FINANCIAL ACCOUNTING TEST BANK PPE ACQUISITION 1.On October 1, 2005, Bitoy Company purchased a machine for P250,000 that was placed in service on November 30, 2005. Bitoy incurred additional costs for this machine, as follows: Shipping 10,000 Installation 15,000 Testing 35,000 In Bitoy’s December 31, 2005 balance sheet, the machine’s cost should be reported at a. 250000 b. 295,000 c. 300,000 d. 310,000 2. On August 1, 2006, Bamco purchased a new machine on a deferred payment basis. A down payment of P100,000 was made and the balance is payable in P100,000 annually for 4 years. The current interest is 12%.The present value of an annuity at 12% for 5 years is 3.04 and the present value of an amount at the end of 5th year at 12% is .064. The same machine could be acquired on cash basis at P400,000. Bamco should record the machine at a. 500,000 b. 400,000 c. 403,735 d. 303,735 EXCHANGE 1. To save transportation costs, X acquired its needed equipment in exchange of its inventory located in the supplier’s business place. The equipment acquired has cash price of P650,000. The inventory of X has cost of P550,000, and X paid P80,000 cash for the difference in fair value of the two assets in exchange. In the books of X, the exchange is to be accounted as resulting to a. gain of P20,000 b. loss of P20,000 c. gain of P30,000 d. loss of P30,000 2. X issued 100,000 of its common shares in the treasury stocks, in exchange for a delivery truck. The treasury stocks with P10 par were selling at P12 at date of exchange. The treasury shares were previously acquired at cost of P11/share. The delivery truck has cash price of P1,250,000. In the books of X, the exchange will result to a. gain of P150,000 b. loss of P50,000 c. gain of P50,000 d. no gain/no loss 3. A P5,000,000 face value bonds were issued to acquire a building. At the time of acquisition, the fair value of the building is properly determined at P5,300,000 and the bonds are quoted at 110. The building is depreciated under the double declining method of depreciation with estimated economic life of 25 years and scrap value of P200,000. This was sold for P4,500,000 at end of its 2nd year . The gain (loss ) from sale is a. 14,080 b. 268,000 c. 183,360 d. (155,200) BORROWING COST 1. Mozely Company borrowed P400, 000 on a 10 percent note payable to finance a new warehouse Mozely is constructing for its own use. The only other debt on Monzely’s books is a P600, 000, 12 percent mortgage payable on an office building. At the end of the current year, average accumulated expenditures on the new warehouse totaled P475, 000. Mozely should capitalize interest for the current year in the amount of (use 2 decimal palaces) a. P40, 000 b. P47, 500 c. P49, 000 d. P380, 000 2. X constructed its own building at a total labor, materials and overhead costs of P5,000,000, which was started January 1 and completed December 31 of the same year. During construction, the following loans are outstanding during the year, which are partly used in construction and partly used in regular operation: Principal amount P1,000,000 Interest Rate 10% Construction costs for the year are as follows: Principal amount P2,000,000 1,000,000 1,000,000 1,000,000 Date taken Jan.1 April 1 July 1 Oct. 1 The capitalized borrowing costs as part of building cost is a. 350,000 DONATION 1. BoyD Company received Land as donation from its shareholder. At date of donation, the land has fair value of P1,000,000. The legal and documentation expenses to transfer b. 240,000 c. 140,000 d. 100,000 the title amounted to P25,000 at the expense of BoyD Company. The land was previously acquired by the donor stockholder at P750,000. BoyD should record the land at a. 1,025,000 b. 1,000,000 c. 775,000 d. 750,000 2. An enterprise receives grant of P15,000,000 from the government as subsidy to defray safety and environmental costs within the area where the enterprise is located. The safety and environmental costs are expected to be incurred over four years as follows: Year 1 P 2,000,000 Year 2 4,000,000 Year 3 6,000,000 Year 4 8,000,000 The amount to be reported as in year 1 Income Statement as other Income from government grant is a. 1,500,000 b. 2,000,000 c. 3,750,000 d. 15,000,000 PPE SUBSEQUENT EXPENDITURES 1. During 2006, Kiyen Company made the following expenditures relating to its plant building: Repainted the plant building 110,000 Major improvements in the electrical wiring 100,000 Partial replacement of roof tiles 80,000 Continuing and frequent repairs 200,000 How much should be capitalized in the above expenditures a. 490,000 b. 290,000 c. 180,000 d. 100,000 2. A machine of X is overhauled at cost of 1,600,000. The overhauling resulted to increase in production capacity of the machine. The machine was originally acquired at cost of P7,000,000 and the depreciated book value before overhauling was P5,600,000. If new similar machine would be purchased, it would have a cash price of 3,500,000. What amount should X recognized as retirement loss? a. 1,280,000 b. 1,600,000 c. 1,900,000 d. 2,100,000 DEPRECIATION 1. On January 1, year 1, the firm purchased for P2,400,000 a machine with useful life of 10 years, no scrap value. The machine was depreciated by the double declining balance method and the carrying amount of the machine was P1,536,000 on December 31, year 2. The firm can justify the change to straight line method of depreciation effective January 1, year 3. What would be the depreciation expense for year 3? a. 307,200 b. 240,000 c. 192,000 d. 153,600 P31.000. which had a cash price of P300.000. The equipment is being depreciated over eight years by the double declining balance method.000. 110. 333 c.2.280. 2000 at a total cost of P1. installation costs of P80. What would be the depreciation expense recorded for the above machine in 2002? a. 000 b. 320. 000 1. When the machine had been in use for ten years. P20.000 c. 2003 would be c.000 c. was paid for as follows: Down payment P30. P90. What should Hunter record as depreciation expense for the first year under the straight-line method? a. Hunter Corporation entered into a contract to acquire a new machine for its factory.000 were incurred. Flax determined that the machine had a useful life of six years from the date of acquisition with no salvage value. 000 c.000 b. The machine. a. How much is the amount of depreciation for 2007? a. 800 b.000 5. Debergen Company purchased factory equipment which was installed and put into service January 3. P75. Salvage value was estimated at P80. 000 d. The depreciation for this machine on December 31. 000.000 c. 000 shares of Hunter common stock with an agreed value of P50 per share 50.000 and depreciated it by the straight-line method using an estimated useful life of eight years with no salvage value. Depreciation is computed using the sum-of-the-years digits method. Flax Company purchased a machine for P528. 2007.000 b. The equipment has an estimated salvage value of P20. 333 . 240. On January 1.000 d. For the year 2000 how much depreciation expense should Debergen record on this equipment. An accounting change was made in 2003 to reflect these additional data. 2003. 308. the company estimated that the useful life of the machine would be extended an additional five years. On April 1. 800 6.000 4. Wang Manufacturing Company bought a new equipment for P800. 300. 320. The Bucol Company purchased a tooling machine in 1992 for P120. 000 d.000 d. 2000. P31. P4. In January. with no salvage value. At the beginning of 2002. 000 Note payable in 10 equal monthly installments 240. The machine was being depreciated on the straight-line method over an estimated useful life of 20 years. P5. P6. 000. 000 Prior to the machine’s use.000 d. 225. P60. P29. 352. P7.000 and useful life of 12 years. On January 1. P30. 000. 000 total P320.000 3. The machine has an estimated useful life of ten years and an estimated salvage value of P10.000 d. 900.000 tons.500 d. 2.000. If sales and production conform to expectations.200.800.000 c.000.500.137.000.000 (intangible).000 tons.500 b. 5.500.000 b.000 units were produced at production cost of P5.000. additional reserves are discovered at cost of P4. P1.000 tons? a.000 units.525.000 units.680.000. The total original depletable costs of the mining entity was P10. 140. it has beginning inventory of 100.625 c.000.DEPLETION 1. 1.000.225. what is the depletion for 2000? a.000 5.000 after restoration cost of P500.000.600. After exploration cost of P1. 3.000 .000. At the start of the year.000. 2. The depletion cost in the inventory is a.000 b.500. a calendar year corporation. 1.200. P1. purchased the rights to a mine. 720.20 per unit.000 tons per month. 1. during the year it produced 1. 112.500 3.000 . At the end of the year. how much is its depletion cost in the Inventory? a. The depletion rate of the entity is P15/ton. After producing 15. 1. 50. how much is the total cost of sale for the year? a.000 units.237.000 b.500.000 d. The total purchase price was P13. 2000.000 was allocable to the land. 1. 675. Kinanto Company.000 4.320. 262.500 2. What is the depletion cost for the year after adjustment on depletion rate. 7. Estimated reserves were 1.000 d. The mining property was acquired at cost of P12.000. It has estimated life of 5 years. Confirmed deposit is at 40.000.000 d.100.000. AT the end of its life.400.825.000 tons are unsold. If the total production cost is P85/ton before depletion cost.000 c.4. and during the year.500.000 units.000 of which P400. It was able to sell 1. the property could be sold for P3. 7. Its original deposit was 42. A wasting asset corporation has established its depletion cost at P1.000 d. 5. For its 1st year of operation.000 b.000 c.400.250.125. On July 1.000 tons were produced and at the end of the year.200. if the production for the year is 6.770.000 tons. Kinanto expects to extract and sell 15. P240.000 c. During the year. 120. 1. The additional reserves discovered is equal to 22.000 of production were sold during the year. it was developed at cost of P1. 150.500. P3. On January 1. It was acquired in June 15. a new building was purchased at a cost of P3.000 b. 60.000.000 . At the time of acquisition. The equipment with estimated life of 12 years is being depreciated under SYD method of depreciation.000. 2006 is P600. 2006.000 On January 1. zero scrap value.000. 2003. a clothing manufacturer.000 b.000 d.000 face value bonds were issued to acquire a building.000 c. a P100. This was sold for P4. 925.000. 500 b.000.000. 183.000 on July 1. gain of P10.000 REVALUATION 1. the fair value of the building is properly determined at P5. Simon Company. the building was appraised by an independent appraiser at P4.000 d. The gain (loss ) from sale is a. (155. The sale will result to a.000. it is estimated that same could be constructed at present price level for the amount of P15. The building was constructed at cost of P12.000. It has original estimated life of 24 years. and was depreciated using the straight line method.080 b. gain of P40. 112. P2. The building is depreciated under the double declining method of depreciation with estimated economic life of 25 years and scrap value of P200.360 c.000.000 at end of its 2nd year .000. 2013.000 d.000 d. P1. If it will shift to revaluation model. 90.200) 2.000 residual value. The business shifted to revalued amount.500. 268.300.000 PPE IMPAIRMENT 1. Depreciation was regularly provided at 2% per year.000. 1994 at cost of P2.500. A P5.500. purchased a sewing machine for P2. On January 1. The machine’s fair value on January 1.000. loss of P70. 100% condition. 2006 a test for impairment indicated that the undiscounted cash flows from the sewing machine are less than its carrying value. What is the loss on impairment? a.000 c.000. The annual depreciation subsequent to appraisal should be a. the equipment was sold at P200.000 and the bonds are quoted at 110. At the end of its 8th year. 14.000 c. The machine had a 10-year life. 2003.000 and a condition percent of 75. loss of P40. 830.000 and it has estimated salvage value of P160.000. P7. the amount to be credited to revaluation surplus should be a.000 b. In June 15.000.DISPOSAL 1. It is being depreciated on straight line method for 8 years with P160. On December 31.000 which is the fair value on that date. without scrap.200.000 .000.000.740. what amount should be reported as net book value of the machine? a.000 INTANGIBLE ASSETS 1.000 2. construction. 10. 1.200.800. Crane reported these PPE at P6. In its December 31.320. The Equipment was acquired at cost of P6. At the end of its 4th year. 700. 500. This loss was related to an item of PPE acquired on January 1. 8. What amount should be credited to revaluation surplus to record the revaluation.500.? a.000 and accumulated depreciation of P2. In addition. without scrap value. 240. 2004 with useful life of 10 years and residual value of P200. and testing of preproduction prototype and model 160.000.120.300.000 c.000 c.000 at January 1. 1.000 c. 150.000 d. The original acquisition cost of the PPE is a.000 5.000. This is being depreciated at rate of 5% per year.500.200. 2006 had suffered a permanent impairment and as a result should have a recoverable value of only P1. 300. Crane Company reported an impairment loss of P2.000 c.000 4.000 is a reasonable amount to be recovered through its use for the rest of its life.000 .000 scrap value. During 2006.100.000 d. 1.000 b.000 d.000 d. 800. 10. The annual depreciation after impairment loss is recorded would be a. 950. Okay Company incurred the following costs: Research and development services performed by Okra for Okay 150.950. 420.000. 2005.000 b. it is observed that this suffered permanent impairment and estimated that P200. Gem Company determined that due to obsolescence an equipment with original cost of P4. 2000 a machine was purchased for P800. At the end of its 4th year.000 Testing in search for new product or process alternative 200. the remaining useful life was reduced from 8 years to only 3 years as of January 1.000 as of the beginning of the year. 9.000 d. 100. an independent appraiser valued it at depreciated amount of P6.c.000 3.000 in its income statement for the year then ended December 31. On January 2. 2004. 320. 2005 balance sheet.000 Design. 2006.000 b.000 b. 200. Pastel determined that the economic benefits of the patent would not last longer than 10 years from the date of acquisition. At the time of exchange.250 5. c. 100.600 d. The treasury shares were previously acquired at cost of P80. 800 3. P56. 110. The franchise grants Ramtell the right to sell Rosebud’s product for a period of 8 years. P7. P51. a. b.500 b. 360. P68.000 d. The patent was being amortized over its remaining legal life of 15 years expiring on January 1.000 1. On October 4. 600 b. Darrell Joe purchases a patent from Ziggy on January 2. For P64. The patent has carrying value in the books of Y at P90. 1999. X’s common stock was quoted in the market at P55 per share. P142. 2003 .000 2. 600 d. 2005? a. The patent has remaining legal life of 16 years at date of purchase. P81. 90.000 d. 2004. purchased a patent on January 1. P60. for P714.P18. During 2002.000 on April 1.000.000. 2004. 000. Darrell Joe feels the patent will be useful for 10 years.000 c. 80. P47. 2002? a.000 .000 3.750 c. what should Okay report as research and development expense? a. P57. What should be the carrying value of the Patent in the books of Darrell Joe at the end of December. The cost of the franchise to be reported in the year 2004 Income statement of Ramtell would be.000 b.In its 2006 income statement.000. What amount should be charged to patent amortization expense for the year ended December 31. 2008. P25.200 b. 200.000 2. 350. RamTell obtained from Rosebud a franchise for a cash payment of P200. P182.000 shares of its P50 par common stock held in treasury for a patent of Y.000 4. At what value should X record the acquisition of the Patent? a.000 c.000 c.X exchanged 2. Pastel Co. d. 510. 200. Mag Lucky expects future net cash flows from this patent to total P180. At the time of purchase.300.000.000 b.000. P1. but IMGONNAPASS believes it can earn 11. IMGONNAPASS is considering acquisition of the net assets of IHAVETOPASS to expand its operations.000 and liabilities of P2. w/o goodwill 500.000 d. AT that date.000. It is estimated that the goodwill will enable RAD U excess earnings for 10 Years.GOODWILL 1.000 c.000.400.000.000 and P4. P20.000 gains from sale of PPE was reported. respectively.600. 1. how much would be the value of the goodwill? a. P 1.500. 350.000 d.000.000 for the rest of its remaining life of 5 years. P1.000 c. In one of these years.000 d. P1.000 Liabilities………………….300.000.000 b.000 and P1. The normal earnings in the same industry where X belongs is 10%.25% annually . P1. P22.000 2.000 1. The following info pertain to X company which is to be acquired by Y company: BOOK VALUE CURRENT VALUE Tangible assets 1. 2004.000 1. 2005 balance sheet of Rad U in the absence of any indication of impairment? a.000 b. 90. As of December 31. What should be the amortization expense for this patent for the year 2005? a. The normal rate of return is believe to be 9%.000. 210.000 2.400. P400.000. At this date. P1.000.000.000. The fair value of Vic Tim’s identifiable tangible and intangible assets is P8. P38.000 b. X reported its past earnings for the last 5 years as P1.500..500.500. Vic Tim’s balance sheet showed assets of P6. the patent of Mag Lucky with original life of 15 years has carrying value of P300. the fair value of the patent is P110.500 c. What is the goodwill if agreed as equal to purchase of average excess earnings for 5 years? a. P1.000.200. Rad U acquired Vic Tim for a cash payment of P7. P1.200. The book value and current value of the net assets of IHAVETOPASS company are P3. P2. P800.000 Intangible.000 5. P24.000.000 c.300. At what value should the goodwill be reported in the December 31.500.000. 450.000.312. 2004.000 .000 at time of purchase. P500.000.000 3.000 d. If X is to be sold at fair value with goodwill equal to excess earnings for the next 5 years.000 4. The Fair value of the net assets of X is P8.000 Normal rate of earning is 8% X’s expected earnings is at 14% per year for 5 years. On September 1. 500 = 210. P1.000. The appraised value of the business’ net assets was P800. Upon execution of the lease.000 c. 200. P2.000 All payments were made when due.2003 balance sheet.000 LEASE On July 1.000. P60.000 b.000 b. determined by capitalizing average net earnings at 10%. What is the amount of goodwill using the “year multiple of excess earning” method assuming a 10-year period of excess earnings? a. under a 3 year operating lease. Radium Inc.000 ON December 31.000 = P60. Opera paid Soap P60. Soap closed its books on December 31 and correctly reported P60.200.000 12 months at 7.000 c. Soap Corporation signed an operating lease for a warehouse with Opera Company for ten years at P30.000. P1.000 d. In Titanium’s June 30. P60. P150. X’s business’ cumulative earnings for the past 5 years amounted to P500. P30.000 b.000 d.000. P5.2001.000. How much should be shown in Soap’s 2003 income statement as gross rental income? a.000 d.000. covering rent for the first two years.2003. P1.on its investment in IHAVETOPASS due to its excellent reputation. leased a delivery truck from Titanium Corp. P 0 b.000 c.200.000 payable as follows: 12 months at P5.000 .500 = 90.000 12 months at 17. Total rent for the term of the lease will be P360.000 per year. X is selling the business plus goodwill. P4. P210. P900.500 c. The value of goodwill is a.000 as gross rental income in its 2003 income tax return. None of the above 6. P90.000 d. what amount should be reported as accrued rent receivable? a. 000 10. 2002. 100. the deferred revenue from the sale of this machine should be a. Pertinent information at this date follows: Sales price 360. 2012. In the December 31.000 d.000 to Rapp as a lease bonus and P25. During January 2000.000 c. 420. Worm has an option to renew the lease for an additional 8-year period on or before January 1. 4.000 b.40. 1998. The lease expires on January 1. 0 b. On December 31. Worm made a decision to exercise the renewal option and made substantial improvements to the warehouse. 2000. for the year ended December 31. Worm has taken a full years depreciation on this leasehold improvement. 2002 balance sheet. 504. 90. Dean Company leased office space at a monthly rental of P30.100 3. 2007.250 c. 468. In Rapp’s 2002 income statement. 30. 87. 90. 2002. 2001. for office space and made the following payments to Cant Properties: Bonus to obtain lease First month’s rent Last month’s rent 30.000 c. 2001.100 Estimated remaining useful life 12 years In Bain’s December 31. Oryx Company entered into a five-year nonrenewable lease.000.000 for 12 months @ 12%) 34. the amount of rental revenue should be. The annual rental is P90. 140.000 4.000 b. Lake paid P50. 34. As an inducement for Dean to enter into the lease. with an estimated useful life of 15 years.100 c. Bain Company sold a machine to Ryan and simultaneously leased it back for one year.000 as a security deposit to be refunded upon expiration of the lease.000 Present value of reasonable lease rentals (P3. Rapp Company leased a new machine to Lake Company on January 1. Additionally. On October 1.000 d.000 for 10 years expiring September 30.000 10. On January 1. a. commencing on that date. 2002. 510.750 d. the lessor permitted Dean to occupy the premises rent-free from October 1 to December 31. The cost of these improvements was P540. Worm Company signed a 12-year lease for warehouse space. 2000. Dean should record rent expense of 0 b. balance sheet.000.000 41.000 42.125. the carrying amount of this leasehold improvement should be a. 2002 .000 .000 Carrying amount 330. On June 1. on January 1. 29. 2002.000 d. 2001. what amount should Oryx report as rent expense? a. P60.550 and P21.000. The appropriate interest rate is 12 percent.000 c.In its income statement for the year ended June 30. payable in advance for five years.546 c. Annual lease payments of P200. For the year ended December 31. P224. P275. 2007. P204. Lazarus Corporation leased equipment under a finance lease. P224. 2007. P460. what amount should Raphael recognize as depreciation expense on the leased asset? a. P204. 000. 2005 is . On December 31. The capital lease obligation was recorded on December 31. Raphael estimates that the equipment’s fair value will be P200.000 · July 1. P210.500 126.508 d. 2008. Lease is payable as follows: · July 1. P300.000 The rent expense to be reported in the income statement of G for the year ended December 31.000 b. Raphael Mining Company (lessee) entered into a 5-year lease for drilling equipment. and the first lease payment was made on that date. 2007.000 · July 1. After five years.771 and P21. What is the total present value of the lease and the first year’s interest expense? (use 2 decimal places for computation of PV) a. P115.000 2. at P1. What amount should Lazarus include in current liabilities for this finance lease in its December 31. 120.000. Raphael accounted for the acquisition as a finance lease for P2. and the interest rate implicit in the lease is 10%.000 d. b. P90.000 are due December 31 for 10 years. 2007. 2007.173 On July 1.000 c.000 d.000 bargain purchase option.000 at the end of its 8-year life. 000. balance sheet? a.400. P85.234 and P21. d. which includes a P100. 2006. Raphael regularly uses straight-line depreciation on similar equipment. P480. Raphael expects to exercise the bargain purchase option. On January 2.000 3. P200. 2005 G leased a delivery truck from M under 3 year operating lease. there is a bargain purchase option of P75. c. P65. 2007.000 b.000 State Repairs acquires equipment under a noncancelable lease at an annual rental of P45.508 b.000 120. At the end of the lease.000 135.771 and P19.350. The equipment’s useful life is 10 years. P5.year noncancelable lease with an implicit interest rate of 10 percent.60.a. 36. what is the lease liability that Stockton should report on the balance sheet at December 31.000 How much should be reported in the December 31. P258.000 · Unearned Income. 7. 6.089.000 · Advances to officers and employees. 2001.000 · Outstanding gift certificates issued. P45. 30. Stockton’s incremental borrowing rate is 12 percent. P288. 52.000 b.000 · Bonds payable. 7.000 .550.000 · Accrued interest receivable. P75. 6. P1. 120. 2002. 2005 balance sheet as total liabilities? a.000 LIABILITIES 6.000 -0120. 90. redeemable with merchandise.960.000 · Discounts on bond payable.000 6. Stockton appropriately accounted for the lease as a capital lease. the following improvements on the leased property were completed: Economic life 5 years 3 years Cost scrap value 60. 2002.000 c. face value. The lease requires annual payments of P50. 2002? a.000 c. X also paid advance rental for 3 months which is applicable to the last quarter of the contract. The monthly rental is P20.000 payable every end of the year starting year January 1.000 b. leased machinery with a fair value of P250. 55.000 Mezzanine Office ………. 60. P39. Inc. X paid initial payment of P100.210. P239. P225. 2002. P189. In January 1.000 Stockton. The contract is a 5. the year of signing. 000 beginning December 31. 2005 trial balance: · Accounts Payable.000 d. The annual depreciation expense to be taken in the books of X is a. P230. P180.672.000 b. 000 from Layton Machine Co.240 d.005.000 b.000 d.000. 50. To obtain the right to the lease.000 c. HI reported the following items on its December 31.79 and the present value of an annuity due of 1 for 5 years at 12 percent to 3.540 X entered in a 5 year lease contract with Y. on December 31. Assuming the present value of an annuity due of 1 for 5 years at 10 percent is 3.500 c.000 · Cash surrender value of life insurance.000 d. 000 c.000 b. 150. P62.000 Salaries expense during the year 815. Monitor Company’s salaried employees are paid biweekly.000 d. the current liabilities section of Riviera’s December 31. 2007. 26. P82. 2002. 17. 2006. On January 1.000 d. P75. X issued a short term non-interest bearing note for cash loan received from a bank.000 P 18.7.000 Accrued salaries payable 65. 500 b. X discounted its own P1.000 On December 31.000.000 c.000 c. 000 c. 000 4. In its income statement for the year ended December 31. X should report interest expense of a. 000 and an interest rate of 10 percent. P35. With respect to the note.000 9. 0 300. with the first payment due June 30. GC received P300.000 150. 12% note payable for one year. 2006. 9% . P12. Riviera Manufacturing Co.400 d. The else contract commenced January 1.000 b. As Of December 31.600 b.000 75. 2003. 2005 balance sheet. more than 10% c. advances made to employees are paid back by payroll deductions. 30. Occasionally. 000 plus accrued interest.000 covering first 2 years’ rent and a deposit of P150. P94. The bank discounted the note at 10%. On October 31. 10% b. 75. issued a five year note payable with a face amount of P250. 500 d. 2002.000. 150.000 150.000 Salaries paid during the year (gross) 780. 2005. The terms of the note require Riviera to make five annual payments of P50.000 8.000 which is returnable at the end of the ten year lease .000 On July 1. 2005. 20. how much should be reported by GC as its liabilities with respect to the above transactions? CURRENT NON-CURRENT a. Information relating to salaries for the calendar year 2007 is as follows: 12/31/06 12/31/07 Employee advances P 12. less than 10% d. P50. The effective interest paid by X for this loan is a. P100. balance sheet should include a. what amount should Monitor report for accrued salaries payable? a. At the end of the period.Tac Cute Co.000. P400.000 b. 2002. The new interest rate is 8% 4. Woods must recognize a loss from restructuring of a.000 c. P2. 2002. 100 containers were collected with deposit . In an agreement with the creditor. 40 containers remained un-returned and out of these. Extend the maturity date to December 31. Since X has no cash available to settle the due account. 000 c. During the period. Gain of P 800. The new date of maturity is December 31. 2. P0 b. 000 d.000 d. As a result of a court imposed settlement on December 31. These containers are required to be returned within 3 months from date of issue. The principal is reduced by P500.000 The above date is also the maturity date of the liabilities.200. 000 plus recorded accrued interest of P128. The interest rate is 15% payable every end of the year.000 d. 000 accrued interest.500. 2004. 2000 is forgiven 2. 4. 600. At the date of settlement.400 RESTRUCTURING On December 31. The accrued interest on December 31. Woods agreed to the following restructuring arrangement: Reduce the principal obligation to P1. How much is the outstanding liability on containers’ deposit? a. Under PAS 39. 000.000 b. the creditor agreed to accept the land of X as settlement. 200. Loss of P 800.000. What is the amount of gain/loss on the debt restructuring? a. 1. 000 As of December 31. P528.000 · Accrued interest on the note. 10 are expired and corresponding deposits are forfeited. 2002.000 Woods. is requiring a deposit of P 100 for each container that costs P80 each. 2006 X’s outstanding liabilities include: · Note Payable.000 c. Gain of P900. holds an overdue note receivable of P1. On December 31. Inc. 2005. the land of X has recorded cost of P1. P288. 000 is to be paid to Woods on December 31. Forgive the P128. 000. 3. Sunrise Company obtained the following changes in terms of note: 1. 2000 Sunrise Company is experiencing extreme financial pressure and is in default in meeting interest payment on its long term note of P6.000. P408. Loss of P900. 2002 and 2003.000 due on December 31.000 and estimated to have realizable value of P2. X should record . 3. Annual interest of P120.000. were P70.000 gain on exchange of P700. Actual warranty costs incurred from April 1 through June 30. 160.250 c. The machine is being depreciated by X using straight-line method over a period of 6 years. X should recognize gain on debt extinguishment of a.000 gain on debt restructuring of P200.a.000 X has a 2. 100. Hole Company began offering a new product for sale under a oneyear warranty.000 c. 3. b.000. W sold 24.000 b. 2000.000 had been sold by June 30.100. what amount should Hole report as warranty liability.000.000 to X. 2000.2006 East should report warranty expense of a. 250. . X is in financial trouble and negotiated to transfer its machine as payment of the matured liability.250 WARRANTY 5. and has fair value of P3. stereo system sales amounted to P5. and estimated realizable value of P500.000 were incurred. 192. Based on the past experience. On April 1.000 b.000 and warranty costs of P100. At June 30. The bank accepted the offer and take over the machine which has acquisition cost of P5. During 2005.000. if based on experience. 240. Of the 5. d.000 units inventory at April 1. 90% of the units sold would need repair? a. Based on the company experience.5000.000 10.000 washing machines and paid warranty costs of P170. 2000.000 at the end of its life.000 d. warranty costs were estimated at average of P30/unit sold. At date of exchange it has remaining life of 4 years. 146. 50.000 c.000 9. 2000. 92.year P2. c.000 b. 170.000 d. 150. 125. 2000. Based on its experience with similar products. gain on exchange of P900.000.000 loan. In its income statement for the year ended December 31. 150.000 gain on debt extinguishments of P900. Hole estimated that the average warranty cost per unit sold would be P80. payable carrying 13% compounded annually.000 d. East company manufactures stereo systems that carry a two-year warranty against defects. warranty costs are estimated at 5% of sales for the warranty period. At maturity date.000. During 2006. W sells washing machines that carry a 3 year warranty against manufacturer’s defects. The cost of gift item is P150/pc.692 real property tax. before bonus and 35% income tax. P0 c. which had been sold to customers during 2007 for P75.000 d.000 b. P175.000 c..000 GIFT CERTIFICATE 5. Under an incentive compensation plan. G Company sells its only line product at average selling price of P500/unit. 2007? a. P240. P170.000 gift certificates outstanding. Laser Company had 1. P164.620 F has an agreement to pay it manager a 5% bonus .000 b.600. The business earnings amounted to P8. 153. and it is estimated that 80% of the proof of purchase will be redeemed. The prevailing income tax rate is 32% The manger’s bonus for 2005 was a.000 d.000.729 c.000? a. The bonus is to be computed on income after bonus and tax of 35%. The net income for year 2005 of PC before any deduction for bonus and income tax amounted to P2. 2005. P550.000 b. The bonus agreement of Christian Company provides that the general manager shall receive an annual bonus of 10% of the net income after bonus and after tax.000 1.000 BONUS 6. P720.000 outstanding gift certificates should be deferred at December 31. Laser operates on a gross margin of 60%. a gift item is offered to customers on the return of 5 empty containers as proof of purchase.000 c.620 b. 2007.000 d. P45.In its income statement for the year ended December 31. How much should the general manager receive for the year as bonus if the pre-tax income after bonus is P2. For the current year.000 c. of which actual containers redeemed were 7. P75.500. The income tax rate is 32%.000 d. How much of the estimated liability for premium payable should be reported in its current year’s end balance sheet? a. P30. How much revenue pertaining to the 1. 250. 240. At December 31. . the general manager is entitled to a yearend bonus of 10% of the net income before deducting the bonus.000 before P57.000.000. 40. 170. W should report warranty expense of a. G Company’s total sales for the product amounted to P6. but after deducting the income tax.000.000 d. 20. 60. 80.000 b.000 11.500. P157. plus remittance of P50. P170. To promote its sales. 71 and @ 12% = 6. 50. On June 30.000 b. During 2003. The bonds are dated January 1. On June 30.000 Underwriter’s commission 200. 770. 2.000 of its 9%. P1.000 14. and . (effective interest) · PV of an ordinary annuity of 1 for 10 periods.47 · PV of an ordinary annuity of 1 for 10 periods.60 d. The bonds were issued through an underwriter to whom Huff paid bond issue cost of P340.60 7. July 1 and January 1 · Issued at yield of 12%. 2000. 251.000 · Term. 2000.000 face value bonds at 102. Haching company issued 3.816 d.000 bonds. 982. issued. 8% · Interest dates. four thousand of its 8%. 380. 250.820. On April 1. 60. @ 8% = 9. P1. at 99 plus accrued interest.36 · PV of an ordinary annuity of 1 for 20 periods.620. 2005: · Face value. 2010.205 c.2006. @ 4% = 8.98 c. 110.000 b. 977 b. In connection with the sale of these bonds. 659.000 bonds? a. mature on January 1.000 13.14 · PV of an ordinary annuity of 1 for 20 periods.51 What should be the issue price for each P1.952 b. 310. 4.000.000 Engraving and printing 60.000 d.59 and @ 6% = 11.000 What amount should Haching record as bond issue costs to be amortized over the term of the bonds a. @ 4% = 13.11 and @ 6% = 7. P1. The following information pertains to SF’s issuance of bonds on July 1.000 BOND ISSUE 12.960. 10 years · Nominal interest.000 bonds. 378.000. Haching paid the following expenses: Promotion costs P 50. Huff should report the bond liability at a. Gerry Corp.000 c. Huff Corporation issued at 99. 3.000 of its 8% P1.000 d. @ 8% = 6.000. 3.2006.000 c. 3.92 and @ 12% = 8.How much bonus should be provided to the manager? a. Gerry received net cash of a. At the date of issuance.000 c.000. at P55 per share.980.000 c.920. 2002 X issued 1. P50 par value. P1. 4. 40% of the warrants were exercised 12 months after the bonds were issued and when the price for each share of common stock was P60.965. Each bond is carrying a warrant that permits the bondholder to purchase 10 common shares.500.000 The company issued 10.000 of its P1. 4.000 5-year bonds. sold at 105. P1.990. the market value of bonds.Warrant P 17.000 of its 10%. in the books of issuing company.479. the following market value are known: . 1. ex-warrant was 98. 1.808 The company issued 10.880. how much should be credited to additional paid in capital at date of exercise of the warrants? a. 2. 340.000 .42 What is the amount to be reported as bond liability in the X’ balance sheet at date of issue? a.000 d. 5.000 On January 1. At date of issue of bonds. At the date of issuance.060.000 b. P1.940.439. 2017. 2.425. Each bond had 4 detachable warrants eligible for the purchase of one share each of X’s P50 par value common stock for P60. From the bond issuance. If 40% of the warrants were exercised 12 months after the bonds were issued and when the price for each share of common stock was P60. 2007. 350. Upon the exercise of 40% stock warrants.330 . 1. 1.000 bonds.000 b. P1.X’s bonds. Florida Corporation. Florida would receive net cash of a. issued at 97 plus accrued interest. 2007 and mature on January 1. Interest is payable semi-annually on January 1 and July 1.000. 850.000 6.000 b. 200. P50 par value. ex-warrant was 98.020.430.000 b.pay interest on July 1 and January 1. 2. Each bond is carrying a warrant that permits the bondholder to purchase 10 common shares.000 face value bonds for P1.000.000 c. 4. Gerry paid bond issue costs of P20.000 5-year bonds.000 c. sold at 105. what is the book value of remaining bonds if the issue date and date of bonds are the same? a.890.50 each . On April 1. 1. The bonds are dated January 1. P1. the market value of bonds. ex-warrant P1.780. face value P500 each. face value P500 each.000 c.Common stock of X…… P 55.000 d.000 d.996 d.000 b. at P55 per share. From the bond issuance. 000 d. What is the amount of interest expense to be reported for the year ended December 31. Interest is paid every April1 and October 1. 2007 and pay interest semiannually every June 30 and December 31. 156.000. 615.000 A 2-year.750 b. On November 1. Bond issue costs totaled P50. 150.000 and related unamortized bond issue cost of P430. 2004? a.000 plus accrued interest. It’s interest is payable every June 30 and December 30.000 of its 10-year. 258. 625.000.500.875 d. The bonds are dated June 30. Michigan.000 P20. On its December 31.000 c. 2002. 341. 2002.333 b. 250.000 d. 80. 945.000 9. 600. The bonds are dated January 1. 2004 and mature in 5 years and pay 12% interest semi-annually on June 30 and December 30. Boni corporation issued P5. 2007.000 face value. P5. The premium is to be amortized using the straightline method over the period during which the bonds are outstanding.000 face value bonds at 97.000 c. What is the interest expense to be reported for the year 2002? a. Inc. The bonds are dated October 1. 2005 is a.125 b. 630. 53.000 c. 2004 the company sells a P5. 2002.500 d.000 face value bonds were issued to yield effective interest of 10%.000 b.000 c. P10. 100. 87. The interest expense to be reported for the year ended December 31. 2004 and issued the same date. The accrued interest on the bonds issuance date is a. 12% 10 year bonds on October 1.000.BOND INTEREST 8. 8% term bonds dated October 1. What should Mason report for interest payable in its December 31.000. Mason Corporation issued P4.000. P30. 12%. 12% . balance sheet? a. 20-year bonds at 102 plus accrued interest on February 1.000. 2002 at 105.000.000 c. The bonds were dated July. issued P1 million. 2002 and pay semiannual interest on April 1 and October 1. 143. 2000 balance sheet.250 d. P50. 300. Molo Corporation reported bonds payable at P8.000 BOND RETIREMENT 10. The bonds had . The bonds were sold to yield 10% with the total proceeds of P3.000 On July 1.000 7. .000 d. P100..000 b. had outstanding 10 percent P1.000 b.000 d.. 2002 the unamortized balance in the bond premium account was P30. 240.000.000 11. 2000. Tyre Company reported pretax financial statement income of P750. What should be the gain on retirement of these bonds? a.000. Depreciation deducted for tax purposes in excess of depreciation deducted for book purposes…………. convertible bonds maturing on December 31.000. 208. On January 2.000 The bonds were issued on December 31.000 Laker. P85. On March 1.000 X’s books showed pre-tax income of P800.000.000 bonds were retired at 99 plus accrued interest.000 c. 12% due December 31. Its taxable income was P650. of each year.78. P115.………………………………………………. In the computation of income taxes. 53. Molo retired P3. 000 were converted into 20. Inc. 73.000 . 000 c. 59.000. What amount should Molo report in its 2001 income statement as loss on extinguishments of debt? a. 000 shares of P20 par common stock. 000. bonds with a face amount of P500.000 .000 for the year ended December 31.000 c. 2003. Estimated tax in 2003 paid for 1st 3 qtrs………. 000.been issued at par. 93. The difference is due to accelerated depreciation for income tax purposes. Laker should credit Additional Paid in Capital for a.000 Premium on bonds payable 108. P2. On that date. 172. 2001. gain from life insurance of the company president where the company is the beneficiary…. recording the conversion by using the value of the bonds. The December 31.P350. 315. After amortization through June 340. 150. What amount should Tyre report as current income tax payable for 2000? a. with interest payable on June 30 and December 31.000 d.200. P0 b. 000 TAX ACCOUNTING 12. For the year ended December 31. 2001 balance sheet of Ross Company included the following items: Bonds payable..000 b. 415. Interest is paid December 31 and June 30.000 . 2005. the following data were considered: .000. 372. 2000. 118. 2002.000 of the outstanding bonds at par plus a call premium of P200. The income tax rate is 32% and Tyre made estimated tax payments during 1st 3 quarters of 2000 in the total amount of P90.50.000 face value. at 103. 2010 4.000 c. 000 d.……………. P100.000 and the temporary non-deductible expenses.000 d.000 d. 350.000 b. 82.000. b. 2002.000 c..000.000) Total ……………………………………………………….400) and straight-line depreciation for accounting purposes (P2.000 The Indy Company had taxable income of P12.000 and its taxable income was P150. Quick had no other permanent or temporary differences. Quick determined that any deferred tax asset is fully realizable. P1. 50. The beginning of the lease was July 1. what would the company's pretax accounting income be for 2002? a. 2003 balance sheet? a. 70.000. d. 70.000 . Assuming Indy had no other temporary differences.000 b. P72. Income tax rate………………………………………………………… 32% What amount should X report as its current income tax liability on its December 31. What amount of deferred tax asset should Quick report in its December 31. 48.000. 54. 65.000).000. Grim Company’s pretax financial statement income was P200. The taxable income per return is P1.000 during 2002. 50. P54.000 c.000 The income tax rate is 32%. 128. 35.000 annual rental payment on June 15.000 Premium expense on keyman life insurance (Grim is the beneficiary) (20. The current tax liability and deferred tax assets are a. 35. P144. Quick Company leased a building and received the P360.000 c. 320. c.000 b.600 P13. 2007. Quick’s tax rates are 30% for 2007 and 40% thereafter.000 b. the new tax law was enacted implementing revised tax rate at 32% effective next year.000. 32. what amount should Grim report as current provision for income tax payable? a.000 d. P208. Rental income is taxable when received.000 37. In its 2002 income Balance sheet.As of balance sheet date. 64. 2007.400 8.000 c. 320.400 P6.400 The prevailing tax rate is 35% . For the year ended December 31. 2007 balance sheet? a.400 P17. Indy used accelerated depreciation for tax purposes (P3. The difference is due to the following: Interest income on saving deposits………………………. 000 . Monitor Company’s salaried employees are paid biweekly.000 c. 2007. Stinx company had the following balances in its memorandum records: Fair value of plan assets P3.000 Unrecognized prior service cost -0Contribution to the plan 204.d.000 b.000 c. For the year ended December 31.000 Benefits paid 200. 50. 54.000 Salaries paid during the year (gross) 780.000.000 Discount rate 9% Expected rate of return 6% The retirement benefit expense for 2007 is a.000 10.000 Premium expense on keyman life insurance (Grim is the beneficiary). Grim Company’s pretax financial statement income was P200.000 Accrued salaries payable 65.000 Salaries expense during the year 815. 2007.000 P 18. 350. Accrued Benefit Obligation P3. On January 1. advances made to employees are paid back by payroll deductions. P236.000 On December 31.400 RETIREMENT BENEFITS 9.000 Actual return on plan assets 185. P82. what amount should Grim report as current provision for income tax payable? a. 48. what amount should Monitor report for accrued salaries payable? a.000 b. Occasionally. 70.000: Other data related to the retirement benefit plan for 2006 are as follows: Current service cost P140. In its 2002 income Balance sheet. the following differences are considered which are part of the computation of GAAP income: Interest income on saving deposits ……………………… 70.000 b. To arrive at taxable income per Tax Code.000 . P35. P143.. 64.(20.000 The income tax rate is 32%. P100.000 d.000) Total ……………………………………………………. P94. 32.000 d.200.000. Information relating to salaries for the calendar year 2007 is as follows: 12/31/06 12/31/07 Employee advances P 12. 2002.200.000 2. 2002.000 On January 1. 9% · Expected rate of return on plan assets.000 5. January 1 Fair value of plan assets. The plan's service cost of P150. P390.000. c.200. Amortization of prior service cost was P24.000 P60. P204. Prior service cost was funded by a contribution of P60. Cubs Corporation adopted a defined benefit pension plan.000 The following information relates to the defined benefit pension plan for the McDonald Company for the year ending December 31.000 4. P185.000 · Discount rate. P243.200. b.000 · Contribution to the plan. What is the amount of Cub's un-amortized past service cost at December 31. P436.000 · Actual return on plan assets. December 31 Expected return on plan assets Amortization of deferred gain Employer contributions Benefits paid to retirees Settlement INTEREST rate Current Service cost for the year would be a. 2002.000 P90.000.000 · Benefits paid to retirees. c. P3. P36.000 P84.000. the following data related to pension plan are available: · current service cost. P129. P140.000 in 2002.000 32.000 d. P94. January 1 Projected benefit obligation.000 During the year.000 for 2002.000 10% . 2002? a.000. At the start of the year. b.600.000 was fully funded at the end of 2002. P200.729.c. P59. 6% P4. d. P3. Projected benefit obligation.000 5.500 425.565.035.000 450.000 · Accrued benefit obligations. d.000 390. BoyD had the following balances in its pension benefit memo records: · Fair value of plan assets. December 31 Fair value of plan assets. P10.000 b.000 The following info are available pertaining to the defined benefit plan of DauzDos: · Unamortized actuarian gain. preferred. authorized P0 par Unissued preferred stock Common stock.000 c.000.000 2.000.000.700. Prepaid of P 243. P2.000. 11. authorized P20 par Unissued common stock Subscription receivable.000 d.000 d.000 380.000.000. 2. If for the succeeding year. at cost Additional paid-in capital Retained earnings All subscription receivables are due in year 2004. The accumulated required contribution as of December 31. Prepaid of P366. common stock Subscribed preferred stock Subscribed common stock Treasury stock.000 · Fair value of plan assets. Accrued of P366. P143. the entity contributed P60. benefit expense for 2006 of P60. preferred stock Subscription receivable.000 d.000 · Accrued benefit obligation.040.000 c.000 3.000 4.000.600.000. 436. P243. Accrued of P243.000 SHARE CAPITAL The accounts shown below appear in the December 31.000 b.000 360.000 1. and the actual contribution made as of the same date amounted to P650. P236. 2003 trial of Hollow Corporation: Preferred stock.000 How much should be shown in the balance sheet of DauzDos as Prepaid or Accrued benefit cost? a.000 How much is the total .000 The agreed annual contribution to the defined contribution plan is P120.000 b. stockholder’s equity of Hollow Corporation? a.000 440. benefit expense for 2006 of P 70. this will result to a.557. P123.BoyD’s retirement benefits expense for the year is a.000 c.000 2.800.000 P10.000 600. 2005 amounted to P600. prepaid benefit expense of .360. accrued benefit expense of P10.000 1. 2002 balance sheet? a.000 The Magic Lamp Corporation was incorporated on January 1. par P100 Common stock option warrants Investments in marketable securities Additional paid-in capital from treasury stock Retained earnings a.000 100. P15 par value 525. no par value. 2003.000 760.000 Compute for the Stockholder’s Equity using the following data. with following authorized capitalization: · 40.000 1. Bonds payable Additional paid-in capital on common stock Donated capital Treasury stock at cost Common stock. par value of P10 per share During 2002.000 .000 20.330.000 860.000 820. 13. c.000 shares of preferred stock were taken at a purchase price of P17. d.000 d.000 1. 1. subscriptions for 2.000 Paid-in Capital in Excess of Par .200.000 500.000 and 6. b. b.2002.000 135.000 shares of preferred stock at P16 per share. P100 par value P230.b.000 15.Preference 80.000 40. In addition.000 c.500 Ordinary Share. stated value P40 per share · 10. 2007: Preference Share.780. revealed the following on January 1. on December 19.040. d.000 1.000 70.000 11.262. 11. 2002.400. What should Magic Lamp report as total contributed capital on its December 31.000 shares of 5% cumulative preferred stock.000 shares of common stock. 720. c. Magic Lamp issued 24. The stockholders’ equity of May Co. 12. These subscribed shares were paid for on January 4.000 50.000 shares of common stock for a total of P1.760.296.000 P300. 2007? a.3055M c.000 7/1/07 Number of shares reacquired but not canceled 5. 60.400 P100.755M 275. P1.000 b. The following information pertaining to Queenie’s ordinary stock transactions: 1/2/07 Number of shares authorized 80.000 12/1/07 Two-for-one stock split What is the number of shares of Queenie’s ordinary share outstanding at December 31.000 12.000 c.Paid-in Capital in Excess of Par – Ordinary Subscribed Ordinary Share Retained Earnings Notes Payable Subscription Receivable — Ordinary How much is the legal capital of the company? a. 120.000 440.600 shares of its p24 par value stock for land. c. 2007. Earnings per share is P40. P1.000 1/1/07 Number of shares issued 60.000 d. 150. c.000 hours of legal services performed.000 3.000 190.000 On July 1.000.000 Corridor Company issued 6. usually bills P500 per hour for legal services.000 P104.000 P117.115M d. P0.000 40.000. 115.000 900. On this data of issuance. A few months ago. P 62. By what amount should the additional paid in capital account of Corridor Company will increase as a result of the issuance of those shares? a.000 . the stock was selling at a public trading at P150 per share. b. as compensation for 1. 2003. b.000 400. Boom exchanged 2. P0. Max L. d.000 5. d. How much should be debited to Land account? a. Queenie Corporation was incorporated on January 2. 110.76M b.000 shares of its P10 par common stock to Max L. the land was appraised by an independent appraiser at P100. Boom is currently trading at the stock exchange at P45. PS par value. P102. Jennifer accounts for treasury stock under the cost method.000 P 42.000 c. Bonds payable Additional paid-in capital on common stock Donated capital Treasury stock at cost Common stock.476.000 and 95.000 14.000 b.000 and 216.000 d.000 500. 2007? a. P108. How many shares are issued and outstanding at December 31.000 135. Inna uses the cost method to account for its treasury stock transactions.000 Total shareholders’ equity P2.000 20.000 Less Treasury Stock.000 shares of its Pl0 par value ordinary shares at P36 per share.000 The following events occurred in 2007: May 1 1. P144.000 b. 200.000 and 106.000 Compute for the Stockholder’s Equity using the following data.000 shares of treasury stock were sold for P10.000 P 42. 100.000 .000. 5.000 and 212. reported the following in its statement of equity on January 1.000 c. 220.500.000 40. In 2006. During 2007. 220.000 70.000 shares? Treasury Additional Retained Common Stock Paid-in Capital Earnings Stock a. Way Co. 110.000 50. 100.000 of these shares at P50 per share.000 P6.000 shares of previously unissued ordinary share were sold for P12 per share.000 P2. P108. par P100 Common stock option warrants Investments in marketable securities Additional paid-in capital from treasury stock Retained earnings P300.000 15.000 P42.000 Additional Paid-in Capital 1. October 1 The distribution of a 2-for-1 stock split resulted in the ordinary share’s par value being halved.000 shares issued P 500.13.0900 d.000 100.000 shares authorized. July 9 10. 2007: Ordinary Share.000 P6.000 shares at cost 40.516.000 Retained Earnings 516. Inna issued 3. Inna Corporation acquired 6. What accounts and amounts should Inna credit in 2007 to record the issuance of the 3. 000 860.000 Retained Earnings 75. d.000 . 20 d. 160. 200 shares at cost 25.000 Treasury Stock b. 2001.a. 165. Cash 20. 1. 50 X grant of 30.000 . 2005. the par value of the stock is a.000 Retained Earnings 2. c.000 stock appreciation rights enables key employees to receive cash equal to the difference between P20 and the market price of the stock on the date each right is exercised.000 Treasury Stock d. Alto Corporation declared a 1 for 5 reverse stock split.000 3.000 760..000 Treasury Stock 20. 240.000 Additional Paid-in Capital from Treasury Stock 3.000 shares issued and outstanding. Alto had P1. Cash 20. divided into 100. respectively. Following are shown on the balance sheet of Pay Company: Capital Stock. Cash 20. when the market value of stock was P100 per share.000 2. 10 c. P100 par. The market price of the stocks was P25 and P28 on December 31. The service period is year 2000 through year 2002. b. and the rights are exercisable in 2003and 2004.000 b.000 c. 720.000 TREASURY STOCKS 15.000 Retained Earnings 5.000. 110.000 shares P100.000 25.000 Additional Paid-in Capital from Treasury Stock 3.000 25.000 credited to capital stock. 2000 and 2001.000 Treasury Stock. what amount of liability should be reported by X pertaining to stock appreciation right? a.000 The whole 200 shares of treasury stock were sold for P20. On July 1. Prior to the split.000. 2 b.000 820.000 Premium on Capital Stock Additional Paid-in Capital from Treasury Stock Treasury Stock c. Cash 20.000 d. As of December 31.000 25. How would the resale of the treasury stock be recorded? a. After the split.000 Premium on Capital Stock 2. 100. The market price of Ball’s 30. 2007 balance sheet were: Preference Share.RETAINED EARNINGS/DIVIDEND On May 31.000 c.220.000 30 Purchase of treasury ordinary share 5. During the fiscal year ending December 31. What amount should Ball credit to additional paid in capital for this stock dividend? a. 240.000 80 Stock split 2-for-1 Reissue of treasury ordinary share 5.140. 300.000 70 Reacquisition and retirement of preference 2. P1.000 d. the company had the following equity transactions in chronological order: No.000. P1.000 Retained Earnings 550.000 Paid-in Capital in Excess of Par.000 Ordinary Share. The stock dividend was distributed on July 31. 0 b. 2007 balance sheet? a.20 per share and on the preferred stock at the preferred rate.000 Paid-in Capital in Excess of Par. 2006. Ball Corporation’s board of directors declared a 10% stock dividend.000 b.000.000 P28 Issue of ordinary share 35. The Powerpoint Corporation has two classes of stock outstanding: 9%. of Price per Shares Share Issue of preference share 10. P20 par Preference and P70 par Ordinary.000 shares 7. 206.200. whn the stock’s market price was P100 per share. Net income for the year was P850.000 outstanding shares of P20 par value common stock was P80 per share on that date. P1. How much should be the amount of Preference Share shown on the December 31.160. P1. Ordinary 1. Preference 400.116.000 d.000 shares P1.000 Dividends were paid at the end of the fiscal year on the common stock at P1.000 c.000 16. 2008.000. 180. 50.000 52 Balances of the accounts in the shareholders’ equity section of the December 31.000 . a calendar-year company. 12% b.000 of the Retained Earnings balance. Fractional Share Warrants Issued 15. Debit Retained Earnings for P100. 2008.000 shares of P50 par value ordinary shares on December 31. which were dated April 1. had outstanding 20. The directors of Pete Corporation.000 18. d.000 PIC from Forfeited Warrants 6. On March 30. Pete has an authorization for 250.000 on March 31. 2007. 2007.000 on March 31. declared a 30% ordinary share dividend. How should Quebec account for the scrip dividend and related interest? a. At December 31. 2008.400 d. The amounts paid to preference shareholders and ordinary shareholders are: . Fractional Share Warrants Issued 15. In distributing the stock dividend. 2006.000 on April 1. whose P50 par value ordinary share is currently selling at P70 per share. Mitz Co. b. To accomplish this. Debit Retained Earnings for P100.600 PIC from Forfeited Warrants 11. 2007. Fractional Share Warrants Issued 6. dividends in arrears on the preference shares were P80. Mitz Co. 2007 and debit Interest Expense for P10. and a 10% interest rate.000 shares are now held as treasury.000 shares of which 10.000 on April 1. The par value is Pl0 per share and 180.000 shares are outstanding.000 ordinary shares.000. c. 2007. 2007. and desires to capitalize P945. Shares were selling on the market on this date at P25 per share. Quebec Corporation. has issued 100. had sufficient retained earnings in 2007 as a basis for dividends.400 c.000 Ordinary Share 3. 15% d. Debit Retained Earnings for P110. Fractional Share Warrants Issued 15.17.000 shares of P100 par value 8% cumulative preference shares and 30. Cash dividends declared in 2007 totaled P300. Debit Retained Earnings for P110.000 on April 1.600 PIC from Forfeited Warrants 2. 2008. issued fractional share warrants totaling 600 shares.000.000 Ordinary Share 15.000 Ordinary Share 9.9% c. 2007. had a maturity date of March 31. 19. The notes. 9% 20. Quebec declared a dividend of P100. 18. the percentage of stock dividend that the directors should declare is a. Assuming that 60% of the warrants are exercised and the remaining warrants expire. have decided to issue a stock dividend. 2007 and debit Interest Expense for P7.000 b.000 on April 1. Sine Co. and issued promissory notes to its stockholders in lieu of cash. the entry to record the exercise and expiration of the fractional share warrants is a.000 Ordinary Share 3. but was temporarily short of cash.500 on December 31. Tools Company granted stock options to key employees for the purchase of 20.000. c.40 b.000 b. P0 c. P80. P20.80 WARRANTS 22.00 and Pl. At December 31. Nanette Corporation issued 4. 2007. On July 1. No stock options were terminated during the year. P40. dividends in arrears on the preference share were P24. P160.00 and Pl.120. P20.000 shares of P100 par value 12% cumulative.000 21. the market price of the preference share without the warrants was P90 per share and the market price of the stock warrants was P15 per warrant.000 and P60. respectively? a.000 P160. fully participating preference share and 20. What is the amount credited to Paid-in Capital in Excess of Par.000 P240.Preference by Nanette on the issuance of the stock? a. What are the amounts of dividend per share on the preference and ordinary shares. On March 2.000 b.000 d. b. Maine Company issued P2 million.000. P18. d.80 d.00 and Pl.000 and P140.000 and P80.000 shares of 6% cumulative P100 par value preference share for P434. On March 2. P34. How much should Tools charge to compensation expense for the year ended December 31. Each preference share carried one nondetachable stock warrant which entitles the holder to acquire at P17. 2009 by grantees still in the employ of the company. Cash dividend declared in 2007 totaled P108. The market price of Tools’ ordinary share was P33 per share at the date of grant. P0 c. one share of Nanette’s Pl0 par ordinary stock. P18. At December 31. Eagle Company had outstanding 4.000 shares of the company’s ordinary stock at P25 per share.40 c. 2007.000. The options are intended to compensate employees for the next two years.000 d. Immediately after the bonds . 2006.000 of Pl0 par value ordinary share. The options are exercisable within a four-year period beginning July 1.000. P80. 2007. 20-year.000 and P220. 2007. Each P1. P62. P8.000 P220. 2007? a. 10% bonds for P2. On May 1.00 and Pl.000 bond had a detachable warrant eligible for the purchase of one share of Maine’s P50 par ordinary share for P60.000 23. 2006 and 2007.a.000 24. . P0 BOOK VALUE PER SHARE 1.500. 2003 shown the following balances: 10% Preferred stock. 300 P3. P100 par…………………… 600.200.000 shares.000 shares authorized and issued.00 3. 30. the preferred stockholders would receive par value plus premium of P10/share. 6.000 Common stock. 126.were issued. shows the following balances on December 31.000 b. What is the book value per share of common stock? a.000 500. Warrants — P20. 59. 24.000 c.000 1. P3. while the 12% preferred stock is non cumulative and fully participating. 30. 44. 28. How much would be the book value per share on common stock? a. Dividends in arrears are 2 years. P500.000 d. 60. Below is the stock holders’ equity section of P Preferred stock. P80.000 shares issued and outstanding……………………………………………P500.80 b.000 shares.00 c. The stockholders’ equity of J Corp..000 shares. P100 par value. How much is the book value per share of common stock? a. 5. on December 31.000 b. If E Corp were to be liquidated. E Corp.50 d.000 4.000 c. 7%. 125. P120. 50. 130. 50.000 shares issued and outstanding.000 Retained Earnings………………………………………………. P100 par.000 Common stock. P100 par……………………P500.500. Ordinary Share P50 par — P56.000 Common stock.27 d.68 c. authorized and issued Donated Capital Retained Earnings All preferred dividends have been fully paid. 480.80 4. total liquidation value.00 d.000 APIC…………………………………………………………… 320.000 APIC………………………………………………………p300. Maine’s securities had the following market values: 10% bonds without warrants — P1. P40. What amount should Maine record as additional paid-in capital? a. The stockholder’s equity of S Corp.000 Retained Earnings ……………………………………….000 The 10% Preferred stock is cumulative and fully participating.000 12% Preferred stock.s balance sheet reports the following stock holders’ equity: 5% Cumulative Preferred stock. 29. 102. P40 par………………………… 400.040. P10 par. 10.000 shares. no par.000 Diviedends in arrears on the preferred stock amount tp P50.00 b.000.P 700. 5.000 2.000. P 100 par. 161. 2006.000.000 shares issued and outstanding 2.580. which are convertible into 100. 2006 income statement.000 shares…………………….50 b.660. cumulative and non participating.000 Ayos reported net income of P5. 149. What is the number of hares that should be used in computing diluted earnings per share on December 31.000 Subscribed Common stock…………………………………. what amount should Ayos report as basic earnings per share? a. On October 1..70 c. 2006. 2006..000 Treasury stock.000. 5.000 Retained earnings…………………………………………….000 for the year ended December 31. 1.00 b. 25. 600. P50 par. 20.000 d 530. 2006? a.000.000 . with liquidation value of P110.400. at cost……………………….000 shares Issued and outstanding Common stock.000 Subscription Receivable…………………………………….000.000 b 630.000 APIC……………………………………………………………. 25 At January 1.000 10.000 Common stock.42 d.000 shares……………………………………….000 in preferred dividends during 2006.000 c. 24.000. 200.000 of common.20 c. 4% cumulative. P100 par.P2..000.2003: 10% Preferred stock.80 d. assuming preferred dividends are in arrears since 2001? a. 720. 144. 1.000 What is the book value per share of common stocks. Will also had P4.500. an additional 120.000 shares of common were issued for cash. In its December 31.14 EARNING PER SHARE Ayos Company had the following capital structure during 2006: Preferred stock. Will Company had 500. 24.000 shares of common stock outstanding. 155.000 of 8% convertible bonds outstanding at December 31. P100 par.000 shares of common. 600. 24. 30. 3. Ayos paid no preferred dividends during 2005 and paid P160. 2006.