ADVANCED ACCOUNTING - ANSWERS AND SOLUTIONS:

Problem 1. D
Fully secured
Cash
Inventory
Receivable
Less:
Unsecured
with priority
Trustees
salary
Salaries
payable
Taxes
Net free assets
Total
unsecured
without priority

P124,200
53,000
13,000

P222,000

Partially
secured
P 59,640
375,000

Unsecured
P

360
79,000

(9,500)

58,500

(50,000)

80,000

(4,000)
126,700
217,860

Recovery percentage: 126,700/217,860 = 58%

Partially secured: 434,640 + 79,360(58%) = P480,669
Problem 2. B
Recovery percentage = 25%
A: P124,000 + 9,920 = 133,920; 133,920 115,000 = 18,920; 18,920 * 25% =
4,730 TOTAL PAYMENT = P119,730
B: P136,000 + 13,600 = 149,600; 149,600 * 25% = P37,400
C: P137,500 + 7,452 = 144,952
D: P12,220
A = partially secured; B = unsecured w/o priority; C = fully secured; D = unsecured
with priority
Problem 3. C

Problem 4. A

Net assets, 1/1/12

115,000

Net income, 2012

90,000

Exchange
rate
45

Peso
P5,175,0
00

43.75
3,937,50
0

Div. declared, 9/1/12

40
(15,000)

Net income, 2013

22,500

(600,000
)
45
1,012,50
0

Net assets translated using the rate at the end

of the year
Exchange difference (Translation adjustment)

212,500

47.50

9,525,00
0
10,093,7
50
56,8750

Problem 5. B

Intrinsic Value
Time Value

Oct. 31, 2013

7,250
1,000

Dec. 31, 2013

14,500
2,500

Jan. 31, 2014

29,000
-

12/31/11 Time value = 1,500 gain

1/31/12 Intrinsic value = 14,500 gain

Page 2
Problem 6. D
Intrinsic value
Time Value

May 1
0
14,000

May 31
12,500
5,000

Equity
Earnings (5000 1500)

June 30
37,500
1,500

37,500 gain
3,500 loss

Problem 7. D
125,000 * (92.20 91.90) = 37,500 loss
Problem 8. A
Hedged item:
2,750 (48 43)
Hedging instrument:
2,750 (43 49)
Net forex loss

13,750 gain
16,500 loss
2,750

Problem 9. C

MV of stocks issued
Contingent
consideration
Total
Goodwill

Cost of
investment
875,000
15,000

You Corp.
Net assets at FV

890,000

660,000
660,000

230,000

Assets:
Loves assets at BV
Add: Goodwill
Less: Cash payments
Yous assets at FV
Total assets

900,000
230,000
(53,000)
695,000
1,772,000

Problem 10. B
FV of net assets
Common stocks issued, at
par
Related APIC
Cost of investment
Goodwill/(income fr. acq.)

Ayiziel
2,990,000

Vianney
903,000

2,843,750

789,250

406,250
3,250,000

112,750
902,000

260,000

(1,000)

Retained earnings:
Acquirers RE + income from acquisition related costs stock issuance costs in
excess of related APIC
4300000 + 1000 118500 69750 = P4,112,750
Problem 11. B

Page 3
Problem 12. C
Direct Cost
Set-up (25*7500)
Utilities (7.60*15000)
No. of parts (20*550)
Total Cost
Cost per Unit (387500/25000)

P75,000
187,500
114,000
11,000
387,500
P15.50

Problem 13. D
Direct materials
Direct labor
FOH
Direct materials rework
Direct labor rework
FOH rework
Total cost
Cost per unit (233150/450)

P42,500
65,250
78,300
13,550
15,250
18,300
233,150
P518.11

Problem 14. C
Direct materials
Direct labor
OH (5.50*120000)
Less: Disposal value
Total cost of good units

P450,000
520,000
660,000
(24,000)
1,606,000

Problem 15. B
(Final selling price Selling price at split-off) Additional processing cost =
Incremental profit
(3 1.50) 2.50 = (1)
Problem 16. D
Let x = Fixed Overhead rate per machine hour
40,000x = 42,000x 28,500
machine hour
28,500 = 2,000x
rate per MH
x = 14.25 per machine hour
Problem 17. B

14.25/60% = 23.75 total OH rate per

23.75 * 40% = 9.50 Variable overhead

GP rates:
2011 = 35%
2012 = 40%
2013 = 35%

Repossessed merchandise
3,400
Deferred gross profit
3,000
Loss on repossession
1,100
Installment AR 2012(3,000/40%)
7,500

Realized gross profit:

2011: 90,000*35% =
33,250
2012: (167,500-7,500)*40% =
64,000
2013 = (600,000 490,000)*35% =
38,500
TOTAL RGP
135,750

Page 4
Problem 18. D
2011: Anticipated total loss
50,000
2012: 28/35 = 80% Percentage of completion
Construction price
33,600,000
Estimated total cost
31,900,000
Gross profit
1,700,000
Percentage of completion
80%
RGP to date
1,360,000
Less: RGP, 2010
(50,000)
RGP, 2011
1,410,000

Problem 19. A
Deferred revenue:
500,000 * 3.60478 = 1,802,390

Problem 20. B
Unadjusted balance
a.
b.
c.
d.
Adjusted balance

Branch Current Manila

522,110
(10,120)
52,920
564,910

Home Office Current

461,490
14,500
36,000
52,920
564,910