FABM2 FIRST GRADING REVIEWER

A. The nominal accounts of ABS Company have the following balances:

Accounts Debits Credits

Sales 739,000
Interest Income 45,000
Gains 15,000
Inventory, beginning 65,000
Purchases 180,000
Freight- in 10,000
Purchase returns 5,000
Purchase discounts 9,000
Freight-out 30,000
Sales commission 45,000
Advertising expense 25,000
Salaries expense 240,000
Rent expense 30,000
Depreciation expense 50,000
Utilities expense 25,000
Supplies expense 15,000
Transportation and travel expense 15,000
Insurance expense 10,000
Taxes and licenses 60,000
Interest expense 5,000
Miscellaneous expense 3,000
Loss on sale of equipment 5,000

ADDDITIONAL INFORMATION
1. Inventory, ending P 90,000
2. One-fourth of salaries, rent and depreciation expenses pertain to non-sales
department, The Sales Department does not share in other expenses.

-How much is the net purchase? 176,000

computation [(180,000 + 10,000) - 5,000 - 9,000] = 176,000

-How much is the “change in inventory” for the year 2017? 25,000 increase
Computation: 65,000 - 90,000 = 25,000 increase

-How much is the cost of sales? 151,000

Computation 176,000 - 25,000 = 151,000

-How much is the total selling expense? 340,000

Computation: 30,000 + 45,000 + 25,000 + (3/4 x 240,000) + (3/4 x 30,000) +
(3/4 x 50,000) = 100,000 + 180,000 + 22,500 + 37,500 = 340,000

-How much is the total general and administrative expense? 208,000

Computation: (1/4 X 240,000) + (1/4 X 30,000) + (1/4 X 50,000) + 25,000 + 15,000 + 15,000 +
10,000 + 60,000 + 3,000 = 208,000

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B. The trial balance of BBC is presented for your analysis and the required information are being
asked from you. You have to provide solution to the following questions after this trial balance.

Account DR CR
Cash on hand 120,000
Cash in bank 2,000,000
Accounts receivable 4,000,000
Allowance for doubtful accounts 600,000
Advances to employees 80,000
Advances to suppliers 60,000
Inventories 2,400,000
Prepaid insurance 1,600,000
Land 4,400,000
Building 6,800,000
Accumulated depreciation - building 4,000,000
Accounts payable 1,440,000
Accrued liabilities 160,000
Income tax payable 1,000,000
Loans payable (due in 2021) 6,000,000
Discounts on loan payable 1,740,000
Interest payable (due in 2020) 680,000
Owner, capital 9,230,000

-How much is the total current assets? 9,660,000

computation: 120,000+2,000,000+4,000,000-600,000+80,000+60,000+2,400,000+1,600,000 =
9,660,000

-How much is the total non-current assets? 7,200,000

Computation: 4,400,000+6,800,000-4,000,000 = 7,200,000

-How much is the total current liabilities? 3,280,000

Computation: 1,440,000+160,000+1,000,000+680,000 = 3,280,000

-How much is the total non-current liabilities? 4,260,000

Computation: 6,000,000 - 1,740,000 = 4,260,000

C. List of accounts is presented

Account Balance
Cost of sales 320,000
Insurance expense 75,000
Marketing expense 25,000
Freight out 30,000
Loss on sale of furniture 7,000
Rent expense ( 1/2 to souvenir store) 80,000
Salaries expense (1/4 to non-souvenir store) 150,000
Sales bonus expense 10,000
Bad debts expense 5,000
Interest expense 5,000

-What is the rent expense for distribution cost? 40,000

computation: 80,000 x 1/2 = 40,000

-What is the computed salaries expense for selling expenses? 112,500

computation: 150,000 x 3/4 = 112,500

-What is the total selling expense? 217,500

Computation: 25,000+30,000+40,000+112,500+10,000 = 217,500

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-What is the rent expense for administrative expense? 40,000
computation: 80,000 x 1/2 = 40,000

-What is the salaries expense for administrative expense? 37,500

computation: 150,000 x 1/4 = 37,500

-What is the total administrative expense? 157,500

computation: 75,000 + 40,000+37,500 + 5,000 = 157,500

END OF REVIEWER