AE 221 SUGGESTED ANSWERS MIDTERMS SA 1

MC Problems STRAIGHT Problems

Fay Company Tricky Company
Casualty loss 350,000 Adjustment to R/E (P1.54M - P1.42M) * 65% 78,000
Insurance expense (P50K/4) 12,500
Total Expense 362,500 Vignette Construction Company
Pretax income (% of Completion) 1,820,000
Undaunted Company Income tax (35%) (637,000)
Income before tax 5,000,000 Net Income (65%) 1,183,000
Prepaid insurance 200,000
Accrued wages (250,000) White Company
Rent revenue collected in advance (300,000) Aggregage Sales (P10M + 2M) 12,000,000
Interest receivable 500,000 Required % 10%
Corrected income b4 tax 5,150,000 Reportable segment 1,200,000

BUDDY Company Vilma Company

Asset test (10% of P140M = P14M) A, B, C, D, E Depreciation expenses (P300T/2) 150,000
Profit test (10% of P12M = P1.2M) A, B, C, D, E Bonus Expenses (P600T/2) 300,000
Revenue test (10% of P66M = P6.6M) A, B, C, E Total expense 450,000

Upright Company
R/E - Jan. 1 4,000,000
Understatement of NI (600T * 2/3 * 70%) 280,000
Adjusted R/E 4,280,000

Monster Company
Adjustment to R/E (880T - 700T) * 65% 117,000