The Review Schoo! of Accountancy PREWEEK LECTURE [FINANCIAL ACCOUNTING AND REPORTING (FAR) ___C.Uberita/C.Espenilia/G.Macariola/-Bineluyo. (On December 33, 2018, the Cash and Cash Equivalent items of AVENGERS Company show ah seg? lovee 100 Romie ey 1s ring composition: Petty cash fund (of which P'750 is uirepientshed vouchers for expenses; P1515 [| JOU notes and remaining currencies and coins armiounting to P3,500) __ 5,000 Cash in bank, General account A, net of P 25,000 bank overdraft in the general | payroll account in a different bank Cash in bank, General account B, including unrestricted compensating balances of P200,000 Cash in bank, General account C, par baak (outstanding checks as of year- end |” 90,000 totaled P10,000) = | | Gash on hand including customers postdated checks of 6,600 — 3,000 Tash in Bank, “Administrators payrolt accocat, after “amounting to | 750,000 125,000 dated Dec. 30, 2018 but unreleased as of Dec. 31, 2018 \ Savings deposit, earmarked for the acqu' FF building which are expected to | 600,000 \ oe be disbursed within & months from rep: \ 625,000 “270,000 * Cash surrender value Gash set aside for payment of interests and dividends ~ ‘Treasury bill, due 3/30/19 (purchased 13/51/18) [revelers and Manager's check Postage stamps Bond Sinking Fund as x 7 100,000 | ...!"" Cash Equivalents to be shown in the 1. How much is the correct amount of Cash and ‘Statement of Financial Position at December 31, 20187 ee a. 1,997,500 ¢. 2,587,500 Frese b. 2,607,500 4. 2,007,500 ines gio em 2: The books of Storm's Service, Inc. disclosed a cash balance of 45,700 on June 30- ‘he bank caer re ime 30 showed @ balance of 50,300. Additional information that might be useful in reconciling the two balances follows: itors for 3,000 was erroneously recorded on the books as P4,500: rect Payal checks totaled P9,800 includiny a certain check of P2,000 payable to supplier ueided on June 25 but not yet mailed os of June 20- set ot bank service charges for June of P200 not yet recorded an the books. Frere rere punt had been charged on June 26 for a customer's NSF check for P1,200. No entry has been made for the return of HEF check. Sfovn's account had been credited by the bank for P5600. This amount should have been credited to Typhoon account. Gadenostted collections as of June 30 for P13,400 including post-dated check of Px,300 from customer recorded on June 29. soon i snemo stated that a customer's note for P7,500 had been collected on June 27 but not yet recorded on the books, © Check payable to credil 2. How much is the correct cash in bank valance as 9f June 30? e a. 52,000 ©. 54,000 b. 53,300 d. 55,300 PREWEEK-FAR (SATCH 37) Page 1 of 24 - : wen Be te We A ‘ee (Bee)° i: Rainbow ae Company provided you the following sales and service transactions as of December +. On Janvary 1, 2017, Rainbow Cor On January 2, 2017, Rainbow Company sold a Machinery for P 5,000,000 to @range Company. ge Company paid 500,000 down and signed 2 noninterest-bearing note for the balance which is payable in 3 equal annual install innual instaliments eve cs sar. The car value of the Machinery is P5,000,000, ery Deca a ae yeae. Te cre | A notes receivable of P1,000,000 with : A notes 000,000 with a coupon rate of 12% from Red Company was received from cals soos inthe nesta cures of buns Te Notes dated Moy 1, 2018 ands ve on MAY 3 i. Interests are cotlecuble very Become 3) A three-year note of £200,000 with @ contract rate of 10% received from Yellow Corporation dated January 1, 2018 was accepted in exchange for consultation services rendered. The note is considered to have a prevailing market rate of 12%. Interests are collectible every December 31. ‘The prevailing rate of interest for the above type of notes was 12%. Present value of P1 at 12% for three periods is 0.712. The present value of an ordinary annuity of 1 for three periods is 2.402 3. How much is the gain or loss on sale of Machinery? Ba 2. None 500,000 © Hose b. 897,000 6. 1,397,000 ov Bae rep 4, How much is the interest income for the year 2018 related to Notes receivable from Red ‘Company? : : a. 56,960 c. 85,440 ooo #12 She >. 120,000 <4. 80,000 5. How much Is the Interest income for the year 2016 related to Notes receivable from Yellow Corporation? By RAY Wok 9 ae 2. None ©. 22,883 wey ees “GES . 20,000 4. 17,088 oa 6. How much is the total amortized cost of notes receivable as of December 31, 20187 3. 2,532,896 © 2,599,008 ee ines b. 3,728,653 3. 2,552,896 ae Yetos“haes iam _ The balances of the selected accounts taken from the December 31, 2017 balance sheet of Madagascar Company are as follows: ‘Accounts Receivable- P 650,000; _Aifowance for bad debts- P 50,000 “The following transactions (in summary) affecting accounts receivable occurred during the year ended December 31, 2018: Sales (all on account terms: 3/10, #/60) 3,000,000 Cash received from credit customers Esra Cash received includes the following ash (omere paying within the 10-day siscount period 1,940,000 Recovery of accounts receivable written off 10,000 Customers paying beyond the discount period 450,000 ‘Accounts receivable written-off as worthless 20,000 Teegit memorandum issued to credit customers for sales returns and allowances 15,000 ‘an aging of accounts receivable and estimate of uncollectible accounts at December 31, 2018 revealed the following: age Amount Probability of uncollectibitity Less than 30 days P 165,000 2% 31-90 days 450,000 10% More than 90 days Balance 30% Freight paid by Zeus on consigned goods to Hera 100,000 > Goods held on consignment from Aves Company 1,000,000 Freight paid by Zeus on consigned goods from Ares 50,000 > Goods purchased in tronsit, FOP Shipping point 2,000,000 > Freight paid by Zeus on goods purchased above 10,000 > Goods sold in transit, FOB shipping point, at sales price 4,500,000 > Freight paid by Zeus on goods sold to customer above 20,000 > Mark-up on cost is 25%. Consigned goods to Hera Corp. were still unsold as of December 31, 2018. 14.How much should be included in ze: ‘6 correct cost of inventory on December 31, 20187 a. 5,010,000 ©. 4,410,000 Stee b. 4,510,000 4. 5,000,000 PRES “Fee PROBLEM 7: During 2018, Thanos Company signed a noncancelable contract to purchase 00 sacks of see at P900 per sack with delivery to be made in 2019. On December 31, 2018, the price of rice had fallen to P 850 per sock, On May 9, 2019. Thanos company accepts delivery of rice when the price 1s PBBD i per sack. 12.What amount of recovery of loss on purchase commitment should Tartarus recognize on 8 ‘May 9, 20197 fale essence a. 10,000 . 25,000 elec tsk b. 15,000 a0 sly ages 0h Past ‘PREWEEK-FAR (BATCH 37) age 3 ot" “etPROBLEM 8: Jean Grey Corporation had the following amounts under retail inventory method | Beginning taventory oe 5,000 | Purchases 100,000 200,000 Freight-in 20,000 Purchase returns (6,000) (7,500) Purchase discounts © G'290) Departmental transfer-in 8,000 10,000 Abnormal shortage (4,000) (5,500) Nat markups. "18,000 Net markdowns __ ______ (2,800) Total goods available for sale 120,310 ‘217,200 ‘Additional informatior Sales 72,000 Sales returns 1,500 Sales discounts 3,000 Employee discount 2/500 Normal spoilage 2000 Bien 13.How much is the estimated cost of inventory under FIFO? Sues, 3 78210 eee ee b. 142,200 d. 217,200 tse Exetel ATES emer PROBLEM 9: Water Company provided you the following assets related to agriculture: | | | | | | Lan¢ related to agricultural activities 3,000,000 Plants with singular purpose ‘600,000 Plants with dual purpose 250,000 Animals related to recreational activities (i.e. 200 animals) 400,000 Bearer animals 590,000 Cheese 20,000 " Orange 80,000" Mango 50,000** Eggs 30,000 ‘Not yet harvested from Plants with singular purpose **Not yet harvested from Plants with dual purpose 14.How much should be classified as Biological assets? Soieo 2. 1,200,000 c. 750,000 0 80 b. 880,000 d. 800,000 “So o0e_ 0 60g, PROBLEM 10: Stark Corporation reported the following Investment in Equity securities transactions: a Stork Corporation acquired 20,000 Sansa shares on February 5, 2018 at P50/share which included S"2a/ehare orokers fees and commissions. A 60,000 cash dividends were receives on Monch ao 2018. These dividends were declared on January 5 payable to shareholders as of February 10. Sanso shores were spit? for Lon November 1” The shares were seling at P30 per shave oa Secember 31, 2018. The investment (s designated at far valve tough proft or nce 50,000 Bran Corp. shares were acquired on March 1, 2017 at P25 per share, The total brokery fee at P75,000 on the acquisition. The company received a 10% stock annende a these shares on November 1, 2018. Shares were selling in the market at P3S/share on Ouceertoe 31, 2017 and P40/share on December 31, 2018. The investment is desi it peat ather comprehensive income, ignated at fair valve through PREWEEX-FAR (BATCH 37) Page 4 of 24con January 1, 2018, Stark Company acquired 20% Interest equivalent to 20,000 shares of Pepper ores 'p3.000,000 when Pepper's net assets had carrying value of P2,000,000. All other Mentinable assets and liabilities show carrying values equal to their fair values except for land Whose fair value is P500,000 higher than its book value, an equipment ( with 4 years remaining life from the date of acquisition) whose fair value exceeds its carrying values by P800,000, and inventories with a book value of P4,500,000 and fair value of P4,700,000. ‘On December 31, 2018, 60% of the inventories remained unsold and Pepper reported a foreign translation gain of P200,000 and net income of P5,000,000. Stark received from Pepper cash dividends of P600,000. 15.How much is the correct unrealized gain or loss to be reported In its 2018 income statement? re shines | 3. 200,000 c. 240,000 Sabre, . 200,000 8. 280,000 Suerte 16.How much is the correct unrealized gain or loss to be reported in its December 31, 2018 statement of financial position? wre hae) ae 8. 275,000: ¢. 950,000 cassis) 36 (13868009) b. 450,000 ~ uslor ocr d. 875,000 Mec ne Seo 17-How much is the total net amount of income taken to profit or ioss related to investment... in Pepper Company for the yeer ended 2018? Tee Tatar 31,000,000 944,000 cous ont 8) > b. 1,040,000 d. 1,016,000 taped aaaD 18.How much is the carrying value of the Investment in Pepper Company on December 31, Sone erase P 2, 3,376,000 ©. 3,400,000 ER] ek &. 3/344/000 4. 3,381,000 ae Fe sy samy PROBLEM 11: On January 1, 2018, Yemen Corp. acquired a 5-year, 10%, P1,000,000 face value bonds at 92. The company paid broker's fees amounting to 118,000. As a result of transaction cost, the yield rate on the bond was 9%. Interests are collectible annually every December 31. The bonds were selling at 120 and P15 as of December 31, 2018, December 31, 2019 respectively. 19.How much is the carrying value of investment on December 31, 2019 assuming the Company classified the investment as financial assets at amortized cost? THO aN wont D — 2.1,200,000 1,150,000 fomk yon te ». 1,031,420 4. 1,024,248 owe FT pt ads 20.Assuming the company classified the investment as financial asset at fair value through profit or loss, how much is the total net amount of income that should be recognized in c Profit or loss for the year ended December 31, 2018? a. 100,000 ¢, 262,000 Canoe) b. 280,000 d. 244,800 PROBLEM 12: Aquinaldo Company has the following property items at December 31, 2018: Land which at the date of acquisition is not intended for any specific use in the future P Lang hed or ftute plant site "$000,000. Building being leased out under operating lease 383,000,000 Building being leased out under finance lease 2,500,000 "sw tere Equipment being leased under operating leases 1's00/000. *: Land and building acquired under finance leases being used by the entity as its general and administrative headquarter * ‘Condominium building that is being constructed aan intended for sale in the ordinary course of business ° swiake Building being leased out under operating lease, an ee insignificant portion is used for administrative purposes ‘Hotel building owned which significant services are provided ee tot! “ai (quests 7,000,000 Fr¥ PREWEEK-FAR (BATCH, Page 5 of 24> B _24:How much should be classified as investment properties on December 31, 20187 a. 16,500,000 9,000,000 ,, 15,000,000 4, 22,000,000 = PROBLEM 13: Verdana Company provided you the following transactions pertaining to the different acquisitions of newly acquired Property, Plant and Equipment for the year 2019: ‘A. On January 1, 2019, Verdana Company purchased several office machineries that will be used in the production of goods at a purchase price of P1,000,000. Verdana company paid import duties of 10,000 and non-refundable purchase taxes of P5,000. Verdana company also incurred a P'30,000 installation cost. The company expects that it will incur dismantling cost amounting to P132,275 at the end of the its 5-year useful Ife. The prevailing market interest rate during the transaction date was 12%. The present value factor of P1 at 12% for 5 periods is at 0.567. The present value factor of ordinary annuity at 12% for 5 periods is at 3.605. ovat | OCes B. On May 1, Verdana Company issued 300,000 shares for a factory machinery having a fair value of 5,000,000 on the date of acquisition. The par value per share is P 10 and the fair value per share on December 31, 2019 is P15. G. Verdana Company owns a tract of land which it purchased in 2016 for P1,000,000. The land is held as a plant site and has a fair market value of P1,500,000 on July 1, 2019. On this date Verdana exchanged its land for.a new land and paid 500,000 cash. The expected cash flows from the asset received differ from the cash flows expected from the asset transferred and the difference ant relative to the fair value of the land givenup. . \c= . Various Furniture and Fixtures were acquired at the beginning of 2019 from a single supplier with the following terms of payments: Downpayment 1,300,000 3 year Non-interest bearing note 2,400,000 10,000 shares at par P50 300,000 It was ascertained that the total cash price of the various furniture and fixtures was at 3,500,000, E. Verdana Company constructed its own factory building. The company had a P2,000,000 one-year 12% loan specifically obtained to finance the asset construction. The construction began on August 1, 2019 and the building was completed on December 31, 2019. Expenditures on the building were made as follows: ‘August 1 400,000 November 1 1,000,000 September 30 1,000,000 December 31 400,000 faaney Bt. 5060000 22.How much is the total initial cost of Machineries? ie gy beam, a, 1,120,000 b. 6,120,000 . 6,045,000 d. 5,545,000 bs 58 car "e600 23.How much is the initial cost of the new Land? ‘eee a. 1,500,000 ’. 2,000,000 . 1,000,000 4,500,000 ipowe ti “Sie 24.How much is the initial cost of the Furniture and Fixtures? “aw009p a. 3,500,000 b. 4,000,000 ©. 3,700,000 4. 2,700,000 : Cap int 100% .25.How much is the initial cost of the self-constructed Building? ached yp? 3D a. 2,800,000 b. 3,040,000 c. 2,900,000 d. none of the choices or PROBLEM 14: You noted the following items relative to the company's intangible assets of Peter Corporation at December 31, 2018. + On January 1, 2017, Peter signed an agreement to operate as franchisee of Harry Copy Service, Inc,, for an initial franchise of P680,000. Of this amount, P200,000 was paid when the agreement was signed and the balance was, payable in four annual payment of P120,000 each beginning on January 1, 2018. The agreement provides that the down payment is not refundable and no future services ate required’ in the franchisor. The implicit rate for loan of this type is 14%. The agreement also provides that 5% of the revenue from the franchise must be paid to the franchisor ‘annually. Peter's revenue from the franchise for 2018 was P8,000,000. Peter estimates the useful life of the franchise to be ten years. PV of ordinary annuity’for 4 periods is 2.9137 PREWEEK-FAR (BATCH 37) pease Page 6 of 24_— - - + Peter incurr cnet curred P624,000 of experimental development costs in its laboratory to develop a patent arenes granted on January 2, 2017. Legal fees and other costs associated with the registration Patent totaled P131,200, Peter estimates that the useful life of the patent will be eight years. + ACtrademark Ww: Tepenateemark Was Pulchased from wary lane Company for P320,000 on July 1, 2016. sabenditures for successiul itigetion in defense of the trademark totaling P80,000 were paid on 'y 1, 2018. Peter estimates that the trademark’s useful life will be indefinite. | 26.What are the carrying amounts of the intangible assets (franchise, patents and trademarks, respectively) on December 31, 20187 (Ri int value factors to 7 ively) , i are (Round off pres 2, 439,715; PUB, a00; 329,000 4. PS44,000; P98,400; P240,00: ” ADEA NS rade ari , PROBLEM-15: The following costs are geherally incurred by Mystique Company: ‘Goodwill purchased in a business combination Cost incurred jn the corporation’s formation and organization | Operating josses e in the start-up of the busi Initial franchise fees paid Continuing franchise fees | nternatiy generated goodwill | Cost of purchasing @ patent from an inventor [Tegal cost in securing a patent Legal costs incurred in successfully defending a patent 155,000 | er Cost of improvements on a leased facility Ta Be Caw z ‘Distribution and packaging cost for internally developed computer software ‘oding after technological feasibility related to internally: 9 | developed computer software 1 268 bisa" 1 Cost to produce a product master for internally developed computer software 140,000 |. | I Coat of purchasing a trademark with indefinite Ife 350,500", Computer software for a computer-controlled machine that cannot operate without “| nm 325,070 210,000 * Cost of developing brands and mastheads i 175,000; Cost to develop customer sts a ie sooo) NS | Laboratory researched aimed at discovery of new knowledge 200,000 | Zost of developing a wabsite to market a certain product a 160,000 | Css tog) Design, construction, and testing of preproduction prototypes and 1, | 70,000, | models a ‘i 27.How much from the above items can be recognized as intangible assets. including, joodwill? soem 1,425,000 1,375,000 ee b. 3,600,000 d, 1,235,000 ek foie woke ave on BAEK PREWEEK-FAR (BATCH 37) Page 7 of 24PROBLEM 16: Berlin Corp.'s acco le at December 31, 2019, totaled P1,700,000 before any ¢ Berlin Corp.'s accounts payable at Dec ts payable at December 31, 2019, totaled P1,700, adjustments relating to the following transactions: 2 On December 27, 2019, Berlin wrot at The check . Berlin wrote and recorded checks to cre t re ald ae pe checks to creditors totaling P400,000. The checks & On December invoice wos recorded ay Berlin purchased and received goods for 300,000, terms 2/10, 1/30. The © Goods srpertrded on January 2, 2020. The company i using the gross method The involee cot of eae enation on December 20, 2019 from a vendor to Berlin were lost in transit. co CaeAeNSIG® cost of P35,000 was not recorded as ofthe balance sheet date 3019. ePPed FOB Destination on December 26, 2019 from a vendor were received December 29, a Conds Me invoice cost of P150,000 was recorded on December 30, 2019. Sr735 AntPRed FOB Supplier on December 22, 2019, from a supplier, were still in transit on December 7 The invoice gost of P47,500 was not recorded as of balance sheet date. es (Sp Pes Pein 28.At December 31, 2019, what amount should Berlin report as total accounts payable? = a. 2,482,500 b. 2,400,000 . 2,447,500 <. 2,435,000 we Tae Phoenix Company, places a Coupon in each box ofits product. Customers m: ene , 0% of its product. Cu: ay send in ten pons and P3.00, and the company will send them a romantic pillow. Sufficient pillows were purchased at P5.40 apiece. During 2019, 1,260,000 boxes were sold. It was estimated that 2 total of £% of the | coupons will be redeemed. In 2019, 18,000 coupons were redeemed. 29.How much is the liability for premiums outstanding as of December 31, 20197 a. 15,120 ¢. 24,300 b. 10,800 4. 43,200 PROBLEM 18: On December 25, 2019, an employee filed a P3,000,000 lawsuit against Oslo Company for damages suffered when one of Oslo's equipment malfunctioned in August of 2019. The legal counsel of the company believes that it is probable that Oslo will pay the damages ranging between PS00,000 to 1,000,000. Each point within the range is as likely as any other. On March 1, 2020, the employee has offered to sett’e the lawsuit out of court for P900,000 and the company accepted the offer and settled the amount. The financial statements were authorized to be issued on March 31, 2020. 30.How much is the provision that should be recognized as of December 31, 20197 a. 620,000 b. 900,000 750,000 4. 1,000,000 adssting vent PROBLEM 19: You are auditing certain liabilities of XMEN Corporation for 2018 which follows the calendar year financial statements reporting. The following information were available with regards to its abilities: 1, LEASE LIABILITY XMEN Corporation leased a new machine on December 31, 2017. The following data related to the jease transaction: Annual rental payable every December 31, starting December 31, 2017 50,000; Lease term- 10 years; Useful life of machine- 12 years; Implicit interest rate -10%; Present value of an annuity of'1 in advance for 10 periods at 10%- 6.76; Present value of an ordinary annuity for 10 periods at 10% - 6.14; Fair value of the machine-P400,000. 2. ACCRUED PENSION Defined benefit obligation, January 1, 2018 13,000,000 Fair value of plan asset, January 1,2018, 12,000,000 Current service cost 1,400,000 Actual return on plan assets 1,485,000 Employer contribution during the year 11275000 Benefits paid to retirees 1,170,000 Discount rate 10% Defines benefit obligation, December 31,2018 14,180,000 3. BONDS PAYABLE XMEN CORP. issued 5,000 of its P1,000, 12% bonds payable on’ January 2) 2018 for PS,500,000. Each P1,000 bond carried one detachable warrant which entitles the holder to purchase 5 shares of the XMEN’s P50 par value ordinary shares at P75 per share. The bonds which pay annual interest every December 31 and mature on December 31, 2022,.were selling to yield 10% without. the Starvants amounting to P5,379,000. The warrants can be separately sold at its prevailing market price at P30 per warrant. PREWEEK-FAR (BATCH 37) Page @ ot 244. DEFERRED TAX LIABILITY AMEN Co. reported pretax financial nome for the current year 2018 at 3,000,000. Included in the determination of the said net income were: | Permanent differences, Non-deductible expenses 100,000 hy Non-taxable revenues 500,000 Temporary differences Unrealized gain thading securities 400,000 pairment loss on machinery 500,000 Provision for bad dette 900,000 scass taxdepreciation over accounting depreciation 420°000. ine come tax rate le 30% and is not expe-ted to change in the futoe 31 How much is the total amount charged against income for the year 2018 related to the © lease? Pesos Makfio a0 ©. 62.600 pn 2300 b, $0,000 4. 67,600 ot 32.How much is the total net amount reperted in the statement of comprehensive it \ D related to accrued pension for the year 2018? ime ee rTS ae Pe ‘3. 1,500,000 ©. 1,565,000 Me ore \ ». 1:150,000 9. ues 000 = 33.How much is the carrying value of the compound instrument on December 31°°20187 6 2. 5,316,900 €. 546,508 SRK ames b. 5,437,900 ¢. 6,066,900 sot ne —- a eaten 34.How much is the current portion of income tax expense related to the above item #47 Se 4 2. 954,000 ©. 246,000) Y 5. 780,000 4. 420,000 Ne eogte, So 35.How much is the deferred tax liability recorded related to the above item #4? met 2g00%, c 2. 954,000 ©. 246,000 oot Ce) . 780,000 43. 429,000 Hoe ee 0h rac =) PROBLEM 20: Hankeye Corp. reported'the following amounts in the shareholders’ equity section of Sage va't December 31, 2018, balance sheet 10% Preference shares, Pi0 par (100,000 shares authorized, ~~ Pa00,000 | 40,000 shares issued 3 - | | Ordinary shares, P5 par (50,000 100,000! . +s 20,000 shares issued) _ eed “| Share premium 3 a 199,000 Retained Farnings Ths 7% 2,200,000 The following transactions occurred during 2019 he Ts. gow Feb, 1-Purchased 4,000 shares of its own outstanding ordinary shares for P80,000. cain ae March 1-Ordinary shares were split 2 for 1. #2000 wuts April 30-Reissued 2,000 treasury ordinary shares tor cash at P15 per share. Cnr. June 30-Issued 10,000 shares of preierence shares at P15 per share ak August 1-Purchased 3,000 preference shares [rom June 30 issuance at P 12 per share, 15 xi Sept. 1-Detiared'a 10% stock dividend on the outstanding ordinary shares when the stock is seling fo PG per share. Issued the share dividend on September 30 cow owe tee Dec. 1-Declared the annual dividend oni preterence shares and the P2.00 per share dividend on ordinary shares. These dividends are payable in 2020. s Sammon Dec. 31-Registered a net income for 2019 at P800,000. th. $68 : PREWEEK-FAR (BATCH 37) Page 9 of 24Determine the adjusted balances of the following accounts: A 8 c ° 36.0rdinary shares 108,500 217,000 ‘187,000 93,500 37.Share premium 240,000 250,000 251,900 261,900 38.Retained Earnings- 1,857,800 1,761,800 1,854,800 1,758,600 Unappropriated 39. Total 2,728,200 2,602,200 2,632,200 2,623,200 ‘Stockholder’s sie ela Equity pe Stee Siete fs Cueaah PROBLEM 21; Miami Company leased equipment from Heat Inc. on July 1, 2019, for an 8-year Equal payments under the lease are P600,000 and a made on July 1, 2019. The interest rate contemplated by Miami and Heat the equipment on Heat's accounting records is P3,569,000, Residual value of P100,000 at re due on July 1 of each year. The first payment was. t is 10%. The carrying value of the end of lease term is guaranteed by Miami. The lease is appropriately recorded as a direct finance lease. Present value of an annuity of 1 in advance for 8 periods at 10% Present value of an ordinary annuity of 1 for 8 periods at 10% Present value.of 1 for 8 periods at 10% %40.How mucl 5.87 5.33 0.47 fn is the interest income for the year 2019 that should be recognized by Heat Inc.? sae, a. 356,900 «, 148,450 ee b. 178,450 4. 296,900 pig? ~\qeaco ; The following information pertains to a sale and operating leaseback of equipment by Michigan Co. on December 31, 2019: sates pace 0,000 Seri amount aso, 000 ig Se ces yet 290,000 se Scomaced remarang ie 7 years ar teese term years — rnp rate ose on Ose farvalue 425,000 41. How much is the gain that should be recognized immediately as a result of sale and Jeaseback? a. 20,000 c. 35,000 b. 55,000 a0 PROBLEM 23: Sorcerer's Stone Company had the following ordinary share activity in 2059) January 1- 500,000 ordinary shares outstanding March 1- Issued new 60,000 ordinary shares june 1- Ordinary share was split 2 for 1 November 1- Reacquired 48,000 ordinary shares Sorcerer's Stone Company had 100,000 shares of P 20 par, 10%, cumulative and convertible preference shi juted earnings per share? 2.27 4. 2.68 42.What is the a. 2.46 b. 2.50 PREWEEK-FAR (BATCH 37) ware outstanding throughout 2019. Each preference share is convertible into one ordinary share. During the year 2019, the company reported net income of P 2,930,000. vwavaco {cee a wk ek Mt ttle “Ta aw eile fk shes wees « Sa 1 se os page 10 0F 24 + tsa DEPS = _2930K ee eeoo AA PROBLEM 24: The shareholders’ & EROSLEM 287 holders’ equity of Utah Corporation on December 31, 2019 shows the following 12% Preference share capital, 9,900 shares P200 par 1,800,000 rainy share capt, 30,006 shares Da pr "200,000 Retamed earns 1380,000 The 12% preference share 1s cumulative and ‘lly participating. No dividends were declared or paid < 2018, 1" Uah is to be aura, the orlerence shareholders mould sects for premium of P10 per share. me pe a aa 4 Thothocie tne book vate pe share a rma share? csumum, "SRE ee + 66.59 ©. 99.27 See ttoE AE A Dw CHE 28 oan eee eS Ai PROBLEM 25: The Cogsworth Company gianted 190 share options to each of its S00 employeds"env™" January 1, 2017. The option plan allows the emplayees to purchase a share of the entity’s P100 par value ordinary share at F120 per share, Gn January 1, 2017, the fair value of each option is P30. The option lan requires the employees receiving the options to be in the service af the company for the next three years, Options are exercisable starting Janualy 1, 2020 ang options expire at the end of 2021. At January 1, 2017, it was estimated that 20% of the employees will leave during the next three years: ‘Actual and revised estimate of employees leaving the company during 2017, 2018 and 2019 are as 2017: 20 employees left; revised estimate is 15% of remaining options 2018: 10 employees left; revised estimate is 10% af remaining options 2019: 18 employees left ¢_ 44How much is the compensation expense for the year 20197 [Mitt ebony 2. 846,000 ». 438,000 «. $20,000 4. 1,355,000 [4 astoorio Bree 4 PROBLEM 26: Jupiter Corp.'s transactions for the year ended December 31, 2019 included the following + Sold long-term investment securities with a carrying value of P100,000 for P130,000 cash, 2 Cosh dividends of 500,000 were declared but P340,000 were only paid during the period 2 esued 10,000 ordinary shares for cash amounting to P220,000. 2 purchased machinery end equipment or Pl, 300,000. ‘Included in the total purchase was 2 machinery costing P100,000 acquired through issuance af long-term notes. + Paid long-term bonds payable on maturity date amounting to 600,000. 2 purchased of treasury shares for cash costing 80,000. 2 Increased of accounts receivable by P 100,000 2 Decreased of inventories by P150,000 2 Increased of accounts payable by'P 200,000 2 Obtained a short-term bank loan of P500,000 + Depreciation expense for the year was P217,000 1 Building costing P600,000 with accumulated depreciation of P350,000 was sold for P230,000. 1 SSin on conversion of preference shares to ordinary shares of P9S,000,. == 2 Net income for the year was P800,000. ‘ es we tak 445.How much Is the net cash provided by operating activit tok, gs 1,050,000 1,280,000 sto D b. 1,260,000 d.1,250,000 tee 46.How much is the net cash used in investing activities? “a 2. 840,000 ©, 940,000 . Ni b. 970,000 @. 1,070,000 digi ‘47. How much is the net cash provided by financing activities? Geo} D “a. 460,000 ¢. 395,000 “ ¥ 4. 100,900 ah b, 120,000 1 een) a BS (#0) page 11 of 24PROBLEM 27: Patience Patience Company has the following information for its five business segments Seament Interseament revenue Seament Assels | Revenue to external customers & 20,000,000" 000,000 25,000,000 5,000,000 500,000 5,000,000 ¢ 2,800,000 1,000,000 3,500,000 > 4200,000 200,000 1,500,000 E 1,600,000 250,000 1;000,000 B _ #8:How much is the minimum amount that should be reported by the reportable segments? 2. 22,500,000 ‘49,500,000 b. 27,000,000 4. 6,600,000 aM PROBLEM 28: Hordwork Corporation has two business segments, Segment A and Segrit B. Segment Business opération is continuing. Segmerit B met the criteria to be classified as “ Held for Sale". The board of directors was able to dispose this segment (B ) on September 1. 2019. Net proceeds from the sale were P 20,000,000; while the segments’ carrying value on September 1, 2019 was P18,000,000. {The following pertains to the results of the operation of Seament A & B during 2019 Revenues _Seling snd generat expenses | be presented as Discontinued operations on the face of the income 49.How much shal ‘statement? o a. 5,850,000 c. 4,550,000 et “Cape0 ®. 1,000,000 4. 650,000 a ee + te er oon January 1, 2039, NATAPOSDIN Company classifies a hotel property a nan-current See | ce EM 2e. mediately before the classification as held for sale, the carrying amount of the property is Teo.000 000 { Cast of » 500,000,000 and Accumulated Depreciation of P 100,000,000 }. The hotel is, ceo tea on the straight-line method with 2 useful ifeof 50 years. The estimate of the fair value less sear eteT cn this Gate 1s P350,000,000. On January 1, 2020, no buyer could be identified. On this date, soe te seat concludes that the criteria for classification could not be met. The estimate of the far value sagen sells is Fevised to P 340,000,000 while the value in use at that time is estimated at 380,000,000. 50.How much should be taken to profit or loss.on the date the asset w: A property plant and equipment? 1 50,000,000 b. 50,000,000 <. 100,000,000 d. 0 j jas reclassified back to guhal Gest aM. I : Ruts ‘hfs0 Uf wok nc Page 12 of 2