Sei sulla pagina 1di 5

Financial Accounting 2 (BSAT) Quiz 1 Divine Word College of Calapan Bachelor of Science in Accounting Technology FINANCIAL ACCOUNTING 2 QUIZ#1

Summer 2013

Name: ______________________________________________

Score: _____________

1. JDC Company acquired two items in machinery as follows: a) On December 31, 2010, JDC Company purchased a machine in exchange for a noninterest bearing note requiring ten payments of P500,000. The first payment was made on December 31, 2011 and the others are due annually on December 31. The prevailing interest for this type of note at date of issuance was 12%. b) On December 31, 2010, JDC Company acquired used machinery by issuing the seller a two-year, noninterest bearing note of P3,000,000. In recent borrowing, JDC has paid a 12% interest for this type of note. Round the PV factor, if any, to two decimal places. What is the total cost of the machinery? 2. Liam Company has received a donation of land from a rich local philantrophist. The land originally had a cost of P1,000,000. On the date of donation, the land had a market value of P1,500,000 and an assessed value of P1,200,000. How much income should be recognized from donation? 3. Celine Company purchased land with a current market value of P2,400,000. The carrying amount of the land was P1,305,000. In exchange for the land, Jazz issued 20,000 ordinary shares with par value of P100 and market value of P140 per share. The shares are traded in an established stock exchange. What amount should Celine record as cost of the land? 4. In October of the current year, Margaux Company exchanged an old packing machine, which cost P1,200,000 and was 50% depreciated, for another used machine and paid a cash difference of P160,000. The fair value of the old packaging machine was determined to be P700,000. What is the cost of the machine acquired in the exchange of the books of Margaux Company? For numbers 5-6. Rebecca Company and Rosanna Company are fuel distributors. To facilitate the delivery of oil to their customers, Rebecca and Rosanna exchanged ownership of 1,200 barrels of oil without physically moving the oil. Rebecca paid Rosanna P300,000 to compensate for a difference in the grade of oil. It is reliably determined that the exchange lacks commercial substance. On the date of the exchange, cost and market value of the oil were as follows: Rebecca Company Rosanna Company Cost 1,000,000 1,400,000 Market Value 1,200,000 1,500,000 5. What amount should Rebecca Company record as cost of the oil inventory received in exchange? 6. What amount should Rosanna Company record as cost of the oil inventory received in exchange? 7. Abby Company exchanged 25,000 shares of its own P50 par value common stock for a turret lathe from Payne Company. The market value of the Abby Company stock was P68 per share at the date of exchange. The equipment had a carrying value of P1,625,000. Record the exchange on the books of Abby Company in general journal form.

Financial Accounting 2 (BSAT) Quiz 1 8. Nikki Company purchased a P1,000,000 life insurance policy on its president of which Nikki is the beneficiary. Information regarding the policy for the year ended December 31, 2010 follows: Cash surrender value, January 1 87,000 Cash surrender value, December 31 108,000 Annual advance premium paid January 1 40,000 During 2010, dividend of P6,000 was applied to increase the cash surrender value of the policy. What amount should Nikki report as life insurance expense for 2010? For Numbers 9-10. 1. On February 1, 2001, Bogs Corporation purchased a parcel of land as a factory site for P320,000. An old building on the property was demolished and construction begun on a new warehouse that was completed April 15, 2002. Costs incurred on the construction project are listed below.
Demolition of old building .......................... Architect's fees .................................... Legal fees--title investigation ..................... Construction costs .................................. Imputed interest based on stock financing ........... Landfill for building site .......................... Clearing of trees from building site ................ Temporary buildings used for construction activities . Land survey .......................................... Excavation for basement .............................. (Salvage materials from demolition sold for P1,800) (Timber sold for P3,300) P 21,000 31,700 4,100 950,000 14,000 19,300 9,600 29,000 4,000 13,200

9. Determine the cost of the land 10. Determine the cost of the building 11. The following expenditures were incurred by Memorata Comapany:
Painting partitions in a large room recently divided into four sections.................................... Labor cost of tearing down a wall to permit extension of an assembly line.................................... Major replacement of the motor of the machine. This replacement is anticipated when the machine was purchased........................................ Cost of grading land prior to construction........... Dust filters in the interior of the factory were replaced. The new filters are expected to reduce employee health hazards and thus reduce wage and fringe benefit costs. P 50,000 200,000 500,000 600,000 800,000

How much of the expenditures should be capitalized? 12. Del Sol Company is installing a new equipment at its production facility and incurred the following costs:
Cost of the equipment per supplier's invoice ........ Initial delivery and handling cost .................. Cost of site preparation ............................ Consultants used for advice on the acquisition of equipment. Interest charges paid to supplier for deferred credit. Estimated dismantling cost to be incurred required by contract Operating losses before commercial production........ P 2,500,000 200,000 600,000 700,000 200,000 300,000 400,000

How much should be capitalized as cost of the equipment?

Financial Accounting 2 (BSAT) Quiz 1 13. On January1, 2010, Barden Bellas Company adopted a plan to accumulate funds for a new plant building to be erected beginning July 1, 2015, at an estimated cost of P6,000,000. The company intends to make five equal annual deposits in a fund that will earn interest at 8% compounded annually. The first deposit is made on July 1, 2010. Present value and future value factors are as follows: Present Value of 1 at 8% for 5 periods 0.68 Present Value of 1 at 8% for 6 periods 0.63 Future Value of an ordinary annuity of 1 at 8% for 5 periods 5.87 Future Value of an annuity of 1 in advance at 8% for 5 periods 6.34 What is the annual deposit to the fund? 946,400 For Numbers 14-15 The Aviation Company ventured into construction of a condominium owned by Richard Lim which is rated as the largest state-of-the-art structure. The entity's board of directors decided that instead of selling the condominium, the entity would hold this property for purposes of earning rentals by letting out space to business executives in the area. The construction of the condominium was completed and the property was placed in service on January 1, 2010. The cost of the construction was P50,000,000. The useful life of the condominium is 25 years and it residual value is P5,000,000. An independent valuation expert provided the following fair value at each subsequent year-end: December 31, 2010 55,000,000 December 31, 2011 53,000,000 December 31, 2012 60,000,000 14. Under the cost model, what amount should Aviation Company report as depreciation of investment property for 2010? 15. Under the fair value model, what amount should Aviation Company recognize as gain from change in fair value in 2010? 16. In January 2010, Maya Company established a sinking fund in connection with its issue of bonds due in 2012. A bank was appointed as independent trustee of the fund. On December 31, 2010, the trustee held P364,000 cash in the sinking fund account representing P300,000 in annual deposits to the fund, and P64,000 of interest earned on those deposits. How should the sinking fund be reported in Maya's statement of financial position on December 31, 2010? a. No part of the sinking fund should appear in Maya's statement of financial position b. P64,000 should appear as a current asset c. P364,000 should appear as a noncurrent asset d. P364,000 should appear as a current asset 17. The following properties fall under the definition of investment properties except: a. Land held for long-term capital appreciation b. Property occupied by the employee paying market rent c. Land held for a currently undetermined use d. A building owned by an entity and leased out under an operating lease. 18. An increase in cash surrender value is recorded by a. increasing annual insurance expense. b. increasing investment income c. memorandum entry only d. decreasing annual insurance expense

Financial Accounting 2 (BSAT) Quiz 1 True or False 19. Statement 1 Cost of demolishing a building, owned by the company, to make room for the construction of a new one should be charged to the cost of the new building. Statement 2 The cost of fully depreciated asset remaining in service and the related accumulated depreciation ordinarily should not be removed from the accounts. 20. Statement 1 The cost of normal amount of wasted material, labor and other resources incurred in the production of self-constructed asset is included in the cost of the asset. Statement 2 The term revenue expenditures refers to those amounts paid out which are expected to provide revenue in the current period or a future period.

For 21-25. ABS-CBN Corporation recently acquired several items of property, plant and equipment. The transactions are as follows: 1. Purchased a building for P1,000,000 in cash and 50,000 shares of ABS-CBN Corporation with P100 par value which sold for P120 on transaction date. 2. Received a parcel of land located in Davao City from a philanthropist as an inducement to locate a regional office in the city. The land has a fair value of P1,500,000. 3. Acquired a machinery for cash. The machinery was priced at P800,000 and a 5% cash discount is allowed. 4. Acquired an equipment for P200,000 by issuing a 60-day, 12% note Prepare journal entries to record the transactions.

Financial Accounting 2 (BSAT) Quiz 1 FINANCIAL ACCOUNTING 2 QUIZ#1 - ANSWER KEY Summer 2013 1. 2. 3. 4. 5. 6. 7. P5,225,000 P1,500,000 P2,400,000 P860,000 1,300,000 1,100,000
Machinery ............................................. Common Stock (25,000 P50) ......................... Paid-In Capital in Excess of Par .................... 1,700,000 1,250,000 450,000

8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

P19,000 372,900 1,023,900 1,950,000 4,300,000 946,400 1,800,000 5,000,000 C B D F/T T/F