ln ltitrrrc teyl l' r o fcss i o n sl .

l ttvt crv
qrrd
Skill s D ovc I op m un t
,20
t9 Claro M. Rccto Avenlrc, Munih (treside UE, Monila)
Tclophorrc/Ftx 733-7832, c-mull
PMCTICAL ACCOUNTING I
..
Uabllltles
-
Current and Noncurrent N. S. Robles
. CURRENI LABTUNES
Hqw much ls the of Hugo Trading as of DecerilbtiSI
'-,.i
i ,:r .. nr,aat a
:Company
at December'31, 2007)' the end of its
account balances. Hugo's 2007 financial statements
'.r
P
gz,soolgolb
:
35,000
, .. .: :
I
'
6oo;qpo
O
,(g(fi) int.
1,200,000
(_,,
2007 are'due on July 31; 2008 and pay lnterest at a
I
r l ri
'
' :
rclr'1, 2008.' Interest at 9% has'been'paid.up to
lstlc ratb). Hugo inEnded at Decimber 31,
7007
to
wlth a new. l0-year moftgage'note. On March 1,
on thi pilqclpal balance and refinanced thi: remainlng
le balance at December 31, 2007 were two ctistomers'
and had credlt balances totalling P18,000. The
mers wlro'were expected to' order,more merchandise
ts to those future purchases.
\
a portlon
of lts factory to a tenant for P3Q000 per
ent for the 12 months'ended October 31, 2008 was
i recelved as required and was credlted to Rent Revenue.
.Cfitf'1-,
r much ls the of Huqo Tradino as of oecerffb-dilftYzoo7?
!1,991;g:: I .
P , 953,ooo
3. How much of the Notes Payable,.net of discount should be reported as pirt of current liabilitles
on December 31, 2007?
It'A
ty
of
qpOob
-U- P 797.440
c.)
B['!zrz,ooo
l1-]-:,(r.
on the lncome statement for the y-ear
\
'tr$/x \t'/, =
:.J
o. P)torouu -. ':i
"
.
-fr0;o
'
---:::;o-
P ero.ooo .
,'
'
-'*'\tlfffi
Itli.oott\
eIo
(
lsqootz\
il o,oo a
*WZ!
ffi !i,q4=
6: Assume that' sbles and repalrs
.occur eve ly tfiqlghoqt_ ach year. How much repalr costs
retaung,to 2006and 2007 slbs are
@@
.
lPrt.'1"(o
u
o
..
On December 28, 2007, a supplier: authorlzed Accounts Company to return
goods billed at
and shlpped on December 20,2007. The goods were returned by Accounts C-ompany
on December.Z1,2007 but the P160,000 credit memo was not received untll January 6, 2008.
'P
.910,000
'
',
. P,' EEOrOOO'
' !.
'P'
sto,ooo
How much ls.the tota
cl\'
p.eso,ooo
)W:
ntrol of Accounts Company amounted to
accounts, The unpald voucher file lnclud
December
3L,2007:
ndise sblpped on December 31, 2007,
9n,
e shlpped on Decembe r 26i, 2OO7
'
000
Janitorial
serylces for the three month
period ending
?i",kn ri"'[!;3i.3crcember lG, zooT to January ts,
x'/1'
=
llr't5O
P5,928,.150
P5,768,450
,
P5,688,450
o4<o,ooo
2qo,
00o
.
1qt, O@
t(.5
,
OoO
8. Prcmo Appllance Store carrles a wlde varlety of electrlcol appllances classlfied as
entertalnment
'
,
applloncos and kltchcn appllonces, Promo uses two sales promotlon technlques: warrantles and
premlums to attract custonrers.
.^\
,Entertalnr,nent
appitances are sold wlth a one-year. wa replacement of
parts and labor.
.
v"
. The esUmated warranty costs, based on past experienc f sales.
i
-'\---J-
".
' .'1,
'.
, '
:'
lBe'prcmtum was offered on the kitchen appllances. Customers received a coupon for every
!
P500 spent.on the kltchen'appllances, Customers may exchange 20 coupons.and P600.foi an
lndustrlal electrlc fan.
,
Promo pays P800 for each lndustrlal.electrlc fan and estimates that 600/o
.,
.
of the coupons glven to.the.custorners wilt be redeemed.
/)
nr
is .. .;r -
'-'-
.
_ _ _._... __
d^t
,
{ r.i
-,
- P 40,000.
-
24,800
"
\l
of ProfoerbrllRcylcw lnd Skllb Devctoprncut. lnc
-
13.6,000
rnrudr Is ih warranty expense for the year ended December 31, 2007?
P144,000
P108,000
P 83,200
P 38,00p
9. How much ls the
Premlum
expense for the
year ended December 31, 2007? I
a. P36,000
b. P24,B0o :
..
\q
P21,6OO
-'',\
10. How much is the estimated liability for warranty at Decernber 31, 2007?
'
a. P136,000
b. P108.000
\,
P 8o;ooo
d. P 38,ooo
11. How rnuch is the estlmated premium clainrs outstanding at December 31,2007?
a. P26,100
b.
'
P24,800
r
C, P21,600
\
P B,4oo
v'\
,.k
12: Computerlink Company sells personal computers. For each unit of personal computer sold, the
'
company sells a service contract for
tfptq@
The contract provides that the personal
computer sold will be repaired by the c-ompany within a perlod of three years from the date of
sale. Sale of serulce contracts and repalrs are made evenly throti$llUlitTdth year. Based on
industrytrend.20o&ofrepairsaredonelnthefirstyea@,3oo/olnthesecond
year and 50o/o tn th'e trurO year. lniorrnation related to the service contracls foilEdrs 2005, 2006
and 200ffias follows:
Number of service contracts sold
Servlce contracts expense incurred
?-oo-5
800
P50,000
2006 2.007
1,000 1,200
P200,000 P350,000
polzx
2oL i
Q
1ttyu
-, z
x qoTo
't lbo
tcwi2*,1o'.rrA
How ntuch
31,2007?
tIr
expenses ol" meeting guarantee for service requirement on merchandise sold,
on bonds payable,
P57,500.
ls the total curren[ llnbilil-ies to be presented ln the balance sheet as of becember
P 126,750
P 1,921,100
P1,681;100
P1,429,100
lrrr11g1. of PrrrfcssionrJ Rcvicrr. nrrd Skills l)o,cloprrrcrrl, Irrc
I'reclicet .tccoun!inB I - Crrrcnl rn(l N.)n-<urr.ni Li"triliri.,
l'ngc
-1
ul' lJ
soq, ''-too'40, t.oof A
t .oqt
'.6.
14,
'Generous
@mpany'pays bonuses
to its chlef c
bl, =
(7" (
S'osv''':'
'
: ..35
( s,ooo, - b)
I
dfficer (COO)
'and
sales,trQnqger.
and the sales. manager get{87j, The
'
tax and bonuses, tncomeh# rate is
HoW much is
15. How much ls thg lncome tax liabili$ at Decenrber 31, 2007?
q-o'l)
=
260,-0'0618
',
-tl - .)Sfs,oao
-e))
t.oSt
b
: 7cco,
r 31, 20
before conslderlng the following informatlon:
i
January 6, 2008, Grape filed a P20,000 claim agalnst the common carrier.
sltlppul by Gr.rp on Dcccrrtbct 2
,
.,.
j
recorded by Grape on January 6, 2008.
What amqunt should Grape report as accounts payable in its De balance
'.
.... ;
shee!?
t,too,ooo
P1,065,000 Lo
tooo
-
:
:
:.r
P!,O85,OOO
[ts,
ooo)
r.
;
',:.-pf,f
ZO,OOO I
OC S,ooO
17.'
'":'\!ir"
company'operates a retJll store and must ctetermtne the proper Decenrber 3!, zoo7,
y0-ar-eM
accrual for the followlng expenses:
'ha,
r
,
J
-,
'o-:,'The
stole lease calls;for fixed rr:nt of P12,000 prcr
rnonth,
payablc
at tlre beginning of the
lfCCrc
month, arrd addltlonal rent equal to 60lo
ef
net sales over [)2,500,000 per calenrtar
year,
ll
',..': payable on January 31 of the following year, Net scrles for 2007 are P4,500,000.
t{flq
'
il,;,ff!r]!
blll of P8,500 coveilns
!li!, nedoct
Lzl'tiloT to 1/15/08 was receivecl January,
18.:''--',l.t9lon. Company sells contracts agieelng to servlce.equlpment for'a three-yeai perlod.
'
,
Informatlon.for the year ended December 31,.2007 ls as follows;
'
cash recelgrts fronr servlce contrdcts.sold
'
pg6o,00o
ilti/i
Service contract'revenue recoqnized 7BO.00O
r,:.titrr'/
'
)ervice
Contract'revenue reCognized
780,000
&.titto,/
, ... Unearned service cbptract revenue,
Ullll
.'
.. ,;570,000 Di)
'
In its Decefiber 31, 2007''balance sheet, Melon shbuld report u'hbarneo seivice contract
,\
19. Mango Dept.'Store sells glft certlficates redeernable only when merchandise is purchased,
These gift
cQrttficates have an expiration date of two
years ,after
lssuance date. Upon
redemption or expiration, ["lango recognlzes the uneame#fc"set]ue as realized. Inforrrlatbn
for 2007 is as follows:
lnttitutc of Profsrioool Revicrv und Skills Devctopnrenl. lnc
Unearned revenue, llll0j
-Gift
certiflcates sold
Gifu certificates redeemed
P 65,000 Expired
gift
certificates
225,000 Cost of
goods sold
195,000
1213_1196
P12,000
65,000
P10,000
600/o
ln its December 31, 2007 balance sheet, Mango should repo( unearned revenues of
P51,000
P57,000
P85,000
P95,000
20. Cherry Company sells magazines subscriptions for one to three year periods, Cash receipts
from subscribers are credil,ed to magazlne subscription:; collected in advance, and this account
had a balance of P2,400,000 at December 31, 2007,- belqre year-end adjustments.
Outstanding subsc7ipTi6fi$"t=Det6mbei5f76-07-expire as follows: O-Uring 20OB-- P600"000;
Durlng 2009 - P900,000; During 2010
-
P400,000
In its December 31, 2007 balance sheet, what amount should Cherry report as the balance for
magazine subscrlptions collected in advance?
21. What amount should Cherry report
.--- December 31, 2007?
\
P 5oo,ooo
b.
\
Pl,2oo,ooo
c. P1,900,000
d. P2,400,000
22$ Atis Company grants all employees two rveeks paicl vacation for each full year of ernployment.
Unused v_a_cation time can be accumulated and carried fonrvard to succeeding years, and will
be paid at the salaries in effect when vacations are taken or when employnrent is terminated.
There was no employee l.urnover in 2007, Additional infornratiorr relating to the
)rear
ended
December 31, 2007 is as follows:
Llability for accumulated vacatlons at 12/31/C6
lrhe
P 250,000
from (the rrL'rrr
\Lrrc
tso'ooorl'lo'/[stlrc
justed 200,000
Atis g
emplo 07, its annual salary
-
lncrea 7, Atis pay expense of
\'-
P 5o0,ooo
P1,200,000
P1,900,000
P2,400,000
b; P225,000
'
c. P300,000
d. ' P350,000
:{
231 The Pomelo Company
employees are paid
calendar year 2007 is
-4
td y
1kw
Z4@,od
46P
'o7
d
as rnagazine suLrscripl-ions revenue for the
year entled
salaried un plo5,,:so
are paid biureekly. Occasiorrally, advances made to
bar:k by payroll dcductions. Infonnation relaling to salaries for the
as iollov,rs:
EmpL:yec a(lverrrcr:s
Accrued salaries payablc
Salaries expense during the year
Salaries paid during the year (gross)
At Decenrber 31, 2007, rtrlrat amourrt should
pomelo
rt:port for accrued
a. P136,000
P100,000
P 94,000
P 82,000
Guava Company pays all salaried eniployees on a biweekly basis. Overtime pay however, is
paid
in the next biweekly period.
Guava accrued s.alaries expense only at its June 30 year
end. Data relating to salaries earnecl in June, 2007 are as follows:
c.
d.
a
a
a
a
Last payroll was paid on 6125/07, for ttre two-week period ended gl25l07.
Overtinte pay earned in the \^;o-week period ended 6125107 was
p(2,000,
Remaining work days in 2C07 r','erc June 28,29, anct 30, on which thiE(vas nr) o'rertime.
The recurring birveekly salaries toiat
p750,0C0.
!a,(,{11i,.
'.'a t'r' '
.'{
24.
.,
",'..
'(
'Assumlng
a S':day work uFpt and a Frcai year endlng June 30, Guava should report a liability
at June 30, 2007 for accrued sabries c{
.,:
In .t,
af2gQZ,'the Chico Company be,carp_i1yo-tyld
[,lltigatlon,
,
Ai b result of thls litlgatlon, it
Otddg@ tha! Cfrico will have to
rsvJi,OCO.
Ib July 2 0.7, a comPe
1qg"r.-19 1
.sultE-galnpt
Chko alleging vpla'.br cf antJtrust laws seeklng damages of
r
denles the atlegations, ard the :ikelihood of Chico paylng any da
iili;ild;; iooi, ur.
sovernrnent
brcusht action .girnit ehico ro
gsyter.rwr. 6vyr, vrv
:rv!9'
Laguna Bay., lt ls reasonab\'
pcfie
that the government will be su
nt
of damages Chico will have to pay is not reAsonably determinable. Wrat amount, it any,
'
should be accrued by a clrarge to i:come in 2007?
"
u, 1;'--i.' P2,709,000
.i..r PT,OOO,OOO
d.t"';"
''
P 0
:r.r
i-.,,-:
.
At December.3l, 20C7, Durian Co;'p. cr.,ed notes payable of F1,000,000 with a maturitydate of
Aprll 30, 2008. These notes did nct arise from tra-n:;at:tlons ln the normal course of business,
.
.OnJebruary
l, 2008, Durian issued P3,0CO, tention of uslng
'
partof the bond
proceeds to liqurdate the Pl. 's Decembef 31,
iooz financial statements vvere issuec on Ma
1,000,000 notes
payable should be classified as oJrrent in Durk !, ZOOII
t.a.;'
P0 -'
'
.b.
P'100,000
.
'
P
,
900,000
,
Pl;000,000
:,.",:
.
'-
On Novembei S, 2007, Langka Trading's tr rck was in an accident with an auto driven by
s for'
.
ill be
that
that agy other amount. Langkat accountlng
lal statbrnents were lssued on March 2,2008,
.:r', P3001000
'.,
P325,000
::d"::.
'i,P4sorooo
,"r . , ri.
;
Mabolo Company.sells washing machines that car a 3-year warran
sales , A.e[Lat-]&arra-0rrEipenditses
.. ;
Mabolo Company.sells washing machines that car a 3-year warran
..:.;i Waffan
llv
rsle
,i
l, 2OO7 ort warranty expense of
,'=-:
":o^
\
'
'
Psso,OCo \o,
_.
P72O;OOO 7rc,@9
onJanuary2'200s'#iid[ft11.'j'*iflitil$##.,.;;[f,
;l*i{#s{a:iiT
r sale. Sale ancl i[ warranty expendltures for the period 2005'2007
2006 2,500,000 37,500',
!'
2007 3,50 112,500
What amoLlnt should Makopa report as
b. P112,500 -
2qoo aao
:,e
P115,000
r"-. :
'
\I Pzlo;ooo
xo1o
.'\
--=.-^
j.a't
\
fgtel
Company started selllng a new p
arranry against
defects.
.
Based upon past experience w
warranty costs
. - related
'are
computecj as follow
Second
year
of
warran I sales and actual warra glven beiow:
2006
.r .".
2007
predlcted
warranty expense covering 2006.and,,2007 sales'stillunder warranty?
B: X33;333
fYst"'h -Fllnr
c. P4s,z4o
6q6oo7.
e"l^|,'h
I
IOIYO
:
What
_amount
should Apple report as its
: D?? ,iflfl '
^-\
, a
-
Pss,74o
(r1U.Do
l {l^
Stlg3ro
32y The net lnconre for2OOT of Banana Company'before iny deduction for bonus and lncome bax
Sales P420,000 P696,000
Actualwarranlyexpenditures
iaRQn_-- lRnoo
. How much ls th
mpensatlon plan, the general mahager Is
c, P712,.135.20
=
0.W
-
d. ,_
P975,000.00
,c{(rs
.
Beglnnlng the
year
2007, the Asian
7, 8,000 beer mugs were ordered by the
nrugs were already distributed to
lbc tq 3. 7, )
'rcm. /ht)
Pnm
'rcm, Erp
FEl. Pnn
33,
6ash
rn. 7
Jto
P' \
lnu.l
nrugs were already distributed to
:rsr. How much ls th(liSbil$rthat As cord on its 2007 batance sheet?
ill:i33
}=16,
n zozsO
--
l3/S6D '
\
that Asian should report on their 2007 lncome statement?
.
Pl5,750
P20,250.
P33,750
P36,000
35.
36.
Plneopple Company poys lts general
nlansger an annual bon
de<Juetlon for both bonus and corporute lncome taxes; For
reallzed a het lncome of P900,
amount of the corporate
a. P 44.487-
{
[,JJ;li,{
_"e
c) P27o;ooo
T
--
3
The Nice Food Factory ; ;t
es a rebate of
p4.00
for every
food box returned. It is estlnrated that only B0Vo of the foocJ lroxes will be returned ancJ
e. Iricludecl in the promotion
anrl solcl are 50,000 boxes with the seliing price
Rebates alreacly given amounted to P48,000. I'low rnuch ls the remaining
P160,000
P112,000
P152,000
P 49,000
P420,000
lnstitutc of Professionrl Rcvicrv nnrl Sliills Dcvclogrnrenl, luc
l'nrcticrl Accounling I - Currcnt tnd Non-currcnt Liubilitics ProoTnfll
37. On May lr'2oo7, srrr o.rmpany 5e-:er marketing a new brand of coffee. As part of their
b. P135,000
dlscounted at the bank at 100/o ls
b. P135,000
38. The effective lnte
10.87olo
10,000,6 I
lO
,?:i?ff
'.q;
39. To ralse money for working capital, the Lunar Sales is corrsidering a one-year loan from
Metro Bank. Two alternatives are available:
.
Alternatlve 1: A P100,000
,
l5o/o note lssued a face value
Alternatlve 2;" A P1OO,O0O, nonintet'est-bearing note, discounted at l5o/o. ,11t S
'The
company plans to borrorv on November 1,2007 and'the accountlng peiioO lollows the
calendar.' If you are asked by the Chief Executive Officer on the preferable alternative to take,
.
ossurnlng whatever difference is rnaterlal tn amount and based on your knowledge of
\
ttccountltlg for notcs, whot oclvlsc sl:ould you glve the CEO of the Lunar Sales?
\\ Attoinoilvo t
b
,
fltlror altcrnotlvo
c.
'
Altornotlvo 2
d,,
',
0oth ulternatlvcs
vj:
404 The
Qulckblte
Food Co. dlsl,ributes to consunrers coupons whlch lnay be prcsented (on or llefore
:
a stated expiratio,r date) to grocei's
on certain producb of
Quickbtte.
fio
grocers
\Ore
reimbursed when they send the ccupons to
Quickblte.
ln
Quickblte's
experience, 500/o of such
coupons are redeemed, and gener-ally
one month elapses beWveen the date a grocer receives a
' couporis from a consumer and the date
Quickbite
receives it. During 2007,
Quickbite
issued hrlo
'separate
serles of coupons as fcllorvs:
the
----------,
*r Issued on.-
tltloT
7lLl07
,,;
--_Ie!ilalue
P125,000
180,000
Consumer
rxpXalso DaJe
6130l07
tzl3uo7
Amount Disbursed as
ot 12.31.07
P59,000
.
75,000
'and
credits to cash of
liabllity for unredeemed
The only
journal
entries to date recorcled debits to coupon expense
P134,000, The December 31, 2007 balance sheet should tnclude a
'
coupons of
i
.'-.-
\----pls,O00
: c\
pir,oooi.
''
d; P9O;O0O
,
:
:
On Janudry 1, 2007, Castro Appllance Co. offerect a three-year warranty from date of sale on
any of its products
sold after that date, Tlre offer was part of a progiam to lncrease sales.
Meeting thg:[ernrs of tlre rvarranty rJ to cost 2olo of sale nder
warran[y ln 2007 totaled P9,000,000.
the units sotcj in 2007 hese
units were iepalred or replaced at a s0o. The amount of that
is
,
d. P 32,500
or.{
'on
June 18, 2007,
--'?nd credit terms O
.Company
recelved'goods from X Corporation, with lnvolce of
p90,000
Darrel paid
thls account on July 18. Darrel records purchases net of
sales, Irene Corgpqrtlon offered a premlugngf
plus remittance o(P5) Each hairbrush costsPl8,>
2007 foltow:
' \J
lO
\/
, Bottles,ofshampoosold
.i ;
2006'
''2007
. : Numbei
of halrbruSh dlstrlbuted:
.
'
i
f,furfrur, of nilrUruin .*peauO to be dlstribut
,'
. :
perlod/s, as estlmated at year end
'
How much ls tlp premium
expense for the
44. How mucti llablllty for'prcmlum'clalms
balance sheet?' .
-
paylng frelght of P
cash dlscount At what amount should the Accounts Payable tti X Corporatlon be shown
on'Darrel's
1
t
31, 2007
'
a.
.
P1,820,000
.r b.,
.P1,495,000
\
c, .,,
.P1,170,000
'
\il.'Pl'
a!6:-o-06
:
gr=ocT
)'3
,\ .,
{rll:33ffi,:; ,'
;",i.,'i[,ro
]
n.,
(Gtsats]2-,as(Qrqr'fta-r)
ir; i:iAt. .
. "
:
.
t/(,.c,4lr.,y(iorro,,en,.or(sttot.tt\
.15.
Whatwasthe bonus ratell gz.
16A,l* f: 327, .
.
:...
I:
,
, 1'll1l.,:' i
-,
6.ior,,s22' B: x (
6tctQi8)2
-,?5 (Q ts(',fi2 - I
45.
i.
':l
i,J,"#briirlnable ,'
:
y.
7
b'ofi' LY'
z
x
L@tlvtY
2t-" '
?
'
-- , / r, rao.g77. - ioocc zo. z\-
\1.
'
D0poslts for contalners at Decernber 31, 2006 fronr clellverles ln:
"=':'-*-2005
. ....
-,i,
.
2006'.
';'
Deposlts for,contalners delivered in 2007
Deposlts for ciintalners returned in 2007 fronr deliveries in:
fYqso,ooo
L
430,000 ,
r 780,000
'
:
2005
2006
2007
r'(ot,:
.Bo,ooo
\
25o,0oo
-
90;000
lrrr1i1r1,' ul l'rofsrlurrrrl llcries. nrxl Sl.tlls l)crt lrr;11116,'1.
gn.
NO N. CUR R ENT LIA BI LTTT ES
1. ets a P4,000,000,
}1ggl
bond isgue.dated January
\2007,
Tlre bonds
y on January 1 and July I at a stated rate ol
'rZYg,
The bonds are sold
tlme the effbctlve yleld ls 10%0,
f,erttiq61
..:
I
pay
nt)
What is the bond's market prlce at July L,2OO7? Round off present value factors to two decimal
4Mr
o,"o
,Ollm
'lnnxC{.xY:33
'
= lWl@
,ltS.llrc
9:Pcco
-
2.
I$: r":i
6PBry tsyd
j
5:
9 I
o:
99
o:
&h
3 9-rPI
bo*1
a I?q ? 1,-?29! : $"#f $ !$,:
.rnqur"rr*;dbd. rtle uo,iar.re prE#'at tciota. The bonds pay tnteresi on March 31
ahd
nuch ls the loss on tlre retircnrent of P2.0 rnilll
'
|Stteryl}.
Interest Company uses the effectlve interest method of amortlzatlon. '
terest Company's lncome statement for the year
er to neirest peso..
\
P{77,844
et19D
.d,
i'
P450,000
-
hlu'{tl
3. On July 1, 2007, Convertible Company lisueri P Each P1,000 bond
\-
At a later lnterest date, prlor
to maturity clate mllllon face vaiue
bonds exerclsed.thelr converslon
privilege when each ordlnary share sells for P180., After
approprlate
bremlum
amortlzatlon and lnterest paynrent, the premium on bonds
payable has a
balance
bonds
were re
on this
.
date at
'\
,, qeco
b.
c' w
\li
d. lg-' ,{
The
ll.
t)'
\
P4,219,200
P4,159,200
P4,oo0,o0o
P3,842,000
PO
P 8,000
P20,000
4.
5.
6.
;';;:
o.o,nll,
sa
n on *TH\rr*i:ffi
ffi,ffiIti..
. .m
CHBr'lo
,#I"fl
\olu.e.
ot
cP.
fa,pfk
Xecro
kroo
P33,000
P60,000
P35,000
P25,000
PO
Present value factors are as follows:
Present vaiuc oF Pl for 10 perir:cls
Present value of an ordinary anrrui[y of Pl for t0 periods
C{
(
bqtls Crfir:rc|
to\
f<lct au\
gel
pCPl$.rn
On January 1, 2007,
flfabanra,
[nc. issued l0-year bonds with a face amount of Pl million a1(a
stated interest rate o'@ payable
annualty on Jaffiaflfl. The bonds were priced to
Vield
lQp
_4rjlyd
0,46319
6.'i1008
total issue price (rouncled
to trearcst P100) ol'tho bonds was
-
Pl,00o,oo0
P 980,000
P 965,800
P 877,loo
.
PV of an'ordlnary annuity of 1 for 10 perlods
9, On July 7,2Cf,7, Ultra Company'issued PS,OOO,OOO of its 10%,'7'year bonds with one
OetactriUte'wanant attached t6 eicn-p1,OOO 6ona. rEach
warrant p;oviaes for the right,to'-'
purchase 20'shares of P15 par ordinary sirarc for P20leach. The maiket value-of the ordina'ry
ihare was'P25 at'July 1, 2007.. The detachable-gaqrant has a market
prlce ofrF6T=er-ch and the
bond without tlre warrants attached is quoted utgg)Ttu bonds were sold
t191.
:What are the
values assigned to tlre bonds and warrants, respecEvely?
t2cO,tm
b, PqT8SO,OOO/P350,000 { InYUo' ?r}k
\
ii:333:333iii33;333
!
On May l,2Oq7, Vlslon Corp. lssued P2.0 rnllllon,20"year, l0o/o bonds for P2,120,000. Each
PI,OOO bond had a detachabte warrant eligible for the purchase of one share of Vision's P50.par
orclinury share for P60. lmmectiately al'ter the bonds were issuecJ, Vision's securities ltad'the
folloraring nrarket values: 109/o bonds without warrants. - P1,040; Warrant
-
P 20; Ordinary
Share, P50 par - P56. What anrount should Visiorr crerlit tu'Brt-firiunr on bonds p.ryable?
followlng lnforrnation
pertains to Sanfo @mpany's issuance of bonds on'July L, 2007,
-Eace
amoqnt
-
P5,000,000; Term
- 10 year;;.-.Stated interest rate
-
60lo; Interest
payment
datpq
-
'hrlv
1 enrl lanrr:nr 1. Fffarlirro rriold
-'1)O/^\
dates
-
July t and January 1; Effective yieia
-'f
ZoA)
,\-,
)
.9%
L2%
'6,7L
6.t4
9.82 8.51
gDtro
1.?1"-f lt,t? =
s -tFl? !-
?jftrE5
'P2,970,000
:.
P2;910,000
P 80,000
P 40,000
PO
On July l; 2007, an intere:;t date, Ure. entir'e P1,000,000 of Hill Co. boncts were converted into
20,000 shares of l-lillrs ordinary sha.re each having par value of P40 and a market value of P55.
There ls'P4,OO0 unamortized discount on the bonds:'" At time of issuance of the convertible
bonds, paid in capital arising fronr bond conversion privilege recorded in tlre accounts is P25,000.
What is the gain or loss on conversion recognizecl by l{ill Cornpany?
P140,000 gain
P22I,000 gain
P 79,000 gain
PO
M
8,11
13.59
It{1
(fis")
8. On January 1, 20 ccru
The bonds are da ture
. annually on Aprll on
payable, net of discount, at
-
I
'
a.
.P3,060,000. I
b.. P3,000,000
10.
'lrii r
Bo/0, P2.0 rnillion ,face value convertible bonds
rising from Bond Conversion Privileqe recorded -'
annually on December 31. Each P1,000 bond
lue ordinary share, Tlre unamortized
premium
ecember 3L, 2007, an lndlvldual holding 200 of
the bo.n(s exerclsed the conversloiiTilijTege when the market value of Universal's
prdlnary share
f*
($p:r
share, LJni's entry'to reiord the conversion should include a credit to Stare
the bo.nds exerClsed the converslofi
prlvilege
when the market value of Universal's
prolnary snare
was
fig)per
share, LJni's entry'to reiord the conversion should include a credit to Strare
;;;i,\rJi
(k,
t
I
0n Januar/ 2, 2007, Mall corp. lssued
p2,000,000
of [0-year,
g%
bords at par. rhe bonds,
dated January t,'2007', pay lnterestsenrl-annually
on January t ard July l. Bord bsrec
.
., ,-..
',,-1 rL1f
lJtvYv.
. .: ;
.
,.,r._;i;.-.i,i.i
il;, . i ... :
,: ..
t
. ...
14. On January..J, 2007, when the market rate
..
face amount of bonds, wlth ln(erest to be
.-;.r-i mature o4 December 3\.20L4 and
.were
I
,
dlscount should be amortlzed by the lnterest
,,,\.il,fif ll33,
'
r'
'Pe
i'.r'P51725
I 6d6 lct
Eocrc
0 face value bonds. The bond was orlginally sold
'
-
effectlve interest ratd . rnet bond
'
unt of the outstanding bond What
ld Well repoft ln lts June 30, eet?
i
----
,l
l
l
.::..
t, . ;
l
.i
16. i
sued lts 9olo P2 mlllion whlch
i
bonds were i0% resultlng lh
',
Corp, usos t g bond discount.
cernber 31. namortlzed bond
:
,i
,":'
.,.'
2,880 for P1,000,000 face amount, Lzoh bonds, a
'
',
prlge.that yields l0Vo. Interest expense for the iix months ended December
?1,
2007,
ls
,+
,
P69,667 ,,
,
Olab
. ;-I'.'il',':i.i-.1:i:.',;
;.,',,
',,'i.l,.;
.
,,,:'".,..,'' .,. .t r.
r,
.:.
.,
.r
,
18.
-
9l
December 3l;'2006, Bell Co. lsuecl'P2,00O,OOO, 8olo
Seilal
borids, to be repald in the imount
of Pqoo,0oo each
year,
Irtterest ls payable
annually on oGiffi3i. fhe bohds were lssued to
\,.
yleld,lOo,'o a year. The bond proceeds were'P1,902,800. based on the present values at
ts as follows:
-l
Interest
DUe . Pfesent
Value. at 12/31/06
'
160,000 P 509,000
128,000 435,100
L2l3LlO9 .
,400,000
96,000.
;r
372;5OO
'\
\.
t2l31110
i
400,000 64,000 316,900
12/31/1.1
I
400,000 32,000 1268.30Q
'
g1&02.gQQ
'
Bell amortlzes the boncl discount by lhe interest method, In its December 31, 2007, b6lance
'sheet,
at what anrount should Bell report the carrying value of the bonds?
P1,393,800'
Pl,{9l,ooo
\Fl;333;333
a.
b.
lnrllhrlo ol Profcrsionnl llcr.loru unrl Skllls l)lvckrDuonl, !ur
I
Slm witl record on September 1, 2007, the first semi-annual lnterest
payment.dateT
Ioterest
--nJEsq*gxCIadrza
[on
Exoense
P88,335.00
P90;000.00
P83,427.50.,
P85,000.00
20. What ls the carrylng
.amount
of the
@rernade?
a. P1,963,000.00
-
b. P1,969,820.10
i
-t\
P1,968,658.40
d.
\
P2,ooo,ooo.oo
obllgatlon.
Notes Payable
Accrued lnterest Payable
b. , P1,000,000
\.
Pt,5o0,0oo
d. P2,500,000
P3,335.00
'
t
,
P5,000.00
PL,762,50
)
----<
bonds on rn" o68gl1,Ei)talance'sheet,
after all
b.
c.
d,
?t, On December 31, 2007, Columbla Conrpany slrows the followlng data with respect to lts maturecl
ekktq
5,OOO,OoO
500,000
The company ls threatened wlth a court suit if lt could not pay its maturing debt.
.
Accordingly,
the cornpany enters lnto an agreement wlth the credltor for the transfer of a noncash asset ln full
settlement of the mortgage. Tlre agreenrent pr<ivldes for the transfer of real estate carried ln the
books of Columbla at P3,O0O,0O_0. The real estate has a current falr marltet value of P4,9q9&0,
What ls the galn on Ufspffif6-I real estate that Columbla recognlzes as o result oT-tFe EbE
22, on olemUel3t,'2006, Guimaras CorporaU rn is experiencing extreme financlal pressure and ls ln
'
' '
default ln long-ternr note of PQrQOO,0OO due on December 31,
2008. Th
ry.
Decernber 3t. IiEn-'E@ment with the ireclitor,
Guimaras changes in the
terms of the note:
..
.
,
The occrud interest of P600,000 on December 31, 2006 ls forgiven.
'
ling rnuitut rate of lnterest.
,
. : ..
:
* .Present value of an ordinary annttity of
;rflN
urdclo\' Urcri;r,
23.
'1.
P[6oo,ooo
*.-;,h1d
3|D{E3O )
,
'
bl P1,599,920
c.
j,
p
soo,ooo
rtrFrp^e+r4
!@ W'.
;:
-io---'.-':
gfrotordtU*f(Snr6zmi
Down Company has an overdue Notes Payable to Clty
ga';if
of
pS,oOO,OgO
arld recorded accrued
a result of a setttement on December 31, 2006, CiW Eank
agrePd to the
rangement:
l( N0 clvtrq0
1r,
[,|rr,
U"tg
q( i$.JFd(qtr
I obligation to P6,000,000.
'
.
.
Forgave
.
Extende
.
Annual , l,:
.
Present
Pl at 10% for 2 periods
is 1,7355.
lWhat
is Dotryn Company's gain on clebt restru
\
P2,500,300
b..) P2,500,000
c P1,300,000 c
cl
2007 and 2008. .
Present value of an ordlnary annulty of
[l'l
o(
de[* B'(D,ar>
PO
lrci'o