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IA VOL 1 VALIX 2019 (ANSWER KEY)

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SOLUTI ON MANUAL
Intermediate Accounting
Valix Peralta Valix
VOLU ME ONE - 201 9 Edition
I
C HAPTER I
Problem 1.. 1
R~quirement I
A«ounts ~ivable
Cash in bank
200,000
b. Cash in bank
Ac-ct)tml:. pnynbte
250,000
c. Cash in bank
AttounlS payable
100.000
d. Accounts. rectl,•able
450,000
8.
200,000
250,000
100.000
Cash
450,000
Requirement 2
3,000,000
Cash ,n b3nk per book
Cu5tomcr check oulst,mdmg for 18 months
Undclivcn.--d check
Poscdated cheek delivered
Collection on January 2020recorded on December 31, 2019
Adj~ted ca~h in bank
Time deposit
( 200,()(IO)
250.000
100,000
{ 450 ()()())
2.700,000
1,000,000
30 daY8
Pcny cash fund
Tot.11cash and cash cquivalcn1
20000
3 Z?OQQQ
R e(tuircmenl 3
Tbt money ma.di:.tt pla~men1 ol' P2,000,000 due on June 30. 2020 should br separately shown as curren.t
asset. The sinking tUnd ot'Pl ,500,000 i$ pn..-sentOO as noncurrcnl nsset.
Problem 1-2
R ec.tuircmcnt I
a. Accounts n.'C-tivable
Cos.hon lund
b. Exponscs
Rccei,·.1ble from employee
r,t.1ty cash fund
150.000
150,000
10,000
5.000
15,000
2
Requirement 2
C_.h (In h:and
Posldatcd check
Adjush."d t.-ash on hand
1.000.000
I 150000)
$CiO(M)Q
Petty cash fu nd
UN'C1,kmshcd pc11y cash cxr1cnscs
Po,-ttb tcd c,npt.oyec chcdt:
Adjusicd petty cash
50,000
(10,000)
( <()00)
~
850,000
35.000
2.000.000
I.S00,000
C..shon hood
Pcuy cash fond
Secumy Bank cum..-n1accoum
PN:8 CUrTCftl
moun•
b~()Ofl()()
Bond smlnng fund
,.ocal ca\ih and cash equfr'llcn1,
eiu~ooo
Jh:q uirement 3
•Titt BSP 120-day lrt3Swy bdl of P3.000.000 ,s sepasat~I>• shown as current asset.
•The overdraft in 800 currc:,nt ocrount of P200.000 is shown as cum:nt llability.
•11tc BPI Time dcpoJ.1t of Pl,000.000 is s;ho'i'n as noncurrent irwestmcnt b~o~ it is •~ trifled for l:tnd
acquisition.
Probkm l•l
Requirement 1
a. Accoums tteeivable ( I 00.000 + 150,000)
250.000
250,000
Cash on hand
b . Advances lo cmplo)'t''-'S
Cash shon or over
10,000
S.000
PC1ty cosh fund
c. Cash ;n bank (200,000 + 300.000)
Accounts ~ •)'".Ible
15.000
500,000
500.000
Requlremen1 2
Cash on hand
NSF cui.tom-:r ch1..-ck
Postd:ucd custnn·liCr died
Adjus1ed or, hand
Currency and coins
Check drawn P-1).tble lo pdty cashier
AdjuSlcd pcuycash
Cash in bink
1.000.000
( 100,000)
( JSQ IJQO)
ZSOQQQ
2.000
llil!!!l
liJljl!l
4,000,000
Unde:liven."\I company check
200,000
Postdated company ch~k dd i, -.ercd
l OQ{l(I()
Adjusted cash iu b11nk
11QQQQQ
Cash on hand
Peny cas.h fund
Cash in bank
So, ing dcp,mt
750.000
35.000
4.S00,000
., 0()0000
Tocal cash
728'000
3
Prob1em 1..4
Requirement I
200.000
Cash on h.:ind
NSF customer e.hec.k
1·•os1dated custo11'1ier c:hcc:k
Adjusted Cll!l.h o n hund
( 35.000)
<
1<oom
JJl!JlW
Petty C3sh fund:
Currency and coins
~
5.000,000
Philippine B:a:nk cum:nt acooun1
Undehvered company check
r ~td1tcd company cheek delh<r4.--d
1\ dju.stc:d bi1lancc
25,000
45000
snznooo
150.000
5.000
5.Q70.000
4.000.000
( 100.000)
Cash on band
Petty cash fund
r hili1>s>ine Bank cumn1
Ci(Y Ban.k current accown No.
Cicy Bank current aocount No. 2
A&1:1 Dank SB\ mg d epos.,t
;.\~fa Bank 1imc dc1,osi1
Toct1I cush and cash l.'<luiw1lent
250,000
'000000
11 J21i QQQ
R equirement 2
I . Accoums reoovable
50.000
Cash on hand
50.000
2. Rc.-cei, able from officer
Expenses
Cash sh.on or over
Pcu ycash
2.000
12.000
1.000
3. Philippine Bonk current
Accounts payuble
70.000
15,000
70,000
4. Chy Bank current
100.000
Bank overd1'l.fi
100.000
Problem l•S
FllK:tuarin.;: J:und Syltem
I . l'.:C~ e11all f\lnd
Hl.000
,o,.ua.~•
1)()0
Supflli<-,
5300
Truspona1,oo
1200
Mu,ecllta-..'-OUS ~J(~ruc
10.000
10.000
Cuhiatwank
800
Prnycash fillkl
3 P'cct)t.llthfinu.l
C.aJ.ti inlxt,ll:
P.:nyc:it,h fund
10.000
C.adl inbr.Lnk
2
lmp rnc Fund System
9.000
14,000
) , Pc11)' ca~ runcl
14,000
""""'
5.000
1.500
SuJ)PII~
BOO
Trmnp(lt'bhCICI
I.ZOO
Mtsalli.wo. e.x~n~
CaJi inbanit
800
1-1.000
4
Pro blem 1-6
fl""tllllting Fund Sy8ttro
Pc:CI) cult f\lnd
I0.000
J lrultfP(lrtllllOl'I
Ai."'fOU11u. l'.l)"lhlt
I.SO0
P~h') cafoh fi.wl
C-i1:sh1obmk
10.000
l . No<"")'
J,000
4,500
1,000
J.JOO
J
"" e"")'
4.500
P<rty cash ti.ind
•
10,000
Pc:UyCil~bfund
10.000
C~sh in ba.n.k
Poi;sa,c
S1,l ppb(:)
P<tt} <:~ fw,.I
J.mprest Fund System
19.00fl
C.asb inblnk
• Pos1agc
10,000
I.SOO
S11ppbc.s
Trani,;p(ll'lllli fm
3.000
1,000
At'<'OOOt $ p3yabli:
3.SOO
Pmy Clilh fu1MI
19.000
19,000
Cish 1ft b.lnk
Problem 1•7
Fhacluatln.i; Fund SyJtc:m
M a) · 2 1•eay C1$h i\md
TmprcM Fund Sy•lffl'I
10.000
29 Potlt11,-:
Supplies
T rw,nsponadoo
3.000
2.100
Miwdl1u11Nt1a: c:,p.'fli.t
1.$0(1
s..,.,,;,,
A«OUMS piyabk
i ,-,1ponatiun
10,000
1,000
3.000
29 l\lQl,u,~
s,w1;,,
Tninsponation
2.SOO
1.l-00
M$."Cll.1J~IU¥ C:\P,.'fl~
8.000
2.000
1.000
1.000
Pcityta1,h fu,.J
10,000
Ca!!h WI bani<
1.000
Pn1y(aslil'unJ
June 30
Pwy cash tl.md
i.\b y
10.000
Cash i111 btwlk
Pmyaish fund
' ""' JO
8.000
Pi:uy aJ.h rm.ct
Cash ill bad:
•.ooo
Supplic~
2.000
1.000
1.000
AttOlWltS payable
Tran1op01111t1on
Peuy tail:h fulld
4,000
J uly
8.000
4,000
I l'clly 011h fund
4,000
s,,,,,....
2,000
1,000
1,000
P~ag,:
Tn11Ufl{ll'Ulicm
To rc\-cl'k die 2<IJ1Ht1nmt ftbck an Jw~ JO.
July 1$ Pctty ca!ih f\i,wl
Suppli«
PO$t.igc
1..-..$pOflltbOn
l\fiwclbnl'Ol,ll, <lll)(fl,:50:
Cash il'I lwlk
July IS s,w1...
5,000
1.500
3.SOO
l'Oll(ll,te
$00
I.SO0
Transponaiion
;oo
I.SOO
lOO
M1:i;~lllnc()t»~ll petl:)I:
$00
P\luy Qi,h ru,iJ
l,000
12.000
Pt1l)' ( llsll
ftlDJ
Cashin bank
12,000
12.000
5
Problem 1-8
2019
Nov. 2 Peny c,ash fond
10.000
Cash m bank
10.000
30 Posw.gc
2.000
S.000
Supplies
Pcny cash rund
Cash in b.lnk
10.000
17,000
Oec. 3 1 Postage
3,000
4,()00
2,000
Supplies
Specfol dcpoi,,it
9,000
Petty cash fund
2020
Jan.
9,000
Pc1ty cash fund
Postage
Supploes
Special deposit
3,000
4.000
2.000
2 Notmry
S.000
31 Post.'lOW
Supplies
6.000
7.000
Accounts p,a;yable
Cash sllOrL or over
Cbh m bank
1.000
19.000
Pro blem 1-9
Rcqulrtment I
2019
01..-c.
P1;ny c,.sh fund
Cuh in bank
10,000
20 Oismbu11on eos1s
S.000
10,000
Miscdl:incous ~~pcn.<1cs
2,000
Equi1>mcm
Cash i.n bank
2,000
31 Receivable from employ«
Distribution costs
Transponation
9.000
2.000
1.SOO
500
4.000
Petty c.as.b IW'ld
2020
Jan.
Petty cash fund
4.000
Rttel\-able from emplo)'W!e
2.000
1,500
500
Ois1rabu1ton ooi.ts
Transpo1131ion
IS No entry
31 Oisuibution costs
Admimstmli\t expenses
Transportation
Pun:hascs
Cash in bank
2.000
2,000
1,500
l,200
6,700
6
Requirement 2
10,000
Pell)' cash
Less: Pcuy ca.sh expenses from Dcccmbcr 21. 2019 to January 31. 2020:
D i$tnbulion costs (1,500
Administrative expenses
1
500)
2,000
Transp0nation (500 + 1.000)
2.000
1.500
Pure~...'$
I '00
Pcuy cash before ri.:pknishrncnt
..filj!j!
...ulll!
Problem 1-J0 Answer C
Problem 1- 11 Answer C
Problem 1- 12 Answer A
Problem 1.. 13 Answer B
Problem 1-14 Answer B
Problem I-IS An1wer C
P,obkm 1- 16
Quescion t AnJ wer B
Checkbook balance
r os1da1cd custnn~ r check
NSF che<lc
Undeliven."tl C<)mpany check
Cash on bund
Change fond
1\ dju.s1cd balance
8,000,000
(2,000,IIOO)
( 500,000)
U00,000
400.000
40000
7110000
Question 2 Answer C
T rt.1sury bill
2.500,000
Money 1narkt1 placement
Torol cash cquivalcntS
1 000000
SSQQQQQ
Problem 1-17
Que.scion 1 Answer A
Question 2 Aosw« A
Problem 1- 18 Answer C
Coins and currency
Aceommodotton check
Toc~,I
22,000
15000
lZ,000
Problem 1-19 Answer C
Coin) and currency
RC'p1rnishmcnt chc:ck
Toca!
2,000
~
llJljljl
7
Problem 1-20
Quesdon 1 Answt:r 8
Ch<ckbool< b.ll•ncc
Cu.~lomcr pouthrtcd check crroni.:ou."IYincluded ,n c-hcckbook balnncc
Unddivcn..·•d check payable to supplier
1-\ djus1ed cash in bank
4,000,000
( 200,0<lO)
400QQQ
4100000
Q uestion 2 Answer A
Cash m b3nk
Cuh on h:md - undcpOIJtcd collec11on
Pcny rosh fund (S,000 • 40,000)
4.200.000
400,000
l 'orol cash
464 ' 000
,,~ooo
8
CHAPTER 2
Problem 2-1
Bakrncc per book
65,000
1\dd: CM for note collected
1'ocnl
10/IOO
Less: OM for sen·ice charge
Adj1.m ed book balance
...2Jlj!jl
95,000
2lJl!!!!
8afoncc per b.1nk
Add: Ocposi1 in transit
108.000
....82.£!00
Tocal
188.000
Lns: Out.seand ing checks:
No. I02
10;
107
Adj us1cd bank balance
15,000
30.000
~
~
..2lJWO
Adjus:ting entries:
I . Cash in bank
Note rcccivnble
30,000
2. tlank Ser\fire charge
2,000
30,000
2,000
Cash in bank
Problem 2-2
Balance per book
Add: CM for n~e oollected
Toca!
Les.Ii: OM for seNicec~g.c
NSF check
11 0.000
~
155.000
5,000
10,000
Book error (52,000 - 25.000)
Adjwi1ed book b:dancc
lLl!22
Bafoncc per bank
Add: Dcposi1 in mmsit
l::.rron..--ous bank debu
~.000
,...,
Les.,;: Ou1.s1anding ch'-.-cks:
No. 770
775
777
Adjusted bank balrincc
..:IZ.!l!l!l
J..LlJljjjl
135.000
...li12!!
~
203,000
20,000
30,000
~
...2l!Jl9!l
.IJ.lJljlll
Adjusting encries:
I , Cash in bank
Bank service charge
45,000
5.000
Nole receivable
2. Bank 54::rvicc c:-hC1rgc
Accouots n:ccivablc
Accounts payable
Cash m bank
50.000
5,000
10,000
27.000
42.000
9
Problem 2-J
Bakmce pet book
Add: CM for n0te collected
T.wl
l.cs5: OM for scn1iec Ch."lrg_c:
J-\ dju.s1c:d book bahmcc
2.840.000
' 20Qg0
3,110,000
~000
1 1osggg
Bafaoce ptt bank
Add: Ocposil Ul trom.it
3.26S.000
Toca!
3.7 15.000
Less: Omsmnding checks:
No. 116
122
124
125
Adjusted bank balance
4~Q !l!J!l
60.000
180,000
120,000
ll!!.!l!!!!
,; Io !!2!!
J 1a~i:wo
Adjus.tlng cncrle~
I. Cash in bank
Bonk krv,cc charge
Note n.!'Cci\•nblc
lnteres1 income
270.000
10,000
2. Bank str\'icc clwrgc
Cash in bank
S.000
250.000
30.000
5.000
Problem 2-4
Book balance:
Add: Collccuon of note
lnwrest 01, note
Book l'tror on chL-ck no. 175
1'ocal
Less: 8.lnk service charge
Pa)ment for light and water
NSF chttk
Adjusted book b:alnnc:c
1.405.000
2.500.000
IS0.000
4~000
' 62~~
4.100.000
5.000
245.000
220 000
470000
' t;ilQ~
Bank balance
Add: Dcposi1 m trllnsil
5.630.000
1·oc.,1
Less: Bank error
6.JS0.000
Ouu mnding ctk..--cks
Adjus1ed bank balance.
z~o!W!l
1. 100.000
1650000
, z~o~
1 fl1Q£WQ
Adjusting: entries
I. Cash in bank
2.69S.000
Nocc receivable
ln~ rcs1 income
Ac-counts payable
2. Rank service c:h1rvc
liafll and water
Accounts receivable:
Cash in bank
2.500.000
150.000
45.000
5,000
245.000
220.000
470.000
JO
Probkm 2-5
a. n alarw.-e 1:,cr book - Apnl J-0
C'ltdi1 memo fi)r note oolloc1cd
Outsl.tnding checks:
No. 1331
1332
1334
1335
Total
Less: Bank sen'icc cbarge
NS~ chock
Undc-pos11ed collect1ons
Balance Iler 1wtk April 30
1,100,000
60,000
40.000
30.000
60,000
-1Jl.!!m
1400QQ
1.300.000
5.000
25.000
lli.!lll!!
100000
1000099
b. Adjusdng cnules
I. Cash in bank
Note rcc:civ11blc
60.000
2. Bant service charg\':
Accounts receivable
Cash tn bank
5.000
25.000
60,000
30,000
<, Bal111« per book - April 30
CM for note collected
1,100,000
60.000
Bank scn•ice charge
5,000)
25 000)
1 IJOOOO
NSF check
Adjusted c;uh in bank
Pro blem 2-6
3.500,000
a. Balance per bank
Add: Undeposned collecuons
NSF ch,-.:k
DM fbr sorcty dc1l0Sil
Unrecorded chcc:k
Tolal
Less: Chooks oul5tanding:
Ovi:r.natcmcnt of <.-o.:ditor'a check
Undcrs1a1cment of co~omcr·s check
Balance per book
550.000
50,000
5,000
.w.J.l2!I
noooo
4,230,000
650,000
270,000
1~00()()
! IOQ (l()()
3 13QQQQ
b. Adjusting cotric."3:
450.000
I. Cash tn bank
A CCOI.Ul b
270,000
1~0.000
payable
A ccounts r1.• cd\'11b le
2. Accounts n.-ceivablc
l) ank scl'Vtce charge
A ccounts p~1)'3ble
Cash in 00.nk
50,000
S,000
125,000
180,000
ll
3,130,000
270,000
ISQggQ
3,580.000
c. Balance per book
Oversuuement ofc1'tditor's c-heck
UnderStott1m· ,11 of cu.uomcr•~ ch<.-d
Tollll
less: NSF cbc<k
0>,11 for safety bo,
Unrecord ed chccli:
Adjusted book baJnnc;c
50,000
5,000
lllJlil!l
181:!ilSla
3499099
£1 roblcm. 2-7
2.700.000
Bsfoncc per book
Add: Procwds of blink kx,11
Nott' collccltd by bani:
Toca!
Less: Service charge
Customer's check charged back
1-\djllSltd book b3111nce
Bafoncc per bank
Add: Oeposil m lr.msit
lncorroc1 dcposi1
Frroncous bank ch.1rs.c
Erroneous debit nltnlO
Toca!
Lc:ss: Outsta1ldi1lg ctk.--cks
E1roneous bank cl\.-<111
1\ dju.sicd bank b;afoncc
940,000
41:\000
1z~
I
ooo
4,075.000
10.000
~
f1Q!lilQ
4~1~WlU
4,000.000
475,000
90.000
150,000
2lllUlOO
600.000
lll2Jlll!I
21, !lllQ
4.9 15.000
2QQ!l22
101snoo
Adj usdng entries:
I. Casb in bonk
Bank service charge
Interest expense (60.000 x 1/6)
Prepaid mtCrc!U c-xpcnsc
L<>an pay:1bk, (940.000/94%)
1.375.000
5.000
10.000
50,000
1.000.000
400.000
40.000
l\ott receivable
Interest mcome
2. Bank scr\lice chqc
Accounts receivable
Ca.sh m bank
10.000
50.000
60.000
Problem 2-8
5,000,000
:\1'2000
5.5 16.000
Rllfancc per book
Add: Proa,cd.s of bank loon
Toe.ii
Lcs,s;
Understatement ofcheck in pGym<:nt of acooum (200.000 - 20.000)
Pcny cash rw1d
1\ dju.stcd book balance
180.000
...J.QJlllj!
19Q!!ilfl
:\ l'6!WQ
12
Bsfoncc: per b;tnk
5.S00.000
Add: Undc:posited eollcc1ions
Erroocou~ bani: ch:;ifl._>c
Deposit omitted from bank slatcmcnt
Tocol
Less: EJTOneous bank crcdu
Oumanding checks
J\dJush:d bank b.:1foncc
300,000
50,000
il0.1lOO
IQQ!!OO
6.000.000
130,000
.ill.!!00
624 Q~
~
12fi!W5t
Adj usting entry
Cash in bank
lntcn:st expense (84.000 x 1/12)
Pn:p1ud interest expense
1\ooounts pay;iblc:
Pctl)' cash fund
Suppli<:s
Transporcatioo
Postage
326,000
7.000
77,000
180,000
4.000
2.000
3.000
1.000
Loan payabl~ (S 16,000,~M.)
600,000
Problem 2-9
1.300,000
8afoncc per bocJk
Add: Ovcrst31cn1c.nt of check number 765
Check number 555 stopped fo, payment
Tocal
l.cS5: Sen-ice charg.c
NSF check
AdJUSled book balance
20.000
.l.Q.!!00
1Q!!OO
1.330,000
5,000
~
2QQ!IQ
J ?~QjWQ
Bafoncc per ~ mk
Add: Undcposit.cd collections
1.200,000
Tocol
1.475.000
221 !!00
Less: Outsea1tding cheeks:
Numbi:r76 1
55.000
762
763
764
765
40,000
25.000
65.000
.1l!Jlllfl
'l~~
J "::ID!lilSI
Adju5tcd bank b:afancc
Adj ustlng entries
I. 0.Shin bank
30.000
Accounts payable
20.000
10.000
MJsccllaneous income
2. Dank SCI'\ ice charge
Acc()unts receivable
5,000
85.000
Cash in bank
3. Rttei,·able from cashier
90,000
40.000
A«oums rettivable
So.les disrowus
30.000
10,000
Prob1tm 2- 10 Answer A
2!lll.Q!IQ
Problem 2- 1 I A nswer 8
'"211ggl}
13
Probl<m l - 12
Ques:cton I AnJwer C
QuestJon 2 An ...,wc-.r C
8.500.000
Bafan~ per book
NO(e collected by bank
Book mor (200,000 20,000)
950.000
180.0(il))
250,IKill)
NSF chc-dc
Bank 5en·icc charge
Adjus1ed book b31ance
(
20 000)
2909999
Problem 2.. 13
Question I Answer A
B>loncc per book (SQUEEZE)
Add: Pro=>ds of bank loon
Prc,,cxcds ofnocc collex:tcd
Tocal
Les.,: Bank 5crvicc charge
DAIF <hcctc
Adjusted book balance
2. 120.000
500.000
9JS !!!l!l
illJlOO
3.055.000
S.000
~aoo
....lD..000
i QQQQQQ
Qucition 2 An.5wu B
Balon« per bank (SQUEEZE)
3.070.000
1-\ dd: Deposit in 1rnnsit
Bank error (200.000 20.0Cill)
Tocal
Less: Ou1standing cheeks (750,0(il) - 50,0(il))
AdJu.sted bank bal.:lnce
450,000
.l.8ll.!lOO
6JQ~HI
3.700.000
ZQ2900
, QUQWJQ
Probkm l -14
Q uesclon I Answer A
Bala.nee pet bank slateinent
De-po.sit in transit
0utsl4ttding cht.."C'kS (1,500,000
Bank error
AdjlL'iled bank balance
8.000.000
1,200,000
200,000)
( 1,300,000)
( ISO 000)
7 259999
Quescton 2 A nswer A
El>krncc per led&,;,r (SQUEEZE)
NO(e: collcctt.'d by bank
Service charge
NSF<hcd<s
Book error
1\ djustcd book balance
7.070,000
1,100,000
(
20,000)
( 500.000)
I00 !!!l!l
ZUOQQO
Question 3 Aosw« A
Cash 1n bank
Currency and coins on hand
7,750,000
900,0(il)
Peuy cash rund
Torol rush
&ZQQQQQ
sonoo
14
Probkm 2-1S
Qucsdon l Answer A
Galante per bank -July I
Deposits
Checks pr<,CC:S:,cd
S1..-rvice eh:wg.c
NSFchc:<:k
Monlhly loan pa)menl
Bafane<.: per bank July 3 l
550,000
1.800,000
( 1,-1-00,{IOO)
( 30.000)
( 120.000)
( 100 000)
ZQQQQQ
Question 2 A nswn B
Bal.inc.: per b:111k
Deposil in u-ansit
July I
Outstand ing t heck
Bank ~-rror - oven,tatement of d1sburscroi.:nl
Adjusted bank balance
Correct amount of disbursement
700,000
100.000
( 150,000)
l1Q.OOjl
mlll!!l
30,000
Rccorck,d by bank
300 000
Bank error - ovcrslatcmc-m of disbursement
m!WII
Question 3 Answer C
B•ku>te per ledger July 31 (SQUEEZE)
Service chari c
990,000
( 30.000)
NSF d!c:<:k
Book error - understatement of collcchon
Monthly Soan p;1)mcn 1
(100.000)
Adjusted book balance
( 120.000)
..lJ!l!.!!00
~
Corr« t amoun1of accounts receivable collc..'Cfcd
200.000
Recorded by dl.'po!litor
....2l!Jl!l!!
Book error - undcrst:ucmcnt orcollection
J..Wljljl
15
CHAPTER 3
Pro blem l -1
Bank recondlladon - June 30
1.000.000
JQQlll!!l
1300.000
Boc1k balance
1\ dd; Credit memo for note collec-te<I
Tocal
u:ss: NSF check
100.000
....:L!l!l!l
$er\' ior charge
;.\ dju.s1cd book balance
IQ~ ggg
l l'Ui£WD
Bank OOlanec
Add: Dcposil 111 lrnnsil
1.650.000
~QQ OOO
2.050.000
Tocal
Less: Outstanding checks
J-\ dJU.Sled bank balance
8:iHl!IQ
1 126000
Bank reconciliation - July 31
Book b:.llance
J-\ dd: Credit mc:mo
1,400.000
SQOOOO
1.900.000
ror bank loan
Toe.ii
Less: Service charge
I lll!!l
AdJUSlcd book balance
J 822000
Bank balance
2.650.000
I I QQ lll!!l
3,750.000
Add:
Deposit in tran:.il
i ·ocul
Less: Oubl~11lding c~ks
l XSI 000
1822QQQ
Adju.slc:d bank bafoncc
Adjusting entries, July 31
I. Cash 1n bank
Bank loan payable
2.
500.000
500.000
1.000
8:mk service charge
Cash in bank
1.000
Compucation o r dcp<>5it in transit - July 31
Dcposil in transit
400,000
June 30
;.\ dd: Deposi1s during J uly:
Book debi1s
Less: June credil memo for nott colkcted
4,000.000
JQQlll!!l
1·ocul
J ZDDlll!!l
4,100.000
Less: Deposits cred ited by banlc during July:
9,mk credits
1,.c,Ss· Joly credit memo fOf bank
Dcposil in transit-July 31
lo.;ln
3,500.000
SQQ ill!!l
' QQQ lll!!l
J IUQ!lilO
16
Computation of outstauding checks - July 31
OutsUmding checks. June 30
J-\ dd: Chcc:ki dmwn by 00m,xrny llurin.g July:
854.000
8ook=<ii1'i
Less: June debit memos for
NSF chect
$4.._-r,.•icc ch:i,v
Toe.ii
Less: Checks paid b)1 bank during July.
Bank debils
LC'~U; JuJy service charge
3.600.000
100.000
___j.Qll!!
10➔ 000
1
4<>6000
4.JS0.000
2.500.000
I 000
Out.stand ing cht..-ck$, Jul)' 31
' 499QQQ
J 8Sl
000
Pro blem 3-2
RKonclllnLlon - October 31
&!Jlil!l
J-\ djus1ed book balance
Rank balam.-e
Add: Dcposh m trnnsil
Toc;;il
l..cs.5: OutsC;md ing checks
Adju.stcd OOnlc b;1fonce
400.000
.1ill!J!OO
700.000
.lJll!.!!m
~
RcconciUntfon - November 30
Oook balance
Add: Unde~ttue-1nen1 ofc-0lkc11on from cu~tomer
T ooil
l..cs$; Undc:TSllllcmcnl of check d isburs,cmcnl
1.000,000
')QQ2Q
1,090,000
220000
Adjusted book b:dancc
820000
930.000
Bank ba lance
1\ dd: Dcposi1 in cr.,nsit
Check of Susan Company charged in error
Toca!
Lc$S: Oui.stnnding dK'Clo:$
OcPQ$i1 or SuSM Comrxiny 1,."rtoncOU$I)' c:.ttdih."<i
190.000
~
l2Qggs}
1.)20.000
4()0,000
.lJll!Jlll!l
~QQ!!!!Q
820000
1\ djus1cd bank balance
Adj1,lS:ling entries - N o vcm~r JO
I. Cash in bank
90.000
90,000
Aceoonts receivable
2. Accounts pay;ablc
Cash in bank
270.000
270.000
17
Cornpuciltlon or ou1surndlng checks - October 31
100.000
O\Jlstan41ng ch<ck$ - O«ot,e, 31 (SQUEEZE)
Add: Checks issued by deposi1or.
1,800,000
Book disburscmcntll
22Q !!l!2
Undcrstalcrncnt of chctk p.iid
Toco!
Les.<: Checks paid by bank:
8a11k dasburscm;;.• ins
Clu~ck of Su.san Camp:1ny chaft:,ot-d m eftor
Outstanding checks No\•c-n1ber JO
222Q!!l!2
2.170.000
1.970.000
(
' !Ill 221!)
I 7221100
:U)Q !lSlll
Compucatlo n or deposit ln transit - November 30
Deposit in transit - October 3 1
Add: Cash rctciptS deposilcd during November:
Book rccc1p1S
Undcrst1.1tcmc.-nl of collcclion from customer
300.000
2.200,000
2Q !!l!2
Toco!
2 29Q !W2
2.590.000
Less: Deposits credited by bank during November:
B:utk receip1s
IJeposit orSus:111 Company erroneouslycreditl'd
Ocpos11 in trans-it
2.500.000
l!lll Q!,lg)
, ~QQ1H2Q
No\<cmbcr30
12QiW!I
Problem 3-l
••
Rtconclliadon on July I
Adjust~d book bafoncc
J ' 20!lil0
Bank balance
1.720,000
Add: Deposit in U'!1nsi1
TMal
2,220,000
Less: Outstanding chccb
Adjus«d bank balaoo:
J
500/IOO
2~Q !!l!2
2Z!l!WQ
Rcc:onc:llfatlo n o n J uly 31
470,000
Book bal!mtal'
Add: Nott' collt.'CkJ by lx mk
l ~00000
Tmal
Less: Bank St.'T'\'i~ charge
1,970,000
Adjus.tt.·d book b3fancc
J 2~12!WO
8ank balance
Add: Deposit in transn
Total
Leu: Outstanding checks.:
2,700,000
Chttk ti 107
108
AdjuS.tt.·d bank balant.-c
;zg !lll!l
~n2~;in
3.100.000
650.000
.iJll!Jl!lll
I I iQ !lll!l
J 2~12!WO
b , Adjusting entries o n July 31
I. Cash m bank
U00.000
1.500,000
Note rcocivablc
2. Oan.k $CIVl<.'I! charge
Cash in bank
20.000
20,000
18
Computation of deposit in transit - J uly I
D<p<>sil in 1ronsi1 - July I (SQUEEZE)
Cash receipts per book
1~UQ!!ilQ
500.000
Toca!
Less: Ocposib credtrtd by bank
1
3.900.000
DL1)0Sil in tr.1nsit - July J I
~Ull!l20
J()QQ99
Computation or outstanding checks - July I
Out<tanding chocks - J uly I (SQUEEZE)
Checks drawn by depositor
1·oca1
l.c$s; Cb~ks p{lid by b:mk
950.000
S,1S0,000
4000000
Ouistruiding checks - July JI
I I 50000
~ ?QQ!Ml!l
Pro blem J-4
Oaklncc per book - NO\tmbcr 30
Ltss: Service charg_c
NSF check
Custo1nc:r's note ctroncously rcconkd u ash ~ccipt
J.\ dju-11cd book b:dt1ncc
500,000
10,000
50.000
.!.!l!!.llil!l
.!fill!!!!!
.liQJJilll
Balance p,:r bank No"e,nbcr 30
Add: Deposit in lmn!iil
Toca!
l.,ess: Oui.standing chtt:ks
Adjw,1ed han.k balance
600.000
ill!.Jli!!I
720.000
.l.l!llJlllQ
lalQJljljl
Oc-posi1 in transit - Ocrobcr 31
Cash receipts deposited:
45,000
710.000
( 45.000)
Book debtlS
October oollect,ons n:cotdL-d 1n November
Customer"s nolc r.xordcd as cash r-:cci1l1
(l
naililil>
lliJlil!I
6 10.000
Tocal
Les.~: [}(-pOSits cn.·•dite-d by bank:
Bank cr~dlls
s00.000
Corr«1ion ofbttnk error
( 10000)
-190000
Dc-PQSil in transit - November 30
lll!JW!l
Outstanding ched,s Oc'lober 31
125.000
Checks issued by depositor:
Book credits
Ocmber bank service charg,e
l.l00.000
C
'!Ml!!)
(
(
1,000,000
10,000)
SQ 00!!)
, ·...1
Checks r>td by bonk:
Bonk tlcbilJ
November b.mk SCl"\•icc ch~,rg_c
November NSF check
Outstanding chec:ks No\•tmbcr 30
J I2'i !.lSlQ
1,320,000
2~Q!l00
)8QQQQ
Adjustin&entry
Bank sen ice ch1u8c
1\ ccoun1s receivable
N01e rt«ivable
Cash in bank
10,000
50,000
100.000
160,000
19
Problem l·S
March 3 1
Rttefpts
Dbburlk':ml!nti
Aprll 30
200.000
800.000
720.000
280.000
60,0()0
( 60,000)
100,000
Book balincc
Noce coll~t¢d by Nnk
March
Apnl
Scrvict: dmgc.
Miu-ch
Ar ni
NSf: check
M:arch
(
3,000)
2,000
MOO)
l 20,0001
( !0,000)
30,000
April
Dq,osit in transit
March 31
100,000
( 110,000)
April 30
(
2,000)
( 30,000)
80,000
(:L~,000)
(220,000)
OuUltndina checks
March 31
178.000
178,000
(.lllJl!l2}
AprilJO
U.an.k OO hUI('~
~
mJ!llll
l.l!!S
~
~
Adjll-)c"ting entry
Bank sen ice charge
10,000
50,000
100,000
AccounL~ receivable
N()(c n:ceivablc
Cash in OOnk
160.000
Problem J.-6
R«dpu
July 31
llankb:tlancc
Book error on tolk..:don
Book crroron payment
8,a.nk mw on deposit
800.000
(
; ,000.000
180,000)
},940.000
1.860.000
( IK0,000)
540,000)
540,000
200.000)
200,000)
Bank error on payment
NSF checl:
July
A ugwu 31
Obbursem~nts
.ioo.ooo
.ioo.0001
100,000
100,000
Augus1
50,0()()
50,000)
NOie l"C)lltttcd hy bonk:
July
( 200.000)
Augu.,;t
20<),000
30(1,000)
3()0,000)
600,000)
480,000
480.000
Oeposn io 1rarrs1r.
July
600,000
Aui'J$1
Oulstanding checks:
Jul)'
100,000)
A ugu1'1
Book balance
I '®000
(
---
:! :JQIJ 11W
100,000)
f:~il 002
' SlQ llS2Q
(
~.1f!il92
, Qlla{WQ
20
Problem 3..7
13ook balance
Bank scrv1cc charge
No\', )0
Receipts
2,0J2.000
2.56li,OOO
No, ~mbcr JO
0c<:f'mbcr JI
2,0\10)
o«. 31
.Disbursements
1,44-0,000
J,1(,(1,000
l,000)
4,000
4,000)
Collection of note
November 30
lkccm~r JI
Adju11kd book bul~ntc
Bank OOlan-:c
I a,g;gQg
,~,~
,~
t 44' 000
2 8S6~Q
1.890.000
2.090.000
1,080.000
2,900,000
( 200,000
200,000
I 300000)
JOO OOO)
Ouut.andu.'lg c~-cks
No,--embcr JO
( 180.000)
180,000)
592.000
Oc«mbtr 31
0cposl(
(
592.000)
in lrtUlSll
N('l\'tmbcr JO
l1rcttmbtr 31
~0.000
-193,000
80,000)
40.000
40,000)
aJngug
' ;;lf:8 ,111
498.000
Chccl: clTQfleously chargtd by bank
l'lo\"cmbcr JO
Octtmbe:r 3 I
Adjusted lxtnk balance
1
wnom
144' 992
:iil !lflO
, Z£~ti 111n
Adjusting e:ncry
8:Utk SCI'\ ice charge
Note l'\.'Ceivablc
Cash in bonk
4.000
300,000
30-1.000
21
Problem 3-8
S<pt. l O
llook bolaoce
NSF chcct·
S..-,itcmb<r 30
Oe1ober 31
Colh.-c11on of 1«wn1s rccelvOOlc
$cplnnbcr )0
0<1oocr 31
0\-crswcrocm ord ied:
1,900.000
Rcc~lpcs
1.400,000
60.000)
l0.000
Sq,tnnll<f lO
90,000
2,4-00.000
O<t. J I
900,000
60.000)
40,000
I 40.000\
O isb ursemcntS
30,000)
S0,000
90,000)
S0,000
, I.,I! lKlll>
October 31
A~ustcd balance
I 2fiQQQQ
1 11ggi;w
2' ~'1lt!211
..J.&!!!JJl
1Olil~
8 :mk bcafapoo
2,100.000
1,200,000
2.soo.000
800,000
0.."l'(>S~ in 1ta"sit
September 30
Occobtt 3 1
Oulslandil.'li, checks
Sqitembc:r 30
Ol..1ob..'T 31
ll0.000
130.000)
260,000
260.000
C
AdjU!ilcd balnncc
270.000)
12'19000
--I JJQQQO
(
210.000)
lOorlO
lfl 000)
z.,,,oono
I 019000
Adjusung entries on October 31
I. Accoun1s rccelvab1t
Cash in b3nk
40.000
2. Cash in bank
170.000
40,000
Accounts receivable
50.000
Salaries
120,000
Problem 3-9
Qucscion I A n.swc.r B
100,000
Outstanding checks- May 31
Checks recorded by boot in June
Tocul
, sooooo
lAs: Chcd:s ri:cordoo by bank in June
2200000
400000
2,(,00,000
Outstanding checks- June 30
Question 2. An$wc.r D
300,000
O~po£11s ootsrnnd1ng - Moy 31
I 800000
D1.-posils n.."COl'dcd by book in June
Toc~,I
l.c$s: Oeposi15 recorded by bank in lune'
2,100,000
11,0QOOQ
500000
Deposits ootslanding - June 30
Question 3 An.swtr A
B:tbncc ptr book
2, 100,000
June- JO
Service c:Mrgcs
Col10e1.ion by bank
NSF dleclc
AdJUSlcd bool balance
Bafancc per bank - June 30
Deposns outscandmg - June 30
Cbcl'ks outslandl.llg June 30
Adjltsled bank b3lnncc
(
5(),00{))
550.000
100000\
, 500090
2.400.000
500,000
I 400 000\
, 'iQQ Q()Q
22
Pro blem 3- 10
Question I - Answer B
Bala.nee per bank November 30
December d tp0i.1ts
, ~ocal
December disbursemenu
OaJance pet bank - Oectmber 31
Dep0i11 in transit- Decembtr
Oubuu,ding chooks - Di.-ccmb1.-r
1\ dju.s1cd bank bafancc fkc:cn1bcr 31
3.600.000
Booooo
9,100,000
(4 400 000)
4.700,000
700,000
I 500 0001
4 200000
Question 2 An.i wtr O
Balance ptr book- December J I (SQUEEZE)
Note e-0lkc1cd by bank
NSF chcdt
Service chorgc
Adjusted book bal-1ncc
4,300.000
1,000.000
( 350,000)
( so 000)
4 200QQQ
Qucsclon 3 - An11wer 8
Bank tt«-ipts in ~ ,ube-.r
Noted c0Ucc1ed
01..-posil in ll',lllSil - No\icm bc:r
0 L'fl(1si1 in transit - Dcccrnbcr
Cash n:<:ciplS per boc,k in December
5.500,000
( I ,000,000)
( 800,0(1())
700000
4 400QQQ
Queslion 4 - Answer C
BMk disbursements 111 Decembi:r
NSF ch\X"k
Service charge
Out.•aanding checks - Novembtt
Erroneous bank credit in November
Out.na.nding chtekS - l)c('ember
Oook d1sbl.irscmen1s in Ocet.'1nlxr
4.400.000
( 350,000)
( 50.000)
( 1.200.000)
I 200.000)
500000
3 100000
Problem J - 11
Ques:cion 1 An.swer 0
B:da.11cc pet ba11k June 30
July l»ink deposits
J uly bank disbursemems
Balance per bank - JuJy 3 l
July deposh an transit
July OOlt-,lartdtng, checks
Adjus1cd bank bafoncc
3,000,000
9,000,000
17 QiMHK)Ql
5.000.000
1.000,000
( 600 !KIO)
(j
JQQQ9Q
Questlon 2 A n.swt.r 8
Balance pet book July J I (SQUEEZE)
Note: collected b) bank ln July
NSf ch1.'Ck in J~1ly
Scrvice chnrgc July
Adjuo;lcd book balance
i,,
The balance per booL on July .ll is ..squ,:-czeti b)' working back tfom I.he adj usted bal11ncc.
5.350,000
200,000
( 140,000)
( IOOOO)
5400QQQ
23
Que:,.tlon 3 AnJ we-r A
Deposi1 per bank sLatemcnt for July
NO(e oolltcled b)' bank tn J uly
D~sil in (l'lnSil - June JO
D1..-pc-,si1 in transic -July 31
(a5h rc<:ciplS per book for July
9.000.000
( 200,000)
( 400,000)
I 000000
2400QQQ
Ques:don 4 AnJ wer A
Disbursements per bank statetnem fo,•July
7.000.000
NSF cll"''Ck in July
( 140,000)
Service charge in July
( 10.0<IO)
( 900.000)
600000
Out.~Ublding checks - June 30
OutSt.anding checks J uly 3 1
Cash d1sbu.1'$emcn1s per book for July
6 SSOQOO
Proof of the cash balance per book - July 31
Balance per book
June JO
Book receipts for July
Book disbursements for Jul)
Bsl:incc ptr bool-July 3 1
2.500,000
9.400.000
(6 <50 000)
'i }5QQ9Q
Pro bkm 3--12
Question I Ati.swer C
Balance per bank - June 30
Oank dc posi~ for July
Dank disbursemcnl:,. fhr July
Bafancc per b;mk July 31
Deposit in transit -July
Out.standing checks
Adjusted bank bafoncc
9.800.000
6,500,000
(9 000 000)
7.300.000
600.000
( I QQQOQO)
Ci2QQQQQ
Question 2 Answtt A
The "dJustcd b:ink balance i, also 1hc cai.h balance per book b<..'C:111$C there are no hook rooonciling item'>.
Quesclon 3 Answer A
Bank dcposit.s for July
Oc:posh in transit- July 31
Oc-posil in transit - June 30
Cash receipts per book for July
6.500.000
600.000
( 400 QQQ)
6 7QQOQQ
Question 4 Answer A
Bank disbursements for July
OU1S""1ding checks J uly 3 1
OU1Sland ing checks- J une 30
Cuh disbursements per book for July
9.000,000
1,000.000
( I , 00 0001
8§QQQQQ
24
Problem 3-13
Question I An.,wer D
Balance per bank March 31
Bank deposits for April
Bank djsbursc-menls for April
0:11:um .• per b:tnk Apnl 30
Dcposil i11 U'ilnsir
Apnl 30
Ou.ts1at1ding cheeks - April 30
AdjlL'iltd hank balance
4,650.000
6.000.000
I 5 000 000 l
S,6SO,OOO
1..100,000
( 750 000)
6400000
Quesdon 2 An.swcr A
The adju.s1cd bank balance is also lhe ca.\h balance per ledger bccaust there nre no book rooonc1hng
i1cms.
Question 3 An.,wer 8
Bank deposits for April
De-posh in rransi1 - Apnl 30
Oeposi1 in 1:ransi1 - Marth 31
Cash receipts per book for Apnl
6,000.000
1.500.000
II 000 !K)IJ>
6190000
Question 4 Answer C
Bank disbursements for April
Oirutand ing checks- April 30
Outs1anding checks March 31
Cash disbursements per book f°' April
5,000,000
750,000
11 '~Q QQOl
4 WOQQQ
25
CHAP'T'ER 4
Prob1ern4•1
ti.
Accounls receivable
Notes rc«ivablc
Installments receivable
Advances to suppliers
Advances to subs.idut.ry
Cluim rccciv11blc
Subscriptions re«ivable
Accrued in1eres1 receivable
Cull<l.Qmc:r's crt.-dit lx1.lanccs
Advances rron, CUSh)IUCl'S
Recciv:ablcs
b. Accounts rec:tivablt
AIIQw•rnoo for doubtful accounls
Notes receivable
lns,allruents rectlvable
Advance.~ to suppliers
Clitim rceci\'abk
Sub.s(..'riJ>CKln l'\':Ccivobk
Accrued in1ercs1 rc:cciva-blc
Total lradc and other recci\'ables
775.000
100.000
300.000
IS0.000
400,000
IS,000
300.000
10.000
30,000
20,000
2,000,000
775,000
S0,0(IO)
100,000
300,000
150.000
15,000
300,000
10000
1§OQQQQ
c. The 00Yancc$ to subsidillf)' ,hould be cfo55ificd as noncurrcnt and prc.scntcd as long.term invcs1mcn1.
The customers' m-dn bafances and 3dvanc..:-s from customers should be dassilicd ns current liabilities
and inc luded a$ par1 o f "tmdc a.nd 01hcr 1»yablc,...
26
Problem 4-2
600,000
o. Accounts receivable Jnnuuy l
Charge sales
T otal
Less: Colk-'CIJODS front CUSIOOlcr!o
WntcotT
Merchandise tttums
A llowanecs 10 cuscomcrs
Accounts receivable Dttembtt 3 I
b. Subscription receivable
Deposit on contract
Claim receivable
Ad,•ances (0 einplb)'CCS
Advances to affihoh..-d
Advances to suppl ier
Accomns rccci, able
6000000
6.600.000
5.300.000
lS,000
40,000
25000
5 400000
1 200000
150,000
120.000
60.000
10.000
100,000
50,000
490,000
1,200,000
60,000
10.000
c. Accounts r..:cdvnble
CL1im receivablt
Advances 10 tmplO)'tt'S
Advance.~ to supplier
·r Olal trade aod other n:cci,ables
soooo
I J'OQQQ
d. The subscrip1ions f'\."Cci\.-.iblc should be dcdueted fiom subsmbcd share capital.
The deposit oo contnu.::1 should bf.: tllissilicd u noncumnt 1r1J prcsem:cd as other
nonc11rrcnl asSd,
The advanres 10 offi liatci. should be closs1fint os noncum-nt and prt~ntNI as
long-1cm1 investment~
Pro blem 4.3
FOB destination and freight collect
I . Accounli. r1.::c dvablc
Freight out
Sal~
Allowti.nce for frcigh1 cha~
2. Cash
Soo,ooo
10,000
500.000
10,000
47S.000
Saks discount
15.000
Allowance for frtigh1 charge
10.000
AC'cOu.nLS recioi\'lblc
S00,000
27
FOB destination and (reighl prepaid
I. Actounls receivable
Freight out
500,000
10.000
Sak-s
500,000
10,000
Cash
2. Cash
Safos disoount
485,000
IS,000
500,000
Aotounts rccc1v1ble
FOB shipping point and freight collect
I. Atcoun1s receivable
500,000
Soles
l . Cash
SaJc.s disoount
Accounts rcceivnble
500.000
485,000
IS,000
500.000
FOB shipping point and frelgh1 prepaid
I. AcCOUl'IIS rect1vablt
Snlcs
510,000
500,000
10,000
Cai;J,
2, Cash
Saiks dis,count
Accounts rcccivnble
495,000
15,000
510,000
Probltm 4-4
I. Accounts receivable
4,000,000
4,000,000
Sales
2. Cash
Salt~~ discount
Accounts recth ablt
1.470.000
30,000
3. Cash
Accounts rect1vablc
1,000.000
4, StJes return
I.S00,000
1.000.000
100.000
100,000
Accounts receivable
5. Sales return
40,000
Allowance for sa.1e.s rerum
40.000
Problcm4-5
I . Accounts recewable
4.500,000
4,500,000
Salt:-s re\tnut
2. Cash
Saks discount
4,4 10.000
90.000
Accow1ts receivable
J. Ca,h
Accounts receivable
4,300,000
4.S00.000
4,500,000
28
Pro bltm4-6
I . Actoun1s recri\•able
2.450,000
2.450,000
Sales revenue
2. Cash
2.450.000
Accounts receivable
J . C.lih
2.450.000
2,500.000
2,450.000
50.000
A~counl.s rcccivabl<'
Sates discounl forCeited
Problem 4-7
l . Accounts rece-ivablc
Saks rc"enuc
4,000.000
4,000.000
2. SnJt~li relum
Accounts r~ctivable
300,000
3. Sales return
Allowan« for saJes rerurns
100.000
300,000
100.000
Esaimatcd stiles rerums (10-/4 x 4,000,000)
ActuaJ returns
&Janee
400.000
[email protected]
.lllll.wl
Pro blem 4-8 Answer A
Trade accounts 1~cc1vr1bk
1\ llowantc for doubtful :1ccoun1$
C laim receivable
2,000,000
( 100,000)
1!!Q !Ml!l
2 10QQQQ
Total trade and 01hcr receivables
Problem 4-9 Answer 8
Ac<iOunts rcceivable-J:·mu:-uy I
Credit $ales
Collec1ions rrom cu$1.Q1ncrs
Saks f't':l um
t\ ccouots wrincn off
Acc-oun1s rcce1vablc-Occ::c111bcr 31
Allowance for doublful acc<M.u11s
Allowance for sale~ rclum
Net rcali~blc value
1,300,000
5,500,000
(5,000,000)
( 150.000)
( JQQ !Ml!l)
1.550.000
( 250,000)
(
S!!!WQ)
J 2:illflgQ
29
Problem 4•10 A nswer A
Accounts re~ivable Janu3ry 1
1,300.000
Add: Crl!dit s:iks
7'ocal
5 400000
Less: Collection from cus1omerS
Ac.ooun1s wrinen off
Aooounts receivable - December 31
6.700.000
4.750.000
125000
4875000
1p <qoo
Pro bkm 4- t 1 A nswer A
Accoun1s receivable
Tr.tide insullmcntS recci,·abk: (850.000 5-0.000)
Attounts receivable from officers
Accounts on which JX>S.tdah.."(I chcoks arc held
T octil rrade nccoun1s N...-cc:ivabh:
3..S00,000
800.000
150.000
' 00000
4fi5QQQQ
30
CHAPTER 5
Pro blem. S- 1
••
Crooi1soles (75% x 5.000.000)
3.750.000
75,000
Doubtful ac(()Un,s (2%x .l.750,000)
Doubd\.1I AC(()UDl!
75,000
75,000
Allowonclj for do ubtful accounts
b. Doubtful ac<.'-OllnL-. (lo/ox 5,000.000)
Allowtinci; for doubtful llCCOURlS
so.ooo
50,000
c. Required allowance
80.000
Less: CredJI bal3.nceofmllowanee
2l!.i!!.!!!
WlW
Doubtful a.c.counts e.xpcnse
Doubtful accounts
Allowuncc for doubd'ul uecounts
60,000
60,000
d. Required allowance ( I O'Yn x 500.()00)
Less: <.:redh lxllanct of 11tlowanc:e
Doul>!ful account$ e~ptnse
Doubtful accoums
AllowruJcc for doubt.ful accounts
50.000
20000
~
30.000
30.000
Problem s..2
lt~quircmcnt n
I. Accounts reccl\'1blc
7,000.000
Sales
2. Cash
SaJt.s d1s.oount
7.000.000
2.450.000
50,000
2,.500,000
Accoun1.s rl!cdvablc (2.-lS0,000/ 98~·•)
3. Cash
Ac,counts rccci\'ablt
3.900.000
3.900,000
4 . Allowance for doubtful accoun&S
Accouo LS ri:cci\'ablc
30,000
5. Accounts receivable
Allowance for doublful accounts
10.000
Cash
10.000
10,000
10,000
Acicounl.s receivable
6. Sak~ r.:turn
Accounts receivable
Jo.ooo[
70,000
70.000
31
Requlremen1 b
Doubtful accounts
40.000
A llov,-.in~ for doub1ful accouncs
40.000
Rote = 40.00011 ,000.000 =
:Wi
1-\ ll0"'"1moe for doubtful accotm1s - O«ember 3 1 (4% x 1.500.000)
Less: Allowance before adjuslmem
Doubtful accounts e.we~c
60.000
Zl!Jlm
~
Requirement c
1,500,000
J-\ 1.'Ct,unl.s rcC<"ivabh: - December 3 l
t\ llowancc for doubtful ac..'CQ\mls
Net realizable vatue
(
llll~l
J:!~Q~IQ
Pro b lc.-m S•l
Req uiremenc a
I. Cash
Accouots n:cci,•ablc
800,000
7.200.000
Sales {800.000/10~,)
8.000,000
2. Cash
Sales d1<CotJn1 (5% x 720.000)
Accounl.s rocci\1blt ( 10%1 ~ 7.200,000)
684.000
36,000
720,000
5,940.000
3. Cash
Accoums rocch·able
5.940,000
4 . SaJc..~ diM.-uunt
10,000
Allo.,.,,mce for sales discount
10,000
5. S11lcs rttum
Accounts recti\'able
80.000
6, A1low.1f1cc for doubcful accounts
Accounls rccci\·:tbk
60,000
80.000
60.000
10,000
A ccounts rcctivtblc
Allowance for doublful ~C'C'Ouncs
10,000
10,000
Cash
10,000
Accounls rccci\*llble
70,000
7. Ooubtt\.11ac.counts
70,000
Allowance ror doubtful n«<Hmts
Required allowance- D<cembc< 31 (5% x 2,400.000)
Less: Allowance before ndjustmcni
Doubtful accounts
Rate = I00,000/2,000,000 =
120.000
~
~
~
Rtquiremen1 b
J\ l"Cnunts rct."Civablc
Less: Allowance fordoub1ful accounts
Allowance ror sales dtScoum
Net realizable value
2,400,000
120,000
..l.li.!lll!!
IJQ!WQ
' 'IQ~
32
Pro blem S-4
Requirement a
I. A ccQunl~ rccci\•ablc
2.600,000
S•lcs (3,070,000 - 470,000)
2.600,000
2. Cash (2.4S5,000 - 1.45S.OOO)
Accounts rccci\ablc
1,000,000
3. Cash
Sales discoont
Accounts rocefrable ( 1.455.000/9r'/4)
l.4SS,OOO
45,000
4 , Allo~anc:c for doub1fol ::acoounLS
Acc01.1n1S rccci,·ablc
5. Cash
s.,..
1,000,000
1.;00.000
20,000
20,000
470,000
470,000
6. Sales retum and alJowances
Accounts recei,able
55,000
7. SaJt~~ return and allowances
10,000
SS,000
Cash
8. Accounts receivable
10,000
5.000
Allowance for doubtful ac.rounts
Cash
S.000
5,000
5,000
Aocounls n:cei,•able
Requlreme.nt b
Doubtful accounts
S0.000
50,000
Allowance fci r doubtful nccounts
Credit sales
Less: Sales discoon1
S;;1lc:s mum und ::illowanccs
Net cn:dil s.aks
Dooht(ul accounts (l.S00.000 x 2"9)
2,600.000
45,000
llill!!!
IQO!!!:!fl
2 ~QQ!l!IO
~
tlequlrement c
Accoun1s receivable
625.000
Less: Allowance rordoubtful accounts
...&!!ll!l
Net rcaliznble ,,atue
~
33
Problem S-S
R eq uirement n
I. Accounts rccth•ablc
Sales
7.935,000
2. Cash
4,4 10,000
90,000
7,935,000
$41le,s diM."()UMl
4,500,000
Accomu.s rccehablc (4,4 10,000 ;it 98•~)
2.475.000
25,000
3. Cash
S1.1lcs dis.count
Accounts rec."Civablc (2,475.000 I <J91:'.)
2,.500,000
4, Accountsrcccivablc
Allowunc:c for doublfol ncrounts
15,000
lS,000
C,sh
Accounl.s rettl\abk
lS,000
15,000
5. C..h
1.100.000
AClCOU.nts rocch able
1.100.000
(8,000.000 4.410,000 2,475,000 15,000)
6. AlloY.ancc for doubtful accounts
Accoun11 recehab1c
55,000
7. Sales return
Account5 recchable
30.000
55,000
30.000
Requirement b
Ra1c {60,000 / 1,500,000)
~
Rtqu,red allowance (4¾ ;( I ,2SO,OOO)
50,000
AlloM1ncc ~fore odjustmcnt (60,000 1 1S,000 SS,000)
22.!lll!l
l!lJW!I
Increase in aUowancc
30,000
Doubtful 1ccounts:
Allowuncc fo r doubtful nt1counts
30,000
Requirement c
1\ ccoUl\ts receivable December 31
Allowinct for d oubtful accounts
Nd r~limble value
l.lS0,000
(
~2 !!!l!l)
I 1 90099
Problem S-6
Amounc
1, Not yet due
I - 30 days pas, due
31 60 days past due
61 9() d>ys past dut
O, er 90 cby,; past due
Percent o (
uncoll« t ibh:
1,700.000
1.200,000
100,000
150,000
25%
SO%,
J "00 000
100¾
~
no oon
5%
Required
(1lh,) W(lllCC
60.000
25.000
75,000
lliJlll!l
l.SllJliljj
34
2. AHow;rnce - Januory I
170,000
30,000
Rcco,,crics
Do111>1fol a«<>Unu UPfflS< (SQUEEZE)
Tooll
Less: Wnieofl' \235,000 + 3(),000)
Required allowance - lA-ccmb1..'f 31
ill.ll!lll
545,000
265000
~
3. DoubtfuJ accounts expense
AJlowancc for doubtful accoums
345.000
345,000
3,270,000
2$0000
4 . AccounlS n:ctivable
Less: Allowance fordoubtfol accounts
Ncl rt.aJizobk value
li0,000 - I0 ,000
R11c in 2018 = -
·····---- - = JWi
10,000,000
I.
2.
222091)0
258,000 - 20,000
Ra1c in 20 19 = - -- - - - l~.000.000
Rernin~ eominp (.0 16 x 1,250,000)
Allowanc,e for doubtful accounts
=Jlll
20,000
20.000
AII0\lMCc - Jnnuary 1. 2019
20,000
10,000
R«ovcrics - 2019
Doublful ocroum, - 2018 (SQUEEZE)
..2ZJlOO
122,000
TOMI
Le$S: WriLcotr- 201()
88Cl00
Allo1,1,,incc - o«cmbc.r 3 I, 2019 (,0 17 x 2,000,000)
.l:l.Wl
3. Accoums receivable - De«mber 31 . 2019
2.000,000
Us.s: AUowtnc, for doubtfu l acc.~nu
Net re11li1JJble w lue
1266000
14 000
Problem S-8
500.000
400.000
I . Allowance - January I, 2019
Doub1fu l accooms recorded (2% x 20.000.000)
Recovery
~
Total
950,000
Less: Writcoff(J00.000 • 100,000)
A11ow-anct ha.Ian« bt':fore adjUiuncnt
:!lll!Jl!l!l
~
2. 5,000,000 x S'¼,
200.000
J.000.000 X 25¾
500.000 - 100.000 X 75, o
250.000
Rtquirtd allowance
3.
250,000
2,000,00() X 101,;,
l QQQQQ
[A"Cenlbtt 31 . 20 19
Doubtful ace<>unts
Allowance for doublful accounts ( 1.000.000- 550.000)
1002000
450,000
450.000
35
Pro blem S-9
I. Allowanre-1/ 112019 (l¾x 2.$00.000)
-Wm
2. A1f(l'A'allCC - l/ 1/2019
Ooublfol a<:c.,-ouncs rteonlcd in 20 19 ( 1% x 3.000.000)
30,000
28,000
..1.l!OO
R«O\Cf)'
Toutl
65,000
Wrilcoff
(?7000)
Allqw;mcx before adjuslmml Octcmbcr3 I, 2019
l!.!lm
XI,.
3. 300,()00
80,000 XS ~♦
60.000 ~ 20'~
25.000 x go,~
3,000
4,000
12,000
ll!.!l!.!n
Rcquirtd allowance: - 12/31/2019
4. Doul>tfi.11 accoun1s
Allowanc~ ror doubtful acrounts (39.000 - 38.000)
.l2JlilQ
1.000
1.000
Problem 5.. 10 A nswer C
Pro blem S- 11 A nswer B
12.000
0 -{,(} days ( 1.200.000 x I%)
61 - 120da)'(900.000x2%)
120doys ( 1,000,000 x 6%)
Allowance - 0 1..' «mbcr 31, 2019
18,000
60000
o,er
~
Allowi,nce -January I. 2019
Un<Olltc11ble ooeounlS e.<p,,IS< (SQUEEZE)
Rcco,cry
Tocnl
Accounts written off
t\ llowi,ncc - O,xc;mb<:r 31. 2019
60.000
80,000
20000
160,000
L.2il.OOO)
..2D.1lllll
r1 ro blcm S- 12
Question t Answer A
A,-ailablc discount (2-/4 x 2,000,000)
Allowance ror sales discount (SO¾ it 40,000)
40.000
20.000
Quesdon 2 Answer 8
30 days ( 1,4-00,000 x5¾)
60day,a \ 400.000x HI', )
O\'CI' 60 days ( 200.000 X50'/4)
A!Iowa.nee for doubrt\11 accounts:
16
JI
70,000
40,000
.lJlllJlm
.ll!IJl!III
Ques-rion 3 A tu wer C
Aooouncs recc-ivable
Allownncc for doubtful nccounls
Allowance for s3lcs discount
Net realizable value
\
4.000,000
2 10,000)
C 20 000\
J 770QQQ
36
Problem 5.. 13 A nswer B
Doubtrul accounu cxp.:nsc (3 1¼ x 3,000,000 ,,. l0.000)
Pro blem 5-14 Answer A
Doubt fill accounts c,pcnsc (2'¼ x 7,000,000)
Pro blem S- IS A nswer D
1\ llowance - January I
Doubcful accounts expeMe (5¾ x 8.000,000)
RttO\ ~ry of accounts ,, rinct1 off'
200.000
400.000
T OWI
650,000
Accouni.s wrinen orr
CI OOOOO)
Allowance - December 31
~
~
Problem 5- 16 A nswer D
Allowance January I
250.000
Doub1ru1 accounts C.\pcnsc (SQUEEZE)
Toc:11
.lllil9!!.
Account,; written off
2lU.!!m
1\llowancc
425,000
December 31
llllJljJj)
Problem S- 17
Question 1 Answer B
Allo~nce -January I
RttOH:-ries
WriteofT(200,000 - 100,000)
J\ll0W11ncc-
Oecc:mber JI
1,000,000
50,000
JOO 000)
zsoooo
t>crore .cljustmc-nt
Question 2 An.swt:r A
0 60 OO)'S (6,000,000 X ) ()'/,,)
61 - 180days (2.000,000 x 20'/4)
181 - J60 days (1.500,000 x 30'/ ,)
O,cr 360days (S()(),000 100,000x S0-/4)
Required allowance - 12/31/201 9
600,000
400.000
450.000
' OOQQQ
1§~9999
Quesllon 3 Answer C
,,now•ntt
1/1/2019
R«overies
Doub1ful accounts e..,pense (SQ UEEZE.)
Toe.ii
WritcofT(200,000 • 100,000)
R,quircdallowancc-12/31/2019
1,000.000
50.000
900000
1,450,000
( 100 QOO)
1650QQQ
Question 4 A nswer 0
Doubtful accounts expense
Rct01Jt1d a.mount (2•~(1 x 20,000,000)
900.000
:llWl!l!I
.2lllLWlll
Yc.1ro('fld adjust1ncnt to the allowance account
Quesdon S Answer 8
1\ ooounts rccciviblc - December 31. 2019
Allowance ror doubtfi.11accounts
Net realizable \•aluc
9.900.000
(I
6;0 000)
tP5QQQQ
37
Problem S•l8
Qucslion J An!lwcr 8
2016
2017
2018
Credit sales
11 ,100.000
12.250,000
Writeoffs
260,000
295,000
14 6SOOOO
18 000000
.1l!ll.l!!lil
~
Recoveries
22,000
37,000
~
~
855,000 95,000
Rate=
.02
38.000.000
Ouub1ru1 ,coounr..il c,pcnsc for 201 9 (2% ~ IS,000,000)
Quesdon 2 An.,wt:r A
Allow-ance for doubtful accounts - January I. 2019
Doublrul accounts expense for 201 9
Rec:o,er1es in 2019
1'otnl
80.000
300.000
~
Writooffin 2019
420,000
OIQQQO}
Allowat1ce for doubtfol accoun1s December 31. 2019
.I.LIi.Wi
Question 3 Answu A
1\ ccoun1s rc«ivablc January I. 20 19
C~di1 sales in 201 !)
Collection from customers in 2019
Writcoff in 2019
1\ccounts rere,vable - December 31. 2019
Aroounts rucdvablc
Dcc..:mher 31, 2(H9
Allow:mce f'or doubtful accounli [)cc(:mbcr l l . 2019
Net realiZl'lblt value
2.070.000
15,000,000
( 14,000,000)
, 100001
, Z§0QQQ
2,760,000
C IIQQOOl
2fi-iQOOQ
Problem S•l9
Question 1 Answer A
30 day'J or less
Between ) I and 60 days
Beowe<n 61 and 180 days
Betwttn 181 and one year
Allowancie: for doublful accounts
(3,000.000 x So/,)
(1,500,000 X 20~; )
(1.200.000 X 25¾)
( 1.200.000 x so~,l
December 31. 2019
150,000
300.000
300.000
600000
11$0990
Question 2 Answer A
Doub<ful accounu expense 2016, 2017 and 20 18 (5'/4 x 23,500.000)
Acc-ounts writteno1T2017 and 2018
Rc;c:o,"<ry of accoon1s written off 20 17 nnd 2018
1,175,000
( 200.000)
75000
Allowance for doubtful uccaun1s January 1. 20 19
1050000
Allowance for doubtful accoonts - January I. 2019
Rtto, ery of accounLS ,, rium off 20 19
Doub<ful occounu expense for 20 19 (SQ UEEZE)
1'ocal
Wnteoffs (200.000 + I00.000 additional)
Allowance f'or doubLful acooums - December 3 I. 2019
1.050,000
100,000
500000
1,650,000
( JOO QilQI
) lS0 0QQ
38
Question 3 A nswcr C
1\ ccounts rc:1X:iv11blc Dei.:cmbcr 31, 2019
Allowance for doubtful l1Cl"-Otln1S - Oa:cmbcr 31, 20l9
Net rcalitnble \lllluc
6,900.000
( p,00001
S 55QQQQ
Be,wc,n 6 1 and 180 da)'S
Betwt."en 18 1 nnd OllC' ytar
3,000,000
1.500,000
1.200,000
1.200.000
OH•r one year- lO be wrlncn off
1·oc~1I :K"coun1s rt."C'ch 11bll'
§ ClQQQOQ
30 days or l\.'S.'i
Bc1wcen l I and 60 days
Problem S-20
Qucscion 1 An.1wc-r A
IS,000
AlloW3ncc ror doublful accoonts-()c«mbcr J I, 201~
Doubtrul accounLs c.,.pcmc for 20 19
10000
45.000
T 01;1I
Allowance tbrdoubtful
8'Cctl'.1"15
Occcmbcr 3 1. 2019
(~
Accounts wrinen olTin 20 19
lilW!l
Question 2 Answer C
Accounts recci,.· ablc- Dccanbcr 31. 2018
Gross $:lk.J
Tocal
Acooun1s receivable- December 31. 2019
Accounts written olTin 20 19
Sales returns
nctua.l
Collection from cus1omeri. in 2019
800,000
6 I ~Q QQQ
6.950.000
( 880.0001
(
35.000)
l
1, 0001
fi OZOQOQ
Quesdon 3 Answer A
Allowance forsaks n::tums-l)cQcmber 31. 20 18
25.000
.L!).000
JS,000
([email protected]\
,....,
Bsumated sales returns (SQUEBZE)
Ac1ual sales rt!lurns
Allowance for sales returns - Decembl!'r 31, 20 19
Zl1Jl!lll
QuestJon 4 A11.,wu B
Gross sales
EslJmated sales relums m 20 19
Net ~le,;
(
6.150,000
10 000)
Ct 140999
39
CHAPTER6
Pr o b1em 6- 1
2019
Jon,
1,000,000
6,000,000
Cu~h
Notes m:ci,.,ablc
Land
5,000,000
2,000,000
G:.'t in on sale of land
720,000
Dec. 31 Acffl.lcd inum:st recci,·ab~
ln1eres1 inc-ome ( 12'1/, x 6.000.000)
720,000
2020
Dec. 3 1 Accrued irnerest rttei\'ablc
lnttft'SI income ( 12¾ :< 6.720.000)
806.400
806,400
202 1
Jan.
Cash
Notes n.'Ceivable
Accrocd intcresl rccewnble
7.526.400
6,000,000
I.S26.400
P,oblcm 6-2
Jon,
6()0,000
Notes rccc1\'abk
Soh.-s
Uncamt."(I ink-rt-SI income
540,000
60,000
200,000
0 1.."C. 31 Cash
Notes ~eivable
200,000
31 Uncirnc:<I intcresl income
l.nlc:n:sl im:omc
Year
2019
2020
2021
30,000
30,000
N oteS rcc:,eivable
600,000
400.000
200 QQQ
I 200 000
F racdon
6112
4/ 12
2/12
Interest inco me
30,000
20,000
.LQ.!!00
~
Problem 6-l
Face ,aluc
Prcscn1 v,tuc (300,000 <t 2.-1018)
900,000
Unc.-,mcd intctcst income
~
720.540
r n.":Seu1 value
720.540
Cssh rcccwed
Saks price
.lJl2Jl!l!I
C'os1 or gble~1or
lJll!JW
Gross mt.i>mc
820.S40
~
40
fan,
Cash
100.000
900.000
Notes rect.ivablt.
Sole.'$
820,540
179,4<,0
U nc:m)f."<I inlcrtst mcomc
0 cc. 31 Cash
Notes R'C.'civable
300.000
300,000
31 Unearned interest mcome
86.465
86,465
lnltreSI U)COl ot
Date
1,2019
3 I, 20!9
Dec. 31, 2020
31,2021
C oUecdon
Interest
Principal
300,000
300,000
300.000
86,465
60,8-1 1
32.154
213.535
239,159
267.846
.l>o.
°'"'·
°"'·
Present value
720,540
507,005
267.846
Problcm6"'4
Requirement I
1213 1'2019
2.500,000
Notc rcccivnblc
Sales (500,000, 3.99)
Unearned interest income
12/3 1/2020
1,995,000
505.000
Cash
Nole roctivablc
500.000
Unearned intcTdt income
Interest i:nt,."Olllc (8(11• it I.Q9S,OOO)
159,600
500.000
159.600
Rcqulrcmtnt 2
NMe n.wavable (2.500.000 - 500.000)
Unearned mtcrcst 1nco1:nc (S0S,000
Carrying :unounl - 12/3112020
IS9.600)
2.000.000
( 14<4001
I §5i 699
Requlreme.nt 3
lnrerCSl income for 202 1 (8¾ x 1,654,600)
Proble-m6•S
Faoc: value of note:
Prcs<..-ilt v,luc (400,000 x .71 l8)
Unearned inttrcst income
Presenl value
400.000
1&4 7'0
~
Cash received
Saks price
284,720
12~ 000
409,720
Carrying amount
llllJl!!!l
Gain on sale
~
41
2019
fan.
Cash
Notes nxcivablc
125.000
400,000
150.000
Accumulated dcprccl!ltion
EquipmC'nl
("4in on S31c of equipment
500,000
59,720
115.280
Unearned imcrcst income
D«. ) I Unearned int1.->n:$t income:
ln1crcs1 income
34,166
34,166
Date
1,2019
interest Income
0...-c, J I, 2019
IA'<. l I , 2020
0..-.:. 31, 2021
34, 166
38,266
42,84.'l
Jlln.
Untamed lmerest
115,280
Rl,114
42,848
Present value
28-1, 720
J l 8,8K6
357,152
400,000
2020
38,266
DL-c. 31 Uncarnt..•d inlen:.st in<..-omc
38,266
Interest income
202 1
Dec. 31 Unearned inte~I income:
42,848
Interest income
42,848
2022
Jan,
Cash
400.000
Notes receivable
400,000
Problem6-6
I.
Nocc n.-ocivablc rrom sale or building due 5/ 1/2020
2..100,000
AC'truod inicrc!lt on nocc rccciv;1blc from 5;1lc of building
from S/1/2019 10 12/31/2019 (5,000,000, 9'4 x 8/12)
300.000
Principal pa)111en1 of noc.e receivable from sale of land due on 7/ J/2020:
880,000
Annual ins1nllnien1
lnlm'SI from 7/11201910 7/112020 (10% x 2,800,000)
Accrued inh::l'CSI on NR from sale ofland from 7/ 1/2019
10 12/31/2019( 1/2 X 280,000)
Total c:um:,u receivables - 12/3112019
2.
Zfil!.ll!l!l
140000
J l~gggg
NR (rom sale ofbutldlng due 5/ l/2021
NR frum officer
NR from s"le oflond noncum:nl portion:
2.500.000
2.000.000
2,800,000
Princ ipal
Due 7/112020
Total noncurrent notes receivable:
(
12/31/2019
600,000
~ !lll!l)
z,agugo
62QQ!WQ
42
Problcm 6•7
Quesdon I A n.swer A
PJ.000.000 X 8% X 3112
Pl.000,000 X 6% X 10/12
i ·ocot mLer~St income
(January I m March 31. 2020)
(Janua,y I 10 Oc1ober 31. 2020)
60.000
~
J..LIIJjjjll
The in1crcst rate on the Pl .000.000 note can 1tc determined as follows;
190,000
lntcre51 recck'nble on 12131/2019
Accru«I inlcr<SI on PJ.000,000 noie (3,000.000 x S% x 9112)
t\ ccrut.-d interest on P l ,000,000 note- (March 3 1.2019 to D~cmbcr 31, 2019)
1180000)
.JJIJlilll
..f)J 0,000 n:prcscnts interest for 1wo months (November and tX-ccmbcr of 20 19) or PS.000 per month.
1\ nnual interest is P).000 x 12 = P60.000.
The
i n1e1'dt
f'lllc ilS P60,000 divided by P 1,000,000 or 6%,
Question 2 Answt.r B
1\ oooun1S reocivablc • Occcmbcr 31 , 2018 (3,840.000 + 520.000)
Credi! sales 20 19
Cash collections 2019
4.360.000
21.200.000
{I9,800.000)
Wn teoffs 2019
I
Accounts receivable - Oectmbtr JI, 2019
,, llowancc
:ll O000>
c; 3c;pogo
December 31. 2018
Dooht(ul accounts c.tpcnsc for 2019 {SQ U EEZE)
Wri1oorn~2019
520.000
42S,000
1410000)
~
1\ llow.na: - D<-c<mb<:r 31. 2019 (10"/4 x 5,350,000)
Problent 6..8 Answer A
First p3ymtnt on January I. 2019
Pn.-.scnl valut' of n:-nu i111ng ~ix payments (600.000 ;\. 4.36)
Corr«t 11A.lc11, rc,cnuc
600.000
'616Mo
J '> 16999
Problem 6-9 Answer C
The note receivable is shown 1u 1hc prcscnl value on ~mbcr 31. 2019.
Fooc vuhx rtmaining nine payments (500,000 x 9)
PK":Scnl \'aluc (500,000 x 6.2.S)
1
Unearned in1crcst income
) p ,; QQQ
4.100.000
q ,; Q()O
Problem 6-10
Question I Answer A
N"R from U tta
1.000.000
Question 2 Answer B
NR from Yola (1 . I50.000 x .68)
782.000
43
Problem6-11
Question I Answer B
Prcsc:111 value of NR (500,000 x 3.99)
I 225000
Ques:don 2 An.~wt:r C
Interest income for 2020 (8¾ x 1,995.000)
Question 3 Answer A
NR - 12/3112020 (2,500.000 - 500,000)
Uncamc<J inte=t inwone - 1213 1/2020 (S05.000- 159,600)
Carrying amouJU - 12/31/2020
2,000.000
( 34 5 400)
1fiH fiQQ
Question 4 An.$wcr A
lnccrCi-1 incumc for 2021 (8¾ x 1,654,600)
Problem 6-12
Question 1 Answer 0
2,825.000
Quesc.ion 2 An..swe.r C
825,000
Question 3 Answer 8
339.000
Question 4 Answer D
2.664.000
Pro blem6- l l Answer D
Note n.-ccivablc
4,000.000
Lw: Pres..'1lt value (4.000.000 x .75)
Unumcd interest inronw.-
' 000000
1000000
The uneamt-d inlcrest income is umot1iicd 3 )'CJU'$ using lhe dTcctiu~ intcrcsl method as fo llows:
t•resc111 value. January I. 2019
!merest income for 20 19 (100/.x 3.000.000)
l•resc:nt value. Ottembtt 31. 201 9
Interest income for 2020 ( 10% x 3,300,000)
3.000.000
woooo
3300.000
}30000
Prescn1 vah,ic, o«embet 3 1, 2020
3,630,000
lnteros< income for 2021 (l.000.000-630,000)
370000
4909000
Pn-.iCTil value, Ottemher 31, 2021
fntcrcst income for 20 19
lntcrcst income for 2020
Interest inrome for 2021 (simply lhe remainder)
1'orol ,nlcrcst l11oomc
300,000
330.000
uoooo
J 000000
44
Probkm6-14
I,
Answer C
Nole re.ceavable.
PttScnl ,alue ofnole r« c i\11blc (6,000,000 x .7S)
Unearned interttt income
lnteres1 income:
2019 (10~, x 4.500.000)
2020 (10¾ X 4.950.000)
2021 (l .500.000 - 4 50.000 - 49:i.OOO)
Total
2.
6.000.000
4500000
1 iOOQQQ
450.000
495.000
i55 000
J ' 00000
Ant1wcr 0
Pttscnt \llluc of note 1-«eh-:ibk:
4.500,000
CUT)ing amount of cquip1:ncn1
4 ~00000
( ,oo 000)
Loss on sale of equipment
Problem 6- IS
Question l Answer D
Prcse111 \'tluc o f nolc rccci\ltblc ( 1,000,000 x .712)
712,000
(aff)in& 3moun1of cquipmc:nl
Loss on sale
fillOJ.lQO
r 88000\
Quesclon 2 An.swer 0
huen."'S.t inco111c for first year( tie/4x 712,000)
Question 3 Answer C
Note n.-ccivahlc
Uncoro«l int<fc,t inromc (288.000- 85.440)
Cffl'}ing amouot - lx<:,mb<r 31. 20 19
1,000,000
( ' 02 160)
722449
Que.scion ◄ Answer A
interest incmm: for 2020 ( 12% x 797 ,440)
~
45
CHAPTER 7
Problem 7- 1
2019
Jon.
Loant'l."1:dvabk
4,000,000
4,000,000
Cash
Cash
342.100
342,100
lJMamed mlcn!St income
Unearned inleresa income
IS0,000
IS0,000
Cash
Dec. 31 Cash
400.000
400,000
lntcre.st moome
Unearned interest inco~
56,948
lntcRS-t mcome
56,948
(10',~)
Date
lnte.rest received
01/01/20 19
12/31/20 19
12131/2020
12/31/202 1
400,000
400.000
400.000
( 12%)
Interest iocome
456,948
463.782
4 71.370·
Amortization
carrying amount
3,807,900
3.864.848
3.928.630
4.000.000
56.948
63.782
71.370
• 12% x 3,928.630 equals 47 l.4JS, or a diffcn.""Oee of P6S due- 10 rounding.
2020
Dec. 31
Cash
400,000
lnteres1income
IJncamcd interest income
Interest tncoc:ne
400.000
63,7~2
63.782
202 1
0..'C,
31
Cash
400.000
lnten!Sl income
Unearned inl'cm:·st income
400.000
71,370
lntcrcst income
31
Cash
Loan •~iv".ibk
71.370
4,000,000
4,000,000
Pro blem 7-2
Rcquiremrnt 1
Ongin;11ion rec l'tCci\'1,..-d
Oirec1 origination oosl
Untamed in1m-st income
Note n.:ccivablc
Unearned intcrcst inromc
Cam,ng amoum - 1/1/2019
3$0,000
C 61 500)
~
4,000,000
( 28&SQQ)
'i ] l) SQQ
46
Requirement 2
Due
(t0,1.)
Interest received
0110112019
12/3 112019
12/3112020
12/3 11202 1
12/31/2022
12/3112023
4-00.000
400.000
4-00.000
400.000
400.000
( 12%)
Interest income
445.380
450.826
456.925
463.756
47 1.613
Amortization
Carrying amow1t
3,711,500
3.756,880
3.807,706
3,864.63 1
3,928.387
4.000.000
45.380
50.826
56.925
63,756
71 ,6 13
Rcc1ulrcmcn1 3
2019
Jan.
Loan recch·,lblc
C-a:sh
Cash
4.000,000
4.000.000
350,000
350,000
Uncam«I inh:rtSt income
Unearned imerest inoome
61.500
61.500
Cash
Dec. J I Cash
(merest income
31
Uncrirncd imcreR inoome
400.000
400.000
45.380
lnccrest income
2020
Dec. 31 Cash
Interest income
JI
Unt:imcd inlcrcst income
45.380
400.000
400.000
50.826
lmcrcst income
50.826
Problem 7-3
Requireme.nc I
2019
Jon.
Loan receivable
Cash
3.000.000
3.000.000
Oil'\.--cL origination cosl
Cash
260.300
Ca~h
Oin:cl Ori&in.ilion c..-oe,,t
100.000
Doc. 31 Caih
Interest income
ln1c1•esc income
Direct originution 00$1
260.300
100.000
240,000
240.000
50.382
50.382
47
Date
(8¾)
Interest recch t<I
1
01/0 1/20 19
12/31/2019
12/31/2020
12/31/202 1
240.000
240.000
240,000
(6%)
Interest income189,618
186,595
183,487
2020
Dec. 3 1 Ca.<h
Amortization
Carrying amount
3, 1(.0,300
3.109.91 8
3.056.513
3,000,000
50.382
53.405
56,513
240,000
interest inoome
240,000
lntcrcs1 income
Direct origination cost
53.405
53.405
202 1
Dec. 3 1 Cash
240.000
Interest incornc
240.000
Interest income
56.513
Dircc1 origination cost
56.513
Ca.~h
Loan receivable
3.000.000
3.000.000
Jbq uircmcnt 2
Noocurrcnt assc1:
Loan receivable
3,000.000
Direct oriain:.i1ion cost
Carrying an101.m1
1
IQQ913
192918
r1 robltm 7-4
Requlremenc I
Principal :amounl
Direct origimnion cost incurred
5.000.000
457.SOO
Origination (ee charged agamst borrower
200 000)
5' H 100
<
Canymgamoum - January I, 2(H9
Requirement 2
D ate
01/01/2019
12/31/2019
12/3112020
12/3112021
(10%)
hu.erest rtceived
500.000
500.000
500,000
(8'-'l
Tn1emt Income
420.600
4 14.248
407,652
Amortlz.ation
79,400
85.752
92.348
Carrying amount
S.257,SOO
5,178.100
5.092.348
5.000,000
48
Requirement 3
2019
Jan.
Lo.ln receivable
Cash
S.000.000
S.000.000
Direct onginatioo cost
Cash
457.500
C'osh
200.000
457.500
Direct origiootion COSl
D«:. 31
Cash
200.000
500.000
500.000
lncerest income
31
lntc.rn t income
79.400
Dircc1 origioolion cost
79.400
2020
Dec. 31 Cash
500.000
Interest income
31
lnccl'CSI income
Direct oriW,in:11ion cost
500.000
85,752
85.752
202 1
Dec. 31
31
31
Cash
Interest jnCOOlc
Interest mcom.:
Ditt.~cl on~ina1ion ros1
Cash
500,000
500,000
92.348
92,348
5.000.000
Loan re«lvable
5.000.000
Pro blem 7•S
Requtreme.nt I
Dooembcr 31. 2020 (1,000.000 x .93)
Dooembcr 31. 202 1 (2,000.000 x .86)
December 31. 2022 (3,000,000 x .79)
900.000
1.720.000
'lZn ~
1"otnl p!X.'$Cnl vnluc or loon
4i !PDUS!II
Loon r<ecivable - 12/3112019
Accrued in1~1 (6.000,000 x s,'11)
Toc;,I c.alT)·ing, mnQunl
Prc-scnl value of loan
(mpainncnl Joss
6.000.000
:!!Q OOO
6.480,000
s QZQ!Kl!l
J~6Q!!QQ
Requirement l
2019 lmpaim,cnl loss
1.460.000
480,000
980.000
Accrued m1cn.·.s1 n.:cch<abk
AllowallC'e for loan impairment
2020 Cash
1.000.000
1,000,000
Loon rcceivablr
Allow:incc: ror loan imJ>Jirmcnt
lntcrni1incon1c (8'• x S.020,000)
401 .600
401 ,600
49
202 1 Cash
2,000,000
loan rccei,able
All~'"'.incc for l~111 imp.:1innen1
lntcrcst income
2.000.000
353,728
353.728
S,000,000
Lonn 1't.-x-ei\'.1bl~ 12/31/2020
Allowance fo,• loan imp.iinncm (980.000 401,600)
SlH!m)
(
~ ;1~ I ~gg
Can);ngamount- 12/31/2020
ill.22!
Interest income for2021 (8% :lt 4,421.600)
2022
Cash
3.000.000
Lo;:m c-..-cci, able
Allowance for loan 1mp.1innen1
3,000,000
224,672
224,672
lntcre:,,t iocc,mc
Loan receivable - I 2/31/2021
Allow:rncc. for loan unpaimle.ut (578.400 353.672)
C:.111)1ng amount 12/ll/2021
3,000.000
zz~ !t2Z>
(
' 22~" B
lnlcrcsl income for 2022 (8% x 2,775.328)
AUowancc per book
Difference due 10 rounding
222,026
,z-1 li72
~
Problem l-6
Requirement I
Oooembcr ) I. 2020 ( $0(),0()Q X .89)
December 31, 202 1 ( 1,000.000 , ,80)
December 31. 2022 (2,000.000 x .71)
Dcocmbcr 31. 2023 (4,000.000 x .64)
Touil present value ot"loan
44S,000
800,000
1,420,000
2 ~~Q!!OO
c;
22~~
Rrquircmtnt 2
Loon n.-ccivabk
Atcrue<I intettSI rectivable ( lr!'u x 7.S00,000)
7,.500,000
Tocal c~rr)'ing amounl
Present value of loan
lmpaim,cnt loss
R.400,000
2QQil!!Q
S'2S!!OO
3124; ~
Req ulremenl 3
1019 lmpairmcn1loss
Accrued int~I rccci\'ablc:
Allowance for loan imp:1irment
1010
3,l 7S,000
900,000
2.275,000
C•sh
Loan receivable
S00,000
Allm-.,111cc for lo:111 1m p.1irmcnt
lmertst income ( 12•'. x 5,225.000)
627,000
S00.000
617,000
50
202 1 Cash
t.o,,n receivable
1,000,000
1,000.000
Allowance for loan impairment
642.240
lnt1.·rcsl incomC'
642,240
Loon rccciv,blc - 12/31/2020
AJlowunce (or loon m1painnem (2.27S.000- 627.000)
Can)·r.ng amount
7.000,000
( I MR 000)
12/31/2020
'i
1~2 ~
~
1
Interest income for 2021 ( 12 1/n x 5.352.000)
Problem 7...7
December 31. 2022 ( 360,000 X . 772)
Dt.'CC'mbcr 31, 2023 ( 360,000 X •708)
O1.'Ccmber 31. 2024 ( 36(1,000 X .650)
December 31. 2025 (4,360.000 x .596)
1"0l01~
nt \•alue ofloon
277,920
2S4,K80
234,000
Z22B ,:;12Q
1 16~ 1(:Q
F';JCc value ofloan
4,000,000
Prescm value of loan
lmpainncm Joss
1165 1(1:fl
f:14~
2019 Cash
360.000
ln,erest income
360.000
Impairment loss
AJJowancc for loan impairment
634,640
634,640
2020 1\ llowuncc for lo:111 il'n1)Qirmc1u
lntcn:st income (9-, x 3,365,360)
302,882
202 1 1\IIOWMCC for loon l nlJXl il'ittC:IU
331,758
lnlcrnt income (63◄,640
2022 Cash
302.882
302,882)
331,758
360.000
360,000
ln1ercst income
2023
Cash
360.000
360,000
Interest income
2024 Cash
360,000
Interest income
2025 Cash
!merest income
UXl.11 receivable
360.000
4.360.000
360.000
4.000.000
SI
Problem 7•8
Requirement I
2019
Jnn.
Loan recciwblc
Ca,;h
Dec. 31 Cash (3,000,000 x 9%)
3,000,000
3,000.000
270,000
270,000
Jntcrtsl income
ltnpl.irmc-nt loss
24,900
A llowance for loan impamnenl
24,900
Carr)'ing amou.m ixctfl1bcr 31. 20 19
3.000.000
r n:.sen1 Yaluc of cx1xc1cd cash flo\~S - December 3 1. 2019
(),00(),000
X
JZ~~!l!!!l
90% X Q.65)
£xpe<1cd credit loss
1.245,000
Multiply by prob.1.bilnyof default \\,_ithin 12 months
12 month i::xpccted cr-:-dit loss allo" ante
2~
' 4999
2020
0.."'<:. 31 Cash
270.000
270,000
lntm:s1 mconxlmpairnwnl loss
Allowance ror loan impamnent
491,700
49 1.700
3,000,000
Carrying amoum - Oeccmbtr 31. 2020
Pn."'$en1 value of cxpt<:h."<I cash tlo"s -Otcc.mher 31, 2020
I ,zg !!!!!l
(3,000,000 X 60%x 0.71)
Exp1.·ch:J credit loss
Mul1iply by prob;1bility of dcfouh wilhin 4 ye:1rs
Lifetime C'\:fX'Cl.cd cn:<lit loM allowance
Uoodjustcd allownJ1C:c
Impairment loss
1,722,000
1~
$16,600
2• 2!!2)
700
➔2 1
202 1
De,:. 31 Cash
270.000
ln1m:s1 income
1.mpairmt.-nt lQSS
Allowance for loan impairment
Loan rccch·oblc;
Cany1ngarnoum - ~c.eri1ber 31 . 2021
270.000
1,559,400
240,600
1,800,000
3.000.000
r•n.":Sent value of ~xpccttd cash flo\~S - Dttc1nbcr 3 I. 2021
(J,00(),00() X 40% X 0 .77)
F.xpee1ed credi1 loss
Lifetime expet'led Cn."<lit h)S.S
[mpairrm:nl loss
2'>~ ggg
2,076,000
< ililfi~)
I ~~2
~
52
Requirement 2
3,000.000
L.A»n m.:civabh:
J-\ llow.mcc for lonn imp,irmc:111
Net carrying amoun1 - December 31 , 20 19
I
24 900)
2975 HK>
3,000,000
Loan n.'CL'IVablc
( 516 600)
248} 499
1\ llow.,ncc for 100:11 impai1,ncn1
Ne, carrying :unoom - Oectn'lber 31 , 2020
3,000,000
Lo.an m:civablc
I 276 000)
Allowance for loon im~im1cn1 (S16,600-240,600)
Net caming amoum - 1);:cro,bcr 31 , 2021
924 400
Requirement 3
2022
OC't'. 31 Allowance fol' loan impa1rml"nt (924,000 x 90/o)
ln1eres1 inoome
83, 160
8),1(,0
2023
Dl-c. 3 1 Allow1moc for Jonn impatrmcnt (1,007, 160 x 9'-'.)
90,644
lntcrcs1 inomnc
90,644
2024
0 ~. J I Allowance for lot1n impairment
lnteres1 income
102, 196
102,196
1,200,000
Cttth
Loan rccci\·nbk
1,200,000
Problem 7.9
Question 1 Answer A
Principal 11mou111
Unc-;1mc:d intcn:st income (340,000
CarT}in1 amount - 111/2019
5,000,000
100.000)
( 240 QOO)
4 76QQQQ
Que$dOn 2 Atuwcr A
571 ,200
lntert$l income for 20 19 (12%x 4,760.000)
lntcrl!S-l 1-«el\ed ( Ier~.\ 5.000,000)
500000
;.\ munita1ion
..zL:2llll
Que.stlon 3 An.,wer C
Loan r.'<lCivablc -12/3 1/2019
U~JJ'llc-0 interest inc-orne (240.000 - 71,200)
Carr)·•nt tunou.111 12/31/20 19
5,000.000
C IM 800>
4,stll ' 00
53
Prob lem 7- 10
Quesdon I An.~wer B
1,000,000
January I , 2020 ('tlllcction
January 1. 2021 roll« tion ( 1.000.000 • .926)
January I. 2022 oollec1ion ( 1.000.000 • .8571
TocaI present value or loan
926.000
,
Loan n:ccivablc
§)7000
28) QQQ
3.000.000
') ]81000
212 QQQ
P~en1 value of kxm
lmpaim1cnl loss
Question 2 Answc.r B
3.000,000
() QOO 000)
Loan receivable
Collea.ion on Januory I. 2020
Loan n."Ceivahlc-Janua:ry 1, 2020
1-\ llowuncc .ior loan itn1>3irmtnl
( 217000)
Carrying omoun1- JonUJ,y I, 2020
1ZIPQQQ
2.000,000
fnten..-st income for 2020 (1.783.000 x 8%,)
Question 3 An.swer B
Loan rece,vablc IV3 112020
Allowan ce for impatnn i:nl I 2/3 J/2020 (2 17,000
2.000.000
142,640)
Carrying a.moum - 12/31/2020
(
74 160)
) 9?'frJ0
Pro blem 7- 11
Quesc:ion I Answer B
Ooocmbcr 31. 2020 ( 1,500.000 • .89)
OecemberJl. 202 1 (2.000.000, .80)
Oecember 3 1. 2022 (2,500.000 x .71)
Oeccmber 31. 2023 (3,000,000 x .64)
Totnl pt~nt value or cash Oll...,$
Loan rtecivable
Accrued incercst rccie1v3bfc ( 12% x 9,000.000)
Carryingamouni - I 2/31/2019
()rcsc-nc value of cash flowi
lmpaimwnt loss
1..335.000
1.600.000
1.775.000
J 9'0 0QQ
6639000
9.000.000
I oxoooo
10,080,000
6 6'\QQQQ
1
4"0 000
Question 2 Answer A
lnteresl income for 2020 ( 12% x 6,630.000)
Quesdon 3 Answer A
Loan n.-cdvabl.:
I 1/3 112020
1\ llow.mce for imp:um,eni 12/3 1/2020 (2.370.000 795,600)
Carrying amoum - 12/31/2020
7,500,000
(I
:1i
'74 400)
92~600
54
Problem 7-12
Question I Answer A
PV of principol (5,000.000, . 75)
PV orinlcl'elil (200,000, 2.49)
Tot.ii J)T'CSClll v11luc
Cart)ing amoun1
lmpaimtcnt lo.ss
3,750,000
49&000
4.248.000
s000000
Z52QQQ
(mpaim1en1 loss
AIIO\\'tl,lltt for impairrnc-nl
752.000
752,000
Question 2 A 1uwer B
Interest income for 2020 t 10°/4 x 4.248.000)
424.800
2Q!l.!lm
~
Interest rccchi!d (41}. x S.000.000)
1\ monizotion of allowance for impainncn1
c,sh
200,000
224,&00
.i\- llowancc for impaimlCl'II
lotcm;1 income
424.800
Qutsclon 3 AnJwcr C
5.000.000
< <>z,ogi
Loan recewable - 12/3 tn o20
Allowance for impmrntl':nt (752,000 - 224,800)
Carryfog 11moun1 12/31/2020
4d7 7 SQQ
Pro blem 7- 13
Ques:lion t Ans wer D
PV of principol (5,000,000 x .S7)
PV orinlereU ( 10-/4 X 5,0()0,000 X 3.60)
2,SS0.000
Cash paid IO borrower
4 6~0000
Principal
Present v.1luc
5,000,000
l SOOOOO
4 "SOQQQ
Unearned intm..--st incon-.e
7150000
5,000,000
Loan rec1:ivoble
Cash
Unearned intcre$1 income
Date
121.)112019
1213112020
I W l/2021
4.650,000
350,000
(10%)
Interest received
( 12~,)
ln1crcst income
Amortizntion
Cnrrylng amount
4,6SO,OOO
500,000
500,000
558,000
564,960
SS,000
64,960
~.708,000
4,772,960
55
1213 1n o20
Cash
Unt!nmcd mt~n.'St inronw
500.000
58,000
Interest income
558.000
12/3tn02 1
Cash
Unearned 1ntCf\.--St inco1:nc
lntcrc-.sl income
Loan receivable
500.000
64,960
564,960
5.000,000
Unearned mkrc:.t inc<:11~ (lS0.0()0 - S8,000 - 64,9()0)
Carrying amount - 12/31/202 1
( 7'7040)
4 72?2"9
Question 3 A1t.\wt:r B
PV ofprincipol (3,000.000 x ,71 )
PV ofinteres, (500.000 x 2.40)
2.130.000
1·oro1pre&ent value
3,330.000
Carrying amounl
Impairment loss
12/31/202 1
1 200000
4 77' 960
Hl4 1 969
56
C HAPTE RS
Problem K- 1
March I
Ap.-il I
Cash
Note p.1y.ablc ~ bank
2.000.000
2,000,000
980,000
20,000
Cash
Sales diSC(lunt
1,000.000
June
Cash
2.000.000
2,000.000
AcCOUllt.S t'etti\'ablc
Sept.
Note payable- bank
lntc~I c.xpcnsc(llo/•X 2.000.000 x 6/12)
Cash
2.000.000
120.000
2,120.000
Problem 8-2
R cqui.rcmcn, I
2019
Oct. I
Cash
Oiscoun1 on no1c J)3)'ablc ( IOo/. x 4.000.C>OO)
Note payable - bank
Interest expense (400,000 x. 3/12)
3,600,000
400.000
4,000.000
100.000
100.000
OiSC'oun1 on note pa)'3blc
2020
Oct
I
Note payable - honk
4,000.000
Cash
0 cc. 3 1
4.000.000
Interest c,pensc
Discount on note pay:,blc
300.000
300.000
Requ(rc mc nl 2
Currcm habthties:
Noce payabl~ - b:inl (Note 3)
Discount on note J>3yablc
Ca")·ing amoum
Note 3
Nott payable
bank
Accounts of PS.000.000 ore pledged 10 "'"' " " the bank loon of P4.000.000.
4.000.000
( 100 000)
3 70° 000
57
Probl<m 8-J
May I
Accourns receivable assigood
800.000
8()0.000
Acto1.mts receivable
Ca,h (640.000 20.000)
Service charge
No1e payable- b3nk
620.000
20.000
640.000
5 Sales re1·um
Accounts receivable - assigned
30.000
10 Cosh
Sales discoum (2% x 500.000)
Accounts reccivabk·.- assigned
490.000
10.000
June I Nole pay.1blc - bank
ln1m;sc cxpcRSC (2% x. 6-l0,000)
Cash
30.000
500.000
490.000
12.800
502.800
7 Allowance f'ordoubtful accoums
Accounts recti\•able.- ass1gnexl
10.000
20 C:t>h
Accounts receivable - assigned
200.000
July I No•• 1»yoblc - bank (640.000 - 490.000)
ln1ms1 expense fi-/4 x l 50,000)
Cash
150,000
J,000
10,000
200.000
153.000
60.000
Acrounts rcc~wable
Accounts receivable - assigned
60.000
Acc:ounl$ rccch•ob1e - 1b!iigncd
800,000
$.tics discoun1
Saks rffllm
690,000
10.000
30.000
Wonhless tlCCOUl\lS
...ll!Jlll!!
l..cS$: CollC'ttions
Bol;uu:-c
~
...&!li!!l
Problem 8-4
July
AOCQunts n:cciv:.1blc
US$igncd
1.500.000
Accounts receivable
Cash ( 1.125,000 - 60,000)
Se,vice charge (4% x 1.500.000)
Nme payable - bank
Aug.
No1c payable- b;ank
1.500.000
1,065,000
60.000
1.125.000
800.000
Accounts receivable - assigned
Interest c,pcnsc (2% x I. I2S,000)
Cash
800.000
22.500
22,500
58
Sep1. I
Ca,h
168,500
lntcres:1e,,;pcnse
6.500
Note poyablc - bank
Accoum.s l'eceh':lble Msigocd
325,000
Accounts receivable
Accoun&.S recei,able- assigned
200.000
500.000
200,000
Collce1ions by bank
Less: P3)1Dffll of loan (1. 125.000- 800.000)
l::.."<ec-.ss rolloction
lli.llj!jl
U:ss: hH~rcst (2"• x 325,000)
Cash ~miHancc from bank
-"ll!I
500.000
175.000
~
Problem 8-5
July
AccoUflts receivable - assigned
Accounts receivable
500.000
Cash (400.000
390,000
10.000
10.000)
S«vie< ch•ri<< (2% x 500,000)
Note ~yablc- ba11k
A~
I
400.000
Ca,h
Accounts receivable - assigned
330.000
ln1rn:s1 expense (1% x 400,000)
4,000
326.000
Note payable bonk
Cash
Sep1.
500.000
Cash
Accounts receivable- assigned
lntm.~, expense (1% x 74,000)
No,e pa~'Oble - bank
Cash
330.000
330.000
170.000
170.000
740
74.000
74.740
Problem 8-6
Requirement a
Dec.
Act0unu rec~vab!e - assigned
Accounts receivable
1,500.000
Ca,h
Service charge
1.250.000
50.000
1,500.000
Note payable bank
31 Cash
S~lcs discount
U00.000
970.000
30.000
Accounts rccciv3ible - assigned
31 Interest expc1tse (1% x I 300.000)
Not< payable - bonk
Ca.sh
1.000.000
13.000
957.000
970,000
59
Req_ulrement b
The accounts n..--ceivablc assigned with 3 balance of P500.000 should be classified as current assc1 and
included
in
1r.1de and other rece1Vables..
The not..: payiblc - bank o r P343,000 should be clos~ifi cd nnd presented as ::i cum:nl liability.
1"he comp:my should disclou the e<Jmty in-'!>"~ aecounts as follows:
Accounts receivable - assi~'TI~
Nole poyablc - bank
Bquily in :L'ISigncd titcounts
S00.000
0 43 (~}())
J.lllWll
Problem 8-7
July
J.\ ug. I
Accounts receivable os:siWM,lll
AccounlS receivable
800,000
Cash (640,000 ?4,000)
Scn•ict charge (3'·'. x 800.000)
NO!C p,1yable - ba"k
6 16,000
24,000
lnl<TC$t expense (1% x 640,000)
N0<c p,1)•ble - b011k
800.000
640.000
6,400
4 13,600
Accounts rcocsvabk- assigned
Sepl. I
Cru;h
lnltn.'$1 expe-n$C
Note p,1yable - baok
Accounts rccc:w,bfc: - i,ssigneJ
AccounlS rece1Vable
~20.000
91 ,336
2,264
226,400
320.000
60.000
Accounts recewable- - assigned
60.000
Bank loan
640.000
August I payment
:!..l.Ul!!l
~
8:tlano:
320,000
Colle<iions by bank
Less: PLlyment of103n
[nlCf'CS I { I o/o X 226,-100)
226,400
----22{tl
Rcmiuancc from b~1nk
ngt,64
....llJ.llli
Problem 8-18
I. Cash
Allov,.1nct- for doub1ful accou,us
Rec.e:1vable from factor
Loss on fac:1oring
Accouna rccci, able
AR filc1o«d
Foctor·s holdback ( IO~. x 6,000,000)
Commi&Sion (I)% '( 6.000.000)
Cash rece-ived
4.500.000
200,000
600,000
700.000
6,000,000
6.000.000
( 600,11001
I 9QO 000)
4 j()QQQQ
60
AR
Commission
6.000.000
( 2ll2 !W!l)
5,100.000
Nc-LsaJes pncc
C1trl')1ng Ulnotllll of AR (6,(M)0,000
l8UQ!J9D
200,0C)O)
Loss 00 faCIOl'ing
2. Cash
(
zgg DW)
600,000
Receivable from fattor
600,000
Problem 9.9
July I
IS
31
Cash
Servi« ch4rgc (5% x 800.000)
R0«ivablc from faccor (Io~. x 800.000)
AccoUJ'ltS rcccm1bl~
680,000
40,000
80.000
800,000
Salt.'$ relum and all<1""1lnces
Rtcel\-ubk from (uctc,r
20,000
Cash (80.000 - 20.000)
Reccwablc from faccor
60.000
20,000
60.000
Problem 8- 10
June
3
Accounts recc1vt1.blc
Saks
500.000
Cash
340,000
10,000
25,000
125,000
s.,ks discoont (2% x 5()0,000)
Cummission (5% x 500,000)
R=h11blc from faccor (25'/4 , 500,000)
Accounts receivable
9
S~lcs n:tum and allowances
500,000
500.000
50,000
Sales discoon1 (2% x 50.0<l0)
Rtttwable from fac:cor
11
No cnt,y
15
Cash (125,000 ~•J,000)
1.000
49,000
76,1100
Recri\•abtt from factor
76,000
Problem 8-11
July 26 Cash
Commission (5% x: 1.000.000)
Ree-dvabll" from fac:cor (20¾ .'< 1,000,000)
750.000
50.000
200,000
1-\ ccount11 rt.:ce,vablc
J uly 28 Sales return and allo\\anc:cs
1,000,000
50.000
R«-c1\ .1.bk from fum,r
Aug. 31 Ca.,J,
R«civublc from fuc1or
50,000
150,000
150.000
61
Problem 8• 12
I. Cash
Service charge (5% x 200.000)
Rcccivnblc from fue1or (20'1, x 200,000)
150.000
10.000
40,000
200,000
Acrounts rccci,11blc
2.
3.
At.-OOUnts 1·t.~i,-able assigned
Account, rt<:ei,111.>Jc
300.000
Cash
Si:-rv,cc charge (5% :< 300.000)
l\o1c payable - btmk
225,000
IS,000
Doubtful acCQuots
300,000
240,000
JS,000
35,000
1\ llowi.ncc for doubtful occounls
65,000
Required allowance (5' o x 1.300.000)
U s.s: Allowance - Jmh1ary I
Doubtful .11ccount.s
l!!.!!!!!!
~
4, 1"hc ncl ~1iz11bk value oflhc accounts n:ccivabfe is included in lrodc and olhcr rccciveblcs
and prcsculcd as current asset..
AcrounB rtteivable - unassigned
1.000.000
,100000
1.300,000
Ae<.•(M.tnts l'tttt\ablt - llSMgned
Totg;J
Lt~,: Alk,\\lln~ fo,rdoubtfill actuunu
65000
) 2J'i 000
J',:e1 reali?-ablc value
l'hc receivable from factor of P40,000 is also indud11,,.-d m trade and 01hcr rccc1Vablcs.
The l'.IOIC payable bm\lc of P240,000 1s classJfit..-d aod presented llS current habihty.
However, the comp;u,y shc,uld disclose the c:qui1y in ns.sign«I accounl.s ~•s follows:
Accounts 1-«-eh"'able - assigned
No1c pay-able bnnk:
Equi1y in ,i.ssig.ncd accounu:
300.000
1'40000\
~
Problem 8- 13
Books of Motorway Company
I. Cash
ltece1\'t1bfc from foctor
Allowoncc for doubl.fuJ acoounts
Loss on fac:1oring
A<:OOUnlS rttet\'tib!t
Gross amount
Holdbatk ( 10%, 3.000.000)
Co1nmiss1on { lS¾ x 3.000.000)
Cash received
Sak s price (3,000,000, 8S¾)
Carryingu1noun1 oruccou111s rccciv11blc (3,000,000 - 100,000)
Loss o n fac1orin_g
2,250,000
300,000
100.000
350.000
3,000,000
3,000.000
( 300.000)
4;0 OOOl
2 ] 'iQOOQ
<
2.250,000
2,9 ()0 CJ(]()
< 150PP9'
62
2. Cash
Receivable from factor
250.000
250,000
Accounts receivable factored
Collections by factor
Balance ~ccmbcr 31
3.000.000
, ~na~
lQQQgg
Rccci'\'abfc from factor per book
300.000
Required holdback ( I0% x 500.000)
Rt'miuancc from factor
..illlOO
llllJlm
Books of Freeway Company (factor)
I , Accounts ~ i -..-able
Ca!<.h
Clients n!laincr
Commission income
3,000,000
Cash
Acoounts rtt<.'-t\'able
2.500.000
2.
2,250,000
300.000
450,000
2.500.000
3. Clients l't'taincr
Cash
4.
250.000
250,000
Doubtful account.,i;
Allowance for doubrful accounts (4% x 500.000)
20.000
20,000
Problem 8- 14
Question I Answer 0
No<e poyible
Finance foe (5% of 5.000.000)
Cash recewed on December I
4,000.000
,so OQQ)
<
',~nQQQ
Question 2 Answer C
4,000,000
Netc p;:1y:ablc
Principal pa)mcnt
Remittance
1.800.000
lntCl\'Sl (4.000.000 X
12~, X 1/12)
No<c poyibk lxccmb<r 31
I 40 000\
J 76QQQQ
2 ' 40QQQ
Question 3 Answer C
5,000,000
( 1,800.000)
( 200.000)
( 100,000)
1\ ccoun1s reC<"ivablc assign<.<d
Collections
Sales discounts
Saks n.:1wns
J\ ooounu written off
Bal.Ince of accounts assianed
No<c poyiblc
( 100 000\
2.600,000
12 240 QOOl
1:1,.quity ln assigned accounts
J(iQQQQ
Problem 8- IS
Quesdon 1- Ans"er A
(6.70 1,370)
Question 2 • Answer 8
(498.630)
63
Prob1em 8-16 Answer C
2,000.000
t-\ccount.s rcceivo;blc factol'cd
Finance charge (5% x 2,000,000)
Holdbaok ( 10% x 2.000.000)
( 100.000)
( 200 000)
1 700000
Cash rccc:,vcd
Finance charge
100.000
Recourse liabil ity
1·oro1loss on factQriDll,
~
Cash
Recei\'able from fac:mr
Loss on fac10<111g
~
1.700.000
200.000
150.000
2,000,000
50,000
Acoounts rt.-cci,ablc
Recourse liability
Pro blem 8- 17
Ques:don I Answtr B
6,000,000
( 300.000)
( 180.000)
1\ ooounts receivable
Fa<tor's holdbm:t (6,000.000 x 5%)
Factoring fee (6.000.000 x 3%)
Interest (6.000,000 x 15% x 54/365)
Cash 1nilially re~wtd from factoring
< I" l~Q)
5 l fi§ fl°'Q
Question 2 Answer A
Factoring ICc
(merest
Total cost of factoring
180.000
~
.llJ.l.lll
Qucsrion 3 Answer C
Factoring fee
180.000
133,150
.lll2.JlQO
:I.WjQ
lntercst
Recourse oblig:uion
Quesclon 1 Answer A
Cash received from factoring
Cash rccci\'ed from assignment
Loan
1-'immoc charg~ (2¾ x 2.S00,000)
1'ocol cas.h recei\'ed
1.390.000
2.500.000
<o 0001
2 4~0000
31t4QQQQ
Question 2 Answu A
1-\ ccounts receivablc - unassigned
Accounts receivable - assigned
1,000.000
S 000 000
Toca! accounts rt.:«hablc
6QQQQQQ
Queslion 3 An.swt:r B
Required allowance IZ/31/2019 ( 1CII, x 6,000.000)
Allowance for bad debls before adjustmenl
Bad debt expense fo,- the year
600.000
.lJll!Jlm
~
64
CHAPTER 9
Problern 9• 1
Jru,.
M arth
Notes receivable
S:ik-s
500.000
Cash
503.500
6,500
Loss on no1~ diM.'Ollnti1ig
500,000
Nole$ nxc:i\·llblc
500,000
Interest income
10,000
Princ1pn1
lnu:rcst (S00,000 x 1211/4x 6/12)
Maturity ••aloe
500,000
....l.!!.llm
01scounc (530,000 x IS% x 4/12)
~
530.000
Nl!lpro<.-a."c'Js
~
Principal
Accrued mtcre.si receivable (500,000 x Ir/4 x 2/12)
-1.Q.i!i!Q
Clll)·•ns amount ofNR
WWlfl
N<t pr<J«<ds
r...ss: Carrying amount orNR
503.500
5 !0 000
500.000
f
Loss 0 11 note discounting
July
6 SQQ\
No cntty.
Problem 9..2
March 14 Accounts rtccivablc
S11k-s
April
? Notes receivable
freight OUI
2.050.000
2,050,000
2,000,000
50,000
2,050,000
Acc:ounl.s rccci,·abk
April 20 Cash
Loss on d1scoun1i11g
Noles recei,able discout1ied
2.001.750
S,250
2,000,000
10.000
lnccn-st inc,ime
2,000,000
Principal
Add: lnrcrcs, (2.000.000 • 12•~ • 60/3(,0)
Maruricy value
L<ss: D1scoon1 (2.040.000 x 15% x 45/360)
40000
2.040.000
J& ,~o
Net proceeds
, 901
Principal
Accrued m1eresc rc«ivablc (2.000.000 x 12,• x 15/360)
C111T);nguooun1 orNR
2,000,000
?liQ
10000
2OIOQQQ
N<t proe<eds
2,001.750
Loss: Carryingamoum of~R
2010000
Loss on discounLmg
(
)(? 'iQ\
6S
June 4 Accounts receivable (2,040.000 + 10.000)
C'ash
July
4
2.050.000
2.0S0.000
Notes f\..""tt'ivable discounted
Notes l'(.--CCi\lahle
2.000.000
Cash
Accoun1s rc«i\':,abk
Interest ineornc (2.000.000 .'( 12% x 30/360)
2.070.000
2.000.000
2.0S0.000
20.000
Problem 9-3
Requirement a
April 5
Notes rcc-civablc
Accoums rccci,•3bJc
19 Cash
Loss on note discounting
500.000
500.000
S0l.075
1.425
5()0,000
N<11es ttech,obll' d1~oun1ed
lntcres1 income
2.SOO
Principal
500.000
Add: lnt~re~t (500,000 x 12% x 6(V.360)
....LO.!!!!!!
510.000
M 1uurity \'nlue
.....uu
L<ss: Discoum C5 I0.0OO x 14% x 45/360)
Net pnx:eeds
.iJl.lJ!ll
Princip;;1I
Accrued interest rcccivablc tS00.000 ~ 12Yo x I S/360)
Clll)ing amoum ofNR
__l.200
~
Net proceedi
501 .075
500,000
~
Los$: Carrying amount of NR
r I ;f' l)
Los.son discounting
M ay 3
NotCS receivable
1.000,000
Accounts receivable
16 Cash
Loss on discoun1ing
1.000.000
995,000
5,000
Notes n:ccivablc discounted
1.000.000
1.000.000
Principal
Less: Discount ( 1.000,000 x 123/o x I 51360)
' WI
Nctproc.~
25 Notes receivable
Interest ioeome
Accounts n::cc:1vabk
22~!WU
1.500.000
4.500
1,504,500
M11turity \'r1lue
1.500.000
l OOOO
1.530,000
Les~: Discount (1,530,000 x 12•~ x 501360)
Net cn:dit
J 20~
Principal
Add: lolm:SI (1.500,000 X 12').x 60/3«})
2~~00
SCIO
66
7
June
Accounl.$ rei-ci,·ablc (S 10.000 + 20.000)
Cash
530,000
Notci n.,cciwblc discounted
500,000
530.000
Notes receivable
500,000
15 Notes rcc.-ci,·ablc
Soles
800,000
18 Ca..:ih
Ac«>unts r«:e:h able
lntcrc.11 income (SJ-0,000 x I:?-lo.\ 151360)
532,650
800,000
530,000
2,650
R equirement b - AdjustmcnL1 o n June 30
I.
Accrued mtercsl recel\-able
loten.-st income (8.00,000 x 12% x I S/360)
4,000
4.000
AccruOO intere:;t on O's note.
2. Notes rixci"ablc di5Countcd
Nmn receivable
1,000,000
1.000.000
To 1.~111<.'<:I the 1.v111ingcn11il1bili1y on B's noce. T his noce mntul'Cd on M1y 31.
Since there is n() 001icc of dishonor it is u»umc<I thnl the said no<e is paid
on the <Lute of maturity.
Problcm9-4
May I
Notes receivable
200,000
/\ccouot.s n:ce1V,blc
N01es rec.civable
Accounts rece1v:..ble
200,000
300.000
300.000
July 30 Accounts n:cC1vablc
Notes receivable
lmcrcst income (200,000 x 121V. x 90/360)
206.000
f\ug. I
306.075
2,925
Cash
LMs on note disoounling
Note ~c1vablc dis.counted
lntc~ incvn'le:
Principal
Interest (300,000 s 12°/4 x 6112)
M,uurity \ alue
Less: Oiscounl (318.000 x 15% x 3/ 12)
Nel proceeds
1
200,000
6.000
300,000
9,000
300.000
..w!l:Q
318,000
...l.1.2.u
.lWlll
Princip.il
Accrued intcres1 rc«iv•blc (300,000 x 12% x 3/12)
300,000
Clf1)10gamou111ofNR
lll2Jl!!!l
Net prOC¢tdS
Los,..:;: Carrying amount ofNR
lll.2.Jl2Q
Loss on discouming
~
306,075
' ~2' ~)
67
Sept.
Notes receivable
Accounts rcceivabk
132.000
120.000
12.000
Interest income
28 Cash
210,120
206.000
4.120
Accounts rcccivabklmcrcs1 income (206,000 x 12~ x 60/360)
500,000
Notes l'\."ttivable
Oet.
500,000
Saks
No,,.
Accotmts receivable (318,000 • 12,000)
330.000
Cash
330.000
300,000
Notes. rec:civ:ible discoUftled
Notes n,"Cci,ablc
300,000
SIS.000
Di..-c. 30 Cash
Notes receivable
500,000
15.000
Interest income (500,000 x 12'-,. x 90/360)
JI
H6,600
Cash
330,000
6.600
AccQtmlS rttcivablc
lntcrcsl income (330,000 x
I ~~ x
2/12)
r roblem 9.s
1
I.
Cash
Interest expense
Liability for nole 1-ccci,·ubk J i,coontcd
lntcrcs,I income
S,021,2SO
2S,7SO
S,000,000
50,000
Prin cipal
S,000,000
lntcn."St (S.000,000 x 12% x 90/360)
Maturity value
Disoount(S,150,000x 15%x60/360)
5.150,000
1' et proceed$
~ 021'~ll
Principal
Ace.rued inttreSl receivable (5,000,000 x 12°/4 x 30/.l60)
Carrying lllnotl l)I or N R
5.000,000
Net proceeds
5.021.250
<QSQlllM!
ISQililO
12£ 2~0
~
l.()ss: Cal"J')'>:ng amount of NR
Loss an discounting
2.
Llabilily for note T\-'Ceivablc discounted
(
lQ llll2
g~gflQg
' 82~£1)
5.000.000
Notes l\,"'t't'iwibli!'
5.000.000
Problem 9-6
Jan.
April I
Nocc: rccci,•able
Land
G{lin on sale of l:md
2.000.000
Ca,h
ln1crc~ cxpcnJc
Liabilily for nolc receivable discounh:d
2.,021,000
29,000
Interest i ncomc
1.S00,000
S00,000
2,000,000
50.000
68
Pnndpal
Interest (2.000.000 x 10-/ o x 9/12)
2.000.000
I SQOjlO
2, 150.000
Maturity \ lllue
Oiien unt (2, 150,000 x 12% x 6/ 12)
Net proceeds
1"9 000
2971 000
Pnnei~•I
A«rncd interest receivable (2,000,000 x l()<l/4 x 3/12)
2.000.000
SO(l()()
Carrying am oun1 ofNR
2 Q5QQQQ
Net 1>NC¢(ds,
2.021 .000
l.oss: C.irryi0,1; onwunl of NR
2 050 000
<
lnt~rcst e xpense
Ocr.
A c:counlli rccti\'.1ble
2, 160.000
Cash (Z. 150.000+ 10.000)
Lfobility of note receivable di!iCountcd
Note ra,ciYablc
72 QQQ)
2.160.000
2,000.000
2.000.000
2.224,800
O1."C. 3 1 Cuh
Accoun11 rcccw:ablc
ln1eres1 income (2, 160,000,. 12*/4 ,1t 3112)
2.160.000
64.800
Pro blem 9.7
Requirement I
June
Notes l'C(.c1vnblc
5,000.000
Saks
July
5.000.000
Nocc:s receivable
1-\ ccounts rccci,·ttbk
6,000.000
Cash
5,047,000
3,000
hu~r expense
Liahili1y for note receivable discounted
Interest int'()~
6.000.000
5.000.000
50,000
Princip;al
ln1em1 (5.000.000 x 12% x 90/360)
5,000.000
l ~(l()()
5.1 50.000
Mauuny ,atue
Ncl procCl"<l:i
IQJ l!j!O
~g;11!WQ
Principal
5.000.000
Accrued inten."SI ttl.'e1vable (S,000,000 x I2-/4 x 30/360)
Carryang amounl of NR
lQ l!jlO
"g~gggg
Net proceeds
Los.s: Conyi11g amounc of NR
ln lff\:SI expense
5.047.000
O ISO<)Wll
(5, 150.000 x 12% x 661360)
July 16 Cosb
ln1ercj1 expense
Liabilicy for 001c receivable discounled
Interest income
~
(
2SQ!lQO
' !ll!Q)
6,0()8,500
16,,500
6.000,000
25.000
69
Principal
lnlm.'St (6,000,000 X 10'4 X 60/360)
M,nuri1y v.ilue
Discount (6.100.000 x 12% x 45/360)
Net prooeeds
6,000,000
IQQ9i!jl
6.100.000
Principal
Accrued interest recc,vable (6,000.000 x 10'/4 x 15/360)
Canying amount ofNR
6,000.000
250QQ
6!22~!lSlO
Net procetds
6.008,500
21 ~22
~ £lQ
!
~
L,os.s: Canying amount of NR
Interest c,~nsc
1\ ug.
(
30 Lsab1hty for not.:- receivable discounted
Nor~s receivable
6.000.000
30
5,170.000
Accounts recc:ivablc
~1!1l
g,~ 9i!jl
16 ~ ~)
6.000.000
S.I 70,000
Cash (5,150,000 + 20,000)
30 Liability for note rcech·ablc discounted
Notes re«ivable
5.000.000
0 cc, 30 Cash
1\ccounts rcce:h-ablc
Interest mcome(S.170.000x 12%:< 4112)
5,376,800
5.000.000
5,170.000
206.800
R cqui_rcm c nt 2
June
Not~s h..-ce,vubl~
5,000,000
5,000,000
SalC8
July
Notes rcccwablc
6.000,000
6,000,000
Accounts fi'cc1v::1hl..:
Ca,J,
5,047,000
Loss on discounting
Note:$ receivable: discounted
lntc:KSt income
3.000
16 C1uh
Loss on discounting
Notes rettivablt discounted
Interest inc.ome
6,008,500
16.500
Aua. JO
Noh:s rcccivt1blc discounted
Notes receivable
J() AC\'t1un1~ n:ccivablc
5,000,000
50,000
6,000,000
25,000
6,000.000
6.000,000
5,170,000
5,170,000
Cash
30 Notes n-cc1voblc discounted
5,000,000
Notes receivable
De,:, 30
c..h
Accounl.ii receivable
lmm:st income
;,000.000
5,376,800
5,170,000
206.800
70
Problem 9-8
Question l Answer C
Principal
Add: lntm:SI (500,000 x 8%)
Maturity \'aluc:
Less: Discount (5-10.000 x 10"/4 x tVI l)
N1:t proceeds
S00,000
....filJlOO
540.000
J1Jlm
.1.LlJlj,Q
Qucslion 2 Answer C
Principal
Accrued interest recewable (500,000 x 8¾ x 6/12)
Canyi.ng amou1u or note r<.."t.-eivnble
NCl pnx:«<ls
Carrymgamoum of note receivable
Loss on note rece1Vable disoounring
500,000
~
~
5 13.000
(520000)
< 2000\
Probkm 9-9
Question I Answer C
Pn ncipal
Less: Discount (2,000,000 x 10% x 6/ 12)
Net proctt<ls
QuestJon 2 Answer A (2,000,000 - 1.900.000)
2.000.000
1()0000
1200999
.IJl!!Jl!l!l
Probkm 9-IO
Question I Answer A
Pnncipal
lnterest (4.000.000 x I2'1. x 90/360)
Matunty ,aluc
l...t$s: OiSCQ1mt (4, 120,000 XIS•,'. X 60f360)
Net proceeds
4.000.000
1' 0000
4,120,000
103 000
4912000
Question 2 An..\wer B
Principal
Accrued imerest receivable (4.000.000 x 12% :< 30/360)
4.000.000
Carrying :amounl o f N R
Net proettds
4,040,000
Loss on discouJlling
40QQQ
4017000
( n f)(X) l
Pro blem 9-1 I
Quesdon 1 Answer C
Principal
6,000.000
Interest (6.000.000 x 10'/4 x 6,/ 12)
Matunty Yalue
63 00.000
1\ dd;
Less: Discount (6,.300,000 x 12o/o x 4/ 12)
N ct proc«"<ls
?OOQQQ
' PQQQ
6048000
71
Question 2 Answer C
Principal
6.000.000
Accru«I inlem;I (6.000.000 x 10¾ x 2112)
Carrying :amoun t or no1c rc«ivnblc
100000
6 IPOQQQ
Net proceeds
Catr)"lOg amoUJlt of note receivable
Loss on nolc r~c~tVabl~ discounting
6.048.000
(6 JOO OOOl
< , , 000)
P,obkm 9- ll
Qucsclon I An1wcr A
6,063,000
Question 2 Answer C
87,000
Question 3 Answer C
6.695.000
Question 4 Answer 8
72
C H APTER
10
Problem 1().. 1
hems counccd in 1hc bodega
ltm1s included in count .!lpt"Cificrilly segregated per saJc:!1 contract
hmis rclu.mcd by customer
(
4,000.000
100.000)
50.000
Items ordered and in receiving de1>anme111
Items shipped tC>da)•. FOB desnmmon
400,000
150.000
200,000
S00,000
50.000)
IWms fo l' display
Items on counter for 1~11~
Oamagoo a,1d unsalable items included in count
htms in shipping department
~
' 50000
ZQQQQQ
Probl<m 10-2
Ma tcri1.\ls
Goods in prOl..""eiS
Finished g,ood.\ in foc1ory
Finished L't)C)d.'i in company-<>wncd retail store (750,000/1 50%,)
Finished b'(K)(Js in the hands of <.-..msignces (400,000 x 60-/ o)
Finished good$ in tr1nsi1
Finished goods out on approv:al
M>tcri• ls in transit (330,000 + 30.000)
Correct invemory
1,400,000
650,000
2,000,000
500.000
240,000
250,000
100,000
160000
55QOQQQ
11rob lcm 10.l
Finished goods
Finished goods held by sale!$men
Ooods iu pn)OCSS (720.000~ 0t;..)
M:.tcrials returned to suppliers for replacement
FoclQfy supplies {110,000 - 60.000)
2.000.000
100,000
900,000
1,000,000
100,000
170000
Correct inventory
., ' 200QQ
Muh.:rials
73
Problem 10-4
R tquittmcnt tt
S00.000
I, Pllr<twi:s"
2. Al:('OIUllb pay,t,k
Pwrelwllc rt1unu,
,0.000
A.:a.unb p!l)'Jblt
\ l cnh.wMfi,11 IIIVCllll.~I)
(°;1)11
600.000
f.530.000
4 , .\rtOlfllltUIX'CtVablt
1,.SSO.OUO
"""
........
A«ou-!b ,,_yal,lo
~00.000
c...
•
lJ.80...000
I\C((llllti rt'Ni vllbl'°
s,..
CO!l()(ple$.
~ l nclwld!'W' lf\VCl'lkll')
,o.ooo
Sal<!iA."11.Wa
Accr..an~ Rffi,·.t,k
"'·""' '
•0.000
S11drttklm
A«olffl~ r«-rivnble
t.h,d -
,.
li "C' !IWffll !lfl'
Cost of sales
6.
c,..
IJ(i(l.000
,.
6(1Jl00
l•vmkl•)•Dcc. ) I
l-..011•
~
I ,)o(),000
,Vc(lllnl) Hee1 nbl1c
.,,000
111arul'lf)'
(61'.h 1.0001
c....
50,000
600.000
1,$80.000
N0,000
.10,000
.:0.000
1.l<,0.000
Ac«,w1t:t r..ulv111>k
'
,00,000
so.ooo
l. Attullflb pilf.tbk
"l,000
l, Mco.nt. ,..,y,l,lt
,.
I Mmh•dist in,'ffll(II')"
,00,000
A.fi:ullllb pt.y•bb:
-...
Perpetual S )"'Retn
Pi:rlodk Syuem
1,.)60,1100
10,00(1
b l\~Olll')' $1)cwtllJl('
M c,,Jwnd1•t lalt.tCllli,.!I)
IU.000
MmhadtR" in,i:t1tnfJ robook
Pll)•ical Cullllt
10,000
~lwf1•sc-
WW
mNV'I
Requirermnt b
Periodk Systc:m
11'1,Q'll(JC) -
Jaiu:aary I
11\l!'(t\11"""
l'w'<balit rmm~
Goodil t,11Utl,le r« Wot
~ l lhCl\40fy
()\~ J I
c~ofPIC$
Per pet\Jlil $)'M!3ft
90.000
=
OJ0,000
~
Cos1ofsales rC\."Ot\'kd (1'0.000-10.000)
710.000
1fWc,IIIQf')' ffi<.tNl,:
,\djll!,Ctd to6t o( SIAkt
..JJl.Wl
.LlilJlli2
.llll.ll:ll
Pro blem 10-5
Company A
L,ist price
Less: First trade discount (20-/4 x 500.000)
500.000
100000
400,000
Second trade di.s<.·ount ( 100/4 ~ 400,000)
..:llti!m
Third trade discount ( IO¾ x 360.000)
...1nJljlQ
360.000
lnvoi~ pnce
USS: Cnsh d1scoun1 (2¾ x 324,UOO)
Paymcnl withm the di11counl ~lC'fiod
324.000
_.ufill
lWlSl
Company B
List price
Less: Trodc discoont (35% x 500,000)
ln,-oioc pnce
Less: Cosh discounl (2'1/• ;< 325,000)
P3)111Cfll within 1hc discount 1:,criod
500.000
.L2if!OO
325,000
~
lJ.8.Sll!I
74
Problem l <H>
Rtqul.remc-nt a
Groumclhod
I . Purdi.i:let,\ccouno l"Y•t-k
4,150.000
Nnm«bod
,,so,ooo
I.
A((('I-·
c,..
1.,, 17,11(11)
c..,,
l.6l'1.000
A.:...o,mt. puytt,lc
250.000
J. M'w111U• ,-~_,k
1,6$0..(IOQ
l"litrch.M<' Jt,.:..11111
-1.6.$.\ ,000
2SCl,OOO
c...
250.000
c..,,
4.6Si.OOO
,vy111>1r
fk4'1t I•
2SO.OOO
J, A.:..-11tt. pt)'allk
ru,-dw....,,
1.617.000
)),IOI)
l, 100.<IOo
.Attou1U• payabl.:
1.0Sl,000
h 1n:hasc 4i5«1Vlll lfi5t
2,100.«lO
•2.000
°""
◄ . f'\irdl:i>("~l~
" · l'foclllfy
ll l lont
An~li ,..)'llblt
0.000.0110.\
.,,.....,
1.000.000
1,000.000
2,100,000
20.000
?O,(IOO
r.,
\llJUXJO
9$1.000
- ~ $Ullll'.IIII)'
Requirement b
G ro.,..'\ m cchod
Net method
4.750,000
"50000
5,000,000
4,655,000
PurthiSf 1»
Freight itt
Tou1I
Less: Purchase: dlSCOUnl$
Goods n\lailablc for snle
Less: lnvco1o,y Oc<ember 3 1
Cost of SAie,
')50 000
4,905,000
11000
4,967,000
4,905.000
I 000000
9~1 000
1 924 QQQ
1267 000
Ending in\"t -ntory:
Om;s (S,000,000 I S)
N<1 (4,905,000 IS)
1,0()0,000
981.000
Problem 10-7
Orossmcthod
I, ,t,11,:,'ltlanllo.,w , i w ~
M\..'OWl,s p,il}'abk
2. !\c..wnu,..,yll,lc
Ktc method
1,000.«IO
"""
50,000
l . Ai.:counu. payable
c,..
1!U,OOO
16.000
Cest flf:r;;aks
Al.:1,.,-nt. p,,yllbk
c...
l.
I00.000
IS0,000
150J)O(I
I .~.000
C'o,1of _ ,
M.:n::ban,cb~ 111'\~.n-,,
(l ,(H)O,Cl(IC)ll ?t%)
"°·""'
$0.000
50,000
~ 1 l payable
..
~ n . b payal,I...,
Purchlst 41So:Ol.lnt b l
n,•.,
Cii•h
7M.000
TA.1,000
1'6.000
,.ooo
1)0,000
I 100,000
1.l00.00'.t
Sole,
(\1M9f'Min
,00,000
9$0.oro
CMh t lKIO,Oll<l, Qr•t
,.
1,.?0o,000
\l~,1)(11)
A«oWIU pryabk
1. "'>Olullli,-yal,lc
$0.000
c...l,
'·
I, M,·"'11,u.,_ iM'ClllliOI')'
1,(101),tlOO
~~ 111\"'C'llll!lf')'
(t'Sl)OOO, 7il",.l
<,~.000
686.000
7S
Pro blem 10-8
I.
50,0()0
lnvcnU,l')
Income summary
2.
J.
Accounts payable
Purdmsci
50,000
75,000
75,000
30,0<JO
Purebasc:S
30,0()0
Account& ,,ayliblc
4.
5.
ln\'CHCOI')'
UICOff'I\! SlllltnULry
30.000
lnc:ome summary
lnv~tory
90,0()()
Purchases
Account.s payable
30.000
90.000
140.000
14-0.000
Pro b lem 10-9 A nswer 0
1 'iQQQQ9
PhyMc.a1 count
Problem 10-1 0 Answ<"r D
2,500,0()0
Phy1,,ic.al count
Mtrc~ndise shipped FOO s.hipping poim on December 30. 2019 from a Vt'fldor
Goods shipped FOO shipping p0in110 a customer on January 4. 2020
Correct inventory
100,000
400000
, QQQOOO
Pro blem 10- 11 Am:wer B
600,000
lnventol)' shipped on consignu-w:n1
Freight paid
Con.c;i1ncd in\·cn1ory
~0000
~
Problem to-- 12 Answer C
900,000
List price
Trade discounts 20°/4 x 900.000
r 180 0001
10'/4 • 720,000
r 72 0001
720.000
6<18,000
~
lmtuicc 1lncc
F'rtigh.1
Cost or purchase
~
Pr o blem 10- 13 Answer B
List price
1.000.000
1'radc di~unts 20'}t, x 1,000,000
I
200 0001
800.000
I0"/4 X800.000
rn,oic-e pnce
Cash dtSCOluU (5% l. 720,00())
Net omount
Fttigl11 ch~rgf
Tocal remittance
xooom
720.000
'6 0001
684,0()()
soooo
214 000
76
Problem 10- 14 Answer 0
1-\ cc-ounts payable per book
Ooods lost in trnnsi1
Purchase n:tum
;\dvnncc pa)mcnt erroneously debited IQ accountor pay.ib:lc
Adj us1ed accounts payable
2,200.000
40,000
70.000)
~00000
2 fiZQQQQ
Problem 1()..15 AMwcr C
Accoun1s payable per book
Uodc-hvc:red checks
Unn.-eo,-ded purchases on lli..-ecmbcr 2X (750,000 x 98'V.)
4.500.000
2.000,000
735000
7 ' 3'999
Pro blem 10-16 Answer A
r bysical count
Goods sold ln transit. FOB destination
Ooods purchtlSed tn lransil, FOO shipping p0ml
AdJU.Slcd m1,,.:n1ory
4.4 10.000
380.000
5 10000
~ 1()0000
Pro blem 10- 17 Answer A
Rcponcd inventory
Goods sold in transit, FOB destina1ion
Goods purchased in 1ransi1, Fob shipping: p0int
Correct amount or mvtnh)I)'
2.000.000
200.000
300000
, snnnoo
P roblem 10- 18 A ns:wc-r C
Goods in process
S,000,000
500,000
300.000
Goods ship1>ed by vendo,- FOB selle,- (shipping point)
Com "t."l
.. inventory
s§5QQQQ
t'hyi.ical count
Inventory marlccd "hold for shi1,ping instruciioo··
50000
Prob1cm 10-19 Aoswc-r 0
lm•c nto1y be.fore adjustmcnl
Goods rurchased FOB shi1>1>ing po;n1
Goods sold FOB shipping p0in1
Goods sold 1:os des1ination
Goods pun:hasc:<I FAS
Goods sold FOB de,lillltion
7,600,000
250,000
Correct December 31 inventory
845QQQQ
850,000)
260,000
350,000
1uoooo
Problem 10-20 Answer A
NL-t sales per b4)ok
Sales n:lum
Goodsshippod on December 31, 2019
Goodsship1>td on January l. 2020 nx..-ordcd oo Doccmbcf 30, 20 19
Adjuslcd net SJles
5,000,000
( S0.000)
300,000
( '>QO 000)
5050000
77
Problem 10.21 Answer A
4,000,000
Gross sales
E.s1imated sales n:tum (10-/4 x. 4,000,000)
Net s.ak:s
(
~!l!l QOO)
J60Q{!QQ
Pro bll'm 10-22 Answl'r 0
zero
Problem 10--23 A nswer B
1.500.000
Problem 10-24
Quest.I on I Answer A
Question 2 Answcr D
Ques:cJon 3 Answer C
[ nvcntory
Unadjus,ed
A
B
C
D
E
Adj usted
1.250.000
165,000)
(
20,000)
(
Accounts payable
Net sales
1.000.000
165,000)
9.000.000
(
40,000
210,()0()
22 QQ2
Sfiil 000
2o~a ooo
Inventory
Accounts payable
Net sales
1,7S0.000
1,200,000
22 000
I 1!m 000
Pro blem 10-2S
Quesdon 1 An.s:wtr 8
Question 2 Answe-r A
Qucscion 3 A n.1wu 0
Un:.idjustcd
A
B
C
D
E
F
G
H
AdjlLSICd
S0,000
20,000
26,000
2S,000
30,000
S0,000
I
8.S00.000
3S.000)
40,000)
IQ !!!Ii!
60,000
?Q!!QQ
I ~I I U!lSl
I ' 10DIW
l:b!'HWO
78
CHAPTERll
Problem 11. 1
FIFO
750,000
.Jan. 20 Purchase (2,500. 300)
25 Purchase (2,000 x 400)
800 00!!
I 559900
We.ighced
Jan.
I balance.
S purchasl"
20 purchase
2S purch;i.sc
Units
Unit cosc
Tot.al cost
6.000
2,000
2,500
150
200
300
~
900.000
400,000
750.000
..2.21!!1
.I.U!lll
800 00!!
, asoOOll
i.lllil
m
m
Units
Unic cost
Total cosc
500
.1.:!.lll!),
100
50,000
90
I Jn~ QQQ
I0,000
2.000
8.000
6.000
9,500
80
100
110
120
100
800,()00
200.000
880.000
720,000
950.000
5
Goods t1vailablc for sale
.1.4.iU!!.
lll.ll!l!I
90
111'.!~ 000
~S5~QQ(I
Weigh<ed o,·.roge (4.855,000/50,000)
J..lJllJj)
Wll
115§ 500
Goods available
Endin,a. inventory
I D26 000
Problem 11·2
I. FIFO - periodic
Lol No. 4
5
J.i.l!!lll
2. Beginning ilt\'Cntory
Purchases: Lot No. I
2
3
4
I 1 ,,s gag
3. Specific identification
Loe 3
6,000
4
9000
J..lJ!ll!I
FIFO
Weighted average
Specific klcnti rteation
Goods avail:lble
4,R55,000
4.855.000
4.855.000
lnvt.nco ry-Dtt. 3 1
IJSS,000
l.4 :io.500
1.620.000
120
100
720,000
900 000
I 62il~
Cost of goods sold
3,500.000
3.398.500
3.235.000
79
Problem I 1. 3
Units
FlFO
December 17
22
Unit cost
Total cost
10.000
4S
450.000
.w.!l!ll!
.lllJlilll
4
Rfl!l OOO
I JUlOOO
10.000
30.000
60.000
S2
520.000
1.500.000
2.700.000
Average method
December
I
7
17
22
A'\'nilablc for sale
so
45
43
~
Rfl!l 000
.l2llJ!!lil
Inventory (5.580.000/120.000)
\'i&)~
46.SO
~
Goods anilablc for sale
Less: ln\<cnLory- Oecembtt 31
Cost o f goods sold
I J2SQ!l!l
FIFO
Avera&c
5.580.000
1JHJ
~'IS!Cllll
5.580.000
noo
I 395 !!!!!!
I!~CW
~
Problem 11-4
The St-Oclc cards art no1 prep.ired anymore, The end rc.sulcs arc simply giH)n,
T otal co.u
Unlls
FCFO
~
F.ndin& inventory
210
Cos1 o f goods sold
Z700 000
Moving average
252.SO
Ending inventory
cos, of goods sold
I 019 000
' 510000
Problem 11 · 5
Pur chases
S,000
9,000
2017
2018
2019
Total in, cn1ory lkcembr-r 31, 2019 (umts)
Sales
Cos1 o f goods sold:
lnvc:ntory - D=mbcr 31, 201S (3,000 x ~0)
Purchases
Goods available for sale
Less: ln\•e ntory- December 31, 2019 (6,000 x 7.S)
Gross inconll~
15,000
Sales
Inventory tncnmcnt
4,000
7,000
12,000
1,000
2,000
3 000
f.!!!!ll
1.200.000
180,000
112sooo
1,)0S.000
450 ()()()
855 000
HS 000
Problem 11-6
Total cos,
Units
Unit COSl
Wl!lll
6!!
~
40
400,000
75-0,000
FIFO
October I
\Vtighled average - ()(!rlodk
.lanu,ry I
April I
October 1
10,000
15,000
50
~
60
Goods :l\ 11ilable for sale
50,000
Less: Sales
Ending invcnlory
liJlQll
Wdglltcd avcrag,, (2,65-0,000/50.000)
I SIX!~
, (:'i£l QQll
Wl!lll
Wl!lll
72' QOO
ll
Moving a,•erage- perpetual
I
10,000
31
Ll.!!!lill
Janui,y
Balance
April I
Totnl
5,000
ISOOO
20,000
~
831::tncc
2.000
illl!lQ
27,000
Tot::tJ
D«emlx.-r3I
Baloncc
)
~
)
l>urchasc-s
Goods n, 11iln.ble for .sale
Les.s: ln\'-entory December 31
Cos, of goods sold
Co..•H o f goods sold - \VC'lghtc:d ,lverage perpcru:11
January 31 Sale
.July
31 Sale
IJ«en1b<r 31 Sale
Totnl cost of goods sold
~
<
47,5-0
&_
59.07
I ; !lll !l!l!l
1,595,000
SC).07
( Z0R R40)
.22.llZ
.w!!lll
FLFO
ln,•enco,y -January I
400,000
( ~!lll !l!!lll
200,000
7S0 000
40
.fil._
47.5-0
July 31
October I
40
:Ill...
400,000
2 250000
2,650,000
900000
I zsoooo
9SO,OOO
ass Q!!ll>
95,000
SSti lfd:I
Wdghted avtrnge
400,000
2 2S0 000
2,650,000
][email protected]
I 3,;5000
200,000
855,000
708 840
I 2638:fQ
Problem 11-7
Unns
Unit cost
Total cost
FIFO
Octolx:1· 1 1>urchasc
Jill!
J.ll.l!!ljl
, ooo non
\Velghted average
Jan UM)' l
April
S
200
300
7,SOO
9.000
10.000
I.S00.000
2.700.000
s QQQ QOO
October 1
Goods a, ailable for sale
Inventory - Occcmbcr 31 (9.200.000/1.000)
_jOO
.IJl!lll
2~~QQD
.2.2llll
lllll
FIFO
, 260QQ(I
Wdgh ted avtrnge
l.n,·entory January I
1.soo.000
1,500.000
l>tl«:hllSC$
Goods n,ailnble for sale
Less: Inventory December JI
ZZQ!>OQ!l
ZZl!!l QOO
9,200.000
9.200,000
l ggggag
fl ' 12n!!Un
~!WI~
Cost of goods sold
Z 26SJDQD
Problem I I-A
Sales
CimJJS ~,roli1
6,000,000
<' -100000\
Cost o f goods sold
Inventory July 31 (see below)
3.600.000
22SQQQ
Cost of goods available for sale
4.52l!,OOO
(l 124 OOQ)
l'urehases for J uly
ln,•cncory - July I
I 15:t 000
Tot.al COSC
QWUltlty
July 12
1,000
25
.llil2!!
.wll!!!
flf"O imcnLory July 3 l
60
62
Problem 11· 9
I. Tnvencory - December 31, 2019
20 19 la)<er
Units
Average unil cost
Total cost
ll.!lllll
138
I 51§ 000
2. lnv\:ntory - D..::<X'1Uber J I, 20 18
Purchascs - 2019
M.altrials available
Less: Im entory - IA~ember 31. 2019
Raw mattrials u.scd 20 19
illlll!!
3. Inventory - D«cmber 31, 2020
2020 layer
illlll!!
IS3
? 225 QOO
11 .000
20000
31 .000
IS3
1.518,000
3 0611000
4,578.000
4, lnvcntory - Occember 31.20 19
Purchases - 2020
ro.•falcrfo ls avoilobk
l..t11s: In\ e,uory - J)c('cmbc:r JI. 2020
Raw maLerials used- 2020
14.000
.llJlll!!
l,4!!0,000
138
26.000
.I.LQQ2
illlll!!
~
I 6S6 000
3.1 36.000
I 518 000
1 1§[email protected]
, 12S 000
Z26} OOQ
82
Problem 11-1 0
A'\·:.'liktblc for sak
Units oold (2,800.000/100)
Cnding iovcntory
42.000
18 000
J.Wlll
Units
Unic cosc
2,000
43.00
42.50
Total COS[
FLFO
Se:pLcmbcr
5
25
\Vcightcd average ( I ,7Sl,S00/42,000)
.ll.l!!ll!
Wl!lil
Wl!lil
%,000
.i.1J!.ll!!2
~
4l.7S
i&l.2lll
FJPO
Average
A\'ail3blc for sale
1.753.SOO
Lcs.s: Ending i1wcntory
SI!:! :iOO
I 162UW
Cos1 of goods sold
(Sela. I)
1,753.500
52'!; Q!ll!
I l~Z ~QCI
(Sci,. 2)
Problem 11 - 11
FIFO
Junc2 1 ( l,S00,33-0)
30 (2,SOOxJIJJ
495,000
2~P ~ml
Cos1 of ending inventory
1
~zz -;oo
Units
Unit cosc
Total cost
13
21
3.000
7.500
4.000
6,000
3.500
300
304
320
32S
330
JO
..l.lllll
.l.il
900.000
2.280.000
1.280.000
1.95-0,000
1, ISS,000
282 :SQQ
Average method
Jw,c I
4
8
~
Cos1 of ending invcn1ory (4,000 x 3 15)
lll
8J;S2 'ml
I 26SlaocJ
83
P roblem 11 -1 2
20 19
A,cragc
Und1..-rstalcmcnt of t.'1'1ding inv1..-ntory:
Cost of goods sol(I
2019
2020
2021
2020
2021
1,500,000
2,000,000
2,400,000
( 150,000)
( 200.000)
150.000
200.000
---
(
'ZQ QOOl
m·o
I 1l0 Q!lil
I 2l!!Q!lg
Sales
Cost o f goods sold - FIFO
Gross income
3.000.000
4.000.000
4.800.000
I ' 5QQQQ
I 9SQ!W
2 H!HlOO
1,650,000
2.050,000
2,470,000
SQQQQQ
&~QQ!lg
OQQQOO
l lSOOOC
1!2~Q2(1
I ~zo QQ!l
700,000
1. 100,000
1,400,000
Cost of goods sold
Opcr:atina c~pcnscs
Opcratina income
2 J1Q QQ!l
Proof
Net im.-ome A,·cragc
Undt:rstatement of ending inventory:
2019
2020
202 1
Net mconic l-lfO
IS0,000
R'\Q~!}
(
150,000)
200.000
I I c;o !l!lQ
( 200.000)
,zg QQ2
I ~7f:!QQ!l
Problem 11-13
FIFO
.lllnuary
9 (250 X 540)
29 (500 X 600)
135.000
~
~
Total cost of ending in,"entocy
Average method
January I
9
29
.l11n1~ry 31 invl.!ntory
Cost o f goods sold
Units
Unit cost
Total cost
500
1,500
_illll
2500
500
540
!,!ll!
~
250.000
8 10,000
1,3(,0.000
.ill.
.ill.
<!li2 U!lll
~
)
~
Ji!! nsm
~08 000)
Problem 11-1 4
26,S50,000
Purchase price
4l 5!!!1 QQQ
zg 1 s'2 ilQD
Improving and subchviding cost
Tornl c:~t
Group
(20 X ),000,0()0)
I
2
( IO X 2,500,000)
3 (JO X 2.000,000)
Sales price
Fraction
Cost
60,000,000
25,0()0,000
60/105
2S/10S
40,200,000
16,7S0,(IOO
20 000 ()()()
20o'IOS
s
IQ QOO QOO
I J:lOS! it!m
Zll lSO000
84
Cosl per IOI
Group
I (40,200.000 / 20)
2 (16,750.000 / 10)
3 (13.400.000 / 10)
2.0 10.000
1.675.000
1.340.000
U nsold
Cost
s
10.050.000
6,700,000
4
3
4 020000
"0 77209()
Problem 11 -1 5
Sales price
20.000.000
30.000.000
H1&),Jand (20 x 1.000.000)
Midland (40 x 750.000)
l..owl•nd ( I 00 x 500.000)
'>Ufl!!!! ~
100000 000
fractio n
201100
30/100
50/100
Problem 11 -16 Answer 0
U nltS
January I
April J
October I
Totnl
Less: Sales (400 + 400)
Ending inventory
200
JOO
....1llil
1,000
To tal cost
12.000.000
18.000.000
1fl~m!l
''° 000000
T o t.al cost
300,000
525,000
I UQ!l~
! &H !!a!}
_..&ll)
-2llll
.I..W
A'\'erJge unit cost (1.825.000/1.000)
Cost ofm\!cntory (200 x l,82S)
~
Problem 11-1 7 Answer A
fan u.ary JI balance
Units
U nit co." t
~
J.l.Ull
T o t.al C05C
Z61 ,c; ~~
Problem 11· 18
Q uei1tion I Ans wer A
Cost of unils a\'ad able for sale for July
1.452.100
0 042 100)
410 000
l>urchast.'1 for July
Coo.I of inventory - July I
Number of units - July I (410.000/ N)
~
Question 2 Answer A
fo ly I invcnmry
Pun:hascs for July
Tot:;il units available: for s.1lc: for July
July JI inventory
Units sold during 1hc: month or July
102.500
ll!!l.ll22
302.500
(
6')
000)
~
Quesdon 3 Answer A
Average uni, COSt (1.452. 100 I 302.500)
lnvenlOI)' - July JI (60.000 X4.80)
.lWl!!!!
Ano1hcrcompu1a1ion ( l,4S2, IOO
.lWl!!!!
1,164,100)
4.80
85
Problem 11- 19 Answer C
A ( 100 x 240.000)
B (100, 160,000)
C (200, 100,000)
Sales price
24.000.000
16.000,000
2QOOO 000
Fraction
24/60
16160
20/60
69000 999
Allocated cost
6,000.000
4,000,000
SQOOQQ(!
1;000000
Problem 11-20 Answer B
A
B
C
D
(10 •
(20 •
(40,
(SO x
100,000)
80.000)
70,000)
60,000)
Sales price
Fraction
Allocated COS(
1,000.000
1.600.000
2,800.000
10184
16184
28184
30184
700.000
1. 120.000
1.960,000
2 I~ Q!l!l
'!lW~
8:Jilil~t
\ aaoO!l!l
Alloc.ucd cost of Class 0
Clcnring cosl of Class 8
Total cost
1, 120.000
100 02!}
1:.Urch:asc price
5,800,000
~ O!l!l
Taxes and documcnlalion
Total cost to be allocated
I 22!! QQ!l
~SWlaml
86
CH.APTE R 12
Problem 12.1
(l..owcr of COSI o r N RV)
A
13
C
D
E
Units
Unit cost
NRV
1.000
1,500
1,200
1.800
1.700
120
11 0
ISO
140
130
ISO
120
140
160
160
Unit C051
NRV
Lower of cost or NR V
700
47S
155
450
650
745
250
740
6S0
I nventory vnlue
120.000
165,000
168,000
252,000
llLll!!!!
.2.Wl!lil
Problem 12-2
Product
I
2
3
4
415
250
450
Problem 12-3
Skis
Soots
Ski cquipmcm
Ski apparel
Cost
2.200.000
1.700.000
700.000
NRV
2.500.000
1.500.000
800,000
L,CNRV
2.200.000
1.500,000
700,000
~00 OQ!l
~on~
~OOQ!l!!
'QQQ 000
$ 300 QQQ
4 899 000
Oir«t method
Ending inventory
4,800,000
4,800,()00
lnc,0me su1runiuy
Allowance mechod
Ending invcnlory
Income summary
Loss on inventory" ritedown
Allowance for inventory \\Titedown
S.000,000
S.000.000
200.000
200.000
87
Problem 12-4
(a)
(b)
(c)
Units
Unit cost
NRV
2S.OOO
20.000
!OS
85
I IS
40.000
30,000
so
~o
65
60
Category 1:
A
8
Category 2:
C
D
80
(a x b)
Total cost
(a xc)
N RV
LCNRV
2.625.000
2,875,000
J
I !al Q!Xl
2,625,000
1.600.000
Category 1:
A
B
Subtoml
Category 2:
C
D
zaamw
4 HS 000
4 475 000
2.000.000
1.600.000
1.600.000
1.800.000
Subtot::il
i 2~omw
l 950 !!!!!!
1400 !!!!!!
Gr.ind total
8 ' Z21l!W
zszsQ!Xt
Total co~t
NRV
Lower
4.325.000
3,9SO,OOO
4.475.000
4.325.000
3,400,000
1400 @
7225000
I S!ijl !!!!!!
n. LCNRV individual
b. LCNRV byca1<gory
Calcgory I
Category 2
c. Total coSt
8,275.000
7,875,000
7,875.000
Toc;ol NRV
LCNR V by local
Problem I 2.5
I. September 30 (40,000 x 75)
D<.-.:cmber 31 ( 10,000 x 90)
3.000.000
900 000
T OC:11FlrO cost
3,900,000
NRV (50,000 x 72)
Required allowance for invt-ntory wri1edown
1600 000
hlH::nCOl'Y Jonu,ry I
Purchases
1,200,000
9.400.000
300 000
Purc.hase dis.count
Goods available for sale
LI."'Ss: hwtntory
I 400 000\
10.200.000
l'>i.-c('mber 31
1900000
6,300.000
Co!il of aoods sold lxforc rcvcrsnl of invcnlOf)' \\Tilcdown
I
Gain on reversal ofinvenlory \\Tilcdown
Cos1of goods sold after in\'Ctltory writcdown
3.900.000
2. lnvcn1ory - Occcmbcr )l
Income summary
Allo\\'tlnec for in\'Cntory writcdown (400,000
Qi.in on reversal ofinvcnlory \\Titcdown
[email protected]\
6 '>QQOQQ
3.900.000
J.00,000)
100.000
100.000
88
Problem 12-6
a. No adjuStmn u is necessary bec.ause 1he marke1 price is higher 1han t~ agreed price. Any gain oc,
purchase comm101u.·•:r11 as not recog.ni21."<l t.nitially.
b. No odjuSlmt-nt is necewry because 1he matke1 pritt ha.1 no1 dec-lir,ed as of December 3 1. 2019. T he
1narke1 decline tS only a pos..<:iblc loss..
c. Loss on purchase oommilment ( 10.000 x 30)
F-nimated liabilily for purthase romm i1men1
300.000
300.000
d. Dccc:mbcr 31, 2019
Loss on purchase rorrunhment
F.stimntL-d l,abihty for purchase oommilmcnt
300,000
300.000
January 31. 2020
Purcboscs (100.000x 150)
Loss on purchase commitment
Esti1na11:d h11bih1y for purchase commi11nent
Accoun1, payable (10,000 A 200)
1.500.000
200.000
300,000
2.000.000
e. December 3 1, 2019
Loss on purchase rommitment
Estimated habiliC)' for purthase c-ommi1rnent
300.000
300.000
J a nuary 3 1. 2020
Purchases
Es1imn11..'<1 l111bihty for purd111!1(: conuniln)ent
2,000.000
300.000
Accounts payable
2.000.000
300.000
Gain on purch.lse commim1ent
Problem 12.7
12/31/2019
03/311202()
Loss on purcha.~ comm1rn1en1
l:.s1iimued habihty (or PC
Purthase (100,000 x54)
l:.s1im31ed liabih1y for PC
Accounts lla)'nblc
G:iin on purch.1se rommilment
500,000
500,000
5,400,000
500,000
5,500,()00
400.000
Problem t 2-8 Answer 8
Estimated sales ptict
Cost 10 complete
Net l'(:a(izoblc value
FIFO cost ( lower than NRV)
4.000.000
I '!22 !l!!!ll
' B!X!~
<
, ~gw
89
Problem 12-9
' 200 QQQ
l Jpn QQQ
Question I Answer 8
Question 2 Answer A
l>roducl X
J->roducLY
Cost
1.500,000
NRV
Lower
1.400,000
'30() 000
1.400.000
I 800 000
' 300 QQQ
' zoo QQQ
Historical cost
240,000
188,000
300,000
NRV
312,000
200,000
2?2.000
I 800 000
3 200 000
Problem 12• l 0 Answer A ( 1.040.000)
Problem 12.11 Answer A
M.irkcrs
Pt--nS
Highlighters
Vnlue
240,000
188,000
lliJlll2
~
Problem I 2· 12
Question I Ans wer A
(10,000, 40)
Quc:stion 2 Answer 8
(10,000x 30)
Question 3 Answer A
Question 4 Aoswcr B
Ending o n February 15, 202()
Purchases (10.000 x 300)
E.s1ima1cd liabili1y
Accounl.5 ~yublc (10,000 x 310)
Gt1in on purchase commitment
3.000.000
400,000
3, 100,000
300.000
90
CHAPTER 13
Probltm 13· 1 An swer A
ln\1t .ntory - January I
1>orchascs
Frc:i&ht in
Totnl
65-0.000
3.200,000
~o ooo
Less: Purchase n:tums
3.25-0.000
7S 000
1 l7S 000
(;o()ds a , ailable for .sale
3,825.000
,.,.,, Cost or good sold (4.S00,000 x 60'- .)
'700 (X)O
lnvc111ory
I pq)Of)
March 31
P roblem 13·2 Answer A
Sales
3.400.000
Sales rttums
Net sales
( 30 000)
1
' 79 000
The sales discoums arc ignored for purposes of estimating inva11ory under the gross profit method.
ln"\1t ntory
January I
l'urthasa;
Purchase: returns
65-0.000
2.300.000
( 80.000)
Fn:igln in
Goods l.'l\ ailn.blc for sole
Cos, of goods sold (70"', x 3,370.000)
60000
2,930,000
(2
1S9 000)
ln'-'Cnl<U')' - December 31
571 .000
P'hys1c.al inventory- Dect:mbtr 31
Cost of mis.sing Ul\CUIOry
420 000
ISi 999
Problem 13·3 Answer C
Sales
S.600,llOO
Sales returns
Net sates
Cos, of goods sold (7;¾ x ; ,.200.000)
( 400 QOC!l
s 200 QQQ
J C)O() ()QP
Like sulc:s discounts, sales allowances arc Ignored in dctcnnining net soles under the gross profi1
met hod,
Problem 13-4 A.n.:swcr B
lm1cnt01)'
Janoory I
Ne1 purchases
Goods :,,aila.blc for stile
cos, of goods sold (7.280,000 / I30'/4)
ln,•enlOJ)' - September 30
Realizable valu, of damag.'<I goods
FU'C loss on tn\lC'll tory
1.100,000
6 000 000
7, 100,000
rs600 OOQI
1.500.000
( 100 QQQ)
I 400 OQQ
91
P roblem 13-S
Question I Answer A
s.000.000
13cginning in\<cntory
l'urcha,;cs
Prtight in
26,000.000
2.000,000
( 3.500,000)
l>urchasc returns and allowances
l~reh'1sc discounts
Cost of s.ovds o, 1tilabl1: for 8-lak:
I
I
500 000)
2SOQQQOO
Q uestion 2 Answer B
40,000,000
t }000000)
Sales
Sales returns
Nc-t sales
37,000.000
®%
Multiply by ro!>I rntic.l
Cos, of goods sold
",OQ QQQ
Nrt s.:ales
Gro» proli1 nuc on sales
Cost ratio
~ lcs ollowances ~ind gales discounts are ignored in dc1c.nnining ru.-l s..i.le5 under the sross profit mcchod,
Question 3 Answer C
Cost of goods available for sale
Cost of goods sold
l~ndm,s inventory
28.000.000
P' ' 00QQQ\
S,800.000
( 4,000,000)
l'hys:1Cal count
( 600 ooo,
I 200 QOQ
Cost of goods out oo consi,nmcnc (1,000.000 x 60~•>
Cost of inventory shormgc
Problem 11-6 An.swcr B
Sales - 2018
Cost of goods sold:
Net purchases - 2018
Less: lnvcn1ory O«<mb<r 31. 20 18
Gross income
R.1c in 2018 (1.S00.000/ 6,000.000)
~
6.000.000
S.S00.000
I QOO 000
4100 000
I 500 QQQ
Ral< in 2019125% + S%) :ll!li
1,000,000
Inventory January I, 2019
Net purcha5q - 2019
7100 000
Goods ;,wailablc for s.ilc
l.<s.s: Cos, of goods sold (9.000.000 x 70%)
ln"\'cntory December 3 I, 2019
Lt-s.s: Undnin~scd merctumdisc (S-00.000 x 70-/ol
Reali7.Jlble vatue or d3rnaged mm hou,dise
Fi.re loss
8.500.000
6100 QOO
2.200.000
JS0.000
..JJ2.!l!!J2
]60 000
I 849 000
Problem I l-7 Ans wt r D
cos, of S')Ods sold 17.000.000 Muloplyhy
Sales
Les.s: Colleccions
Accounts rc«ivablc
I.~00.000)
S,600,000
14()-f
7.840.000
4 000 000
l &40 OQQ
92
Problem 1343 Answc-r C
z~·•
Ave1>ge gross profi1 ra1e (2,250,000 19.000.000)
660,000
Inventory January I
~ ' ~!!!!SK!
Nc1 purchasn
Good.i ~l"ailablc for sale
4.900,000
Less: Cos, of goods sokl \5.600.000 x 75%)
l.nvenwry Scpu:mbcr 30
Les..~: Undom:1gcd goods (60,000 :it 7SYo)
Rr-JliT.iblc value or damag"'-d tOOlls
Fire los~
~
2~ QQ!l
700.000
45,000
:w~
.llJllm
639 000
Problem 13-9 Ans wu A
Sales - 2013
Cost ol' goods :,01d:
tkg,nning invcnt(IC")'
Purchas,s
t-reight m
7,500.000
1,260,000
6.450.000
350,000
90.000)
120,000)
Purchase discounu
PurthaK tctu rm
Purcha!iC' nlk,w:mcc5
Goods a,•ailablc
Ending inveoh:,ry
Gross inco,ne
(
20!I!!!!)
7.830.000
~4ll Q9Q
(' l~H!!l!ll
' D'~ '~
Bc-gin.n ing i nventory-2019
1>urch!lSC:S
2,355.000
3, 180.000
Frd g.ht in
220.000
1~urchasc discount,
45,000)
40.000)
P\lrchase retums
Purchase allowances
Goods a, ailablc
(
l~Q2Q>
S.6SS.000
Co.."1 o f goods M>ld - 2019 (4,S00,000 x 733/•)
l 2R~ 000
Endina inventory - 2019
' 370 000
Problem 13-10 Answer 0
8.000.000
"'" sales m 2018
l.(':fs: cl)jt or goods $Old
Bc;ginn ing invcntO')'
:?.000.000
Net purchasts in 20 I8
Goods i\';Ubble for S31t
Leu: b!du•.s invcnu,iy
~ ~UQ(!QQ
6.800.000
J '00 Cfil():
~ @21~!}
Z~f.!Qngo
Gross profit
Grm.:1 profit r:ahi (l ,400,00018.000,()00)
lo:.
ln,·emory. January I, 1019
1,200,000
Nd pwcb:L•'l· s
J 0(..0 000
2019
Goods available for sale
I~ : CQSt ot good'> sold
Suks
1-tst: Sales recurn tind ollowinces
Nn saks
Cost of goods sold (7,SOO.OOOx 70-Ai)
Estinutcd v.1Ju,.. of ending in\l.'ntaty
L.tss: COSI of in\'tfltory noc ,101<:n
l;.Stima1ed cost or stol<"n invtmory
6, 160.000
7,880.000
fil!QQ!!
z~miwm
( ~!!it~
700.000
H!!.!IX!2
,!Jlll!JSm
93
Problem 13,.. 11 Answer 0
Sa.k s
9.600,000
cos, of b'O0ds wld (9,600,000 / 125%)
7 6RO 000
Gross pro Ii 1
I 220000
Problem I 3-1 2
3,200.000
40¾
A\'C.ntgc rate
8,000,000
Question I Answer A
Q ucnion 2 Ans wer A
Quesdon 3 Answer 0
IR\'tRIOI)' -
January
500.000
I
l'urchascs ( 1.600.000 - 500.000 - 400.000)
Goods aH® le for sak
' 7QQ QQ(I
,l,
2.200.000
Less: c~, of good~ sokl:
Colh.-ctic,ns
1\ ecounts receivable - Dtcembcr 31
Accounts rccc1vablc - Ja:nuary I
Sales
2.640.000
440.000
' 480000\
, AfXl pop
I 500 000
Cost of goods $-Old (2,600,000 • 60%)
ln,·tnlory - Dee~mber I
Lnt: Ooodi on ronsit,-nmenl {200,000 x 60%)
Salvage value
Fire toss
640.000
120,000
~
)40 OOQ
j(I() 000
94
Problem 13-13
Question I Answer 8
Raw mmerials - Jn11uory I
Purchaso;
Freight in
Raw materials available- (Of use
Raw mmcriaU - December 3 1
Raw mntcrials used
1,700,000
3.800.000
200 000
S.700,000
,2000 000)
1700 000
Question 2 Answer C
Raw m~lc:rials used
l)m~ct labor
Mnnufacruring overhead (60'1/• x S.000,000)
Towl manufacruring cost
3.700,000
s.000.000
l 000 000
IJ 792 QQQ
The chtinge lo the foc1ory supplies is no lo'l~-cr considered because it is already part of the manufocturing
o,erheod npplied.
Question 3 Answet' D
Cos, of goods sold (70¾ x 20.000.000)
MOOOOOO
The cos1 t.llio i$ 70% because the gross ptofit rote is 30'~ on sales.
Quesdon 4 A.nswe1· A
Total m&\ufacruring cost
Goods in process - J<ll\U:11) 1
Tornl goods in proocss
Goods in pro.:c.« - 0,'C<onb<r J I (SQUEEZE)
CMt of goods manufactured
Fmishcd goods - January I
Goods o, llihtble for s.tle
Fmishcd goods lxccmbcr 3J
Cos, of aoods :;old
11.700.000
~
JOO 000
16.000,000
( l soo QOOl
12.500.000
6000000
18,500.000
( POQQOOl
14 QQQQQQ
The ros1 or l!ndlng goods tn process is cornputcd by working back from tht l."051 of ~-oods se>ld.
Problem 13,.14
Question I Answer A
Mayl l, 2019
P urchases up to
May 31, 2019
Purchases up 10
June 30, 2019
950.000
6 ,750.000
8.000.000
Physical invcnlo ry
Balances
I
2
3
1
4
1sOQQI
ws
Adjusted
(
(
I
75,000
10.000)
20.000)
SS QOOl
6 ZiQQQO
Inventory July I. 2018
I
(
15.000)
20.000)
226SQOQ
875.000
Purchases up 10 ~1Jy 31. 20 19
~ 1~0
Goods available for sale
ooo
7.615.000
Less: ln\-<nlory l\·11ty JI, .2019
C~1 o f &oods sold
RO.S 000
6 Z'i!CQQ
Sales up 10 May 31. 2019
8.400.000
Cost of goods sold
6 7'022Q
Gross: proli1
16Wlcml
Rat< (1.680 .(J()O /
R.400.000)
~
QuestJon 2 Answer 8
S.le, for p r ended June 3-0. 20 19
Less: Sales for 11 months ended May 31. 2019
9.600.000
8400 000
, ?QQ QQQ
Sak s (or J une
Question 3 Answer C
Cosl of &00ds sold wilh profil (1.100,000 X 80%)
880.000
Cost of goods sold withou1profit
Cost of goods sold durtng June
.IJWl!l!!
2lWJlOO
Question 4 Ans we r 0
l.n~•cntory, July I, 2018
Purch:ascs for ~;,,r ended June 30. 2019 (as adjusted)
Goods ;;wailablc for s.ilc
Less: Cost or good, ,old
Sulc, " ;,h P"'r.t (9,500.000, 80%)
S~tlc..-s wilhoul profil
ln,•e11Wf)', Juoe JO, 2019
875,000
7 9M OOQ
8.840,000
7.600,000
100 000
7 700 000
I 140 000
Problem ll~IS
Question I Answe-r A
Accoums re«ivabk April 30
Wri1eolT
Collcc1ions (440.000 - 20.000)
1.040.000
60.000
'12" QQQ
1.520.000
220 OOQ
600.000
Toto)
~ss: Acrouncs receivable - March
Sales for April
Sales up to March 31
3 600 000
4 '90099
TQtal ~akll
Question 2 Answer 8
Accoon1.s payable April 30 for April shipm,e·n ts
Paymcn1 for April merchandise ship1ncms
Purchases of J-\ pril
l>utchases up to March 31
340.000
89 000
4:W.000
I §8!1000
2 100 000
Totol purchmscs
Quwion 3 Answer C
Question 4 Answer D
1,8!!0.000
Inventory - Janu;;1ry I
Purcha.,.
Less: Purchases return
Goods available for sale
Less: Cc,,1 of goods sold (4,200,000 x 60,~J
2. 100.000
70 000
Sah11gc vah1e
Fire: loss
3.960.000
, ~,n ooo
1.440.000
Inventory - A1>ril 30
~s.s: Goods in uunsit
7 ORO 000
100.000
~
240 000
l 200 099
CHAPTER 14
Problem 14-1 Answer 8
lkginning inventory
Purchases
F'rtight in
Mark111>
Morlm1>~ u1«11,1ioo
GAS
Cost rat;o (2,8JS/6,JOO)
Cost
RctaiJ
280,000
2.480.000
75.000
700,000
5, 160.000
500.000
l\0000)
U35.000
6.300.000
45%
( 250.000)
.Markdown
~o <!00
Markdo" n cancellation
GAS Avcmgc
' HJ~ OW
Sales
Shrinkage (2% x 5.000.000)
6, 100,000
(S.000.000)
(
End1ng invealory
Conservative cost (1.000,000 x 45%)
11!2!122)
I UIX! OW
~
Problem 14-2 Answt:r C
13cginning inventory
l'urchascs
Markup
MnrkdO\\O
GAS
C..t nu;o (4.800/7.500)
Cost
Retail
700.000
4. 100.000
1.000.000
6.300.000
700.000
~!12 Q!.lQ)
7,500,000
~alllaas;i
64%
(5.900.000)
Sale•
Normal shrinkage and breakage
ln,•cntory at retail
(
AveragecoSl ( 1.500.000 x 64%)
Ill2 !lll!!)
I l!X! nml
.2&ll!ll!
Problem 14-3 Amwcr D
Beginning inventory and purchases
Cost
Retail
6.000.000
9.200,000
6 Ulm UQll
9,600.000
~Ill! !lll2
Net markup
GAS
C..t nu;o (6.000/9.600)
62.5%
Sales
(7.800.000)
Net markdown
Ending inventory
(
Conservative cost (1.200,000 x 62.S'/4)
Goods a, ailablc for !mlc
Less: Ending i1wcn1ory
Cost of saJes
~!lil !lll!!)
I 2~0W
lll2Jl!l!l
6,000,000
Zln !lll2
2 2~£l UQO
Problem 14-4 Answer C
Beginoing inventory
l'urchascs
Cost
Retail
560,000
4.000.000
1.000.000
6.200.000
S00.000
Morkup (S,000 x PIOO)
Morlmpcancela1ion(l,OOOx PIOO)
Goods anilable
Mnrkdo" n (reduction in retail price)
GQOds o, ailablc - 1-..cragc
60'/o
4 ,560,000
62%
~ Ci(::g
(
I!Ml 000)
7.600.000
(
200 000)
7,400,000
Wit
(~ 400 !!92)
Nct sales
Cnd1ng inventory
' mmuoo
Conservative cost (62% x 2,000.000)
I Z~O~
Problem 14-5 Answet C
Cost
~21mQO!t
A••ailablc for sale
Morkdo"n
Soles
Endms inventory
7.000.000
( 100,000)
(~ ~()() 000)
I ~ml ggg
~
Average cost ( 1.400,000 x 7 l '!-11)
Cos1 ra1io (4.900.000 16.900.000)
Retail
l.l!ll.
Problem 14-6 A ns wcr A
Cos,
Bcginnina inventory
Nct purchas,s
0...-partmcnlal transfer crc..-dit
Net ni.1rkup
Mnl'kd0\\ ll (500,000 400.000)
Goods available for sale
1.650.000
3.725.000
( 200,000 I
(75%)
't,
1zs aw
Retail
2.200.000
4.950.000
( 300,000)
150,000
( I!l2 !!!!!l)
6.900.000
Sales
ln\'en,ory shorlagc - sales price
(4,000,000)
( 100.000)
Employtt discounlS
Ending inventory
(
Average cosl (2.600.000 x 75%)
Problem 14--7
QuestJon 1 Answer A
Question 2 Answer A
I 2SO '2Qll
ZQQ~>
Z611!:! QQ!l
Problem 1441
Question I Answer 8
Question 2 Ans wer C
Cwt
500,000
3,070,000
70,000
25,000)
45,000)
Beginning invcntt>ry
l>un:hases
Tr:aniportarion in
l>urch:ascs rc1Um
l)urchase discount
Mttrkup
C,mcc:ln1ion of m:nimp
Goods o, ailablc for sale conserva1i,c
Cost ratio conscn•t11ive (357/510)
Ma.rkdO\\ n
Canccluhon of m;u-kdown
Goods twail3blc for tale aver.:1g.c CO$f
Cosl mtto - a,•c r.tgc cost (357/476)
Rcl'ail
770,000
4,300,000
40,000)
100,000
(
3,570,000
10000\
5, 100.000
70"/4
( 350,000)
JO ()()(I
l
~]9 QOO
4,760.000
15%
Us.s: Sak$
4,000,000
(
Sales rcmm
Ending inwntory at selling price
SP 000)
1
<po ooo
&fO 000
Conservative CO$C (840.000 x 70%)
A,•erage COSI
(840.000 x 75¾)
S81!,000
ti.l!W!II
Problem 1-4-9
Question
Answer A
Question 2 Ans"·cr 8
Cost
13eginning lnventt)ry
l>urc.hases
1:-rcishc in
l'tlrch:asc returns
l~hase allowances
340,000
4,500,000
100.000
IS0.000)
90.000)
100,000
DepanJUffltal transfer in
Morkup
Gooch m ailaltlc for snlc - c;(ln,cntionul
Cos, r•1io (4,S00/$,000)
Marl:down
Goods 9\'ililable- for sale- avMge
Cos• rn1io \4,800/7.500)
Les..~: Sales
Employee discoun1
SJ>oalagc :and bJ'CJkngc
l';nding inventory
Conservative CO!oC (600,000 x 6()'}•)
Awr.igc coil
(600,000 x 64,:e)
Reta.U
640,()00
7,300,000
(
lS0.000)
160,000
1~0 ooo
4,800,000
8,000,000
60"/4
r 500 000\
4 800 000
7.500,000
64%
6,600.000
100,000
'00000
360,000
~
6 9CIO 000
6QQ 000
100
Problem 14-10
Question I Answer C
Question 2 Answer C
Reial!
Cost
Finished goods - J.anuary I
Cos! of goods manufucrure<I (SQUEEZE)
Goods :;t\·:ailohk for ~1lc
Lc:u: Fini,hcd goocb - Dcc:.:inbc:r 31
Cos1 of gOClds sold
144,000
240,000
12~~
, QOO !l!l!!
1.344,000
2.240,000
'i!l:l 000
R40 000
&112 aw
I !!IX! WXI
The amoum of goods m.inufac1urcd a1 rc111jl ts dc1cm,incd by simply wo11<i11g b11ek.
Goods Lnanulactu.red a1cost
Costnuio =
Goods manufactured al rcuail
1.200.000 / 2.000.000
60¾
Fmishcd good.:
.lanua,y 1 • 240.000 x 60"!.
~
Occcmb<r 31 • 840.000 x 60"/.
~
Problem 14-11
Cost
ln\ cntory - Janu.1ry I. 2019
1
Purchases
RetaiJ
llf 800
[email protected]
4,576.000
7.028.000
42,000
Nc1 markup
Net m~1rkdown
(
l0 000)
Nc:t purcMS4'S (65C}.)
4 S7fi 000
7-040 000
Goods ovailablt for sale
' IPSOO
7.968.000
Sales
lnvernory - Oecernber JI. 2019
FIFO i0\enlory(65¾ ~ 1,128,000)
Lm·entof)' - January I, 2020
Pu«hascs
/6R40000)
I 17§ 000
z.l.UllQ
71:1 200
4.760.000
Net m.:irkup
Nc1 ,n..-•wkdo~n
N<t purchas,s (70%)
Goods a, ailable for sale
6,8 12,000
56,000
4 760 000
5 491 zoo
C liB 000'
6800 000
1.92i.ooo
16928 000\
S.llcs
ln\•en1ory - December 31. 2020
FIFO inven1ory(70'-~ ~ 1,000,000)
I l?SOOO
1 128®
I f)QQ 000
lll!l.ll!!ll
I POO 000
IOI
Problem 14-12
Co.st
lnVC"OlOJ)'. January l, 2019
l>urchascs adjust1."<I for markup and nt:lrkdown
72¾
~
420,000
!}JI 2Qil
S:131 '°~
Goods tm1ilablc for .5{llc
7.560.000
2ZI~
Inventory. Dccffllbcr 31 , 20 19
I-IFO COSl (721.000 x 72¾)
.l.1.2J.2il
70'/4
519, 120
721.000
4 21ll Q!!il
Z I!!ll !l!!il
\ ~82 12!1
7,821.000
(H" !l!.12>
2RB OW
Sal<s - 2020
Inventory. Dccnnber 31, 2020
FIFO COSl (788.800 x 70'/4)
600.000
6 2("1 ~
(6al2 !.!!ljll
Sak s 2019
ln\•entoty. January I. 2020
l>urchases adjusted
Goods m ailablc for .sale
Retail
~
CHAPTER 15
Problem 15,,,1
I. Unn:ali2<d loss TS
60.000
Trading sccuriues
2. Cash
Loss on s~1lc o(cnidmgsea1riti.cs
Tmding securi1ics
3. Tmding sccuri11c:s (680.000-610,000)
Un~ lizcd g:ain - TS
/I Oni no,y (4,000 x 80)
C Preference (2,000 x 180)
60,000
140,000
20.000
160,000
70,000
70,000
Carrying amount
Market
300.000
320,000
~
.ll!W!!l
!lll2Jl!!!I
~
Problem I S-2
20 19
.Ian. 1 1' riding .M:curi1i..-,
1.450.()00
Cash
0cc. 31 lJnrcaliud loss TS
1.450.000
200.000
Trading securi1ies
200.000
2020
Oct
Cash
Trading securitie-5
375,000
325.000
50,000
Gain on :;all" (tfTS
Sule price
C.rriini; amount sold (650,000 x 1/2)
375.000
ill.002
~
Cain on sale
De<:. 3 I Unrealiml loss - TS
Trading sccurilics
At1ra
llora
C-ara
Total carrying aruow11 - Dcce01lxr 31, 20 19
Fair Whk - DecemMr JI , 2020
Decrease in fair value
125.000
125,000
325.000
200,000
~
925,000
lill!lJl!l!!
J..U.ll!!Q
Proble.m IS-3
l)cccm bcr 31, 2019
Ttadmg, securities
Unreali.tcd guin - TS (2,S00,000
500.000
500.000
2,000.000)
Unrealized loss - olhcr comprehensive lntomc
1:mancial 1t~t - 1-·voc:1
100.000
100.000
Dc<:cmbcr 31, 2020
Unrea1i7ed loss TS
300.000
Trading sccurilKS (2500.000- 2.200.000)
Unrc.aliZl..-d loss 01hcrcomprchcnsivc income
Financial asset - F'VOCI
300.000
600.000
(,00.000
Problem I S-4
Dwcmbcr 31. 2019
Vnrcaliicd loss othcrcomprchcnsi\.-c income
Financial :tssct - FVOCI
IS0.000
150,000
Dccentbtr l t. 2020
Finuncial asscl - FVOCI
UnMlli.t.t.!d Josi - OIIH~r COOlJ)fl!hi:-nsi\C incoml.!
S0.000
50,000
Problem I S-5
Unrcali7cd loss - othc-r comprchc-ns i\'C income
100.000
Financial asset - FVOCI (600,000 - 500,000)
2
3
Co,h
financial .asset - FVOCI
Remiocd earnings
100.000
2, 100.000
2.000.000
100.000
Rclaincd earnings
Unn=alizcd loss - other comprehensive income
S00.000
Vnrcaliicd loss - OCl
250.000
500.000
fin111ncial asset - fVOCI
250,000
XYZ
1,200.000
Market
1.000.000
RST
'00 000
I 400 000
I !59 000
carrying amount
l"il~
To,al (1.400,000 - 1.150.000 • 250.000)
Tu1•J <OSI (1 ,000,000 + 500,000)
1,500,000
Mari:e1 ,alue
I I ~g il2D
Cumulative un.real12ed loss
350.000
Unre.ati2ed loss per book
Increase in unn.'UhZl.!d lur.s
I ml QQll
2VI !!Ql;I
Problem ls-6
20 19
I.
Trading sccuri1ics
2,900.000
3.600,000
Financial asset at fVOC I
Cash
6.S00,000
2. Unrealized loss - TS
Trading SC'Clu'l.tics (2,900.000 2,400,000)
500,000
3.
400.000
Financial asset - FVOCI
Unrealacd gain . OCI (3.600.000 - 4,000.000)
500,000
400.000
2020
I. Cash
Trading sccuntics( l/2 x. 1,400,000)
Goin on sale of TS
1.000.000
2. Cash
1.300.000
700,000
300,000
Financial ASSC'l - FVOCI ( 1/2 " 2.500,000)
Rctuincd e:1tn il'lgS
3.
1,250,000
50.000
Unrealized goin - OCI (500,000 x 112)
Retained c.-.rnings
250.000
Trading sccuri1ics
300.000
250,000
Unn:oHzcd gain - TS (2,000.000 - 1,700,000)
Security One
~curily 1\\o
300,000
Carrying amount
M arket
700,000
900,000
I 000 000
I 1211 000
' ll!l!l~
1709000
4.
Jt1nl.\ndlll 1ts.set - FVOCI
Unn:-alizl.'d gain - OCI
S0,000
50,000
Sl.'<..'W'i ty Three
Security Four
1,S00,000
I ''.liQ 000
2Z50QQQ
1,600,000
I "l!l QQ!J
' Sm!~
P roblem I S-7
O.Ccmb<r 3 1, 2019
Vnrca1i7cd Ion - TS
Trading securities
400.000
Financial 11»cl - F-VOCI
Unrealized a,;1in other com1)T't'hcnsi,·c income
100,000
400.000
100.000
Oecen,1bcr J t, 2020
Trading securities
Unr<>lizcd gain
900,000
TS (S.500,000
Financial asset - FVOCI
Unrealized gnio - other com1>n:hcnsivc income
(J,300,000 - 3, 100,000)
()00,000
4,600,000)
200.000
200.000
Problem I 5-A An.swcr A
1'ornJ nlarke1 value
1'otnl market value
Unrcali7cd g_.1in
Decnubtt 31, 2020
December 31, 2019
2.000.000
I 6 iin 000
359 QQQ
Problem 1S-.9 Answer 8
Under PFRS 9. th en: is no more imJIQinnent loss on equily investmem measured ,u (air value. whtther
through profil or toss.. or through olhcr comprehensive income, The cumufotivc unr~ lizcd loss of
r l,800,000 would continue to be n:portcd au:omponcnt ofOCI.
Problem 1S-10 Answer A
4,500,000
Tot~l market value - Dc:cemlxr 31, 2020
Total mark.cl value- December 31, 2019
Unrealizc<I loss in 2020
Unrcalizc..-d los1:1o - l)r:<:1..-mlx.'1' 31, 20 19
Toto I unn:.aJited loss - December JI, 2020
18QQ 000
( 300,000)
( ?()O 000\
c ~oo (H)Q\
Problem I S-11 Answer C
(Wl.000- 320.000)
Problem IS-.12 Answer B
Unrealized losses
260.000
Unrealized gains
Nt..1 unrc:1Ji-a'll los1:1o - IA.'Ct.-mbt..'1' 31, 20 19
~
40000
Problem IS-1 3 Answer C
1.450,000
Sulc price
l..css: Carryini amount ofR
Loss on sale debited t() rt-Laincd earnings
C'ash
Retain<.-d earnings
Financial llSM!'t - FVOCI
Rctainc:d eaminp
Unn--alitcd loss- other <:.ocnprehensive income
Problem IS-14 Answer D
(
I Ill) 000
Icg llilQ)
1,450,000
100,000
1,550,000
150.000
150,000
Zero
Problem IS-IS Answer C
Sales price of Security 8
Carrying amount o(SCC\lrity 8 - 12/31/2019
LA)ss on s:al~ of tmdmg sccurilies
1,100.000
Mnrkcc ,aluc of Security A - 12/31/2020
Morket , alue of Security A - 12/31/20 19
Unrcalil'cd loss on TS in 2020
600.000
I 000 Q00
Total loss (500,000 + 4-00,000)
I 6QQ 000
~ug llilQ)
~USI tW>
2'20 ilQQ)
CHAPTER 16
Problem 16-1
.July 15 Cash
Dividtnd income (5,000 sh.arcs x 5)
25.000
25,000
Dec. I 5 Memo - RcccivOO 1,000 shares l'CPf'C$Cnt ing 20o/• stock
dividend on 5,000 ori,sin:11shares held.
O.c. 28 Cuh (3,000 sh,,,... x 60)
180.000
Gain on sale of inves1men1
133.000
47,000
Lot No. I (2.400 !!hares)
Lot No. 2 (600/3.600 x 198.000)
..J.l.ll!lll
1n, cstmcnt in shares
100,000
JllJlgQ
Cost 0Finve~me:o1sold
Problem 16-2
I. lnvesune111111 Aycordinarysh:m•.-s(40,000x 50)
Cash
2.000,000
2,000,000
2. Meino Recti\'ed 200.000 1\ re ordlnal'y shares as
a re!luh of 5 for I split or 40.000 origin.ii ~~ires.
3. lnvesonent 1t1 Aye prererence.shares
125.000
In, es1mcn1 in Aye orchnaty shares
125,000
Market value
Ordioorysh,n:s(200,000 x 15)
Prcfrrcncc stuu\."S (20,000 x 10)
J.000.000
' 00 000
Fraction
30/32
2/32
' '00 000
4. lnvcstmci'.11 tn lkc ordtnary sbnres
Oh 1dend ,ncomc (200,000/4 S0,000 x 6)
S. Ca.h (80,000 x I 5)
Cost
),875,000
1~000
, mm~
300,000
300,000
1,200.000
lnvcstnll:'nt in Ay..:orditmry ;han:.s (80,0001200,000 x l,M7S,OOO)
750,000
450,000
Gain on Hie ofill\."CSIIUCI\I
Problem 16-3
I.
2
3
4
lnvestmc:.'111 in ANA ordinary shan:$
Ca.<h
300,000
fnvc..-stmc:nl in BcnS11et ordinary shares
Oi, iden<I income (2,000 x 60)
120,000
lnvcstmc:fll in ANA ordin.ary shilrt"S
Cash
420,000
Ca,h
Di,·idcnd income ( 12% x P200 = 24 x S.000 x 1/2)
300,000
120.000
420.000
60,000
60.000
S
Memo Rl"C'civcd 20,000 new ANA ordinary sh.ires as
\I result of a 2 for I split of I0.000 orialnal shares..
6. Cash (680,000 - 34,000)
lm·csllm:nt in ANA ordinary sharci;. (8.000'20.000 x 720.000)
Gain on sale of investment
646,000
288.000
35$,000
SMC 1>reftteoce share
Benguet ordinary share
Bcnguet ordinary share
Shares
5.000
10.000
2.000
Cos:t
1.200.000
1,000,000
120,000
ANA onlinary $!Um.:
.12.!lll!!
l.2.!lll2
41, 000
2 7~2 QOO
Problem 16-4
I.
lnvcstmcm m sharts
Cash
1.800.000
1.800.000
2.
10.000 righis
3.
Initial measurement of rights t I0,000 x 10)
4.
Share nght.S
lm·cstmcna in sh:m.: s
100,000
lnvtstmc:>nt m share$
400,000
5.
.ll!ll.ll!l!!
100,000
Ca,h(I0.()00 / S 2,000x ISO)
Share ng,h1s
300,000
100,000
6. Cash (10,000 x IS)
Share nghb
Gain on sale of rig.hts
I50,C)OO
7.
100,000
I 00,ClOO
S0.000
Loss on shar~ nghts
Share nghls
I 00,()00
Problem I 6-S
Requirement 1
125 • 100
Thcorclicol ,,:.,Ju~ •
• S.00 pcrrighl
4+1
o.
Shore righlS (25,000 x S)
lnYcstmcnt in shares
125,000
b.
Investment m shores
750,000
Share ri&hts
Cash (25.000 I 4 = 6.250 x 100)
125.000
125.000
625.000
Requ.Jrement 2
125 • 100
·rt,eoretical ,-alut • _ _ _ _ __ ... 6.25 peuight
4
•·
156,250
Shan: right,, (25,000 x 6.25)
156,250
hwcstmcnt in shflreS
b
Investment in share$
Shtre nghts
Cosh
781.250
156.250
625,000
Problem 16-6
Shon: righi, (40,000 x I 0)
400,000
Investment in shares
400.000
2. Investment in lihart:.i
1,500,000
Shon: righlS (30.000 x I 0)
Cash (15.000 sharesx 80)
3
Cash (6,000x 12)
Sh:1te riglus (6,000 x 10)
300.000
1.200.000
72.000
60.000
Gain on sale of 1'1g.hts
4.
U>SS on SIOC:k righu (4.000 x
Share ng.htS
12,000
JO)
First acquisition (3,000.000 -400,000)
New acq\lisition
40.000
40.000
Shnres
40.000
J 5 000
~
Cosl
2.600,000
I l~QOO
4 100000
l'robkm 16-7
lnvcslmc:nt in dmrcl
3 ,200,000
3,200,000
Cash
2. Memo
3.
4.
Rt't:ci\'Cd 20,000 shares ;u s.h~1re dividend on
80.000 orijpnal $h=ircs. Shares now held. 100.000.
Cash (100.000 xS)
Dividend income
500.000
Share nghts ( 100,000 x 5)
500,000
500,000
lm·cstmcnl in shares
5. Cash (40.000 x 7)
500.000
280.000
Sh•re ngln• ( 40.000 A 5)
Gt1in cm sale of righl.s
6.
lnvestm.tm m shares
Share ngh1:1 (60,000 x S)
C:c,h (60,00015 = 12,000 x 3-0)
200,000
80,000
660.000
300,000
360,000
7.
Cash (80.000 x 35)
Investment in shares (80.000II00,000 x 2.700.000)
Gain on ~ale of in\·cs1mcnt
Original acqu1s1lion
Nev. acquisition
2.800.000
2. 160.000
64-0.000
Shares
20.000
illl!l!l
Cost
54-0.000
6(,() QOO
.l2.Qllji
I l~OQQ
Problem 16-8
20 19
Aug, I
Oct. I
lnvestn1c-01 in shares
C.sh
60.000
Investment En shares
560.000
60.000
C.sb
2020
.July 1
Aug. I
560.000
ln\·c!ttmt.-nt in shares
Cash
480.000
Cash
ln\1es1ment in shares
G.iin on sole orm, e!ittru:nt
500.000
480.000
34-0.000
160.000
60.000
Lot I ( 1.000 shares)
Lot 2 (4.0<)0/8,000, 560,000)
280 000
CO$t o r invL'1illlK'1l l sold
l1!l.!l!!!!
202 1
f'<t>. I Rccci\,•ed 5.000 sh.1.res reprcscnung 50,♦ share di\·idend on
I0,000 ccmaining shotcs held. Shares no"' held, 15,000,
Nov. I Sh.arc nghl.5
150.000
lnves.tmcn1 in shtares
150.000
Loe 2-6.000 rights (6.000x 10)
Loe ) 9.000rights(9.000x 10)
C051 <1r riS,h lS l'cCcivcd
Ix<. I
Cash ( l 5.000x 15)
Sh.nrc rights
Gain on ~ le of shalt rights
Sununo.r-y of lnvestm en L1
Lot 2 (280,()0() (,0,(>00)
Lot J (480,000 90.000)
Total
60.000
...22.000
~
225.000
150.000
7S.000
Shares
CO.ill
6,000
220.000
...2.llOO
J.illOO
:.l.2!WlOO
.6lJl.!l!lll
Problem 16--9
Jan. 2 lnve.slnlertl i.n King Company
Cash
Mai·.
lnve-.sament in Queen Company
700.000
700,000
660.000
660.000
Cash
Apr.
Cash ( I0.000 X 5)
0 1\"idcnd UlCOlll~
50,000
S0,000
July 1
RccC'ivcd 2,000 share, as 200/4 share dividend on
I0.000 Queen Company shores oriainally held
S h•rcs oow held, 12,000.
Aug.
lm•ct-:lmcnl. in Princes..-; Company
S00.000
0.sh
Oc:t,
S00.000
Received 60.000 new s.harcs of Queen Comp.1ny
as n rcsuh of n S for I spli1 of 12.000 oriJPnal shares.
Co,h ( 10,000 xS)
Dividend income
50,000
S0.000
3 1 Mcmo - Rct"Ci\'cd 60,000 slock ,•ighu from Queen Compa ny
to subscribe for one new share at P20 for every
10 righis held.
Nov. IS
Dt'c.
IS
hwcslmC'nl in Queen Comp;any
Cash (6,000 shares• 20)
120,000
Cash (66.000sharcsx S)
Oivicknd incomC'
330,000
Cash (10,000 sl1>t<sx 30)
lm•estmcnl in Qucm Comp.my (10.000/60,000 x 660,000)
Gain on sale ofim·cs1mcn1
300.000
Summary or l11ves:Lmen1~
King Corn1,any shares
Queen Comp::uiy shares
Block I
Block 2
Princess Comi->any shnn:s
120.000
330.000
110,000
190.000
Shares
10,(100
so.ooo
6,000
.l.!l.l!2!l
l6Jl!lll
Cost
700,000
550.000
120.000
SOOQ!!!!
I 87Q 000
Problem 16-10 Answer D
Original shares on October I
Stock dividrnd oo November 30 ( 1001-)
Toto! shares
Sh~1rc--5 M>ld on December 3 I
&lance
& !er.price:
Cos• of share, sold (4,000 / 44.000 x 6,600,000)
Gain on salt
Problem 16,,-11 Answer D
Cash di,ickod (1(>1Yi, x S-00.000)
40,000
4 000
44,000
~
~
1,000,000
( ~!l!! Q!!!!)
~i;mamt
Problem 1~ 12
Question I Answer A
Jun e 1
Original shan:;s
Sha re dh 1dend -20-/4
Totol sho.n.=.s
30,000
4 000
_!.QQQ
~
Gain on sale
~
3,750,000
Sales price (30,000 x 125)
Cost o l' shares sold.
From June I 2.i,000 shun.- ,
From Dceembcr I 6,000 sham (6,000 1 36.000 x 3.600.000)
December I
20.000
2.000,000
600 000
1600 000
I I ljO 000
Question 2 Answer A
Avf'rage appro ac,h
Sale price
3.750.000
Co,;1 of ,ha,.. sold (30,000160,000 x 5,600,000)
G:iin on snle
' 800 000
<tljnnon
Question 3 Answer A
Divid(nd inco1ne (50.000 x I0)
Gain on sale of' inves11nenl - FIFO
·1 ornJ rncome from LO \'(Slment
500.000
I 1"'0000
I M9000
Problem 16-13
QucstJoo I Aoswel' D
C..t of righlS (100.000 X 6)
Question 2 Ans wer D
C;ljh pa)i,1cn1 (20,000 :t 90)
1,800,000
Cosl o f rig.Ins cxcrcil<..-d
Total COSt of new invCS1ment
600 000
?400000
Problem 16-14 Answer B
Initial cost of rights {S0.000 x 20)
Cash paid for new shnrt.-s (25,000 x 90)
Totol cost of new shares
1,000.000
, '50 000
, ' lifl oon
Problem 16-.15 Answer B
Toto I COSI of rijjJ,tS (60.000 x 5)
ll!!l.il!Q
I 0,000 shan:s x 5 rig.lUJ
lll.l!W! rights
C.Sh paid (10.000 x 80)
800.000
Cos1 of rig)us exercised (.S0,000 x 5)
Tornl c:ost of900sharcs
l "ifl ooo
I 059 000
Problem 1~ 16 Answer A
Original invesLmem
New inves1mem acquired 1hroogh s1ock riglus (50.(X)O .:< 80)
ToLaJ
Shnres
C o,;t
50.000
3.800,000
~
4 OCIO 000
ZHOOQQQ
.IJWl!!I!
FIFO approach
S.,lcs price (25,000, 90)
Cost o f shares sold ( 25,000 / 50.000 x 3.800.000)
Gain on sale
2.250,000
I 900 000
JSQ QQQ
Average approach
Snlcs price
Cost o f ,hares sold (25,000/ 100,000 • 7.800.000)
Gain on sale
2,2$0,000
I ?SO000
300 000
CHAPTER 17
Problem 17-1
2019
ln\'cstmcnt in rnocfa1c
5,000.000
5,000.000
Cash
Investment m 1ssoclatc
ln,•estmcnt income (30'/4 x 4,000,000 x JIil)
1.200.000
1,200,000
Cash (30"/4 x 3.000.000)
lnvesuncru u, rnocfotc
900.000
lnvesuncnl moome
200.000
900.000
(n,•esm~m m rnoc1~1c (1,000,000 / 5)
2020
lnveslmmt in associtite
200.000
1,800.000
1,800,000
lnvc:s:tmcnt mcome (30'/4 A 6.000,000)
C•sh (30"/4 • S.000.000)
1.500.000
1,500.000
lnve;;tmttll in associate
fnvc"tml."fl1 income
200,000
200,000
fnv c:stmc:nt ln associate
I.
Investment in mociatc
3,500.000
3,500,000
C1o,;h
2.
Investment in associate
lnvcslment inco1llC' (40¾ x 4,000.000)
1.600.000
1,600,000
3. Cash(4-0%x 1.000,000)
lnvcslmcnt ln associa1c
400.000
4
15-0.000
Investment income
400,000
Investment in associate (600.000 / 4)
15-0,000
Cos1
3.S00.000
, 800 OOQ
Carrying amc:u.int or net assets acquired (40',♦ x 7,000.000)
Excess of cost o,•cr carrying amount
txocss auribullble m equipn-,ent (40'._ x 1,500,000)
C.11ccS$ 1U1ribu\lb1e to i,wemory (40"/4 ,'< 500.000)
700,000
( 600,000)
C 200000)
( 100000'
Excess net fair ,•aloe over cost
S.
lnvts1rncn1 inoornc
200.000
bwes1mcnt in associa1c
6.
Investment m o.s~ocintc
In, estment income
Sh,11'C in net ancomc
Amnrtiza1ion of exec;,.,~ a11ribul(1blc 10 ct1uipmcn1
Amorti7.ation of excess attribU1ablc to i1wen1ory
E.-<cess nel fair ,--alue ove1·cost
Net uwestment mcome
200.000
100.000
100.000
1,600,000
( 150,000)
( 200.000)
100 OQO
l 1 ,0 000
Problem 17- 3
Requirement I
3.
b.
c.
d.
lnvcstmcnc in BS$ocintc
Cash
1.700.000
1.700,000
Investment m associnlc
lnw:~lmcm iooonw (40o/. x 650.000)
Cash (40'Yo x IS0.(100 )
Im csimcm in tt.'isociatc
ln vC$tmcnt m llSSOCiote
Rc\alUltion i,,ll111lus
im -.:::.tee c-10,. x 1,300,()0())
260.000
260,000
60.000
60.000
520,000
520,000
Note
a. Cos1
1.700.000
I 600 OOQ
lntel\."SI acquired (40~. x 4.000.000)
Goodwill - not amol'lttcd
100 000
b. There is no need 10 adjust for the difference in depreciation method. Lf both entities as method cha,
best reflects the flow of benefits as the assc'3 arc consumed. then there lS no pobcy difference.
Requirement 2
Acq uisi1ion co!II
1.700,000
260.000
Sh~•rc in net income
Share in cash di\'idend
Share i.n revalua11on surplus
60.000)
510 ()00
, 420 000
Curr)1ng omaunt - Oecembcr J I, 2019
Proble.m 17-4
I.
Journal e ntries
a.
ln\'CSLmcnt In associate
6.000.000
6.000.000
Cash
b.
In\ l!SLment in U..'tSOd atc
750,000
750,000
lm~:.tment incom~
t.
Cash
450,000
ln,cstmcnt ln ossoc,11.te
d.
In, C$lment i01..""01ne
In, eS-tnlent in assoc1:i.te
2. Share in net incon:-.c
Amortization of patent (2,000.000 / I 0)
Investment mt'Ollll!
450.000
200.000
200,000
75-0.000
(mll!!U)
~
3. Acquisition cost
6.000.000
55-0.000
lnvc:stmem mcomc
Shn~ in cash divi<knd (3,000,000 x I5'}•)
Cmrying 1,mount
( 4 SO flOO)
6 100 000
ln1crcs1 ocquired (30,000 1200,000)
Acquisition oost
Carrying amoum of net assc&S ncquircd
• oon ooo
[xcc.ss of COSI up1>licabl1; to p.alttll
, QQQ QQQ
6.000.000
Problem 17-S
Share in 2019 ncl incom e
Amorl ir.ilion of c:xcc:ss (400.000 / 20)
900.000
Investment income for 2019
~
20 000)
Acquisi1ion co.st (20,000 x 120)
Nd osSd.S acquired (25% • 8.000.000)
2.400.000
' 000 OOQ
400 Q9Q
Excess of cost
2. Shan: in 2020 n<I income
Amortizatioo or excess
975.000
( '0 000)
~
lnvdtmtnt mcome for 2020
3.
2.400.000
Acquisirion cosr
Share: io (lL':t inCQ1~
2019 (25~. x J,600,000)
2020 (2S~. x 3,900,000)
Share in cash dividend:
2019 (20.000x 16)
20:!() (20,000 X 20)
900,000
975,000
( 320.000)
( 400,000)
Amorl in,lion of cxccu:
2019 (400.000/20)
20:!0
20.000)
(
(
20 000)
1
Carrying amount-12/31/2020
515000
Problem 17-6
RequJrement 1
I.
2.
Investment m associate
Ca,h
6.500.000
Loss frotn invesl1ntr11
ln\'eStmenc in assodate ( ~• x 4,000.000)
1.600.000
3. Ca.sh (4-0% x 2.500.000)
6,500,000
1,600.000
1,000.000
ln\'tStment in a.~soc.iate
4.
Loss from invcslmcnt
Investment in as,s ociate
1.000,000
150,000
15-0.000
Acquii-ition cost
6,500,000
Carrying amount of net a!-SCLS acquired(~ x 12,500.000)
Hlim Q2ll
Excess annbutable 10 cqu1pme-n1
I '\~Q2!.l
Am0rlitation ( 1.500,000 / I0)
~
Requirement 2
6.500,000
( J.600.000)
( I,000,000)
( I SQ®)
Acqu1smon cost
Share in net loss
Sh:i1'C' in cash dividend
Amortiwtion of excess
Car111ng amouot-1'2131/20 19
32S9QQQ
Problem 17-7
20 16
Im csuncnt In asso,datc
7.000,000
7,000,000
C.uh
loss rroin IIWtstment
2.000,000
lmc!l-tmcnt in associntc (40-o x 5,000.000)
2017
Loss from io,•cstrncnt
2,000,000
2.800,000
ln,·c:s.1men1 in .assoc;i:uc (-10,o x 7,000,000)
20 18
2019
2,goo,000
Advances to associate
Cash
2.000,000
Loss from i.nvtsunent
lmest.rnent in associate
Ad\•onces 10 associate
3.200,000
Loss from investment
A<h·~nccs to associa1c:
1,000.000
Acquisition cost
Ca.sh ad-..'3J)CC$
Total invc.stJ11C111
Net loss rrom 20 1~ 10 20IS (40% x l0,000,000)
C'alT}'in,¥ ffllOUnl (>f inYCSlmtnl - 12/3112018
SMre in nc:1 loss of 20 19 (40'/4, 4,000,000)
Loss 10 be reponcd in 2019 should be <:quol 10 the c•rrying
nmount of the investment only.
2.000,000
2.200,000
1.000,000
1,000,000
7.000.000
>OQQQOO
9.000,000
(8 OQQ !J!!!l)
I Ill!!~
I 600 000
1noonw
Problem 17-8 Answer R
lm•cslment income (20'~ x 1,600.(J00)
Problem 17-9 Answer C
Cost
4,000.000
Less: Net assets oc(J\1ircd \40'/, x 8.000.000)
1200000
Excess of cost or goodwill
Sh.ird n n.;:dnconw from April l to rxoonbcr 31 (1 .000.000 x 9/12 x 40--~)
300 000
l!Wl!!Q
Problem 17-I0An~wc:r 8
Acquisition cost
Sb~u'e in net mcumc (20'1.1 :c 1,800,000)
Sh;:u't': in cash dividend (20¾ x 600,000)
Amortiwtion of c:xcc:ss ( 1,000.000II0)
C'nr11;ng amount
7.000,000
300,000
( 120,000)
r IQQ®I
Z IMQQQ
Problem 17-11 Answer C
lnler<SI (30.000/100.000)
ln\•es1mcru income (S.000.000 x 6/12 x 30%)
.l!a,i
liJl.!lQ!l
Problem 17-12 Answer A
Acqu,sitJon cost
Shnr~ in net income (100/., ~ S.000,000}
Sh.ire in cash di\;dcnd (IO¾ x I.S00.000)
Carl)ing amount
4.000,000
S00,000
( I SQ 000\
4J59QQQ
Problem 17.13 An$wtr D
A<qu1Siuon <OSI (SQUEEZE)
Shnrc in uct tnco,n~ (2S11/i1 x 1,200,000)
Sh::irc in cas.h di\·id md (2S•1♦ x 480,000)
Carl)ing amoum December 31
1,720,000
300,000
i?OOOO\
I 900 OQO
Problem 17-14 Answer 8
Acquisition ros1
Net asseu acquired (40% x S.000.000)
E..~ccss of cost
Atmbutable to eqlupment (40,~ x k00.000)
Attributable to building (40%1 :c 600,000)
Ac:qu1sitJon c:0s1
Net
UlCOO'IC (40~{. X
1,(,00,000)
Cash diYidcnd (40'/4 x 1,000.000)
Amonlu tion of excess·
Equipment (320.00014)
Ouilding (240,000 / 12)
Carryint amount orin\-es1mcnt - ()c(1:mbcr J I
25 60,000
' 000 ooo
~60 009
320,000
~
~
2.560,000
640.000
( 400.000)
80.000)
20 000)
, 700 999
Proble.m 17-I S Answer A
Nci income
Less: Preference di,idtnd ( 10% x 2,000,000)
5,000.000
Net mcome to ordinary sh.are_s
200 ooo
4 §00 000
lm'CSlmcnl income(S~ x 4,800.000)
' 400 000
118
CHAPTER 18
Problem 18-1
I.
Net incomt for 2019
Unn.""ali~d profit in 12/31/2019 inventory of Hca\·cn (900.000 - 600.000)
Adjuslcd net iU(omc
3,000,000
( 100 000)
Z700 QQQ
~
lnvc-stor·$ shtu\! (20% x 2,i00,000)
2. Net u10001(' for 2020
Reahzt'd profit in 12/31/2019 inventory of Hcrl\en Company
Unrealiz«I profit in 12/31/2020 invcnto,y of Heaven Compony (750.000 - 500.000)
Adjuslcd net income
4,000.000
300,000
( ?~0 000)
4 050 000
lnvcstor·s 1,haR' (20¾ x 4,0S0,000)
.&lJl.llQO
Requirement 3
2019
Jan.
tn,~tStmtnl i.n associate
Cash
6,000,000
l:>t<-. 3 1 ln,eSLment in a.~i:~ne
540,000
6.000,000
54-0.000
tn,•cShll eDl U1COMC
3 1 Cash (20% X 1,000,000)
200,000
tn,•es1men1 lll woc,ate
2020
Dec. 31 fm•cstment in associate
200,000
810.000
L1wes1mcn1 moome
31 Cash (20Y, x 1500.000)
ln,•es1mcnt m mocfo1c
810.000
300.000
300.000
Requjrcment 4
6,000.000
540.000
200,000)
810.000
Ac<1uiii1ioo wst
Sht1rc in profi1 ofossociate 20 19
Shart in cash di\'idend- 20 19
$ha rt in profit orassoc1.11e- 2020
Share in cMh di~idcnd 2020
Cn.rr)ing 11mo11nt
lOO OOO\
6 850 099
12/31/2020
Problem 18-2
I.
Net income tOt 2019
Unrealiltd profit on sale of equipment sold on 1/112019 (800.000 - 500.000)
Re.al1zed profil on equlpl'nenl sold on 1/112019 ( 1O"~ x 300.000)
AdjWlll'<I net incorn..:
Investor's shatt (40% x 1.730.000)
(
2.000.000
300.000)
10 00(1
I 7' 0 QQQ
119
2
3,000,000
30,000
400.000)
40,000
Nc1 tncomc for 2020
Rc.ali~.cd pror., on cquip1-nen1 sold on I/ln0IQ ( 1O"~ .x 300,000)
Unn,•li1cd profit on sale of cquipmenl on 7fl /2020 (900.000 500,000)
Rt-.alized profit e n equiprnerH sold on 7/1/2020(400,00015 x 1/2)
Unrealized profit on ending invenlOI)' on I 2131/2020 (2.800.000 - 2.000.000)
Adjus.1cd net iuc:omc
( SQQ QOQ\
I 320 QQQ
Investor's share (40% x 1,870.000)
.1:ltOQO
Requirement J
2019
fan.
ln\'cstmcru in os,-ociat-.'
S,000,000
Cash
IA"C. l I
lmcs.unc-nt ,n assocr::uc
s .000.000
692,000
692,000
ln\'e,1m m1 incom~
JI
Cash (40'/4 , 800.000)
320,000
ln\•cstntcnt m as.qocm.tc
320,000
2020
()«, 3 1
ID\'CSUlltnt ID U.ssoci-3lC
748,000
748,000
lnvcslmefll income
3 1 Cash (40% x 1,000.000)
400,000
ln\fCSlrllent oo a.s.,qoc,a1c-
400,000
Requircmcnt 4
S,000,000
692,000
( 320.000)
748,000
( 400 (tOO)
Aequ1si11on cos!
ln,•cs1mcn1 income - 20 19
Cash dividend -2019
lm•cs1mcru income - 2020
Ca,h dh·idcnd - 2020
Carrying amount - 1'2/31/2020
" 2?9000
Problem 18-J
Acqnisiticm cost
Ne• assets acquired (30% x 6,000.000)
E.,ccss of cost
3.200.000
(I SQQ QOO)
1.400,000
excess auributable to cquipn:)c111 (JO'le x J,000,000)
(
Goodwill
2.
900000)
~!!!Dall
Untt.:ali.1t..'<1 profit on 12/3112019 invenh)f)'
Adjusted net i1'1Come
4,000,000
( 6Q!l Q!l!l)
l~QIJQQll
Investor's <bore (30%, 3.400,000)
Amortir.ition of cx<-Ci$ attribuwbl..: 10 equipment (900,000 / S)
( I SQ il!!Q)
Net u,oomc ror 2019
1,020.000
l.nvestmern income
840 000
R equirement 3
I.
lnvestmem in associate
3.200,000
3,200,000
Ca.sh
2.
lrwestment m associate
ln,·estrrk'int Income
840,000
840,000
120
3.
Cash (30% • 1.500.000)
4:i0.000
lnveslmem in associate
4
lnva.1mcm in associ::t1c
R.CV31uation surplus {30~ x 2.000.000)
45-0.000
600.000
600.000
Rc.q uircmcnt 4
Acquisition co"1
LD\'eslment income
3.200.000
840.000
( 450.000)
Cash dividend
ltevatu,u,on 3urplu11
C.:u-rying amount
600 000
4 199 QQQ
12/31/20 19
Problem 184
Requirement a
1:nir \Oluc of 10'~, C'<h,hng UllC'l'CSI
2,400,000
Cost of:ZOil/4 new intcrcsl
5 ()(10 000
·rot.ii cost
7.400.000
C.arrywgamount of nc1assets acquired {304'/. x 20,000.000)
6000 000
I 400 000
Goodwill
Requfrement b
I.
Memo- Rccci,·«I 500 shares as 10% slock dividend oo 5,000 o riiin al
Dale ordinary share$. Shares now held, S.S00.
2
C,c,h (5,500, 20)
110.000
110.000
Oivid'-'"nd income
3.
Investment in 115sociulc
s.000.000
C:osh
Investment in 1usociulc
Gain on rcmcasun-nu.-nl to cqt1ity
lnvcsumnt in 11,socia1c
5,000,000
400.000
400.000
2.400,000
2.400.000
Investment in e<1uity sccuriti~
(Rcclassifica1ion)
4
lnv~tmcnt in 1usuciu1c
1.800.000
1.800.000
l"'·c~lmcnt inconlC' (30¾ Jt 6,000.000)
Cnsh {75,000 x 20)
Investment in :LSsoci:11c:
1.500.000
1.500,000
RcquJr cment c
Noncurrent assets:
lnve!,IJJll"l'll m ~uity SLX"unties (Note)
lnvestme nl m U-'SOC1.tlc fox Company
2,85-0.000
7,700.000
Note - lnvestmenc in equity securities
!>.lie Corponnion, 5.500 s:h;'lres
l.2:i0.000
Ever Corporation. 10.000 shares
loiaJ cost
I 600 000
' H:'O OOQ
121
Problem 18-5
Requirement I
6,000.000
1:ai.r ,,aluc of cxis:ling interest
11 000000
C<r-t o f 1~ldition.'ll inti:res1
Total cost
17,000.000
Car11ing amount of ncl assets acquired (300-• x 40,000.000)
F,ccss of cost
E,,;cC$.S attributable to cquipmcnl (J~ x 5,000,000)
Goodwill
11000000
S.000.000
,I 500
~oo 000
ooo
Requirement 2
20 19
.Jan,
Finaocial asset at FVOCI
S.000.000
Cash
Financial asset at FVOCI
S.000.000
500,000
S00.000
Unreali:,cd gain- OCI
2020
Ix<:. J I
Financial asset at FVOCI
Unre.aliud gain - OCI
;00.000
;00.000
2021
.Ian,
Unrcaliicd p in - OCT
1.000.000
1,000,000
Retained earnings
lnvcstn-.cnl in 35$(X'i:ltc
11,000.000
Cash
Dec. 31
11.000.000
lm.'ntmcnt in :1ssocin1c
Financial asscl at FVOCI
6.000.000
lnvctamcnl in associate
2,700,000
6,000.000
ln\'cstment income (30%, 9,000.000)
31
Cash (30'~ x 4,000,000)
2.700.000
1,200,000
1,200.000
Investment i n associate
3l
lnvcsllncnl income
300,000
lnvcstmcnt in associt11c (1,500,000 I S)
300,000
Problem IS-6
2019
Jan.
tx-c. 3 1
ln,·estmetu in associate
Cash
8,000.000
ln\tS.lmcnt in a.•>sociati.'
1500,000
8.000,000
ln,estrnent income (30~~ x S.000,000)
3 1 Cash (JO¾ x 2,000.000)
lnves1men1 in woc,att
1,500,000
600.000
600.000
122
2020
June 30 lnvc,1nu:n1 in ossoc1::1tc
1.800,000
fn\'C:-Jlmml incomi.- (30'tl., x 6.000,000)
July
I C:uh
1.800.000
6.000,000
lnvcs1mm1 ,n :usocmlc (10,700,000 x 1/2)
S,JS0.000
Gain on sale of investment
Oct.
650.000
rm•c.i.tmcnl in ossoc131c
Gain from remeasurement 10 fair \"nluc
(6,500.000- 5.350,000)
1.150.000
Finnncial as5Ci at FVOCI
ln\'CSlmccn in associate
6.500.000
Cash (2,500.000 x I 5%)
Dividend income
Ike. 3 1 Unrealized loss o lhc r comprehensive incon-.c
1.150.000
6.500,000
375.000
375.000
(.00.000
Finoocial asset•• FVOCI (6,500.000- 5.900,000)
600.000
Problem lS-7
Question 1 Answer A
lnvc.s1mcn1 income for 2019 equal 10 1hc dividend received in 2019 ( I0-/4 x 2.000.000)
Quesdon :2 Answer 8
lm•es1men1 income for 2020 (3,00/4 x 6,500.000)
I 259 QQQ
Quescion l Answer B
r-air \'aluc of lfr'o interest
Cost of20"/4 nc" in1crc:s1
Toto I cost of im·cstmcnt - J:munry I, 2020
Shore in net income for 2020 (30'/ , x 6.500.000)
Shore in cash dividend for 2020 (30% x 3.000,000)
Ca1'1')1ng amolUll December 3 1. 2020
6,000.000
10000000
16,000.000
1.950.000
900 000)
!2 Q'iQ000
N01e lhat the-re is no exc.ess of cost over carrying amount bttause the. fair \.'tllue of the nee asseu of the
Jn.,.estee equaled c.anying amoum.
Problem 18-8
Quest.ion 1 Answer A
1,500,000
QuestJon :2 Answe:1· B
1,2S-O,OOO
Question 3 Answer 8
11.800.000
123
Problem 18-9
Quescion I - Answer
n
Shore in 2019 nd income (3~/4 x 1,500,000)
Quesdon 2 - Answer D
Atqu1si11on c-ost
Shm-c in ncl income - 20 19
Cash dividends - 20 19 (30'/4 x S00.000)
Carrying amouot-D<..-ccmbcr3 1. 2019
2,000.000
45(),000
( 1so 000)
'> 300 QQQ
Question l - Answer A
Currying amount- December J I, 2019
Sho,-e io nee in«>mc u1>to June JO. 2020 (30-:, x 1,000.000)
2,300.000
100 000
Carr)iog amount - Juoe 30. 2020
? 600 000
Sulcs price
C;m)'iog amount sold (2,600,000 x 112)
Gain on sale
2,000.000
I lQO OOQ
Fair ,oluc ufrc&ajncd invc-"'mcnl
Carryina amount of retained 1nvcsamm1
700 QQQ
2.200.000
0 100000)
Gain from rm:u.."aSurcmcnt to fair value
200 000
Gain on s:;ilc
Volin on ~ measurement
700.000
900.000
300.000
IS(),000
Share in net income from January I to J unc 30, 2020 (30% x 1,000.000)
Otvidcnd inoon,e oo October I, 2020 ( I S%x 1,000,000)
Increase 111 fair, alue on 0...'<lcmb~r 31, 2020 (2,000,000 • 1,600,000)
Totnl income
'00 000
z2;;;9 000
124
CHAPTER 19
Problem 19-1
Trading Jtec:uritics
Cash
Jan.
3,761.000
240,000
Ca.sh
July
3,761,000
Interest incl)fflc (4,000,000 <t 12¾ x 6112)
lxc.3 1 Accrued mterest receivable
240.000
240.000
lntctt'sl ,ncon1c
31
Tradmg securities
Unrealized g;,in - TS \4,200.000 - 3.761.000)
240.000
439.000
439.000
Problem 19-2
Aus
31
Tm dins securities (S.000,000, I04)
lntc,.., income (5,000.000 x 12% x 3112)
Cash
S.200.000
150.000
Trading securities (2,000.000 x 98)
1.960.000
40.000
lntcresl income (2,000.000 x 12% x 2/ 12)
5,350,000
Cash
Nov.
Cash (5.000.000 x 12% x 6,112)
2,000,000
300.000
300,000
lntercst income
txc.
Cash (2,040.000 + 20.000)
Loss on !Wk of trading sccuritic:,
Tradi.ng :,ccuritics
2.060.000
40,000
2,080,000
20,000
ln1eres11nt.'(Mn c{2,000,000x 12"o x 1/12)
Sellmg pric:.: (2,000,000 x I02)
Les,, Co,1 ol'bonds sold (2,000/5,()00, 5,200,000)
2,040.000
' 080 <HlO
Lo,-s on sale
31
31
Ca,h \2,000,000 • 12% x 6,112)
lnlercst income
Accrued interest receh able (3,000.000 x 123/o x 2/ 12)
(
120,()0()
120,()00
60.000
60,000
lnlerdl intomt
31
Unrcali2:cd loss - TS
160.000
160,000
Trading i;ocuntie.s
Acme bonds (3.000.000 x 98¾)
Avco bonds (2,000.000 x 99"/4)
:Ul lW)
Carrying amounc
3.120.000
I Q6() 000
"i f»lQOOO
Market
2.940.000
I 9~g !!!l!l
!!220~
Current wees:
Tmding sc:curihi:5, al fim value
4,920,000
12S
Problem 19-3
Requirement a
March I Tf'Jdtng sccuritteS (2,000,000 ;\ 93•/4)
lnt~n!.'i.l ancome(2,000,000x 121Y.x 1/ 12)
1.860,000
20,000
Cash
1.880.000
April I Trading securi11cs \4.000.000 x 95%)
Interest tncomc (4,000.000 .'( 121¼ x 11 12)
Cas.h
Aug.
Sept.
3.800.000
40.000
3,840.000
Cosh (2.000.000 x 12¾ x 6.'I 2)
ln11:rcs1 income:
120.000
Cash (4.000.000 x 12~, x 6/12)
240.000
120.000
tn1eres1 income:
Cash ( 1.050.000-. I 0.000)
lntc:rcst incomc:(1 .000.000x 12~~x l/12)
Tmdin,g b1.-curitics
Qi.jn on saJc of tr.adin¥ sccuriCi«..-S
Oct.
240,000
l.0<,0.000
10.000
950,000
100,000
1,050,000
S:olcs price ( 1.000.000 x 105•,J
Les,:
or bond, sold ( I ,000/4,000 x 3,800.000)
cos,
QSO 000
Gain on sale
Ca.b (2,000,000 + 80,000)
100 000
2.080.000
1.860,000
80.000
140,000
Tradin_g ~-curili<:s
1nltn!'$1 income (1,000,000 x 12% x 4/12)
Gain on sate of uading sc-curities
Sal"' price (2,000.000 x 100'/4)
Less: Cos1 of bond.,; sold
2,000.000
I 860 000
Ow..n on saJc
31
31
149 000
Accrued interest ~eivable (J,000,000 A 12% x 4/ 12)
fotercst income
120.000
Unrealized los.s - TS (2,&50.000-2.700,000)
Trading secunties
150,000
120,000
150.000
Requirement b
cu,·rtnt w,u:
Tn.)ding sccuri1N!11.. at fair, aluc (J,000.000 x 90)
2.700.000
126
Problem 19-4
20 19
July
Tniding 5ccuritics
Commission expense
loltrt$.I i_llC..."OOlC (2,000,000 )i. 4¾)
2.200.000
S0,000
8-0,000
2,330,000
CniJ\
Dec. 31
Unrl':.1li7cd lus.s TS
300,000
Tradina securities
300.000
1,900,000
Mark<1 •·oluc (2,000,000 x 95)
C1myin1 amounl
Unrealized loss
D«:. 31
2 200 QOQ
300 QQQ
Cosh (2,000.000) '8%)
160,000
160.000
Interest ill('omc
2020
MOl'c hJI
Cash
Trading secuntie:s
G::un on sale.of TS
Jnu:rcsa income (2,000,000 x
2. 14-0,000
1.900,000
200,000
40,000
s,., x 3/12)
Problem 1\1-S
20 19
O<t.
4,300,000
100,000
lnvcsimcnl in bonds
lntcrcsl im.-ome
Cash
()«:. J I
4,400,000
200,000
Accrued inlere.sa n."Ctivable
200,1)00
lntere~t income
(4,000,000 x IO'Y. x 61 12)
31
l_ntcresl inL-omt
Jm·cstmcnt in bonds
0<1noer I, 20 19 10 January I. 2026
C<>.<1 (4,400.000 - 100,000l
Face value
Premium
12,000
12,000
-
75 months
4,300,000
~
llQQ Q2D
J~QQQ
~
Monthly amo11irn1i<,n (300,000 115)
Amoniu.tiu,1 from Qaoba' I to Dccmibcr 31, 2019 (4,000 x J)
.llJl!l!l
2020
Cash
fan.
200,1)01)
Accrued in1cn:s1 rccci,1J1blc
Cash (4,000,000 x 10'/4 x t\112)
July
200.000
200,000
lntcrdt ,neome
0..'<. J I Accrued intcn."St receivable
Interest ,ncome
31
lntcr~t income (4,000 '< 12)
ln\'CSlmtnl '" bonds
200,000
200,000
200,000
4S.OOO
48,1)01)
127
Problt-m 19-6
Requirement a
2019
Moy I
(n\'cllltnml in bonds
fnh:rcsl income
5,640,000
180,000
Cash
5,820,000
5,640.000
IRfl QQ!!
(6,000.000 X !).1%)
J\cc:rucd inlcrc:sl (6,000,000 x 12% x 3/12)
('051
~S2DilQD
Total payment
Aug. 1
360,000
Cash
lnh:rc.111 incom e (6.000,000 x 12"t x 6/ 12)
360,000
Dec. 31 1\ ccrued inicrcst rtccivable
ln1crc:s1 income (6,000.000 x 121}.~ x S/ 12)
300.000
bonds
6-1.000
31
ln\'CSlnlC'lll in
300,000
lnlcrcill income
64.000
45 months
May I. 20 19 to Fcbn,a,y 1. 2023
Monthly amo11i1at1on (360.000 / 45)
2.!ll!!!
ti:Wl!1
May I lo Occl!mbcr 3 1, 2017 (8,000 x M)
2020
fan.
ln1crcs1 income
300.000
300.000
Accrued inlcrcst receivable
Feb.
('ash (6.000,000 X 12% X 6/12)
360,000
360,000
(ntcn.'.!11 inCOO'lc
Aug.
Dec.J I
Cash
lnlcrcil lncotnc
360,000
Accrued 1ntercs. receivable
300.000
360.000
300.000
tn1ercs1 lll OOOl C
31
lnvcst1ncnt in bond.i
lntcres.1 rneome (8.000 .t 12)
96.000
96.000
2021
.lao.
l'cb.
May
Interest incon:ie
Accrued intt~t receh able
300,000
Cash
lnteres11.ncome
360.000
lnvesamc-nt in bond$
l.nteres1 income (8,000 x 4)
300,()00
360,000
32,000
32,000
128
Moy I
Ca.,;h
lnvcsuncnt m bonds
6.480,000
lnteres1 mcorne
Gain on sale of bonds
S,KJ?.00(1
18-0,000
468.000
Sole price (6.000.000 x 105)
Carrying amount
6.300,000
; &31 QOO
G.iin on sale
46SQQQ
6.300,000
18-0 OOQ
Sale price
Accru«l
in•=• from February I 10 May I. 202 1 (6.000.000 x 12% x 3112)
Tot1l cash l't(!civc::d
6 489 000
Cost
S.64<1.000
Amortizntion of disc:oun1 from l\fay I. 20l9 to ~fay I, 2021 (8.000 x 24)
Corryin_g omount S/lnOl I
~anoon
, ~, 000
Problem 19-7
Requirement a
Year
Bond o utstandlng
Frac.tlon
Amortb.arlon
2019
2020
2021
2022
2023
1.000.000
800.000
600.000
400,000
10130
8/30
6/30
S0.000
40.000
30.000
20.000
413()
}()O ()(l()
.!/JO
...lJ!.ll!lQ
~
' QOO 900
RequJrtmenc b
20 19
J:io.
l, IS0,000
l_n\•estmcnt in bonds
l, IS0,000
Cash
June30 Cash
lntcn:s1ml'Ofllc( l.000.000,c 12-}.x 61 12)
60.000
Ix<. 3 1 Cash
60,000
60.000
lntc~I i.ncome
31
60.000
lmcr(St income
S0.000
S0.000
lnvcslm cnl in bonds
Problem 19-.'!
Bond year
1010 112019 - 02/01/2020
02101/2020 • 01/0112021
02/01'2021 - Ol/Olf1022
llond
OU~landin i;
3,000.000
2,000.000
1.000.000
M o nth.'1.
o utltanding
•
12
12
Pe.ico
month
12.000.000
24.000,000
12 QW!~
:1~1l!lQl2(.?ll
Discoun t
F"raction
amortization
12/48
7S,OOO
i.&!43
U-0.000
1214.S
~
lllll.!lllll
129
20 19
Oct.
I
bouds
lnre~ l income ().000.000 x 12¾ x 2/12)
f.D\'Cl>lllltn l ID
2,700,()()()
60,000
2.760,000
Cash
[>cc. 3 1 Accrued U1tcrcs1rccdvable
lntcrcs1 incom e (3.000.000 x 12~. x S/12)
3 1 ln\ t.Slnltnl in bonds
1
I SO,()()()
IS0,000
56,250
fn tcrcsl income (75.000 x 3/4)
56.250
2020
,Ian.
lnteres1income
IS0,000
150,000
A('('nled interest rttei\'able
Ca.<h (3,000,000 • 12%, • 6112)
F,-b.
180.000
interest income
Cash
lnvtsunen1 i n bonds
Aug.
Cash(2,000,000x 12'¼ x 6/12)
180,000
1,000,000
1.000.000
120,000
ln1ere,u income
IX(;. 3 1
Accrued mleresl rccci\11blc
120,000
100,000
ln1crc111 income (2,000.000 x 12•~ x 5/12)
3l
Lnvcstmcnt in bonc.h
ln1erc:,t inoomc
100.000
156.250
I 56,25-0
From January I to February I. 2020 (75.000 • 1/4)
From fd>ruary I to O«<!mbcr 31 . 2020 (150,000 • 11/12)
1
T 0 1il ,11nor1iza1ion for 2020
~
18.750
n ,oo
130
CHAPTER 20
Problem 20-1
Requirement 1
Discount
lntemt received
lnterest income
amortization
Carrying
amounc
01/01/2019
12/31/2019
160.000
190.050
30.050
1.900.500
1.930.550
12/31/2020
12131/202 1
160.000
160.000
193,055
1%,395
33.055
36,395
1,963.605
2,000.000
Date
Requirt:ment 2
2019
Jan.
(Q\'CStmCnlS In
bonds
1.900.500
1.900,500
Cash
IA>c. 3 1 Cash
160.000
100,000
lntcre!H ancocne
31
lnves1men1 in bonds
30.050
30.050
lnlcres.t UlCOOlC
2020
lk<.3 1 Cash
100.000
160,()()(1
lntercs1i.nt'Ome
3 1 Investment in bonds
33.0SS
33,055
lntcre,sl IOCOOJC
2021
o.e. 3 1
Cash
160.000
160.000
lnt('f\.~SI lflC'OOl C',
3 1 lnve.stmem in hoods
36.395
36,395
lntCtt.Sl ltlt.'OOlC
31
Cash
2.000.000
lnvesm1en1 111 bonds
2.000.000
Problem 20-2
Requirement 1
Date
01/01/2019
12/31/2019
12/31/2020
12/31/202 1
!merest received
lnterw income
Discount
amortiudon
3-00,000
3-00.000
3-00,000
379,360
385,709
392,931
79,360
85,709
92,931
Carrying
amounc
4.742.000
4,821,360
4,907.069
5,000.000
131
Requitcmcnt 2
20 19
J:in,
1
4,742,000
lnH'."Slmcnt in bonds
Cash
(X-c. J I
4,742,000
300.000
Cash
300,000
ln11.:-re:s1 inoorne
31
l.nvcstmcol in bonds
79.:160
7'},J60
lnti:rcs1 income
2020
l)('e. 31 Cash
lnt~re.'11 lnC."Ofll C
300,000
3 1 ln\'e.stment in bonds
SS,709
300,000
85,709
lnh:rc!II income
S,500,000
3 1 Cash
ln\'es:tmcnt tn bonds
4,907,069
S9?,9JI
G:iin on snle of bond inHstnu-nt
.
S,S00,000
Sale price
Carr)tniamounl
4 907 062
50, 911
12131/2020
G:1inon s.ale
Problem 20-3
Requirement a
20 19
Feb. I
5.486,000
lnves1n, en1 in bonds
Cash
5.486,000
D<c. 31 1-\e<:rucd inlm!SI rccci\ablc
lntertsl incon,e (6.000.000 :< 12¾ x 11/12)
660,000
660,000
3 1 ln\'Cbtmcnt i.n bonds
Interest incorne(l02,900 x 11/ 12)
Date
2/ll20l9
2/1/2020
2/1/2021
12¾
lnterut
received
!).l,2JS
94,235
IS%
ln tc~st
income
Discount
amortizatjon
Carrying
amount
S.486.000
720,000
720,000
822.900
838,JJS
102.900
I 18.335
S,588.900
S,707.235
132
Requirement b
2020
MQy I
lnvei;un en1 ,n bonds (I 18.JJS, 3fl2)
lntcrcst income
Cash (6.300,000 ~ 180.000)
lnvntJll(n1 in bonds
Interest income \6.000.000 x 12% x 3/12)
G:;iin on s~lc of bonds
29.584
6.480.000
5.618.484
180,000
681.516
5.588,900
Carrying amount - February I. 2020 (see table)
Add: Oiscounl anl0f1i1:.ation from February I, 2020 to
Mayl.2020(3/12' 118.335)
Carrying amount, ~·tay I, 2020
Selling price (6.000,000 x 105%)
Less.: Carrying amount
6.300.000
s 6! S484
681 'i i§
Gain on sale
Problemlo-4
20 19
Jan,
lm•eslm tnl
in
bonds
8.598.400
8.598,400
Cash
IX-c. J I
C11,.h ( I 2-1, x 8,000,000)
960,000
960,000
Interest income
31
Interest mcornc
lm•estmcnt m bonds
100, 160
100. 160
')60.000
lntCn:$1 reedv1.'<l
lnlCte!il mcocu ~ ( I 0"/4 x 8,S98,400)
859 ~40
JlW!,!1
Premium :1mrn1ization
Problem 20--S
2019
Jan.
Investment in bonds
5.2Al.500
Cash
Ix<. 31 Cash (5,000.000 • IZ-/4)
5.241.500
600.000
lntcrcs:1rneome
De<:. 31 l01crcs1 income
600.000
75.85-0
l m·esm1em in bonds
75.850
lnte!n.-st rl"Cei,cd
600,000
Interest income (10¾ x S.241,SOO)
Premium amonization
lliJ.S!
Ix<. 3 1 Co,h
lnvcstmcot in bonds
~
1.000.000
1.000.000
133
2020
°""· 31 Ca.shlnteres1
(4,000.000 12"/4)
income
480.000
x
480,000
6).43S
J I Interest income
lnveSln'lent in bonds
63.435
480,000
lncc:rcst rn:ci, ed
lnterc..-st income (10"1' x 4,165,650)
Premium amortizahon
~
..6l.il.i.
3 1 C'.,.h
1,000.000
ln\'c1mucn1 in b<>ndi
1.000.000
Problem 20-6
Journal cncrie1
:a.
lm·cstmcm in bonds
C.Sh
7,679,000
7,679.000
b. Cash (10~.x 8.000.000)
800,000
lnl,;NSt ineum<:
c.
d.
800.000
lnv,;stmcm in bonds
Interest income
121,480
121.480
lnlcr<sl income: (7,679.000 x 12%)
lntcr<sl rctcivcd (8,000,000 x 10%)
921.480
Oi&eount 1morti:r..a1ion
.w.i!ll
MOOOO
Cash
2.000.000
2,000,000
lm.-es.1ment in bonds
2. Cos,
Oiscouin amon1zauon
7.769.000
121.480
Annu~•I in.stallrncnt
Carrying arn<>un1 - 12/31n01 9
(' llOO OOO\
i 800 480
Probltm 20-7
Date
011111no19
12131no19
12/31/2020
12/311202 1
In terest rttei\'Cd
300,000
300.000
300.000
Interest Income
Discount
amortization
Carrying
amount
4,742,000
379,364)
385,709
392.931
79,364)
85.709
92.931
4,821,360
4.907,069
5.000.000
'l'he interes.1 re«ived is equal to 6% muhiplied by the fac:e value, TI1e interest mcon1e is equal 10 8"1mulnplied by the carrying amounL
134
2019
Fin.uncial assc1 - I-VOCI
Jan.
4.742,000
Cash
4,742.000
300,000
0..-.:. 3 1 Cash
ln1ere;;1 income
31
Fin:mci,1 ;1sse1 FVOCI
300.000
79,360
79.360
fn1en:s1 income
31
Fin:mci:d :1!1sct - FVOCI
Unrealized anin OCI
428,640
428.640
M;u1ccc \'l!luc 12/31/2019 (S,000,0()0 x ICIS)
Carrying amount 12/.ll/2019
5,250,000
CH>I ~fi!!l
~~a fWl
Vnrcaliud gain - Oeciember l l. 2019
2020
lxc. 31 Cash
300,000
lnteres.t mcome
31 Financfol ~isset - FVOCI
300.000
SS.709
lntcre.st income
31
FVOCI
t;nrcalitcd s;:,in - OCT
Finul'l(illl OSk:I
85.709
16-1,291
164,291
Market ,,aluc-12/31/2020(5.000.000x 110)
Carrying nmount per tabl..- 12/)1/2020
5.500.000
(! 222 !1!!2)
Cumul:uiw unreali1ed gain
Unrea.li1.ed (!;tin - 12/31/2019
Increase m unrealized gain
592.931
:P86£t
l(M221
Another approach
Market ,1aluc-1 2/3 1/2020
Cal'f)1ng amouN per book • 12/31/2020 (5.250.000 + 85,709)
li,crc1scd in unn:alizcd gisin 2020
2021
D<e. 3 1 Cash
5,500,000
S 115 2l)2
led 221
300,()00
300,000
lntcn:sl lllCQCUC
31
Financhtl assc::t FVOCI
92.931
92.931
lnt..:rcsl 1111."«ll C
31 Cash
Vnroliic:d ~ in -OCI
Financinl md - n'OCI
S.000.000
592,931
5,592,931
135
Problem 20-IJ
20 19
Pin::ulttlll asset. FVJ>L
Cash
Jan.
S.380.000
S,380,000
O.c. 31 Cash (l2~.x5,000,000)
lntc~, meome
600,000
600,000
3 1 Financi.al asstt · FVPL
620.000
(iBio from eh11n&oe io ra1r value
(6,000,000
620,000
5.380,000)
2020
D«:. 31 Cash
Interest mec,me
600.000
600.000
31 Loss from change in fair value
Financial a~stl. FVPL
250,000
25-0.000
(6.000.000 - 5.750.000)
Problem 20-9
l'n:scnt value of principal (S.000,000 x 0.377)
l)r\:scrtl ,~Jtuc of scmiunnuul in1crcs1(200,000 x 12.462)
l.88S.000
, 4tl2 400
4 "JV400
Purth11:,.c price
Date
Interest recc-lved
Interest Income
200.000
21 8.870
18.870
200,000
219,8 14
19.814
Amordl.adOn
4,377,400
.January I
.lune 30
O.C~mbedl
lnvcs.tment in bonds
Cash
Jan.
.June JO
ca.rrying amount
4 ,396.270
4,416,084
4,377.400
4,377,400
Cash
200.000
200.000
ln1crcs1income
30 ln,·cs.imcnl in bond.s
ln1cres1 income
18,870
Dec. 31 Cash
lntcmll income
200,000
fn,·cs.1.mcnt in bonds
19,814
31
18.870
200,000
19,814
ln1crcs1 in<..-omc
Problem 2~ I 0
2.268,000
Pn:scnl value of principal (4,000,000 x 0.567)
P~cnt value or semiannual in1cres1(640,000 x 3.605)
2 107 200
4 525 ,oo
1>1.1rchasc price
amortization
Carrying
amount
90,976
101.893
4,484.224
4.382.331
Premium
Date
I, 201 9
0..'C.3 1.2019
Ix<:. 31. 2020
Tnrcrcst rccch•cd
Interest income
Jan.
4,575.200
640.000
640.000
549.024
538. 107
136
lnves1ment in bonds
4.575.200
4.575.200
Cash
Cash
lntc:res1 income
640.000
lnvcsamcnt in bonds
lntertSI income
90.976
640,000
90.976
Problem 20-11
PV or printipal (8.000.000 x .6756)
5.41M.800
PV c,f semiam1UJ.I m1cre.,;1payments (400,000 x 8. 11)
'":HOOO
8§48 800
l)urchasc price or p~-Sfflt value of bonds
Journal entries
Jan,
I
lmcslmc:nl in bood!I
8.648,800
Cash
July I
8.648,800
Cuh
400.000
400,000
l ntcrc$1 income
Interest income
lm·c111mcnt in bonds
lnrcrcst rccci,·cd
Interest income (8,64ft800 1
P~mium mnor1i1111ion
54,048
54,048
400,000
s•~ x 6/12)
Dec. 3 1 Accrued in1cn.-s1 receivable
:W.W.
..arw
400,000
(nlcrc.$1 income
3l
Interest income
lnvc11tmmt in hond.s
400,000
56,llO
~.210
lncerest accrued
400,000
:w.zm
lntcrdl income (8.S~.7S2 :\ 8¾ x 6112)
P~mium "mor1intion
1\ e<1u1si1ion cos:, January 1
Premium un-Klr1i~ation from J1mmuy I to June 30
Carryin~ amount June .10
Pn:mium a1nortization fn>m July I to December 31
Carryrng amount Dcc~mbcr 3 1
~
(
8.648,800
"04&)
8,59,1.752
c 56?1Q) I
8 S'S ~4'
Problem 20-12
I.
Princi~J J~yment
lnte:~, payn,cnt (l.000,000 x I 2o/o)
TotaJ 1:>ayment on December 3 l . 20l9
PrinciJ:tal 1,ayment
lnteres1 payment (2.000,000 x 12%)
Total I>ayment on December 31 . 2020
1,000.000
1§0 QQQ
I JfiOOOQ
1.000.000
240 ooo
I ' MOOQ
Principal rayment
h:nerest payment (1 .000.000 x 12%)
1.000.000
Total payment oo December 3l . 2021
I 1' 9 000
120 000
137
December 31, 20 19 poymcnt (1.360,000 x ,9 1)
Dcccmb<r JI. 2020 payment ( I .240.000, .83)
December 31, 2021 payment( 1,120.000, ,7S)
Tola.I p~cnt value on January I. 2019
2.
1,237,(,00
1,029.200
8:10 QOO
3 106 800
Journal entries
20 19
Jan. 1 Investment in bonds
3. 106.800
3. 106.800
Cash
3(,0,000
Dec. 3 1 Ca:-h
3(,0,000
ln1crcs1income
Dec. 31
interest in-come
49,320
49,320
Investment m bonds
lmcrcst received
3(,0,000
lntcll:51 mcomc t.3.106.800 x I 0'}•)
1)06!!0
IJn:mi"um t11nortiw1ion
~
31 Cash
1,000,000
1,000,000
lnvcsuncnt m bonds
3. Acquisitioncos&-1/ 1/2019
Pn.mium omonization ror 2019
I
Annt.1.11 in.s1allmcn1
Can-ying amount of i n\!Cfittncnt - 12/J 112019
3. 106,800
49,320)
() OOOOOQ)
' Qli7 43P
Problem 20--13 An."wer C
Carrying amount - 1/1 12019
Am0<1iza1ioo from 1/112019 to 3/112019:
7,800.000
lntert!St mcomc (7,800,000 x 10,. x 2/12)
130,000
lrtlCl'CSI received (8,(I00,000 x 9'}.
.ul!.ll!!ll
x 2/ 12)
10 000
Carrying amou.nt - 3/lll0l9
7310 000
Snlc price
3,'>20,000
Carr)1ng amount of bonds sold (7,3 10.000 x 1/2)
l
Gain on sale
205 ()Q(I
1"000
Problem 20--14 An&wcr 8
I>renuum on sale of bonds
Unamor111.ed discount ( 100,000 20,000)
14-0.000
..J!l.ll2!!
l2!l.l!!!!!
Gain on solc-ofbonds
Problem 20-1 S Answer A
3.767,000
Acquisi1ion cos1 - 1/ 1/2019
Discount a1uo11izanon for 2019:
lmcrcsl income (14"♦ x 3.767.000)
fn1c1l:sl ~ c i\-'cd (12% x 4,000,000)
CmT)ina amount 12/31/2019
Problem 20-16 Answer D
lmcre.,t income for 2019 (3,756.000 x 10%)
527,380
~
47 18()
1 &14 '\&Q
138
Problem 20-17 Answer D
200 000
Interest accrued from July I 10 December 31, 2019 (5,000,000 x 8% x 6/12)
Problem 20-18 Answer C
Interest received (1 ,000.000 x I 0% x 6/12)
Interest income ( 1, 198.000 x 8% x 6/12)
50.000
il.220
Premium amo11ization
.ill&!
Acquisition cost - July I. 20 19
Premium amo11iza1ion
Carrying amount - December 31, 2019
1,198.000
<
2 080)
1 12S 220
P,oblern 20· 19 A nswer A
lntcre,i accrue~ ( 1,000,000, 8½ x 6/12)
Interest income (906.000 x l0% x 6/12)
Discount :imortiz:atit)n
40.000
il.:100
....l.J.ll!l
Acqui,ition <OSI July I, 2019 (946,000 - 40,000)
Discount amoni·za1ion
Canyingamounl
906,000
53ilQ
21I JOO
December ll, 2019
Prob l•m 20-20 Answu A
4,562,000
lnvc:."Stment balance, January I, 2019
A 1no11iz.a1io11 or discoum for 2019:
ln1m:s1 income (4.562.000 x 10%)
456.200
lntcr~t received (S,000.000 x 8~/4)
l11\''-.":ll nu:111 l,.,1h1m.:t:, IA:i:t:rnUt:t J l. 201 9
Amor11za11on or discount lor 2020:
400000
Interest income (4.618.200 x 10%)
Interest received (5,000.000 x 8¼)
Investment balance. December 3 i . 2020
461.820
S6 .,oo
4,616.200
4000<)0
6 I 820
4 680020
Prob lem 20-21 Answer D
lnteres1 received from Jul)' I to December 31. 201 <J (5,00..,,000 ,: ~% x 6/ 12)
Dond di.;ccunl 11mortiza1ion tOr :si:ot mo111h1
200,000
I A 000
21 E 000
Interest income
Prob lem 20-22
lotcrcst received
Interest income
Premjum
amonizntJon
01/01/2019
12/31/201 9
400,000
12/31/2020
I 2/31/202 I
400.000
400,000
3}6,480
331 ,398
63,520
68,602
Carryins
umount
4,206.000
4, l42,4R0
4,073,878
326,122
73,878
4,000,000
Date
Questioa I Answer A
M:1rlcct v11lue - 12/31120 I~
3,MO,OllO
C:arryingnmount - 12131/1019
4 142 4go
Unnmlized loss 20 19
( J42 480<
•
139
Question 2 Answer B
Market value - 12/31/2020
Carrying amount per table
Cumulative unrealized loss - 12/31/2020
Unrealized loss 12/31no19
lncre,,sc in unrealized loss - 2020
3,600.000
4
071878
( 473,878)
( 342 480)
P l 328
Another approach
Market value - 12131no20
Carrying amount per book - 12/3 1/2020 (3,800,000 - 68,602)
Increase in unrealized loss 2020
3,600,000
3 73 1 398
C 13 1396\
Question 3 Answer C
C 473 878)
Question 4 Answer B
1600 000
Problem 20-23
Question I A nswcr C
Purchase price
Transaction cost
Adjusted cost
5,500,000
< IQQ QOO)
S400 000
The transaction cost is expensed Immediately if the fi nancial asset is measured at fair valuo through
profit and loss.
Market value (5.000,000 x 115)
Adjusted COSl
Gain from change in fair value
5,750.000
S400 000
350 000
Question 2 Answer A
Interest income ( 12% x 5,000,000)
600 000
Under the fair value option, interest income is based on nominal rate rather than effective rate.
Question 3 Answer A
Carrying amount equal 10 market value at year-end
S750 000
Question 4 Answer B
Gain from change in fair value
350,000
Interest income
600 000
Q')Q 000
Total income from investment
Under the fair value option, any change in fair value is recognized in profit and loss.
140
CHAPTER21
Problem 21- 1
Rcqulrcrncnl I
Date
Discount
Carryfag
Interest received
Interest income
amortJzatlon
amount
300.000
300.000
300,000
300,000
373.488
379.367
385.7 16
393,829
73.488
79.367
85.716
92,829
4.688,600
4.742.0SR
4.821.455
4.907. 17 1
5.000,000
1/1/20 19
12/31/2019
12/31/2020
12/31/2021
12/31/2022
Requirement 2
Fainaluc - 12/31/2019 (5,000,000 x 105)
Carrying amount - 121.ll/2019
Unrealized g.iin OCI for 20 19
5,250,000
:! 742 oxs
507 212
Requirement 3
Fain"1luc - 12/3 1/2020 (5,000.000 x 115)
Carrying amount - 12/31/2020 per table
5.500,000
4 82( 455
678,545
507 912
Cumulative unrealized gain - 12/31/2019
Unrealized goin for 20 19
Unreali7cd g1.1in for 2020
120 §J'\
Requlremcnt 4
2019
.Ian. I Financial asset
Cash
FVOCI
Dec. 31 Cash
4,688,600
4.688,600
300,000
Interest income
3 1 Financial assct - FVOCI
300.000
73,488
73,488
lnteres1 income
3 1 Financial asset - FVOCI
Unrealized gain OCI
2020
Dec. JI Cash
ln1eres, income
31 Financiol nsset J':VOCI
lntercsc inco,ne
3 1 Financial asset FVOCI
Unrcali1cd gain - OCJ
507.912
507,912
300.000
300.000
79,367
79.367
170.633
170,633
141
2021
Jan.
ln\'CSlmcnt in bonds
5.500,000
5,500,000
rin1tnci11I ai;St.'I - FVOCI
618.545
Unreahl'..ed ga_ul - OCI
678,545
ln\'"c~mrnt 11'1 bonds
3()0,000
Dec. 31 Cash
300.000
lnt~ l'CSt U'lCOfflC
85.716
31 F'in:inc1al asscc - FVOCI
RS,716
lnlcl'('51 lncoml'
Problem 2 1-2
Requittmcnt I
Once
( 10-/4)
(8%)
Interest rccdv1;d
t111crcst Income
Discount
an1orilza1.lon
160.000
160.0()0
160.000
190,0S0
193,0SS
196.395
30,0S0
JJ,0SS
.16.395
1/1/2019
I213 1/2019
12/31/2020
12/J l/2021
Carrying
11m o unt
1.900.500
1,930,550
1.963,6(15
2.000.000
Requirem ent 2
htir value January I. 2020 (2,000.000 ~ 110)
2.200.000
/ I 910 S~)
Corrying amount per tablcJonu:uy I , 20?0
Unrt31i?Cd gain OCI
262450
2.400,000
F111r \•nluc Dl- cember 31. 2020
Cmrying :11ooun1 per table - December 31. 2020
/ 1961601\
436-32)
C umulath·c unrealized p in in OCI for 2020
Rcquittmcnt 3
2019
Jan.
lnH-stm..:nt in bonds
1,900,000
C'a:sh
1,900.000
1(,0,000
Dec. J I Ct.Ul
Interest income
31 lme;stmcnt in bonds
160.000
30,050
30,050
lnh:1'CSI income
2020
Jlln.
F1roncml assd - FVOCI
1,930,550
1,930.550
1nvcstmc:nt in bonds
Fin.inci.11 aslld - rvoc1
269,-150
Unreali'lt<I pin - OCI
269,450
160,000
Dec 31 Ca'11
160,000
lntert:51 income
31 FmJllCIOI tbSCI
f-'V OCI
33.0SS
33.055
1ntc:rcst income
31
11 in::mcinl
~~•. FVOCI
Unra 1i1:t..-d g;ain • OCI(436.395 269.450)
166,945
166-94S
142
Problem 21-3
(8%)
Date
Jun.
Intuest rccdved
Premium
(Jo,'. )
Interi:st income
amo rtiz.atio n
in.400
27,600
1.2019
Carrying
am ount
3,40S,000
D« 31 . Z019
Dec. 31, 2020
300.000
300,000
270,192
29.ROS
3.377.400
3,347,592
Requirement 2
F11ir v,,luc - Jonu.,ry I, 1021
2,845,000
Carrying arnoun1 1>er table fanumy I. 2021
Loss on reclassification
(l
147 597 )
<
501 $9' )
Requirement l
2019
Jan
(n\--estmcnt in bond11
Cash
3,405,000
Dec. 3 1 Cuh
1ntcrcs1 income
300,000
31 lntcre,1 income:
27,600
3.40S.000
300.000
27.600
111\ ciimtfll in bonds
2020
Dec. 3 1 Ca.\h
1ntcrcst income
300,000
31 lnterc!ot inoon.'lc
29,RO!it
300,000
Investment in bonds
29,803
20 2 1
Jan
Lon on r« las.sific;i.tion
502,592
502.592
lnvcsimc:nt in bonds
FinJnci~1I ::is"°t
FVPL
2,84S,000
ln\'csm,mt in bonds
Doc. 31 Ca,h
ln1eres1 income
2.84S.000
300,000
300.000
Problem 2 1-4
Require-meat l
lntcrcsl income for2019 (6,000.000 " 9••)
~
Rcqulrcm cnt 2
fair value: - Occcmbc:r 31 . 2019
Carrying amount Deccmb(-r 31, 2019
Unrc.1linxl loss for 2019
5,450,000
(~ ~50()00)
( IPOOQQ)
Rcqulremem 3
Fairw1luc - December 31. 2020
Carrying B.mount - December 31. 2019
UnrtalitL-<I gain for 2019
6.150.000
(5450 000)
( 70n 900)
14 3
Requirement 4
lntcrrsl income for 2021 c6, ISO,OOO "<
s,-.)
Rcqu1ttment S
2019
Jan.
s.sso.ooo
F1rt1.1lC1al assc1 • FVPL
Cash
5,550,000
540,000
Dcc. 31 Ca.h
lntcN':sl income
540.000
100,000
3 I U11JCah:i,d IOS$
financ ial !L1>SC1 • FVPL
100,000
2020
540,000
0cc. 31 Cash
540,000
lntcrcs1 income
31 ri~1nci:11 asset
700,000
FVPL
Unruli t«I gain
700,000
2021
Jin.
6. 1S0,000
lnH-stmcnt in bonds
6,150,000
Fin11nci11I at1sc-l - FVPI..
540,000
0cc. 3 1 C:lll,
540,000
lnt4'rcsl income
31 lntcrcs1 income
ln\'es1m cnt in bonds (S40,000
48,000
48,000
492,C>OO)
Problem 2 1-S
R equirement I
lntc~isl mcom,: for 2019 (4,33S,OOO x 6¾)
Requirement 2
Canyina amount -January 1, 2019
Prcmiwn amorti2arion:
lnltf'l.:SI !nt()mc
fn1 Cf(:SI r1.-<c-ivi-d (4,000,000,: R'-)
Canying amount - Oct~mbcr 3 1. 2019
Fair w1luc - Dl'C'cmbcr 31, 2019
Conyin,g a1TMJunt December 31, 2019
Unrealized loss in OCI for 2019
4,335.000
260.1 00
s2 20Ql
lll!.ilil!t
4 175 100
3,870,000
<4
<
ns !Pm
40s ,orn
Requirement l
lntert'SI UlC0U\(' for 20 20 (4,000,000 x 8'9)
l2lWl!I
Since rhc bond in11:srmcnt is 11:d11ss1iicd to li,ir ,,.,fuc tbn>Ugh proiir and Joss. 1/Jc 1'ntcrcst i'tx.'Olllc 1s Med
oo tbt.· nom1m1! mre..
144
Rcquircmc-nt 4
fair v.,luc - OL-ccmb(.'f' JI. 2020
3,615,000
Corryini: amount December 3 1. 2(H9
Unrcali7ed loss in 2020 included in profo or loss
Reclassified frotu OCI m profit ot loss
Tot.al mno unl Included In prone o r loss In 2020
1 St1n ftQO
( 255.000)
< ➔9' IQQl
<
§60100'
or
The cumulative amoun1 P405.IOO reoogmzed in OCI on December 31. 2019 is reclassifled 10 profit or
k>ss on J;un.1,uy I. 2020, the rec:la.ssific;31ton 001c
The INmd invcttmmt is ,m-.·1.wrt'fl at FVPL M:1t1ing 1020.
Requlrt-mtnt S
2019
Jan.
F,nann ol asse1 - FVOCI
Cash
4,335,000
4.33S.OOO
320,()()(1
D<c.3 1 Ca,h
320,000
lntcrC'Sl l!ICOme
31 Interest income
rinanci1tl U.tiSl.1 • FVOCI
59.900
31 Uoreah>.<d loss - OCI
Fmancial asse1 FVOCI
405. 100
59,900
40S.100
2020
bn.
Ftn;inc1al JSSd - fVPL
Financial asset
3,870,000
3,870,000
FVOCI
Dec. 3 1 Unrcalit..ed l<)S$- PL
Financial ass.ti . fVP L
255,000
31 Uorcaliud loss - Pl.
Unrealiit."(l 106S-OCI
405, 100
31 Cash
320.000
2SS.OOO
405,100
Jntc rest income
320.000
Problem 2 1·6
Requlr~mcnt l
Jnte~st incotr\l!' for2019 (.J.000,000 x 6, .)
Requif'C'ment 2
F11ir\ .1luc
1
Occcmbcr Jl , 2019
Cnrrying amount December 31. 2019
Unrealized loss included in profit or loss fo r 2019
JA90,000
(1 S1Q OOOJ
<
dO QQQ)
Requirem ent· l
lnteres.t income for 2020 (3.490.000 x 10'~)
The bond investment is m:l.,ssilied from FVPl to FVOCI on Ja111Mry / , 2020. the rrc:1.-,ssific:mM d3tc.
A n ew cffccrin~ interest rate musl be compulcd based on the foir value on such dale.
Subsc\ltJC'ntly,
intereSI ll'ICOlllc
is COlllpUled Ming the errei:li\'C 1nlc r"C"SI method.
145
Rcquin-m""nt 4
Cunying iumiunt - J11nu11,y I , 2020
3,490,000
Discount runon.izauon·
lntcn.-st income (3.490.000 x 10°. )
lnte-rcst rerei\rOO (-1.000,000 x 6%)
Conying llmount - D«cmb~r J I, 2020
349,000
~
11!2 Q!lj!
' ~22g,~
)
Fair \'alue - OeC'ember 31. 2020
3.425.000
Carrying amount Occcinbcr 31, 2020
Unr~alizcd Joss in OCJ for 2020
(1 S<lOOOO)
(
l~QQ!l)
Req uJrtment S
2019
Jan.
I F1.t1a.ncaal asset .. fVPL
3530.000
Cash
Oec.3 1 C3Sh
3..530,000
240,000
240.000
Jn1crcs.1 Lncomc
31 Unn:aliud loss - PL
Financial aSx-1- FVPL
40,000
F1t1.1..11c1al asstt - fVOC I
Financial ns!oct - FVPL
3.490.000
4-0,000
2020
Jan.
Dec.3 1 Cash
lntcrtst income
3.490.000
24-0,000
240.000
31 Fmanetal assec - I-VOCI
lntcrcst income
109.000
31 Unrealized loss - OCI
Financial asset • FVOCI
174.000
109,000
174.000
146
C H APTER 22
Problem 22-1
5,000,000
3.000.000
1..500.000
Land he-Id by parent for undcccrmincd use
Vacant building
Budding owned by a subsidiary occupied by lessees
Propc.11y undi=r cons1ruclion (or use llS in1,,c5tmeru properly
TotJI invcsuncnl pro1,c:rty
2. •·
b.
6000000
I" 500900
171c:: propcny held by :a sub~Kliary ,n the: C>rdmary courw of business 11 incluck:d ui invauory.
Thi: property held b) parent for ui.c in production is owner~cupied property and there fore pa11
o f prop.:11y, plant and cquipml.'nl.
c. The land k:3scd by parcm 1.0 a subsidiary under an operating ~sc is ov.11cr--occupicd property for
purposes or con$ohd!1tt.-d Gnancial flt:lh.'Ul<-'tlts. I lowc,cr. Crom the persp1..-cthc or se1w111e
fin:um11l !it;11cmcnts of lhc J>.1rcn1, the land 1s an inH~mcnt pm1')Cf1y.
d. 1'bc INtd held for fu:1urc foc1ory s11c is owncr-<tCCUptcd propcny and 1hcrcforc pan or property.
p lant !'Ind eq1.upmcn1.
e. The rnach1nery leased out 10 ao unrelated p:1ny is pan or propeny. plant and equapmenl bec-,.use
in\cs1mcn1 propcny mclOOes only land and building. and nm movabk prupcny hkc miKhincry
Problem 22-2
Cost mod el
2019
rn\cs1mcnt I:iroperty
S0.000.000
C,sh
O cpt\.."C'Kl l10n
50,000,000
l.~00,000
Accumul.-1<.-d dcpr-ccm1ion
(S0.000.000 S.000.000 / 25)
202-0
2021
1,800,000
Ocpn.-cimi,on
Accumulau:d dcprcc,mion
l,S00,000
Dl- prcctahon
1,800,000
1,800.000
1,800,000
/u.icunn1h1Ct.-d dc-prcceottoo
F air nlue model
2019
(mrcstmcnt JHt>Pffi)'
Cash
S0.000.000
lm·es1mco1 property
$.000,000
S0.000.000
Gain from change in fair ,1alu~ (SS - SO)
2020
Loss from c hange i_n fair ,·aluc
s.000.000
2.000.000
2.000.000
lnvi:-stmtnl property (55 - 53)
2021
ln\"CSlmcnt property
Gain from ehan~ in fair value (60 - 53)
7,000,000
7.000.000
147
Problc:m '22- 3 Answer A
4,000,000
I 400 000)
CoSl - 1/1/lO IR
Accumula1cd ckpn...~iallon (4.000.000 / 20 x 2)
Carrying amount - Occcmbcr 3 1. 2019
36QQOOQ
Salt pri~
4500.000
C.1rrying amount
Gain on d isposal
1
600 000
2QQQQQ
Problem 22-4 Answer 8
Propcny I
Property 2
Property 3
Net los5 from c-hangl! in fur v:aluc
Falr value
12/31/2019
3.200.000
Fnlr vnlue
1213112020
4.000.000
3.000.000
3,900,000
2,100,000
3,600,000
Gain (loss)
800.000
1900.000)
1300 000)
«400000)
Problem 22-S Answer A
Cos,
9.000.000
Accum ula1ed dq>r\.'Cia,ion \9.000.000 / 30 x 2)
Corrying 11moU11t - 12/l I/2020
S400999
Depreciation exp,,,sc \9.000.000/ 30)
600000
lll!!.QOO
Probkm 22-6 Answer 8
Fair value model
l<>ss (6,000,000-5.900,000)
Cost mod el
Ocprcc,ation c11p<.:-nsc (5,800.000 / 40)
Problem 22-7 Answer A
fair vnluc
8.000.000
Acquisition cost
Gain t"rom change. in fair ,alue
2600 000
4QQQQQ
Problem 22-8 Answer 0
Cos.i or the 1nv~1m.ent property
Accumulated ck.1)1'\~fotion (5.000,000 I 20}
C::1nying am(m nl - December 3 1, 2019
s.000,000
( 1'\0 000)
4 759 000
Problt<m 22-9
Qoestlou 1 Answer A
PurchaS< price (200,000.000 • 9110)
Nonrefundable o-ansfcr ,a,cs 120.000.000 x 9/ 10)
Les-)""'' 11.000.000, 9/ 10 )
lni1i.al CO$I ofin~''-'Stmc-.nl prt1picrty
180,000.000
18,000,000
900000
128 ~00000
148
Quc-stio n 2 Answer B
4,000.000
400.000
Purcha~ price (200,000.000 ~ 1/10 >- 20--~)
Nonrefundable transfer tri,;c.,- (:Z0.000.000 x l/ 10 x 200/4)
L<g,,I cost(l,000.000, 1/ 10 , 20%)
Jniti.:tl oos1ilf land
20()00
4 J' O000
Questio n l Answer C
Purchase J>ricC (200,()00,000 X 1/10 X80%}
I 6.000,000
Nonrefundable 1r.lnsfcr tt'l,;cs (20.000.000 x 1110 x 80"/4)
l<!l>I COSI (1,000,000 X 1/ 10 X 80'/4)
lnhial cost of building
1.600.000
80 000
17 §MPOQ
Question 4 Answer D
Fair volu~ O~mber3I. 2019(25.000.000 x 9 unns)
Cunyina: amount
Gain from ,m::rtasc- m fair value
ll$,000,000
,2~200000
26 IQQQQQ
Question S Answer A
Dl!pr1:c.1Jion f0t2019 (1 7,680,000 / SO yc.:11'$)
Note that the property taxes. advenismg. cost 01 open funcuon. aod repa1rs and m.a1n1cnance are c."<pcoscd
in11ncdiah.:ly when incurred.
Problem 22-10
Question I Answer C
F,ur \'tllue ofbuildmg
lS,000,000
Carrying amount of l>uilding
ReYaluation surplus
20 000000
I 1i QQQ 000
Quc,tlo n l Answer C
I S,000,000
Fau \'Oluc of land
Cnnying amount or land
10000 000
;; QQQ 000
Gain no Tt.··d:as~ificatioo
Problem 2l• ll
2019
Jan.
Lafe LOSurJDN
60,000
60,000
CJl!oh
2020
Jan.
2021
bn.
L, IC m~uror.ce
Ca~h
(,0,0 00
Life insurnncc
Cash
(,0,000
Dec. 3 1 Ca.~h surrcnck-r value
Life in50mnce
Retained c.vnin.gs
60,(IOO
60,000
(,0,000
20.000
40,000
149
2022
Jan.
Lafe msuranre
C1sh
Dec. 3 1 Cash surrender , alue
60.000
60,000
24,000
Ufe msurance
24.000
R:ilancc-Occembcr 31. 2022
Bolanct Dec-e:mbtr 31, 2021
lncrt'asc in cash surrender ,•oluc
2023
bn.
Li fo insurance
ca~h
Juot 30 Ca.sh summd~r, alU<
Life insurance
84.000
&!W
11.ll!l!!
60.000
60,000
16.000
16.000
8.113t'tcc-Occcmbcr 31, 2023
116.000
B.1lnncc Di:Cl'ntlx.T 31, 2022
lncr<'asc in ca$h surrender \'t1luc for 2023
..iW!!ljl
..llJl!!jl
lncrc3sc from JanUlry I lO June 30, 2023 ( 1/2 ,c 32,000)
July 31
Cash
Cash surrtndcr , alue
JilJlllll
2.000,000
100.000
30,000
1.870,000
Life mi,.urancc (60,000 x 6/12)
Gain on salt uf life in~rance scnkmcn1
Problem 22.. 12
2020
Jan.
Lafe lDSIKtlOCC
80.000
80,000
Cai,.h
2021
Jan.
La(¢ t.nSutlln~
80,000
Ca:,.h
Dec. J I Cash
Life msurllncc
31
Cash surrender ,·alue
80.000
S.000
S,000
42.000
Lffc mwran<e (42,000 ~ 1/3)
Rcuiincd camin8$
14,000
28.000
2022
Jan.
Life mswtmce
80,000
Cash
Dee.J I C11sh
Life insurance
31
Cash surr-.:odcr vnl!J(;
Life insumncc
80.000
6,000
6.000
S,000
S.000
BolMc~ Dtcfmbtr 31, 2022
47.000
Decomba 31, 202 1
Increase in cash surrender \•alue
~
8alanc:c
42 f)(M)
150
P r oblem 22- 1.3
a. Life insurance ( 10.000 x 6112)
Cash sllJTCDdcr value
b.
5.000
S.000
14,000
Prepaid li fe i n$Unllnce (28,000 x 1/2)
Ure insurance
c
4,$00
lnlercst expense
Accrued inten:."SI payable (S0.000 x
d.
14.000
121).♦ x
9/12)
4.500
2,000
Oi,idend income
2.000
Oi,•idrnd rcccivabk
Cumm1 llSS('IS:
Prcpuid li fe insurance
14.000
Investment:
~S.000
Cai;h $urrcndcr vatuc
Cumn1 ht1btli1ic!I:
LOlU'I payable
50.000
Ac<'n1cd in1crcs1 payable
4.500
Pr oblem 21- 14 A nswer C
100.000
Premium paid - January I
Less: D,,·idcnd rcccivcd
lncressc in cash sum:nder \1.ll tlt (270.000 - 24S.OO0 )
Life insuranc4: cxpcnst
15.000
ll.lll!!!
~
..idl.l!!l!I
Problem 22• I5 Answer D
Premium paid
200.000
L :-ss.: Inert .tic in eash su,nndc..""r ,a.tue (540.000 - 4JS.000)
Life insurance t"lf.pcnsc
~
The d h·idcod of PJ 0.000 is not dcductc:d
,ul'rtnder , •oiul.'.
3 1l) 111Qfc
bcc:,use ii is already pan or the
....21Jl!!f!
incr ease:
in cash
15 1
C HA PTE R 23
Probleml:!-1
Requirement 1
2019
Jan
I Cash
4.000.000
Loan payabl<
4,000.000
Dec. 31 lntere,1 expense
480.000
Cash ( 12", x 4.000.000)
3 1 l ntcrc51 ralc 5'\"ap rccci,·ablc
Unrealized gain inh~rest ra(e swap
480.000
70, 160
70.160
(80.000 X .877)
2020
0cc. 31 lmercsc expense
Ca,h ( 14% , 4,000,000)
JI Cash
ln1cres1 rate swap recci, able
UtlJ'CJli;te<I pin interest r.ttc Jwap
560.000
560,000
80.000
70.160
9,840
1
JI Loan payable
Cash
3 1 Unrealized gain - intt."l'CSl rate swap
1nte mt t .'<pense
4.000.000
4.000.000
80,000
80.000
Rcquircmr n t 2
2019
Jan.
1 Cash
Loon payi ble
Dec, 31 lmcrc-st expense
4,000.000
4.000.000
480.000
480,000
Ca,;h
31 UM."'tJiZ\.--d loss - imcrCR rate swap
ln1ercs11111eswappayable{40.000x .90 1)
2020
Dec. 31 lmeresc c"(pcnsc
36.040
36.040
440.000
Cash ( I<% x 4,000,000)
31 lmtrest rate swap payable
Unrealized loss - lmcY"cst rate swap
440,000
36.040
3.960
40,000
Callh
JI Loon payable
Cash
31 Interest expense
UnrealiZi..--xl loss. imcrest rate swap
4.000.000
4.000.000
40,000
40.000
152
Problem B-2
2019
Jan. I Cash
Loon payable
6.000.000
6.000.000
Dec.J I fnlerest C.\ptnsc
C~h ( I0% • 6.000.000)
600.000
600.000
31 Interest nue swap rcceivablr
UnrealiZOO gain-interest rate swap l I80,000 x .885)
159.300
159.300
2020
Dec.3 1 lnlerest expense
Cash ( 13% x 6.000.000)
780.000
780.000
3 1 Cash
h11cres1 rate swap rtcci\·ablt
Unrca..lizi."d gain - inccrcs1 rate swap
180.000
159.300
20.700
3 1 l..oan payable
6,000.000
Cbh
6.000.000
JI Unrealized g.am - interest raie sv,:ap
180.000
180,000
lntc:rcst apcn.sc:
Problem lJ.-3
2019
Jan. 1 Cash
Loon payabk
3.000.000
3,000,000
Dec. J I lmeres1 expense
Cash (8"/4 x 3.000.000)
240.000
2AO.OOO
31 ln1crcst r.ttc swap f't(.'C i\'1bk
Unrealized gain - 1nceri.--s, rate swap ()0.000 X 3.24)
97,200
97.200
~
entity will ra.xivc P30.000 :ii the md or 2020 and can cxpcc1
10 retcive P30.000 at the end of 2021. 2022 and 2023. Thus, the
or
preseu1 value.of the, four anoual p.iyments PJ0.000 ,s rec-0gnized
on Occc:mbcr 31, 2019 llS interesc r,tc,: swi1p receivable.
31 ln1crcst expense
Cash (9'), x 3.000,000)
3 1 Cash
Interest nte swap recci,at,le
2020
Dee.JI Unreahzed ga111 - mt~res:1 rate swap
lntc1\!S1 expense
31 Unl"C31i--tcd gain -interest rate swap
lnti:rest rate.swap rccd ,ablC' (97,200 30.000)
31 U11reahzed loss - lnhtres1 rate swap
Jntcresl rate s:wap psyablc (60.000 x 2.67)
270,000
270.000
30.000
30,000
30.000
30.000
67,200
67,200
160.200
The cnrity will make a pa)ment of P60.000 at die end of2021 by rnsoo of
d,e NdUCOO tnl('rVSI rate t'lnd can c., peti 10 m.'ILC pl)'mttlt of 1'60,000 M the end
of20:U und 2023, Thus. lhc pn:s;:nr ,·flue oflhc three • nnml pay1t1ent, of
P(,(),000 is reoogni2td oo December 31, 2020 as 1he inreresi ratii!' s•ap pa)•able.
160,200
153
Problem 21-4
2019
Jan I Cash
Loon P"Y"bl<
5,000,000
S.000.000
Dec 31 lnttrl!SI expense ( I~ • x S.000.000)
Cash
JI lntCl'CSI li\\'"::IJ) receivable
500,000
500.000
46J,OOO
Unrcali;,00 pin-in1crcs1 svlap (S.000.000 x 4%, 2.32)
2020
Dec 3 1 lmcrcss c~pcnsc ( 14~♦ x S.000.000)
C.Sh
464,000
700.000
700.000
Jl Cash
lntc:rcsl rate swap receivable
200.000
31 Unreali;:ed gain - i,ueteil rate S\\ .lp
200.000
200.000
lnter(:St ap~c
3 1 Unrealized gain intc:rest S\\-..-ip
ln1crcs1 rate iwap rccci,ablc
Unrcllhi'A-d gain
200.000
95,000
95.000
12/31/20 20 (S,000,000 x 2~.x 1.69)
l(i9,000
Unrcaliicd gain per book (464,000 200.000)
26!.!l!!!l
' 9-; 000)
De<:-rttie in unrW itNI gain
2021
Dec. 31 Interest cxpoose ( 12'-'o x 5.000.000)
Cash
600.000
600.000
31 Cash
l111cres.1 rate swap rttCi\·able
100,000
31 Vnn..-aJi7A'd pin - interest rate swip
100.000
100.000
100,000
lntct'C$t expense
JI Unrtafo,.ed gain - in1etes1 S\ltap
Interest rate swap receivable
2.i.000
24.000
12/3112021 (5,000,000x 1°,x 90)
Unrea1;,.ec1 gain per bool< (169.000 - 100.000)
45,000
Unrcaliud gain
~
(~
)
0-..--crease rn unrealized gain
2022
Dec. 31 lmcrcsc c"°pensc ( I 13/o x 5,000.000)
Cash
550,000
550,000
JI Cash
Interest me swap rccci,1ablc
Unrc:11iit.xl g;ain - interest natc $WU{)
50.000
31 Unn."alized gain - interes1 rate swap
l1uc1'U1 c.,pcnsc
50.000
31 1..o,tn pa)'ll,1•
Cash
45.000
5,000
50,000
5,000,000
5.000.000
154
ProblemlJ-S
2019
I Cash
Loon p.,y.,blc
Jan.
5.000.000
5.000.000
Dec. 31 lnccresi cxpens.e (S,000,000 ,c 8"11)
C.Sh
31 Interest swnp receivable
Unrealiud gain - interest rate swap
(5.000.000 X2% X 2.49)
400,000
400.000
249.000
249.000
2020
0cc. 31 Imeres. expense (S.000.000 x I0-/4)
500.000
500,000
Cll5h
) I Cash
100.000
lnlcrcs1 t111c swnp rccei,:able
3 J Unrealized gain - in Le.~ rate swap
100.000
100.000
fnt...re:,I ...·xpe11sc
100.000
31 ln1erest rate swap re«ivablc
Unrcahzed gatn
107.500
!07,500
inle1't'St rate 5wap
Unrcahzoo gain - 12131/2020 (5.000.000 x J~, x 1.71)
UnrcahZ<d gau1 per book (2J9,000 100.000)
lncrc.ia.sc in unrc.aliz"'tl g•in
256.500
J49 000
~
2021
Dec. 3 1 lntcres1 c,.pe.nse: (S,000,000,. 11•/,:,)
550,000
Ca,h
550.000
J I Cash
150.000
I50.000
lnterC$;1 i.\\111, receivable
31 U11reahzed ga.Ul
i1uerest ,·ate- swap
150,000
IS0,000
lnt~st CXl)f:OK
31 hnerest rate swap receivable
Unrcah2t.-d gam - iut,..,c,.1 rat~ swn1>
71.500
71.SOO
Unreahzcd gain - I VJ 1/2021 ($.000.000 x 4~• x .89)
178.000
Unrcalu.N g:arn per book (ll6,SOO - ISO,()()())
Increase in unrcali7cd aain
~
...2.1...W!l
2022
Dec. 3 1 lntcrcsc expense (5.000,000,; 12"!.;)
Cash
600,000
3 1 Cash
lntcrc:s1 rate i-w.ip receivable
Unn:-~~ed gain - in1tresa s"ap
200,000
3 1 Unrcahzcd Q.tlln
200.000
inlCl\."St sw.:tp
600.000
178,000
21.000
200.000
lntcrCSI CltpCtlSC
JI
L.o.111
pAyablc
Cash
s.000.000
5.000.000
155
Problem 2J.-6
Question I Answer B
lntcrcs1rnlc swap rccch·ablc - I113112019 (2'/4 x 3,000.000 =(J0,000 x .877)
Que!ltio n l Ans""er A
Interest expense for 2020 ( 12% x 3.000.000)
Problem ll-7
Quest.Ion 1 Answer
n
Interest mte swap payable- 12/31/201 9 (3% x S,000.000 = 150,000 x .93S)
QuC8.Lion 2 Answer A
lnlcre111 expense fOI' 2020 ( 10% x S,000,000)
Problcmn-8
Question I Answer A
Que11tio n 2 Answer C
(S.000.000 x 4% - 200.000 x 2.49)
Quesdon 3 Answer C
(S.000,000 x 2% • 100,000 x 1.78)
Problem 23-9
Question 1 Answer 0
(4o/, x 5,000,000 -100.000 x 1.67)
Question 2 Answer 8
(3¾.S.000.000 • 150.000 a 1.81)
lll.ill!I
Question 3 Answer A
( 10~• x S,000,000)
Problem 2,-J0
Questio n I Answer C
(60,000 x 3.24)
Question 2 Answer C
(240.000 X 2.40)
Qu~tio n l Ans~er C-
(8¾ X 6,QOQ,000)
i2llJlllll
156
C HAPTER 24
Problem 24- 1
2019
Oec. 31 Forward contrac1 receivable
Um-c:3.Ji.h'il t,-ain forward contract (S.000 x 300)
1,500,000
1.500,000
2020
Unrcahzcd gain • forn·ard oontrncL
Forw-ard conlract recch-ablc (S.000 x 100)
Mar.
500.000
500.000
T ree inventory (5,000 x 1.700)
C~sh
8,500,000
Cash
1,01)0.1)00
S.500,000
1.000,000
fo"' J.l'd con1rnct r1.-cch abk
Unrtali1..ed gain - forward ~ontraet
1.000.000
1.000.000
Tree m"entory
2019
Oec. 3 1 Unrealized loss +forward contract
Forward oontracl payable (100,000 x 2)
2020
Jan 31 Unrealized loss forw:ud conlracl
200.000
200.000
300.000
Forward oontracl payable (100.000 x 3)
31 Purehases(JOO,OOlh 751
300.000
7.500.000
7,500,000
Cash
3 1 Forward contract p<1yablc
500,000
Cash
3 1 Purchases
500.000
500,000
Unf\.--alizcd loss - forward con1rac1
500.000
Problem 24-3
R cquircm enl l
2019
Dec 31 Futun:-s contract n:cc,vnblc
500,000
500,000
UnrenliJ.cJ gain - fut ures conm,et (S0,000 :c 10)
2020
fcb. I futures coo1rac, rccciv:,blc
Unrealued gain - fulure t."-Ontrac1 (50,000 x .S)
250.000
250.000
157
2020
Feb. I J>urduses:
Cash (50.000x 165)
Cash
8250.000
8.250.000
750.000
F'ucun:s contract receivable
Untcali1cd gJin - futul't S f,)l)tltratt
Purchases
750.000
750,000
750.000
Rc:q u.irement 2
2019
Occ. l 1 Unt.;:alizcd loss furutes COl'lt.ract
250.000
Fotorcs con1rac1payable \50.000 x 5)
250.000
2020
Feb, 1 Purchll:ScJ
Ca,h (50,000 x 145)
Fututes contract payable
7.250.000
7.250.000
250.000
Cash
250.000
1>urthascs
Unrealized los.,; • futun.-s c<.mtracc
250.000
250,000
Problem 2..,4
2019
Dec. 31 Fumrcs contrac1 rccc1Yablc
Unrc:olu.ed gam
1.500.000
1,500,000
futures contra£t (100,000 x IS)
2020
Mar.
U11reah1.t-d gain futures l'l(NUract
Futu~ conlrac-1 rcccivablc (100,000 ,-,; S)
500.000
500,000
1>urctuscs
Cnsh (100,000 x 60)
6,000,000
Cash
1.000.000
6,000,000
1:uwrc$ contr.act n.-ecivabk
Unrealized g,Jn - Cuturt"S contract
Purchases
1,000,000
1.000.000
1.000,000
Pro blem 24--5
2019
Dec. 31 Unrealized loss - fuwrcs conlract
Fuuircs cootracl payable \25,000 x 5)
125.000
125.000
158
202-0
June
Unrcali1..td los..~ - fu1ure!. cont.race
futures contract payable
7S,000
7S.000
Fururcs contract ))3yablc - 611/2020 (2S.000 x P8)
Futures CO<tlr11Cl payoblo - 12/31/2019
Increase in dm vauw liability
furures contntet p:iyablc
200.000
rum
...liJ!IJj!
200.000
Cas.h
Purchases (25.000 x 42)
CO$h
Purchases
200,000
1.0 50.000
1.050,000
200.000
Urueahzed loss futures conuact
200.000
Problem 24--6
Requirement l
2019
Dec. I Call opti0in
50.000
50,000
ca~h
3 1 Coll O!)tlon
Unrco:lizcd gain call ope ion (150,000 x l • J00,000 .50.()()0)
2020
July
250.000
2S0,000
Call option
Unrcahud p m • call oJl(ion t IS0.000,. 5 ~ 1so.ooo )00,000)
450,000
C.sh
750,000
450,000
7S0,000
Call oplion
Purchases
5,250.000
Ca.,h ( I 50,000 x35)
Unrt'3Jit00 gain - call c,ption
Purc.•. lusc.s
S,250,000
700,000
700.000
Requirt-ment 2
2019
Dec. I Call option
Cash
3 1 Call optioo
Unrcahud ga.111 - eall ope.ion
2020
July
Pu«hases
Co,h ( I 50,000 x 28)
Loss on call option
Unrcahud gai1l c,all option
C.all option
50.000
50.000
250.000
250.000
4.200.000
4.200.000
50,000
250,000
300,000
159
Probleml-4-7
2019
INc. I Call option
20.000
Cash
J I Call option
Unr..:-ahud gain - call option
20.000
380,000
3il0.000
Fair \'lluc (200,000 A 2)
400.000
Paymtnl for ~II op1ion
..lll.J!f.!jl
~
lncrease
2020
June
I
Call option
Unn:alit.cd gain -call option
200,000
200.000
Call Ol"ion 6/112020 (200.000 x Pl)
Call o.-ioo-12/31/2019
l_ncrcase in deriv:ui\'e ussct
Cash
600.000
:!!IMOO
~
600.000
C.11 op<ioo
Purchases (200.000 x P28\
Casll
Un~lizcd gain - call opcion
600.000
5,600.000
S.600.000
S80.000
580.000
F>urchas<.-s
Pro bk m24-8
2019
0cc. I Put opt1on
100,000
Cash
100.000
2020
Feb,
Cush (S0.000 • I80\
9,000,000
Sales
Loss on 1"1t option
Pu1op1ion
9.000.000
100,000
100.000
With lb'° pri« above 1he put option pncc, on the part of the sell<'r, 1hc~ is no rcawn 10 ~xcrt•~
the option h is bc1tcr to sell the produce on the open m.iltcL Thus, 1hc pul option is not exercised
on February I. 2020 and has no value.
Problem 2,4-9
Question 1 Ans.,'er 8
The nonon.al figure is 8.000 kilos and lht notional ,·,llue is 8,000 kilos times the underlying lixcd price of
Pl ,200 per kilo cir P9,600,000.
Question 2 Answer C
Martce1price - 12/l 112(1 19
Undcrl)1.ng fixed price
Ocri\'oti\·c: met
1.500
.LZl!!I
..JlJjl
160
for~ -ard con,rac1 recch able (8,000 x J OO)
24(1() 099
Pres.em \'.llue of derivative asset (2.400.000 A .91)
The prt"'>cnt value of P2.184.000 is rcoog.oi:i-;cd :tit forward contrncl receivable on D«cmbl'J 31. 20 19
because- lhc amount is collectible on January I. 2021, one year from lx."Cemba 31, 2019.
QuC'!ltion l An$wcr 8
Martel p1•iL-c - 12/l l/2020
1,000
Undcrl),ng, fixed price
DcriY.1tivc fo1bility
.l.llJn
FoN rnrd co,ntrQCI paygblc - 1213 1/20 20 (8,000 x 200)
....2ll!I
I 699QQQ
Problem 24,..10
Question I Answer A
(SO,OOOx 10)
Question l Answer A
(50.000 x I5)
lJ.QJlllll
Questio n 3 Answer C
(S0,000 x 115 • 5,750.000 - 50.000)
5QWQQQ
Problem 24-11
Quntion I Answer A
(200,000 X J)
Question 2 Answer D
Opoon p;i.ymcm
QuL~tion 3 Ansv.:cr 0
No dcm11u,·c ha.b1lity
Question 4 Answer C
(200,000 X 21)
4 200 000
Problem 24-12 Answer C
Fair value of call option (120- 100 =20x 10.000)
Problem 24,.. t J Answer 8
Sus,, (20,000 x IS)
Milk (S0,000 x 9)
Ice «cam (30,000 < 2SJ
Fu1urcsoomrac1 ~ ivable - 12/31/2019
300.000
(450,000)
llllJ!Q!l
!i!ll!.l!!l!I
161
C HAPTER 2S
Probkm ZS- I
I.
LQnd
6,000,000
5,000.000
1.000.000
Share cr.1Ji1al
Share premium
2.
L:,nd
Donated c.api1at
1,000,000
1.000.000
50,000
Dooalcd capilal
Ca,h
].
50.000
2,200,000
x 5,500,000)
Building \315 , 5.500,000)
Lond (.?/5
3.J00.000
c.,h
4,
5.500.000
<~•
4,000,000
6.000.000
Lnnd
x 10.000.000)
Building (60% x 10,000.000)
Cash
7.500.000
2.500.000
M ortg.:i,gc pay:1blc
Problem 25-2
2019
Jan. I Equipment
580.000
120.000
0 1SCoun1 on note payable
Cash
100,000
500,000
Not~ pa)'llbl~
Dec. JI Note payable
Cash
100.000
100,000
3 1 lnttrcsl expens~
D,soount on note payablt
2019
2020
202 1
2022
2023
2020
0cc 3 I Note payable
Cash
JI
lntCl'CSI CXl'lffl.qc
Discoun1 on note payable
40,000
40,000
Note payable
Fracdon
Amonizadon
500.000
~00.000
300.000
200.000
5115
4/15
J/15
40,000
32.000
24.000
16,000
100 000
I 509000
I/IS
2115
...!J!2!I
.U!lJlllll
100.000
100,000
32.000
32.000
162
Problem lS.3
Ot.m n p:tymcnt
100,000
PrcliCnt \ ';1lu..: of note (200,000 x 3. 17)
61 4 !tQO
Tota.I cost
2.11.Wl
2019
Jan
734,000
166.000
Machinery
Orscow:u on note payable
Cosh
100.000
800,000
N ote p:l)'!lblc
Dec.JI Noct. payable
200.000
200.000
Cash
63.400
Dec.JI Interest expense
O,scowu on 1~1e pa)'llbte
Du e
1/1/2019
12/31/2019
12/3 1/2020
12/31/2021
12131/2022
2020
Dec. JI Noce payable
63.400
Paymenl
HW. lnterest
Principal
200,000
200.000
200,000
200,000
63,400
49.740
34,714
IR,146
136,600
150.260
165.286
181,854
lnlCl'C ll cxpcnjC
634,000
497,400
347.140
181.854
200,000
Cash
31
Present value
200.000
49,740
49.740
OilCOOlll on note pa)":lblc
Problem 25-4
I.
\1ochi_ncry
Accounts p::t)'llble
3,000.000
J-\ ccoun,s IX'l)'llblc
J,000,000
J00.000
Pun.:hasc d1scoun1 los1
3.000.000
Cash
f\fachinery
Loss on rctir<:mcnt of old nu1chinc
Spare parts im en1ory
3.000.000
300.000
50,000
150,000
200.000
Cath
2. Moch1nc1·y
lntcr(~t cxp.;nk
Cash
4,700.000
800.000
500,000
5,000.000
Noh,· payable
Note payable
5.000.000
5.000,000
C°'h
3
Mochinery(S00.000 x 3.17)
Discount on noc.e payable
N0<e.poyablc
1.S8S.OOO
415.000
2.000.000
163
Nole paynhlc
Ca,h
500,000
tn1c:rcst expense
158,500
500,000
158,500
O1.SC0unt on note pa)'able
4,
Macbintry (2,000.000 x .68)
Disrount on oote payable
U60.000
640.000
Nocc payable
lnlcn:st expense (10°1. x 1.360,000)
Oi~oun1 on nnlc p;1yablc
2.000,000
136,000
136,000
Problem 15-S
I.
land ( 114 x 6.(J()(),(J()()J
Bu.ilding (),4 x 6.000.000)
Ma1;hinn-y (8/l l x l ,R00.000)
Offttt «ioit•ri~,u (.&1 12 x 1.S00,000)
Och\'CI)' c-quipment
1.500,(J()()
•.500,000
1,200,000
600.000
500.000
Cash
2.
S.300.000
land
1,000,000
Bu ilding
MaC'hillO')'
Shirt c;ap1tal
Stun- prenuum
5,(J()(),()00
2,000,000
6,000.000
2,000,000
l.l00,000
),
l<'lnd
4.
MadtLIK'f)' (900.000 ., 98¾)
Cuh
t,S00,000
lncumc ftom don:itmn
~IU.000
~K?,000
)5,000
Machilll..'f)'
JS,000
(';15'1
5.
Fum itlltt' and fi:durtS (400 .000 x .797)
Oi,;,c(lllmt on noic: payable
JIUOO
11,200
400.000
N01t p1yable
Problem 2.S-6
430,000
Computer
J00,000
hwemory (c~r)
Cash
Gain on c~ehangc
2.
Ma.hiDcty- new \110.000 • 30.000)
Aceunud:11ed deptttl.11ion
Los.son ~~ch.,n,e
50.000
80,000
140.000
120,000
10,000
240,000
30.000
MM."hiaery- okl
Cll,h
F:1ir value or asset gJYdl
110,000
C1myi1~ umou1,1
~
Wll.Wll)
LO!iJ on CXC'hllllg(
).
......
l!qu1pn'lrfll
Lo» on exch:tl'IJ<
1,000,000
200,000
A~cumulall!d. d(Jlr«ia1ioo
l!.qt11pmcm old
1.800,000
l.000,000
164
P,oblem 2S-7
Pr-o"·n
Smillf'
r"'-.iipm.:n1 . '"""'
N«lfflulatd ~ i l ) n
Ga.in_, eidl~"f'l
..
r41ip~111
AttumulmeJ d~ i ( ) f l
,00,000
'"
l,000,000
f.4111iflh.'d (,IJ
100.000
'""""°
l . il)f!X'tll
,
SQD.IIOO
1.750.000
2,100,000
,o.eoo
Qamo.q-,uto,~
P.obkm 2S-8
Cash price ,, itbout trade in
Cash paymcnl
Tmdc in value
l..tss:: Carr)'lng amoun1
Gain on exchange
1,400,000
()~Q~
420,000
~UQQQQ
z11,~·~1
1.400.000
600.000
EquiplllClll • new
Acc:umulattd dq)reciation
bQUipmcOI - old
C.ash
1.000.000
980,000
20.000
Gain on exchange
Problem lS-9
Deli, ery equipment - new
2,J00,000
1.300,000
150,000
J00.000
120.000
10.000
Accwnula1cd ck-,,n.-eiatJon
lo$11 on cX\.' hmtgc
lnpu, tax
lns.urance
Taxes and liccoscll
Ochvl.'ry equipmenl o ld
1,500,000
2.680.000
Ca"1
Fair v,1luc or i1ssc1 given
Cash paid
Tou,I
Us~: VAT
lnsu,.tnce
Rcg.itlrlllion fc:c
Cos.i or new asse1
50,000
Zfi~2illl0
2.730.000
J00.000
120.000
...lJ!.llOO
Fair v::,luc
Cmrying amount
410 !l!J9
) 1QQ!XIQ
50,000
~
loss on exchange
0"0000}
Problem lS- 10
I.
2.
Direct labor
Materials
Overhc~d
Oirtcl l1bor
Materials
Ovcrh~d
135 / 180 X 2,000,000
45 / 180 x 2,000,000
Total
1-'laJ!ihed goOlh
Build.Ing
6.000.000
7,000,000
4.200.000
3.000,000
4,000,000
I~ QQQ Q!JQ
2 ' '1n0QO
SBOOOOQ
6,000,000
4.200,000
J,000,000
l,M00,000
4,000.000
, m;mQQa
7,000,000
2.000.000
1.800.000
, ilQQ ilQQ
1,500,000
I~Qgg ~Q
azan ogg
"122 ttm!
6Jllfl(wg
165
T oti1I
3
O ircc1 labor
Materials
Ove-rhead
42 / 60 X 2.000.000
I8 / 60 , 2,000,000
6.000.000
7,000.000
1.000.000
l:..n.ished go~
4.200.000
3,000.000
B\liklin&
1,800.000
4,000.000
1.400.000
!i!lQ QQ!!
IH }()()QOO
8§00000
6400000
Problem l S- 11
a. MauriaJs
OirtCI 13bor
O \·el'hc.1d
500.000
1.000.000
liOO QQ!!
Cost ofmachil'lcry
, Jfl:Q Qgg
O verhead
('h,rgcd to fin ished BOOds (75% x 4,000.000)
3,600,000
' QQ!! QQ!!
Charged to machinery
~!X!D
b. Materials
DiK-CI labor
S00.000
1,000,000
Overhead ( 1/5 x 3.600.000)
U22'!0
2229 000
Cost of machinery
Oirecc labor:
l'imsl,cd g.oo<b,
4,000,000
4/5
Mnthinery
I iU!QQim
Sf.lOQOOO
1/5
Problem 1.S. 12 AnAwer C ( 1,160,000 + 20,000)
I IH9ftM
Problem 2$-13 Answer C
Cos:h pric.:c
2,000,000
Installation cost
To1aJ cos.t
? QjQQQQ
,a lt!lil
Problem l.S- 14 Answer C
(3,000,000 - 450,000 - 2SS.OOO + 40.000 + 30.000)
2 ' ~~(WO
Problem 25- 1S
Qu~tion
Ans wer 0
Quesdon 2 Answer 0
Q uestion 3 Answer 8
Questio n 4 Answer 0
2019
Dec. 3 1 M M;hincry(l00.000 x S.712)
Discount on note pay.able
1,142,400
457.600
1.600,000
Noc.e payable
Dec. 3 I Noc< payable
C'ash
200.000
200.000
166
2020
l>ec 31 Noce p,yable
C3'h
J 1 ln1eres1expense
200,000
200,000
10),66,1
Oiscoun1 on note p.1y.1bk (11 % :'I: 942.400)
103.664
1,600,000
( 200.000)
Nuh: p.t)'llblc
Paymem - Oc«-mber 31 . 2019
Paynwnt - December 31, 2020
I
2000001
1.200,000
face iunount - December 3 1, 2020
Discount on notll payable - 12131/2020 (4$7.600 - 103.664)
Carrying :tmounl - December 31, 2020
( '\\1916)
846 064
Problem lS.- 16 Answer 0
' 1 H2 ttQQ
Problem 2S- l 7 Answer A
F irst equipment:
Invoice price
Oiscoun1 taken - 5%
Fre1gh1 and msurant"c
ln:11all1n1on t.:Ojt
3,000,000
( 150.000)
50,000
' 00 000
3,100,000
S«on d cquipmcnc:
Invoice price
Oi5CQunt l:lkcn - I00/4
Total cost
2,000,000
r 200 000)
, aoo ooo
4299099
Problem lS- 18
Quest1on 1 Answer B
Fair Wllue of asset given
Cash payment
Total cost
700.000
.lCl!l..!!00.
!!11!,0QO
Question 2 Answer 8
Fair value of assc1 given
Canying amount
~
Gain on exchange
.LOOJlllll
700,000
Problem lS- 19
Q u estJ.o u I AnS'#i er D
t-·air \'aluc of asset given (2.050.000-600.000)
Cash paymcfll
Coi.i o f ncv. m3clun'-'
1.450.000
600000
., o~o ooo
Question 2 Answer B
Fair value of asset ghen
C::111yi11g 3.COOUDI
l.QS5 on cxch:u,ge
1.450.000
I 6SOOOO
( , 1qgog,
167
Problem 25-20
Qu C!lt io n 1 Answer C
( 1,200,000 - 200,000)
Question l Answer 0
(No cornmertial substance)
1,000,000
0
Problem 25-21
QuC":Stio n I Am1wcr C
(2,100,000
Questio n l Answer A
(2.100.000 - 2,000.000)
t
100,000)
2,200.000
100.000
Problem 25-22
QuNtlo n I Answer C
( 1,000,000
300,000)
1.300.000
Question 2 AnS¥ier C
( 1.400.000 - 300.000)
1.1 00.000
t
168
C HAPTER26
Problem~I
Cash
Ocforn.-J gr.nu income
30,000,000
30.000.000
l!n\<1ronmental expense.s
Cash
2,000,000
ocrerrc..-d gn:1111 incon~
J,000,000
2,000.000
Oranl income (2/20 x 30,000.000)
l
3.000.000
Cash
Oefttrt-d gro,u ioconw
40,000,000
Omlding
50.000,000
40,000.000
50,000,000
CaJh
l.
O"'Prccaation
Accu,nulnl4.'<I depreciation (S0,000,000 1 20)
2,500,000
Deferred gram income
Gran I income (40,000,000 / 20)
2,000.000
2,500,000
2,000,000
Land
Dcforrcd gn:in1 income
50.000.000
8 uildin_g
Cash
80,000.000
50,000.000
80,000.000
Depreciation
Accumulated dc1,n:ci.n.tion (80,000,000 / 2S)
3.200.000
Oeftrred gram mrorne
Gran, income (50.000.000 1 25)
2.000.000
4. Cash
Grant tncorue
3,200,000
2,000,000
10,000,000
10.000.000
Problem 26-2
I.
Land
12,000,000
Dcfcm.xl Jr:&lll income
2.
l.
Lund improvcmen,
ca,h
Ocfcm.-d gru111 moo1l\oe
12.000.000
2,000.000
2.000.000
2.400.000
2,400,000
Ontnl income (2/10 x 12,000,000)
Problem 26-l
Cash
12.000.000
12,0()0,()()()
Deferred grant income
2.
Building
Cosh
9.000.000
9,000.000
169
3.
4
Depreciation
AccumulUOO depreciation
900.000
Turtion expense
600.000
900.000
Cash
s
Deferred i:mn1moo1nc
600.000
1.650.000
Granl income
1.6S0.OOO
900,000
Z"QQ!lQ
lluild ing (9,000,000 / I0)
Tuiuon (3.000.000/ 41
16~0D!IO
Proble m 26-4
Deferred inco me ap proach
I. Machinel'y
7.000.000
C._,h
2.
Cash
7.000.000
1.000.000
Dtft m-d grant il\come
3
Oq,rcciatfon
1.000.000
1.300.000
1.300,000
At."Cu mulatcd de preciation Cl,000,000- SOO,OOOJ Sl
J,
Deferred grant incon'W!
Gran, income ( 1.000.000 / S)
200.000
200.000
.Deduction from asset approach
2
).
Ml'!chinc:,•y
Cash
7,000,000
Cash
Machinery
1,000,000
Ocprcciatic,n
Acc:u mulalcd d"·prcc1ation (6.000.000 S00.000 1 S)
1,1()(),000
7.000,000
1,000,000
1,100,000
Pr o.ble-m 2~5
Deferred inco me approach
MKhinc1•y
5,400,000
Cash
2
Cash
lxf..:m-d grant income
3.
Ocprcdiu ion
/\cx11mulatcd depreciation (20% x S,400,000)
4.
Oc rerrOO gri:1111 ineonl<!
Gram income (20'✓• .x 400.000)
5.400.000
400,000
400.000
1,080.000
l ,0R0,000
80.000
80.000
170
Deduction fro m
'·
Mr:.chitK."ry
2.
CtHh
~ t approach
5,4()0,000
5.400,000
Cash
400,000
Machinery
3
Dcprccuuion
400.000
1.000,000
1.000.000
AL-c11mul:m:d depreciation (200,- :< 5,000,000)
Problem 26-6
Carrying a,nounl - 111/2019 tS.000.000 ~ .7~73)
S.978.400
J~S 704
lntc:rtit for 2019 (611 • x 5.9iK.400)
Carryint amount 121.ll/2019
Interest for 2020(6"1• x 6.337. 104)
Ca~m,gamoun.1 12f.ll12020
6.,1)7,10,I
1s12 ,2~
ft 2121l"
Journal entries
2019
Jan. I Casi,
Discount on note- payabk
l.oon pay;iblc
Ocfcm.-d grant income
8.000.000
2.021.600
•.000.000
2.021.600
Ike. 31 hum-s1 C'Xptt\SC'
Discou,. on nOCC' PJ1)'1b1.-
JS&.704
31 Oc:fnred grim u,e~
Gra,• income
358.7()4
Dec. JI lmcrc5C cx~n.w
Discount on 00k payabk
380.226
31 Dcfol'rc:d '-'f'iu U in«Knc:
380.226
3S8.i04
)58.704
2018
380.226
(irant i:lk:Qrnc
380.226
Probltm 26-7
2019
~bchincry
Jan.
c,sh
Cash
DefCm::d gnllnl income:
Dec.J I Oqn«1a11on
Accumuh.11<.-d dc-p<ccm11on
31 Deferred gront ioco1nc
Gra.nt incom,c (500,000 / 5)
3,000.000
J.000,000
S00.000
500,000
600,000
600.000
100,000
100,000
2020
Dec. 3 1 Oq,n."CiallOn
Aocumulatcd dcprccialion
J I [k(c:rrcd grant income
Oranl incon~
600,000
600.000
100.000
100,000
17 1
2021
Jan.
Dtferred gra.nl income"
Loss on repa)111cn1 of gram
300.000
200.000
Cuh
500,000
Dec.J I IA1>1·..•tiat1on
Accumul1tcd d l"J'f'-'<1,11100
600,000
600.000
Problem 2~8
Dcfcrn:d inco me approach
2019
Jan
Buihling
Cash
12.000.000
Cash
Defcn"d grant income
2,000.000
12.000.000
Ike. J I Ot-pn.--cfohon
2.000.000
2,400,000
Act11mul:ucd dcprcci:uion (12,000,000/ S)
31 Dcfcm:d g.ront incon.1c
Gr.mt income (2-,000.000/ S)
2.400.000
400,000
400.000
2020
bn.
Deferred grn.nt income
Loss on a,ovcmmcnt arant
Cash
Dec. J I °'-1,n..-ciauon
1,600,000
400.000
2.000.000
2.400.000
2.400.000
AccumulJted dcprcct.-ilion
Deduction fro m
:a..,scc appro ach
2019
bn.
13:u,ldu\g
12,000.000
Ca,h
Ct$h
12.000.000
2,000,000
0uildmg
Dec. J I lkprc<iauon
2.000.000
2.000.000
Accumulmted d1.-p,..-ci-11ioo ( 10,000,000 IS)
2.000.000
2020
Jian.
llujldmg
2,000,000
2.000.000
C3Sh
Dec. 31 Dcprocionon
Accomutatcd depreciation
Orig,nnl carrying amount
lnc-ruscd carrying amount (2,000,000 / S x 2)
Total depreciation
2.800.000
2.800.000
2.000.000
RQ!!.000
'BQQDJJQ
172
Problem 26-9 Answer 0
Acquisi1ion <:0$t nc1 of arant (S,400.000 - 400.000)
Accumula1cd dcpn:-cia1ion:
2019 (2~, X 5.000.000)
2020 (20% x 4.000.000)
5.0(10.000
1.000.000
SQOQQO
Corrying amount - Occt"mbcr 31, 2020
I KflOOOO
' 200 QQQ
Problem 26- 10
Questio n I Am;-..i•c r 0
Dcprcci01ion f0< 2019 (6,000,000 - .5-00,000 / 10)
Question 2 Answer 0
Origin al dcpn."ri.i1ion
Addttiooal del)C'eciation (600.000/ IOx 3)
550,000
.Llil!..2QO
Total ~kpreci.ation for 2021
llllJlllll
Problem 26- 11
Questio n I An~wer 0
5.000,000
'\ 75:0 000
NuL~ p:t)'tlbk
Prcl'Cnt v;1luc (5,000,000 :it • 75)
OiStount on nocc payable
Cash
OiSC()unt oo note payable
1noooo
5,000,000
1,250.000
No1e payable
5.000.000
1.250.000
Deferred gram mron'W!
Qut?Stion 2 Answer 8
lntcrt!il c-xpcn.s c ( 100/4 x 3.750.(KJO)
)75.000
Discount on note payable
37S.000
Qu ~ tio n 3 Answer 8
1.,250,000
Dcfc:-m:d gram income
Grnnl income in 2019
1/1/2019
Dcfcrn:d 1,tr.ant income
12/31/2019
825 OQQ
Present \'aluc- 1/1/2019
lntcrcSI 1hr 2019
Prci;cnt \'.1luc - 12131/20 19
lntcn:" for 2020 (10¾ x 4, 125,000)
Present \'a lu~ - 12131/2020
3,750.000
( J7S 000)
Qu~tlon 4 Answer 0
J]S 000
4,125,000
4)2 500
4 nz "00
A n ochtr compucatlon
Nol~ p:tyablc
Discount on note pay.,blc ( 1,250.000- )75,000- 412.500)
Carrying amount - 12/3 1/2020
5,000,000
<
462 liQQ)
4 537 599
173
CHAPTER27
Problem 27- 1
Oate
Expenditure
F'raction
2.000.000
2.000.000
12/12
6112
J1nu.11')'
JO
December 31
June
I 000000
sMQQQQ
2,000,000
1.000,000
JMOOOO
Average capitali2a1ion rate ( 1.060.000 I 8,000.000)
S.000.000
E."<pcndJtUl\."!l on buildm4t
lntcrc$1(3,000,000 x 13.25%)
Total cost of building
32? CiQQ
5
'27 '00
Problem 27-2
Avcr:.lge capitaltiallon rote (900,000 / IS,000,0()0)
Date
Janu;uy
Mareh
31
September 30
J.1.1.l:.
Expr:nditurc
F raction
Average
2.000.000
1.000.000
12/ 12
9112
J/I2
2.000.000
750.000
1,0 000
1000000
69'KHKt2
~
txpendm1res on oons.trucdon
Specilie in1cn..'$l 001SI:
509000
6.000.000
240,000
A«u:il inlcr~,;.i
C IQ000\
rmcrcst income
Gencral inttn'~ cost:
Averag,t expenditures
230.000
3500.000
000)
1,500.000
Spcxiltc borrowing
(') l)fl()
General borro\\ ing
C.p,taltzauon rote (900.000 / 8.000.000)
Tot.a.I cost of building
11
z,,s
1('>8
z,o
6398250
Problem 27-3
Dace
IMW.r)'
July
No,·cmbcr 1
E~Jkndlture
F raction
Average
1,000.000
4.000.000
12/12
6112
2/12
1.000.000
2.000.000
1 000000
3 000000
Avt"rngt> expe nditures
Applicable to specific loan
Applk.able.10 gt,,eral loan
Actual cx1xnditurc1
~00,000
~
'00000
2.500.000
iJ 000000)
I 5QQ QQQ
S.000.000
Capitalizable in1eres.t:
Specific 12,000,000 x 10,IJ
200.000
Gcnc nll ( 1,500,000 x 12~.. )
To tal cos1of buildini
818QQQQ
IXOOOO
174
Problem 27-4
Rcquirc:m c-n1 I
Da1c
January I, 21) 19
Apnl I, 2019
December 1, 2019
Expeodlnare
Fr=icdon
4,000,000
S,000.000
12/12
9/ 12
1000000
1/12
17 OOOQQQ
Average
4,000,000
3,750.000
1-1i0QQO
8 000 QQQ
8,000,000
Avcr.1gc cxpcndilu~s 1n 20 19
Applicable 10 ipedfic loan
Applicable 10 general loan
11000000)
'1i QQQQQQ
AchJal cx1,cnd1turc,; in 2019
12,000.000
CapitaliT~blc intcrcsl in 2019
Spc<:ifi< (3,000.000 x Hl"/4)
General (S,000.000 x I 2, , )
To1.J cosl of building
0:ue
January I, 21)20
Man:h I. .W20
300,000
6000(Xt
12 200000
Expcodimrc
Fraction
Average
12,900.000
6/6
12,900.000
6000000
!R2QQ QQQ
4/6
A vernge expenditures tn 2020
4000000
I§ 2QQQQQ
16.900.000
Applu.:ablc 10 specific Joan
I HkkHMlO)
A r I>1icublc 10 ~n<."rtll loan
I' 209000
No1.c 1lu1t the coostruciion pcnod 10 2020 is only 6 months because: the buildmg was COOlpleted 0 1,
June 30, 2020. T hus, the 1wcragu cxpcnd1ture!I sboukl be tbr 6 inonthi only.
Actual expenditure$ in 2020
18,900.000
Capitolu.abl\' in1eres1 1:n 2020
Specific 13,000,000, 10%, 6112)
Gcnen,1(13.900.000, 12%, 6fl2)
Total cost of new building - 61300020
8}4000
12$84 000
IS0.000
Requittme.ru 2
Actual antcrest anc:urrcd on general borrowing 2019 t 12¾ x 2S.OOO.OOO)
lnle~&l on genert1I borrowins cupit11lizcd in 2019
ln(erts1expense for 2019
3,000,000
< 600000'
2400 QQQ
300.000
Ac,ual interest incurred on spcci fac bom,~·ina: - 2020 (3,000.000 x 10%)
Actu.11 inlel't'Sl incurred on Jieneral borrowing- 2020 (25,000,000 x 12%)
1 000 QQO
Total inttrest incurred for 2020
3.300.000
less: Total cap1rnh1.cd mtcresc ror 2020
lnt~~111 expense foe 2020
98• ooo
~ll§QQQ
175
Problrm 27-5
Expenditu re
Fraction
I
2,000.000
12/12
2,000,000
JI
4,000,000
9/12
3,000,000
6,100,000
4,400,000
3 'iQQ QQQ
(~12
3112
0/12
3,050.000
1, 100,000
0:tlc
January
M!:trt."h
June
30
Sc:ptcmbt.T 3-0
O.cembet 31
2QOOQQQQ
2 150000
Avcragc cx.penditun..--s
9,150.000
18500 000)
Ap1>licablc tQ specific bom,wing
§"i9fWV!
Appheablc to &>c..""nl.'r.tl bonnwmg
2.
100/u IO•ycar note
12% 5-)-c-;ir nol.c
Gcnr-ml borrowina
Average c1,pitn1iwti<in ro1c ( 1,.140,000 / 13,000,000)
Average
Principal
Interest
6,000,000
600,000
7000000
¥40000
I 440000
1} QQQ QQQ
.u.m
Spec.tic borro1,1,.u1g
8.500.000
Muh1plyby ruturc \alw of 1 at 3°. for4 ~ riods
f>rincipal and intuesc due 12/31/2019
J>rincipal amount
9,5(,6,750
Inte-,res1on s.,eC'ilic borrowing
lmcres1on general bom>w1ng (650,000 x I 1.08~)
Tomi cupiu1..liwblc tn1cresl
I 12i~
18 soo000)
1.066.750
71 029
I 138 170
Smee the 12% mlcrcst on the sp«ific borrowing is compounded qu.ancrly, d,c future w luc o(thc
principal nnd in1c1'C$I due on Decembi:r J I, 2019 i$ ddttmim.\41 by mulliplying the prinnpal u,nount or
P8.SOO.OOO by,~ r,ctor ror 1he futur~ value of I al 3% for 4 1>eriods.
20,000.000
I IJ& 770
3 Actual expcndimrcs on building
C:ir,i1nlit.able borrowing cost
Total cost ofbwlding
' I 138 779
4 Ac:lual intc~ I incuncd on gcm:ral borrowing
Capi1ali.:red in1tn!SI on gent"ral borrowintt
C 71020)
ln,e.rest (Xpense for 2019
1.440,000
1167 (180
Problem 27~6 Answer A
A vC'nlg.: expcnditun:s (20.000,000 / 2)
Multiply by c;"pit:ilization rute
ln1c~s1on a..•mgc e~penditurci
10.000.000
11"2
I 200000
The capit:.111.,.nbf(' bo1Towms cost i.s limittd to th(' actu;il borrowms co:.t incumd. In this cas'-', the
oompulcd amount of P 1.200.000 j., more lhan chc actual borrowin& CO!il of Pl ,020,000. Accordingly. 1hc
ct1.piu.li1.able interest is P l.020,000. No1t lhat in computing the a .. erage exper1di1ures. lhe amoun1 of
P20.000.000 is simply d,,.,ided by 2 because lhc said :unoum. is i1lcurl'OO e-..•enly during the year coded
20 19.
176
Problem 27-7
Qumio n 1 Am1wcr C
Question 2 Answer B
Avcrngc cxpcndilun:s ( I0.000,000 / 2)
sQQOQOQ
ln1crts.1~ 1>it.1lizcd on :wmgc upcnditu~, (5,000.000 x 12°/4)
lnh.'K'SI cxpe-111':' ( 1.800.000 - 600.000)
I 700 000
Problem 27-8 Answer B
Accumula1cd CXJX!ltdimrcs :it ihe end o f N,'O years
Average cxpcnditun:s m <he third ycar(8.000.000 / 2)
Total
J.000.000
1000000
2QQQ QQQ
~
Capitaliz.ablt inlCteS-t (7.000.000 x ~ /4)
Problem 27-9 Answer A
Average ac.cumula1ed c:<p,endtturcs
Specific borro""mg
Ap~iublc to gcncr.11 boITOwing
2,500,000
( I ~00 000\
I OOOQQQ
90,000
...!&l!!l!!
Sp~iti~(6~. x l,S00,000)
Gcncr.11(911 , x 1,000.000)
Capitnlintblc:: interest
Co" o r tiuilding (3,600,000 , 180,000)
J.&IJlOO
' 780 000
Problem 27-10 Answer B
Annual in1.eres1:
r'/4 X 5.000.000
350.000
8o/, X 10,000.000
800.000
9"/4 X 10,000,000
Total
900000
' MOOOO
Avcr.sgc inlcrcsl raic l2,0SO,OOO / 2S.000.000)
Capitalizable total bom,wing costs (20,000,000 >. $.?-/4 x 2 years)
~
'
1
8QQQQ
lllt in\'CStmcm income of PS-00.000 is ignored because tht cons.truc:1ion is financed by gcocral
borrowings.
Problem 27• I 1 Answer C
Ave.mg_(' i!~penditurcs
Specific borrow-ing
Gentra.1 borrowing
Spt...-cific borrowmg (4,000,000 :< ICP'/4)
Gener.ii borrowin& (7S0.000 x I~1,)
Capitahzable interest
4 ,750,000
/4 000 000)
759 QQQ
400,000
.J!!l.!l!al
mooo
177
Problem 27-12 Answer 0
Gcnt..'1111 burT'-m ings:
1.500.000, 10'/4
150.000
I 000 001'.h 8W.
''\QOMO
~
U!l.lt!lS!
~
Avcr.,gc rate (230.0001 2.500.000)
Specific (2,000,000 • 7.5%)
150,000
( 59 QQO)
.lli.&l!l
lntcres.1rcverrne
Genml ( 1.900.000 x 9.2~, )
CnpiL1l1lllblc lnterest
~
Problem 27-13 Answer 8
QuC$tlo n 1 Am;wcr D
A1rnual tntettSI:
8~mk A {6¾ x 8,000,000)
480,000
660.000
Dank B (6,6¾ x 10,000,000)
Baok (' (7', x 30.000.000)
Totnl
2 JOQQOO
'"49 OOQ
Averagc interesl rate (3.240.000 / 48.000.000)
Cnpitnli-7..ublc borrowina CO!lls ( I 8,000,000 x 6.75%, 8/12)
Qucsd on 2 Answer A
Tolal in1eres1
3.2AO.OOO
I 8)0000\
lntcrcs1coP4tnhzcd
, 4,0 ( ),()0
lntcn!SI upen~
Problem 27-14
Question I Answer B
Qu ~ tlon 2 Ans~er C
15.000.000
I Jo ooo ooo)
Avcrag«xt)<oditures (30.000.000 / 2)
Ar 1)1icnble 10 ~ citic borrowing
Ap1>1icable lo gcncnl OOrrowmi
~ fl()O()OO
Principal
Interest
3-0.000 .000
1o 000 00<\
3.600.000
8'1" S-ycar note payubk
Toi.al gcncrnl borrowing
40 000000
4 400 000
12¾ 20-year bonds payabk
Ave.rage capitah~auon rate (4.400.000 / 40.000.000)
lntCfCst on ipecific bQrro"ina ( Ioe/4 ,; I0.000.000)
lnle~ st tnconu~
lnwrcst on gcntml borrowtng ( 11• ~ x S.000.000)
Tota.I capil.tli7,ablc in1ncs,
lnle~ st cxpcnSc.- for 2019 (4.400,000- SS0,000)
~00 000
.I.I!.
1.000.000
( 100.000)
~,oooo
I 459 OOQ
135goog
178
Probkm 27-IS
Qumion 1 Answer 8
July
I. 20 19 (5.000.000 x 6/6)
OCtobcrl,2019 (3,000,000x3/6)
5.000.000
Avcrng<' cxpcndi1urn in 2019
!i ~00 OQO
Capitol11:cd mtcr..:54 frorn spt-c:/licbom.nn11g(6,SOO,OOO :< 6' ~ "< 6/12)
I '.500000
.W.000
There is no general borrowing from lhe- 2019 a verage t..~peod itures because the specific: borrowing 1s
P7,000,000.
January
I . 2020
(8.19 5.000x 10/101
(3.000.000 • 9110)
Ap1, I
I, 2020
(2,000,000 Jc. 7110)
Sept<mb<r I, 2020
(2.000,000 x 2/10)
Octob<~ I. 2020
( 500.000 • 1/10)
Average expcnditwts m 2020
February I. 2020
8.195.000
2..700.000
1,400,000
400.000
soooo
12 745QOO
Note Om the consm1c:1ion 1xriod for 2020 is 10 months b«:lusc the plant was com pleted October 3 1.
2020.
July
I. 20 19
OCtobcr I, 2019
5.000.000
Actual c.Jpcnditurc in 20 19
8.000.000
Cophnhzublc inh:rcsl for 20 19
Co~ incu1·1'td to December 31, 2019
HK)O 000
12sooo
8 )2$ 099
Question 2 Answer 0
Ave:rag~ expenditwt in 2020
Specific: bOffOWUlg
Gc:ncrol bon-o"ing
Specific borrowu1g (7.000.000 :< 6% x In' 12)
Gcrwml borrO\\.ing(S.745.000 x s,-~11: 10 112)
Capirnli:t.i.blc: inC<:rc!l for 2020
12.745.000
C 7 000 0(10)
'i J4'i 000
350.000
~
l1.1.llll!l
Que$tion l An.swer C
lntcres1 on specific (7,000,000 x 6%)
lntcrcs1on gl'.'neral ( 15,000.000 x S¾)
Tu1a.l intc:iut inc:um:d in 2020
Capitali:1ed in1erefit in 20 20
Interest expense for 2020
420,000
I ' 00 000
1.620,000
( 711000)
887 QQQ
179
CHAPTER28
Problem 23-1
'"2 QQQ
Quc,Hon I Answer A (950,000 + R,000,000 t 300,000)
Q
Question 2 Answer A (4,500.000 + 200,000)
4ZQQ QQQ
Problem 28-2 Answer A
Purcht,sc price
Legal foes.
Tille insurance
Tot.al cost of land
4,000,000
150.000
;;;ppoo
4 ' 02 QQQ
Problem 23-3
Question t Answer
n
Question 2 Answer 8
Land
Building
Porcht1k price or land
Lega] fees for conlr.lCl
Arc:hil«t fee
Demolition of ofd building
Sale of scrap
Construction cost
600,000
20.000
Tow oost
~
1600 000
Land
Building
80.000
50,000
(
30,000)
'~O!!U!!!!
Problem 28-4 Answer A
Purctiasc price of land
Oemolitioo
Arc:hllect ftt
Legal fee
Cormruc-tion cost
Salvaged matenals
1.000.000
Total c:os.t
10?5 QQQ
100,000
175.000
25,000
5.450.000
(
lit Q!!!!)
5625 000
Problem 28--S
Question I Answer A
4 ,; "'2 llllll
Question 2 Answer A
2211QOOO
Qucstioo 3 Answer 1\
i50QQQ
180
Problem 28-6
Qu ~ Llo n I Answ~r D
Questio n 2 Answer A
[..and
Building
1,000,000
Cash paid for l1tnd und old building
50.000
IS.000
200.000
30.000
Removal oro ld building
Payment lo 1cnan1s or old buiklin,: lo \':.'lcalc premises
Architect fee
Building penn,1
Fee for tille scareh
Sun.cy before conslructi<m
10,000
20.000
100.000
6.000.000
£.<(c.t\'3000
Cosi of new bwldmg consmic1cd
AsScSS-mcnl foi:
Cosi of 1radin¥o lc,·c-hn1 ;and landfill
Drivcwa~ and walks
Temporary quartcrS for construction ere"
Tc111porary building 10 home 100b t'lnd macait\l.s
Coi;.1or «innruction changes
5,000
45.000
4-0.000
80.000
00.000
I OBOQQQ
50000
'162ii ftQQ
Notr:Thc cost of replacing window, is 1n:;11cd 11s c,;pcnsc.
Problem 28-7
Questio n 1 Answer C
Questio n l An&wl.lr A
Question 3 Answer C
Land
Fair "'::1lul! of land
I.cpl foe,
Payment of mortgage
Payn1c.n1 of 1!1.XCS
Land im.pro "•ement
1,800,000
10.000
50.000
20.000
30,000
Cos.1 o f n11it1g building
Grading and drainage
Architect fee
Building
15,000
200.000
8,000,000
P11ymecn1 lO contractor
lntcrciu c:ost
Drin way :md parking 101
CoSt of uecs. shrubs and other land.,;caping,
Cost or installing lights in partrng IOI
Premium l"o r in:.urnnce
300,000
4-0,000
55.000
5.000
1~ 000
I ~2SU!!Q
N '\SCi
iK!!l
.lll!!.l!ll!!
The P<l)Tnenc for mcchcul bills and cbe cos, of open house pany ;:'I re ourl'igln opcnscs bectlusc Ibey arc noc
a n«'-~sary co~ of u1.-quirins th'- Jund and building..
181
Problem 23-8
Qu estion I Answer A
Question 2 Answer B
Qu estio n l Ans" er
n
Purthast price
Land
Om« bulldlng
1.300.000
700.000
Mate-dab
Ucavi.nion
J!:'actory bulldlng
3.000.000
100,000
2.500.000
labor
Rtmodeli1:i,
Cash discounts
Supcrv,,.lon
200.000
60,()00)
70,000
20.000
30.000
140.000
Compcns.1tion insurnncc
Clerical a nd other c:<pm..:;e1
Plans :.lnd spccdications
Lf:pl C~I • land
10000
I l J£t~
~
' HOO 000
I. The ,mputcd m1ttesc on corporation's own mcmcy is not captrnli:zablc,
2.. The pa)mein of claim for injuries n-01 c(wercJ by inwran<:c and the kg11I CO.SI of inj ury ch,im ;ire treated
as c,prosc.
3. Saving on constructfon is 001 recognized.
Pl'Qblem 28-9
Queitio n I Answer A
Qucstioo 2 Answer B
Question l Answer A
Q u Clltio n 4 Answer 0
Lan d
BuHding
Lan d impro vement
Balances. Januiry I
land acquired
3.500.000
1,250.000
6,000,000
900.000
Issuance o r share aipilal:
12/36 X >,500,000
1,500.000
24/36 X 4,500,000
New parking Joe. st.reel and sidt\\ Jlk
Balances. De«mber 31
8.ll:m-:c of cqu1pmcm
January I
f..quipn1"'tll purdlaSt:d
Freight and unktading charge
lnstalla11on cost
Equipmc-nl ,old
To1al00!1
3,000,000
7
6 2' 0 000
2000000
so OQO
I MOrKN)
1.500,000
3.000.000
S0,000
350.000
$00000)
4 499 000
182
Problem 23- 10
Qu ~tio n l Answer 8
Balat1ct of land .1crount oo J&J1uary I
2,200.000
Fina pi1Xc of land acquired:
Cos•
Pa)mC:nl of real esra1e ag.:nt
Cmt of clc~ring l1nd
Timbl-r and ¥J"J\1d T(.'COVl-rtd
1,600.000
175.000
30.000
')~ 000)
1.800,000
Second piereofland acquu'-'Cl (4.500.000 x 2/3)
To1..t cost of land under property, plant and equipment
J 000 000
1QQQ 000
Second pitrt ofland with an old building:
Land
2.000.000
O ld building
Tocal 11pprniscd v:aluc
I 000 000
3 QQQ 000
Allocated cost:
L•nd
(4,500,000. W )
Old buildio11 <•.S00.000 x 113)
Total purchas.: pric:e
3,000.000
I ~QQ QQO
4 500 OOQ
The third piece ofl,rnd ac:q uircd is c la$.5i fied as invcMm enl property
Qucsdon l Answer B
Archit4.."\..1. fee
100,000
5.000,000
50.000
80,000
Building Pl~lit
Total C()S.t of new bulld1ng
5 JOQ000
Demolition of old building
New CunSLNCl10 n L-0:.l
F1tcavu11on foe
70000
The allocated cost of tht- old building i$ accounK-d for as loiiS because ii is dcmolish,-d to m,1.kc room
for a new building c<HNruction.
Problem 28- 11
QuH-tlo n I Answer A
2.500,000
1.000,000
300.000
50.000
Cash paid for Iond
Mortga~icd as..~wned tncludrng iuten:-st 1tl"C1'utd
Commis:sion
Legal foci!., n:ahy ta:<e!I and documcntllion
Cost of relocating squaners
100000
Cos, of land
J?lQOQQ
Questio n 2 Answer C
Coll-I of tearing down old building
Sah·agt -.·alue of old building
Ainoum paid to contractor
Building pctrnit r«
E.,cav,mon
Archi1ca fee
C()~ of building
200.000
(
50.000)
5.000.000
50,000
50,000
200 QQO
5412000
183
Qu~tion 3 Answer A
lnvoice coA
Frcagh1
2.000.000
60.000
Cus1.om du1lcs 1md other charges
140,000
Allowonces und hotel a.coon,mod:llilMt
Cos:.1 o fmud1i~
400 000
The cost of rcndng 1ht property is dsssificd as land Improvement.
The mtercs11ha1 would ha,-e been e.amed is an opportunuy coSI which IS not recorded.
2(tf)Q QQQ
184
CHAPTER29
1 ;oopoo
Problem 29,..1 Answer A
Problem 29-2 An~wcr C
Cos.t paid (896J KIO 96,000}
800,000
Cos.I of tr:mspc,rtinc machine
30.000
50.000
lnst.alla1ion cost
Testing cost
40.000
(,0,000
R0,000
75.000
Safety ~Jls and phuform
Wmcrdc:vicc
Cos.1 of3dj ustmcn1
Estlma1ed dismantling cost
65000
1 ' MQQQ
Total t.OSl or um .hint'
NQLC' lhat lhc estimated d ismantling coJ:I is capitalized bccau~ the <:om1W1Y tuu; a prCSt"nt obligation as
required by contract. 1n 1bc absence of a present obligation. the cs1ima1ed dtsmantling rost is noc
capiul tud.
Problem 29--3 Answer A
2,400,000
Second twnd 11Q,\ct value
Overhaul and f\1)3.irs
Install anon
Tt:Shng
Haulin;
Safety device
150.000
~0.000
110,000
10,000
210 000
'QQQ 000
Problem 29-4 An.!wer A
1,600.000
tnvo,cc cost
Dii.count (S-1, ~ I .600.000)
Tr;msporlation
lns1.alla1ion (35.000 + tS,000)
Salary of engiMer (213 x 60,000)
Co~ ullow#l'lcc
Total cost
Problem 29-5 Answer C
\400,000 ~ 100.000 ~ 150,000)
(
80,000)
S0.000
50.000
40.000
100000>
I W9QQQ
650,000
Problem 29-6 Ans wer A
1,470.000
Problem 29-7 Answer A
1,600.000
Problem 29-8 An~wcr B
50,000
P11in1ing p11r1itions
Major replacemcn1o f mo1or
500.000
Cosi of grading land
Ou.s1 fihers
800 000
To1al c.apital expenditure:.
600.000
l(JSQ{tQQ
185
Problem 29-9 Answu A
150,000
200.000
500.000
200.000
lni1ial dc~ign fee
Purchase ofcxccm1vc ch;urs and dicsks
Stonn "indows
lnstalla1.1on of autocna1.1c door
Ovc.-rhcad cran.:
Tnl.1.1 cilpil.al <.:xpcndium:~
'"i!!QQ2
I 400 000
Problem 29- 10
Materials
Labor
lnsull:.uion
600.000
-l-00,000
(i(),000
30,000
40.000)
Trial run
Discount
O\'erhead
JlliQOOQ
l ' M't09
2.
Adjusting tn1ries:
I,
2.
Loss on retirement ofold machinery
Mochinery (20,000 - 14,000)
Purchase discoum
6.000
6.000
40,000
Machinc,y
3.
4,
s.
40,000
Machinery
Famwy overhead
150,000
Profit on construction
f\fachincry
100,000
Tools
150.000
100.000
90,(100
M,1ehincry
6.
7.
90.000
Drpr«io1i<in tools
Tools (90,000 / J x 4112)
10,000
Maduncry
Ac;cumulatcd dePf"C(:io1ion
IA,>rtCiation - ,nac-hinN)'
128,600
10.000
40,000
88.600
Oepr«intton m::orded
128,600
Corrcc1 dcprttialion ( 1,200.000/ 10 x .-ti 2)
~
O\etde-prteiatio1l
...JiU!!j!
Problem 29- 1J
I.
2.
Machinery
Ca.d 1
Oq,reciation
/\ec11inula1cd d..:1wcclll1ion
s .000.000
s .000.000
450,000
450.000
186
3.
Ocproc,alion (3.600.000 / 6)
Accumulatcd dcprcciation
600.000
600,000
Cost
5.000.000
Accumulated dl!'prtchnion.
450,000
2019
2020
~
Canying amount
Rc51du.:i.l v1l1Jc
Rcm:1in1ng depreciable cost
900000
4.100.000
500 000
' 600000
1/ 1/ 202 1
4. Machinery
Cash
300.000
5.
660,000
J00.000
Deprtcitnfon (3.300,000 / S)
J\ ccumuhucd dcpreci,uion
660.000
Cost
S.300,000
Accumulal'-'il dcllredation (900,000 + 600,000)
Carrying amount 1/1/2022
Residual \1aluc
Remaining dcpredab~ amount - 1/1/2022
I 500 000
3,800.000
500000
} 1QQQOQ
P,oblcm 29- ll
I.
10.500.000
Dudding
10.soo.000
C"'h
2.
3.
Ocprcci:uion
1\c-cumul1:ued dcprecl3t ion
200,000
200.000
Building
3.000,000
c,sh
3,000.000
Aetumulatc:il depredation (2.500,000 / SO x 2)
Lo" on n:tu\·mcnt ofbuikllng
Clnh
4.
Ocprtcunion (I0,700.000 SOOJ)OO/ 48)
An:11mul:11cd depreciation
100,000
2.400.000
2,500.000
2 12,500
212.500
eu;kllng ( 10,S00,000 + 3.000.000- 2,500,000)
Acieumulat.c<I d~1vcci.ntion (400,000
11.000.000
300000
100,00())
Carryina amount - 111/2020
10700900
Problem 29- 1l
I. Discount on bonds payable
Macluocry
ln1o.-.s1 expense: (500.000 I 10 x 9/ 12)
500.000
500.000
37,500
37,500
O~ount on bc.mds payable
A(.'(U.mulaie<I deprtciation
Oqlrcci.allOn
Depreciation for 9 month.~
Depredation for 12 months (600.000 / 9112)
Dcprccoablc 00.1(800.000 x 5 years)
75.000
15.000
600.000
800.000
4.000.000
187
Cos,
Per book
5.000.000
Adjusted
4.500.000
LcM: Rcsicluol value
Ocprcciablc amow1t
I 000 000
1 QQQOQQ
I 000000
3 'iflQ (tQQ
COfTcct depreciation for 9 mon1h1 (3.S00.000/ S ,c 9/12)
LC'1-: Dcpn:cia.1ion recorded
S2S,OOO
~
Overstatemem
2
ln1~1 cxpcn~
...AllllQ
300.000
Ma,h;nery (3.500.000 J.200.000)
~13chtnery
300.000
IS0.000
frcii,1)1 in
Accuinuhitcd dtprccintiOl'l
Oeprec:1.-it1on
IS0.000
J0,000
30.000
Depreciation per book
Com.ice deprccia1ion (3.350,000 / 5)
700,000
ml!llll
..lll.!lll!I
Ovcrscatcmem
3. Loss on exchange
Machinery
390.000
390.000
Cost pc,- book
3,000,000
Correet cost
T rade in value
Add: Ca.~h p31d
O "crslalcmcnl
IS0,000
' 460000
IS0,000
Traci<; in value
Less: Call')'ing 1unount
~
(l211.!1ilfil
Loss on cxchan1c
.&,
Allow,ncc fordoub1ful llCCOW'IIJ
Loss on c.xchangc a«ounu; rcc-civablc
' 610 000
300 000
840,000
(,0,000
Trc3sury share
900.000
Per book
Machiocry
4,200.000
Aocoun1s receivable
Tre.asury shares
Machinery
4.200.000
4.200.000
4,200.000
Sh ould be
Machinc..-ry
Allowance for doubtful accounts (20'/o x 4.200.000)
Lou on ,,ccoun1s n:eciv:ibk
,1.\cc<t0n1s receivable
Tre3.Sul')' shares
Machinery
TI1c C:OSt ol' tn:&ury shores acqu,red for ncnc:J.Sb
mca.~un.'<I by 1hc rn·,Nti,:d umountof the noncm,h asset .!lum:ndcr1..",t
3..300,000
840.000
60.000
4.200.000
J.300,000
3.300,000
t'()t1$J'tkT'J/l{HJ
,,
u~u:ally
188
CHAPTER 30
Problem 30-1
Depredation Table - Straight Une
Acc-umulatcd
Year
Particular
Depreciation
deprKiation
120.000
120.000
120,000
120,000
120.000
240.000
360,000
480.000
.ll!l.!!lll
f!lll.lW
fllilJlilll
.i\- cquisilion ()OSI
20 19
2020
2021
2022
2023
Carrying amount
63S,OOO
51).000
39S.000
27S,OOO
lSS.000
~
Depredation T;1blc - Service Hours Method
Accumulated
Year
20 19
2020
2021
2022
2023
Particular
Acquisition cos1
14,000x 10
13.000 X 10
10.000 x 10
11.000x 10
12.000x JO
dc:prcxlndon
Carryln.i,; amounl
140.000
130.000
100,000
I I0,000
140,000
270.000
370.000
480.000
635,000
495,000
36S.OOO
265.000
155.000
120000
fJW.IWll
...uJlllll
Ocprcdnti<>n
lll!!IJl!lll
Oeprcelallon race per hour • 600,000 / 60.000 • 10
Depredation Table - Production Method
Year
Particular
Depreciation
Acc-umulated
depreciation
136.000
128.000
100,000
116,000
136.000
264.000
364,000
480.000
J.2ll.wl
f!lll.lW
fillilJlllll
63S,000
Acquisition cosl
20 19
2020
2021
2022
2023
34.000x 4
32.000x 4
2S.000 x 4
29.000 X 4
30.000x 4
Carr);ng amount
Dcprccfolion mle per unil ofoutpul = (,()(),000 / l S0.000 =4
499.000
371.000
27 1,000
ISS.000
....liJlll!).
189
Problem 3~2
a.
Straight line mc.thod:
2019
2020
b.
27,500
55.000
W orki ng hours mcchod:
550.000
Rate per ho ur =
=
.u.
50,000 ho un:
2019 (3,000 hours X 11)
2020 (5,000 boun x 11)
c.
33.000
5S,000
Outpul inetbod;
550.000
U1
Rate plT unit =
200.000 unils
2019 (18.000 uni,sx2.75)
49.500
2020 (22,000 units x 2.7S)
60,500
Problem 30--3
Dcprt--clnblc
LJfc in
Annual
Cost
Salvage
COIi
years
deprecia tion
310.000
110,000
1.600.000
l0,000
10,000
100.000
30.000
300,000
100,000
1500.000
s
10
15
400 000
4
60,000
10,000
100.000
.l!!l!.OOQ
Asset
Machintry
Office equipment
Building
Dcli,·ery equipment
?
410 000
:\50 0()0
, 1i!Q~
~
a. Composite rate • 270.000 / 2.450.000 • I 1.02'/4
b.
Composite life
=
2.300.000 / 270.000
=
8.52yc,r,;
c. Ocprcci1uion
270,000
270.000
1\ tttunulaued depreci:uion
Problem 30-4
Depreciable
Ufein
COS(
years
Cost
Salvage
Budding
Machinery
6.100.000
2,550,000
100.000
50,000
6.000.000
2,500,000
20
Equ1pn-icn1
I 0]0000
268QQOQ
30,000
I ~!2!!52Q
OSilailSlQ
10
Ass<<
s
Annual
deprecladon
300.000
500,000
.l.!W!l!!I
~
190
a.. Coinpos1te depri:,c,ation rate - 900.000/ 9,680.000 • 9.3%
b
Average life = 9.S00.000/ 900.000 = 10.56 ye'1rs
c.
Ocprc.-eialion
900.000
900.000
Attumulatcd depreciation
d
40,000
2.5 10,000
Cash
Accumulated dcpn:<:iation
Maehinety
c.
2.550.000
Ocprcdation
66).090
663.090
Accumulated depreciation (9.680,000- 2,SS0,000 x 9.3%)
Problem 3()..S
Cost of m;u:hincry (cash price}
1.100.000
U-ss..: Residual \'Jlue
50000
Depreciable COSI
I 950 f>QQ
Slraigh1 line dcftt'tci.11~ Cl,050 ,000 / 10)
.llUJWII
Problem 30-6 Answer B
S;ak price
CafT)'ln,g amount:
2.300.000
cos,
4.200.000
., MOQQO
Accul'm1lutC'd dt1>n:ci1nicm (3,600.000 / S x J)
Gain
fuQ40QQO
'ffi QQQ
Problem 30.7
3.700.000
HQOOQ
Add: Dcprecia11on for 2020
To1al
4.250.000
lc-ss:: An:umul11tcd depreciation on IM'Opcrty, plant 11nd equipment ~ 1ircnwn1s (SQUEEZE) ?~0 000
Accumulated ckprcciation-12/31/2020
4 QQOOOQ
Accumulated depreciation - 12/31/2019
Problem 30-8 Ans wer 8
Depreciable
Msct
A
8
C
Cost
Salvage
550.000
50.000
20.000
200.000
C•O$t
500.000
180.000
40000
40 000
l2l!JlJl!I
m..!l!l!l
Compo~ih.' hfo • 720)000 / 45.000
Ufeln
Annual
years dep rccladon
20
15
5
25.000
12.000
....RJl!J!!
:W!DII
.1.6.l=
191
Problem 30-9
Questio n 1 Answer A
Tutalwst - Jumu,,y
1.20 19
Cos.i of new asset acquirod
C'osi or asset sold
Remaining cost
December 31, 2<.l 19
Depreciation fo, 2019 (2;3/, X 6.5-00.000)
5,000,000
2.500.000
cJ ooo000)
6 ~oo QQQ
I 6' ~QQQ
Questio n 2 Anih ,er 0
Under tho.' oomptbltt: ,~ 1hod, no gain or lost is re.:ogmzcd on th<.' d..:n."Cog.t111ion oran OS!>CI.
Problem 3~ 10 Answer A
.iW!!l!l
192
CHAPTER 3 1
Problem l l-1
Sum ofyt.ars• digit
Question 1 Answer A
Apnl I. 2019 - March 31. 2020 (1.080.000 x 8136)
Apnl l.2020 - March 3l.2021 (l.080,000x71.l6)
240.000
210.000
Oepreciati0n from April I 10 Oecctnbtr JI.20 19 (240,000 x 9112)
,WWijl
Qucsllon l Answc:r D
Depreciatioo for 2020:
January I - March 31 (240.000 x 3/ 12)
Apnl I - lx<;cmb<t 31 (210,000 x 9112)
60.000
)57500
.l.l.Ullll
Double declining balance
Questio n l Answer C
Qu~tio n ◄ An~wcr C
fixed r:nc = 100 / 8 = 12.S x 2= ~
20 19 (1 ,200,000 X 25'\ X 9/12)
2020 (1.200.000 225.000 X 25¾)
225.000
243.750
Cos.t
4.000.000
Accumukucd dq)nxia1ion~
20 19 (8136 <3.600,000)
2020 (7/36 X 3.600.000)
Corrying amoun,. 12131/2020
~00.000
1ll!1.!ll!!l
I sooooo
z5llQOQQ
Problem 31-3 AnS\\'er 8
2017
2018
2019
10155
o,ss
8155
Thus. the 201 9 ck:prc<.i~lion of P2.i0,000 is c.'qual 10 8/SS,
Dcpred:ibl< cost (240,000 / 8155)
RcsKlual valuo
1,650,000
Ttllal c;osl
I 700 000
~O()QO
Problem 31.4 Answer 8
Ap1il I. 2019 to M•rch 3 1. 2020 (5/IS x 3.000,000)
Apnl l,202010Morcb3 1, 202 1 (4/15.3,000,000)
Acc,.mmlotcd d<..-pn.-cialion. Murch 31. 2011
1.000.000
800 000
I SMftQQ
193
Problem l l•S Ans \Jl-er A
The aecumuloted di:predation on lA-c.en1bct 31, 2018 is retompuled lblht\\ ing a ci:11ain method. The
11:1mc ii arrived 11, following the SYD 115 follows·
$YO • I + 2 + 3 + 4 ➔ S - IS
20 16 (5115x 900.000)
2017 (4115 X 900,000)
20 18 ()II S x 900,000)
Accumula1N ckprcc:kttion
300.000
240.0<IO
JRO 000
llll.U!l!I
12/31/2018
Accordingly. th!.: SYD i, followed for 2019.
20 19 depreciaLIOI) (2/15 x 900.0<IO)
Probl~m 31-6 An!lwer 8
Stmigh1 linc ratC? (100-/4 / 8 y~rs)
Fixe<I rite (12.S x 2)
20 19 dcpreciotion (1,280.000, 25%)
2020 deprcci'°'ion ( I ,280,000 - 320,000 x 25%)
12.5~
is,~
320.000
240.0<IO
Problem 31-7 Answer C
CoJTying nm<>unt - 1/1/2020 (900,000 / 2S¾l
).600,000
Acquisition cost- 1/1/2019 (3,600,000 / 75•1.)
4.800,000
Problem 31-8
I.
4,000,000 2.560.0UO x M,
(Answer D )
2.
1.800.000x 2/15 (SYD)
{Answer A)
l
Sale price
Carrying amount (2.800.000- 1,344,000)
Gam
mJlll!!
~
1.700.000
1456()00
(Answer A )
?:fi QQQ
Problem 11·9 Answer B
Str:ughl linr rate ( 10()4}'. / S ye3rs)
fixed rate (20'¼ x 2)
20 19 d1..-ptX."Ci.1hon (S,000,000 x 409/o)
2020 depreci,11ion (J,000,000, 40'/4)
Accumulated dcprt'ciation. 0a:.t.'1llber 31. 2020
Depreciation for 202 1 - st.mif;ht tine (5,000.000- 3.200.000 / 3)
Acc:umul,.ucd ckpf\.'<'fat.1on. O...--ccrnb1.T 31. 2021
2,000.000
I 7 00 000
3.200.000
600000
' §QQ OOQ
Problem 31- 10 Answer A
1/ 1/2016
Accumulated dq,rcciation-12/31/2018 (7,200.000 / IOx 3)
Canying amount-12/3 1/2018
Co>l
SYD for,he remaining lireor7 )<ears (I + 2 1- 3- 4 + 5 +6+ 7)
Dcl'"'ciotioo foe- 2019 (5,040,000 • 7/2R)
7.200.000
2)60()00
~040000
lll.
I 269QQQ
Problem 31- 11 Answer B
Annual depreciation ( 1.536.000 I 8)
l.Wl!!!I
194
Problem 31.. 12 Answer 0
~
F'1x1.•d rate (IOO't/4 / 4 ii: 2}
Cost
6.000.000
Oepr,;cia,;on f0< 2019 (SO', x 6.000.000)
Conying amount - 1/ 1/202(1
RcsKlu11I vatuc
rnooooo
3,000.000
< MQQQQ>
\i:,,i;imum dc-prcciation in 2020
2400 000
Fixed rate in 2020 C100% / 2 ,c 2)
.WU:.
This ,utans that the oompuun should be fu lly dtproc-iated in 2020. Sui<:e thi...~ 1s a n.""Sid ual ,salut of
P600.000. the maximum depreciation lb( 2020 Is equal to 1hc c.11nying amoum of PJ.000.000 minus 1he
rtSid1.wl ,·uhac orP600.000 i.,r P"?,-100,000.
Problem 31 .. 13 Answer C
SYD= I + 2 + 3 -4 + S = IS
Accumula1eJ fmc1ic,ns rvr 2016, 20 17 ahd 2018 (S/ 1S • 4/S I J/ IS)
Cost - I/ 1/20 I6
.Ila!
3.760.000
Accumult11cd dq,rccio11on 12/31/2018 (3,760.000 240,000x 12/IS)
C.'!nying amount -1/ 112019
Rcsldual value
Rcnuirung dcprcc1ablc amount
') ~ Iii 000
944,000
ruooo
52' 099
Since the rni$C.·d Iota) ui.c:-ful life i:( 4 )'ears and three )'CSU'li alrcad)' cx1>ircd. 11,,e remaining ukfiJI life iJ
only <H1e )'\.'"al'. AtcordingJy. the remaini,,g d~"'aable amount 1s drnrged to depreciation e.xpense for
20 19.
Problem J t.. 14 Answer 8
SYD( I + 2+3 + 4 + S +6 + 7
+ 8)
CoSA - Januory I , 20 I 7
Accumulotcd dtpt"('Ci:.ltion • 1/1/20 19
2017 (8/36 X 9,000,000)
2018 (7/36 X 9,000,00())
Carrying amount - Ja1,uary I. 2019
Accumulated ck:pn...""C:iation-1 11/20 19
Oepn,d>t;,., for 2019 (4110 x 6,250,000 - 400,00<))
Accumul:ucd dt.'fU\.-tfohOn 12/31/2019
Rclll:l;nmg ~fc (6 years- 2)
S YO( I +2+3+4)
.lli
10.000,000
< 2.000.000)
! zsooom
1. ,,i:9900
3.750.000
'340 QOO
60''9QQQ
:I.nm
.Ill
Problem 31.. 1s
Question 1 Answer C
800.000
QuQ-lion l Answer D
3.200.000
Question l Ans-·er 8
2.600.000
195
PrQblcm l l- 16
Tools
Ca.sh
40.000
2. Tools
Chh
20.000
3. Cash
Tuuls
4.000
I.
4. Oe.prertal1on
40.000
20.000
4,000
46.000
Tools
46.000
Balance oftools ac..-coun1
Less: l:.st1mated COSl on Otctmber 31
Ocpteewtion
196.000
~
~
Problem 3 1- 17
Rcd remcnt method
2019
Tools
Cash
Cosh (300 x 50)
l)q,rcci,11100
120.000
120.000
IS.000
45,000
Tools (J OO x 200)
2020
Tooh•
60.000
J<>0,000
Cash
Ca,h (700x 70)
D1.-pn."'C'io1ion
360.000
49.000
11 1.000
Tools
160.000
500 X 200
200 X 300
_&ll!ijl
Cost of tools recired
.l!2!Wl!I
100,000
Replacement method
2019
Tool, (100 x JOO)
J0,000
IA--prccim,on (JOO x 30)
90,000
Cash
Cl•,h
Dtpr«iation
2020
Tools (200 x 400)
l)q,rec1011on (7()0 x JO())
120.000
IS,000
1;.000
80,000
280,000
Cash
Cash
Oepre-ciation
360.000
49.000
49.000
196
I_nvencory method
2019
Tools
120.000
Cash
Cash
120,000
15.000
Tools
Depreciation (265.000 - 200.000)
Tools
2020
Tools
IS,000
65.000
6S.000
360.000
Cash
CIISh
36(1,000
49,000
Tools
Oq,rcciorion (S 11,000 • 350.000)
Tools
49.000
161.000
161.000
Problem 31-18
Ocpreciution of I3tld iniprovernc,us ( I 80.000 / 1S)
2.
O..:prt.~111tion of buildmg (4,S00.000 - I.OS0.000 x 7.S¾)
3.
DcprecJation of n1.1chmcry ~md equipment
( I , 160,000 60,000 I 10)
(300.000 / 10)
(60,000/ 10 X 6112)
WIIJjl
lll.llf!
110,000
30.000
..J.QQ!)
.wJlQII
4.
t'ixedrate( I00'/4 / 3 x I.S)
( 1.800.000- 1.344.000 x SO%)
"9'2
2.2.S.lMlll
Problem 3 1-19
I. Old (7.500.000- 1.644.500 x 8%)
N""· 1600.ooonso.ooo x 1.250,000 c 1.000.000 x S''/4)
Depreciation - building
2.
2.250.000 1 10
400,000 / 10 X 6/12
Ocprcci:uion machinery
3.
O~pretllltion land improvements (192,000/ 12 x 9/12)
468.440
~
llU:!ll
22S.000
..ll!.!l!!O
.wJ!llll
WIIJjl
197
Problem 3 1·20
I.
O ld budding (4.672,200,. 10"/4)
Ncwhuildmg
r>in:ct cost
467,220
faxed (15.000 X 25)
Variable (IS.000 :< 27)
2,220,000
375.000
4()4;QOQ
TQl:.ll COIII
' 900000
),000,000 X 1(1'/4
w
Fi,cdr,1c ( I00/ 20x 2)
2.
138,000
O ld mochiiicry ( 1,380,000 / 10)
New machinery
tmoicc cos1
Concmc embedding
W1JI demolition
Rebuilding of wall
Total cos1
400.000 I 10 x 6/12
Total dtpn-cia11on
ml!ll!!
2W.Zll
Total depreciation
356,000
18.000
7,000
..illll!!!
~
-22.l!!l!l
~
198
CHAPTER32
Problem 32- J
2019
960,000
Rock and i;ra\tl pr~rt)
960,000
Cash
2020
Dcplt11on (1,000,000 x ,40)
Aecumulaccd dc-plc1Km
,100,000
Rock and gra\•c l property
490,()00
400,000
,190,000
Cash
Dcpletoon (600,000 x. 7S)
Accumulllcd dl-plC-1K1n
4S0.000
450,000
1'ocal cost (960.000 + 490,000)
LN!: Accumulated depletion
D1.i,h..1ahlc tnnounc
0 1,·ide by estimated remaining outpul (2.400.000
Revised dq)lccioo rate per coo
2021
Rock and anwcl property
1.450.000
400 000
1,050,000
1400000
1,()()().000)
75
500.000
Cash
Depletion (700,000 x ,44)
Accunmla,cd dcplcuon
500,000
308,000
308.000
1,450,000
Total co,1
~00000
1\ dd: Addnional development cost
1'ocal
Lcs...;i: Accumul11L1..-<I depkcion (4-00,00() + 4.S0,000)
Rtmaining deple1nble nmounc
Divide by new csaimitcd rcmaininJ output
1.950.000
850 000
1,100.000
2 ~oo ooo
44
New deplttjon rat~
Probkm 32-2
2019
Rts0un:e pr0perty
3,960,000
3,960,000
Cash
Building
Equipmcnl
960,000
1,240,000
2.200.000
Cash
0 1..-pldion ( 12.000 x 32)
/\ccumulaced deple1ton
JX4,000
Cost of 1't:S-Ou~ property
Leu: Rci.:idual value
Ot:c,lctablc amount
Oividc by estimated output
Ot.1Jlet10n ral~ per UIUl
Dcprc'<1onon ( 12.000 x 8)
Accumulated dcp<cc1a11on - building
3,960,000
l?QOOQ
3.840.000
120000
96,000
"
%,000
199
Oc:-preciatfon mtc per unit =
960,000
120,000
T he out1>u1 rntlhod iJ used in ro,upuling dH: dcpn:ci3tion of the building because the lire of the
resource ptopercy (S )ears or 120.000 / 24.000) is shorter 1han th e lift oflhe building (8 yeas-s).
Dl-pr~cm11on
3 10,000
A0tumul11ed depf«i'11ion
(1.240.000 14 Y,01' • 3 10.000)
110.000
·r hc ilruipu line method ii;: u!iN f..w 1hc heavy ~uipml'fll because the life of 4 )1.mrs is s hor1cr
than lhr life of 1hc tc$0Un:e property of S years..
2020
Oq,le1ion
Accumulated d~ lcti<m (25.000 x 32}
~00.000
o..-pn.--c,011on (2S.ooo x 8)
200,000
800.000
AQCum11hucd dt"pft'ciation - buildina
Oq:m.,cimion
200.000
3 10,000
Accumulated depfeao1,on equi1>men1
310.000
Problem 32-3
2019
Ore propeny
Cash
Ore propmy
£stjmatod Uability for restorouon cos1
Mine impro\'l"tru.mts
5.400.000
5,400,000
450.000
450.000
i.000.000
Cash
2020
DepJe,;on (600,000 • 2.60)
8.000.000
l.5/i0,000
Accumulated depleoon
Depre,c-rnl1on (600,000 X4)
Accumulated depn-cia1ion
2021
r.:>l-plc.1ion (400,000 x 1.60)
Accum11l1tcd deplr-1K)n
1.560.000
2,400.000
2.400.000
640,000
640.000
s.200.000
! [email protected]
o~-pleuhlt nnk1UJU
Less: 2020 depte,;on
Balance (3,640,00012,275.000 = 1.60)
Mine itnpro\'CmCt11s
36:1QQQQ
770,000
Cash
Dcprccio1ion (400,000 x 2.80)
Atcum11l11ed dcprecia1ion
c.., (8,000.000 •
770,000)
Less: .Accumulalcd dc:prttiation
Carrying amoun1 (6.370.000 12.275.000 • 2.80)
770.000
1,120,000
1.120.000
8,770.000
2 400 QQO
6 noooo
200
Problem 32°4
I.
RcWirk-d carmngi.
1,500.000
Accumul.llcd depiction
~ ~00 !l!!!l
Total
Les.1: Capi1al hquidatOO
Ocplcoon mending 1n\'c,:11tor)' (S.000 x 20)
4.000.000
1.800.000
1()0000
2.
Rct11ined carmngs
Cllpit11I liquid11cd
I 9()0 000
'.) 1112 mm
Maximum divKlcnd
1500.000
500,000
Dividends payable
2,000.000
Problem 32-S
I.
Cash (50,000 x 1101
Share c,p;,a1(50.000 ., 100)
5,500.000
5.000.000
500,000
Shire ptcmium
2. RC!.ourcc pmJ)C'rty
Cash
3,000,000
3. Mining equipment
Ca,h
800.000
4. Cash (85.000 x 50)
4.250.000
3.000.000
800,000
Sal<:$
s.
Mining and 01her dirctt c:'OSI
Admimsu::ui"e expenses
4.250.000
2.268,000
500.000
C&sh
6.
Oeplell0n
2.768.000
270,000
270.000
Actuntulu.u."<I dC1') kt1ot1 (3,000.000 / 1.000.000 x l)()J>OO)
7. Ocprccltltion (90,000 ~ .80)
72,000
Accumulated dcpreci.ation - minmg t-qu1p1nc:n1
72,000
Depreciation ,.., (800.000 / 1.000.000) = .80
8. Inventory. December 31 (5,000 x 29)
Profit and lo..o;s
Mining Jabor and 01her dLrecc cos,s
Ocplction
OeprccitHfon
Total production OOSI> mcum~d
Oi,idc by number o f units c.:ittnlc:tcd
Unit cos,
145,000
145.000
2.268.000
270.000
2' ll:22
2.610.000
29QQQ
Z2
201
Muldnadonal Company
Income Slateme,u
Yea r ended OeccmbC't 3 1, 2019
4.250,000
Salts
Cos.I of sales
Mining 1abor and other direct costs
2.268.000
270.000
Depletion
Depreciation
2" 000
2,6 10,000
Tollll produ¢hot1 WSI
Lm: Inventory. Deotmber )I
145000
Gross income
Adulinistra.tive expensc-.s
Nct inoomc-
2 46" 000
1.785.000
~00000
I 285 000
Mulcinadooal Company
Statem ent' or Fln ilnclal PosJtlon
Dcctmbcr J I, 1019
Current 11ss.ets:
Ca,h
J .182.000
14~000
Inventory
3,327.000
Noncumn1 asseu :
3.000,000
RcSOUJ'CC ()(Opcl'IY
Lt:»: Accumu14'1td d 1.1)1i.-1 i(l11
Mining cqui1>mcm
Less; Accumulated depreciation
"70 000
2.730.000
800.000
72 000
Total W c lS
7'8000
1418000
62§5ftQQ
Equity
Share capital
S.000.000
Share prcnuum
Retained earnings
I ' 6S000
500.000
Total <.-quit)
67 H5!tQQ
Rc1run~ earnings
Add. Accumulated depiction
Tollll
1.285.000
'70 000
1,555,000
Less· Unrcali:r.cd dq,lction in ending, inventory tS.000 x 3)
Maximum dividend
HOOO
1540000
Rcteincd camina,.~
Capitnl liquidated
Oi,'1dends payablt
U RS.000
ZSS.000
1.540.000
Problem 32-6
P lU\".'.h fLSC price
Road ronstn.1c1ion
Improvements and dc,·clopmcnt costs
Tl)tal cost
Residual value.
Ocplccablc :amount
DcplC'llon rote per umt (S..200.000 I 4,000,000)
Depletion for 2019 (500.000 x I.JO)
50,000
5.000.000
750000
S.800,000
( 6()0 ()00)
5?90 000
1.30
202
O1.'ph:t~blc umount
5,200.000
Ocph:1ion in 2019
Remaining depfolabfe amount
~~o
oooi
4.550.000
1100 000
De,, elopmem costs in 2020
Tot.31 dq)lct~blc ttmounl - 1/1/2020
5HSQ 000
4.000,000
Original esijmal<.-d tons
Addi1,onal es11mate
Total c5eim.:ucd tons
Ex lmettd in 20 19
, tKMl ono
7,000.000
< 500000)
6 QQ9
;oo
Rcmainrng tons - 1/112020
New depiction rate 1,cr unit (5.SS0.000 / 6,S00.000)
Ocplcl.ion (or 2020 (1,000,000 x .90)
2.
(
Cost of buddings
RcSldual \'l)uc
.90
2!Wlll!I
2.000.000
c 21)0 000>
Oepreciabl< tunount
I 'l02000
Depred1ulorl rate pet uru1 (1.800.000/ 4.000.000)
.4S
Ocpreciotion for 2019 (500,000 x .45)
In 1he absence o r ~y s1a1c:mc111 10 the a m1.nuy. the ou.t1>ul 1m1hod i.s used in compulin, dcpn.-ci111ion
of mining equipment
Ocpreciabk ~mount
Oepretia1ion for 2019
Remainulg deprectable amount
,\ ddi1ion11I building in 2020
Toi.al dq,rc<:i0:ble 31HOUl11
111/2020
New dcpr«l.mon rate per umt ( l.950.000 / 6.S00.000)
1,800.000
( 12; 000)
1.575.000
115 ooo
I 2"20QQ
.30
Depreciation for 2020 ( 1.000.000 x .JO)
Problem 32.7 Answer A
Acquis111on cOSI
Oc1,clopmcn1 C:Ojl
Estimated 1\.--Storntioo cos1
26.400.000
3.600.000
I &00000
Tolal COS!
31.800.000
LI.-si,,:: R1.-sidual \1lluc
3 000 000
' 8SQOQQO
Dcpklable nmount
Role per unu (28.!100.000 I 1.200.000)
Dc:pk-tion included in co~t of gooru: sold (60,000 x 24)
Dcpk-tion (or C.'urrcnt )1.'llr (80,000 x 24)
1440000
I '>20000
203
Problem 32-8 An~wcr A
10,0()0,000
AcquiMt1on coi;t
I 600000
Development oosl
To1lll
ResKluaJ value of land
Ocplc1able amount
11 ,600.000
t 2 000000)
2fi{l(}QQQ
Ra1e pc, Ion (9,600,000 I ~.000,000)
Depletion for 2019(500.000 x 2,40)
I ZOO QQQ
2020
F..stimnlcd outp111- Occcmbcr 3 1. 2020
Tota] es,imate - January I. 2020
4 JOO QQ0
800,(X)O
PruduCll(UI m
New ra,c in 2Cl20 (9,000.000
" OOOQQQ
1,200,000 / S.CXJ0.000)
Ocpk11011 t:\pt."flse 111 2020 (800.000 x
I 't44 QQ9
1.68)
Problem 32-9 Ans wer C
ROie per unil (46,800,000 - 3.600,000 I 2,160,000)
20
Oeplcuon in cos, of goods wld (240.000 x 20)
4 1(0Q'tQQ
Problem 32- 10 Answer 8
Dcple1able :uuo1.1n1
Dcple1ion for 2019133.000.000 / 4,(X)O,(X)O = 8.2$ x 200.000)
B>lance - 1/1/2020
33.000,000
c
I MQOOOJ
}I
150900
225.(X)O
Produc(ion in 2020
New cstm1atc - I 213 112020
New estimate - 1/112020
5 000000
, .,,, QQQ
Depletion for 2020 (31 .350.000 / 5.225.000 - 6 x 225.000)
I H QQOO
Problem 31• I I
Question J - Answer A
Purchase price
L.,\<;s.;
Residual \'alut
Ocplctable amoun1
14.000.000
' 000000
,, QQQQOQ
Dcpk1ion ralc (12,000,000/ l,SOO,(X)O)
Depletion for2019( 1S0,000 x 8)
1 1 00 QOO
Productmn (25,000 x 6)
Question 2 - Answer C
Sinc.e 1he hfc of the cquipmenl is sl:!oner than the life
or the mine. the straight lme method is uS4:d in
C(lmputing dcprecistion.
Oepre<iatioo f0< 2019 (8.000.000 / 4 x 6112)
I 000000
204
Problem 3?- 12 Answer ;.\
c,,ima1ed l'f flllrlliun <:OM
)0,000.000
).600.000
Oevelopmc,m C06l
Total cost
, 1.100.000
,\cqu,s1hOll COSI
7 ~00000
Rc~du11I ,·ulUoC
f 1 15011()())
' 7 959999
0..:pk.1.'lblt Ufl(Klnl
Rtit~ pcrlOfl (37.950,000/ 1,500,000)
~
Tucal dl"plehon for cun-cru ~~.r t.iso.ooo .It 2.S.30)
Problem 32-IJ
2018
No dcplc1K>n because Ihm: is no production.
Question J An.swc:r C
2019
Purchase price
28.000.000
es1ima1cd R:SIOrtliOD COSI
2-000.000
Ocvclop1ncn1cosi - 20 18
1,000,000
OC'\·clop1ncn1cosc - 20 19
Total cos1
RC$idual ,,'tlue
32.000.000
( ~QOQ()OQ)
Dc-plcublc omount
Ralc in 2019 (27,000,000 / 10,000,0()()1
Depiction in 20 19 (3.000.000 x 2.70)
Question 2 Answer
2020
I 000000
27 990000
l..211
8100000
n
1'ons cx1rac1ed in 2020
Tons ttnutining in 1213112020
3..500.000
1'ocol es.tim:u-ed output
NKIO (tlJO
1/112020
N.w rat< in 2020 (27,000,000 - 8.100,000/6,000,000)
D'l'letion in 2020 (3.500,000 x 3. 15)
-, 500 000
lJJ.
II MiQQQ
Problem 32- 14 Answer lJ
l..:ind c<»I
F..xplor,nion and dc,•c101,mcn1 cost
Prcscnl \":tluc of c.xpcc1cd restomuon rose (1 ,500.000 x .62)
Ocpklable amounl
Depiction ra1c perion ( I0.930.000/ 2500.000)
9.000.000
1,000.000
910000
102 19000
!l.ll
Smee 1hc entity is r~quircd by contract to ~tore I.he land to a condilton sm1abk for rccn:atiM:il ui1c~ the
~lim:llcd rc.,1oouion cos.I $hall be capita lized. If an appropriate mlc i8 available, lhc amount should be
discoun1ed.
Problem 32. 1s Answer 8
Co:..t per oil wdl
\1ultiply by succ...'SSfbl o il wells
TotAI C.:<plor:11ioo OOSI c.apitaliz<:d
Depletion for 2019 (30% x 20.000.000)
C:.myin.g amount of exploration cos1
4.000,000
'
20.000.000
c 6 000000)
14 902900
205
CHAPTER 33
Problem 33- 1
Annu:-il dcpn.-a-:i1ton on cosl \900.000 / 3 years)
300.000
Original life (4,500,000 / 300,0()0) 0< (3 yeor,; 120%)
2. Machinery
Aa:umulal..:-d deprectalion
.1..2.=
2.700.000
540.000
2, 160,000
R.e,uhi;11ton sur1>lus
).
Apprec,att00 (7.200.000 - 4.500.000)
2.700.000
Car,yin1 amount (4.500.000 - 900.000)
3.600.000
Depreciated 1>q>foi:cmcn1 co~, (7,200,000 x 8~1))
5.760,000
Re,nlllltion surplus (S, 760,000 3,600.000)
2.160.000
Ocprccaation (5.760.000 / 12)
Accumul111c:d dc.-prcciaLion
480.000
480.000
Oriainal cost (M00.000 112)
APP",'ClOltOO (2. 160.000 112)
~-
300.000
.lW!OO
:liU.WI
Re,~lu,1ion survlus (2. 160,000 112)
Rnained ~ uning.s
180.000
180.000
Problt-m ll-2
I.
Annu:;11 di:prccfation on COlll (750,000 / S)
150,000
Original life (3.000.000 / 150.000) 0< (5 ye:in / 25'-)
20ycars
' 5%
Percc:nlllge o r accumulated depreciation (750,000 / 3,000,000)
2.
Equi1>mcnt
Am1mul:nl.!d depreciation (25% x 1.800.000)
1.800.000
450.000
1,.350,000
Revalu:ition surplus
).
Ocpredatioo (3.600.000 / 15)
A«-umulated dcprectalioo
240.000
240.000
4. Rcvalualion surplu.o;
Re1ained earnings ( 1.350.000 / IS)
90.000
90.000
Problem ll-3
Pmportiomtl 111,pro:x·h
I. 8 u;ldio1g \8.000.000 - 5.000.000)
Aocumul:ucd deprc:ci:uioo (?.S~. x 3.000,000)
Rc,atu.11too wrptus
2. Oeprtt,atioo (8,000.000 / 40) or (6,000,000/ 30)
J\ccumulatcd dcprcci,uion
Oros$ repl1tecmeo1 cost (6,000.000 115~,)
3.
Re"aluation surplus
Rc1ainc:d earnings (2.250.000 / JO)
3.000.000
750,000
2.250.000
200.000
200.000
SQQOOOQ
75.000
75.000
206
J;,1inuilatJ'oo 3/)fNO#Ch
Accu1m1hltcd dc1>rccia.1ion
Builditlg
1.250,000
BuildinJ (6,000,000 3,750,000)
2,250,000
1.150.000
Rcvi,tu., tion surptus
2.
2.250.000
200,000
Oepreclluion (6,000,000 / ,1 0)
Accumulated depree131ion
l
200.000
75,000
Rcv:ilui1ioa liurplu,
Retained e:i,nings
lS.000
Problem 3).4
I.
2.700.000
Equipment
500.000
2.200.000
At.x:umulawd dcprc-d ation
Rcvalu.'llton surplus
O<:prc-ciat ion (7,500,000 / I0)
750.000
750,000
AccumulaU'<I
. dcpred11.tion
Re-.luatioo surplus (2,200.000 / 10)
220.000
220.000
Retnined e11T1ing.s
2. Cash
Accumuhucd dcp~iation
P.quipmcnt
Gain on s3le of equipment
8.000.000
2.250,000
9.200.000
1,050.000
RC\'1., lu:1ti0f1surplus (2.200,000 • 220,000)
Rttaimed t.irnings
1,980,000
1.980.000
Problem 3J.S
I.
10,000.000
8 uildin.g
Att"umulated dcprc.c,ation
4.000.000
6,000.000
Rc,alwltOn surplus
2.
2,600,000
Depreciat ion (13,000,000/ S)
Accu mulated dcprcc111tion
2.600,000
3. Rc-,'aluacion surplus
Rc:1ained e.ir1ungs (6,000,000 / S)
1.200.000
1.200.000
Problem 3J.6
ReJ:>lace.me.nt
Appreciation
Cose
cost
Building
3,000,000
5,000,000
2.000.000
Accumul~ttd ckprcc:iation - 20%
§00000
Z.tOOOOO
I !!OQ Q!!!l
:!!!20!!2
I '2QQ QQQ
;1ggagag
Accumula1td deprtei3tion on ros1 (3,000.000 x 20--/4)
~
Life o f ASSd. ( 100~. / d1v1dctl by 4%)
l1=
Percent o l' oc-cumulatcd depredation (S )~rs/ 25)
~
207
Gross repla«mcm cos1 (4,000.000 / w>/4)
"'llilS2~
Accumula1td dcprcc:ia11on on replacement COISl (S,000,000 x 20'¾,)
I 000000
a.
-should be'" entry.
2,000,000
Building
Aca,mulatcd depreciation
400.000
1.600.000
R.evufu::ilion sur1>tus
b. C0rrecting cnuy:
c.
d.
Buildin&
Rc.-taiocd earnings
Acc-umulated dc.preciatioo
Kcvah.1;11ton wrplus
1.000,000
1,000.000
Depreciation (4,000,000 / 20)
Accumuhucd dcpre-C:&ation
200.000
400.000
1.600.000
200.000
Revaluation surplus
80.000
R,etained c--.mungs ( 1,600,000 / 20)
80,000
Problem 33-- 7
Rt placcmcnt
Ltmd
Building
Accumut:.ued dq.,n=ciahon
Cos:c
cos,
Ap1>reclarlon
~ £!S2St ililll
lil!l!m~t
l(wglmi;t
25.000.000
45.000.000
20.000.000
,, Ql}Q Qllg
~~!!!l!m
12~~
J 2 {dl2 llllQ
10,000.000
15.000.000
5.000.000
9 000 !!22
' ~!~
3.000,000
(lS.000,000 x J/ZS)
(45,000.000 X 3/lS)
Machinery
Accumul;,ned dcprcc:iatlon
(10.000.000 x 3/S)
(I S.000.000 x 3/S)
6.000.000
Equ,pm.C!nl
Accumulated lkpn.-cia1ion
(3,000.00(h 3110)
(4.200.000 X 3/10)
~ Qllll~
~ QllQ llDll
3,000,000
4,200,000
1,200,000
I Z~!!!!!!
., ~SQOOO
&ia WlO
Land
Budding
Mcach1nc1·y
F.quipment
1\ octunulalcd dcprccsation - bmlding
Acc,umul3rcd dt-prcci:uion - m11Chincry
AL'Clllttulatcd dc-proc111tion c4u1pm~n1
Rc,·alu:11ioo surptus
b.
Oeprel'.'ttU ion
Accumulated d..:prcdation
2i;wg llllQ
900,000
2 IUOOQD
a.
2~QQ~
;~Qgg
5,000,000
20.000.000
S,000,000
1.100,000
2.400.000
3.000,000
360,000
25.4110,000
5.220,000
building
Accumula1cd dcprcci:uion - machinery
Accumulated dcprecialion - equipment
1.800.000
3.000.000
420.000
208
Buildins:
Cose (22,000.000 / 22)
1.000.000
8000<IO
Apprl'Ciat1on ti 7,600,000 / 2.2)
1,800,000
Machmery:
Cos, 1•.000.000 12)
2.000.000
Appr~ iation (2,000,000 / 2)
I 000000
Eqwpmenr.
C'os, (2. 100,000 / 7)
J00,000
ill!JlO<!
ApprC('iarion (840,000 / 7)
Toml dcpn..""Cia1ion
c.
Rcwl~tion $urplu;
4'0 000
5 229 QQQ
1,920,000
Rc1oined carnin&S (800.000 • 1.000.000- I20.000)
d.
3,000,000
1,920.000
Pro~11)\ 1>kuu and ~qui1>mc1u (at 1·t.•H1lucd amounlJ):
l..3nd
MachirM.·ry
10.000.000
45,000,000
I 5,000.000
Equipmenl
Total
742 00.000
Bu1ld i11&
4 200000
Less: Accumufatcd depreC"rnuon
"0 .MROOOO
5] }2QQQQ
Carrying an1ounl
The foUowang disclosure should bt made- in the n-01es U\ 11nantl.).I s101enitnts:
R eplacemen t
Land
Building
Machine')'
Equipm..•nt
Cost
cost
5.000.000
10.000,000
45,000.000
15,000.000
25.000.000
10,000.000
'000()00
4 ' 00000
Total
•J.000,000
74,200,000
Ac<:umul;ned dcprc<i:11ion
1J 200000
'2 Stfl(}QQQ
:H l?() QQQ
Carrying a1noum
20 8SOOOO
54:hedulc o f Accumula1ed Depreciation
R eplacement
l).uildmg
M11chinery
Eq-i.1ipmcnt
Coiu
cost
• .000.000
8,000,000
7.200,000
12,000,000
I ?00000
J' '>OOQQQ
I 1580 QQQ
' OSRQOQQ
Problem 31-8
Question 1 Ans,,.,·er 8
Percen{age o f accum ulated d epreda tion
Build int: (3,750,000 / I5,000,000)
Mochincry ( 1,500.00013,000.000)
Usdul life
8u11ding ( 10 years c:xpircd / 2S¾)
~13chinc-ry (IO ycars C-'<J>ircd I 50-{1)
40 )-C:11'$
20 ycurs
209
Sound
Currying
Revaluation
value
amount
su.rph.1$
3,000,000
7.500.000
t..:111d
Building (75% x 25,000.000)
5,000.000
2.000,000
18.750.000
11.250.000
Mochinery (50', x 5,000,000)
2.500.000
1.500.000
I 000000
11 190000
Question 2 Answer 8
De~ciation - building ( 18. 750.000 / 30 years remaining)
Depreciation - machine1y (2.500.000/ 10 years remainmg)
Total
Qucstioo 3 Answer B
Revaluation surplus Junuary I, 20 19
11,500,000
Piecemeal realization in 2019:
Building (7,500.000 / 30)
250.000)
Mo,h,nery(l,000,000/ 10)
Rc\11luation surplus
)00000)
,, ,~oooo
lk-«mber l 1, 2019
Problem 33-9
Questio n 1 Answer J\
135,000,000
Que:!!tlon 2 Answer 8
35,000,000
Question l Answer B
130.000.000
Problem 33- 10
Qundon 1 Answer C
Cosi - 6130/2019
5.000.000
Accum ulated dc.-pn.,'"Cia11on
Cm-ryini: amount 6/30/2019
11500 000)
Depreciation from July I lo Dcccmb«-31. 2019 (5.000,000/ IOx 6' 12)
( 2SO 000\
3,500,000
Carrying amount - 12/3 l nol9
1 'HQOOQ
fainialue
4.550.000
1213 1/2019
usoooo
Carrying am,ount-1213 1/2019
Revalutuion surplus
12/3 1/2019
I ' U9 QQQ
Cosl
Equipn-.enl (4.SS0,000 / 65% )
Accu:mul.lttd depreciation JS¾
Oepn:c:iable amount
Equipn-.e-nl
t\ccumulat.«I dcpreciaaion
Re\ohution surplus
Rcplac:emtcnt cost
5,000,000
7,000,000
11 710 000)
}2$0009
(2 4'.iQQOO)
4 S599QQ
Ap))r't'Ciation
2.000.000
<
700000)
) 1QQ 000
2.000.000
700.000
1,300,000
21 0
Questio n 2 Answer A
Dcrm:ciatilin fur2019(S.000,000 / 10)
Qu~tion l Ans~,er A
Depreciation for 2020 (4.550.000 / S)
Qua tlon 4 Answer B
Revaluation surplus 12/31/2019
Annual rculi7ation ( 1,300.000 / S)
Revaluation surplus - 12/3112020
1,300,000
( ?<50 QQQ)
I <HQ 000
2 11
C HAPTER 34
Problem 34-1
Impairment h»s
900.000
Al-cumutaccd dc-precialion
900.000
Cos,
4.500.000
1\ ccumuJ:Jtc<I depredation
' l!MH!OO
2,400,000
1 ~!Ml ocig
Carrying amount - January I
Recoverable amount
20a (Wg
lmpainncnt loss
2.
500,000
Ocpreci:ulon (J ,S00,000 I J)
Acc;u mutatcd dl.'prcc,ation
500,000
3. cos,
4,500,000
J ~il2Di!D
Accu1nulnt1.'<I deprtciation (2~100,000 t- 900,000 -1 500,000)
Canyin1 amount - l)cccmbcr 31
I 000000
Problem 34-2
I.
lmpaj1mem loss
1.125.000
1,125.000
J\cc-umulatcd dcprc:ctation
Cost -January I
A<:curnulat1.'<I depreciation (2.S00.000 - S00,000 / 8 x 2)
2,500,000
Cui'T)'ing amount - Januory I
2.000,000
~oo !!l!2
Ret.•(wcrable amoun1
BZ~Q!JQ
lmpairmcm loss
2.
I 122QIJQ
Ocprcci:nion
f\ ttumulaled depreciation {875.000
375.000
125 .0001 2)
375.000
3. Cost
Accmm1lnto:I dcpn:ciation (S00.000 ., 1,125,000 I 375.000)
Dnying amount - IA"'Cember JI
2,500,000
2!l!!il !!l!2
~!!QW!Q
Problem 3+3
I.
Nee cash lnOO\\"S
PV factor
Presenc value
18.000.000
15,000.000
15,000.000
.930
.851
16,740,000
12,855,000
11,910.000
2019
2020
2021
2022
1"000000
.794
.ns
SElQQQQ
60QQOQQQ
'iQ l Z\ i:IQQ
Total , -alu~ in use
1
2. The recovcrnbk amoun1 1s the ,3luc in use or PS0.32.S,000 because this is higher duu, 1hc fcur vah~
less cost 10 sen or P4H,OOO,OOO.
3.
4,
Impairment loss
Accumulated depredalion (65.000.000 S0J2S.OOO)
14,675,000
Ocprcctation
12.581.250
Accu mulated de predation (50,325,000/ 4)
14.675.000
12,581,2SO
212
Problem 34-4
2019
Dcprccialion
Accumulated dtpreciation (10.000.000 / I0)
1,000.000
Oq,r..:cmion
Acc-umuloccd drprccia1ion
1,000.000
lmp.1irm~nt loiS
2,000,000
1.000.000
1,000,000
2.000.000
Accumufo1cd dcprcci11"ion
2020
750,000
l>cpn'Cl3tion
750.000
Ac:cumuln1«t ckprctialion (6,000.000 / 8)
1,750,000
Accumvh1le<I dcpr«ia1ion
Gain on l'C\Crg.l of imp.1imlcrtl
1,750.000
Cos, 1/1/2018
Aceurnut..11cd d,c:pl\.-ci:uion ( I0,000,000 / 10 ,c 2)
Canyingamount 12/3 1/2019
lmpairmcn1 loss - 2019
AdJUSted~rymg,amount 12/31/2019
Dcpre<i•tioo - 2020 (6.000.000 18)
CafT)"ins: i1m()un1 12/3 1/2020
10,000.000
C0ij.l - 111/2018
10,000.000
, QQQQQQ
7.000.000
., SU)O PmJ
8.000.000
'O!JQQ!IO
6.000,000
7~t•opn
i2'QQQD
Accumulalf:d dcp"-"'!iation ( I0,000,000 / 10 x 3)
CafT)"ina: 11mount - 12/3 1/2019 (assuming no imp.1irment)
Recorded carrying a,noum
Gain on J"C\ersal of i111.pajnncn1
The (air value of P7.SOO.OOO cannot C'(Cced the ..carrying
asswning no imp:.,irmen1 a.s ret.--ogni.zOO.
~ '~tHml2
I Z~llQQll
ani()Wlt..
that ,,<mid h,ti,•c been deimnincd
Problem 34-S
Vnlue in use (l.S00,000 » S.65)
2.
3
Buildings
Accumulnlc:d dcp~ciMion (22,500.000 / 20 x 6)
Carryingamounl - 1/1/2017
Fair value- h ightr than yaJue in use
hnpa11ment loss
Oq,reciat.ion (10,000,000110)
H4HQQQ
25,000.000
67W OOO
IS.250.000
10000 000
*,~oooo
I QQQOOQ
Proble.m 3~6 Answer C
Cost. January I. 2016
Acc:umula1cd dqmxiouon. Deecmbcr 31. 2018 (100.000 ;,( 3)
Conying amount December J I. 20 18
:imJl!l!l
Recoverable amount
~
lmp3irmc111 loss
800.000
500.000
~
213
lnlpairme.nt loss
Accutnululcd dcprc<.:iation
300.000
300,000
Cost
800,000
Aec-wn ulmed d~rectatJon (300,000 T 300,000)
Rccovcrnblc amount. Janu.,ry I, 20 19
Oeprtci:niOl't for 2019 (200.000 / S)
200.000
Carrying amount. De«rnber 31.20 19
.J.&llO!I
~
~
Problem 3~7 An11\Aict D
Cost
i\ccumulu1cd ckpf'C(:fat1on 5/3112019 (3,200,000 500,000 x 33 60)
Co.nying umount - 5/31/2019
3.200.000
fair value less ros1 of dis.posaJ
lmpalrmcn1loss
I 1"0CMJO
I :flHOOO
1,71S.OOO
l6~ooo
Frum August 31, 2016 to May 31. 2019 is a p~riodorJ3 monlhs. Thus, tht remaining lifoof d,c machine
es 27 montbs. 60 monlbs onganal life minus 33.
Dcpn:<intioo ftlf the month ofJune 2019 ( I.JS0.000 / 27 mon1hs)
Problem 34-8 Answer B
CoSI - January I . 20 I 5
1.000.000
lt\0 000
Accumufated (kpreci,1ion, December 31, 2018 (900,000 / 10 x 4)
Cnnying amounl, O\.'CC01l,cr J I.20 18
D<:pn:<ia,ioo for 2019 (64-0.000 - 40.000 / 4)
Canying tuoount, 0<.--ecmbcr 31, 20 19
640,000
i ,o 000
400 099
Problem 34-9 An!lwcr C
2.400,000
Cnrrying amount, 1/ 1/2019
;no ooo
Oepr(;cia1ion for 2019 ( 1,600.000 / 4)
Carryinaa"1<lun1, 12/31/2019
2.000.000
Sale price-rcco-.·c rablc amount
lmp3irment loss
I 1500:QQ
650 000
Problem 34- 10
Qu~tlon I Answer A
Qutsdon l AnS\\er 8
Qu1!$tlOn l Answer A
Co<1 111/2019
Accum ula1cd dcprt-cia1lon t i 1.000.000 / 10)
Conying amount - 12/3 1/2019
Value in use
11,000,000
I i iQOQOOl
9.900,000
8.550000
higher than fair value
I l'iQ()QQ
lmp:airmcnl loss for 2019
Carrying amoum-1/1/2019
lxprcci>1ioo for 2020 (8,5S0,000 i 9)
Cnnying nm<mnl - 121.l 1/2020 wilh impairment
8-550.000
(
91-0 0 00)
7 600 000
214
Cos, - 1/1/2019
Accumulmcd dq,r<eiauon - 12/31/2020 ( I 1.000.000 / IO x 2)
\1aximum curl')'ing omuunt - 12131/2020 n o impairment
11.000.000
( , ?00000)
asooooo
fair \ alue ltss cos1 of disp0sal - 12/31/2020 higher tha,1 value in use
8.400.000
Conying cunount 12/3 1/2020 whh Im pairment
Gain on rcwri.al ofimpt,inncnt for 2020
7600(Ml0
Ocpn;c•••ion lo, 202 1(8,400,000 / 8 )
I 059000
1
fi(IQ ()(N)
Problem 34- 11 Answer D
lmp:urmcnl loss (450,000 428,00(1)
2Z.!!!!!I
Problem 34- 12 Answer 8
Cos, January I • 20 I6
Accumulated depf\.."Ciauon- August 31. 20 19 (4.800.000 / 96 months~ 44)
Carrying ttll)QWlt August 31, 2019
5.600.000
2200 QQO
Useful hfe (8 )'t.'Ll'S x 12 months)
26 mmuhs
Value in u"
Fair \'tiluc
3.500.000
3.000,000
Recoverable amowu
3.500.000
' 4fl0 000
The reroverablc amount of PJ.S00.000 is higher 1han 1hc talT')ing amaun1 of PJ.400.000. Therefore.
I.here is no unpa.i.nnem loss.
The equipment should be n:portcd :u the c{lrryina amount of P).400.000.
21S
CHA PTER 35
Problem 3S.l
Total carrying amoun1
l.
5.000.000
Valut in U$C
3 60Q OOQ
lmpajnncnt los.s
I 4fMl 000
lm~ i.nncnt loss allocated to goodwill
IJUP3inncnt l()SS allocated lo the either assets
500.000
900 000
I 4fM) QQQ
Wbc-n an impatnllfflt loss 1s m..•ogmzcd
lhc unit in the following order.
a.
b.
for u cash gcucroung un.iL. the loss is ;tllocatcd 10 1,hc wc:1s of
First. to the goodwill, i(uny.
11)(n, 10 111 other ,ssc1s o f the unit prorata baStd on their canyLng amount.
Building
T,wcn1ory
Trademark
3.
lm painnent loss
Gooduill
Carrying amount
f raction
Loss
2.000.000
1.500,000
20/45
15/45
10/45
400.000
J00.000
I 000 000
:f SQQ QQQ
ll!!l.l!!lll
2ill!Jllln
1.400,000
500.000
400,000
Aec.:t1mula1cd dcprc:cllation - building
ln,·c n1ory
1~radcm~rk
300,000
200.000
Problem 3S-2
I. Carrying amount
V.1Juc in USC
lmpainncnt lou
2.
16.000.000
11 000000
snnoooo
A llocad on of lmpalrment loss
Build ing\81 16 x 5.000.000)
Eqwpment(4116x 5.000.000)
Inventory (4116 x 5,000,000)
2,500.000
1.250.000
I ,5n o,oo
000 QQO
(i
ObM'nl!" th:it after 11llocutmg the Pl,.S00,000 ll)SS to th~ building. t he carrying amoum o f the building
wc,ul~I be PS,S00,000 which i..s l ower t.ha n its foir ,ah1e orP6,S00,000,
Accordtngly, onl) P l,S00,000 loss is allocattd to the building and die balam:e o f P l.000.000 is
reallocated to the equipment and 11'1 \tntory p roraL.a.
2 16
A llocmcd loss
Rcallocotcd loss
\4/8 X I,000,000)
Building
f,quipmcnt
Tnvcntory
2.soo.000
I 1.000.000)
1,250.000
1.250,000
500.000
(4/l! X I ,000,000)
I 'i!J!! !l!!!2
lm1>3inncnt lffl
3.
lm.~inni:Ol 10$5
Acc.·11mulatcd dcprcciat ion bt1ilding
Accumula1cd dcprcciat ion - cquipmcn1
IO\entory
~!12 ti!!!
1 7'iflQ!l!l
I Z'i!:HlQ!l
5,000.000
1.500,000
1.750.000
1.750.000
Problem 3S-3
I. Carrying tlmount ofCOU
I 15,000.000
1an gnn a1m
VoJuc in o.se
lmpainncnt loss
2.
(
lmpainncnt loss
15.000.000
5.000.000
2.000.000
3.000.000
5.000.000
Good" ill
J\C'('.OW'll!I
15 000000)
ret-1.'ivablc
fnnnlory
Accumulated depreciation
fhc remaining impainncnt losi. of P I0,000,000, aOcr dcductins lhc loss applicable to i,-oodwill, is
allocated to the other noncash as.sets on a 1>rorata basi;s.
Problem 3S-.4
I.
10.000,000
Carrying.amount ofCGU
Vnluc in use
lml)',linnent l~i
2.
7 ?()0.000
28Wl '211!
hllp.,lnnent los.s
Goodwill
2,800.000
1,000.000
1.000.000
600.000
200,000
Actumuhned depreciiuion - ,nochinery (519" 1.800,000)
1\ ooounts receivable (3/9 x 1.800.000)
Patent ( 119 x 1,800,000)
Problem 3S-5
Cash
A<:counl'- rccci,•oblc
4,000.000
5.000,000
7.000.000
18.000.000
nc1
bwemo,y
Propcny. pfom and cquipmcm
net
lSU!llQQQ
Gooc'.h1.11l
JZ ou12m)O
Canyina amount ofCGU
?.
lmp,1inncnt loM
3.
lmp3inni:nt loss
Good•ill
fnvcntory (1125 x 4,000,000)
Propeny. plant and equipment (18/25 x 4,000.000)
2DWW!
7,000.000
3,000.000
1,120,000
2.880,000
N<• 1mp.,.inucn1 loss is :allocalcd 10 1hc nccounl.s rcC4."tvablc bcrousc the- accounts :arc co1uidl-n:d cotl~e1iblcc::<ccpl 1hosc doubtful.
217
Problem 3S-6
lnwntu,y
200,000
300.000
Accoom., J\.--ecivabk
3.400.000
Plan1 and equipment - net
Pat<:nl
Goodwill
Canying amount ofCGU
Value in use
lm1>3irmcn1 loss
lmpairmt-111 loss
850,000
100000
4.R50.000
4
o~o ooo
3QQQQQ
800.000
Ooodwdl
100.000
Plane and cquipinc:cn
600.000
Poltnl
100,000
Pinnt
Plltent
Allocated loss:
(3.400 14 .250, 700.000)
560.000
(850 / 4,250 X 700.000)
Rtailocat~ los.s
140,000
~
~
• 40 000)
.IJlllJ!llll
The patent shall not be reducc..-<l 10 an umount below it$ fair , aloe- lcsi, coi;t of d1spo:,al or P7SO,OOO. No
am1>4-1nncnt i!I allocau..-d to a..:counts lt'cc1v11blc and ill\ cntory because th~ accounts arc comidtrcd
collcttiblc and the inventory's fair value lcu cOSI of disposal is c:qu.il to the carrying am ounl
Problem 3S.7
Cash
lnv~tory
600.000
1,400,000
Lnnd
2,500,000
Pinnt and cqui1}fllc:nt net
Goodwill
Carryfog amount of CGU
7,500,000
I 000000
qooooo
4 snooon
13.000.000
Value in use
lmpairmcnl I°"
lmpairmem loss
Goodwill
land (lS/ 100, 3.500.000)
Actumul3t«I dcprcciMioo (75/ 100 x 3,500,000)
4.500,000
1.000,000
s1;.ooo
2.625.000
No imp:1irmcn1 los& jg t1lloc.awd co inVmcory btcau~ lhc in,cntOf)''t fair ,11h1e lcs, 1.-m;l of di1-po!QI iit
higher than its canying amount
Problem 3S•8
Question l Answer C
Question 2 Answer B
Quest Io n J Aniiwcr 0
2 18
C:arrying amount
lm1>Hcd voluc
Lon
Rcttuling
J00,000
2l(),OO()
Sen. ,ce
Financing
TotaJ impairment loss
200,000
100,000
600,000
50,000
100,000
(k,odw ill impairnlall
400,000
i, dct.:rmincd at the lc:vd of the fndlvldu:-al repordng unic :utd nol M the entil)'
Jevel Thus. no loss is rtoognized for the Financing uni1 be-cause 1he implied value of goodwill e.xettds ihe
c.irrying amount.
Problem lS.-9 Answer A
Telrcommun l(',atlon
Segment carrying amount mduding goodwdl
Estimated total fnir value of scgmcm
lmp.:.irmc111 )(15$
2.500.000
2 900 000
The currying amount of goodwill or PS00,000 1s not atTcctcd be-cause the 'fc.lccommunlcJUlon reporting
uni! iJ not im1,1u1'(.-d.
Segmc.n1 carrying amount including, goodwill
Estimalcd tot.al fair value of segment
lmplirmcn1 loss • 11 allnc.,.tt..-d 10 goodwill
3.000.000
2!!00000
' 00 [t99
Goodwill
500.000
lmpalrmcm loss
( 2QQ()OO)
c,urying 111noun1ur goo,fo ill
JlWlllll
Problem 3S-. 10 Answer C
Ctlnyina :,mount-12.13 1/2019
Depreciation loo- 2020 (20",)
Canying amount - 12/31/2020
Corryini; mnount - 1213 1/2020(usumi,~ no imp.1i.mit11t)
Reversal ofimpaimiem loss
7.000.000
() 400000)
5.600.000
7100 000
I AflOQQQ
219
CH A PTER 36
Problem 36- 1
7,500.000
(~~QQQ!!!I)
Acquisilion cost
Ne1 assels acquired
Goodwdl
2
Cash
Acc()unts rtce,,,able
ln \'CDlOI')'
Propc11y, pfa nt und cqui1>mcnt
Goodwill
Accounts payable
2 2'1!1 lt!lO
S0.000
800,000
l.lS0,000
4,300.000
2.900.000
900.000
1,000,000
7,S00,000
Note payable - baok
C:uh
Problem 36-2
I.
2.
Acquisition cost
NCI assets acquired m fair vatuc
6.000.000
(1 3{K!
m~)
Gooch,111
., 2QQQilQ
Tocal assets ot fair value
l'oi.al liab1htics
Net asscls ocquir~ 0 1 foir value
5.300.000
cash
Accounts rtcetvabk
hw(niory
Patfflt
Propcny. phln1and cqui1)mcn1
Goodwill
2Jl!l!l ~
JJUQllQg
50.000
500.000
I ,S00,000
250.000
3.000.000
2,700.000
2.000.000
6,000,000
Acoounls pa~blc
Cash
Problem 36-3
I. Cash
1.000.000
500,000
lmtntc,ry
~ !!!12 !!!!!I
ln-procci.s R and D
Total assets
6,500,000
Total liabilities
1 !!!IQ !l!!!I
, ,1m1wa
Net assets
Acquisition cost
Net asstts acquired at foir value
Goodw,11
8.000.000
<l <gg Q!!!I>
~
1Q12 lltlfl
The goodwill includes the fair value of die assembled workforce of P 1.200.000. The assembled
wortrorte 1s not accowucd for scparn1cly Man asset.
2. Cash
tnw:ntory
1.000.000
500,000
In process R and 0
5,000,000
Goodwill
AccounLs pay.able
Now: payabt,
4,500.000
Ca5h
2.600.000
400.000
8,000.000
220
Problem 36-4
Averugc c1•mings or prior )Cit~ (1 ,500.000 / J)
500,000
lncrc:.1!iC m a\!C'r.lj'C earnings (10°~x 500.000)
Total
L~\'.S: Patent amortizatton (500.000 / S years)
t..am,ngs fOf ~ood" ill comput.ation
....i2.!l!!II
~
a.
450,000
550.000
.lll2.l!!!!I
A\'erugc l"uturc earnings
Oi\1dc by
Net t\S!lels including goodwill
Less: Net a.ssoo c.xcluding good\\ ill
Ooodwtll
b
H%
5,625,000
s ooo ooo
6'i 000
450.000
A,·crnge caminp
Less: Nonnal camin~ (8% x 5,000,000)
A ,•trag(: excess earnings
mooo
S0.000
Ciooch1.i ll
~
lll!!,000
Goodwill (50,000. 3.17)
,WJll!l
O i\1dcby
c.
Problem 36-5
I. Awr:,.gc carmn,gs
DiV1dc by
Net assets mcluding &oOOdwill
Les.s: Nt't mseu be-for~ good" ill
Goodwill
2.
1-\
250.000
JO¾
2.500,000
I ZQQ (tQO
800 QQQ
250,000
verugc earnings
Lc;.s: Normal caming.s (S-o x 1,700,000)
lli.lHl!I
114,000
Excess ~minp
3
Divide b)'
Goodwtll
~
Avcrngc camin,as
250.000
Lci.s: No,mal earning:, ( 10-/4 x 1,700,000)
170000
Excess earnings
Goodwill
80.000
_,1
1l1!lJl'1Q
Exrc.n cttminp
Multiply by
Goodwill
_i.6,i
~
Z!l!!J!!l!l
Muhiplyby
4
X0,000
Problem 36-6
I.
l•od
M:.1c-h1nc-ry
Inventory
Accou111s rtet-i\•able
TrOOcina.rk
f{I ICOI
Accourus pr.1)':lblc
Nci assets acquired
Acquisitioo cost
Ooodwtll
3,500,000
2,000,000
1,800.000
700.000
1.000.000
500,000
000 000)
6.500.000
I)
2 000 000
2 ~(Ml 'tQO
221
2.
Land
Machinery
lmcmory
Accoums n:ccivt1bfc
Trade-mart
PaLtnl
Goodwill
J\tcounl!J p:-1yablc
Cash
3.500.000
2.000,000
1,800,000
700,000
1,000,000
500.000
2.500,000
3,000,000
9.000.000
Problt:m 36-,7 Ansv.-cr C
Acquisition cost ( 150,000 x PSO)
h1ir v:,luc of n..-t ns.s..it> acquil'\-d
Goodwill
7.500.000
6 gog QOO
Corrying amount of net osscts
Execs, fair \·aloo ofprop~rty, plant u.nd cquipmt:nl
Fair \/Oluc of net a~t~
6,000.000
200000
XQC} t)l)(J
6800 000
Problem 36-8 Answer C
AcC<JOntS rccch·ablc
lowntory
Eqmpnw nl
Short-term payable
Net ~scu a1 fair value
Acquishion cos.t
'Net assets al fair value
Goodwill
2.000.000
500,000
500,000
11000000)
I 000000
5,000.000
<1000000)
4 QQQ 000
Problem ~9 Answer C
Acquisu,on cost (200,000 x PJO)
fair \':1lue of net assets acquiM:I
Good,,;11
Conying amount of ,,ct ,1$stl.s
Excess fuir \·aloe of identifiable assets
fain•aluc of net assets
6,000,000
( S 400 000)
600000
5,000,000
400000
5;QQ 000
Problem 36- 10 Answer A
Conying an,oun1 of net :im1s
Umktvttlu:ttivn of pl'Op(:l'ty, pl:1111 M d ~quirrrn:nt
Overvaluation of o.her assets
Ovcrvaluation of long-term debl
fair \'Olue of net as.sets
Acquismon cost
Fair \'tiluc of nct assc~ aequircd
Goodw ill
3.200.000
750,000
( 500.000)
200000
1 §5QQQQ
4.000.000
( H SOOOO)
, sq QQQ
222
Problem 36-- 1l
I. B
2. C
J, C
4, B
;, 8
6. A
7. C
8. D
9. B
10. D
223
CHAPTER 37
Probkm 37.. 1
2019
Jan. I Patent
Ois:b
Dcc.31
Amortization of pa.tent
Pat,'111(255.000/ 20)
2020
Dcc. 31 AmoniZ1:11ion ofpo1cn1
255.000
255.000
12.750
12.750
12,750
12,750
Patctll
2021
Jan. 5
U'gal expense
90,000
Cas:h
Dcc, 31 Amoni1ution ofp;:i1c:n1
Piucn1
Q0,000
12,750
12,750
2022
bn.
510,000
l'a tenl
Cash
Dec, .} I
Amorti:1.atic,n (,r p;11cn1
510.000
42,750
42,750
Pate.nt
On ongin:al ros1
12,750
On eompc1ing ~1en1 (510,000 f 17)
lll.!!00
il.Ull
Problem 37-2
2019
Resttrth and development c,_t.;pcnsc
510.000
Cash
2022
510,000
720.000
Patent
Cash
J-\mon12a1ionofpat~t{720.000/ 16)
720,000
45.000
45.000
Patent
2023
Patent
540,000
Cash
Amoni~mion or pa1cn1
Patent
On related pa1c-n1
On comptt;ng pat"11 (540,000 I 15)
540,000
81,000
81.000
45,000
ill!ll!l
wm
224
Problem 37-l
2019
Res""arch and deH!l0pment expense
250.000
Cash
2020
Patem
250.000
60.000
60,000
Cosh
Amortization of patent
l'ate1n (60,000 / 10)
2021
Patent
6,000
6,000
600.000
C~h
600.000
Original cosl
60.000
NtwpatMt
~
Tomi cost
660.000
Less: 1\mor1iza1ion for 2020
Catrying amouni January I. 202 1
~
Amortm111on of pal~nt (654.000 / JS)
~
43,600
43,600
Patent
2022
Amonaz:.mon ofp;Hcnt
Patent
r at..:-nt wnu,: n olT
43,600
43,600
566,800
5(,(i,800
Paccnl
Carrying amounl - 111/2021
Less: Amo111z:ation
2021
2022
Carrying amown 12/31/2022
654,000
4),600
~
~
~
Problt:m 37~4
P:11en1
7,140,000
Co,h
2.
).
4.
7,140,000
Amoriitation o f ,_c,u
r a,em (7,140.000 / 15)
~76.000
Amo11tZlllJ0ll of pat~n,
Potcnl(S,7 12,000 / 7)
816.000
Acqui$ttion ~Cht
Amo11rzation for 2019, 2020 and 202 1 (476.000 x 3)
Canyin,s amount I /1/2022
Amo11.izatiorl for 2022
12/31/2022
Carrying amount
476.000
816.000
7.140,000
<I ~~ jl
t!!lP)
5,712.000
( 81~ Q!!ll)
~826Wla
225
Problem 37-S
I.
PaLC,u
900,000
900,000
Cluh
2. Amorii.L.ation of l>llt'nl
90,000
Pattut (900,000 / JO)
3.
Pn1cnt written off
90.000
540,000
540,000
Patent
cos,
900.000
Amo11oza1io11 for 2019, 2020, 2021111d 2022 (90,000 x 4)
(1MOOO)
~
Carrying omount - 12/31/2022
Problem 37-6
P alC'lll
6.200,000
Cash
2. Lc~I expenses
6.200.000
450,000
450,000
Cash
3. Amonization of 1>a1c1n
Patent
1.050.000
1.050.000
X (1,200,000 / 8)
Y (2.000.000 1 5)
150,000
400.000
Z (3.000.000 / 6)
' 220:UQ
I 't~ll WlSI
Problem 37-7
2
Rct:ainc.-d earning,
Patent
500,000
P.11cn1
5 10,000
500.000
Rc=tained c:.iming.t
),
~s.
510.000
No ndjus1~ nt.
Loss on d:unag.?-s
Leg.ii npcruic
Accrued liabili1ies
P.111."tll
100.000
30,000
130.000
24,S00
24,500
Rc1ainc:d c;1ming,s
Amc1rtualion pc.-r book (50(),000 - 450,000)
S0,000
Correct n1nonizuhcH1for20 19 ($10,000 / 20)
2.Ull!l
~
O vcrmnortinllion
6.
Am011ization of 1u1cn1
Patent
25,500
25.500
226
Problem 37-8
I.
2.
3.
~-
A1»o1'Lu·:ation of l)lltnl
A1,.>t111nultucd t111\0t1i"a1ion (l.'120,CI0 0 - 240.000/ \\)
280,000
Trade1na1t. (800.000 x 3/4)
Noncompi..1ition 3.grccmcnt
CaJh
600,000
200.000
lR0.000
800,000
Amorh1.11tio11 of no11oompctit1on :tg_rl!CnK·'l'tl
Acc11mulatcd :Lmortirolion (200,000/ S)
40.000
RO)'llll)' i!Xpc n:,,c
50,000
40.000
50,000
Cash
Problem 37-9
2019
Copyright
Ca,;h
28$.000
Amonizarioo of OOl))Tigh1
Copyright
150.000
28S,000
150.000
28S,000 / 95,000 = 3 per c:opy
50.000x 3 - 150.000
2020
Amortin11ion of C'Ol))'T'iglu
Copyrighl. (30.000 x 3)
90,000
90.000
Problem 37- 10
I.
2.
C0pyrigh1
Rcl.\ined ~ ••rungs
240.000
240.000
Cost or copyright
300,000
Ll'll.S: Amortit..ation (300.000 / 5)
Canying amount
...!z2.l!ll!I
2:lll.llllll
r\ morlttativn ot' C.."Op)flght
(,0,000
(,0.000
Copynglu
Problem 37-1 1
I.
C0py,igh1
PatC'lll
620.000
400.000
1.020,000
Reu1ined ~mings
2.
C0pyrigh1 I
Less: Amottizatlon from 1/1/2015 10 12/3112018 (400.000 / 20 x 4)
..li!l.l!!lQ
Can;ing 1n101,1n1
.l1.IWIII
400.000
Cc,pyright 2
360.000
Less: Amor1izatic,n fram 7/1/2016 to 12131/201 8 (360.000 1 1S x 2.S}
..i!!!.!!!l!!
Cal'T)'ing ~mount
~
Pmc..,11
Leu: Amorti7.ation for 2017 and 2018 (S00.000 / 10 x 2)
Carrying amQunt
ml!!!!!
500,000
~
Amorhzation o f oop)ngJu (20,000 ➔ 24,000)
44,000
Amor1iz:uion of 1>3tcn1
Cop)'right
Patem
50.000
44,000
50.000
227
Problem 37. 12
Books of Franchisee
Franchise
Cash
2
J
.a
6,000.000
6.000.000
300.000
Amo11izarion of frineh isc
p,..,chiS< (6.000.000 / 20)
Ca,h
s.i.,
From!hi.sc fee c,pcnSC'
Cash (25.000.000 ., 5%)
300.000
2s.ooo.ooo
25.000.000
1,250,000
1.250.000
Problem 37-U
Books of Franchi.see
frnnchi.sc
Cash
Noc.c payable
2
No« payable (I S.000.000 I 4)
lilteresc espense (JS,000.000 x 10-/4)
20.000.000
5.000.000
IS.000.000
3.750.000
1.500.000
Ca,h
5.250.000
3. There it no amortiw1ion because the franch ise 1.s for an indcfi:nilc period.
Problem 37- 14
nooks of Franchi.Jee
I.
t'ronch,sc (3.000.000 - 3.790.000)
Oi.scounl on ooce p.ayablc
6.790.000
1.2 10.000
3,000.000
5.000.000
Cosh
No<c payoblc
NOie payubli:
Present nlue o r 1101e (1 .000.000 :< 3.i9)
Implied interest
2
J.
Amorlization of franchise
Franchise (6.790.000/ 10)
Nolt p;ay.ible
5.000.000
~Z22121X1
IZUlQllQ
679.000
679.000
1,000,000
Cash
4
lnlcl\:st cxpcnK ( 10'1'. it 3,790,000)
Oiicounl on note p::iyablt
1.000.000
379,000
379.000
Problem 37.15 Answer C
Cost 1/1/2014
Accu1n ulatc:d di-pn.-ciaLJon - 12/31/2018 (6,000,000 / IS x S)
, 222 QI.lg
Conying amount - 1/ 1/201()
~ QQQ~
An-
i<-llioo for 20 19 (4,000.000 / 5)
6.000,000
l!lWlllQ
228
Problem 37- 16 Answi:r A
Amorti"1tioo foe 20 19 (4.500.000 / IO)
Problc-m 37- 17 Answer D
Acquis111on co$1 - J;1.nwuy I, 2016
Amonir.ition for 20 16, 2Ul7 :ind 2018 (450,000 / 15 x J)
450,000
( YOQQQl
Cnnyin1 amount - January 1, 2019
llWl!l!l
Sak pri«
750,000
J&lHl!I
Corrying arnount
Gaioon sale
~
Problem 17- I K Answer C
Cos, - I/ 1/20 17
A1noni~11ion r...,.. 20 17 ;ind 2018 (S,400,000 / 6x 2l
Conying iunouru - 1/1/2019
An>octiz:1111><> foe 20 19 (3,600,000 I 20)
5.400.000
ti soo 000)
' 600 000
.l.lillJlllj!
Problem 37- 19 Answer A
Dcliign oo~ts
I.S00.000
150.000
Ug,1 recs of rqislCrina 1r.ademark
Registration fee with Patent Office
To1al cost of trademott
1109 (tQQ
Problem 37-20 Answer 8
I ISHK!Q
so 000
Problem 37-21
Q u e:st1on 1 Answer C
Trademark
Value in us, ( 120,000 / 8% )
ln1pairmen1 loss
2.000.000
I soo 000
SM ft®
Q uc$tlOn 2 Answer D
Patent
An- izatioo foe 2019 (6.000.000 / 5)
6.000.000
Conyingamount -12/3 1/2(Jl9
4.800,000
Value in u!IC (1 ,000,000 x 3.31)
' '10000
I 420 000
lmpairmcnl loss
I 200 000
Problem 37-21 Answer C
Oownpa)'ll'M:flt
Pn:scnt w1lut' o(unoual paynu.-nl for 4 yc-ars( l,000,000x 2.9 1)
Coi.1 of'fmnchisc
2.000.000
'9l0000
, orn rwn
229
Problem 37-21 Answ-.,r D
Orig.m:il lease
Ex1cnslon
To1al life
Less: Years expirc'<l(2017 and 2018)
Remaining life
!.B. )~ars
Life o f iml)t()vmicnt (shoncr)
.U years
LcmhoM improvcn1em
L<ss: Oqm.-.:iarion for 201 9 \540.000 / 15)
S40.000
Corryi.ng amount
12
.a
}"C:ll'li
..
20
~
~
Problem 37-24 Answer 8
Accumulo1cd dqmxiouon
~ocmbcl' lt, 2019 U..200.000/ SJ
Problem 37-2S Answer D
Trm·cl C0$1S of snlaricd employees
Tminins: of local employees
Tot.al start-up costs to be expensed
400.000
I 200 000
I ftQO!tQQ
230
CHAPTER38
Probk r:n 3~ 1
Qm.-st1o n l Answer A
CoSt of'p,unu - legal and registration 011.ly
I <KtQQQQ
Questio n 2 Answer B
0..,vclupmc-nt cost aflt.T C(-chnologk1d fo1mb1IJ ty
Additional dc\·clopmcnt cosl up 10 full m;11111fae1t1ring stage
Ocvtloprnent eost capim.lized
5.000.000
2000000
2 000 000
Question l Ans" er A
An.ortit.ation of p:ttcnt ( 1.000.000 / S>
Anl0fti:r~11ion of de,·clopmtnl co$l (7,000,000 / S}
Total t11nortii01ion for 2020
Problem 33-2 Ans wer A
200.000
1400000
1600000
1600 QQQ
All cos1s incurred arc charged 10 research and dc:,·c lopmcn1 expense with the cxccprion of the cos1 or
confereucc. The cos1 of c.·onfm:occ 1s also .:xpcns:td 1mmed1atcly but noc as p:u1 of ,~ h aod
dcvclopmc.nl c,i;pcmc.
Problem 38-3 Answer D
I 220000
Probk m 38-4 Answer A
Problem 38-S Answer B
Ocprec1a1ion
Salaric~
lnd1rce1 costs allocah..-d
\fatcrial,!1
Total resean::h and dc,-el0pment expense
300.000
700,000
200,000
180 QQO
I 380000
PAS 38 does not cover res,e:1~h and development pt•rfflmwd u1ult!r crmtmct for others. includini; indiree1
costs lhat are spi.,"Cifically reimb ursable under the oonlr.lCL
Problem 38--6 Answer C
Special equipment used solely f'or Prodoct Y
l.:,bor :ind m~11erfal cosl.8
Co$.! o r 1u1ing p,otc.t~
Total rcsc-arch ;md devclopmcnl e~pcnsc
TI1c kgal costr. u1cun'Cd to f111:"
Problem 38-7 Ans wer 8
p;ttc11t
600.000
2,000,000
800 000
1400 OQQ
5hould be chirg,00 to the p:itcut .tccoun t.
6 599 000
Problem 33-8 Answer C
L.ibonuory r.;search
CoSl o f tes1ing prototype
ConstnXtion ofrcSC,1rch faciliry
Rand O c:x.pcn.se
200.000
50,000
~
~
231
Problem 38-9 An~wer 8
UlboruLory rescari:h
Oc!ii&n oftools,jip:. molds :md dies
Ocpn:ciation of equipment (1.500,000 I S)
R and D perfomi.ed by Stone for McW
Toutl Rand I) e"tp,ensc
750,(KIO
220.000
300.000
''0 000
I ~oo 000
Problem 38-10 Answer A
R ond D cqui1>1ncn1 ( 1.1100,000 / 4)
Enainceri11.& costs
Tot.al R and D expense
450,000
I 200 000
I §SQ 000
Probkm 38- 11 Answer C
~fachine A
Machine B
chart,~d entirely to cxpt..-nsc
(1,000,000 / 10)
To1al R and D c,:1:,msc
1,000,(KIO
100000
I JQQOOQ
Pro blem 38- 12
Questio n 1 Ans wer 8
Ou1>lkation of compt11cr softu·are and training materials
Packaging produce
Total in, cntory
2.500.000
900000
' 400 009
Ques tion 2 Answer R
Complaion of dellil progr.un desig_n
Cost incu1TCd for coding and lCStmg 10 establish 1cchnologic-al rcas1bilily
To1al C.'OStS charged as expense
I.J00.000
I 009 000
2 JOOQQQ
Questio n 3 Answer C
Othl...-r coding ~ Is an« c~41bti<1hm<.,11 of l(.-chr101Qgjctll feasibility
Other testing costs after cstablishmcrw: oftcchnologic.il feasibility
2,400,000
2.000.000
Costs of producing prodoc1 masters for training materials
J 500 000
Total costs lo be: capitalized
S2QQ 000
Problem 33-JJ Answer A
JOOQQQQ
Problem 38- 14 Ans wer 8
6 9"9 {tQQ
Problem 33-15 Answer D
The P l.000.000 COSI Would be c:hargcd lo compuler sofiwarc on the prcmis,c: th:il then:- is already a
technological feasibility. The P750.000 oost should be classified as dmribution cost.
Problem 38- 16 A n swer C
Copi1alimbJc co:;t
The cost incurred o f P7S0.000 in third quarter is aipitnlizc:d bc:causc the altc:mativc: already became
technologically and cconom.ically feasi ble in the second quancr.
Any cost incurred afler the h::chnolo1,.'1c:.1ll fe-asibility has bero achic\·cd should be copitoli7c:cl
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