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    P1 - Cash, C.E, Receivables, Inventories

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    ReSA The Review School of Accountancy ‘"@ Tel. Nos, 734-3989 / 735-9807 PRACTICAL ACCOUNTING 1 records as of December 31, 2014 YY, etn Cres nes ine fog coon baal Coking acount Margutsnk, 20,00; Chcking ann Lan ak, 750,00; Parl acct = Nit bankP 10.00 Focien bank acon P7500: Postape stamp, 2.00; Employes penned check, P3000, 10°. ram pesca wo, P7500: Traveler check 0.00; Nest Tans hcl, P10: uty cash nd (T6000 ea expenses oss or PRA.00), P1008 ad What is the correct ggsbs balince to be reported in the balance sheet of Lipton Company on Dis. 31, 20142 1582.00 P702,000) : bh P6k.00. A. Pros. 000 " The eash account ih the current asset section of the by Sat for Heater Company showed a balance of 555,000. It was fowl togjuabide the following itenit Petty cash find (P1,000. is ia the form of gaid aauchers), 5,000: Checking account balance, fr bal Slalsiicnt (A P2S.000 check is still outstinding), P255,000; Undeposited receipts (including a pestdate check for PS,000).P120,000; Currencies and eoins awaiting deposit, P$5,000; Bond sinking fund — cash, i 100,000; Check dave by mi ured by hank marked NSE, P20,000 HK che ching excastt, Whale the cot san hale for Heater Company's lance she for wads tenet 2 PAOLO ©, PA30,000 be PA29.000 529.000 yea) tion has supplied you with the following list of its bank accounts and eash at December 31, 2014 Checking account (compensating bake of P1S,000 with po rextriion), PAK.O00; Savings account, 2%, 130,000, Certificate of deposit, (gusadhs, 10%, due April 20. 2015, P80,000; Money market (20-day certificate), current rate, 9.75%, PA0,000: Payroll aecount, P20.000: Cerificate of deposit. Lgoaths, 10Po, due February 15, 2015, 775,000 and Petty cash, P1,300. What should be the balance to by reported as “Cash e A Delta Compo anh is" in the December 31,201 statement of financial position of Delta Corporation & PIS9.S00 fc. P214,500) bP199.500 4 P274,500 see 4. On December 31, 2014, First Company ha te following cash balances: Cash in banks, 1,800,000 ew Petty cash funds (all finds wereaignhuesed on 1231/14) - 50,000 ‘Cast in banks igeluled 600,000 in a Seprnate bank whert-in the company is required t Pate average of P8O0000-of 10 workings on a gallina In the current assets section of First's December 31, 2014 statement oF Financial position, what total amount a. P1200000 . P1.8O0.000 X ations b. P1250.000 4. PL8S0.000 = sa basis - means vorertased its cash and eash equivalents: ~\ (On December 31, 2014, Everlasting Company has the following gomposiia p 20,000; Money market smanul deposit, 1,500,000; Certifieate of deposit-Sadase, PS00.000; NSE check of customer June 30, 2015), 11,000,000; Savings deposit in os “6h ‘Bagk, 50,000; 1OU from an employee. 130,000; Penty cash fund, P10.000; Customer's check ated ih January 31. 2015, P60,000; Customer's check outstanding for 18 months, 30,000, Check of P100,000 in paytnent al accounts payable was rgenrded on December 31, 2014 but ‘mailed to creditors om January 15, 3018 _ 1B Cheek of PS0,000 dated January’ 31.2015 in payment of accounts payable was wot recorded and mailed Deeeniber 31, 2014 eu The company uses the calendar year, The eash receipts, 2015, during whieh time, P200.000 warns was held open until January 1. How much “ash and cash ents” showkt be shown iw the December 31; 2014 htance sive a. 1,910,000 2,160,000, ft San 3104 F AeSA / Practictl Accounting: GASH —___Page20f2 & Z% *imber Company provided the following data For the purpose of reconecifing the cash balance per book prelate Fo, Dulane per bok Te Pigm00 e 3/4 sain ‘Outstanding cheeks (including cetitied cheek of P20,000) woo 100,000 Zr Deposit ia transi 40,000 \ paste December NSF checks (of which P10,000 bad heen re-deposited and eared «on December 27) 6.60 30,000 Erroncons sme to Timber's account, represemting proceeds of loan granted ie to another company 60,000 Proceeds of note collected by bank for Timber, net of service charge of P4,000 150,000 gee roo hank ch 73,000 : ‘A check of P5000 i pavinent of account way recoiled y the company as 500 econ sh lancet be shown iy the company’s December 31,2014 satenent of finan position x a Sse sod e335,300 wb. 295:500 1 MS.s00 * A Va your tut of Glenisus Company ws ci Dedersber 31; 2014 you gathered the following: Balance per book, Pot,000, Bank charges P1500; olan per bank, P6000 Deposit in ians PLRU 000, Coss calleted hy hank, P225 000: Inert eumpmer mae, P00; Gon Deposio's note gs acc, F150,000. What she ttl avant of ousanding eke? a. 140.000 © 160.00) i. 150,000 a. tes.000 ic 8. The following information was i ‘vin the bank reconciliation for Fox Company. Assume all other © * Chicks & changes retored by gk in Ae incluling 4 Fane servic change oF PS,000, 900,000: Check ssl ty campy (or P9,000 was reborded at, PAH: Lroncous hank debit, P40: Service charge mak by bank in May and recorded on book in June, P10,000; Toil credits to cash in “all journals during June PR00,000; Customer's NST heck returned asa bank charge in luge (ni cntry wis madam book), B1O.000; Customer’ NSE check retuned in May’ and ce-deprsites in June (no entcy made on book i ether May oF June), PSO,O Customer's NSE check gsuurned ini May. and recorded in June, P20,000: Outstanding checks at Muy. 31.) 200,000. What's the adjusted amount oF cash dishirsemens. foe June? ‘a, 833,100 ae BO1200 Aways cae of MEP Rear R100 & $94,100 & eveor is Opposite ‘9 The following information was inctuded in the bank reesmeiliation of on Comipany on December 31, 2014 receipts for December P850,000 Seceipfy -e00 ber recorded in Devember 60,000 a for December not yet recorded 80,000 chee Frroneous receipt by December, no comection was ‘made until the following 50,000 “) erroneous bunk disbursement in December congetvd by. bank in December 18,000 BesaN Als Deposit of Siliman Co. gssdited o Silicon ¢ December 20,000 Total receipts per bank in December 990,000 ; F Deposit in transt-December 31,2014 100,000 DT cn e Book receipt for P50,000 in Dec. recorded by the company as 5,000 eta What isthe contectadiusted feceipt for December? 4 845,000 & 865,001 b. 850,000 895,000 10. Rock Conhpany hud the followins bank reconciliation at Marci 31. 2014 Arisuitec! th dnt WR Balance per bank statement, 03/31 468,000 Deposit in transit 100,000 Debit mento 10,000 110,000 Total ‘ 575,000 : ess: Outstanding cheeks 2135.00 Credit memo 50000 145,000 Balance per book. 03/31 ‘All reconcitiation items t March 31, 2014 eléared throueh the bank in April. Ouistandi 2014 totaled P75,000; deposits in transit amounted to ¥ {for Apri P15,000, Ertencous book rexeipt on- April 119.000 bat com for April-P’600,000 and a apk disbursement for April 500,000, hocks st April 30, "80,000 debit meio revels What is the amount of gash receipts popbook in April? a 590,000 &. 619.000 bh, 630,000. 1d, 650,000 Fea thoagh 104, 00 he sume wre! ShY Error Bk J PR, ReSA The Review School of Accountancy ‘MTel. No. 735-9807 & 734-3989 CTICAL ACCOUNTING | . Uberitw©. Espenilla Nature of receivables - Receivable represents financial asset arising from a:contractual right to receive cash or another financial asset from another company. It falls under one of four categories of financial instruments, namely Loans and Receivables. Loans and Receivables are non-derivative financial assets with fixed maturity (including loan assets, trade receivables, investments in debt securities and deposits held by banks) that are not quoted in an active market other than those classified as “financial assets at fair value”. The reference to fixed matyrity in the definition means a contractual arrangement that defines the amounts and dates of payments to the holder such as interest and: principal payments. For most entities, they comprise trade receivables, foan assets, investments in debt instruments. For banks and similar institutions, they constitute a significant proportion of their non-trading assets, in particular loans and advances to customers. . Classes of receivables Trade receivables ~ are claims. arising from sale of merchandise or service in the ordinary course of business operations; such as the following (a) accounts receivable and (b) notes receivable, Non-trade receivable ~ are claims arising from sources other than from sale of goods and services.in the normal course of business; such, as the following (a) advances to Officers and employees (b) advances to subsidiaries (c) dividends and interest receivable (4) deposits as 2.guarantee of performance or payment (e) deposits to cover potential damages or losses (f) claims for; insurance, tax refunds, lawsuits, merchandise damaged or lost in transit, returnable items, etc Presentation of receivabies on the face of the balance sheet or in the notes Receivables are disaggregated into amounts receivable from trade custon receivables from related parties prepayments and other amounts (PAS 1 paragraph 5b) Trade receivables should be presented on the face of the balance sheet as one line item, and classified as current assets but the detail of which will be disclosed in the nates. Non-trade receivables that are currently collectible should be presented as one line item under the current asset section but the detail of which will be disclosed in the notes. Valuation of Loans and Receivabies: a. At initial recognition loans and recetvables are measured at fair value (transaction price). The fair value is based on the total expected future cash inflows that an enterprise will realized. b. Subsequent to initial recognition foans and receivables are measured at amortized Cost. The amortized cost of a financial asset |s the amount at which the financial asset. is measured at initial recognition minus principal repayments, plus or minus principal amortization using the effective interest method of any difference between that initial amount and maturity amount and minus any reduction (directly through the use of allowance account) for impairment or uncollectibility, Accounts receivable are measured at original exchange price between the firm and the outside party, less adjustment for cash discount, sales return and allowances, yielding and approximation to fair value which is the amount expected to be collected, The issue of bad and doubtful debts will inevita receivables. There are currently no approved accounting standards that deal specifically with the measurement of bad and doubtful debts, the dnly guide. which accountants rely on in practice is the prudence consideration of PAS 1, which generally requires that known bad and doubtful debts shall be provided fo However, the application of this prudence consideration on accounting for trade receivables is subjective as it is left méstly to the discretion of the reporting e: y arise in accounting for trade 5. 284 / PRACTICAL ACCOUNTING |_ r z Receivables (Lecture) One view of doubtful debt is Based on the direct write-off method, where bad febts expense ognized 01 ‘ded in the period in which it is determined that a specific trade receivable cannot be collected. This, view that each, sale results in a “good” trade receivable and accordingly, the full amount shall be recognized in the period of sale. In other words, no allowance shall be made in respect of that “good” trade receivable. When iater events proved that certain receivables are uncoliectible 1 are worthless, a direct write nade to recognize the bad debts. From a tical standpoint, this method has been argued as simple and convenient to Furthermore, the amount written off is based on actual facts rather than which may need revisions subsequently when facts become known. _ the direct write off method is theoretically deficient because it usually does natch costs with revenues of the period, This is due to the. fact that trade receivables do not gener less at an identifiable moment of time. AS uch, the method doe: ‘eceivables being stated a the estimated fe value on the be In practice today, the view that is generally accepted is that bad and doubtful debts shall be provided immediately when they are known. This is in accordance with the prudence principle which requires that when the collectability of trade receivables is considered doubtful, adequate allowance shall be made Notes receivable should be stated at present value. The present value of a note receivable maybe its face value (for notes that are short-term and interest bearing long-term notes) or discounted value (for long-term non-interest bearing and long term interest bearing but the interest rate is unreasonably low) A note receivable is said to be interest bearing when a specific interest rate is stated in the promissory note. The stated rate /s the “nominal or face rate or coupon rate or contracted rate as part of the note which usually corresponds to the market rate of interest of similar risk. The market interest rate or effective interest rate or yield rate is the rate used in the market to determine the value of the note, which is actually the discount rate to determine present value. When the stated and market rates are equa! it means the notes were selling at face but when the stated and market rates are different it means that the face of the note is differs from the present value of the note. The difference wouid either be a discount or premium that is to. be amortized over the term of the note using the effective interest method as prescribed by the standard for financial instrum A note is said to be non-interest bearing when there is no specific stated interest rate. The interest rate is already imbedded in the face of the note and consequently the maturity value of @ note Is its face amount, therefore, it is necessary to separate the interest from the n discounting the note using the prevailing market interest rate. Impairment of Loans and Receivabies: ‘Assessment and recording of impairment loss - An entity shallvassess at each balance sheet date whether there is any objective evidence that a financial asset or group financial assets js impaired. A financial asset or group of financial assets is impaired and impairment losses are considered, if and only if: (a) there Is objective evidence of impairment as a result of one or more events (loss events) that occurred after initial recognition, and (b) that the event (loss event) has an impact on the estimated future cash flows of the financial assets that can be reliably estimated. It may not be possible to identify a single discrete event that caused the impairment The combined effect of several events considered, Losses expected as a result of future events, no matter how likely, are not recognized, Objective evidence that a financial asset or group of financial assets such a receivables is impaired includes observable date that ‘0 the attention of the holder of the financial asset about the following loss event: aused the impairment should be a. Significant financial difficulty of the debtor, issuer or obligor Default or delinquency in interest or principal payments. . The creditor granting the debtor a concession that the creditor would not otherwise consider. The Review School of Accountancy Tol, No. 735-9807 & 734-3989 ReSA / PRACTICAL ACCOUNTING 1 Receivables (Lecture) d. Probability that the borrower will enter bankruptcy or other financial reorganization or restructuring. e. Disappearance of an active market for that financial asset because of financial difficulties, f. Indication that there is a measurable decrease in the estimated future cash flows from the group of financial assets including: 1, Adverse changes in the payment status of the borrower in the group (e. 9. increase number of delayed payments. 2. National or local economic conditions that correlate with difficulties on the assets in the group (example, increase in the unemployment rate, decrease in proper price for mortgages in the relevant areas, adverse changes in industry conditions. affect the borrower in the group). If there is objective evidence that the receivables are impaired an impairment loss should: be recognized. The amount of the loss is the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate. The carrying amount of the receivables shall be reduced either directly or through use of an allowance account and the amount of the loss shall be recognized in profit or loss. 6. Transfer of receivables: a. Pledging of Account receivable 1. Continue to recognize and report the receivable with appropriate disclosure. 2. Recognize the proceeds as a liability rather than as income 3. Charge interest on the carrying value of the liability b. Assignment of Account receivable 1, Transfer the account receivable to account receivable assigned 2. Recognized the proceeds as a liability and charge interest on the carrying value of the liability 3, Changes in the value of the assigned receivable such as, returns, write-offs and collections with-in or after the discount period are accounted the usual way with a corresponding credit to the account "Account Receivable Assigned” 4. Any balance in the Account Receivable Assigned is reported and classified in the same manner for outstanding account receivables. ¢. Factoring of Accounts receivable The receivables are sold to a factor, which then collects the cash from the customers. The factor makes a profit either by charging a fee, charging interest, or by paying below face value for the receivables. The company selling its receivables is nearly always referred to as the seller, even if the receivables: have not been sold in the eyes of accounting theory Typical arrangement might include the following term: 1. The seller will assign (sell) some or all of its receivables to the factor. 2. The factor will then advance a percentage of the amount factored. The amount advanced will typically be about 70% - 90% of the face value of the receivables, 3. The factor can be repaid in a number of ways: a. The factor may collect in all the cash from the customers, and then pass on the balance to the seller (less any charges). b. The seller may repay the advance after a specified period of time (plus any charges), 4. The factor may charge the seller a fee based upon the length of time that it takes to collect in the receivables. 5. Receivables may be factored with recourse (hybrid method) or without recourse (continuing agreement method). a. With recourse means that the seller has to reimburse the factor for any unpaid receivables. Sometimes this is limited to a fixed amount. b. Without recourse means that the factor bears the cost of unpaid receivables. ‘There will obviously be a higher charge far this service to compensate the factor for the higher risks taken. 6. The factor may also administer the sales ledger for a separate fee. This will have no effect on the accounting treatment. ReSA ReSA The Review School of Accountancy ‘BTel. No, 735-9807 & 734-3989 illa/G, Macariols PRACTICAL ACCOUNTING 1 C.Espw ivables ables” account of G Company shows a debit balance of PS.950,000, p 1. “On December 31, 2014, the “Ree Fer Sosa slay a te long Accouns esvable, ETBSbUe Nes csv, RIO vines rccvbl, womals de | year vo ARE UBMH.000; Customers” accounts reporting credit balances arising from sales scturns. oe Veet La secu of mortulise, PLSOO00: Cash hansen subs P4800 Ceea eee nna, £1800: Subserplin asksbable die in BO-days: P2O0.OUD' Accred iets seit 10.000 posh i bohret le lle in 2018), PROD OD. om uch th amount to be pe Faden ot a P. 725,000 c. P1,S90,000 Gasronk ioe Gohebhn b. PI.125,000 dd. P1,600,000 win Me Stee ee 2 On hanaary 1, 2014, F Company’ Trade Loans ng balance of P500,000, Below PAF Se aaskctions in is Trae Tina md Receivables and eahérecated accounts during 2014 am hadi a V0, 00 EiesaJ>o PH 704,000, Acct receivable weierrofT; 250.000; Purchases “hac 7-400 00; Payments to eer, P6400, 000; Purchase discounts, PS20,00; Total Sales tur, rg Rests; Amount feoived. Tom eri custimer, PA90.000; § Sales acount ht, PROG; Not Ir accouns, P800.000; Purchase Fire, P4000. Parents Cah oy. ar abtse P2000; Process ton Seta pa Rates recelvableInclding interest of P10.000, P370.000, — adore | Proviso for fae turns and iscounts on ous Teche, 25,000. What i the amoriagh co of ; the Loans and Receivable on December 31, 2014? AR ker reve P2.258,000 & P2A15,000 "| soe b P2.280,000 1 P2.440,000 Souk es . Cae) (200) er) = 24408, Se et ie gla holt tdi 5M, AM tow sah sb tod tm aia . canpror gs retain errr SRSA experience 50% af Mould’s customers take advat | otal Sales 9282 50,000 of which P20,000 were age of the dise recording Sal and trade receivables, An analysis of Mould’s trade receivables balances at December 31, 20L4 DANSE revealed the following: = Age Amount 0-15 days 300,000, 16-30 days 180,000 31-60 days 15,000 ‘Over 60 days 7,500 P1.s00 suo 502,500 AR ene! 3 499 0 provisiof for discounts’ oN sors bh paseo 1 Pes 200000x22 501 = 3,00 Vhat isthe amortized cost of the receivable on December 31, 2014? 8, PA8E.000 Sie ©. P493,000) bh. P486,000, 1, Pay9,s00 6,000,000 loan to Global Com 4 Megabank granted an 8%, 3-yeu ny on January 1, 2013. The inter Joan is payable every December 31. Megabank incurred P148,122 of direct origination cost but an origination fe of P300,000 was charged against Global Company, The effective nthe Joan as a result of the Origination fag and cost is now 9 S Question i aise ofthe hn on cmb 2044 in Mersbur' accounting bon Pei¥i4122 —axeu 30 20% Praicans Bh PSAIIS) Jom, 2@ta ‘L Pe00.000 | PM cla Wintel usa didi igeinkasnatbritcapsatinie, 902 rac ps se) carga , Se sitcon 1. Pst0.000 ¢ ; F443 nar oa ave => 56,00 (Cow) FRE RE KHOA —4eOt KOA -GHE = S944 ASF Or rivable ng P65 million as of December 31 and sales on WF PS4 million. There is also a eredit balance of P12,000 in the allowance for doubtful ils outstanding geecivables will be uncolleetible, what will be the accounts. If the company’ estimates that ized for the year! amount of bad debt expsuse recog 508,000 fe. P 532,000, GSM X84 > 620,00 atend P520,000 4 P1.920,000 ae §20000 -12. DO = SE ODL Ate close os fist sear of operations, December 31,2015, Ming. Company lid accounts receivable of G 540,000, after dedetinis ths relat s- During 2015, the company had charges to badd oxpense oT P98 and wrote oh a neo accu ecivale of PAO OOD, What shoul he ‘company report on its statement-of financial position at December 31, 2015, a5 a8 . alleatance for doubiboccouus’ wR Aro 4 ©. 590,000 Sy, For is P490,000 a. Ps40,000 C4962 h snerient, sue un Iie assigps P2,000,000 of its accounts receives as collateral for « PY million 8% loan ith Ine: also pays finance tee of 1% on the tratisnction uptront, What would be recorded as a gai (ass) on the rausicr of receivables a. nomi ©. Toss of P160,000 b. loss of P20.0000 I oss of P180,000 siganent one:Jear Town af P500.000. Paul Finance charged w 2% commission on th thesJoan; the interest rate 4 the note was 1025. During December. Peter gollggied 1245,000 on assiuned accounts @fheB deducting P5,000 discus PEGE Company acu curs worth PLOIUD and wrote of signed accounts ling PLOW. peg What mow able should Paul Company, continue to diselose in its December 31, 2014 statement of Financ position ba me “hone ©. P736,000 © hb. P731,000 a. P740,004 L ie f ae h 9 Sur ne. factors #2,000.000 of its vce " 3 wil gauss econ) Yor nancy arg 06396 el (1034 afte asst caciable Tor possible adjusunents, What ange eonypany retains an ann would be recorded by Sun is He ransfer of receivable 24 4 Loss of 100,000 kos of P200,000 God gain of P100,000 AL fs oF P3000, Sar va = 1M Prods tS sp Lam , k yo Sn Ine Tits 17,000,000 ob is accu Feccivabies ai aur reese) fra finance charge of 3% The finance edenp pmnount equal 10% of WE RTC recivable for possible astments What oe. ‘would be recorded as again (ass) on the teaser of receivables? ae toss of P260,000 raed (24 x2 20H) Gh pa coe ose nc receivable dated Aug’31,2014. The hank discount b. gain of P60,000 omer’ P600,000, Gmonsh, 10% note the bank act the note at 12 leer, ie or Mu > GaDk + CLOEKIT x Ya) Y, one = take oy auton 12.600 = whe + 308 en ~ oe P20 8 1. P17.400 = eine Ouest What al sof nancial asst ssh ld the company eos in the atoment of positon ws of December 37-2014, assuming the discounting was treated a w bogpsins is a. none ote eel or ©, 1620.00 Fe toe x lee b. P2000 gaged 4. 130.0 oer 7 cane ene) Baty, Praceeds = Gur —25 W= 664.19 2 Samay 1. 2014, Cursor Cony J gordo Matrix ¢ Matey signed a ponstatersat bearing nat = eC requirin: payment of P60,000,annually every December 31 ven years... The prevailing rate of interest for this type of note at the dute of issuance Was Informition on present value factors is as follows: FU Faced Preset Lond Pigg wv BROS te 0 wnuigotiatioe 2 ) Periods cirat, ofa se 4 ra Sale, 292,105 3105 MiaLaasiite plead setts of ne woah on Vicenza > Gig gnethl nee tan tera ts tiated &) EY CA20K ~voK) _ 20.00 ie 184 ‘aes ded (29 KIS 2 DIL K ot) Cu eg Mores Qe Bie 292 ResA a Bel Sie ‘The Review Schoo! of Accountancy 242M wrel.NO. 735-9807 87343989 oe Cupene 202,10 x1CL > ai 2a 20 _ Bel Ble Bed Method conow x 4-n55%y = 2AM ONE AE SR Se aan i 2c gu. aie ReSA/ PRACTICAL ACCOUNTING I: Loans and receivable 13, On December 31, 2014, Dwarf Corporation gold for P480,000 an old machine having an original cost of 800,000 and a hook value of 600,000, the tem ofthe sale were as follows DP (20/000 > wv 120,000 down payment Troea2 sanoer 2D 120,000 payable on December Leach of the next shnse-ycars agence “~A2SASS ew 4009) this (ype Gees) The agreement of sale made no mention of interést; however, 9% would be a fair rate was Question What is the amount of gain or loss from the sale oF the machine “ae a. P176.000 i &. P200,000 b Pr6.245 &. 1296248 ews 4 os =U 9° Question 2/What should be the amortized cost ofthe note reesivable on December 31,2015? Awe Se OS, u PLyfoo2 —_ P303,785 SE (209 asrcal 23 238) P211,093 <. P360,000 Fj iy A. on Deccmber 31, 2015, Dall Company finished, consultation serviees and accepted in exchan sory note Willa face value of P260,000, a duc date of. 31.2018, and a stated rate of S%, with interest receivable a the end ofeach year. ‘The Tair valu of the services is not readily Meterminable i readily mgrketable. Under the circumstances, the note is considered to have an appropriate imputed rate of cate ines of 18% Ploy thie. 1K HS Root ANSI = ISD BG4 SY \OeX24Ew > 244 The following interest fuctors are provided: ee el 4 aA . ee Interest Rate Tas (33 ¥¢ ®% 9097 able Factors for Thee Periods 58 a adage é Listes 135100 ee 86384 75132 ei Future value of ordinary annuity of 1 3.18250 3.31000 igo? Yt Present valucof ordinary annuity of 1 3.73328 2AR6RS ‘What is the amortized cost of the note on December 31.2017? st sol a PIISI31 = Be, BA, 2015 es SNPI90.99 Gok Mena. Glee ARIS | LY b. PISD6NS Dee, 41, 200 J. P200,000 15. AtDgcembsr 1.2014, Queen Co. had a receivable from A Conipany of P400,000 that has been outstanding for Gute Some tine. Inia invest | Qianpany i unable to sce all eustandng obligations bat Tr Investigation revealed that I: Company fs | tok MEA Company owever.F Company 6 more than willing torasun niet Deceiver 31,2016 pie TA Aa Desgsber 34-3014 Quen Company expects nna 3 Sal Sona te ued PSODE Uh dc fr A Company A the Gime while the preiing on revealed that A Company is deep financial dilemma. At present A 1 the prevailing rate of interest for a similar Financial asset is er 31, 2014 is 15% Question 1. Wh ant should Queen report in ity December $2014 state ‘ofthe receivable? x Sot ke resale @ s Financial position as the sme GOS) ES 39 b. P230,840, dL P2RA, ane aay Question 2: What amount of bad debvimpaimsn oss should Quicn Company rcienize related to is accounts > bison 201 wo p10 ares Le ve'piggleo” -mieers . b. P129.640, aur ed d. P173,187 ae 2a Kprarrmcat = 129.048 1k 324 > ip A any slits enery fr #300000 6 Matec ony 2:28 ods Fe bearing an interest rate or 12% for the full amount. On Deve 2015, Maxi Fe cts teeny a change ae pte ceten The say ad cane in the pattern shows that #150,000'will be due on December 31, 2016 und P80,000 will be due on December ure x 09 LT sh 507 ae adeno ernie nid cra Copa reco be Dents 2015 mae £ Fieato S Pisna9e ww geU wait : 3105 pacaGaiexot) © 272 © srained cost, MI sae 3.4 PU of FOE ——_—_—_—— * =1BBAA ReSA (49 Aemhe Review School of accountanc iat: ( Fel. No. 735-9807 & F3a-3989. 13920 Dione 624 = 2) we x 2972 © Less ike eS a a ReSA The Review School of Accountancy Tel. No. 735-9807 & 734-3989 PRACTICAL ACCOUNTING i _____Conrad 0. Uberite INVENTORIES: HCTURE |. Definition of inventories -these are asses that ate Held for sale inthe normal course of business, OF 1) nthe process of production for such sale or Un the form of materials or supplies to be consumed in the production processor in the rendering of services Clussineation of inventories: i. Merchandising business 1. Merchandise inventory or faventory — goods purchased hy 4 trading company for resale in the cnterprise's ordinary course of bu! Manufacturing |. Raw materials inventory’ tangible goods purchased for direct use in the manufacture of goods for sale 2. Work in process inventory manufactured items requiring further processing 3. Finished goods inventory - manufactured goods completed and ready for sale 4, Manufacturing supplies inventory — items purchased for indirect resitle jn the manufacture of goods for Service provider busines: 1. Work in process inventory «1 an ncasure at hiforical cost. The cost of inventoriés should include allcoats of purchgs, cos al conssrsion ond other cows incurred in bringing the inventories to ir presen oat and cond T, Coat of purchase includes the purchase price, impor_dut subsequently secaxzrabe by the enerpise frm the faxing ont, handling and ther conte diretly atributable to the acquisition of fined yous. maicrials und services. ‘Trade - Tecounts, sob inventories jal measurement — inventories are initial other than those and other similar items are desluciod! in determining the cost of purchase. A 2. Cost of conversion - includes cosis directly systematic allocation of fived process. ed to the units of praduction, sich as direct Idbor and {variable production overheads that are incurred in the production 3. Cost of agricultural produce hurvested from biological assets - are measured on initial recognition their fuir value less estimated point of Sale-costs at the point of haryest J. Cost of inventories of a setviee provider: the labor ipervisory 4 18 oF non-attbutable overieads Pic coats of ces) Sakae in ibuinhi ons The following are excludes for the cost oF inventories Sa” Abnormal amounts of wasted materials. labor, or other pr Ab. Storage costs. unless these costs are © Administrative overhicads that do not coniribute t condition, and d,_ Selling coss B. Balance sheet measurement should he measured realizable the lower of cyst or net realizable value. The 0. alue is the net selling price in the cowrse of the businesy lest) the estimated cast of completion and the estimates caste nscesaary 10 make the Gls) Fnverorie are aswalysriten sawn 10 net realizable ‘ulue om dadividual ys. Iw Some cases, however, it may be appropriate tO group similar or related be properly valued on aygrew : cot oF FG Materials and other supplies he Kruse in the production of inventories ae the Finished products in which thes However, wien a decline in. the price of indicates that the cost of the finished products exceeds net realizable value. the maierals are writen gown to net rsalizable valve, In such effeumstances, the ust of the materiale may be the Psst atallable-Zacasure of their net realizable value. (PAS 2 Salts Hick written down below cost if cost of FU When an item of inventory has been writen -daven to its tet reylizable Satue, and if in subsespuert sheet period the same item of inventory sill on hand. a mew assessment of net réalicable vi made. If there J a clear evidence af an increase in net realizable valu eeause of change in econom! ‘ReSA/ Prac, | Inventory-Lecture. So cincs Cg wre down Tho be revered. Te a original amano of write-down that was reeugnized previously. 5. Establishment of the year-end inventory ~ the periodic system of recording inventories calls for the physical counting of goods while the perpetual system provides a record of the cost c. however, phlysical counting is necessary to determine the reasonable 1 possible ic practicabley would be necessary to estimate ind units remaining as of a particular ssofthe records. » However, when pus al coh ofthe Include in the year-end inventory. all tem oF inv usable and s rories own snd controlled by the enterprise that are in good. Jin wn in the enterprise's premises and adjust the count by including those items of ae uit that are alw own ad controlled by the entity. Therefore, the flowing items of inventories should te comsidered: 2 Merchandise Jt if the teem of shipment is shipping pout. include as inv the term is destination, include »s inventory of thell Consignment include as inventory of hessignae, oo eece Ua approval goods sent on approval to 8 potential buyer should semanas inventory on ‘bot payments ceceive for items kept by the buyer oy 4. "Specia sates contract 1 produet-Reancing (Sale with a buyback are Faris (iansfers) is inventory in the buyer's purchase back the same inventory over a specifi inventory ofthese ory of the(fuydy but if cller ) also known as a park sale because the seller eomises thr sales contrac, that clearly specifies to feria! of time at specified amount. Include as 2. Sale but buyer given the right to-return the revenue fe he following conditions are he sales wansiction shall be recognized 1: (a) the seller's prige to the buyer is substantially, fisedor determinable the dare of sale, (b) the buyer bas plidahe seller, oF the buyer is obligated 10 Fp the seller and the obligation is got santingsot on resi of the product, (c) the buyer's obization (0 the seller would noi be-chaaged in the event of tie oF physial destruction or damage ofthe produc, {d) the buyer acquiring the product for ressleas-econeme-substanee apart from that provided by the deiher (eo the seller dogs not ave siznitican. obligations for future performance to direetly about the Peale of tig product by the buyer, and (2) the amount of fiture ceuuens.can be reasonably estimated Fob in seep onl ete io recognize the iment scales - goods shouldbe considered sold or removed from inventory, even though legal (o pass to the buyer, Include as inventory ofthe buvet ce. Seregated goods - mere segregation does not exclude such inventory. however, if the seer cratic contract Such as special ander, such inventory is excluded in the inventory of the seller on is due Teehniques for the measurement of Cost The sail method oF siandard cost method may be used for convenience if the Fesults approximate 6. Standard cost# take ino account normal levels of materials ind. supplies: tabor efMicency and cepacity vcview ie a requirement and if necessary. revised in the light oF current conditions, Gnethod is often used in the retail industry for measuring inveniories of large numbers of rapidly rae eit similar margins for which itis Tnpracticable 10 wse other costing methods. The cost of is deterinined by reducit the sales value of the inventory by the appropriate percentase of yross ye cost The cost of inventory that are not ordinarily inisixhiaes specific projects shall be assigned using specific identification oftheir individual costs ke and goods or services produced and seereyated for The cost of inventories that are ordinarily: interchangeable shall be assigned by ust average method “An entiy shalt use the same cost formula for all javentories having a similar mature and uss. For iicatories with a different nature or use, different cost formulas maybe justified yg the EEO. Comparison between Full PFRS and PERS for SME's the PFRS for SMEs is drafted in simple and ‘relodes significantly tess guidance ox how to apply the principles. PAS 25 borrowing covts reais borne costs directly attributable to the seul ‘aventories) to be capitalized as part of the cost of the asset, for cost bet SMEs requires such costs to be charged to expense on, contraction or production of & qualifying asset (including, some lof the PFRS for it reason borrow ReSA ‘The Review School of Accountancy ‘Brel. No. 735-9807 & 734-3989 ReSA The Review School of Accountancy ‘®Tel. No, 735-9807 & 734-3989 PRACTICAL ACCOUNTING 1 _ ©. Ubwrita/C. Expenilla/G. Macariola Inventory 1. On fanry 2 2014, imal pay purchased good ete Coola « ebay n Singapore For an invoice amount of SS100,000 if paid within the norm credit period of 0-day, However, payment maybe dloferred up to 3 months subject tv a revised invwice in the amount of $$102.000, On January 2, 2014 the exchange rate ws P34.00 10 881.00. Import cities and transport charges amounted to PS00,000 and P300,000 respectively. Journal Company paid the invoiced amount on April,2044, on this date the exchange rate was P35,00 10 S$1.00 Se a: gen'2, 2014 Paaceheices [Serve v ‘Question 4: What amount should the goods be initially recorded? Citas 138 1 P3400,0007 02-000 25 3590.06. P4200,000 ag, hh. P3.570,000 Soe S00 00D P4,370,000 ao Cz _ gooey am ‘What tofal am o Question ot exchange es af inerest ust should the company nec Sav owt a New Fectinn oe, P1020 Ayr 20H 6 Ley ow (qe wu Ire b. Pof,000 —eeaorRe Cate ee a pita AP Hoa Get ie cath (rock x 34) 8576099 On December 20, 2014, Rolex Company pursbase goods costing PIOU,000. The terms were FOB destination, see Some of the costs ction with the sale and delivery of the goods were as follows Packaging Tor shipment, 22,000: Shipping special handling charges, P4000. These goods were received on Deceinber 31,2014, In the December 31, 2014 statement of tigancial position, what amount of these goods should be inelud a. P100,000 =. P107,000 b. P108,000 “a. PHO8.000°= >» Ser c 3. On Janoary 1, 2014 the entity purchased raw materials to he consumed in the production process for PSS0,000)=50- Ow) = € UN cc ishing P50,000.refindable-porehase-iaxes, The purchase price wis funded by raising a foan of PSSS,000 (including P5,000 loan-raising fees), The han ries, Daring January 2014 the entity ‘designed the corporate gifts for the customer, the design Juded: Cost of external designer, #7,000 and bor cost, P3,000; During February 2014, the entity’s production ‘eum developed the manufacturing ‘technique and made further modifications necessary to bring the inveutoris to the conditions specitied in the agreement, ‘The following costs were incurred in the testing phase; Material, net of P3,000 recovered trom the sale of the scrapped output, P21,000; Labor, PLY,000. and deprecistion of plant used to perform the modifications, 5,000, During February 2014 the eawity incurred the following additional costs ized comporate sis; consiimable stores, P55,000; labor. PS, 0009 and deprec of plant used to perform the modifications, P15,000.. The exstomized gifts were ready for sale on March ! 2014. No abnormal wastage oceurred in the development and manufacture ofthe corporate gifts. What i th epstofihe finished inventory of customized ifls? 4 PS55,000 «682,000: ». P6as,000 692,000 c 4, Marker Company tas the following information pertaining, to its m handise inventory as of Dee. 31, 2014 Inventory on hand (inchating merchandise eecived on consignment of 20,000, 200,000 12. 0% Inventory purchased with « buyback agreement ~PA"9"9 Frm ny = CAMRY 69.04) Merchandise in ansit, FOB, shippits poi, excluding 5,000 freight cost 155,000 \40/000 Merchandise in transit. free Alongside, including delivery eas alongside the ‘Vessel of P ‘but excluding the cost of shipment of P3,000 + 250,000 24400” ‘Merchandise in transit, CTF (exch hi of PRO. 175,000 1%9/ 2° insurance costs ad f ‘What amount should Marker Company report us valtc ofits inventory in its 2014 balance sheet?” 2g ‘a P749,000 “P770,000 b. P760,000 <1 876.000 for sale a 5. On Ocioher 1,214, Act Company consigned 50 freezers a unit eos of PLS,000 to King Compan 20,600 cach and paid P20,000 jn transportation vost. On December 31, 2014, King reported the sale ofthe 25 freezers and returned 10 units. Cost paid hy the consig c returned units was P4,000.- Amount de to consignor was remitted on the Sane date. Commission rite #8 agreed upon was 15% Page 1475 tae a ee Soe sd ee Med ec eiege By yi As eee he me Re ReSA/ PRACTICAL ACCOUNTING 1 Inventory What amount oF inventory on consignment and net income related to the sokd units, Feepectively, should Act repwrt on December 31, 2014 4. 225,000 and £36,000 «6. 235,000 and P40,000 bb. P231,000 and P32,000 «. P375,000 and P44,000 6. Oh December 1, 2014, Looney Store received 1,000 units of windbrcakers,on consignment trom Tune Co, Trune’s cost for the Windbreakers was P1600 each, and they were priced to sell at P2,000. Transpo ‘of P2,000 was paid by Looney. As of December 31 50 units were returned to the consignor and 200 units are stil held by the consignee. Commission rate us agreed upon between contracting parties was 12% om all sales tw be made by Tune Co, In its December 31, 2014 balance sheet, what amount should Looney report as payable For eansigned goods? 4. PL3IR000 ‘e. P1,500,000 b. P1320,000 i. P2,000,000 7. ‘the following information was derived from the 2015 accounting records of Perez Co. Perez's Goods I Warcuse Held bv Consiances Beginning inventory P130,000, P 14,000 = 144,009 Forchases $75,000 noo) = eS 02 Vesa 10.000 = Toyo Tratgrortaion wean S000 ° 2 €/000 Freight = 30.000 21000 p inventory 143,000 20,000 Gute) Pere/'s 21S cost of sa a em sn 3 000 a. 570,000 634,000 ee . P600,000 : 4 930.000 ® 4, 00 June 1, 2018 Concept Corp: sd merchanlise with isa 200,000.26 Randall on acco’ Concept. allowed trade discounts of 30%, 20P6 and 1s. Croit terms were 215. 0/40 and the sale was made EOB_ shipping point. Concept prepaid! P 1,000 of delivery costs for Randall ws an accommodation. On June 3, 2014 Concept received trom Randall roturied merchandise with an, invoice priee of PS0,000 due w minor defects. On June 14, 2014, Randall setied its account in full to Concept. Hwy much net cash remittance did! Concept reeeive 2OMKICZ XEILX a02 es, fe PAS 70A aleden Lee oo Lad. ce, POO.T60 be PIE 2 de coe| aye ¥ L P740RS = that e 9. Fortune Company lil 10,000 units of produet A ou hand at December |, 2014, costing PAO each, Purchases of product 4 durin hf Hammary were as follows Units Cost - December i200 PS 15.000 615,000 1.000 140,000 5.000 225,000 #000 308.000 {Aphysieal count on December 31.2014 shows 16,000 unset Product A on hand a0 * What is the cost of the inventory at December 31 20LLandr the HLO. Ses a PORS,500 &. PT2S, b. P698.000 a 9736000 10, During J iy 2014 Forlorn Company recorded the followin in Units cost Total cost January | bake 50,008 Pio 7200.00, January 15 sales 15.000 18 purchase 20.000 n 220,000 hase 15,000 2 80,000 January 25 sales 24.000 January 30 purchases 14,000 210.000 January 31 sles _to.000, rt Ou nh, wht Jory should P20, 000 «80.000 4 b. 7260.00) 722,000 Company report in 8 3106 Resa Pave ‘The Review Schoo! of Accountancy ‘WTel, No. 735-9807 & 734-3989 W¥ te * Gouxn = oe KIO ok x= Inventory S16» \2* (vs 6% ReSA/ PRACTICAL ACCOL Duestion 2: Using the i 4ok xno Gee % ieton 2. Using 40k x NTE Geo] - MF NAFS De P240.000, cc. PORNO Gosh a's iouint OF inventory should Porlorm Company report in Hane (4 ape zee B information pertains to For of reciners fr the year’ Unit Coss ry | Inventory on han x P 600,000 rare Purchase 3.200 960,000 : Purcias 33300 990,000 dob rich 3400 680,000 recember 26” Pah 300 __ 700,000 Teal 75.930,000 /1200~ 3.295 he company sok! 400 recliners on ne 25 atl SON on Devember 10. What isthe weighted average cost ofthe wcntory on December 31,2014 — 930.00 #1 990,000 ree Thiainng 200% B2RS= VED, SC i: im process ending inventory, cach accounted for at the lower ‘cost or net realizable value, Specific dat with respect to each product follow ea 1 Prodoct#2 Selig poe Pin isteial eos HAY © Co “16-15 30 NOVe 130-2640 of Cost to sell - 35 %6 = Cost to complete 2 is 40 In pricing ts ending inventory using the lowersofeast-gr-nct realizable value, what unit values should Oslo use fr products #1. and #2, respectively a. P35 and P64, ¢. P40 and P70 b. P50 and P104 PAS and Poo, 13. Rarity Company's closing inventories as of December 31, 2044 consist of three groups of inventory items and their respective eosts and not realiabic values (NRV) are as follows 4 Group t T Pp? I Group 3 ] i Cost NRV {Tem Cost” NRV fA [Piao — | Pi.so0 | viso0 fG. 1 PLs00~ [i200] BT 2000 t 400] 6.00 | 200 | 2000 | ¢ 13.000] 2600 73.0007 | a.000" 11 3.000300] [Ffeat—Tresoo0 | resoo | raai[rstponeeLeitane —| toa epoo Tea + (Question 1: What isthe value of the elosing inventories for December 31,2014 under the ite by item bass a, P20.600 wore ae © PPT,600 ~ BPW 1 msn . estan a 730,600 pa b m0 GS Gu 1 P38,300 canal —B1 Go c 14, The following inforiiaton fete oan item of rw materials of Roviant Company as of Rune 30,3014 1 root fistoecal cast rad mate psoigo F908 Replacement cost of raw materials A as ut 30 June 2014 400,000 ee rnversion costs to finished product A (laber, 720,000 ancl production overhead, P100,000,- ee eae

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