 per share.
"e#e$ber 1 Co%%e#ted the ba%an#e due on 'u%y 1 subs#riptions and issued the sto#3
#ertifi#ate.
How much is the contributed capital for December 31, 2006? (914,900
5*. The shareho%ders4 e0uity se#tion of 5%ess Corp4s ba%an#e sheet at "e#e$ber *1, 2005 as as fo%%os&

6rdinary share 7P10 par 8a%ue, authorized 1,000,000 shares issued
and outstanding ,00,000 shares9 ,,000,000
2hare pre$iu$ 2,!00,000
A##u$u%ated Profits and %osses 1,*00,000
Tota% shareho%ders: e0uity 1*,000,000
6n 'anuary 2, 2006, 5%ess pur#hased and retired 100,000 shares of its sto#3 for P1,800,000.
!mmediatel" after retirement of these 100,000 shares, how much is the balance in the #hare $remium and
%ccumulated $rofits? (#hare premium 2,400,000& %ccumulated $rofit '00,000
5(. 2a%8ation Corporation had to issues of se#urities outstanding ; ordinary share and an 81 #on8ertib%e bond issue ith a fa#e
a$ount of P16,000,000. )nterest pay$ent dates of the bond issue are 'une *0 and "e#e$ber *1. The #on8ersion #%ause in the
bond indenture entit%es the bondho%ders to re#ei8e forty share of P20 par 8a%ue ordinary share in e.#hange for ea#h P1,000 bond.
6n 'une *0, 2006, the ho%ders of P2,(00,000 fa#e 8a%ue bonds e.er#ised the #on8ersion pri8i%ege. The e0uity #o$ponent of the
#on8ertib%e debt at the ti$e of issue is P,50,000. The $ar3et pri#e of the bonds on that date as P1,100 and the $ar3et pri#e of
the ordinary share as P*5. The tota% una$ortized bond dis#ount at the date of the #on8ersion as P1,000,000.
!n appl"in( the boo) *alue method, what amount should #al*ation credit to the +share premium in e,cess of par-
account as a result of this con*ersion? (4.2,000
55. 6n 'anuary 1, 205, -%%e Co$pany granted 5,000 share options ith a ten<year %ife to ea#h of ten e.e#uti8es. The share option i%%
8est and be#o$e e.er#isab%e i$$ediate%y if and hen the #o$pany4s share pri#e in#reases fro$ P50 to P!0 and pro8ided that the
e.e#uti8es re$ain in ser8i#e unti% the share target is a#hie8ed.
The #o$pany app%ies the bino$ia% option $ode%, hi#h ta3es into a##ount the possibi%ity that the target share pri#e i%% not be
a#hie8ed. The #o$pany esti$ates that the fair 8a%ue of the options at grant date is P25 per option. =ro$ the option ;pri#ing
$ode%, the #o$pany deter$ines that the $ode of the distribution of possib%e 8esting date is fi8e years. The $ost %i3e%y
out#o$e of the $ar3et #ondition is that the share pri#e target i%% be a#hie8ed at the end of 200,. Therefore, -%%e esti$ates
that the e.pe#ted 8esting period is fi8e years. -%%e a%so esti$ates that to e.e#uti8es i%% ha8e %eft by the end of 200, and
therefore e.pe#ts that (0,000 share options i%% 8est at the end of 200,.
Throughout 2005 to 2008, -%%e #ontinues to esti$ate that a tota% of to e.e#uti8es i%% %ea8e by end of 200,. >oe8er, in tota%,
three e.e#uti8es had %eft, one ea#h in 200!, 2008 and 200,. Another e.e#uti8e %eft in 2010 before the share pri#e target is
a#hie8ed.
/hat amount of remuneration e,pense should the compan" reco(ni0e in its December 31, 2009 income statement?
(.1,000
56. The shareho%ders4 e0uity of the A%bert #o. on 'une *0, 2006 as as fo%%os&
6n 'u%y 1, the fo%%oing
a#tions ere ta3en&
a. 6rdinary shareho%ders turned in their o%d ordinary shares and re#ei8ed in e.#hange ne ordinary shares, 1 share
of the ne share being e.#hanged for e8ery ( shares of the o%d. ?e ordinary share as gi8en a stated 8a%ue of
P60 per share.
b. 6ne<ha%f share of the ne ordinary share as issued on ea#h share of preferen#e share outstanding in
%i0uidation of di8idends in arrears on preferen#e share.
#. The defi#it fro$ operations as app%ied against the share pre$iu$ arising fro$ the ordinary share restate$ent.
Transa#tions for the re$ainder of 2006 affe#ting the shareho%ders4 e0uity ere as fo%%os&
6#tober 1 10,000 preferen#e shares ere #a%%ed at P55 p%us di8idends for * $onths at 51. 2hare
as for$a%%y retired.
?o8e$ber 10 60,000 ne ordinary shares ere so%d at P65.
"e#e$ber *1 ?et in#o$e for the 6 $onths ended on this date, as P(00,000 7Assu$e that re8enues
and e.penses ere #%osed to a te$porary a##ount, )n#o$e 2u$$ary. @se this
a##ount to #o$p%ete the #%osing pro#ess9. The se$i<annua% di8idend as de#%ared on
preferen#e shares, and a P0.!5 di8idend as de#%ared on ordinary shares, di8idends
being payab%e 'anuary 2, 200!.
/hat would be the total #hareholders- 23uit" as of December 31, 2006? (.,143,.10
5!. As the beginning of the a##ounting year 2006, Tru$ has $a#hinery ith a histori#a% #ost of P(,500,000 and a##u$u%ated
depre#iation of P1,500,000.
6n "e#e$ber *1, 2006, Tru$ de#%ared the $a#hinery as di8idend hi#h has a #arrying a$ount at the ti$e of P2,500,000.
Tru$4s po%i#y is to $easure a%% depre#iab%e asset at #ost. At the ti$e of de#%aration, the e0uip$ent has a fair $ar3et 8a%ue of
P2,000,000.
Contributed #apita%&
51 preferen#e shares,P50 par, #u$u%ati8e, *0,000 shares issued,
di8idends 5 years in arrears 1,500,000
6rdinary shares, P*0 par, 100,000 shares issued *,000,000
(,500,000
"efi#its fro$ operations 7600,0009
Tota% shareho%ders: e0uity *,,00,000
/hat total amount should 4rum char(e its accumulated profits and losses related to the machiner" durin( 2006?
(3,000,000

58. )n 200,, The Aorf Co$pany, reported preta. finan#ia% in#o$e of P500,000. )n#%uded in that preta. finan#ia% in#o$e as P,0,000 of
nonta.ab%e %ife insuran#e pro#eeds re#ei8ed as a resu%t of the death of an offi#erB P120,000 of arranty e.penses a##rued but
unpaid as of "e#e$ber *1, 200,B and P20,000 of %ife insuran#e pre$iu$s for a po%i#y for an offi#er.
%ssumin( that no income ta,es were pre*iousl" paid durin( the "ear and assumin( an income ta, rate of 40 percent,
the amount of income ta,es pa"able on December 31, 2009, would be (220,000
5,. The boo3s of the Tra#3er Co$pany for the year ended "e#e$ber *1, 2008, shoed preta. in#o$e of P*60,000. )n #o$puting the
ta.ab%e in#o$e for federa% in#o$e ta. purposes, the fo%%oing ti$ing differen#es ere ta3en into a##ount&
/hat should
4rac)er record
as its current
income ta,
liabilit" at December 31, 200', assumin( a corporate income ta, rate of 30 percent? (106,'00
60. =rey Corporation:s in#o$e state$ent for the year ended "e#e$ber *1, 2008, shos preta. in#o$e of P1,000,000. The fo%%oing
ite$s are treated different%y on the ta. return and in the a##ounting re#ords&
%ssume
that 5re"6s
ta, rate for
200' is 30
percent7
/hat is the amount of income ta, pa"able for 200'? (294,000
61. )n8enti8e Corporation:s in#o$e state$ent for the year ended "e#e$ber *1, 2008, shos preta. in#o$e of P*00,000. The fo%%oing
ite$s are treated different%y on the ta. return and in the a##ounting re#ords&
Ta. A##ounting
/eturn /e#ords
Aarranty e.pense ...................... P1!0,000 P185,500
"epre#iation e.pense .................. 150,000 100,000
Pre$iu$s on offi#ers: %ife insuran#e .. << 60,000
%ssume that !n*enti*e6s ta, rate for 200' is 40 percent7 /hat is the current portion of !n*enti*e6s total income ta,
e,pense for 200'? (130,000
62. The fo%%oing differen#es beteen finan#ia% and ta.ab%e in#o$e ere reported by "ider Corporation for the #urrent year&
7a9 -.#ess of ta. depre#iation o8er boo3 depre#iation .... P60,000
7b9 )nterest re8enue on $uni#ipa% bonds .................. ,,000
7#9 -.#ess of esti$ated arranty e.pense o8er a#tua%
e.penditures ......................................... 5(,000
7d9 @nearned rent re#ei8ed ............................... 12,000
7e9 =ines paid ........................................... *0,000
7f9 -.#ess of in#o$e reported under per#entage<of<#o$p%etion a##ounting for
finan#ia% reporting o8er
#o$p%eted<#ontra#t a##ounting used for ta. reporting . (5,000
7g9 )nterest on indebtedness in#urred to pur#hase ta.<e.e$pt
se#urities .................................... *,000
7h9 @nrea%ized %osses on $ar3etab%e se#urities re#ognized
for finan#ia% reporting .............................. 18,000
%ssume that Dider 8orporation had preta, accountin( income 9before considerin( items (a throu(h (h: of $900,000 for the
current "ear7 8ompute the ta,able income for the current "ear7 (903,000
6*. )n 2008, Ayatt Corporation issued for P110 per share, 15,000 shares of P100 par 8a%ue #on8ertib%e preferred sto#3. 6ne share of
preferred sto#3 $ay be #on8erted into three shares of Ayatt:s P25 par 8a%ue #o$$on sto#3 at the option of the preferred
"epre#iation dedu#ted for ta. purposes in e.#ess of
depre#iation re#orded on the boo3s ................... P16,000
)n#o$e fro$ insta%%$ent sa%e reportab%e for ta. purposes
in e.#ess of in#o$e re#ognized on the boo3s .......... 12,000
Ta. A##ounting
/eturn /e#ords
/ent in#o$e ........................... P !0,000 P120,000
"epre#iation e.pense .................. 280,000 220,000
Pre$iu$s on offi#ers: %ife insuran#e .. << ,0,000
shareho%der. 6n "e#e$ber *1, 200,, a%% of the preferred sto#3 as #on8erted into #o$$on sto#3. The $ar3et 8a%ue of the #o$$on
sto#3 at the #on8ersion date as P(0 per share.
/hat amount should be credited to the common stoc) account on December 31, 2009? (1,121,000
6(. 5e%don Co. as organized on 'anuary 2, 2008, ith the fo%%oing #apita% stru#ture&
;eldon6s net
income for the
"ear ended
December 31, 200', was $900,000, but no di*idends were declared7 ;eldon6s balance sheet would report Di*idends
$a"able at December 31, 2001, of (<0<
65. The a##ounts and ba%an#es shon be%o ere gathered fro$ Paynter Corporation:s tria% ba%an#e on "e#e$ber *1, 200!. A%%
adCusting entries ha8e been $ade.
Aages Payab%e ........................................... P 25,600
Cash .................................................... 1!,!00
+ortgage Payab%e ........................................ 151,600
"i8idends Payab%e ....................................... 1(,000
Prepaid /ent ............................................ 1*,600
)n8entory ............................................... 81,800
2in3ing =und Assets ..................................... 52,(00
2hort<Ter$ )n8est$ents .................................. 15,200
Pre$iu$ on 5onds Payab%e ................................ (,600
2to#3 )n8est$ent in 2ubsidiary .......................... 102,(00
Ta.es Payab%e ........................................... 22,800
A##ounts Payab%e ........................................ 2(,800
A##ounts /e#ei8ab%e ..................................... *6,600
4he amount that should be reported as current assets on $a"nter 8orporation6s balance sheet is? $164,000
667 #ee information for $a"nter 8orporation abo*e7 4he amount that should be reported as current liabilities on $a"nter
8orporation6s balance sheet is ('.,200
6!. +ary3 -%e#troni#s )n#. reported the fo%%oing ite$s on its "e#e$ber *1, 200!, tria% ba%an#e&
A##ounts Payab%e ........................................ P108,,00
Ad8an#es to -$p%oyees ................................... (,500
@nearned /ent /e8enue ................................... 28,800
-sti$ated Diabi%ity @nder Aarranties .................... 25,800
Cash 2urrender Ea%ue of 6ffi#ers: Dife )nsuran#e ........ !,500
5onds Payab%e ........................................... 555,000
"is#ount on 5onds Payab%e ............................... 22,500
Trade$ar3s .............................................. *,,00
4he amount that should be recorded on =ar")6s balance sheet as total liabilities is? (696,000
68. -ag%e Co. prepared a draft of its 200! ba%an#e sheet. The draft state$ent reported #urrent %iabi%ities tota%ing P200,000. >oe8er,
none of the fo%%oing ite$s ere in#%uded in this pre%i$inary tota% at "e#e$ber *1, 200!&
A##ounts payab%e ........................................ P*0,000
5onds payab%e, due 2008 ................................. 50,000
"is#ount on bonds payab%e, due 2008 ..................... 6,000
"i8idends payab%e on 'anuary *1, 2008 ................... 16,000
?otes payab%e, due 200, ................................. (0,000
%t which amount should 2a(le6s current liabilities be correctl" reported in the December 31, 200., balance sheet?
(290,000
10 per#ent #u$u%ati8e preferred sto#3, par 8a%ue P100,
and %i0uidation 8a%ue P105B issued and outstanding
2,000 shares ........................................ P200,000
Co$$on sto#3, par 8a%ue P25B authorized 100,000 sharesB
issued and outstanding 20,000 shares ................ 500,000
6,. The "e#e$ber *1, 200!, ba%an#e sheet of +adden )n#., reported tota% assets of P1,050,000 and tota% %iabi%ities of P680,000. The
fo%%oing infor$ation re%ates to the year 2008&
F +adden )n#. issued an additiona% 5,000 shares of #o$$on sto#3 at P25 per share on 'u%y 1,
2008.
F +adden )n#. paid di8idends tota%ing P80,000.
F ?et in#o$e for 2008 as P110,000.
F ?o other #hanges o##urred in sto#3ho%ders: e0uity during 2008.
4he stoc)holders6 e3uit" section of the December 31, 200', balance sheet would report a balance of? (121,000
!0. 2eaha3 Co$pany:s adCusted tria% ba%an#e at "e#e$ber *1, 200!, in#%udes the fo%%oing a##ount ba%an#es&
Co$$on 2to#3, P* par .................................... P*00,000
Additiona% Paid<)n Capita% .............................. (00,000
Treasury 2to#3, at #ost ................................. 25,000
?et @nrea%ized >o%ding Doss on A8ai%ab%e<=or<2a%e
2e#urities ............................................ 10,000
/etained -arnings<<Appropriated for @ninsured -arth0ua3e
Dosses ................................................ !5,000
/etained -arnings<<@nappropriated ....................... 100,000
/hat amount should #eahaw) report as total owners6 e3uit" in its December 31, 200., balance sheet? ('40,000
!1. The fo%%oing e.penses ere re#ognized by Ga%ob Co$pany, a retai%er, during 2008&
)nterest e.pense ..................................... P120,000
Te%ephone e.pense .................................... ,5,000
Doss on sa%e of store e0uip$ent ...................... (!,000
Dega% fees ........................................... !(,000
6ffi#ers: sa%aries ................................... 115,000
/hat should >alob report as (eneral and administrati*e e,penses for 200'? (2'4,000
A)3W=R H=I
Theories
1.11 8
11@"( &
Problems
1. Anser& b

3olutionE J1011,111 O1,111,111K :" P1,0(1,111 x (
P0,,(1,111

J1,111,111 O 1,"11,111K:" P1,1(1,111 x '
P',*11,111
0,,(1,111@',*11,111 P (,1(1,111
2. Anser& #

3olutionE ",111,111 2 (11,111 P 1,(11,111
PPPPPPPP
*. Anser& a
3olutionE J',111,111 x 117K:" P "11,111 x 1.0*1( P 10",%11
",111,111 O J',111,111 x 117K:" P ","11,111 x 1.0"'*P",1'%,1"1
J",111,111 x 117K:" P 111,111 x 1..001 P .0,011
",111,111 O J",111,111 x 117K:" P ",111,111 x 1..('. P1,,0(,1.1
',111,'11
PPPPPPPP
(. Anser& #

3olutionE +ost .,111,111
.,111,111 x %:. P J%11,111K (,111,111

Replacement cost 1",111,111
1",111,111 x %:. P J',(11,111K ,,(11,111
Revaluation 3urplus ",(11,111

&epreciation ,,(11,111:( x *:1" P ,(1,111

",(11,111 11,111,111 2 *,,(1,111 P
%,"(1,111
(,,(1,111
J,(1,111K
E P (,111,111
HHHHHHHH
5. Anser& #
2o%ution& 1
st
year 78,000,000 . 150,0009I1,500,000 H 800,000
2
nd
year 78,000,000 . 225,0009I1,500,000 H 1,500,000
*
rd
year 7 8,000,000<800,000<1,200,0009I8 H !50,000
(
th
year 78,00,000<800,000<1,200,000<!50,000 . 225,0009I1,050,00 H 1,050,000
*,800,000
8,000,000<*,800,000 H (,200,000
HHHHHHHH
6. Anser& #

3olutionE ;nadBusted #ncome %,111,1111
;nearned #ncome J%11,111K
Coss on #nventory 1(1,111

AdBusted #ncome ",.(1,111
PPPPPPPP
,. AnswerE b
3olutionE =xcess Preference 9rdinary
R:= (,111,11 ",111,111 1,111,111
3P ,11,111
J",111,111 x 1"7 x "K J'.1,111K '.1,111
J"1,111 x "1K J'11,111K
J',."1,111K ',."1,111
1 (,."1,111:"1,111
P P "01
PPPPP
.. AnswerE a
3olutionE ',(11,111:1"(7 P %,*11,111
J",111,111K
J"11,111K
%11,111
Total Retained =arnings 1,,11,111
R:= Appropriated for T:3 J%11,111K
1,'11,111
PPPPPPPP
0. AnswerE c
3olutionE J(,'11,111@*,(,11K x "17 P 0'(,111
J',%.,,(11O0'(,111 x "17 P 1,1**,(11
",111,(11
PPPPPPPP
11. AnswerE a
3olutionE Retained =arnings 1,(11,111
Accum. &epletion ",(11,111
',111,111
CessE +apital Ci!uidated J1,.11,111K
#nventory J1(,111 x "1K J111,111K
",111,111
PPPPPPP
11. AnswerE a
3olutionE Aift +ertificate Payable, end *.1,111
+ertificates Redeemed 1,(*1,111
=xpired +ertificates .1,111
Aift +ertificates, beg. J("1,111K
Aift +ertificates 3old 1,.11,111
PPPPPPPP
1". AnswerE d
3olutionE Prepaid:Accrued@&ebit, beg. 1,'11,111
+urrent 3ervice +ost *11,111
#nterest J ',(11,111 x 117K '(1,111
=xpected Return J(,111,111 x 117K J(11,111K
Past 3ervice +ost J "11,111:11K "1,111
Amorti4ation J *11,111@(11,11K:11 0,111
+urtailment: 3ettlement J1"1,111K
Benefit Expense '(1,111
Prepaid:Accrued J,"1,111@'(1,111K ",1,11
Total 1,*.1,111
PPPPPPP
1%. AnswerE a

3olutionE J (,111,111 O 0,111,1111K P 1',111,111

1',111,1111 x 1'7 P 1,0*1,111
J%01,111K
J011,111K

*,1,111
PPPPPP
1'. AnswerE c
3olution (,(11,111 x 1.*%(( P %,'0(,"(1
J(,(11,111 x .7K P ''1,111x %.1%,%P 1,%%*,'1"
P of restructured liability ',.%1,**"

*,111,111
,"1,111
*,,"1,111
J',.%1,111K

1,...,%%.
PPPPPPP

1(. AnswerE a
"11,111
3olutionE 1,1(",111 x 117 P J11(,"11K
.',.11

J1,1(",111@.',.11K x 117 P 11*,,"1
PPPPPP
1*. AnswerE a
3olutionE +urrent service cost '0(,111
#nterest J*,111,111 x 1"7K ,"1,111
Amorti4ation J(11,111@'(1,111K (1,111
Amorti4ation of he net gain J11,111K
=xpected return on plan assets J(.1,111K
)et benefit =xpense P *,(,111
PPPPPPP
1,. AnswerE b
3olution >anuary " Q*1,111 x JP11 2 P*KR "'1,111
?arch . Q"1,111 x JP11 2 P*KR 111,111
>uly " Q1(,111 x JP1% 2 P*KR 11(,111
August 1, Q1(,111 x JP1' 2 P1"KR 11,111
Total 3hare Premium P '((,111
PPPPPPP
1.. AnswerE c
3olutionE Accumulated Profits P%11,111
;nderstatement in #nventory for "11(
111,111 x *(7 *(,1111
AdBusted >anuary 1 "11* Accumulated Profits P%*(,111
PPPPPPP
10. AnswerE d
3olutionE 1,(11,111 x "17 P%11,111
PPPPPPP
"1. AnswerE a
"1. AnswerE c
=stimated no. of pac-s to be redeemed J%,111,111 x %17K 011,111:11
P 01,111
@%,,111
(%,111
M P%
1(0,111
PPPPPP
"". AnswerE b
3olutionE
Average S of shares for basic =P3
11:11:1* ",111,111 x 1":1" ",111,111
1':11:1* 111,111 x 0:1" ,(,111
10:11:1* "'1,111 x ':1" .1,111
",1((,111
PPPPPPP
&iluted =P3 P Average S of shares issued
",1((,111
Average 9rdinary shares issued as if it
converted J%,111,111 x 1,111 x '1 x %:1"K %1,111
",1.(,111
"%. AnswerE a
3olutionE
Purchases, accrual P%,"11,111
Accounts Payable, &ecember %1,"11( 011,111 ',111,111
CessE Accounts Payable &ecember %1,"11* 1,"(1,111
P",.(1,111
PPPPPPPP
"'.AnswerE b
3olutionE
Trade@in value:5air value J",111,111 2 *11,111K P1,'11,111
+arrying value 1,*11,111
P "11,111
PPPPPPPPP
"(. AnswerE b
3olutionE
Ac!uisition cost J"11,111 x P%1K P*,111,111
CessE ?ar-et value of the net assets ac!uired
8oo- value P(,111,111
5air value of identifiable assets *11,111 (,*11,111
P '11,111
PPPPPPPP