SUMMARY OF ANSWERS

ACCTG 9A REQUIREMENT No. 5

ANSWERS
1. B 11. B 21. B 31. C 41. C 51. B 61. A
2. D 12. B 22. B 32. C 42. D 52. A 62. D
3. B 13. D 23. B 33. A 43. A 53. B 63. B
4. B 14. A 24. B 34. B 44. B 54. A 64. B
5. C 15. D 25. B 35. C 45. D 55. A 65. C
6. D 16. A 26. D 36. B 46. D 56. A 66. D
7. D 17. A 27. D 37. C 47. B 57. B 67. B
8. C 18. B 28. C 38. A 48. C 58. A 68. A
9. B 19. C 29. C 39. C 49. D 59. C 69. A
10. C 20. D 30. C 40. D 50. C 60. A 70. D

SOLUTIONS:
31. Deposits for containers for 2005 and 2006 (P430,000+780,000) P 1,210,000
Deposits for containers returned (250,000+286,000) (536,000)
TOTAL P 674,000

32. Escrow accounts liability P 900,000

Escrow payments 1,500,000
Real estate tax (1,900,000)
Interest (90k x 90%) 81,000
TOTAL P 581,000

33. 2006 Sales P 2,000,000

2006 redemptions (1,400,000)
Estimated unredeemable gifts (2M x 10%) (200,000)
TOTAL P 400,000

34. Total Sales Tax Collected (26500 x 6% / 106%) P 1,500

Remittance of sales tax (600)
SALES TAX PAYABLE P 900

35. Interest Expense (4M x 112% x 12%) P 537,600

36. Current Liability [(750+270)/3] P 67,500

Non-current Liability (67,500 x 2) P 135,000

37. PV of Principal (1M x 0.666342) P 666,342

PV of Interest (60k x 4.766540) 285,992
TOTAL P 952,334

38. Principal P 3,807,852

Bond Issue Cost (179,316)
TOTAL P 3,628,536
39. Present Value, Jan 1 P 3,628,536
Multiply: 14% 14%
INTEREST EXPENSE P 507,995.04
40. Present Value, Jan 1 P 3,628,536
Amortization (507,995-400,000) 107,995
TOTAL P 3,736,531

41. Issue Price P 2,600,000

FV (2M x102%) (2,040,000)
TOTAL P 560,000

42. Loss on extinguishment (33,800,000+1,360,000-32M) P 3,160,000

43. CA on bonds P 4,168,896

Retirement price (4,080,000-240k) (3,840,000)
GAIN P 328,896

44. Present Value P 11,601,220

Amortization (5,200,000-1,392,148) (3,807,852)
TOTAL P 7,793,368

52. PROVISION [(80M x 5%) + (60M x 20%) + (40M x 35%) + (20M x 40%)] P 38,000,000

53. Provision [(400,000,000+40M)/2] P 220,000,000

54. Total Repairs (120k+720k) P 840,000

PV factor 0.95238
Total P 800,000
Risk Adjustment 106%
Percentage of amount to be settled 50%
WARRANTY PROVISION P 424,000

55. Warranty Expense (5000x400) P 2,000,000

56. Jan 1 given P 800,000

Warranty Expense 2,000,000
Actual Warranty Cost (1,240,000)
TOTAL P 1,560,000

60. Bonus to be received [(8M x 5%)/6] P 66,667

62. Total working days of employee after last salary payment (3x100) P 300
Multiply: Average pay per day 4,000
TOTAL P 1,200,000

63. Total sick leave entitled (100x5) 500

Sick leave expected to be taken (92x5) (460)
Sick leave expected to be taken (8x6 ½) (52)
Excess sick leave (12)
Multiply: P 4,000 4,000
TOTAL P 48,000

64. Equity Component (12M x 110% x 110% x 110%) x PV of 1 @18%, n=3 P 9,721,052
65. Issue Price P 4,000,000
FV of instrument (4M x 98%) (3,920,000)
Equity Component P 80,000
Allocation of transaction cost for equity component (4,000)
TOTAL P 76,000

66. Share capital credit (squeeze) P 3,200,000

Share premium 728,569
Share premium (debit) (80,000)
NET INCREASE P 3,848,569

67. Carrying amount of bonds (squeeze) P 3,928,570

Retirement price for bonds (3,963,964)
LOSS P 35,964

68. SHARE PREMIUM CREDIT (592,148-36,036) P 556,112

69. Share premium Debit (556,112+36,036) P 592,148

Share premium credit (556,112)
TOTAL P 36,036