PROBLEM 9-3

WHAT AMOUNT OF GAIN OR LOSS SHOULD BE REPORTED IN THE INTERIM STATEMENTS FOR THE FIRST AND SECOND QUARTERS?
ANSWER A
FIRST QUARTER 500,000 LOSS
SECOND QUARTER 500,000 GAIN

PROBLEM 9-13
WHAT AMOUNT SHOULD BE RECOGNIZED AS BAD DEBT EXPENSE FOR THE FORTH QUARTER?
ANSWER B

FIRST QUARTER (2,000,000 X 5%) 100,000

SECOND QUARTER (1,500,000 X 5%) 75,000
THIRD QUARTER (2,500,000 X 5%) 125,000
TOTAL 300,000
ONE YEAR BAD DEBT 450,000
FORTH QUARTER 150,000

PROBLEM 9-17
1.PREPARE AN INCOME STATEMENT FOR THE FIRST SIX MONTHS OF 2021.

DUNHILL COMPANY
INCOME STATEMENT
SIX MONTH ENDED JUNE 30,2021

SALES 20,000,000
COST OF SALES 11,500,000
GROSS PROFIT 8,500,000
INTEREST REVENUE 250,000
DIVIDEND REVENUE 500,000
GROSS INCOME 9,250,000

EXPENSES
DISTRIBUTION COSTS (2,500,000)
GENERAL EXPENSE (1,100,000)
DEPRECIATION (700,000)
INTEREST EXPENSE (300,000)
INCOME BEFORE TAX 4,650,000
INCOME TAX (1,300,000)
NET INCOME 3,350,000
2.PREPARE AN INTERIM INCOME STATEMENT FOR THE SECOND QUARTER OF 2021.

DUNHILL COMPANY
INCOME STATEMENT
SIX MONTH ENDED JUNE 30, 2021

SALES 12,500,000
COST OF SALES 7,000,000
GROSS PROFIT 5,500,000
INTEREST REVENUE 250,000
DIVIDEND REVENUE 200,000
GROSS INCOME 5,950,000

EXPENSES
DISTRIBUTION COSTS (1,600,000)
GENERAL EXPENSE (600,000)
DEPRECIATION (300,000)
INTEREST EXPENSE (200,000)
INCOME BEFORE TAX 3,250,000
INCOME TAX (900,000)
NET INCOME 2,350,000

PROBLEM 10-6
1.WHAT IS THE MINIMUM AMOUNT OF SALES TO A MAJOR CUSTOMER?
50,000,000 X 10% = 5,000,000
ANSWER A

2. WHAT IS THE MINIMUM AMOUNT OF EXTERNAL REVENUE TO BE DISCLOSE BY REPORTABLE SEGMENTS?

50,000,000 X 75% = 37,500,000
ANSWER D

PROBLEM 10-15
1. DETERMINE THE PROFIT OR LOSS FOR ALL OF THE OPERATING SEGMENTS.

FURNITURE STATIONERY COMPUTER OTHERS TOTAL

SALES-EXTERNAL P800,000 500,000 400,000 100,000 1,800,000
SALES-INTERSEGMENT 200,000 150,000 50,000 400,000
COGS-EXTERNAL (600,000) (300,000) (240,000) (60,000) (1,200,000)
COGS-INTERSEGMENT (120,000) (96,000) (24,000) (240,000)
GROSS PROFIT 280,000 254,000 186,000 40,000 760,000
DISTRIBUTION COST (100,000) (50,000) (40,000) (10,000) (200,000)
ADMINISTRATIVE EXPENSE (50,000) (25,000) (20,000) (5,000) (100,000)
FINANCE COST (30,000) (15,000) (12,000) (3,000) (60,000)
PROFIT/LOSS 100,000 164,000 114,000 22,000 400,000
2.PREPARE THE DISCLOSURES REQUIRED FOR OPERATING SEGMENTS.

FURNITURE STATIONERY COMPUTER OTHERS TOTAL

SALES-EXTERNAL 800,000 500,000 400,000 100,000 1,800,000
SALES-INTERSEGMENT 200,000 150,000 50,000 400,000
FINANCE COST 30,000 15,000 12,000 3,000 60,000
PROFIT/LOSS 100,000 164,000 114,000 22,000 400,000
TOTAL ASSETS 440,000 170,000 100,000 5,000 715,000
TOTAL LIABILITIES 75,000 50,000 15,000 3,000 143,000

3.PREPARE THE NECESSARY RECONCILIATIONS BETWEEN THE SEGMENT INFORMATION

AND AMOUNTS SHOWN IN THE ENTITY'S FINANCIAL STATEMENT

RECONCILIATIONS
REVENUE FROM REPORTED SEGMENTS P 2,100,000
REVENUE FROM NON REPORTABLE SEGMENTS 100,000
ELIMINATION OF INTERSEGMENT REVENUE (400,000)
ENTITY'S REVENUE SHOWN IN INCOME STATEMENT 1,800,000

PROFIT FROM REPORTABLE SEGMENTS P378,000

PROFIT FROM NON REPORTABLE SEGMENTS 22,000
SHARE IN PROFIT 10,000
ELIMINATION OF INTERSEGMENT PROFIT (160,000)
UNALLOCATED INCOME 60,000
UNALLOCATED EXPENSE (50,000)
UNALLOCATED INCOME TAX (90,000)
ENTITY'S PROFIT SHOWN IN INCOME SATEMENT 170,000

ASSETS FROM REPORTABLE SEGMENTS P710,000

ASSETS FROM NON REPORTABLE SEGMENTS 5,000
GENERAL CORPORATE ASSETS 85,000
ENTITY'S ASSETS SHOWN IN STATEMENT IN FINANCIAL POSITION 800,000

LIABILITIES FROM REPORTABLE SEGMENTS P140,000

LIABILITIES FROM NON REPORTABLE SEGMENTS 3,000
GENERAL CORPORATE LIABILITIES 7,000
ENTITY'S LIABILITIES SHOWN IN STATEMENT IN FINANCIAL POSITION 150,000
PROBLEM 11-4
PREPARE JOURNAL ENTRIES FOR 2021,2022,2023 &2024 TO RECORGNIZE
ALL TRANSACTIONS RELATING TO THE CONTRACT OF LOAN AND THE DERIVATIVE CONTRACT.

2021

Jan-01 CASH 5,000,000

LOAN PAYABLE 5,000,000

Dec-31 INTEREST EXPENSE 500,000

CASH 500,000
( 5,000,000 X 10%)

31 INTEREST RATE SWAP RECEIVABLE 634,000

UNREALIZED GAIN-INTEREST RATE SWAP 634,000
(5,000,000 x 4% =200,000)
(200,000 X 3.17=634,000)
2022
Dec-31 INTEREST EXPENSE 700,000
CASH 700,000
(5,000,000 X 14%)

31 CASH 200,000
INTEREST RATE SWAP RECEIVABLE 200,000

31 UNREALIZED GAIN-INTEREST RATE SWAP 200,000

INTEREST EXPENSE 200,000

31 UNREALIZED GAIN INTEREST RATE SWAP 434,000

INTEREST RATE SWAP RECEIVABLE 434,000
(634,000-200,000)

31 UNREALIZED LOSS-INTEREST RATE SWAP 928,000

INTEREST RATE SWAP RECEIVABLE 928,000
(400,000 X 2.32)

2023
Dec-31 INTEREST EXPENSE 600,000
CASH 600,000
(5,000,000 X 12%)

31 INTEREST RATE SWAP PAYABLE 400,000

CASH 400,000
 31 INTEREST EXPENSE 400,000
UNREALIZED LOSS-INTEREST RATE SWAP 400,000

31 INTEREST RATE SWAP PAYABLE 359,000

UNREALIZED LOSS-INTEREST RATE SWAP 359,000

VARIABLE RATE 1/1/2023 12%

UNDERLYING FIXED RATE 10%
2%

UNREALIZED LOSS-12/31/2023 (5,000,000 X 2% X 1.69) 169,000

UNREALIZED LOSS PER BOOK (928,000-400,000) -528,000
DECREASE IN UNREALIZED LOSS -359,000

2024
Dec-31 INTEREST EXPENSE 550,000
CASH 550,000
(5,000,000 X 11%)

31 INTEREST RATE SWAP PAYABLE 50,000

CASH 50,000

31 INTEREST EXPENSE 50,000

UNREALIZED LOSS-INTEREST RATE SWAP 50,000

31 INTEREST RATE SWAP PAYABLE 74,000

UNREALIZED LOSS-INTEREST RATE SWAP 74,000

VARIABLE RATE 1/1/2024 11%

UNDERLYING FIXED RATE 10%
1%

UNREALIZED LOSS-12/31/2023 (5,000,000 X 1% X .90) 45,000

UNREALIZED LOSS PER BOOK (169,000-50,000) -119,000
DECREASE IN UNREALIZED LOSS -74,000

31 INTEREST RATE SWAP PAYABLE 45,000

UNREALIZED LOSS-INTEREST RATE SWAP 5,000
CASH 50,000

31 LOAN PAYABLE 5,000,000

CASH 5,000,000
PROBLEM 11-10
1. ON DECEMBER 31,2021 WHAT AMOUNT SHOULD BE REPORTED AS INTERES RATE SWAP RECEIVABLE?

9%-8%=1% X 6,000,000= 60,000 X 3.24=194,400

ANSWER C 194,400

2. ON DECEMBER 31,2022 WHAT AMOUNT SHOULD BE REPORTED AS INTEREST RATE SWAP RECEIVABLE?
12%-*%=4% X 6,000,000=240,000 X 2.40 =576,000
ANSWER C

3. WHAT AMOUNT SHOULD BE REPORTED AS INTEREST EXPENSE FOR 2022?

6,000,000 X 8%= 480,000
ANSWER C

PROBLEM 12-4
PREPARE JOURNAL ENTRIES FOR 2021 AND 2022 TO RECORD THE
FUTURES CONTRACT AND THE PURCHASE OF THE GRAPE JUICE CONCENTRATE.

MARKET PRICE- DECEMBER 31,2021 (100,000 X 65) 6,500,000

UNDERLYING PRICE (100,000 X 50) 5,000,000
FUTURE CONTRACT RECEIVABLE-DEC 31,2021 1,500,000

MARKET PRICE- MARCH 1,2022(100,000 X 60) 6,000,000

UNDERLYING PRICE 5,000,000
FUTURE CONTRACT RECEIVABLE-MARCH 1,2022 1,000,000
FUTURE CONTRACT RECEIVABLE- DECEMBER 31,2021 1,500,000
DECREASE IN FUTURES CONTRACT RECEIVABLE -500,000

JOURNAL ENTRIES
2021
Dec-31 FUTURES CONTRACT RECEIVABLE 1,500,000
UNREALIZED GAIN-FUTURES CONTRACT 1,500,000

2022
Mar-01 PURCHASES 6,000,000
CASH (100,000 X 60) 6,000,000

1 UNREALIZED GAIN-FUTURES CONTRACT 500,000

FUTURES CONTRACT RECEIVABLE 500,000

1 CASH 1,000,000
FUTURES CONTRACT RECEIVABLE 1,000,000

1 UNREALIZED GAIN-FUTURES CONTRACT 1,000,000

PURCHASES 1,000,000
PROBLEM 12-10
1. WHAT AMOUNT SHOULD BE REPORTED AS DERIVATIVE ASSET OR LIABILITY ON DECEMBER 31,2021?

MARKET PRICE-DECEMBER 31,2021 60

UNDERLYING FIXED PRICE 50
DERIVATIVE ASSET 10

FORWARD CONTRACT RECEIVABLE(50,000 X 10) 500,000 ANSWER A

FORWARD CONTRACT RECEIVABLE 500,000

UNREALIZED GAIN-OCI 500,000

2. WHAT AMOUNT SHOULD BE REPORTED AS DERIVATIVE ASSET OR LIABILITY ON MARCH 1,2021?

MARKET PRICE-MARCH1,2021 58
UNDERLYING FIXED PRICE 50
DERIVATIVE ASSET 8

FORWARD CONTRACT RECEIVABLE (50,000 X 8) 400,000 ANSWER A

PROBLEM 12-13

ANSWER C RECEIVE P200,000 FROM THE BANK

CALL OPTION RECEIPT (10,000 X 20) 200,000

PROBLEM 13-1
1.WHAT TOTAL AMOUNT SHOULD BE REPORTED AS BIOLOGICAL ASSETS?
FREESTANDING TREES 5,000,000
BEARER ANIMALS 2,000,000
AGRICULTURAL PRODUCE GROWING ON BEARER PLANTS 800,000
PLANTS WITH DUAL USE 1,400,000
TOTAL BIOLOGICAL ASSETS 9,200,000
ANSWER D

2. WHAT TOTAL AMOUNT SHOULD BE INCLUDED IN PROPERTY, PLANT AND EQUIPMENT?

LAND UNDER TREES 600,000

ROADS IN FOREST 300,000
ANIMALS RELATED TO RECREATIONAL ACTIVITIES 1,000,000
BEARER PLANTS 1,500,000
TOTAL PROPERTY, PLANT AND EQUIPMENT 3,400,000
PROBLEM 13-8
1.WHAT AMOUNT SHOULD BE REPORTED AS FAIR VALUE OF THE BIOLOGICAL ASSETS
ON DECEMBER 31?

FAIR VALUE OF 3YR OLD ANIMALS ON 12/31 (11 X 120) 1320

FAIR VALUE OF 0.5YR OLD ANIMALS ON 12/31 (1 X 80) 80
TOTAL FAIR VALUE-DEC 31 1,400

2. WHAT AMOUNT OF GAIN FROM CHANGE IN FAIR VALUE OF BIOLOGICAL ASSETS

SHOULD BE RECOGNIZE IN THE CURRENT YEAR?

FAIR VALUE OF 10 ANIMALS ON JAN 1 (10X P100) 1,000

ACQUISITION COST OF 1 ANIMAL ON JULY 1 108
CARRYING AMOUNT OF BIOLOGICAL ASSETS EXCLUDING THE NEW BORN-12/31 1,108

FAIR VALUE DEC 31 1,400

CARRYING AMOUNT 1,108
GAIN FROM EXCHANGE IN FV 292 ANSWER B

3.WHAT AMOUNT SHOULD BE RECOGNIZED AS GAIN FROM BIOLOGICAL ASSETS

ATTRIBUTABLE TO PRICE CHANGE?
ANSWER D
GAIN FROM CHANGE IN FAIR VALUE DUE TO PRICE CHANGE:
10 2 YR OLD ANIMALS (105-100=5X10) 50
1 2.5 YR OLD ANIMAL (111-108=3X1) 3
A NEWBORN 7/1 (72-70=2X1) 2
TOTAL 55

GAIN FROM CHANGE IN FAIR VALUE DUE TO PHYSICAL CHANGE:

10 3YR OLD ANIMALS AQUIRED 1/1 (120-105=15X10) 150
1 3YR OLD ANIMAL ACQUIRED JULY 1 (120-111=9 X1) 9
1 0.5YR OLD BORN ON 7/1 (80-72=8X1) 8
1 NEWBORN (70X1) 70
TOTAL 237

PROBLEM 14-15
1. WHAT AMOUNT SHOULD BE REPORTED AS NET INCOME UNDER CASH BASIS FOR 2021?

CASH BASIS NET INCOME BEFORE DEPRECIATION 2,600,000

DEPRECIATION -100,000
CASH BASIS NET INCOME 2,500,000
ANSWER C
2.WHAT AMOUNT SHOULD BE REPORTED AS NET INCOME UNDER ACCRUAL BASIS FOR 2021?

CASH BASIS NET INCOME BEFORE DEPRECIATION 2,600,000

DEPRECIATION (100,000)
PREPAID INSURANCE- 800,000
A/R DEC 2021 650000
A/R DEC 2020 (500,000)
ACCRUED SALARIES-1/1/2021 700,000
ACCRUED SALARIES-1/1/2022 (800,000)
ACCRUED UTILLIES-2021 (100,000)
ACCRUED UTILLIES-2020 250,000
INVENTORY 2021 3,500,000
INVENTORY 2020 (3,200,000)
ACCOUNTS PAYABLE (400,000)
NET INCOME 3,400,000
ANSWER A

PROBLEM 14-17
1. UNDER ACCRUAL BASIS, WHAT AMOUNT SHOULD BE REPORTED AS GROSS SALES FOR THE
CUURENT YEAR?
ACCOUNTS RECEIVABLE DEC 31 250,000
NOTES RECEIVABLE DEC 31 150,000
COLLECTION OF A/R 1,800,000
SALES DISCOUNTS 40,000
COLLECTION OF N/R 80,000
TOTAL 2,320,000
ACCOUNTS RECEIVABLE JAN 1 (300,000)
NOTES RECEIVABLE JAN 1 (100,000)
SALES ON ACCOUNT 1,920,000
CASH SALES 500,000
GROSS SALES 2,420,000 ANSWER A
2. UNDER ACCRUAL BASIS,WHAT AMOUNT SHOULD BE REPORTED AS GROSS PURCHASES
FOR THE CURRENT YEAR?
ACCOUNTS PAYABLE 120,000
NOTE PAYABLE-TRADE 100,000
PAYMENT OF ACCOUNTS PAYABLE 1,500,000
PURCHASE DISCOUNT 20,000
PAYMENTS OF NOTES PAYABLE 400,000
TOTAL 2,140,000
ACCOUNTS PAYABLE (160,000)
NOTE PAYABLE (150,000)
PURCHASE ON ACCOUNT 1,830,000
CASH PURCHASE 130,000
GROSS PURCHASE 1,960,000 ANSWER A
AND SECOND QUARTERS?