Supporting Computation2

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PROBLEM NO. 1 - Cavaliers Corporation
1 Warranty payable, 3/31/04
Add warranty expense accrued during 2004-2005
Total
Less payments during 2004-2005
Warranty payable, 3/31/05
252,000
630,000
882,000
537,000
345,000
2 Bond discount, 10/1/99 (P5,000,000 x .04)
Discount amortization, 10/1/99 to 3/31/05 (P200,000/10 x 5.5)
Bond discount, 3/31/05
200,000
(110,000)
90,000 D
3 Bond interest payable, 10/1/04 to 3/31/05 (P5,000,000 x 12% x 6/12)
4 Notes payable - current (maturing up to 3/31/06)
Accounts payable
Estimated warranty payable (see no. 1)
Cash dividends payable (5 million shares x P0.30)
Accrued interest:
Notes payable
Bonds payable (see no. 3)
Total current liabilities
5 Bonds payable:
Face value
Unamortized bond discount (see no. 2)
Notes payable - non current
Total non current liabilities
300,000 B
2,400,000
560,000
345,000
1,500,000
340,000
300,000
5,000,000
(90,000)
PROBLEM NO. 2 - Pirates' Music Emporium
Question No. 1 - A
Warranty expense (P5,400,000 x 2%)
108,000
Question No. 2 - D
Estimated liability from warranties, 1/1/05
Add warranty expense for 2005
Total
Less actual expenditures for 2005
Estimated liability from warranties, 12/31/05
136,000
108,000
244,000
164,000
80,000
Question No. 3 - A
Premium expense [(1,800,000 x 60%)/200 x P14]
B
75,600
Question No. 4 - D
Inventory of premium, 1/1/05
Add premium purchases (6,500 x P34)
Total premium available
Less premiums issued (1,200,000/200 x P34)
Inventory of premium, 12/31/05
39,950
221,000
260,950
204,000
56,950
Question No. 5 - C
Estimated premium claims outstanding, 1/1/05
Add premium expense for 2005
Total
Less premiums issued (1,200,000/200 x P14)
Estimated premium claims outstanding, 12/31/05
44,800
75,600
120,400
84,000
36,400
640,000
5,445,000 C
4,910,000
2,700,000
7,610,000 D
PROBLEM NO. 3 - Spurs Company
Date
Voucher No.
Creditor
Nov. 27
Dec. 02
11
20
21
797
821
829
836
842
Duncan Supply Co.
Ginobili Distributors
Parker Sales
Mohamed Dealers
Bowen Merchandising
22
31
856
865
Horry Mercantile
Jackson Traders
Amount
Per sked
78,400
19,600
44,100
17,150
22,050
Amount
As adjusted
80,000
45,000
22,500
Discount
Lost
1,600
900
450
80,850
78,400
340,550
80,850
78,400
306,750
2,950
Note: All invoices dated prior to Dec. 22 are not entitled to discount anymore.
Adjustment
Purchase discount lost
Vouchers payable
8,000
Unpaid vouchers as adjusted
Balance of control account (P1,645,000-P1,309,500-P36,750)
Total purchase discount lost
8,000
306,750
298,750
8,000
Analysis
Original net vouchers payable
Less cancelled vouchers
Net vouchers payable
Less net vouchers payable still unpaid (P340,550-P36,750)
Payment that should have been made if all dicounts were taken
Less actual cash disbursements (per control account)
Dicount lost on paid vouchers
Dicount lost on unpaid vouchers
Total purchase discount lost
1,645,000
36,750
1,608,250
303,800
1,304,450
1,309,500
5,050
2,950
8,000
ANSWERS: 1) B; 2) B; 3) C; 4) C
PROBLEM NO. 4 - Bulls Finance Company
Question no. 1 - A
Total bonds issued
Face value of bonds retired {P216,000/[1.05 + (.12 x 3/12)]}
Adjusted balance of bonds payable, 12/31/03
1,600,000
200,000
1,400,000
Question no. 2 - C
Unamortized bond premium, 12/31/03 (P80,000 x 14/16 x 20/25)
Question no. 3 - B
Nominal interest
P1,400,000 x 12%
P200,000 x 12% x 9/12
Total
Less premium amortization
Bonds retired (P80,000/25 x 2/16 x 9/12)
Remaining bonds (P80,000/25 x 14/16)
Bond interest expense
Question no. 4 - A
Redemption price (P200,000 x 1.05)
Book value of bonds retired
Face value
Unamortized bond premium
(P80,000 x 2/16 x 20.25/25)
Loss on bond redemption
56,000
168,000
18,000
186,000
300
2,800
3,100
182,900
210,000
200,000
8,100
208,100
1,900
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