You are on page 1of 25

AUDIT OF CASH AND CASH EQUIVALENT

Problem 1
In connection with your audit of Caloocan Corporation for the year ended December 31, 2010, you gathered the following:
Traveler’s check 50,000
Not-sufficient-funds check 15,000
Money order 30,000
Petty cash fund(P4,000 in currency and expenses receipts for P6,000) 10,000
Treasury bills, due 3/30/11(purchased 12/29/10) 200,000
Treasury bills, due , 1/31/11(purchased 2/1/10) 300,000
QUESTION: Based on the above information and the result of your audit, compute for the cash and cash equivalents that will be reported on the December 31,
2010 statement of financial position.
a. P2,784,000 b. P3,084,000
c. P2,790,000 d. P2,704,000

Problem 2
The books of Manila’s Service, Inc. disclosed a cash balance of P687,570 on December 31, 2010. The bank statement as of December 31 showed a balance of
P547,800. Additional information that might be useful in reconciling the two balances follows:
a. Check number 748 for P30,000 was originally recorded on the books as P45,000.
b. A customer’s note dated September 25 was discounted on October 12. The note was dishonored on December 29 (maturity date). The bank charged
Manila’s account for P142,650, including a protest fee of P2,650.
c. The deposit of December 24 was recorded on the books as P28,950, but it was actually a deposit of P27,000.
d. Outstanding check totaled P98,850 as of December 31.
e. There were bank service charges for December of P2,100 not yet recorded on the books.
f. Manila’s account had been charged on December 26 for a customer’s NSF for check for P12,960
g. Manila properly deposited P6,000 on December 3 that was not recorded by the bank.
h. Receipts of December 31 for P134,250 were recorded by the bank on January 2.
i. A bank memo stated that a customer’s note for P45,000 and interest of P1,650 had been collected on December 27, and the bank charged a P360
collection fee.
Based on the above and the result of your audit, determine the following
1. Adjusted cash in bank balance
a. P583,200 b. P577,200 c. P589,200 d.P512,400
2. Net adjustment to cash as of December 31, 2010
a. P104,370 b. P110,370 c. P98,370 d.P175,170

Problem 3
Your audit senior instructed you to prepare a four column proof of cash receipts and disbursements for the month of December, 2010.
The bank reconciliation prepared by Cubao Company at November 30 is reproduced below:
Unadjusted bank balance P96,800 Unadjusted book balance P58,640
Add: deposit in transit 18,000 Add: CM-Note collected 40,320
Total 114,800 Total 98,960
Less outstanding less: DM bank charges 160
Checks: No. 276 P2,400
282 7,200
284 4,800
285 1,600 16,000
Adjusted balance P98,800 Adjusted balance P98,800
The December bank statement, which has a beginning balance of P96,800, is reproduced below:
May Bank
Account Name: Cubao Company
Date Debits Credits
December 01 P18,000
December 02 P7,200 40,000
December 04 24,000
December 06 48,000

December 08 400,000 CM83
December 10 40,000 DM97
December 11 56,000
December 16 20,000
December 18 64,000
December 21 72,400
December 28 36,000 80,000
December 31 4,000 DM98 64,000 CM84
Totals P131,200 P842,400

DM97- Customers DAIF check CM83- Note collected by the bank
DM98- Service Charges CM84- Account collected by the bank

The company’s cash receipts and cash disbursement journals for the month of December 2010 are provided below:
The company’ s cash in Bank Ledger appears below:
Cash Receipts Journal Cash Disbursements Journal
Date OR No. Amount Date Check No Amount
Dec. 01 415 P40,000 Dec. 01 286 P16,000
05 416 48,000 03 287 24,000
10 417 56,000 10 288 32,000
17 418 64,000 14 289 20,000
20 419 72,000 20 290 28,000
27 420 80,000 23 291 36,000
31 421 88,000 26 292 40,000
28 293 44,000
31 294 48,000
Total P440,800 total P304,000

Cash in Bank

Balance P58,640 12/31/10 CDJ P304,000
12/01/10 GJ 40,320
12/10/10 GJ(CM83) 400,000
12/31/10 CRJ 440,800

Based on the application of the necessary audit procedures and appreciation of the above data, you are to provide the answers to the following
1.How much is the outstanding checks as of December 31, 2010?
a. P208,000 b. P232,800 c. P216,800 d. P224,000
2. How much is the adjusted book receipts for December, 2010?
a. P913,200 b. P985,200 c. P904,800 d. P771,600
3. How much is the adjusted book disbursements for December, 2010?
a. P347,840 b. P332,000 c. P348,000 d. P339,200
4. How much is the cash shortage as of December 31, 2010?
a. 664,000 b. 680,000 c. 688,800 d. 672,800
5. How much is the cash shortage as of December 31, 2010?
a. P24,240 b. 15,840 c. P23,840 d. P0

AUDIT OF RECEIVABLES
Problem 1
Your audit disclosed that on December 31, 2010, the accounts receivable control account of Alilem Company had a balance of P2,865,000. An analysis of the
accounts receivable account showed the following
Interest receivable on bonds 150,000
Other trade accounts receivable-unassigned 750,000
Subscriptions receivable due in 30 days 825,000

647. Determine its bad debt expense for 2010.000) 375. P2. December 3. P1.500 d. 2610.000. a.000 What should be the balance in accounts receivable at December 31.000 b. P9.447.485. P1. P23. Below is a transcript of the Allowance for Doubtful Accounts: .000 b.000 Allowance for doubtful accounts 100.272.000 Collection of accounts written off in prior years (Customer credit was reestablished) 80. P0 Problem 2 Presented below are a series of unrelated situations. 2010.000 Problem 3 You were able to obtain the following information from your audit of Magsingal Corporation’s Accounts Receivable and Allowance for Doubtful Accounts From the general ledger you noted that the Accounts Receivable has a balance of P848.000 b.500 d. The net current trade and other receivables as of December 31. including unearned finance charges of P30.000 b. P1.000 Allowance for doubtful accounts 40. P500. 2010? a.000 Accounts receivable 17.000 2. P1.500 c.500.000 c.100.000.250.000 Allowance for doubtful accounts (per books) 1. P214. P420.000 Bantay Company estimates its bad debt expense to be 1 ½% of net sales.500 2. accounts receivable at December 31.500 c.000 c.000 c. determine the bad debt expense to be reported for 2010 a.000 as of December 31.The trade accounts receivable as of December 31. 2010.800. 2010. 2010? a.000 Sales return and allowances 70. Caoayan.740.000 Trade installment receivable due 1-18 months.822.580. The following data are available for 2010. 1.000 d.147.000 c. disclosed the following: Amounts estimated to be uncollectible P1. P1. Answer the following questions relating to each of the independent situations as requested. P15.000 Bad debts expense for 2010 840.000 If doubtful accounts are 3% of accounts receivable.000 Customer accounts written off as uncollectible during 2010 240. P17.000 c.865. Cabugao Company provides for doubtful accounts based 3% of credit sales.000 Based on the above and the result of your audit. An analysis and aging of Burgos Corp. P1. P525.500.000 Customer accounts written off as uncollectible during 2010 300. P10.200.’s statement of financial position at December 31. reported the following information: Accounts receivable. 2010. P16.500 3.000 What is the balance in allowance for doubtful accounts at December 31. P2. Included the following accounts: Debit Credit Accounts receivable P1.500 b.250.000 What is the net realizable value of Burgos’ receivables at December 31. The following accounts were taken from Cervantes Inc.000 c.000. P254. P10.000 Net credit sales P7.500.500.522.000 330. 2010.2010 before subtracting the allowance for doubtful accounts? a. P123.P630.450.000 5.000 d.500 Trade accounts on which post-dated checks are held (no entries were made on receipts of checks) 75. How much of the foregoing will be presented under noncurrent assets as of December 31.340.500 b. Debit Credit Accounts receivable P4. 2010? a. 2010 is a. P10. P225. At the end of its first year of operations.000 Trade receivables from officers due currently 22.000 d.P55. Inc.000 Sales P15.000 d. Trade accounts receivable-assigned (Alilem company’s equity in assigned accounts is P150.000 d.000 b.000 Allowance for doubtful accounts 1/1/10 170. determine the adjusted balance of following: 1.000 3.000 b. P580. 2010 is a.700. Bantay Company’s unadjusted trial balance at December 31.000 d. P223.000 P2.P225. P14.100.000 4. net allowance for doubtful accounts P9. Credit sales during 2010 P21. P375.

800.000 Over six months 152. P818. Current portion of long-term notes receivables as of December 31. A tract of land was sold by the corporation to No Co. 2010? a. 2011.000.000.240 c. 2010.680 b.Should have been credited to Apol Dee Lah 18.750 payable on July 1. The present value factor of 1 for two periods at 12% is 0. c. The land has an established cash price of P6. but slow (estimated to be 90% collectible ) 80. in additional to the down payment of P1. earns interest at 10% per annum.000.000 The customer’s ledger is not in agreement with the accounts receivable control.690. The note had no ready market. answer the following: 1. The initial principal and interest payment was made on April 1. additional billing in Jan. 2011 T. P74. The 2010 interest was received on December 31.500.400 b.200. 2010. The note is payable in 3 annual installments of P3. Accounts over six months are analyzed as follows: Definitely bad P48.000.750. on July 1.240 c. P30.960 d.000.P826. How much is the Doubtful Accounts expense for the year 2010? a.400 d. P846. Based on the above and the result of your audit. The note receivable from officer is dated December 31. P74.650 c.726 2.000 Total P152. Noncurrent notes receivable as of December 31.760 3. 2010.000 c. The prevailing interest rate for a note of this type at April 1. Inc. Accounts one to six months are expected to require a reserve of 2 percent. d.000. No Co. The corporation sold a piece of equipment to Yes.000 d. b. 2012. It is agreed that 1 percent is adequate for accounts under one month. 2010 was totaled as follows: Debit balances: Under one month P360. Debit Credit Balance January 1.000 b. P75. How much s the adjusted balance of the Allowance for Doubtful Accounts as of December 31. P31.664.556. P30.960 d. and there was no established exchange price for the equipment.000 under an installment sale contract. P10.000 Credit balances: Alien P8.000. P9. 2012. 2009.000 2.400.000 Note receivable from officer 2. 2012. P13. signed a 4-year 11% note for P4. The equal annual payments of principal and interest on the note will be P1. 2010? a. The note receivable from sale of plant bears interest at 12% per annum. How much is the adjusted balance of Accounts Receivable as of December 31.Provision P52.556. Twister 14.000 P880. 2010. you were able to gather the following transactions during 2010 and other information pertaining to the company’s long term receivables: a. on April 1. determine the following: 1.680 b. and is due on December 31.000 Apparently good. P832.000.Advances on sales contract P40. 2013.000.000 The summary of the subsidiary ledger as of December 31.000 In connection with your audit.was 12%.000 noninterest bearing note due on April 1.353.000 on July 1.000 Doubtful (estimated to be 50% collectible) 24. in exchange for an P1. The client requested you to adjust the control account to the subsidiary ledger after corrections are made. 2010 .797 while the present value factor of ordinary annuity of 1 for two periods at 12% is 1.000 One to six months 368.760 Problem 4 The statement of financial position of Santiago Corporation reported the following long-term receivables as of December 31. 2010. and its cost to the corporation was P4.000 July 31-Write-off P16.200. 2010. P9. 2009: Note receivable from sale of plant P9.000 4.000 December 31. 2010 a.000.000 QUESTIONS: Based on the above and the result of your audit. P30.000 plus interest on the unpaid balance every April 1.OK. P74.Balance 20. The collection of the installments on this note is reasonably assured. and 2014. for P6.

800 2. P200.000. determine the following (Round off present value factors to four decimal places) 1.2010 is a. P255. P1. P1..545.281.011. Excluded from total receivables without disclosure 5.353.489 4. payable annually. it was also considered likely that interest would continue to be paid. answer the followong: 1. Included in total receivables with disclosure b.000. P0 3. P617. Tagudin remitted the collections to the bank in partial payment for the loan. P137.500. The bank discounted the note at 12% on the same date.000 c. 90-day. P239.000. A debit to Allowance for Doubtful Accounts of P80.470.000. six month.000 b.000.000 from Union Bank by pledging P360.000 d. P857.470. P569.892. Unfortunately. 6-month. P616. The proceeds from the notes receivable discounted on June 30. b.000 note Aug. 2008 a.000.480 b.000 note to Laoag Bank. P1. Tah signed a P2. P222.000 of accounts receivable. Tagulin Co. Tagudin should report note payable as a current liability at a.000 4.134. In its December 31. 30 – A Company defaulted on the P1. as follows: a.000 c. 10% note receivable dated April 30.41 b. Tagudin Company assigned on a nonnotification basis accounts receivable of P5.750 c. P225. Based on the above and the result of your audit. Loan impairment loss in 2010 a. 12% interest bearing note from A Company in settlement of account 1 – Received a P1.000 of accounts receivable for P. P230.000 b. A debit to Finance Charge of P210.Amount of cash Ms. P1.960 c. On December 31.200.000 d. On December 31.700. The entry to record the sale of accounts receivable would include a.142 c.691 d.000 d.000 4. However.250. Accounts receivable pledged against borrowings. discounted at bank a customer’s P600. Interest income for the year 2010 a.855.512.000 b.745. P761.076 d. 2010.000 to a bank in consideration for a loan of 90% of the receivables less a 5% service fee on the accounts assigned.P1. 2008. Accrued interest receivable as of December 31. Based on the above and the result of your audit. Tagudn Co.1 – Discounted the B Company note at a bank at 15% .000 3. 2010 a.000. 2010.550.000 b. The prevailing interest rate for similar type of note as of December 31. required additional cash for its operation and used accounts receivable to raise such needed cash.400 c.2010.000. P604.500.858 d.891.a.340.345 d.000 c.000 and were sold outright on a nonrecourse basis c.000 loan. The receivables had a carrying amount of P1.367. d.000 d. The agreed interest iis 1% per month on the loan balance. P300.000. P1. P771.637. P1. Laoag Bank determined that it was probable that Ms. P4.000 2. Tagudin signed a note for the bank loan.000 Problem 5 On December 31. P160. A credit to Accounts Receivable of P1.000 Problem 7 Vintar Company has the following transactions in 2010 involving notes receivable: May 1 – Received a P1. Tagudin Co. P1. P2. sold P1. Interest income in 2010 a.000 b. should be a. P3. Tah would pay back only P1. because of lower sales. Ms.760 d. P665.076 c. P0 3.000.000 Problem 6 Tagudin Co. 2010 is a. The bank applied first the collection to the interest and the balance to the principal. P576. On December 1. P455.000. 2010 is 14%. The stated interest rate on the note was 10%. P540. Tah received from the loan on Decmeber 31.414 c. 2010. 2010 statement of financial position.750 b. P564. P1. A credit to Notes Payable of P1. On June 30.000 of the principal at maturity. 12% interest bearing note from B Company in settlement of account Jul.085 b.800 d. P1.000.000 b. received an advance of P300.000. Tagudin Company’s equity in the assigned accounts receivable as of December 31. P2.076 c.009 c.P1. Tah’s financial condition worsened. Excluded from total receivables with disclosure d. P200. Tagudin collected assigned accounts of P3.000 b. Ms. based on the P2. 2010. The market interest rate at that time was 12%. The note matures in five years. P3.000 d. Included in total receivables without disclosure c. Interest income in 2011 a.000 less discount of P200.

it was market “ On consignment”.600 b. A special machine costing P200. A packing case containing a product costing P100. The note is for the payment goods purchased and ears interest at 12% Nov. P2. fabricated to order for a particular customer.000 d.650. for which our company has signed an agreement to repurchase at a set price that covers all costs related to the inventory 300. 1 – Received a one-year noninterest bearing note from C Company in settlement of a P600. Goods out on consignment at another company’s store P800.000 Factory supplies 20.000 Interest cost incurred for inventories that are routinely manufactured 40.000 Good purchased f.000 was received on December 28. but the case shipping and the customer billed on January 10.260. d. Vintar Company paid the bank the total amount due plus P60. and the related purchase invoice was recorded January 5. destination that are in transit at December 31 200. P1. It was not included n the inventory because it was marked “ Hold for shipping instructions”. was finished in the shipping room on December 30.Sep. shipping point that are in transit at December 31 120.000 d. you received its inventory as of December 31. P1.P1.530. 2011. P1. 1 – B Company defaulted on the P1.220.000. P1.000 was entered in purchase register on January 7.000 b. Because it was not on hand during the inventory count.600 c. P1.000 b.o. The invoice was in the hands of the purchasing agent.000.680.000 Materials on hand not yet placed into production 350. shipping point that are in transit December 31 120.000 Office supplies 10. Merchandise received on January 6. e. P2.375 b.000 Factory labor costs incurred on goods still unsold 50. P1.300.681.000 was received on January 6.000 Goods sold f. answer the following: 1.000 Goods purchased f.000 account receivable. The amount collected on September 28. P2.000 2.000 was standing in the shipping room when the physical inventory was taken.050.000 note. .000 PROBLEM 2 In connection with your audit of the Alcala Manufacturing Company. The customer’s order was dated December 18.000 Goods sold to another company.030.000 Freight charges on goods purchased 80.500. Merchandise costing P600.000 Goods sold on installment basis 100. costing P700.000 Goods held on consignment from another company 450.b.542. P2.050.780 c.b.000 c. Merchandise costing P200. The invoice showed the shipment was made on December 29. P193. and the invoice was recorded.600 d.000 on that date and the machine was excluded from inventory although it was shipped January 4. P268. P238. The face value of the note was P660.000 Costs incurred to advertise goods held for resale 20. The amount collected on December 31. The customer was billed for P300.000 for protest fee and other bank charges Dec. 90 day note from D Company.500.000 c.500 3. The proceeds from the discounted B Company note on August 1. 2010.300 d. P1. 2010 is a. P1. P1. b.062 c. c. 2010 and found the following items: a.800 d.487. P1.000.000 4.600 AUDIT OF INVENTORY PROBLEM 1 Presented below is a list of items that may or may not reported as inventory in a company’s December 31 statement of financial position. 2010 on defaulted B Company note is a. it was not included. 2010. The invoice showed shipment was made FOB shipping point on December 31. 2010 on the defaulted A Company note is a.b. 2011.000 How much of these items would typically be reported as inventory in the financial statements? a. but which are not completely processed 280.000 28 – Collected the defaulted A Company note plus accrued interest at 12% per annum on the total amount due Oct 1 – Received a P2. P1. 2011. 2010. 30 – Collected D Company note in full 31 – Collected from B Company in full including interest on the total amount due at 12% since default date Based on the above and the result of your audit.683.o. FOB destination.000. The interest income to be recognized in 2010 related to these transactions is a.2011.000 b.081. P223.000 Raw materials on which a the company has started production .o.000 Goods sold where large returns are predictable 280.

P2.250 3. and were delivered to the customer on Jan.000 PROBLEM 3 The following accounts were included in the unadjusted trial balance of Bani Company as of December 31.01 PROBLEM 4 The Bolinao Company values its inventory at the lower of FIFO cost or net realizable value (NRV). 30.000 b.127. Goods costing P108. P1. 3.000 d. P2.300 b. P334.84 d. Receipt for January 2011 of P327. P1.286. 2010. The following information had been found relating to certain inventory transactions. 4. The sale was properly recorded in 2011.100. The customer took possession of the goods on that date. The terms of the invoice were FOB shipping point. determine the adjusted balances of the following as of December 31. P2.000 The following are some of the transactions that affected the inventory of the Bolinao Company during 2010.300 d. 31. The goods were included in the inventory because the sale was accompanied by a purchase agreement requiring Alcala to buy back the inventory in February 2011. terms FOB shipping point. P2.000 Finished goods 1. P1.000 4. your audit revealed the following: 1. Cash a. 2010 cash receipts book.640. P800. Merchandise costing P150.250 represent collections from customers. 8 Bolinao purchased raw materials with a list price of P200. The merchandise was included in inventory because Alcala still holds legal title.300.700 2. d. 2010? a. P1.050. net of 5% cash discounts.000 was sold on an installment basis on December 15.000 b. you noted that Bani held its cash books open after year-end. Current ratio a. Accounts payable of P186. were included in the Dec. 2010 check register. Goods valued at P137. The invoice for goods costing P87.400 are on consignment from a vendor. Goods costing P500. P481. 2011.505.650.395.600 Accounts receivable 1. These goods are not included on the physical inventory. 2011. 31.750 were received from a vendor on Jan. Bolinao values inventory at the net invoice price . 4.500 b. P2.000 d. P1. 2011.500 c. terms FOB destination are not included in the year. Jan.000 d. P3.200. had the following balances.017.000 and were delivered to the customer on Jan 3. Merchandise inventory is valued at P3. The goods were shipped on Dec. 3. and thus were not included in the physical inventory. The related goods.200 were taken.930. Raw materials P 650. 2010.000 prior to any adjustments.282. Accounts payable a. Historical experience suggests that full payment on installment sale is received approximately 99% of the time g. A P91. 2010. P340. Inventory a. shipped FOB destination were received on Jan. b.500 b. The goods were included in the 2010 ending inventory even though the sale was recorded in 2010.200 was paid in Jan. f. Based on the above and the result of your audit.000 Inventory 3.050 represent cash sales and P147. 2010: Cash P 481.286.500 Accrued expenses 215. The goods cost P65. 346. 6 2011. P2. The inventory accounts at December 31.040.600 b. Based on the above and the result of your audit. P2.025.000 were sold and delivered on December 20. the payments.end inventory. Accounts receivable a. Goods valued at P306. P1.750 5.000 Work in process 1. The related invoice was received and recorded on Jan. n/30. 2. 31.500 d.500 are on consignment with a customer. terms 2/15. P1. P2. P1.127.025. P1. f.454. c.274.83 c.750 were shipped on Dec.00 b. how much of these items should be included in the inventory balance at December 31.000 c. e.000 Accounts payable 2.500 was received and recorded as a purchase on Dec. 2011. on which discounts of P6. 2009. 2010: 1. These goods are not included in the inventory figure.000 b. Goods costing P318. P3.000 and was given a trade discount of 20% and 10%.300 were recorded in the Dec. a.000 shipment of goods to a customer on Dec. The receipts of P180.301.500 During your audit. 2011. In additional.450 b.

30 is most likely to be valued at a.80 1. 14 is most likely to e valued at b. P6. Purchases of raw materials Month Units Unit Price Amount Jan – Feb. 2010. P17. P200.232. Each unit of finished goods contains one unit of raw materials.000 Finished goods 15. P141.200. The repossessed merchandise is to be refinished and placed on sale.200 d. 35. Apr.200 and a cost P38. – Dec.000 c.000 20.P196. The normal profit on this type of inventory is 25% of the sales price.000 b. P14.600 d. P4.8 will include a debit to Raw Materials Inventory of a. During the year . The repossessed inventory on Feb. Debit to Cash of P24. 55. Credit to Repossessed Inventory of P20.000 265. 60. Debit to Cost of Repossessed Goods Sold of P14.000 on account.400 as is. 1/1/2010 P720.000 40. Based on the above and the result of your audit.200 Raw materials purchases 5. 3 will include a a.000 b. The journal entries on Apr.000 units c.112.800 c.00 700. Raw materials are issued at the beginning of the manufacturing process.240.000 Selling expenses 8. P6. spoilage. The entry on Jan. 4.200 Your examination disclosed the following additional information: a.000 P5.600 PROBLEM 5 During your audit of the records of the Manaoag Corporation for the year ended December 31.000 July – Aug.800 b.800.000 20. It is expected that the item can be sold for P24.000 c.60 490. How much will be recorded as Sales on Aug. P14.00 900.232.400.000 Finished goods inventory. 30? a.400 3.000 Nov. P56.120 d.000 May – June 25.000 b.400.Feb 14 Bolinao repossessed an inventory item from a customer who was overdue in making payment. 45. The trade-in inventory on Aug.200.000 2. Aug.000 Manufacturing overhead applied (150% of direct labor) 7.000 c. 200. 20% down.200 b. the following facts were disclosed Raw materials inventory. The trade-in item is to be priced to sell at P6. Data with respect to quantities are as follows: Units Explanation 1/1/10 12/31/10 Raw materials 35. P51.000 c.000 Sep. Raw materials – according to the FIFO method ii. or wastage occurred.800 Administrative expenses 7. P144. The unpaid balance on the sale is P15. 1/1/2010 1.200 d. answer the following: (Assume the client is using perpetual inventory system) 1. P57. 3 The repossessed item was resold for P24.377.248.000 20.000 ? Work in process (80% completed) – 25. Direct labor – at an average rate determined by correlating total direct labor cost with effective production during the period .000 Sales. 45.000 b.000 19.400 5. Inventories are stated at cost as follows: i. d. 30 A sale on account was made of finished goods that have a list price of P59. P24. The normal profit for this item is considered to be P3.800 March – Apr. Credit to Profit on Sale of Repossessed Inventory of P3.000 d. P8.40 918.76 P976.900.800 Direct labor 4. A reduction of P8.000 P17.000 20. P57. – Oct.000 after estimated refinished costs of P6.000 off the list price was granted as a trade-in allowance.350. no returns.

2 years old) and 150 heifers (average age. answer the following: 1.000 b.000 d .040.000 d.July 1. 2010 is a. 2010 is a.000 .000 c.000 Purchases 230.5 million for these animals after costs to sell and further offered P3 million for the farms themselves in that region. 2010 P3.000 Gain arising from changes in fair value less costs to sell attributable to physical changes 60. 1. Mabini Dairy Products. iii.000 d.000 d.776. This fact was published in the national press on December 1. milk consumption has gone down.000 Based on the above and the result of your audit. P555.000 2. P640. P888.000 Gain arising from changes in fair value less costs to sell attributable to price changes 40.000 b. P1. Carrying amount. The work in process inventory as of December 31. Mabini received an official letter on December 10. The company estimates that the future discounted cash flow income from the cattle in Region X amounted to P2 million. A rival company had offered Mabini P1.000 b. The increase in value of biological assets in 2010 due to price change? a.P1.600 b. P460.000 c. P1. 2010. 2010. P936. b. P16. in connection with your audit.514.400 PROBLEM 6 You noted the following related to the biological assets owned by Malasiqui Farms. P1. P3.000 c.496. The company has had problems during the year. P3.31.000 ii. produces milk on its farms. where the government curtailed milk production in the region.600 3-year old animal at Dec. starting that P100.000 c. The company also estimated the following costs. 2010 4.000 2.year old animal at Dec. Mabini has no intention of selling the farms at present.130 d. P660. The fair values less costs to sell were: 1-year old animal at Dec. 2010 P800. Mabini purchased 375 heifers. P14. The company produced milk with a fair value of P660.500. The company’s business is spread over different parts of the country. 2011. d. P992. answer the following 1.5.000 b.911. Commissions to brokers and dealers 20.000 d.077. The cost of goods sold for the year ended December 31.793. Contaminated milk was sold to customers. 1 year old). Transport and other costs necessary to get milk to a market 10.000 would be paid it on April 3.000 2. on July 1. P2.200 2-year old animal at Dec.000 d. 2010. The government decide to compensate farmers for potential loss in revenue from sale of milk.746. The carrying amount of the biological assets on December 31. 2010 4.P630.000 c. As a result. P920.812. Manufacturing overhead – at an applied rate of 150% of direct labor cost Based on the above and the result of your audit.000 1-year old animal at Jan.161.000 c.000 3. The raw materials inventory as of December 31.030.31. The cattle was unaffected by the contamination and were healthy.31.000 d.31.There are 300 cows and 100 heifers in the region. P650.500 1. The company feels that it cannot measure the fair value of the cows in the region because of the problems created by the contamination . All these animals had been purchased before January 1.553. No animals were born or sold during the year. P2.000 c. P14.400 c.000 Sales 110. 2010 3. average age 1 year. The finished goods inventory as of December 31.000 b. 2010.000 4. The amount to e recognized in 2010 profit or loss related to these biological assets is a. answer the following: 1. P20.000 Based on the above and the result of your audit.000 2-year old animal at Jan. 2010 Mabini has a stock of P1. P1. after taking into account the government restriction order. 2010 is a. The only region affected y the contamination was Region X.000 (that is determined at the time of milking) in the year ended 31 December 2010.334.050 cows (average age. 1.000 b. The milk should be valued at a.000 c. 2010 5. Additional information: a.020. As of January 1. P1.000 b.897. P100. P13. i.000 PROBLEM 7 A public limited company. Inc. P1. P210. P630. P1. January 1. 2010 is a. P110. 2010 a.130. P1. 2010 3.

000 of RP Treasury 7% bonds.000 d. P74.740. P590. purchased equity securities as available-for-sale securities.000 Malolos shares on October 1.000 gain d.500 c.500 loss 2. How much should e reported as net unrealized loss in AFS in (accumulated) equity as of December 31.000) 3. P18.150) c. P7. P720. P5.000 loss d.000 d. What total amount of gain or loss on its securities should be included in Magalang’s 2010 profit or loss? a. Gain or loss on sale of 3. (P21.000 P880.920.000 c.240.000 P3.000 gain 4. Angat classifies these shares as available for sale Apr. P180. P68.000 of RP Treasury 7% bonds at 103 plus accrued interest Oct.000 Total P4. The carrying amount of the biological assets as of December 31. 1 Purchased P2.000 1.000 1.720. In addition. P590. 2010. P6.150. P2. The increase in value of biological assets in 2010 due to physical change? a.000.275. Gain or loss arising from change in the fair value of securities to be recognized in 2010 profit or loss a.000.150 gain c.920. (P18.000.000 A Company 2.500. Magalang Co purchased equity securities as trading securities.000 P Company 1.000 b.000 gain PROBLEM 3 On December 31. P260.1 Received semiannual interest on the RP Treasury Bonds Aug. P80. 2008.000 b.000 shares of Malolos at its fair value of P132 per share Based on the above and the result of your audit.120. P780. P870.000 P780.000 P880. P15. P85.000 gain b.000 P Company 1. Magalang transferred its investment in security A from trading to available-for sale because Magalang intends to retain security A as a long term investment. Pertinent data are as follows: Cost Fair value 12/31/2010 12/31/2009 C Company P900. P4.000. 2010 a. 2010 a.000 P3. 2010 a.000 On December 31. P3. Pertinent data are as follows: Cost Fair value 12/31/2010 12/31/2009 C Company P900.000 c.000 P3.920.000. 2008.000 1. Disregarding income taxes.720.000 Total P4.150.825. P 0 PROBLEM 2 On December 31.31.000 On December 31.000 1.000 c.000 5. 2010? .2 Purchased 20. P7.2010 a.100.120.000 A Company 2. P18. P21. determine the following: 1. Net unrealized gain in accumulated other comprehensive income in equity as of Dec.000. 2010 is a.3.000 d. 2010 is a.500 gain c. reclassification adjustment for other comprehensive income on the sale of 3. P92.000 d. P18. P6.850 b. These shares were classified as held for trading Feb.000 4. 1 Purchased 20.1 Sold P500.000 Malolos shares on October 1.500 b. P2.1 Sold 3. for P40 per share plus brokerage costs of P4.325.000 AUDIT OF INVESTMENTS IN EQUITY AND DEBT SECURITIES PROBLEM 1 The following transactions of the Angat Company were completed during the year 2010: Jan.000.000 d. P97.000 c.000 1.150 b. P180.740. 2010.100.000 gain b. Masantol Co.000 P3.000 1. P20.000.000 5. Masantol transferred its investment in security P from available-for sale to financial asset at fair value through profit or loss. Angat classified these bonds as held for trading Jul.150 loss b. the company paid brokerage fees of P18.000 P780.000 b.000 shares of Malolos Company ordinary shares at P125 per share plus brokerage fees of P19.000 loss d. P7.240.5 plus accrued interest of P35. P66.000 1.000 shares of Bulacan Auto C. P21.000 loss c. P2.000 d.000 1. The carrying amount of the biological assets as of January 1.205.920.650. Gain or loss on sale of P500. paying 102.000 RP Treasury Bonds on Aug. 1.

The carrying amount of Investment in BBB. P300. P1.000 150. How much is the net unrealized gain in accumulated other comprehensive income in equity as of December 31. Because of the change in intention and ability.268. P208.31. P960.000 c.060 b.034 b. The bonds were selling at 99 and 98 on December 31. P250.000 b. 2009.500 d.350. respectively.000 P225. P25. 2011? . Both AAA Inc. Both securities are being held as long term investments.917 d. P 252. in 2010 is a. P35. 2009.31. P15.000 b.480 c.250.230 2.00 12/31/10 6. 2010 P1.000 PROBLEM 4 Meycauayan Inc. in 2009 is a.000 (P175. Capas sold P500. P40.000 10% bonds for P3.000 325. P31. P81. 2013.300 b. P25.000 Retained earnings. 2009 and 2010. How much is the net unrealized gain in accumulated other comprehensive income in equity as of December 31. Interest is payable annually every December 31.00 P12. Bamban reclassified the investment to held0to-maturity on December 31. P951. a. 2010 is a. On December 31.750 c. P90. P 0 d. as Dec. 2009 is a.033 c.520 and designated as available-for-sale. 2010? a. 2011. P 0 5. Dec.500 d. P1.00 Based on the above and the result of your audit. 2010 (150. the prevailing market interest rate is 9%. P1.387 d.000) Cash dividends. Interest is payable annually every December 31. P10.000 ordinary shares of AAA for P5 per share and 125. P12. have 500. answer the following: 1.800 d.000 125.000 ordinary shares of BBB for P10 per share on January 2. Inc. Inc. P112. P400.063.000 10% bonds designated as held-to-maturity. Dec.000 face value bonds at 101.500 4. P41. The bonds mature on December 31. 2009 the bonds were selling at 99.034 b. P939.225. P 0 2. P 0 PROBLEM 5 On January 1. P2.875. P946.000.000 Market value of share: 12/31/09 P7.000 d. P1. P1.226 3.000 loss c. answer the following: (Round off present value factors to four decimal places and final answers to nearest hundred) 1. The carrying amount of Investment in AAA.000. 2010. P31. P927.000 b. P39. The income from investment in AAA.000.000 gain d.034 c. 1/1/09 P1.796 d.000 c. The bonds were selling at 103 on December 31.500 c. How much s the realized gain on sale of the investment in bonds in 2010? a.000 d. P 0 3.250 c.938 c. P75. Inc.000 ordinary shares outstanding. Based on the above and the result of your audit.000 b. 2013. How much should be reported as net unrealized gain or loss on AFS (accumulated) in equity as of December 31.000 gain b. 2009. The carrying amount of the investment in bonds on December 31. P39.000 5. Changes in retained earnings for AAA and BBB for 2009 and 2010 are as follows: AAA. P1. How much is the net unrealized gain in accumulated other comprehensive income in equity as of December 31. P29. BBB Corp Retained earnings (deficit). Inc. The bonds were purchased to yield 12%.075.034 c.058 d. as December 31.000 4.50 15. P31. The income from investment in BBB.000) Profit for 2010 300.376 b. 2009 is a.000 Cash dividends.711. acquired 50. P350. Capas Corporation purchased P1.000 2.000) (50. P29. P1. P260. 2010? a. On December 31. How much is the net unrealized gain in accumulated other comprehensive income in equity as of December 31.000 c. 31. 2011? a. P325.000) Profit for 2009 200. Inc. 2010? a. The bonds mature on December 31.075. Bamban Corporation purchased P4. P0 PROBLEM 6 On January 1. On the date of reclassification. answer the following: (Round off present value factors to four decimal places) 1. Based on the above and the result of your audit. The purchase price of the bonds on January 1. 2009 (125.880 b. The bonds were purchased to yield 12%.250 b. and BBB Corp.000 Retained earnings.917 d. P29. 2013. 2010 is a. P939. 2009 1.

P21.928. P100. P175. 2012? a. P396. P205. 2010 when the bonds are quoted 70. On December 31. P300. How much should be recognized in 2010 profit or loss as a result of the fair value changes? a.000 Fee for title search 25. The tenants began occupying the building after its completion. P 0 AUDIT OF PROPERTY.000 5.000 Survey before construction of new building 20. The building is estimated to be economically useful for 25 years.000 Cost of razing the apartment building 40.006.000.000 PROBLEM 9 Dagupan. a.000 c. Tenants began occupying the old building by the end of 2010. The company’s business expanded in 2009.800 b.500 d. P200.000 d.900 c. the bonds are quoted at 95. 2011 is due to the improvement of the issuer’s credit rating. Inc. P 0 2. 2010? a.000 Excavation before construction of new building 100. How much should be recognized in the 2010 profit or loss as a result of the transfer from owner-occupied to investment property? a. The building was used as the company’s head office. Because of the significant financial difficulty of the issuer. 2010. PLANT AND EQUIPMENT PROBLEM 1 Aliaga Corporation was incorporated on January 2. In 2010. P4. As a result.000. The building was constructed for the purpose of earning rentals under operating leases. 2012 a.000. The bonds are classified as available- for-sale. 2009 the bonds were selling at 90.100 PROBLEM 7 Pura Company purchased investment in bonds on January 1.000 c.120.0000. P24 million and 25 million. 1.000 b. P366.000.000 d.700 c. The increase in the fair value of the bonds on December 31.000 P3. The fair value on the date of reclassification was P85 million.000. P23. P200. P100.400 c.000 d. An independent valuation expect was used by the company to estimate the fair value of the building on an annual basis. The company opted to use the fair value model to measure the building. P358. P15. the company reclassified the building from investment property.000. P0 3.000. 2010.000 Apartment building mortgage assumed.000 Proceeds from sale of salvaged materials 10. P4.000 . completed the construction of a building at the end of 2008 for a total cost of P20 million. P5. which included an old apartment building appraised at P300. P 0 PROBLEM 8 Candon. How much is the carrying amount of the building on December 31. P3. P400. 2010. respectibely. The following items relate to the Aliaga’s property and equipment transactions: QUESTIONS: Cost of land. P463.800 d. At this date. the company started to use the building in its operations on January 1. owns a building purchased on January 1.040c. Inc.000 Deliquent property taxes assumed by Aliaga 30.000 Payment to building contractor 10.780 b. including related interest due at the time of purchase 80. 2009. 2006 for P100 million. P24.100 d.036.000 Architects fee for new building 60.000 b. 2009 and 2010 were P22 million . P0 b. P4. According to the expert the fair values of the building at the end of 2008.000 Payments to tenants to vacate the apartment building 20.300 b.000 d.0000 b.104.000 c. plant and equipment. P400.000. P23. 2011. How much is the net unrealized gain in accumulated other comprehensive income in equity as of December 31. How much should be recognized in 2011 profit or loss as a result of the fair value changes? a.000 b. P172. P250. The building has an estimated useful life of 25 years. On December 31. How much is the carrying amount of the investment in bonds on December 31. Because of the change in use. the company reclassified the building as investment property to be carries at fair value. P1. On December 31. the cost and fair value is P1. the bonds are considered impaired on December 31. the company transferred its head office and decide to lease out the old building.400 c.700 d.000 4. P93. How much should be recognized in 2012 profit or loss related to this investment in bonds? a.000 Building permit for new construction 40.

P976.645. Feb.980.000 and by paying cash of P144. you noted the following transactions affecting the property and equipment items of the company: Jan. Land improvements .800. P940.692 4.000 and P76. P1. P560.000 Temporary quarters for construction crew 80.000 2. P122.000. P10. The value of the franchise is set at P160.000 b.000 (par P24.895.400 d. P10.800. Dec.000 b.000 Cost of grading and leveling 50.615 d. Based on the above and the result of your audit.270. required redecorating and repairs were completed at a cost of P60. Land a.000) for a patent and a new equipment.947.000 Based on the above and the result of your audit. In addition.000 b.000 representing property tax for 2010 that had been prepaid by the vendor.000 c.000. Upon completion of construction. Apr. P 0 4. P4. a new franchise was acquired from the manufacturer of the machinery. P50. P576. Cost of buildings a. Mar. cost P76.000 was assumed by Cuyapo on the purchase.000. P10. Buildings a.000 Premium for insurance on building during construction 30.800.000. A mortgage of P3. Cash was paid for the balance Jan.052. which could have been avoided.000 Temporary building to house tools and materials 50. Assessment by city for drainage project 15.800. P12. city inspectors ordered extensive modifications to the building as a result of failure on the part of the company to comply with building safety code. which included a charge of P146. Machinery and Equipment a. P10. P5.000 c. Total depreciable property and equipment a. During this time. respectively. P10.000 d. 20% of the purchase price is deemed applicable to land the balance to buildings.005. 1 The new machinery for the new building arrived.1 Purchased real property for P5. 1 The company exchanged its own shares with a fair value of P320.000 Cost of changes during construction to make new building more energy efficient 90.110.500 d. P1. Payment was made by issuing bonds with a face value of P400. The equipment has a fair value of P200. P360. determine the following 1.200 c. P659. Amount that should be expensed when incurred a.810.000 c. P80. Cost of land a.681. P110. P4. P3. 15 Demolished garages in the rear of the building.875. The company proceeded to construct a warehouse.000 d.000 c. May 1 The company contracted for parking lots and waiting sheds at a cost P360.205. P3.000.000 b.000 c.762. P11.000 3. 15 Previous owners had failed to take care of normal maintenance and repair requirements on the buildings. P2.000 d.000 being recovered on the lumber salvage.000 Cost of paving driveway and parking lot 60.000.000 d.000. necessitating current reconditioning at a cost of P236. 31 The business was closed to permit taking the year-end inventory. P36. P4.000 Interest cost on specific borrowing incurred during construction 360. P10. P3.000 b.000 PROBLEM 2 In connection with your audit of Cuyapo Company’s financial statements for the year 2010.000 less than the average bids made on the construction by independent contractors. which was P90.005.000 d.000 5. P11.600 c.800 2. Cost of Land Improvements a.000 Payment of medical bills of employees accidentally injured while inspecting building construction 18.000 c.600 b.000 Cost of installing lights in parking lot 12. The work was completed and paid for on June 1.185.000 Cost of open house party to celebrate opening of new building 50.000 Cost of windows broken by vandals distracted by the celebration 12.882.000 b. P62. determine the cost of the following: 1.026.600 3.182.000 b. The cost of such warehouse was P540. P72. while the machine’s fair value is P360. Such modifications.967.

2010.000 Depreciation policy: a. The company estimated that 25. 2010.000 and a carrying amount of P30. What would be the depreciation expense on the new equipment for the year ended December 31.065 c. P6.290. P9. . 2. c. P185.500 c.750 d. 388. P1.000 on December 31. Building used in mine operations cost P800. 2007 b. machinery and equipment were purchased at a total invoice cost of P325. 2010? a. a machine with a cost of P17. P612.000 tons of coal.618.718. Installation cost of P44. 2010. a truck with a cost of P48. Also on June 1. 2010 is a.200 c.500. P0 2. a carrying amount of P2. P436. P2. Natividad Mining Corp. Machinery and equipment – straight line .000 selling price of the equipment could be expected. Based on the above and the result of your audit.725 c.307. 2010.500 c.497 b.000. 2010.800 c.000.250 d. d.000 d. What would be the depletion expense for the year ended December 31.547 d.000 tons of coal would be extracted and sold each month. On July 1. P15.000. On August 30.000 d. answer the following: 1. P6. On December 20. Cost allocable to coal was P7.000 d.800 d.000. a.000.764.000 b.578. The adjusted balance of the property.000. The carrying amount of the property. P2.600. P2. The total depreciation expense for the year ended December 31. 10 years ii. Production was in full blast since June 2. you noted that the compant purchased for P10.547 c.000 114.000 c. Automobiles and trucks – 150% declining balance . P1. P245.975 on date of disposition.402 b. Gabaldon interest into a 12-year operating lease stating January 1.326 Leasehold improvements 432. P1.000 b. plant and equipment as of December 31. 2009 was sold for P23.625 Problem 5 In connection with your audit of the Talavera Mining Corporation for the year ended December 31.000 was incurred. P16. plant and equipment and accumulated depreciation balances at December 31.000.000 which has an estimated useful life of 10 years.680 b.322 PROBLEM 4 On June 1. Gabaldon purchased new automobile for P25. P221. Depreciation is computed to the nearest month. 2006 and the facility was occupied on January 1.000 b. P13.402 5.351. P6. P1.617. Leasehold improvements – straight line b. Mine machinery costs P1.000 with an estimated residual value P320.000 P367.400 PROBLEM 3 Gabaldon Company’s property. P6. 2010. 2010. P306. P2.400.919. c. On September 30. P525.500 2.000 tons of ore. acquired the rights to a coal mine containing an estimated reserves of 2. QUESTIONS: Based on the above and the result of your audit. 2007. P1.000 mining property estimated to contain 8. The equipment was expected to become obsolete after the coal deposits had been extracted from the mine and only P10. P250 d. costing P190. The leasehold improvements were completed on December 31. Depreciation methods and useful lives: i. 2010 is a. 2010 is a. all were acquired after 2005 iii. 2009 are: Cost Accumulated Depreciation Machinery and equipment P1. P 0 3.000 c. Total a.000 b.025 b. P6. answer the following: 1.400 b. P360.567. P138. P1. the company purchased an equipment to be used in the production.000 4.000 after its physical life of 4 years.000 and have estimate life of fifteen years with no residual value. P76.000. The residual value of the property is P800. e. P1. Salvage values are immaterial except for automobiles and trucks which have estimated salvage values equal to 15% of cost Additional information: a. 2010. 2010? a.050. f. P18.731. was sold for P4.000. plant and equipment as of December 31. The gain on sale of truck on September 30 is a.500 Automobiles and trucks 210.000 108. The gain on sale of machinery on December 20.380. 2010 is a. P 0 5.092 d. 5 years.

answer the following: . Depreciation on machinery is chargeable to production. Carrying amount of property and equipment as of December 31. 80% to production. P625.000 d. On March 31. P150.000. San Isidro sold the plant for P785. Tons mined 800. P384.467 PROBLEM 6 On December 31. P2.400 c. 2009.000 and the equipment to be P900. P362.600 b. The building and equipment had remaining useful lives of 25 years and 4 years.319. P100. Depreciation on the plant since it was originally acquired has been charged at P10. P1.000.000 b. P150. 2010.080.600 d.400 d.000 c. P418. P1. On June 30.000.000 c.000. The plant has been depreciated at an amount of P10. after recording the revaluation a. Total inventoriable depreciation for 2010? a. This has resulted in the recognition in prior periods of an asset revaluation surplus for the building of P150.000 per month. incurring P25. On December 31.000 selling costs in the process. 2010? a.000 b.000 d. Revaluation surplus as of December 31.600 c.667 d. San Isidro Corporation decided to dispose of an item of plant that is carried in its records at a cost of P900. P1. P 0 PROBLEM 7 On January 1. answer the following (Disregard tax implications) 1.289. at which time the operations of the plant will be outsourced. 2010 a.400 b.533 5. 2010.000.000 c. 2010? a.600 d. P720. Amount to be recognized in 2009 profit or loss related to the revaluation of property and equipment a.000.753.000 Equipment 1. P250. P300.000 The company has adopted the revaluation model for the valuation of property and equipment.211.702.000 d. P2. How much is the maximum amount that may be declared as dividends at the end of the company’s first year of operations? a.000 d.040.689. P438. The company undertook all the necessary actions to be able to classify the asset as held to for sale.000 tons Unit selling price per ton P 4.000 tons Tons sold 640.00 c.000) P2. P289.000 selling costs.400 c. P420.000 b.000. Based on the above and the result of your audit. P400.672. 2009. P 0 2.000 Accumulated (1. 2010. P1. How much is the cost of sales for the year ended December 31. P2.400 b.000 b.302.000 2. incurring P20.000 d.000 5. the statement of financial position of Tinio Company showed the following property and equipment after charging depreciation: Building P3. there had been an increase in the fair value to P770.000) 800. P425. P422.000 c. It is estimated that it could sell the plant for its fair value.000 per month. P400.200. How much is the Inventory as of December 31.400.000 b. 2009.000 3. P960. P100. P768.494. How much is the depletion for 2010? a.000 b. P1. P192.000 4. Depreciation on the building is to be allocated as follows: 20% to operating expense. Revaluation surplus as of December 31.000 Operating expenses (excluding depreciation) 576. with accumulated depreciation of P160.500.40 Direct labor 640.000 Miscellaneous mining overhead 128.Following is the summary of the company’s operations for the first year of operations.000 Inventories are valued on a first-in.000 Accumulated depreciation ( 400. P100.133 4.000. The plant will continue to be operated until it is sold.000c. P1.000 b. Questions: Based on the above and the result of your audit. the plant had not been sold but. first out basis.600. P250. due to a shortage of this type of plant. P75. determine the following: (Ignore deferred tax consequence) 1.000. respectively. Total depreciation in 2010 a. an independent valuer assessed the fair value of the building to be P1. P1. P2.000. P1.000 d. P1. Based on the above and the result of your audit. 2010 a. 2009. P144. as of December 31.000 c. P0 3.

P180. Paete’s revenue from the franchise for 2010 was P8.Operating system of a computer 10. P68. P45. P10.Cost of equipment obtained under finance lease 700.Timberland 2. P 0 3. P56. beginning January 1.600.Cost of purchasing a trademark 290. P70.000 c. P5. P3.Legal cost incurred in securing a patent 70.000 b. for an initial franchise of P680.000.000 18.Goodwill internally generated 300.500.000 c. P60.Costs incurred in the information of the corporation 90. Inc. 2010.000 17.Cost of purchasing a copyright 900. The impairment loss to be recognized on January 1. The implicit rate for a loan of this type is 14%.000 was paid when the agreement was signed and the balance was payable in four annual payments of P120. The agreement also provides the 5% of the revenue from the franchise must be paid to the franchisor annually.000 each.000 8.760 c.Cost of testing in search for product alternatives 65.000 23. Expenditures for successful litigation in defense of the trademark totaling P80.000 d.Computer software for a computer-controlled machine that cannot operate without that specific software130.1.000 5. 2010 (date of classification as held for sale) is a.000 d.000 22.Lease prepayments (6 months’ rent paid in advance) 60.Cost of engineering activity required to advance the design of a product to the manufacturing stage 120.000 AUDIT OF INTANGIBLE ASSETS PROBLEM 1 The following are items that could be included in the Intangible Assets: 1. P200. The depreciation expense to be recognized in 2010 is a. P3.000 4.000 11.530.000 6.Internally generated publishing title 230. P40. P58.740.000 b.  A trademark was purchased from Tsek Company for P320. P 0 4. Of this amount.000 13.000 24.000 25.Operating losses incurred in the start-up of the business 560.000 20.000.000 c.Cost of a successful legal suit to protect the patent 230.Goodwill acquired in the purchase of a business 640. Paete estimates that the useful life of the franchise to be ten years. Paete signed an agreement to operate as franchisee of Clear Copy Services. Paete estimates that the useful life of the patent will be eight years. P20.Cost of purchasing a patent from an inventor 500. P20.Cost of a conceptual formulation of possible product alternatives 160. Legal fees and other costs associated with the registration of the patent totaled P131. 2010.000 PROBLEM 2 You noted the following items relative to the company’s Intangible assets in connection with your audit of the Paete Corporation’s financial statements for the year 2010. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. 2010.830. 2011.000 7.000 14.000.000 16.200. determine the following: (Round off present value factors to 4 decimal places) 1.000 c. The gain to be recognized on sale of plant on June 30.Investment in a subsidiary company P1.000 21.Training costs incurred in start-up operations 80.000 were paid on July 1.Cost of developing a trademark 61.000 15.Long-term receivables 310.Cost of developing a patent 140.000 d. P50.000 10.  On January 1. Paete estimates that the trademark’s usefull life will be indefinite Based on the above and the result of your audit.000 12.000 b.200.380 d.  Paete incurred P624. P40. P3.000 on July 1.000 b. The gain to be recognized in profit or loss as a result of increase in the fair value of the plant is a.000 b.380 d.000.000 9.000 of experimental and development costs in its laboratory to develop a patent which was granted on January 2.000 2. 2007. 2010 is a.000 How much could be recognized as Intangible Assets? a. Total expenses related to franchise in 2010 .Research and development costs 340.Purchase of a franchise 1. P 0 2.000 3.000 19.

Carrying amount of trademark as of December 31.000 in 2012. Carrying amount of Trademark as of December 31. P984.000 d.000 b.000 ? Liabilities 2. P220. P212. determine the following: 1. b) The cash flows expected to be generated by the Laguna Manufacturing reporting unit is P375. P416. P114. Loss on patent obsolescence in 2010 a. P448. Amortization of patent in 2007 a. Carrying amount of patents as of December 31. 2009 a. P448. 2010 a.050.200 c.000 d. a competitor obtained rights to a patent that made the company’s patent obsolete. The goodwill is associated with Siniloan’s Laguna Manufacturing reporting unit. The trademark has 7 years remaining legal life. At the beginning of 2007. P1. before any adjusting entries for the year were made. Round off present value factors to 4 decimal places): 1. 2010 a. P338. P123. 2010. P444.600 d.P364. the company purchased for P280. P929. P454. Based on the above and the result of your audit.009. P64.000 b. P64.000 b.  A customer list for P330. Carrying amount of intangible assets as of December 31.444 c.000 b. P174.000 P4. P448. P360.250.480 d. 2010 a. P454. The useful life of trademark still extends beyond the foreseeable horizon.000 in successfully prosecuting an attempted patent infringement. the following information was assembled about each of the intangible assets: a) Because of a decline in the economy. Siniloan has exclusive use of the list for 5 years.000 in 2011 and P120.000 c.000 d. P63. P250.750 5.700. the company spent P144. 2010 a.000 per year for the next 22 years. P304. P131. without problem. P2.680 c. P135.000 b. a. P503. P494. P2. Carrying amount of franchise as of December 31.700. determine the following: (Assume that the appropriate discount rate for all items is 6%. indefinitely. P200. P450.193. P130.273 d.640 d.000 a patent that was expected to prolong the life of its original patent by 5 years.000 to apply for and obtain a patent on a newly developed product. P180. At the beginning of 2006.500 c. Nagcarlan Company spent P480.000 b.046.P355. P369. P400.P364.000 c. Carrying amount of Customer list as of December 31. On July 1. On December 31.285 c.000 PROBLEM 4 On December 31.000 d. P549. P320. P110. By contract.950 d. P240. Based on the above and the result of your audit.483 4.147.376 c. 2010 a.250.800 c.000 5. Total amortization for the year 2010 a.000 b. P2.480 PROBLEM 3 On January 2. P1. P535. P 0 .200 2.000 b.500. the trademark is now expected to generate cash flows of just P15.624 4.000. P264.000 per year.000.000 c.000 c) The cash flows expected to be generated by the customer list are P180.714 b. 2002.640 d.000 2. P52.644 b.000 c. The patent had an estimated useful life of 10 years. Impairment loss for the year 2010 a.640 d. 2006 a. 2009. P123.482 3.000 b.000 4.960 c.715 d. P 0 3. Carrying amount of patent as of December 31. 2010 a. P288. P330.000. it is expected that the list will have economic value for just 3 years.000 Goodwill 2.200 b.000 c.  Goodwill for P2.727 d.964 2. 2010. P2. Because of market conditions. P124. Siniloan Corporation acquired the following three intangible assets:  A trademark for P450.720 c.520 3. Carrying amounts and fair values of the assets and liabilities of the Laguna Manufacturing reporting units are as follows: Carrying amount Fair values Identifiable assets P4. P269. 2010 a.285 2. P124. Carrying amount of patent as of December 31. Carrying amount of Goodwill as of December 31.800 b.914 b.000 d.137. It is anticipated that the trademark will be renewed in the future. P385.250.

The goods were turned by Candelaria on December 28. payable on demand.000.000 c. P500. On December 28. received on January 10.000 d. As of December 31.712.500.2010. with a term of 20 years. but the P160.760. FOB destination. net of P240. The 12% mortgage note was issued May 1. The bonds payable is 10-year. For each of the numbered items. d. P3.000 Wages and salaries payable 15.560.000 Bonds payable 2. 2010 is a. Terms of the note give the holder the right to demand immediate payment if the company fails to make a monthly interest payment within 10 days of the date the payment is due. Total noncurrent liabilities as of December 31.000 Notes payable – bank 800. answer the following: 1.000.000 SSS contributions 64.000 b.000 Mortgage notes payable – 12% 1. related to the company’s liabilities as of December 31.950.000.000 Interest payable ? Mortgage notes payable – 10% 600. 2011. P800.000 The following additional information pertains to these liabilities. A payment of P220. Payroll: Items related to Candelaria’s payroll as of December 31.000 b. The payment includes interest of P180.200 b.2004. P1. P143. Interest payable as of December 31.000 merchandise shipped on December 26. 2011.400. a. P215. Accounts payable P 650. 2010 to January 15.000 2.000 e.000 Payroll deductions for: Income taxes withheld 56.998. 2010 statement of financial position. Inc. The 10% mortgage note was issued October 1. 2010. All trade notes payable are due within six months from the end of the reporting period.2010.000 d.000 Philhealth contributions 16. P5. The current principal amount due is P1.000 is due April 30. P5. 2010. A company. determined the amount of any. 2010: a. C Super Services – P144.960. 2010.138.600 c. with a term of 10 years.923. P5. On December 30.000 c. 2010. received on January 16. issued June 30. 2001.000 and shipped on December 20.841.600 2. 1. 2011. 11 ½% note issued January 2. 2007.bank to be reported under current liabilities as of December 31.000 credit memo was not received until January 6. – P192.601. A P300.000 debit balances in supplier’s accounts.000 4. Principal and interest payable annually on April 30. Interest is payable every six months.000.000 c.000 b. Total current liabilities as of December 31. 2010. 8% notes issued March 1. 10% note to be issued January 2.000 d. c. Agdangan negotiated a written agreement with Allied Bank to replace the note with a 2-year. b. 2010 is a.000 c. P 0 3.000 d. Agdangan is three months behind is paying its required interest payment d. 2010 are: Accrued salaries and wages P776. P2. The interest was paid on December 31.AUDIT OF LIABILITIES PROBLEM 1 You were able to obtain the following from the accountant for Agdangan Corp.000 . b. A 1-year.938. FOB shipping point.P67. 2011. The unpaid voucher file included the following items that not had been recorded as of December 31.000 merchandise shipped on December 31. a. Based on the above and the result of your audit. a supplier authorized Candelaria to return goods billed at P160. 2010 is a. Accounts payable: Accounts payable per general ledger control amounted to P5. that should be reported as current liability in Candelaria’s December 31. 2010.000 Advances to employees 80.960.200 electric bill covering the period December 16. i. B. P4. 2011.000 b. 2010. ii. 2010. The portion of the Note Payable. 2011 c. P500. 2010. P1. P3. 2008. P300.000. Bank notes-payable include two separate notes payable to Allied Bank. Interest is payable semi-annually every June 30 and December 31.000 Notes payable – trade 190. P3. P203. P5.000 d.000 janitorial services for the three month period ending January 31.P224. Meralco. 2011. P3. 2010 is a.000. 8% bonds.000 PROBLEM 2 The following information related to Candelaria Company’s obligations as of December 31.500. P500. P155.

On December 31.) a. The goods covered by the purchase contract were delivered on January 28. P192.000 c.400. you find the following ledger account balances. 25-year bonds Payable.000 b. P72.000. Candelaria placed a coupon redeemable for a premium in each package of product sold.000 . 2010.240. Purchase commitment: During 2010.000 PROBLEM 3 In your initial audit of Infanta Finance Co. delivery to be made in 2011. P776. P800. 2011. bears interest at 18%. P1.000 c. P952.000 c.000 d.000 d. P2.000 d.200Dr P772.600. Note payable: A note payable to the Bank of the Philippines Islands for P2.000 3.000 d. P872. P512. P908. The distribution cost per premium is P20. P1. Bonus obligation: Candelaria Company’s president gets an annual bonus of 10% of net income after bonus and income tax. 2010.000 9.000 d. The suit being contested. 2010.000 6. Candelaria estimated that only 60% of the coupons issued will be redeemed.000. a. P0 8.000. P576.400.800 b. P196.600.000 Total warranty claims honored P1. P2. A premium is offered to customers who send 5 coupons and a remittance of P30. P3.152.000. P96.000 5. Actual warranty costs incurred during 2010 are as follows: Warranty claims honored on 2009 sales P416.40 per unit. the purchase price of this inventory item had fallen to P4. but Candelaria’s lawyer believes there is probable that Candelaria may be held liable for damages estimated in the range between P2.000. P1. P912. a. Candelaria became involved in a litigation.800 c. P772. Candelaria’s deferred income tax account has a 2010 ending credit balance of P772. P1.800.000c. 2010. Candelaria Company inaugurated a promotional campaign on June 30.728.000 Treasury Bonds 10/01/2010 P864. 2009. the following is available: Packages of product sold 160. P722. and is payable in three equal annual installment of P800. P0 b.600 b. Premiums: To increase sales.800Cr a.504.000 units of inventory at fixed price of P5 per unit.000 d. (Ignore the effects of other given items on net income. 2010. P2.000 c. P 0 b. amounted to P416. P832. Product warranty: Candelaria has a one year product warrant on selected items in its product line.000Cr For depreciation on property and equipment 576.000 b. The first interest and principal payment was made on October 1.000 b.000 4.000 Coupons redeemed 64. 2010. P1. Each premium costs P100.600. P 0 b.500.. consisting of the following items: Caused by temporary differences in accounting Deferred tax For gross profit on installment sales P376. Litigation: In May.000 and P3.504.000Cr For product warranty expense 179. The note is dated October 1. The warranty costs on sales made in 2010 are estimated at P1.000 Warranty claims honored on 2010 sales 992.000. a. Candelaria entered in a noncancellable commitment to purchase 320.000c.000 Bond Premium 01/01/2006 320. 2009.408. Deferred taxes: On December 31.000 7. The estimated warranty liability on sales made during 2009.000 Premiums purchased 16.408.000 a.000.000 c. P395. Assume the tax rate of 30% and the correct income before bonus and tax is P9. For the six months ended December 31.000 d. P992. which was outstanding as of December 31.000 d. 2006 issue 01/01/2006 P6. and no amount is a better estimate of potential liability than any other amount.000. P1. Debit Credit 12%. 2010. a. P628.000 is outstanding on December 31.000 a.000.

840 c. Pagbilao accounts for this as available for sale securities. P1.000 at 9% evidenced by a note payable to ABC Bank.000 b. 2009: 11% bonds payable. 2010.000.000 c. The market price was P21 per share on December 31. P256.970. answer the following questions: 1.600.755. P5.388. Based on the above and the result of your audit.600. determine the following : (Round off present value factors to four decimal places.) 1.000 plus accrued interest.000 d. the Corporation reissued 30.654. 2010? a.400 loss c.000 Treasury shares. the 3.655 c. The Corporation uses the effective interest method to amortize bond premium.000 b.000 07/01/2010 384. P1.000.190.000 .930 b. P5.453.324. The adjusted balance of bonds payable as of December 31.000 The bonds were redeemed for permanent cancellation on October 1. the Corporation owned 20. P320.000 to yield 10%. Interest is payable each December 31. P116.236 b. P8.600 loss b. P731. 2010? a. How much is the carrying of the bonds payable on December 31.590. P5. P9. Perez uses the effective interest method of amortization. P10 par. P72. The bonds mature on December 31.000 b.756. How much is the treasury shares balance as of December 31.930.200 4. determine the following: (Use straight line method to amortize premium or discount) 1. P266. 2009 is a.000 of its 50. P224.630.600 d.220. P4. 2010 is a. P1.704. The note is payable in five annual principal installments of P1.000 d. P731.000 3.000 face value. 2011. 2010. Perez Corporation issued 5. 2009 is a. The gain or loss on partial bond redemption is a. P6. P260. P1. P650.360 2.200 3.600 gain d.536. P10.000 treasury shares for P550. e) On December 31.524 d.760 Share capital 16.000. P72.830 d.000. 2009 at P20 per share. P181.000 2.000 bonds were extinguished early through acquisition in the open market by Perez for P2.000 c.236 . How much is the noncurrent portion of the note payable to bank as of December 31.442 b.000. 2010 is a.835 b.135 d.600. P755. which represented a 1% ownership interest.000 3. 2009.000. 2010? a. How much is the 2010 total interest expense? a. authorized ordinary shares. P 0 4.400.000.764 d. Bond Interest Expense 01/01/2010 384. P1.400 b. Interest is payable annually on December 31. On December 31. 2009. P5. P1. d) On November 2.785 d. at cost 650.000 Share premium 4. P5. 2009. 2010. P200. 2007. The treasury shares had been acquired on February 28. The gain on early retirement of bonds on December 31. 2009. 2022.000 b. 11% bonds dated January 1 at an effective annual interest rate (yield) of 9%.200 c. P100. b) At December 31. The first principal and interest payment is due on November 2.400. P7.675.000 d.000. at face value P10. P4.000 Premium on bonds payable 704. 2010. P10. c) On January 15. the Corporation borrowed P8.187. 2010 at 105 plus accrued interest Based on the above and the result of your audit .000 Transaction during 2010 and other information relating to the Corporation’s liability and equity accounts were as follows: a) The bonds were issued on December 31. The total bond interest expense for the year 2010 is a. P5.282. P5. P10. P7.000 ordinary shares of Awoo Corp. The unamortized bond premium on December 31. P5. 2010. 2010 is a.811 c.000 of its 5 year. The issue price of the bonds on January 1.760 c.476 c. P6.249. you gathered the following liability and equity account balances as December 31.400 gain PROBLEM 4 On January 1.000. The shares were purchased on May 4. The carrying amount of the bonds on December 31.00 c. P756. P235.000. P4.000 2.000 b. for P10.000 Retained earnings 4.000 c. P 0 PROBLEM 5 In connection with your audit of Pagbilao Corporation.000 d. and P18 per share on December 31. the Corporation had 4.323. Based on the above and the result of your audit.

239 b.897 d. P110. P52. 2010 a. P1.547 4. P61. answer the following: (Round off present value factors to four decimal places.5. P60. P2.500. P40. 2009 Lease period 20 years PV of an ordinary annuity of 1 for 20 periods at 10% 8. P60.792 c. P1. 2010 is a. P55. 2009. P2.320 d.538 b.392. P91. the system will revert to Luna b) General is aware of Luna’s rate of implicit interest c) The lease rental consists of equal payments. The system was delivered the same day (by prior arrangement) to General Investment Company. a lessee.) 1.464 b.000 Estimated useful life and lease term 8 years Expected residual value (unguaranteed) P40. P607. P35. P 0 PROBLEM 6 Luna Corporation is in the business of leasing new sophisticated computer systems.736 3.634. Depreciation expense to be recognized by the lessee for the year 2009 a. Liability under finance lease to be reported by the lessee as of December 31. 2009 Additional information is as follows: a) At the end of the lease. The amount to be reported under current liability under finance lease as of December 31. 2010 a. P257. The ferry is expected to be economically useful for 25 years.858. P130. P95. The corporation accountant revealed the: Following information relating to lease transaction: Cost of system to Luna P550.616 b. 2009.063 d. P60. P48.560 d. P39.366 4.263 5. the ferry was leased to the Balik-Balik Ferry line on a contract specifying that ownership of the ferry will transfer to the lessee at the end of the lease period. Amount to be reported under current liabilities as liability under finance lease by the lessee as of December 31.3649 PV of 1 for 20 periods at 10% 0. P60. P618. P1.313 c.611 c.650. The interest income to be recognized by the lessor in 2010 is a. P112. The total financial revenue to be earned by the lessor over the lease term is a.000 Lease payments P225.127 c.194 c. P76.630 d. 1. Catanauan completed construction of a passenger ferry for use between Quiapo and Guadalupe. P54. P20.000 Implicit rate 10% Date of first lease payment April 1.849 c.600 b. P121.440 2.963 PROBLEM 7 Catanauan Incorporated uses leases as a method of selling its products. P335.276 5.000 Estimated residual value P78. On April 1.647.103 b.000 Luna’s implicit rate of interest 12% General’s incremental borrowing rate 14% Date of first lease payment Dec.469 d. The profit on sale to be recognized by the lessor a.306 b.680 b.717 b. The total expenses related to the lease that will be recognized by the lessee in 2010 is a.000 c. P1.312 c.615 d. Other terms of the agreement are as follows: Original cost of the ferry P1.584. Based on the above and the result of your audit.664 2.151 c. 31.950c.000 d. As a lessor of computers . P102. P2.486 d. P183. determine the following. P427.694 3. In early 2009.873 . P52. P64. P271. How much is the net unrealized loss on available for sale securities as of December 31.000 b. Annual lease payments do not include executory costs.845. P415.665 d. 2010? a.5136 PV of an annuity due of 1 for 20 periods at 10% 9.221 b. Total finance income that will be earned by the lessor over the lease term a. The annual lease payment under the lease is a. P119.459. P40.714 c. P61.1486 Based on the above and the result of your audit.091 d d. Luna purchased a new system on December 31. P53. P2.

000  Settle one-fourth of the note by transferring 200. Share premium to be recognized on the settlement of P500. P1. P465. Only interest had been paid to date.425. P75.000 on the life of an officer with Mulanay Company as beneficiary. P1.300.000 Litigation accrual 500.0875.  Settle one-half of the note by transferring land with a recorded value of P800.000 c. P7. P437.000. 2010. . The total lease-related expenses to be recognized by the lessee during 2010 is a. P1.000 shares of P1 par ordinary shares with a fair market value of P15 per share  Modify the terms of the remaining one-fourth of the note by reducing the interest rate to 5%.098. P200.000 c. P2. Guinayangan uses straight-line depreciation for its other various business holdings. P1. 2010 Mulanay paid insurance premium of P200. Life insurance expense P100.584 c. Fair value of the land at time of the sale was P750. P1.000 d.000.000 d.000 b. P1.000 Warranty expense 200. purchases land and constructs a service station and car wash for a total of P6. P976.750.000. The lease is a 10 year. 105 note.000 c.595 c. 2010 is a. P2.PROBLEM 8 Guinayangan Co.000 Additional information: a.220.269 c. noncancelable lease. Due to its financial difficulties Maca Company has negotiated a restructuring of its note payable. The amount of annual lease payment is a.000 b.000 b. The parties agreed that Maca Company would settle the debt on the following terms.000 b.000 b.000.000 d. P750.000 Unamortized computer software 3. on a P2.000 b. answer the following: (Round off present value factors to four decimal places) 1. P337. The interest rate implicit in the lease is 10%.000 note by issuing ordinary shares a. Carrying amount of the note payable as of December 31.500.642 b.000 c. b.306 c.000 Excess tax depreciation 2. P600. P 0 3. P 0 5. P50. The economic life of the facility is 15 years with zero salvage value.000 PROBLEM 10 The following differences enter into the reconciliation of accounting profit and taxable profit of Mulanay Company for the year ended December 31.000. Gain on extinguishing of debt on the 1 million note a. Interest expense in 2011 a. P142. the facility and land on which it was constructed are sold to a major oil company for P7.000 d. 2011 – 2014 c. P26. Based on the above and the result of your audit. P13. P750. 2010.000 Unearned rent income deferred on the books but appropriately recognized in taxable profit 400. determine the following: 1. P262. P 0 2. Total gain on extinguishment of debt a.000 Interest income from long-term certificate of deposit 200.694 c.200. its first year of operations. 2010.632 2. P0 4. P414. The total lease-related income to be recognized by the lessee during 2010 is a.000 c. On July 1. Maca Company was indebted to Lelon Co. The warranty liability is the esstimated warranty cost that was recognized as expense in 2010 but deductible for tax purposes when actually paid. The agreement requires equal rental payments at the end of each year beginning December 31.494 d. Based on the above and the result of your audit.500 d. The total lease-related income to be recognized by the lessor during 2010 is a. P550.109. P300. Title to the facility and land will pass to Guinayangan at termination of the lease. when construction is completed. The amount to be reported under current liabilities as liability under finance lease as of December 31.000 .526 b.500. P470.114 d. P100.000 3.000.963 b.306 b.000 and a fair value of P900. P1. P273.879 PROBLEM 9 On December 31. P300. At January 2. 2011 a. P675.134 5.000 d.006 d. P300. 2010. P517. extend the due date three years from the date of restructuring and reducing the principal to P300. P15.000 and immediately leased from the oil company by Guinayangan. Excess tax deprecation will reverse equally over a four-year period.467 d. P 0 4.000.

Accounting profit for 201 is P10. P2.000.ordinary.000 Accounts receivable P963. Current tax expense a. P1.000 Building and equipment 1. 2010: 1.820.200 Ordinary share capital (P1 par value) 270. P385.000 Reserve for doubtful accounts 54.480. d. P2.000 Issued 270.000 d. Deferred tax liability a. P1.000 Premium on ordinary shares 1.000 of computer software cost.890.000 Donated capital 800. at cost 324. Share premium / Additional paid-in capital . Considering the technical feasibility of the project. P4.000 Net unrealized loss on available-for-sale securities 45.000 each year until their maturity At the end of 2014 h. P1. determine the following as of December 31. Based on the above and the result of your audit.000 The dividends on preference shares are P0.000 c.500. 2010 Debit Credit Accounts payable P459. g.000 P6. It is estimated that litigation liability will be paid in 2014 e. P3. P1.000 Trading securities at fair value 387. 2010 was as follows: Alcoy Corporation Post – Closing Trial Balance December 31.000 Prepaid expenses 72.000 18. P3.465. In addition.000 Preference shares capital (P50 par value) 900. Alcoy had the following number of ordinary and preference shares: Ordinary Preference Authorized 900.000 90.000 Cash 396.800.085.000. Based on the above and the result of your audit. However.000 Reserve for depreciation 360.000 c. Tax expense a.000 Bonds payable 720.000 b.100.000 b.000 Inventories 1.000 d.000 Land 684. Interest income from the from long-term certificate of deposit is expected to be P200.000 d.800.000 c.480.800. P2. Deferred tax asset a.000 4.750.000 Totals P6.40 cumulative.000 At December 31.050. compute for the following: 1.000 3.000 c.116. Tax rate is 35%. P1.000 Share warrants outstanding 208.535.000 Retained earnings 415.000 2.980.000 Available-for-sale securities at fair value 513.000 b. the total amount was expensed in 2010 for tax purposes. the preference share has a preference in liquidation of P50 per share. 2010. P1. Mulanay Company incurred P4.750.000 Outstanding 252. Rent income will be recognized during the last year of the lease.000 d.100.000 Gain on sale of treasury shares 450.800 Treasury shares. P1.000. 2014.000 Dividends payable on preference shares 7. f.000 b.830.000 AUDIT OF EQUITY PROBLEM 1 Alcoy Corporation’s post-closing trial balance at December 31. P3. In January 2010. this cost was capitalized and amortized over 4 years for accounting purposes. P2.000 18.820.

050 2. P8.600. The following transactions occurred during 2010: Feb. P9. In addition. P850. 1 Issued 1. Dec. exercisable within a 30-day period) permitting holders to acquire one share at P40 with every 10 rights submitted.000. Total equity a. Shares stock were issued for the dully paid subscriptions. 15 Payments in full for half of the subscriptions and partial payments for the rest of the subscriptions were received.000 at par.000 c.000 shares authorized. P777.000 bond a detachable warrant enabling the holder to purchase two ordinary shares at P40 each for a 1 year period. Profit for the first year of operations was P1. P4. Each option has a fair value of P5 at the time the options were granted.500 4.500 options outstanding at December 31.150 5.1 The company issued bonds of P2. The company was authorized to issue 60.000 cash Nov.266.300 b.000 d.522.000 convertible preference shares at P150 per share. The building was originally purchased for P1. Share capital a.500.258. P415. P4. P10 par value.800. Dec . P730.800 c.219. Because the market price was below the option price.000 PROBLEM 3 Bogo Corporation began operations on January 1.000 3 years ago and was carried on the promoters’ books at P150.050.000. Based on the above and the result of your audit.000.770. Total share premium a. P1.982.000 c. 15 Sold 9.000. you noted the following transactions involving shareholders’ equity during 2010: Jan.200. Total equity a. Unappropriated retained earnings a.770.030.000 bond without the warrant.500 c.800 ordinary shares were sold for P720. P150.800 PROBLEM 2 The equity section of the Austrias Inc. P9.000 and services valued at P210.500 d. Total contributed capital a.299.000 ordinary shares at P35 per share. ordinary shares and 120. The corporation paid P225. P4. 300.220. P9.000. P848.474. P8.500 ordinary shares to the corporation promoters in exchange for equipment valued at P510. P480.200. P9.450 3.000 b.000.000 2.650 d. Jan.000 ordinary shares at P450 per share Aug. Share premium – share options.251.000 c.213.000 3. Each share can be converted to five ordinary shares. P4.000. giving each P1. 1 Declared a cash dividend of P10 per share on preference shares. P8. 2011 to shareholders of record on December 15 Dec.000 May 30 Received subscriptions for 12.800 b. Total ash received was P4. 1 Key executives 4.428. 2009: Share capital. In connection with your audit of the company’s financial statements.00 c.700 c. P580.000. 1 The market price per share dropped to P33 and options came due.053.200 b. P2.800 d. 250. 1.000 ordinary shares at P390 per share. payable on January 15.000 shares of 10%.000. P3.200 preference share in exchanged for a building with a fair value of P1.800 c.784.800 b. 31 Issued 30. P10. The property costs P270. P9. P100 par value convertible preference shares. The bonds would sell at P996 per P1. no remaining options were exercised.000 share issued and outstanding. P750. P858.000 4. P4. P4.000.170. Dec. Retained earnings. Share premium – excess over par.000 by the investors and has a carrying amount of P660. 31 Paid the preference share dividend. July 1 The company issued rights to shareholders (one right on each share. P7. a. and 20 per share cash dividend on ordinary shares.000. The share options were granted to key executives and provided them the right to acquire 30. determine the following as of December 31. P8.000 rights were exercised on July 31. P3.000 d.100 ordinary shares and 4.000 d. The market price per share was P44 at this time Apr. All but 6.500 d. 1 All warrants issued in connection with the bonds on April 1 were exercised.000 d.519. P1. P3 par.000 b.269. and the additional shares were issued. 30 Issued 2.402.500 b.050. P3. P654. P4.000 to an agent for selling the shares Feb. 31 Profit for 2010 was P250.530. The corporation paid issue costs of P75.140. P9. P3.888. payable on December 31 to shareholders of record on December 15. P7. Retained earnings a.000 b. showed the following data on December 31. P3.419.000. Total contributed capital a. P833.170. 2009. Oct.000 . The balance is collectible next year. 2010. 2010: 1.500 b.850 d.000 c.

032. P1.50 per share. Retained earnings a.170. P1.099.500. The Treasury shares were purchased at an average price of P37.000 c. Ordinary share capital a. Employees exercised 2. each option entitled the employees to purchase 1 ordinary share for P50 per share.175.860. P58. P63.000 b. Share premium – ordinary a. P75.000 5.000 d.068.000. Share premium a.010.200 d. only 22. P1. 2010: 1. The market price of the ordinary share was P50 per share on May 1 31 Colon sold 300 treasury shares reacquired on April 15 and an additional 400 shares costing P15. P92. 2009. Total retained earnings a. Share premium-preference a. Colon Corporation has 32. P1. ordinary shares authorized. P1.250 d.000 c.756 b.851.950. Preference share capital a. Treasury shares a. determine the balances of the following as of December 31. P10.211.000 b. Both are payable on October 15 to shareholders of record on October 1.320 d. 5% cumulative preference shares. During 2010. When the options were granted. determine the following as of December 31. and the Retained Earnings balance was P220.810.000 5. P23. Ordinary share capital a. at P55 per share. P1.Based on the above and the result of your audit. P84.000 c. P11.000 are outstanding.000 4.000 that had been on hand since the beginning of the year. P77. 15 The semiannual cash dividend on ordinary shares was declared. On December 31. Only 75% of these shares have been issued. P1.680 b. and of the shares issued.195.000 c.000. 15 Colon declared a cash dividend on ordinary shares for P43 per share.000 b. Colon also declared the yearly dividend on preference shares. Profit for 2010 was P100. 2010: 1. P80.200 c.000 3. P1. P144. P86.545.320 c.300 b.756 c.000 d. P2 par value. The share price on the date of grant was also P50 per share.295.000 newly issued ordinary shares at P42 per share Mar.000 d.000 share options granted in 2004.000 2. P183. P174. P99. 01 Colon sold 3. P15. Colon had the following transactions: Jan.000 PROBLEM 4 In connection with your audit of the Colon Corporation.15 Colon issued. P183.121.000 c. P16. P264.000 2.680 4. P90.275.458. P17. 4. P1.000 c. P74.000 b. P10. P1.000. May 01 Colon declared a 10% share dividend to be distributed on June 1 to shareholders of record on May 7.680 d. P930. P204. The selling price was P57 per share Sept. Colon issued new shares to the employees.000.320 b.000 shares are authorized Feb.15 per share. Based on the above and the result of your audit.000 d.000 b. the equity section revealed that the balance in Share premium –ordinary was P832. P8. amounting to P0.000 d.756 .050. P1. 1. P17. you were able to obtain the following information pertaining to the corporation’s equity accounts. P186.600 shares of P50 par. Total equity a.000 b. P64.000 d.000 3.000 c.