CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
DUSAYEN, BERNARD I.
CBET-01-202P
C O M P U TA T I O N S
CHAPTER 8
PROBLEM 8-1
Simple Company
Statement of Financial Position
December 31, 2020
ASSETS
Current assets:
Cash
Trading securities
Trade and other receivables
Inventories
Prepaid expenses
Total current assets
Noncurrent assets:
Property, plant and equipment
Long-term investments
Intangible assets
Total noncurrent assets
Total assets
Note
(1)
(2)
(3)
420,000
250,000
620,000
1,250,000
20,000
(4)
(5)
(6)
4,640,000
2,000,000
300,000
2,560,000
6,940,000
9,500,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Note
Trade and other payables
(7)
Serial bonds payable - current portion
Total current liabilities
620,000
500,000
Noncurrent liabilities:
Serial bonds payable - remaining portion
Shareholders’ equity:
Share capital
Share premium
Retained earnings
Total shareholders’ equity
1,120,000
2,000,000
5,000,000
500,000
880,000
6,380,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
Total liabilities and shareholders’ equity
Note 1 - Trade and other receivables
Accounts receivable
Allowance for doubtful accounts
Notes receivable
Claim receivable
Total
9,500,000
500,000
(50,000)
150,000
20,000
620,000
Note 2 - Inventories
Finished goods
Goods in process
Raw materials
Factory supplies
Total
400,000
600,000
200,000
50,000
1,250,000
Note 3 - Prepaid expenses
Prepaid insurance
20,000
Note 4 - Property, plant and equipment
Land
Building
Machinery
Tools
Total
Cost
1,500,000
4,000,000
2,000,000
40,000
7,540,000
Accum.
depr.
1,600,000
1,300,000
2,900,000
Note 5 - Long-term investments
Investment in bonds
Plant expansion fund
Total
1,500,000
500,000
2,000,000
Note 6 - Intangible assets
Franchise
Goodwill
Total
200,000
100,000
300,000
Note 7 - Trade and other payables
Accounts payable
Notes payable
Income tax payable
Advances from customers
Accrued expenses
Accrued interest on note payable
Employees income tax payable
Total
300,000
100,000
60,000
100,000
30,000
10,000
20,000
620,000
Book
value
1,500,000
2,400,000
700,000
40,000
4,640,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 8-2
Exemplar Company
Statement of Financial Position
December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents
Trading securities
Trade and other receivables
Inventories
Prepaid expenses
Total current assets
Noncurrent assets:
Property, plant and equipment
Long-term investments
Intangible assets
Other noncurrent assets
Total noncurrent assets
Total assets
Note
(1)
500,000
280,000
640,000
1,300,000
70,000
2,790,000
(2)
(3)
(4)
(5)
5,300,000
1,310,000
3,350,000
150,000
10,110,000
12,900,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade and other payables
Note
(6)
Noncurrent liabilities:
Bonds payable
Premium on bonds payable
Total noncurrent liabilities
Shareholders’ equity:
Share capital
Reserves
Retained earnings (deficit)
Total shareholders’ equity
Total liabilities and shareholders’ equity
Note 1 - Trade and other receivables
Accounts receivable
Allowance for doubtful accounts
Notes receivable
Accrued interest on notes receivable
Total
1,000,000
5,000,000
1,000,000
(7)
(8)
7,000,000
700,000
(1,800,000)
6,000,000
5,900,000
12,900,000
400,000
(20,000)
250,000
10,000
640,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
Note 2 - Property, plant and equipment
Land
Building
Equipment
Total
Cost
1,500,000
5,000,000
1,000,000
7,500,000
Accum.
depr.
2,000,000
200,000
2,200,000
Note 3 - Long-term investments
Land held for speculation
Sinking fund
Preference share redemption fund
Cash surrender value
Total
500,000
400,000
350,000
60,000
1,310,000
Note 4 - Intangible assets
Computer software
Lease rights
Total
3,250,000
100,000
3,350,000
Note 5 - Other noncurrent assets
Advances to officers, not collectible currently
Long-term refundable deposit
Total
100,000
50,000
150,000
Note 6 - Trade and other payables
Accounts payable
Notes payable
Unearned rent income
SSS payable
Accrued salaries
Dividends payable
Withholding tax payable
Total
400,000
300,000
40,000
10,000
100,000
120,000
30,000
1,000,000
Note 7 – Share capital
Preference share capital
Ordinary share capital
Total
2,000,000
5,000,000
7,000,000
Note 8 - Reserves
Share premium – preference
Share premium – ordinary
Total
500,000
200,000
700,000
Book
value
1,500,000
3,000,000
800,000
5,300,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 8-3
Relax Company
Statement of Financial Position
December 31, 2020
ASSETS
Current assets:
Cash
Trade accounts receivable
Inventories
Prepaid expenses
Total current assets
Noncurrent assets:
Property, plant and equipment
Investment in associate
Intangible assets
Total noncurrent assets
Total assets
Note
(1)
(2)
(3)
400,000
750,000
1,000,000
100,000
5,600,000
1,300,000
350,000
2,250,000
7,250,000
9,500,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Note
Trade and other payables
(4)
Mortgage note payable-current portion
Total current liabilities
1,350,000
400,000
Noncurrent liabilities:
Mortgage note payable, remaining position
Bank loan payable, due June 30, 2022
Total noncurrent liabilities
1,600,000
500,000
Shareholders’ equity:
Share capital
Reserves
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
Note 1 - Trade accounts receivable
Accounts receivable
Allowance for doubtful accounts
Net realizable value
(5)
1,750,000
2,100,000
3,000,000
1,400,000
1,250,000
5,650,000
9,500,000
800,000
(50,000)
750,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
Note 2 - Property, plant and equipment
Cost
500,000
5,000,000
3,000,000
400,000
8,900,000
Land
Building
Machinery
Equipment
Total
Accum.
depr.
2,000,000
1,200,000
100,000
3,300,000
Book
value
500,000
3,000,000
1,800,000
300,000
5,600,000
Note 3 - Intangible assets
Trademark
Secret processes and formulas
Total
150,000
200,000
350,000
Note 4 - Trade and other payables
Notes payable
Accounts payable
Income tax payable
Accrued expenses
Estimated liability for damages
Total
750,000
350,000
50,000
60,000
140,000
1,350,000
Note 5 - Reserves
Additional paid in capital
Retained earnings appropriated for plant expansion
Retained earnings appropriated for contingencies
Total
300,000
1,000,000
100,000
1,400,000
PROBLEM 8-4
Summa Company
Statement of Financial Position
December 31, 2020
ASSETS
Current assets:
Cash
Bond sinking fund
Trade and other receivables
Inventory
Prepaid expenses
Total current assets
Note
(1)
(2)
700,000
2,000,000
830,000
1,200,000
100,000
4,830,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
Noncurrent assets:
Property, plant and equipment
Investment property
Intangible asset
Total noncurrent assets
Total assets
(3)
(4)
5,500,000
700,000
370,000
6,570,000
11,400,000
LIABILITIES AND EQUITY
Current liabilities:
Trade and other payables
Bonds payable due June 30, 2021
Total current liabilities
Note
(5)
2,050,000
2,000,000
4,050,000
Noncurrent liability:
Deferred tax liability
650,000
Equity:
Share capital
Reserves
Retained earnings
Total equity
Total liabilities and equity
(6)
(7)
3,500,000
500,000
2,700,000
6,700,000
11,400,000
Note 1 - Cash
Cash on hand
Cash in bank
Total
50,000
650,000
700,000
Note 2 - Trade and other receivables
Accounts receivable
Allowance for doubtful accounts
Notes receivable
Accrued interest receivable
Total
650,000
(50,000)
200,000
30,000
830,000
Note 3 - Property, plant and equipment
Land
Building
Furniture and equipment
Total
Note 4 - Intangible asset
Patent
Cost
1,000,000
5,500,000
2,400,000
8,900,000
Accum.
depr.
2,500,000
900,000
3,400,000
370,000
Book
value
1,000,000
3,000,000
1,500,000
5,500,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
Note 5 - Trade and other payables
Accounts payable
Notes payable
Accrued taxes
Other accrued liabilities
Total
1,000,000
850,000
50,000
150,000
2,050,000
Note 6 – Share capital
Authorized share capital, 50,000 shares, P100 par
Unissued share capital
Issued share capital
Subscribed share capital, 10,000 shares
Subscription receivable
Paid in capital
5,000,000
(2,000,000)
1,000,000
(500,000)
Note 7 - Reserves
Share premium
Retained earnings appropriated for contingencies
Total
3,000,000
500,000
3,500,000
300,000
200,000
500,000
CHAPTER 9
PROBLEM 9-1
FUNCTIONAL METHOD
Karla Company
Income Statement
Year ended December 31, 2020
Net sales revenue
Cost of sales
Gross income
Other income
Total income
Expenses:
Selling expenses
Administrative expenses
Other expenses
Income before tax
Income tax
Net income
Note
(1)
(2)
7,700,000
(5,000,000)
2,700,000
400,000
3,100,000
(3)
(4)
(5)
(6)
950,000
800,000
100,000
(1,850,000)
1,250,000
(250,000)
1,000,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
Note 1 – Net sales revenue
Gross sales
Sales returns and allowances
Sales discounts
Net sales revenue
Note 2 – Cost of sales
Inventory, January 1
Purchases
Freight in
Purchase returns and allowances
Purchase discounts
Net purchases
Goods available for sale
Inventory, December 31
Cost of sales
Note 3 – Other income
Rental income
Dividend revenue
Total other income
Note 4 – Selling expenses
Freight out
Salesmen’s commission
Depreciation – store equipment
Total selling expenses
7,850,000
(140,000)
(10,000)
7,700,000
1,000,000
5,250,000
500,000
(150,000)
(100,000)
5,500,000
6,500,000
(1,500,000)
5,000,000
250,000
150,000
400,000
175,000
650,000
125,000
950,000
Note 5 – Administrative expenses
Officers’ salaries
Depreciation – office equipment
Total administrative expenses
500,000
300,000
800,000
Note 6 – Other expenses
Loss on sale of equipment
Loss on sale of investment
Total other expenses
50,000
50,000
100,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
NATURAL METHOD
Karla Company
Income Statement
Year ended December 31, 2020
Net sales revenue
Other income
Total
Expenses:
Increase in inventory
Net purchases
Freight out
Salesmen’s commission
Depreciation
Officers’ salaries
Other expenses
Income before tax
Income tax
Net income
Note
(1)
(2)
(3)
(4)
(5)
(6)
7,700,000
400,000
8,100,000
(500,000)
5,500,000
175,000
650,000
425,000
500,000
100,000
(6,850,000)
1,250,000
(250,000)
1,000,000
Note 1 – Net sales revenue
Gross sales
Sales returns and allowances
Sales discounts
Net sales revenue
7,850,000
(140,000)
(10,000)
7,700,000
Note 2 – Other income
Rental income
Dividend revenue
Total other income
250,000
150,000
400,000
Note 3 – Increase in inventory
Inventory, December 31
Inventory, January 1
Increase in inventory
1,500,000
1,000,000
500,000
Note 4 – Net purchases
Purchases
Freight in
Purchase returns and allowances
Purchase discounts
Net purchases
5,250,000
500,000
(150,000)
(100,000)
5,500,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
Note 5 – Depreciation
Depreciation – store equipment
Depreciation – office equipment
Total
125,000
300,000
425,000
Note 6 – Other expenses
Loss on sale of equipment
Loss on sale of investment
Total
50,000
50,000
100,000
PROBLEM 9-2
STATEMENT OF COST OF GOODS MANUFACTURED
Masay Company
Statement of Cost of Goods Manufactured
Year Ended December 31, 2020
Raw materials – January 1
Purchases
Raw materials available for use
Less: Raw materials – December 31
Raw materials used
Direct labor
Factory overhead:
Indirect labor
Superintendence
Light, heat and power
Rent – factory building
Repair and maintenance – machinery
Factory supplies used
Depreciation – machinery
Total manufacturing cost
Goods in process – January 1
Total Cost of goods in process
Less: Goods in process – December 31
Cost of goods manufactured
200,000
3,000,000
3,200,000
280,000
2,920,000
950,000
250,000
210,000
320,000
120,000
50,000
110,000
60,000
1,120,000
4,990,000
240,000
5,230,000
170,000
5,060,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
COST OF GOODS SOLD METHOD
Masay Company
Income Statement
Year ended December 31, 2020
Net sales revenue
Cost of goods sold
Gross income
Other income
Total income
Expenses:
Selling expenses
Administrative expenses
Other expense
Income before tax
Income tax expense
Net income
Note
(1)
(2)
7,450,000
(5,120,000)
2,330,000
210,000
2,540,000
(3)
(4)
(5)
(6)
830,000
590,000
300,000
(1,720,000)
820,000
(320,000)
500,000
Note 1 – Net sales revenue
Sales
Sales returns and allowances
Net sales revenue
7,500,000
(50,000)
7,450,000
Note 2 – Cost of goods sold
Finished goods – January 1
Cost of goods manufactured
Goods available for sale
Finished goods – December 31
Cost of goods sold
360,000
5,060,000
5,420,000
(300,000)
5,120,000
Note 3 – Other income
Gain from expropriation
Interest income
Gain on sale of equipment
Total
100,000
10,000
100,000
210,000
Note 4 – Selling expenses
Sales salaries
Advertising
Depreciation – store equipment
Delivery expenses
Total
400,000
160,000
70,000
200,000
830,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
Note 5 – Administrative expenses
Office salaries
Depreciation – office equipment
Accounting and legal fees
Office expenses
Total
150,000
40,000
150,000
250,000
590,000
Note 6 – Other expense
Earthquake loss
300,000
NATURE OF EXPENSE METHOD
Masay Company
Income Statement
Year Ended December 31, 2020
Net sales revenue
Other income
Total income
Expenses:
Decrease in finished goods
and goods in process
Raw materials used
Direct labor
Factory overhead
Salaries
Advertising
Depreciation
Delivery expenses
Accounting and legal fees
Office expenses
Other expense
Income before tax
Income tax expense
Net income
Note
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
7,450,000
210,000
7,660,000
130,000
2,920,000
950,000
1,120,000
550,000
160,000
110,000
200,000
150,000
250,000
300,000
(6,840,000)
820,000
(320,000)
500,000
Note 1 – Net sales revenue
Sales
Sales returns and allowances
Net sales revenue
7,500,000
(50,000)
7,450,000
Note 2 – Other income
Gain from expropriation
Interest income
Gain on sale of equipment
Total
100,000
10,000
100,000
210,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
Note 3 – Decrease in finished goods and goods in process
January 1
December 31
Finished goods
360,000
300,000
Goods in process
240,000
170,000
Total
600,000
470,000
Note 4 – Raw materials used
Raw materials – January 1
Purchases
Raw materials available for use
Raw materials – December 31
Raw materials used
200,000
3,000,000
3,200,000
280,000
2,920,000
Note 5 – Factory overhead
Indirect labor
Superintendence
Light, heat and power
Rent – factory building
Repair and maintenance – machinery
Factory supplies used
Depreciation – machinery
Total
250,000
210,000
320,000
120,000
50,000
110,000
60,000
1,120,000
Note 6 – Salaries
Sales salaries
Office salaries
Total
400,000
150,000
550,000
Note 7 – Depreciation
Depreciation – store equipment
Depreciation – office equipment
Total
70,000
40,000
110,000
Note 8 – Other expense
Earthquake loss
300,000
Decrease
60,000
70,000
130,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 9-3
Christian Company
Statement of Cost of Goods Manufactured
Year Ended December 31, 2020
Purchases
Freight in
Total
Increase in raw materials
Raw materials used
Direct labor
Factory overhead:
Indirect labor
Depreciation – machinery
Factory taxes
Factory supplies expense
Factory superintendence
Factory maintenance
Factory heat, light and power
Total manufacturing cost
Decrease in goods in process
Cost of goods manufactured
1,600,000
80,000
1,680,000
(100,000)
1,580,000
1,480,000
600,000
50,000
130,000
120,000
480,000
150,000
220,000
1,750,000
4,810,000
90,000
4,900,000
Christian Company
Income Statement
Year Ended December 31, 2020
Note
Sales revenue
Cost of goods sold
Gross income
Expenses:
Selling expenses
Administrative expenses
Income before tax
Income tax expense
Net income
Note 1 – Cost of goods sold
Cost of goods manufactured
Decrease in finished goods
Cost of goods sold
8,000,000
(5,100,000)
2,900,000
(1)
(2)
(3)
800,000
930,000
(1,730,000)
1,170,000
(170,000)
1,000,000
4,900,000
200,000
5,100,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
Note 2 – Selling expenses
Sales salaries
Advertising
Delivery expense
Total
520,000
120,000
160,000
800,000
Note 3 – Administrative expenses
Office supplies expense
Office salaries
Doubtful accounts
Total
30,000
800,000
100,000
930,000
PROBLEM 9-4
Ronald Company
Statement of Cost of Goods Manufactured
Year Ended December 31, 2020
Materials – January 1
Purchases
Freight on purchases
Purchase discounts
Materials available for use
Less: Materials – December 31
Materials used
Direct labor
Factory overhead:
Heat, light and power
Repairs and maintenance
Indirect labor
Other factory overhead
Factory supplies used
(300,000 + 660,000 – 540,000)
Depreciation – factory building
Total manufacturing cost
Goods in process – January 1
Total cost of goods in process
Less: Goods in process – December 31
Cost of goods manufactured
1,120,000
1,600,000
220,000
(20,000)
1,800,000
2,920,000
1,560,000
1,360,000
2,000,000
600,000
100,000
360,000
340,000
420,000
280,000
2,100,000
5,460,000
360,000
5,820,000
320,000
5,500,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
Ronald Company
Income Statement
Year Ended December 31, 2020
Net sales revenue
Cost of goods sold
Gross income
Other income
Total income
Expenses:
Selling expenses
Administrative expenses
Income before tax
Income tax expense
Net income
Note
(1)
(2)
6,980,000
(5,400,000)
1,580,000
160,000
1,740,000
(3)
200,000
340,000
540,000
1,200,000
(200,000)
1,000,000
Note 1 – Net sales revenue
Sales
Sales returns and allowances
Net sales revenue
7,120,000
(140,000)
6,980,000
Note 2 – Cost of goods sold
Finished goods – January 1
Cost of goods manufactured
Goods available for sale
Finished goods – December 31
Cost of goods sold
420,000
5,500,000
5,920,000
( 520,000)
5,400,000
Note 3 – Other income
Interest revenue
160,000
PROBLEM 9-5
Distribution Cost:
Advertising
Freight Out
Rent for office space
Sales salaries and commissions
Total
Answer: A
1,500,000
800,000
1,100,000
1,400,000
4,800,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 9-6
Administrative Expense:
Legal and audit fees
Rent for office space
Officer’s Salaries
Insurance
Research and development expense
Total
1,700,000
1,200,000
1,500,000
850,000
1,000,000
6,250,000
Answer: D
PROBLEM 9-7
Beginning Raw Materials
Purchases of Raw Materials
Raw Materials Available for Use
Ending Raw Materials
Raw Materials Used
Direct Labor
Factory Overhead:
Indirect Labor
Depreciation of Factory Building
Factory Supervisor’s Salary
Total Manufacturing Cost
Beginning Goods in Process
Total Cost of Goods in Process
Ending Goods in Process
Cost of Goods Manufactured
400,000
2,300,000
2,700,000
(340,000)
2,360,000
1,980,000
360,000
320,000
560,000
1,240,000
5,580,000
760,000
6,340,000
(1,000,000)
5,340,000
Answer: A
PROBLEM 9-8
Raw Materials Purchases
Freight in
Total
Increase in raw materials
Raw materials used
Direct labor payroll
Factory overhead
Total manufacturing cost
Decrease in goods in process inventory
Decrease in finished goods inventory
Cost of goods manufactured
Answer: A
4,300,000
250,000
4,550,000
(150,000)
4,400,000
2,000,000
3,000,000
9,400,000
200,000
350,000
9,950,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 9-9
Beginning Raw Materials
Raw Materials Purchased
Raw Materials Available for Use
Ending Raw Materials
Raw Materials Used
Direct Labor
Factory overhead:
Indirect labor – factory
Factory repairs and maintenance
Utilities
Taxes on factory building
Depreciation – factory building
Total Manufacturing Cost
Beginning Goods in Process
Total Cost of Goods in Process
Ending Goods in Process
Cost of Goods Manufactured
Beginning Finished Goods
Goods Available for Sale
Ending Finished Goods
Cost of Goods Sold
300,000
4,000,000
4,300,000
(450,000)
3,850,000 (1)
1,500,000
800,000
200,000
300,000
100,000
300,000
1,700,000
7,050,000
400,000
7,450,000
(350,000)
7,100,000 (2)
500,000
7,600,000
(700,000)
6,900,000 (3)
Answer:
1. A, 3,850,000
2. C, 7,100,000
3. B, 6,900,000
PROBLEM 9-10
Net Income
Unrealized loss on foreign currency translation
Adjustment of profit of prior year for
error in depreciation, net of tax effect
Adjusted Net Income
Answer: D
7,410,000
540,000
750,000
8,700,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 9-11
Sales
Cost of Goods Sold
Gross Income
Expenses:
Distribution Cost
General and Administrative Expense
Operating Income
Other income (expense):
Gain on expropriation
Interest Expense
Investment Income
Income (loss) from continuing
operations before income taxes
Income Tax Expense
Income (loss) from continuing operations
50,000,000
(30,000,000)
20,000,000
5,000,000
4,000,000
2,000,000
(2,000,000)
3,000,000
(9,000,000)
11,000,000
3,000,000
14,000,000
(5,000,000)
9,000,000
Answer: A
PROBLEM 9-12
Sales
Cost of Goods Sold
Gross Income
Expenses:
Selling Expenses
Administrative Expense
Operating Income
Other income (expense):
Proceeds from sale of land at cost
Gain on sale of investment
Income (loss) from continuing
operations before income taxes
Income Tax Expense
Income (loss) from continuing operations
Answer: C
5,000,000
(2,800,000)
2,200,000
700,000
600,000
800,000
50,000
(1,300,000)
900,000
850,000
1,750,000
(150,000)
1,600,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 9-13
Sales
Less: Sales Returns & Allowances
Net Sales
Cost of Goods Sold
Gross Income
Expenses:
Utilities Expense
Salaries Expense
Operating Income
Other income (expense):
Interest Revenue
Casualty loss due to earthquake
Finance Cost
Loss on sale of investment
Income (loss) from continuing
operations before income taxes
Income Tax Expense
Income (loss) from continuing operations
7,000,000
(100,000)
6,900,000
(2,800,000)
4,100,000
1,000,000
600,000
150,000
(50,000)
(200,000)
(50,000)
(150,000)
2,350,000
(800,000)
1,550,000
Answer: A
PROBLEM 9-14
Cost of Goods Sold
Ending Goods Inventory
Goods Available for Sale
Beginning Goods Inventory
Cost of Goods Manufactured
2,400,000
3,600,000
6,000,000
(4,000,000)
2,000,000 (1)
Total Revenue
Total Expense
Income (loss) from continuing
operations before income taxes
Income Tax Rate (30%)
Income (loss) from continuing operations
6,000,000
(4,200,000)
Answer:
1. A, 2,000,000
2. A, 1,260,000
(1,600,000)
2,500,000
1,800,000
(540,000)
1,260,000 (2)
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
CHAPTER 10
PROBLEM 10-1
Cash Balance, January 1
Net Cash provided by Operating Activities:
Cash received from customers
Interest received
Dividend received
Cash paid to suppliers and employees
Interest paid on long term debt
1,800,000
9,000,000
200,000
500,000
(6,000,000)
(400,000)
Net Cash provided by Investing Activities:
Cash proceeds from sale
of long term investments
2,000,000 (2)
Net Cash provided by Financing Activities:
Cash proceeds from issuing of share capital
Cash paid for dividends
Cash Balance, December 31
Answer:
1. A, 300,000,000
2. B, 2,000,000
3,000,000 (1)
1,500,000
(1,000,000)
3. C, 500,000
500,000 (3)
7,300,000 (4)
4. D, 7,300,000
PROBLEM 10-2
Cash Balance, beginning
Net Cash provided by Operating Activities:
Cash collected from customers
Cash received from sale of trading securities
Cash paid to purchase inventory
Cash paid for income taxes
Cash paid to purchase trading securities
Cash paid for interest on bank loan
1,500,000
10,000,000
2,500,000
(7,800,000)
(1,350,000)
(1,000,000)
(450,000)
Net Cash used in Financing Activities:
Cash received from issuance of ordinary shares
Cash paid to repay principal amount of bank loan
Cash paid for dividends
Cash Balance, ending
Answer:
1. A, 1,900,000
2.
B, (1,800,000)
3.
1,200,000
(1,000,000)
(2,000,000)
C, 1,600,000
1,900,000 (1)
(1,800,000) (2)
1,600,000 (3)
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 10-3
Cash Balance, January 1
Net Cash provided by Operating Activities:
Cash received from customers
Cash payments for wages and
other operating expenses
Cash payment for taxes
3,500,000
2,000,000
Net Cash provided by Investing Activities:
Cash receipts from repayment o
of loan made to another entity
Cash payment to purchase land
Net Cash provided by Financing Activities:
Cash receipts from issuance of ordinary shares
Cash receipts from dividends
on long-term investments
Cash payments for insurance
Cash payments for dividends
Cash Balance, December 31
Answer:
1. B, 400,000
2. B, 1,400,000
(1,200,000)
(400,000)
400,000 (1)
2,200,000
(800,000)
1,400,000 (2)
4,000,000
300,000
(100,000)
(200,000)
3. A, 4,000,000
PROBLEM 10-4
Checking account #101
Checking account #201
Time deposit
Money market placement
90-day Treasury bill, due February 28, 2021
Total Cash and Cash Equivalents
1,750,000
(100,000)
250,000
1,000,000
500,000
3,400,000
Answer: A
PROBLEM 10-5
Cash balance, beginning of year
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Cash balance, ending of the year
Answer: A
1,300,000
400,000
(1,500,000)
1,000,000
1,200,000
4,000,000 (3)
9,300,000 (4)
4. B, 9,300,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 10-6
Cash receipts from sale of an investment
Dividends collected from share investment
Cash receipts from interest of
long term investments
Cash payments to acquire
long term investments
Cash payments to acquire share investment
Net Cash used in Investing Activities
3,300,000
120,000
375,000
(5,000,000)
(2,600,000)
3,805,000
Answer: B
PROBLEM 10-7
Cash proceeds from sale of treasury shares
Cash payment for early extinguishment
of long-term bonds payable
Cash paid for dividends declared in prior year
Net Cash used in Financing Activities
860,000
(7,400,000)
(620,000)
7.160,000
Answer: B
PROBLEM 10-8
Cash receipts from sale of treasury shares
Cash payment for dividends
Net Cash used in Financing Activities
750,000
(450,000)
370,000
Answer: D
PROBLEM 10-9
Cash borrowed from bank
Issuance of ordinary shares for cash
Issuance of bonds payable for cash
Cash paid for dividends
Cash payment for bank loan
Net Cash provided by Financing Activities
5,500,000
2,500,000
3,000,000
(6,000,000)
(1,500,000)
3,500,000 (1)
Cash collected from sale of investment
Cash paid to acquire real estate
Cash paid to acquire patent
Net Cash used in Investing Activities
5,000,000
(5,500,000)
(1,250,000)
1,700,000 (2)
Answer:
1. B, 3,500,000
2.
C, 1,700,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
CHAPTER 11
PROBLEM 11-1
Weighted Average Inventory – January 1, 2020
FIFO Inventory - January 1, 2020
Increase in beginning inventory
7,700,000
7,100,000
600,000
Answer: C
PROBLEM 11-2
Change in Cost of Goods Sold
2017
Increase in COGS
5,400,000 – 4,500,000
2018
Decrease in COGS
7,100,000 – 7,800,000
2019
Decrease in COGS
7,800,000 – 8,300,000
Total Decrease in COGS
Answer: B
PROBLEM 11-3
Straight Line Depreciation
=
Annual Depreciation
=
Cost of an Asset – Residual Value
Useful Life of an Asset
6,000,000 – 0
6 years
1,000,000
Accumulated Depreciation
=
=
1,000,000 x 3 (year 2017 – 2019)
3,000,000
Current Book Value
=
=
6,000,000 – 3,000,000
3,000,000
Change in Depreciation
=
3,000,000 – 0
8 years – 3 (year 2017 -2019)
3,000,000
5 years
600,000
=
=
Annual Depreciation
Answer: B
=
900,000
(700,00)
(500,000)
(300,000)
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 11-4
Straight Line Depreciation
=
Annual Depreciation
=
Cost of an Asset – Residual Value
Useful Life of an Asset
5,280,000 – 0
8 years
660,000
Accumulated Depreciation
=
=
660,000 x 3 (year 2017 – 2019)
1,980,000
Current Book Value
=
=
5,280,000 – 1,980,000
3,300,000
Change in Depreciation
=
=
Annual Depreciation
=
3,300,000 – 480,000
6 years – 3 (year 2017 -2019)
2,820,000
3 years
940,000
Current Acc. Depreciation
=
=
1,980,000 + 940,000
2,920,000
=
Answer: A
PROBLEM 11-5
Straight Line Depreciation
=
Annual Depreciation
=
Cost of an Asset – Residual Value
Useful Life of an Asset
6,000,000 – 600,000
20 years
270,000
Accumulated Depreciation
=
=
270,000 x 2 (year 2018 – 2019)
540,000
Current Book Value
=
=
6,000,000 – 540,000
5,460,000
Change in Depreciation
=
5,460,000 – 800,000
10 years – 2 (year 2018 -2019)
4,660,000
8 years
582,000
=
=
Annual Depreciation
Answer: D
=
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 11-6
BUILDING
Straight Line Depreciation
=
Annual Depreciation
=
Cost of an Asset – Residual Value
Useful Life of an Asset
15,000,000 – 0
15 years
1,000,000
Accumulated Depreciation
=
=
1,000,000 x 3 (year 2017 – 2019)
3,000,000
Current Book Value
=
=
15,000,000 – 3,000,000
12,000,000
Change in Depreciation
=
Annual Depreciation
=
12,000,000 – 0
10 years (remaining life)
1,200,000
=
MACHINERY
Straight Line Depreciation
=
Annual Depreciation
=
Cost of an Asset – Residual Value
Useful Life of an Asset
10,500,000 – 0
10 years
1,050,000
Accumulated Depreciation
=
=
1,050,000 x 3 (year 2017 – 2019)
3,150,000
Current Book Value
=
=
10,500,000 – 3,150,000
7,350,000
Change in Depreciation
=
Annual Depreciation
=
7,350,000 – 0
7 years (remaining life)
1,050,000
=
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
FURNITURE
Straight Line Depreciation
=
Annual Depreciation
=
Cost of an Asset – Residual Value
Useful Life of an Asset
3,500,000 – 0
7 years
500,000
Accumulated Depreciation
=
=
500,000 x 3 (year 2017 – 2019)
1,500,000
Current Book Value
=
=
3,500,000 – 1,500,000
2,000,000
Change in Depreciation
=
Annual Depreciation
=
2,000,000 – 0
5 years (remaining life)
400,000
=
TOTAL DEPRECIATION
Depreciation Expense:
Building
Machinery
Furniture
Total
1,200,000
1,050,000
400,000
2,650,000
Answer: A
PROBLEM 11-7
Straight Line Depreciation
=
Current Book Value
=
Change in Depreciation
=
=
Annual Depreciation
Answer: D
=
Cost of an Asset – Residual Value
Useful Life of an Asset
3,072,000
3,072,000 – 200,000
10 years – 2 (year 2018 -2019)
2,872,000
8 years
359,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 11-8
PATENT
Straight Line Depreciation
=
Annual Depreciation
=
Cost of an Asset – Residual Value
Useful Life of an Asset
3,000,000 – 0
10 years
300,000
Accumulated Depreciation
=
=
300,000 x 5 (year 2015 – 2019)
1,500,000
Current Book Value
=
=
3,000,000 – 1,500,000
1,500,000
Change in Depreciation
=
=
1,500,000 – 0
8 years – 5 (year 2018 -2019)
1,500,000
3 years
500,000
Current Book Value
=
=
8,000,000 – 3,400,000
4,600,000
Change in Depreciation
=
4,600,000 – 200,000
10 years (remaining life)
4,400,000
10 years
440,000
=
=
Annual Depreciation
EQUIPMENT
=
Annual Depreciation
=
TOTAL CHARGE AGAINST INCOME FOR 2020
Depreciation Expense:
Patent
Equipment
Total
Answer: A
500,000
440,000
940,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 11-9
Answer: B
First event is a change in accounting estimate and not an accounting error. The second
event involve an omitting of sales from financial statements. Hence, it needs correction of prior
period error.
PROBLEM 11-10
Answer: A
Second event in the given problem is a change in accounting estimate. If prospective
application is an accounting treatment to it, then it will not restate the beginning balance of
retained earnings. On the other hand, the first event given in the problem is an accounting error,
which needs retrospective restatement in correcting a prior period error.
CHAPTER 12
PROBLEM 12-1
1. Allowance for Bad Debts
Accounts Receivable
2. No Entry
3. Insurance compensation
Insurance compensation receivable
800,000
800,000
400,000
1,200,000
400,000
1,200,000
PROBLEM 12-2
1. No Entry
2. No Entry
3. Loss from Lawsuit
Lawsuit Payable
4. Allowance for Bad Debts
Accounts Receivable
3,000,000
3,150,000
6,150,000
3,000,000
3,150,000
6,150,00
PROBLEM 12-3
The fire occurred after the reporting period. Hence, there will be no adjustments to be made.
Answer: B
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 12-4
Marian Company should recognize the P3, 500,000 as accrued liabilities on December 31, 2020
because it reflects the event after reporting period. The approval of the board of directors was the
same as the authorization for issue of the financial statements.
Answer: B
CHAPTER 24
PROBLEM 24-1
Issue price of bonds with warrants (5,000,000 x 103%)
Market value of bonds ex-warrants – liability (5,000,000 x 95%)
Residual amount allocated to share warrants – equity
5,150,000
(4,750,000) (1)
400,000 (2)
Answer:
1. B, 4,750,000
2. D, 400,000
PROBLEM 24-2
Issue price of bonds with warrants (5,000,000 x 110%)
Market value of bonds ex-warrants – liability (5,000,000 x 102%)
Residual amount allocated to share warrants – equity
5,500,000
(5,100,000)
400,000
Answer: A
CHAPTER 36
PROBLEM 36-1
JOURNAL ENTRY
In acquisition:
Trading Securities
Commission Expense
Cash
Entry on increase in Market Value:
Trading Securities
Unrealized Gain – TS
(5,500,000 – 5,000,000 = 500,000)
Answer: A
5,000,000
200,000
5,200,000
500,000
500,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 36-2
Total Market Value of Shares
Total Cost of Shares
Unrealized Gain (Loss)
4,800,000
(5,000,000)
(200,000)
Entry from selling of securities:
Cash
Loss on sale of trading securities
Trading Securities
(10,000 shares x P150 = 1,500,000)
Answer:
1. A, 200,000 loss
2.
1,500,000
100,000
1,600,000
D, 100,000 loss
PROBLEM 36-3
JOURNAL ENTRY
In acquisition:
Financial Asset – FVOCI
Cash
4,700,000
4,700,000
Increase in Market Value:
Financial Asset – FVOCI
Unrealized Gain – OCI
(5,500,000 – 4,700,000 = 800,000)
800,000
800,000
Answer: C
PROBLEM 36-4
Initial Entry
Financial Asset – FVOCI
Cash
Entry on increase in Market Value (Security X)
Financial Asset – FVOCI
Unrealized Gain – OCI
(2,400,000 – 2,000,000 = 400,000)
Entry from selling of securities (Security X):
Cash
Financial Asset – FVOCI
Retained Earnings
(2,500,000 – 2,400,000 = 100,000)
Answer: B
2,000,000
400,000
2,000,000
400,000
2,500,000
2,400,000
100,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
CHAPTER 14
PROBLEM 14-1
Materials
Irrecoverable purchase taxes
Total cost of inventory
700,000
60,000
760,000
Answer: B
PROBLEM 14-2
Materials
Production labor cost
Production overhead
Value of completed inventory
300,000
330,000
120,000
750,000
Answer: C
PROBLEM 14-3
Merchandise purchased
Freight in
Purchase returns
Inventoriable cost of purchase
4,000,000
100,000
(20,000)
4,080,000
Answer: C
PROBLEM 14-4
Cost of purchases
Import duties
Freight and insurance
Other handling costs
Brokerage commission
Total cost of purchases
5,000,000
400,000
1,000,000
100,000
200,000
6,700,000
Answer: D
PROBLEM 14-5
Direct materials and labor
Variable production overhead
Factory administrative costs
Fixed production costs
Inventoriable cost of purchase
Answer: D
180,000
25,000
15,000
20,000
240,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 14-6
Product A sold based on FIFO:
January
1
10
18
Total FIFO cost
Units
150,000
200,000
100,000
450,000
Unit cost
21
22
23
Total cost
3,150,000
4,400,000
2,300,000
9,850,000
Units
150,000
100,000
250,000
Unit cost
23
24
Total cost
3,450,000
2,400,000
5,850,000
Units
150,000
200,000
250,000
100,000
700,000
450,000
250,000
Unit cost
21
22
23
24
Total cost
3,150,000
4,400,000
5,750,000
2,300,000
15,600,000
9,850,000
5,850,000
Product A on hand:
January
18
28
Total FIFO cost
Checking:
January
1
10
18
28
Total FIFO cost
Less: Product Sold
Total FIFO cost on hand
Answer: A
PROBLEM 14-7
Jan. 1
6
Feb. 5
Mar. 5
Mar. 8
Apr. 10
Apr. 30
Beginning balance
Purchase
Sale
Purchase
Purchase return
Sale
Sale return
Total Units on Hand
Units
8,000
3,000
(10,000)
11,000
(800)
(7,000)
300
4,500
Using the latest unit cost of 73.50, multiply it by the total units on hand (4,500 x 73.50 = 330,750)
Answer: A
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 14-8
Beginning inventory
Purchases
Total units available
Sales
Ending inventory in units
From August 21 purchase
From August 29 purchase
Total cost of inventory, August 31
(30,000 + 48,000 + 16,000)
(36,000+ 38,000)
(24,000 x 38.00)
(16,000 x 38.60)
20,000
94,000
114,000
( 74,000)
40,000
912,000
617,600
1,529,600
Answer: D
PROBLEM 14-9
January 1
January 17
Balance
January 28
Balance
Units
40,000
(35,000)
5,000
20,000
25,000
Unit cost
50
50
50
80
74
Total cost
2,000,000
(1,750,000)
250,000
1,600,000
1,850,000
Answer: B
PROBLEM 14-10
January 1
January 7
Balance (2,800,000/16,000)
January 20 sale
Balance
January 25
Balance (3,225,000/11,000)
Answer: B
Units
10,000
6,000
16,000
(9,000)
7,000
4,000
11,000
Unit cost
100
300
175
175
175
500
293
Total cost
1,000,000
1,800,000
2,800,000
(1,575,000)
1,225,000
2,000,000
3,225,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
CHAPTER 22
PROBLEM 22-1
Freestanding trees
Bearer animals
Agricultural produce
growing on bearer plants
Plants with dual use
Total biological assets
5,000,000
2,000,000
Land under trees
Roads in forest
Animal related to
recreational activities
Bearer plants
Total Property, Plant and Equipment
600,000
300,000
Answer:
1. D
800,000
1,400,000
9,200,000
1,000,000
1,500,000
3,400,000
2. B
PROBLEM 22-2
Acquisition cost - December 31, 2020
Increase in fair value on initial recognition
Change in fair value in 2021
Decrease in fair value due to harvest
Carrying amount - December 31, 2021
6,000,000
500,000
900,000
(100,000)
7,300,000
Change in fair value in 2021
Decrease in fair value due to harvest
Net gain
900,000
(100,000)
800,000
Answer:
1. B
2. D
PROBLEM 22-3
Carrying amount - beginning
Increase due to purchases
Gain arising from change in fair value
Decrease due to sales
Decrease due to harvest
Carrying amount – ending
Answer: A
5,000,000
2,000,000
1,000,000
(850,000)
(200,000)
6,950,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
CHAPTER 15
PROBLEM 15-1
1. The acquisition in land and building is in lump-sum. So to allocate the cost of the land and
building, I get the sum of their appraised value (2,000,000 + 3,000,000 = 5,000,000). Then I
divided it to the lump-sum price (5,400,000 / 5,000,000 = 1.08). Then I multiplied it again to
their appraised value.
Land (2,000,000 x 1.08)
2,160,000
Building (3,000,000 x 1.08)
3,240,000
Total
5,400,000
2. The office building and the land are a lump-sum purchase. The acquisition cost of both the land
and the building is equal to the cash paid plus the mortgage assumed, 7,500,000 + 2,500,000 =
10,000,000. Since 60% of the assessed value can be allocated to the building, 40% of the
amount paid should be allocated to the land account.
Land (10,000,000 x 40%)
4,000,000
Building (10,000,000 x 60%)
6,000,000
Total
10,000,000
3. To get the cost of the land, multiply the shares for exchange to the land in a market price
(25,000 x 120 = 3,000,000)
Land
2,160,000
4,000,000
3,000,000
9,160,000
Acquisition 1
Acquisition 2
Acquisition 3
Total
Answer:
1. A
2. B
PROBLEM 15-2
Cash price
Installation cost
Total cost
Answer: B
950,000
30,000
980,000
Building
3,240,000
6,000,000
_
9,240,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 15-3
Cash price
Installation costs
Total cost
2,000,000
50,000
2,050,000
Answer: C
PROBLEM 15-4
Fair value of old machine
Cash payment
Cost of new machine
700,000
160,000
860,000 (1)
Fair value of old machine
Carrying amount
Gain on exchange
700,000
600,000
100,000(2)
Answer:
2. A
2. B
PROBLEM 15-5
Fair value of land given – Eagle
Cash paid by Eagle
Total cost
2,800,000
1,000,000
3,800,000
Answer: D
PROBLEM 15-6
Cost of oil inventory given
Add: Cash payment
Total cost of oil inventory received
1,000,000
300,000
1,300,000
Answer: B
PROBLEM 15-7
Fair value of truck given
Cash paid by Eagle
Total cost
Answer: A
500,000
600,000
1,100,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
PROBLEM 15-8
First equipment:
Invoice price
Discount taken – 5%
Freight and insurance
Installation cost
Second equipment:
Invoice price
Discount not taken – 10%
Total cost
3,000,000
( 150,000)
50,000
200,000
2,000,000
( 200,000)
3,100,000
1,800,000
4,900,000
Answer: A
PROBLEM 15-9
Materials
Direct labor
Overhead (15,000/50,000 x 1,200,000)
Total cost of office equipment
Answer: C
600,000
500,000
360,000
1,460,000
CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARDS
CHAPTER 20
PROBLEM 20-1
Franchise
Computer Software
Patent
Customer list purchase
Copyright
Goodwill
Trademark
Total
1,000,000
1,500,000
2,500,000
500,000
700,000
4,000,000
900,000
11,100,000
Answer: C
PROBLEM 20-2
Cost of trademark
Employee benefit relating to testing of new process
Total cost
3,500,000
200,000
3,700,000
Answer: C
PROBLEM 20-3
Deprecation on the above equipment
Material Used
Compensation cost of personnel
Outside consulting fees
Indirect cost of appropriately allocated
Total research and development costs
Answer: C
135,000
200,000
500,000
150,000
250,000
1,235,000