ReSA The Review School of Accountancy ‘BTel. No. 735-9807 & 734-3989 AUOITING PROBLEMS IRENCO/ESPENTLLA SOLUTIONS To QUIZZER 3 - LIABILITIES -PROBLEM 1: PROBE IMC, rem Current Noncurrent Uabinies — Usbiltes 2 Accounts pyaie- ae, 9170,000 + 3,000 200.000, 1. Notes payable - trage, 970,000 70,000 nearest on Notes: §0,000*159%4"4/12 2,300 £26,00015%*2/12 ‘500 & Advance receipts irom customers, 100,000 4. Containers deport ‘30,000, (© Notes payable = BPI , 7200,000/5 0,000 160,000 . Converbble bonds. 1,000,000 1 Notas payabse = officers 40,000 ‘Salaries and wages (68,00018/30) 34.000 ‘m, Output VAT, net tapi (246,000 ~ 164,000) 2,000 1 Accounte racewable, creak balance 12/300 0. Cash in banks (overdraft) 118,000 - (125,000+55,000) 5,000 Estimated warranty costs on goods sod 446,000 5. Installment notes peyeble, P75,000 1/2 25/000 0,000 1 Prowston for losses (25,000 + 75,000) / 2 Deferred tex Hay TOTAL PROBLEM 2: DATING, 4b. 5. 6. PROBLEM: RADQING. 6. Estimated Werrartes Payable, beginning belence: Required Estimated Experse (7-250,000-150,000)"5% Less: Actual cost incurred for the year Fetimated Warranties Payable, ending betence 4: SAN MIG CORP SUABICTY FOR COMP ABSENSES, 2014 'S5 employer with 4 weeks 20 25 omployees witn 2 weeks 0 270 5, multiply by (5 ¢ay operations) 3 ‘TOTAL LIXB FOR CONP. ABSENSES IN DAY'S 1350 Multipiy by: daly rate 9 ‘Required llablity balance, 12/31/2014 Coms7 300) 7.4. LUIABILTY FOR COMP ABSENSES, 2015 '30 employees with 6 weeks (4 weeks limit) 120 25 employess with 5 weeks (4 weeks mit) 100 50 employees with 2 weeks 30 10 employers with 2 weeks 20 230 suttiply by (5 cay operations) 5 TOTAL Lids FOR COMP, ABSENSES IN DAYS, 1.550 Mutiply op: cally rate cometh REQUIRED BALANCE OF THE LIABILITY ae PROBLEM 5: CUMMINGS INC Fst quarter sales 16,200,000 Second querer sales _14850,000_ Total 31,050,000 eh 10% 3,105,000, ‘Third querter soles 12,005,000" Fourth quarter sales ——8.100,000_ Total 20,100,000 Matty by! 15% 3,015,000 ‘TOTAL ESTIMATED RETURNS ‘oral estimated returns utepty by: Cost of sale ratio Freight coe (6,120,000 10%) Laser Salvage value of returnea goods (6,120,000"35%) NET WARRANTIES EXPENSEQUIZZER 3 ~ LIABILITIES - SOLUTIONS ‘Sales for the frst quarter (16,200K" 10%) IRENEO/ESPENTLLA Saas marisa vein ‘Sales for the second quarter (14,850K*10%) 7 Sec incest eae wast Sorat cai cai poorer tes secs soaseny olen : a rca ae Se I name st ‘Satvage value of returns {2,002,500*15%) ESTIMATED WARRANTIES PAYABLE PROBLEM 6: MOUNTAIN PROVINCE HOME DEPOT “ote! sales = home trnure 29,000, Divide by: 000 Total premium cstibutable 18:400 Mutipty by: estimated redemation co Estimated redemption 30 Multoy by, net cost of premiums (380-50) Estimated pramium expence bremuume holy, bop Soa Actual redemption (9,600,000/2900)"250 Estimated prema lépity, em Estmatec warranty ibility, begin Tota siee-htchon appieoncet ato By Estimated warronties expense ‘Actual merranty costs Gurnee veer” Estimated warranty lability, end PROBLEM 7: OCAMPO APPLI/ wae 32. 2,176,000 4,320,000, 2.828, (3g72,.000] 14. v. 19,6 206 24, b Face value of dscount coupons cetrbuted 20,200 ‘ad: Distributors enching fee (P250,000"10%) 25,000 Tots! 7275000 Multiply by estimated exercise rate 75%, Reauires Estimated Exoense 708,250 tose: Actua ct/Reimbursenent to dstrnutors 340,350 Estimated liability for discount coupons, end seine] 1. Lnearned service revenue, begining 300,000 Age: Cash coleccons dung the year 480,000 Less: Service revenue actualy carred dunng the year 430,000) (esses) as. Uneamed ervice revenue, and 0% (N= Tey; Tax Bonus 5 = 65,000 + 0358 B = 65,000/0.965 B= 767,358 17. b. Unadjusted Net Income 38H (Nt B= 10% (7,000,000 ~ 35%(1,000,000 - &) 1,016,250, ‘Overstated Habilty Tor discount coupon (109, 750-66,000) “43,750 Understated unearned service revenue {300,000-360,000) ___(60,000) TEip00.0007 ‘Adjusted Wec Income 7. Accounts Payable, unadjusted 250,000 Receiving report number 2634 (Unrecorded purchase) 12,500 Receiving report number 2636 (Purchase in transit) ‘Accounts Payable, adjusted Warranties labilty, unadjusted Warranty expense, 2014 (10,550,000%6%) Total Less: Actual warranties paid ‘warranties sblity, adjusted (12/2014) te anes. 10,000 533,000, 643,000 Legal services 4,600 Medical services S00 Payroll (52/21/ ~ 2/31) + 14,400 *8/12 ; Royalties 3,300 Acctved interest on Lease Liability aie (3.823,326"2%)see table below ecru inturest on Bond Liat 1249/12) 24,000 ‘Acetued i ‘Bond Liablity (800,000*12%*3/12) ae Total accruals ‘The Review School of Accountancy (No. 735-B807 & 734-3989QUTFZER 3 - LtABILTTIES - SOLUTIONS IRENEO/ESPENTLLA ‘Amortization Table: Lease Libity Payment Heerest (Ba.*29) Pinal batence Ms0i4——as0,000 d/ua01 180,000 80,708 69,292 ' sifzo1e 150,000 79322 7aie7e 395.418 + airs deere 71308 font Sass 20 ines’ ine Naor Bisa Saaiyan egos eo ise EBL 3 Shazes ojos 180,000 7136s lose (SsSgORSE] 24. Ane. ‘Amortization Table: Bonds Payable ‘Nominal Interest Effective Interest Amortization Belance Belance asi706 Sp30/36 42,505 (a1) 945.291 anos 22315 (58s}** 890,505, as ot opao/2014 ‘**As of 12/31/2014: 5,60593/6 = __(2,043] Balance, 42/21/2014 PO4S449 22. Ans. a. PROBLEM 9: DETOX INC, ‘Accounts Paysite, unaclusted 534,000 RR# 1015 (ourchese In trarsit ~ FOB Destination) (@5,000) RRE 1013 (goods received on Decernber 30, 2014) 165,000 RRRa 1018 (porenaze in transit ~ FOB Stupping PIN) 40 ‘Accounts payable, aujusted 23. Ans. 4 Required estimated expense 2013: (50,000/5)*40%*(PL60-P50) ‘Actual cost of redeemed premlutrs 2013: (3,000-1,200)*(P160-P50) timated premiums payable, 12/31/2013. Required extmated expense 2014: (50,000/5)°40%(P160-P30) ‘Actual cost of redeemed premiums 2074: (1,20046,000-2,100)*(P180-PS0) Estimated premiums payable, 12/31/2014 Proceeds from Issuance of bonds on 1/1/2013 P2.050,000 Flr value of bonds at 12% ertective rate* 1, APIC = Bond Conversion Priaiege $108,073, “PV of future cash flows st 12% for 3 periods: ‘rinelpel: 2,000,000 * 0.711780 1,423,560 Interest: 260,000 * 2.40183 460,366 “Total present value = Fair val P503,527 ‘Amortization table: Bonds payable “Correct Interest Nominal Interest Amortization alone an. 1, 2033: 1,303,927 Dec. 31, 2103: 228,471 200,000 20.471 1,932,398 731,888 200,000 31/868 1/964,285 25. ans. 4 Bs,738 200,000 35,714 7,000,000 enery upon conversion on 12/31/14: "OR: Bonds payable 1,000,000 DR: APIC ~ Bond conv. priv. 73,036 Discount on bonds payable 17,857 CR: Ordinary shares (10,000*50) 500,000 CR Share premium SS5)179 26.Ans. A. Present value of the minimum lease payment at Implicit lease rate, 8% for § periods: (500,0003.9927) 2,305,626 Fair market valve of tne leased asset at Inception of lease 2/400,000 “100%, thus Finance lease ‘Amortization table: Lease babilty Pesiodic Interest’ ©—Principal Date payments “Expense © Amount alance Jan. 1, 2014: 2,395,626 dec 31, 2014 600,000 191,650 408,350 [_ 4,987,276 Dee. 31, 2015: 600,000 «158,982 441,018 1,546,258 Present value of MLP on 1/1/14 72,395,526 Divide by: Term (na transter of onnershio) i Deprediation expense in 2014 [ya79,325] 20. ans.c. PROBLEM 10: PIPINO CORP, ‘Amortization table: Nates Payable Date ‘Correct Interest. Nominol Interest Amortization ary2032 3/31/2033, 1,079,250 geojg00 119250 7/316,250 wyaizors 1,097,138 900,000 137138 7,451,308, 122014 38,281* 720,000" 118,281 [__P7,569,669 ] 29. Ans. c. 9 months only up to December 31, 2014 esa ‘The Review School of Accountancy Wel. No. 735-9807 & 734-3989QUIZzeR 3 - LIABILITIES ~ SOLUTIONS. 1RENEO/ESPENTLLA ‘Lease lability balance per books, 12/31/2014 2,240,000 ‘Dots to the account forthe periodic payments starting 12/31/2011 (1.2¢*4yeers) ‘Areounds initially capitalized on 12/34/2014 = Fale marteet vate of the ascat 30, Ane. 5. Amortization taba: Finance Lease LnbIy Date Payment nective terest Princioal ‘Balance 1ays1y2011 7,040,000, 1pio1 14,200,000 _§,640,000 1231/2012 1,200,000 04.000 "616,000 ‘$224,000 12/31/2013 4,200,000 Seeaoo —677;600 4,546,400 Lpstp2018 3/200,000 545,640 3803,040 Unb. balance Lersur2015 3,200,000 320,104 aipenase Notes payable UUsolity under capital lace ~ Lng teem Deferred tax Kentity Total long term liabilities 3. Ane Accounts payable, unaayusted balance 1,640,500 Ria 65216, purchase in tans, FOB Destination ‘49,600, Rg 65216. purchase in franck, FOB Buyer (Destination) (30,500) Rae 65220, goods received ony after the December 31 1,000) Accounts payable, adjusted balance 2 Ane 8 2014 Sales 1,650,000 ‘Mutioty by estimated warranty cost as % of ses 2%, Warranties expense in 2018 (ez5sz00] 39. ane. 0. ‘Accounts payable 1,750,000 Warranties payable (2,532,000 - 1,950,000) ‘382,000, Inverese poyobie on notes (8,000,000"12%99/12) 720,000 Current portion of tang term Veblity under capita ease 819.396 Total current aiites (Coa s96] 34. ane. 8. PROSLEM 11: ADELAIDA ING. ‘Tots bage sctually dictibuted n 2014 38,000 Estimated premivme lability tthe end of 2013, in tte bags (7,000) Eetimated premium labltty at the end of 2024, a tote bags 8,000 Estimated premiums expense in 2014, in tote bags ‘ Multiply by: Net expense per tote bag (P25 ~ PS) ‘p20 Estimated premiums expense in 2034 35. Ane. D. “The temporary difference from premiums payable ts future deducuble amount creeting Deferred Tex Asset: Eeimwtad porsiume payaies 2014 (5,000 " 720) 100,000 Matiply by tx ate 30% Deferred tac esse (oncutent Aset) rn ‘Te temporary dierence from excess tx deoreiaton ave nancial deprecation ie future taxable amount ‘resting Deterred Tax Usb Deferred tax liability (Noncurrent Liability): #250,000%30% 36, Ans. C. Accounts payable, as adustes (P540,000 + #50,000) 590,000 Esurmated premiums payable, 2018 (5,000 * €20) 100,000 Current iebilties (8s0,200] 37. ane. 0. proceeds from bad issuance (the anaunt credited per etry made) 5,500,000 Tar velue of Bonds without tne conversion option (at 8% effective rate)* 23 Equity component/ APIC from Bond Conversion Privilege (ies 726] 38. ane. a. resent vaiue of Principal: P8,000,000"0.680563 P3,402,916 resent valve of Interest: 300,0003,99271 1,996,355 Foi value ofthe Bonds without the conv. Option P5,399,271. ‘Amortization Table: Bonds Payabie ‘Nominal Interest Correct Interest Amortization Balance appara, 5399271 12/31/2016: 509,000 431,982 (ease) 5,331,213 12/31/2018: 500,000 225,497 (73503) 5,257,710 Upon assumed conversion 1/2016 ‘Carrying value of bonds up te +2/31/2015 5,257,710 {PIC- Bond Conversion Priv. "100,728 ‘Total Par Value of Shares (5,00010*50) (2,500,000) Shere Premium from conversion 39. Ans. Upon aesumed retirement: 1/2016: Carrying value ot onde up to 22/31/2035 5,257,730 For vale of bonds without the conversion option at 12% efecve rate: resent value of principal: P5,000,000"0.711780 3,558,802 Present value of interest: '300,000"2401831 1,200,936 759.81 Gain on retirement of bonds (profit or loms) (P497,893) 40. ane.souumro! - us RENEO/ESPENTLLA 41. ans c, uae Unadjusted Account avancs trom cosane’? 235,000 erate 35000 me ica) RR wo 0637 5,900 ‘Adjusted Accounts Payable balance 42, ane. stated premiuns expense: Numer of Premiums (40,000°004)/ Mutey by: Net exoense (9525) Actual cost oa: Numer of reruns (500 = 1,200) 3:300 Imutiply by: Wet onpones (95.28), 70 BEDOO Estimated premiums payabie (—tss00) 43, ans. €. Warranty expense 2013 (nana) 320,000 Uses actual cont ald 219 27 e0 Estimated warrartes pmyable, 2013 188,500 Warranty expense 2018 (n4S75t"2%) 362.000 tees: ck cost paid n 20a 233790 Extimated waren poyeble, 2014 nub Warrenty expense 2015 (93.275"*8%) 4122/00 ter actnl cont plc in S045, 205 250) Ebemered wervsntien peyeble, 2085 44, an. B. ‘accounts peyote 272900 SGiratad prelims peyeble 13800 Esornoent warranties pavate, 2015 457500 heoued ese seaa00 : Notes payable, cient 50,000 pecrocd treat on Motes oe Carrent aabnites Ans. c. eter tx ebity 220,000 Mores peyeble, noncurrent ‘so00 Tae ‘Total current Kabilities: PROBLEM 13; JOVI COMPANY Ana. Ae ‘ acount porabe, matted Pies ST) “cnt pyaie 36,000 RR 2135 Goode in transi F03 Dest (2,00) Purehases _ BR 2136 Goods mn ans. [Recounts payable, adjusted balance 47mm A ‘rovion for womens O09 773,000 A rants exes 2,000 Estimated expense, Provision for warranties: 92,000 "G5 2004"50%)=?300 ae tes toa cepoes com ncured ——- GEBEODD PiSviston for wareantles,en8 3, 48. Ans. A 1750 ES rg unused leaves F ales expense 126,400 ZOE rus ea! series n 2018 (AHO) SUITE, — 16 eared leaves Fone ere unused eaves, 12/33/18 1950 Catoly by: probable exercise rate im snr chmoensated absences, in JOYS 550 Sey iaie aatyroes FOOT a HD 5 esa ‘The Review School of Accountancy Brel, No. 735-9807 & 734-3909QUEZZER 3 - LIABILITIES - SOLUTIONS: IRENEO/ESPENTLLA, 49, Ane. A. Nominal ‘Amortization tabs Int, Correct ant. ‘Amortization Jan. 1, 2015 intial meae.** 355,809 Dec. 33, 2035 amortizotion 200,000 222,697 ner ages Dec. 31; 2016 amortization 200,000 225,421 25,424 ‘** FMY of Bonds » PY of future cosh flows at 12%: Principal: P2,000,000°0.567427 1a34ase Ale 4: Interest: 200,000"3.6047762 720,955” Discount on bonds 96,073 ‘Initial fair value of bonds 855,003" Interest expense. 25,421 Retained earnings, beg 121,494 50. Ans. A. ‘Bonus per books (based on unadjusted Net income} _20,000_ Whore: B= 10% (NI TX - B) TK = 30%(NI - 8) B= 10% (1NI- 0.3NI + 0.36 - 18) B~ 0.071 - 0.078 3.078 = 0.07mr 1 Bonus per books is P210,000, substituted to the equation: 41.07°210,000 = 0,07N1 N= 224,700/0.07 NI = 3,210,000 Net income per books nefore AJES 3,210,000, ‘AME 1L:Creait to purenases 118,000 ‘JE 2: Debit to warranty expense (82,000) INE 3: Debit salaries experse (126,400) 4: Debit to injerest expense (25,423) ‘sjusted Net Income 2,994,178 8 = 0.07°7,984,179 - 0.078 1.078 - 208,893 8 = 195,227 1 IN, Glass A Leundry appliance sales (280,000,000"60%) 168,000,000 Divide by P50 ‘Number of coupons cistrbuted 3,360,000" Multiply by: pranabie redemption 60%, Coupons that wil probably be redeemed 2,016,000 Divide Dy: number of coupors to acauire 2 premium ‘400 Estimated number of premiums to be redeemed 5040 umber of premiums actually redeemed (1,680,000/400) (4,200) LUsblity for premiums in units 340. Liability for premium in pave (840"4,100) 58. Ane. &, Clase 8 Launcy apotance sales (280,000,00040%) 112,000,000 uply by: Estimated werrancy cost as % of sales > Estimated warranty expense for 2014 Ans. D. Unagyusted net ncome 80,164,000 ‘Agjustment for adatonal premium expense (4,00) Adjustment for addtional warranties expense iv7aa ‘jsted net mcome 75,000,000 ese: Bonus 2,400,018 52. Ans.c. Income tax (35%) —25381,679_ 54 Ane A. et income 47,137,405. 58. Ane A. ‘Bonus = 52% (75,000,000 - 15%(75,000,000 - B)) Tax = 35% (75,000,000 2,480,916) 7 ee (aa,750.000 + 358) Fe be sener 8 = 2,437,500 + .01758 0.98258 = 2,437,500 B= 2,480,916 PROBLEM 15: MNO ING, Proceeds from issuance of convertible bonds 5,500,000, FMV of bonds w/out conv. option at 5% for 30 semi-annual periods: V of Principal: PS,000,00070.613913 3,059,566 PY of Interest: '300,000°7.721734 16,520 5,386, Equity portion (APIC -Bond Conv. Priv.) Di13,014_ 56. Ans. 8, Total Bonds @ FV APIC (Res. Val.) Retirement Price 2,500,000 2,365,267 134,733 ‘Carrying Value™* (5,289,319*10%); (113,914*50%) ——2.844,089__56,957_ PBL Loss/ Cap. Gain (279,392) THT profitviess capital gain 7. Ans. C. esa ‘The Review Schoo! of Accountancy 6 Tel. No, 735-9807 @ 734-3980SowTrons IRENEO/ESPENELLA aE RT waar P16, o74 rey Se pF Nominal Corset Atortiation —Batonce Seeroe7 200000 255,04 (aoe) Sass 38) SU 30000 arrest Snes Inert toy Bons Praia 800 aa.ABE GSSe7) 52091310 5 B/A»6/30 (eae sort from 2/1 «tarsi (eve amor) um fs from rae oy ic St (2 SHriowne/12) 7 rete MAL ahead Nese) 233.333 reat expense 58, Ane. c. ne, oernanent at ieee the period 100,000 TALE for the peo sper Taxable neome — sar Munpty by en rate iro] ‘Current Tax Expense (249.200) 59. ans. 6. cum. Temp ost (FTA) 180 Sento om 98 (Deferred Text Lisniety: 80. Ans. D. ends Payable haf ee amor) Perey Notes payatie long tern as Deferred tm tamiey S29, Total noncarrent ability (CAPERS) 2. ane.v. PROBLEM 46. KURT-CORP, Proceeds frm tsuarce (at face valve) 4,000,000 Tor vate of bonds at efectve rate 3 or 3 periods ‘vot pencil" "ba ooon0s0 ks on, 734 Pretimeren "“‘mojoorassizes _ “so7sii 3,506,208 Equity component/APIC-Bond Conversion P05, 755) 62. Ane. c. ovect Int, Nominal It. ——Ame.——_Baance cmmeren) (S39) aeons Ssecez — ““zan.000 —szssz_— 3 700,307 Seioor = zao.o00 «10.607 -34ea,308 December 3ij2016; 380,002 aa0s0) «190.087 «800/000 63. Ane. Bonds Payable, CV at 1/1/2016 (see amortization table) 3,985,908, Abtesbonds Conversion Privlege Soa.58 “Toa Paastibee Maoh by exeree rat: (2,000/4,000) oa prorated CV of Bp ena APC Bond Cons Pr waa {inecPer value of sueble shares (3.000840) "910 1,300,600) ‘Share premium trom assumed conversion [CPsigas.248] 60, Ana. 8, proceeds from Issuance (6 fee value, nt of tanescvon cost) P8483 Tor value of bands at effective rate 396 fo 3 periods ‘av ef prncpal P4000 000°0. 741362 2,954,648 PVof interact: '240,000%7.465123 3,856,278 Equity component/APIC-Bond Conversion ae 292,253] 68. Ans. A. Total Benda @ FYE APIC (Res. Va.) _— exco0'sc0 “"3003.908 tigate Scnving vee Stsrses ass) pal tore cp. ain aoa ia pra tess cpa gh cane 3. std or pat ofthe bonds fuk te conn priv. 896 fr Krenning pest af epar #000 000 S173 75688 728 Pv of Interest: 240,000°0.917431 220,163 ‘Fair value of bonds w/out conv. priv 73,289,908. “Amortization table: Bonds Payable Correct Int. Nominal Int, ari Balance ‘January 1, 2014: 3,556,278 December 31, 2014 373,409 240,000 153,409 3,689,587 December 31, 2015: 307,417 40}000 © 347.417 3,837,104 December 31, 2016: 402,896 240,000 © 162\896 4,000,000 ReSA . ‘The Review Schoo! of Accountancy WWTel, No. 735-9807 & 734-3989QUIZZER 3 — LIABILITIES - SOLUTIONS IRENEO/ESPENTLLA PROBLEM 17;_ ROEHL WHOLESALE. 150,000"27.9026 (present valve n advance of 1 at 2% for 40 periods) = P4,105,388. 67. Ane. C. Period Petiodie payment Laterest expense Principal Balence wane 4,185,368 wena 150,000 10,000 4,035,388 150/000 £0,708 69,292 3,966,096 150,000 wana 79.578 3,895,418 350,000 77,908 72,092 3,823,226, 68. Ans. B. 350,000 75,087 73,533" 3,749,793 $50,000 74996 75,006" 3167, 450,000 73.496 76,506" 3,598,205 1OA/15 150,000 71,966 e036" 3.520251 wens 150,000, 70,805 73,595 3,440,686 + short vorm portion = 203,075. 69. Ane. 8. PROBLEM 18: DEF CORP. Rent Expense per booxs 1,000,000, Expenses per aust: Toterest expense 302,133 292.240 504,373 Depreciation (5,542,650710) 654.266 COverstatement in net income 3248,639. 70. Ane. D. ‘Amortization Table: Lease Lisbilty Period Cash payment Interest expense Lease Liab, Balance 76,542,660 4/1/34 P500,000 00,000 6,042,660 Tilia 500,600 302,33 197,067 5,844,793 4/5 $00,000 282,240 3207,760% 5,637,033 TANS 500,000 281/552 Bigg" 5/418,885 136 560,000 27¢,944 a9/se 5,109,629 71136 5¢0,000 2561491 240,508 4/949,320 Current portion (207,760+218,148 = 425,908) 71. Ans. B. Carrying value of Leased Asset, 12/31/14: (P6,542,66049/10) =P5,888,394. 72. Ans. D. PROBLEM 19: ABC Co, Financia! Income 20,000,000 Add: Nondeductible expenses 100,000 Leas: Nontaxable income 500,000 Financial income after perm dif P5,600,000 * 40% = 3,040,000 (TOTAL TAX EXPENSE) 74, Ans, As Add: FOAAB: Werr ad 250,000 ‘ae from cust 500,000 Prov. for losses ‘300,000 Less: FTALE: Prepayrants (400,000) ‘Taxable Income 30,850,000 * 40% = 4,240,000 (CURRENT TAX EXPENSE) 73. Ans. B. Deferred Tax Assat trom: FOAAB (total) 1,650,000°40% Deferred Tax Liability from: FTALE €00,000°40% Current tax expense (10,850,000"40%) 4,340,009 ess: Deferred tax benefit (1,650,000"35%) (577,500), ‘AOO: Deferred tax expense (402,000°35%) 140,000 Total tax expense 3.902.500 77. Ans. A Deferred Tax Asset from: FDAAB (total) 1,650,000°35% PS77,500 78. Ans. B. Deferred Tax Liability from: FTALE — 460,00025% 'P140,000 79. Ans. A. PROBLEM 20: XYZ Co, income » 5,000,000, ‘add: Nondeductible exoense 150,000 Lage: Nontazable income __{50 30,000) Financial Income after PD -P5,100,000 * 40% P2,040,000 (TOTAL INCOME TAX) 81. Ans. B. ‘Ada: Increase in FDAAB “400,000 reese 300.900 Fe Ent ro 75,00/000 * 40% 2,320,000 (CURRENT TAX EXPENSE) 80. Ans. A. Deferred Tax Asset from: FDAAB, end P1,600,000°40% P640,000 G2. Ans. C. Deferred Tax Liability from: FTALE, end PS09,000"40% 200,000 83. Ans. D, Reconciliation: ‘Current income tax 2,320,000 Deferred tax benefit From increase in FDA(400,000*40%) (360,000) From decrease in FTA(300,000°40%) __(320,000) Total tax expense 080.000 esa ‘The Review Schoo! of Tel. No. 735-9807 & 734-3989