Investment Account Balance, Dec. 31, 2013 P500,000 P569,000: Cost Method Equity Method

Investment cost (price paid) P500,000
Less: Book value of interest acquired 480,000

Excess P 60,000
Cost Method Equity Method

Investment cost P500,000 P500,000
Parent’s share of subsidiary’s CI - 120,000
Dividends received from subsidiary - ( 48,000)
Amortization of allocated excess (P60,000/20) - ( 3,000)
Investment account balance, Dec. 31, 2013 P500,000 P569,000
16-5: a
NCI, January 2, 2013 [(P270,000/75%) x 25%] P 90,000

NCI in S Company dividends [(P60,000/75%) x 25%] (16,000)
NCI in S Company CI (P160,000 x 25%) 40,000
NCI balance, December 31, 2013 P114,000
16-6: a
Puno’s CI P 145,000
Dividend income (P40,000 x 90%) ( 36,000)
Puno’s CI from own operations 109,000
Salas’ CI from own operations 120,000
Consolidated CI P 229,000
16-7: b
Peter’s CI from own operations P1,000,000

Seller’s CI from own operations 200,000
Consolidated CI 1,200,000
Attributable to NCI (P200,000 x 20%) 40,000
Attributable to parent P1,160,000
16-8: a
2011 2012 2013

Investment in Son, Jan. 1 P310,000 P396,200MULTIPLE
CHOICES - COMPUTATIONAL
16-1: c, [(P260,000/80%) x 20%]
16-2: d, consolidated CI will decrease by P6,000 due to amortization of the allocated excess
(P60,000 / 10 years).
147
Excess P 60,000

16-5: a
NCI, January 2, 2013 [(P270,000/75%) x 25%] P 90,000

16-6: a
16-7: b

16-8: a
2011 2012 2013

16-1: c, [(P260,000/80%) x 20%]
148
(P60,000 / 10 years).

Excess P 60,000

16-5: a
NCI, January 2, 2013 [(P270,000/75%) x 25%] P 90,000

16-6: a
16-7: b

16-8: a
2011 2012 2013

16-1: c, [(P260,000/80%) x 20%]
149
(P60,000 / 10 years).
Direct exchange rate:

December 1 1 ÷ 2.22 yen = P 0.45
December 31 1 ÷ 2.70 yen = 0.37
Decrease in forex rate P 0.08
Forex gain (200,000 yen x P0.08) P 16,000
19-2: c.
Forex rate, December 1 P 0.45

Forex rate, December 31 0.47
Increase in forex rate P 0.02
Forex gain (1,500,000 yen x P0.02) P 30,000
19-3: d.
September 30:
Forex rate, September 1 P 5.61
Forex rate, September 30 5.59
Forex gain (200,000 hkg.$ x P0.02) P 4,000
December 31:
Forex rate, October 1 P 5.59
Forex loss (200,000 hkg.$ x P0.03) P (6,000)
19-4: c.
Forex loss on importation of merchandise:

Peso equivalent, January 10, 2013 P 600,000
Peso equivalent, April 20, 2013 608,000
Forex loss (increase) P (8,000)
Forex loss on notes payable:

Peso equivalent, September 1, 2013 P 3,000,000
Peso equivalent, December 31, 2013 3,200,000
Forex loss on principal P (200,000)
Add: Forex loss on interest
Based on P 3,2000,000 P 120,000
Based on P 300,000,000 (P3,000,000x10%x4/12) 100,000 20,000
Forex loss P (220,000)
Total forex loss (P 8,000 + P220,000) P (228,000)
19-5: a.
150
Direct forex rate – Transaction date (P 1 ÷ $0.018) P 55.5555
Direct forex rate – Balance sheet date (P 1 ÷ $0.017) 58.8235
Direct forex rate – Settlement date (P 1 ÷ $0.020) 50.0000
Forex gain (loss), 2012

Transaction date ($10,000 x P55.5555) P 555,555
Balance sheet ($10,000 x P 58.8235) 588,235
Forex loss (increase) P ( 32,680)

Balance sheet date ($10,000 x P58.8235) P 588,235
Settlement data ($10,000 x P 50.00) 500,000
Forex gain (decrease) P 88,235

December 1 1 ÷ 2.22 yen = P 0.45
December 31 1 ÷ 2.70 yen = 0.37

December 1 1 ÷ 2.22 yen = P 0.45
December 31 1 ÷ 2.70 yen = 0.37
19-2: c.

19-3: d.
September 30:
December 31:
19-4: c.
151

Based on P 3,2000,000 P 120,000
Based on P 300,000,000 (P3,000,000x10%x4/12) 100,000 20,000
December 31:
19-4: c.


Based on P 3,2000,000 P 120,000
Based on P 300,000,000 (P3,000,000x10%x4/12) 100,000 20,000
19-5: a.


Balance sheet ($10,000 x P 58.8235) 588,235
152

December 1 1 ÷ 2.22 yen = P 0.45
December 31 1 ÷ 2.70 yen = 0.37

December 1 1 ÷ 2.22 yen = P 0.45
December 31 1 ÷ 2.70 yen = 0.37
19-2: c.

19-3: d.
September 30:
December 31:
19-4: c.


153
Based on P 3,2000,000 P 120,000
Based on P 300,000,000 (P3,000,000x10%x4/12) 100,000 20,000
19-5: a.


Balance sheet ($10,000 x P 58.8235) 588,235


December 1 1 ÷ 2.22 yen = P 0.45
December 31 1 ÷ 2.70 yen = 0.37
Forex loss on interest

Based on P 3,2000,000 P 120,000
Based on P 300,000,000 (P3,000,000x10%x4/12) 100,000 20,000
19-5: a.


Balance sheet ($10,000 x P 58.8235) 588,235

154
CHAPTER 20
MULTIPLE CHOICES - COMPUTATIONAL
20-1: b
Bad debt expense (S$ 6,000 x P28.20) P169,200

Amortization of patents (S$ 4,000 x P28.20) 112,800
Rent expense (S$ 10,000 x P28.20) 282,000
Total P564,000
Average rate (P28.20) is used to translate all expenses since this is a reasonable
estimation.
20-2: b
Machinery [(24,000 Ringgit ÷ 10) x P10.42] P 25,008

Equipment [(12,000 Ringgit ÷ 10) x P10.42] 12,504
Total depreciation P 37,512
20-3: d
Accounts receivable P120,000

Prepaid expenses 55,000
Property and equipment (net) 275,000
Total P450,000
20-4: a
Depreciation expense (H$ 12,000 x P5.80) P 69,600

Bad debts (H$ 8,000 x P5.80) 46,400
Rent (H$ 20,000 x P5.80) 116,000
Total P232,000
Average rate for the year is used in translating depreciation expense because this is more
reasonable estimation than the rate when the related asset was acquired (P4.80).

Based on P 3,2000,000 P 120,000
Based on P 300,000,000 (P3,000,000x10%x4/12) 100,000 20,000
19-5: a.

155
Balance sheet ($10,000 x P 58.8235) 588,235

CHAPTER 20
20-1: b

Rent expense (S$ 10,000 x P28.20) 282,000
Total P564,000
estimation.
20-2: b

20-3: d

Total P450,000
20-4: a

Bad debts (H$ 8,000 x P5.80) 46,400
Rent (H$ 20,000 x P5.80) 116,000
Total P232,000

Based on P 3,2000,000 P 120,000
Based on P 300,000,000 (P3,000,000x10%x4/12) 100,000 20,000
156
19-5: a.


Balance sheet ($10,000 x P 58.8235) 588,235

CHAPTER 20
20-1: b

Rent expense (S$ 10,000 x P28.20) 282,000
Total P564,000
estimation.
20-2: b

20-3: d

Total P450,000
20-4: a

Bad debts (H$ 8,000 x P5.80) 46,400
157
Rent (H$ 20,000 x P5.80) 116,000
Total P232,000

Based on P 3,2000,000 P 120,000
Based on P 300,000,000 (P3,000,000x10%x4/12) 100,000 20,000
19-5: a.


Balance sheet ($10,000 x P 58.8235) 588,235

CHAPTER 20
20-1: b

Rent expense (S$ 10,000 x P28.20) 282,000
Total P564,000
estimation.
20-2: b

20-3: d
158
Total P450,000
20-4: a

Bad debts (H$ 8,000 x P5.80) 46,400
Rent (H$ 20,000 x P5.80) 116,000
Total P232,000
Total P450,000
20-4: a

Bad debts (H$ 8,000 x P5.80) 46,400
Rent (H$ 20,000 x P5.80) 116,000
Total P232,000

Based on P 3,2000,000 P 120,000
Based on P 300,000,000 (P3,000,000x10%x4/12) 100,000 20,000
19-5: a.


Balance sheet ($10,000 x P 58.8235) 588,235

CHAPTER 20
159
20-1: b

Rent expense (S$ 10,000 x P28.20) 282,000
Total P564,000
estimation.
20-2: b

20-3: d

Total P450,000
20-4: a

Bad debts (H$ 8,000 x P5.80) 46,400
Rent (H$ 20,000 x P5.80) 116,000
Total P232,000

Based on P 3,2000,000 P 120,000
Based on P 300,000,000 (P3,000,000x10%x4/12) 100,000 20,000
19-5: a.


Balance sheet ($10,000 x P 58.8235) 588,235
160
CHAPTER 20
20-1: b

Rent expense (S$ 10,000 x P28.20) 282,000
Total P564,000
estimation.
20-2: b

20-3: d

Cash provided by operating activities P 275
PROBLEMS
Problem 21-1
1. Memo entry in the RAOPS, RAOMO, RAOCO and RAOFE.
2. Cash – National Treasury – MDS 2,000,000

Subsidy Income from National Government 2,000,000
3. Memo entry in the RAOPS, RAOMO, RAOCO and RAOFE.
161
4. Office equipment 50,000
Accounts payable 50,000
5. Cash – Disbursing Officer 40,000

Cash – National Treasury – MDS 40,000
6. Salaries and wages – Regular 44,000

Personal economic relief allowance (PERA) 3,000
Additional compensation 3,000
Due to BIR 3,500
Due to GSIS 5,500
Due to Pag-ibig 400
Due to Philhealth 600
Cash – Disbursing Officer 40,000
7. Due to GSIS 5,500

Due to Pag-ibig 400
8. Life and retirement contribution 5,500

Pag-ibig contribution 400
Philhealth contribution 600
9. Electricity 5,000
Telephone expense – Landline 4,000
Accounts payable 50,000
Due to BIR 5,000
10. Due to BIR 4,500

Subsidy income from national government 4,500
11. Cash – Collecting Officer 90,000

Sales revenue 40,000
Permit fees 30,000
Miscellaneous income 20,000
12. Cash in Bank – Local currency – Current account 90,000

Cash – Collecting Officer 90,000
Problem 21-2
Building
1. Memo entry in RAOCO.
2. Advances to contractor 240

Cash – National Treasury – MDS 240
162
3. Construction in progress – Other Public Infrastructure 400
Advances to contractor 240
Accounts payable 160
4. Accounts payable 160

Due to BIR 40


Due to BIR 40
Cash – National Treasury 360
7. Due to BIR 80
Subsidy income from national government 80
8. Office Building 800

Construction in progress – OPI 800
Repairs of Building
1. Memo entry in RAOCO.
2. Construction materials inventory 70

Accounts payable 70
Due to BIR 7

Construction materials inventory 60
5. Memo entry in the RAOCO
Problem 21-1, continued:

6. Cash – Disbursing Officer 36

Due to BIR 4
Cash – Disbursing Officer 36
163
8. Due to BIR 47
9. Office building 100

Construction in progress – OPI 100
Land:
1. Memo entry in the RAOCO, P100.
2. Land 100

Due to BIR 10
Problem 21-3
(a) Journal Entries:
1. Memo entry in the Registry of Obligations and Allotments.
2. Cash – National Treasury – MDS 2,500
164
3. Memo entry in Registry of Obligations and Allotments.
4. Office equipment 120

5. IT equipment and software 30

Accounts payable 30
6. Prepaid rent 60
7. Electricity expense 50
8. Telephone expense – Landline 40

9. Petty cash fund 45


Due to BIR 12

12. Due to BIR 12

13. Cash – Collecting Officer 50

Other service income 10
Sales revenue 40
14. Cash in bank – LCCA 50

Cash – Collecting Officer 50
Problem 21-3, continued:

(b) Pre-closing Trial Balance
Petty cash fund 45

Cash in Bank – Local Currency – Current Account 50
Prepaid rent 60
Office equipment 120
165
IT equipment and software 30
Sales revenue 40
Electricity expense 50
Telephone expense – landline 40
Total 2,562 2,562
(c) Adjusting Entries
(1) Depreciation – Office equipment & software 20

Depreciation – IT equipment 5
Accumulated depreciation – Office equipment 20
Accumulated depreciation – IT equip & software 5
(2) Rent expense 30

Prepaid rent 30
Closing Entries:
(1) Unused National Clearing Account (NCA)

NCA received during the year 2,500

Less: MDS check issued 333
Unused NCA 2,167
(2) Income accounts:

Sales revenue 40
Income and expense summary 395
(3) Expense accounts:

Income and expense summary 90
(4) Income and expense summary 305

Retained operating surplus 305
(5) Retained operating surplus 305

Government equity 305
Problem 21-4
Agency VV
Statement of Income and Expenses
Year Ended December 31, 2013
166
Income:
Subsidy income from national government P1,700
Less: Reversion of unused NCA 800 P900
Less: Expenses
Salaries and wages – Regular P 320
Personnel Economic Relief Allowance 40
Additional compensation 40
Life and retirement insurance contribution 60
Pag-ibig contribution 10
Philhealth contgribution 10
Traveling expense – Local 35
Office supplies expense 60
Janitorial services 30
Security services 35
Repairs and maintenance – Office building 65
Depreciation – Office building 15
Depreciation – office equipment 10
Depreciation – furniture and fixtures 5
Depreciation – IT equipment and software 5 860
Net income over expenses P 40
Agency VV
Balance Sheet
As of December 31, 2013
ASSETS
Current Assets
167
Cash:
Cash in vault P 200
Cash – collecting officer 500
Cash – disbursing officer 1,000
Petty cash fund 150
Cash in bank – LCCA 350 P2,200
Receivables:
Accounts receivable P 120
Less: Allowance for doubtful accounts 20 100
Inventories:
Office supplies inventory 30
Other current assets 15
Long-term investment:
Investment in stock 400
Property, Plant and Equipment:
Land 600
Office building 650
Less: accumulated depreciation 50 600
Office equipment 250
Furniture and fixtures 110
IT equipment and software 190
Less: accumulated depreciation 25 165 1,695
Total assets 4,440
LIABILITIES AND EQUITY

Liabilities
Current liabilities
Due to BIR 50
Due to GSIS 30
Due to Pag-ibig 25
Other payables 15 330
Equity:
Government equity 4,110
Total liabilities and equity 4,440
168

Investment Account Balance, Dec. 31, 2013 P500,000 P569,000: Cost Method Equity Method

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Investment Account Balance, Dec. 31, 2013 P500,000 P569,000: Cost Method Equity Method

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Investment cost (price paid) P500,000

Less: Book value of interest acquired 480,000

Cost Method Equity Method

NCI, January 2, 2013 [(P270,000/75%) x 25%] P 90,000

Peter’s CI from own operations P1,000,000

2011 2012 2013

16-1: c, [(P260,000/80%) x 20%]

Cost Method Equity Method

NCI, January 2, 2013 [(P270,000/75%) x 25%] P 90,000

Peter’s CI from own operations P1,000,000

2011 2012 2013

16-1: c, [(P260,000/80%) x 20%]

Investment cost (price paid) P500,000

Cost Method Equity Method

NCI, January 2, 2013 [(P270,000/75%) x 25%] P 90,000

Peter’s CI from own operations P1,000,000

2011 2012 2013

16-1: c, [(P260,000/80%) x 20%]

Direct exchange rate:

Forex gain (200,000 yen x P0.08) P 16,000

Forex rate, December 1 P 0.45

Forex gain (1,500,000 yen x P0.02) P 30,000

Forex gain (200,000 hkg.$ x P0.02) P 4,000

Forex loss (200,000 hkg.$ x P0.03) P (6,000)

Forex loss on importation of merchandise:

Forex loss on notes payable:

Total forex loss (P 8,000 + P220,000) P (228,000)

Forex gain (loss), 2012

Forex gain (loss), 2013

Direct exchange rate:

Direct exchange rate:

Forex gain (200,000 yen x P0.08) P 16,000

Forex rate, December 1 P 0.45

Forex gain (1,500,000 yen x P0.02) P 30,000

Forex gain (200,000 hkg.$ x P0.02) P 4,000

Forex loss (200,000 hkg.$ x P0.03) P (6,000)

Forex loss on notes payable:

Total forex loss (P 8,000 + P220,000) P (228,000)

Forex loss (200,000 hkg.$ x P0.03) P (6,000)

Forex loss on importation of merchandise:

Forex loss on notes payable:

Total forex loss (P 8,000 + P220,000) P (228,000)

Direct forex rate – Transaction date (P 1 ÷ $0.018) P 55.5555

Forex gain (loss), 2012

Forex gain (loss), 2013

Direct exchange rate:

Direct exchange rate:

Forex gain (200,000 yen x P0.08) P 16,000

Forex rate, December 1 P 0.45

Forex gain (1,500,000 yen x P0.02) P 30,000

Forex gain (200,000 hkg.$ x P0.02) P 4,000

Forex loss (200,000 hkg.$ x P0.03) P (6,000)

Forex loss on importation of merchandise:

Forex loss on notes payable:

Total forex loss (P 8,000 + P220,000) P (228,000)

Direct forex rate – Transaction date (P 1 ÷ $0.018) P 55.5555

Forex gain (loss), 2012

Forex gain (loss), 2013

Direct exchange rate:

Forex loss on interest

Total forex loss (P 8,000 + P220,000) P (228,000)

Direct forex rate – Transaction date (P 1 ÷ $0.018) P 55.5555

Forex gain (loss), 2012