CCPAREVIEW SCHOOI. OF THE PHILIFFINES Manila TUNEL ACCOUNTING AND REPORTING. VALIVSIVYALDUESCALABANTOSBELA CRUZ | ‘ (CURRENT LIABILITIES | 1. Anentity includes one coupon in each box of laundry soap it sells. A towel is offered as 8 premium to customers who sendin 10 coupons and a remitance of P10. Distribution cat of premium is PS. Experience indicates that only 30"» of th coupons will be redeemed. | T | = x¢3 of sap sold 2,000,000 | 2,500,000 Number of towels purchased at P50 each 0,000 |, 80,000 Coupons redeemed 400,000 |} 700,000 ‘a 2,500,000 ’. 400,000 © 1,800,000 &. 2,700,000 2, Whats the estimated premium lability on December 31,2019? 1,000,000 ’. 1,100,000 800,000, 4. 900,000 1. Whatis thé premium expense for 20197 I 3, Whats the premium expense for 20207 a. 3,000,000 | '. 3,750,000 fe. 3375.00 4. 4,000,009 ‘4. What i the ehimated premium lisilty on Deeember 31, 2020? ‘a. 1,000,000 ’. 1,250,000 & 1125,000 . | 4. 1,375,000 i 2 An eatiy, a grocery rele, pers estomer loyally program. The entity gets progam rnembers loyalty points when they spend specified amount on groceries. Prograro members can redeem the poins for further groves. The points have no expay date. During 2019, the sles Trnounted 10 P7,000,000 based on stand-alone sling price. During the year, the bnity gramed 10,000 points. But management expected that only 80% or 8,000 points wil be redeemed. The standalone selling price of each loyalty point is estimated at P10. (On December 31, 2019, 4800 points have been redeemed, In 2020, management revised its expectation and now expected that 90% or 9,000 points will be redeemed altogether. During 2020,| the entity redeemed 2,400 point | + What amount shouldbe reported a sales revenue iftuding the revenue eared from points for 20197 7.000.000 | . 6,125,000 ' 1. 6,650,000 | 7,525,000 2. What is the revenue esmed from loyalty points for 2020? 700,000 b. 175,000 «. 210,000 4. 200,000 6679Page 2 3. During 2019, n eniy intoduced a new product carrying a two-year warranty agus! defects. The estimated warrenty cost elated to peso sles are 4¥ within 12 months following sale and 6¥ inthe second 12 months following sae, The enuly reported stles of P5,000,000 for 2019 and P6000, 000 for 2020. The actual expenditures incured nd paid amounted to P1$0,000 for 2019 and PSS0,000 fo 2020. 1. What is the warranty expense for 20207 «650,000 . 600,000 «$00,000 4. 550,000 2. What isthe estimated warrenty libiity on December 31, 2020? 2. 260,000 . 400,000 . 240,000 4. 100,000 44. During 2019, en entity is the defendant in a patent infingement lawsuit. The lawyers believe there is a30%6 chance thatthe eoun will dismiss the case and the entity will incur no outflow of economic benefits, However, ifthe court rus in favor ofthe claimant, the lawyers believe tht there isa 20% chance that the entity will be required to pay damages of P200,000 and an 80% chance tht the entity will be required to pay damages of P100,000. Other outcomes are unlikely. The count is expected to rule in late December 2020. There is no indication thatthe claimant wll sete eut of court. ‘A 796 risk adjustment factor tothe probabilty-weighted expected cashflows is considered appropriate 10 reflect the uncertsintes inthe cash flow estimate. An appropriate discount rae is 5% per year. The preseot value of I at $¥ forse period is 0.95 1 What isthe undiscounted provision before risk adjustment on December 31, 2019? a. 200,000 100,000 ©. 150,000 4 84,000 2. What amount should be reported as provision for lawsutt on December 31, 2019? a. 79,800 b. 95,000 ©. 89,880 4. 85,386 5. On January 15,2019, an explosion occured at an entity plant causing extensive property damage to area buildings. By March 1, 2020, no claims hal been asserted against the entity but management ‘and counse! concluded that itis Hikely tet cleans wil be asserted acd thet itis probable tht the entity will be responsible for daraages. Management believed that Pi.250,000 would be a reasonable estimate of the liabily. The entity's PS,000,000 comprehensive public would be a reasonable estimat2 ofthe libilivy. The comprehensive pubic lnk ‘The financial satemeris for 2019 were issued on March 3, ‘What amount of provision should be reported on December 31, 20197 a 5,000,000 b. 2,500,000 1,250,000 or ° 6679Page 3 6, During 2019, an entity filed suit against another entity seeking damages for patent infringement. On December 31,2019, the legal counse! believed that it was probable thatthe enity would be successful ‘guint the other entity for an estimated erount of P1,$00,000. On March 31,2020, the entity was awarded P1,000,000 and received ful payment thereof. The 2019 financial statements were issued (on March 1, 2020. How should this award be reported in the 2019 financial statements? As receivable and revenue P1,000,000 b. As receivable and deferred revenue Pl,000,000 © As disclosure of contingent asset P1,000,000 4. As disclosure of contingent asset P1,500,000 7. An entity sells magazine subscriptions for @ L-year, 2-year or 3-year period. Cash receipts from subscribers are credited to unearned subscription revenue and this account had a balance of 1,700,000 on January 1, 2019. The entity provided the following information for the year ended December 31,2019 (Cash receipts from subscribers 2,300,000 Subscription revenue credited on December 31, 2019 1,500,000 On Deceraber31, 2019, what amount shouldbe reported as uneamed subscription revenue? a 1,100,000 , 2,500,000 1,300,000 4 23300,000 8 An coity sels equipment service contacts that cover a two-year period. The sale price of each contract is P800. The entity sold 1,000 conrass evenly troughot 209. ‘The past experience stat, ofthe total pesos spent for repairs on service contrat, 40% i incurred ‘evenly during the first contract year and 60% evenly during the second contract year 1, Whats the contract revenue for 20197 a 320,000 160,000 © 400,000 640,000 2. What isthe unearned contract revenue on December 31, 20197 ‘480,000 '. 640,000 240,000 $60,000 3. What isthe contract revenue for 2020? ‘a 480,000 '. 240,000 400,000 4. 500,000 END 6679