Valix Finacc Vol 1 Problem 1

Valix Finacc vol 1 Problem 1-19 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 1-19 Problem 1-19

1. Accrual 2. Going concern 3. Accounting entity 4. Monetary unit 5.

Time period

Posted by Louie Lansang at 2:45 AM No comments: Labels: Finacc Volume 1 Chap 1, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 1-18 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 1-18 1. The cost of the asset should be the amount of cash paid. No income should be recognized when an asset is purchased at an amount less than its market value. Revenue arises from the act of selling and not from the act of buying.

2. The entry should be reversed because the pending lawsuit is a mere contingency. The contingent loss is simply disclosed. To be recognized in accordance with conservatism, the contingent loss must be both probable and measurable.

3. The new car should be charged against the president and debited to receivable from officer, because the car is for personal use.

4.

The entry is incorrect because no revenue shall be recognized until a sale has

taken place.

5. Purchased goodwill should be recorded as an asset. Under the new standard, goodwill is not amortized anymore but on each balance sheet date it should be assessed for impairment.

Posted by Louie Lansang at 2:43 AM No comments: Labels: Finacc Volume 1 Chap 1, Finacc Volume 1 Solutions, Valix Solutions Friday, May 28, 2010 Valix Finacc vol 1 Problem 1-17 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 1-17 1. Monetary unit assumption 2. Cost principle 3. Materiality 4. Time period 5. Matching principle 6. Substance over form 7. Income recognition principle 8. Comparability or consistency 9. Conservatism or prudence 10. Adequate disclosure or completeness

Posted by Louie Lansang at 12:01 AM No comments: Labels: Finacc Volume 1 Chap 1, Finacc Volume 1 Solutions, Valix Solutions Thursday, May 27, 2010 Valix Finacc vol 1 Problem 1-16 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 1-16 1. Accrual assumption 2. Going concern assumption 3. Asset recognition principle 4. Cost principle

5. Liability recognition principle 6. Income recognition principle 7. Expense recognition principle 8. Cause and effect association principle 9. Systematic and rational allocation princple 10. Immediate recognition principle

Posted by Louie Lansang at 11:59 PM No comments: Labels: Finacc Volume 1 Chap 1, Finacc Volume 1 Solutions, Valix Solutions Friday, May 21, 2010 Valix Finacc vol 1 Problem 1-15 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 1-15

1. The cost of leasehold improvement should not be recorded as outright expense, but should be amortized as expense over the life of the improvement or life of the lease, whichever is shorter. This is in conformity with the systematic and rational allocation principle of expense recognition.

2. The fact that the customer has not been seen for a year is not a controlling factor to write off the account. If the account is doubtful of collection, an allowance should be set up. It is only when there is proof of uncollectibility that the account should be written off.

3. Advertising cost should be treated as outright expense, by reason of the uncertainty of the benefit that may be derived therefrom in the future, in conformity with “immediate recognition principle”.

4. The balance of the cash surrender value should not be charged to loss. In reality, this is conceived as a prospective receivable if and when the policy is canceled because of excessive premium in the early stage of policy. The CSV should be classified as noncurrent investment.

5. The cost of obsolete merchandise should not be included as part of inventory but charged to expense, as a conservative approach.

6. The excess payment represents goodwill which should not be amortized but subject to impairment. Conservatism dictates that goodwill should be recognized when paid for.

7. The depreciation is not dependent on the amount of profit generated during the year. Depreciation is an allocation of cost and therefore should be provided regardless of the level of earnings.

8. An entry should be made to recognize the inventory fire loss, and such loss should be treated as component of income.

9. Revenues and expenses of the canteen should be separated from the revenues and cost of regular business operations in order to present fairly the financial position and performance of the regular operations.

10. The increase in value of land and building should not be taken up in the accounts. The use of revalued amount is permitted only when the revaluation is made by independent and expert appraiser. The expected sales price of P5,000,000 is not necessarily the revalued amount of the land and building. Moreover, increase in value is not an income until the asset is sold. Posted by Louie Lansang at 3:09 AM No comments: Labels: Finacc Volume 1 Chap 1, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol Problem 1-14 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 1-14 1. Materiality 2. Going concern 3. Income recognition principle 4. Accounting entity 5. Standard of adequate disclosure 6. Comparability 7. Matching principle 8. Cost principle

9. Reliability 10. Time period Posted by Louie Lansang at 3:07 AM No comments: Labels: Finacc Volume 1 Chap 1, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 1-13 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 1-13 1. Systematic and rational allocation as a matching process 2. Comparability or consistency 3. Monetary unit 4. Income recognition principle 5. Time Period 6. Going concern and cost principle 7. Accounting entity 8. Materiality 9. Completeness or standard of adequate disclosure 10. Conservatism or prudence

Posted by Louie Lansang at 2:32 AM No comments: Labels: Finacc Volume 1 Chap 1, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol Problem 1-12 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 1-12 1. E 2. D 3. B 4. C

5. G 6. H 7. I 8. F 9. J 10. A Posted by Louie Lansang at 2:29 AM No comments: Labels: Finacc Volume 1 Chap 1, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 1-11 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 1-11 1. C 2. B 3. D 4. A 5. F 6. E 7. J 8. G 9. H 10. I

Posted by Louie Lansang at 2:28 AM No comments: Labels: Finacc Volume 1 Chap 1, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 1-10 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 1-10

1. A 2. B 3. D 4. B 5. A 6. D 7. C 8. A 9. D 10. A

Posted by Louie Lansang at 2:25 AM No comments: Labels: Finacc Volume 1 Chap 1, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 problem 1-9 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 1-9 1. D 2. D 3. C 4. B 5. C

Posted by Louie Lansang at 2:24 AM No comments: Labels: Finacc Volume 1 Chap 1, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 1-8

Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 1-8 1. B 2. B 3. C 4. C 5. A 6. B 7. D 8. D 9. A 10. B

Posted by Louie Lansang at 2:23 AM No comments: Labels: Finacc Volume 1 Chap 1, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 1-7 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 1-7 1. D 2. D 3. C 4. A 5. A 6. C 7. D 8. D 9. B

10. D


1. A 2. A 3. C 4. A 5. A 6. A 7. B 8. C 9. A 10. B Posted by Louie Lansang at 1:43 AM No comments: Labels: Finacc Volume 1 Chap 1, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 1-5 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 1-5 1. A 2. A 3. A 4. D 5. D

6. D 7. B 8. D 9. C 10. D


1. A 2. C 3. A 4. A 5. D 6. A 7. D 8. B 9. D 10. D Posted by Louie Lansang at 1:41 AM No comments: Labels: Finacc Volume 1 Chap 1, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 1-3 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 1-3 1. C

2. D 3. D 4. A 5. D Posted by Louie Lansang at 12:53 AM No comments: Labels: Finacc Volume 1 Chap 1, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 1-2 Financial Accounting Volume 1 Valix Problem 1-2 1. A 2. A 3. D 4. B 5. D 6. B 7. D 8. C 9. C 10. D Posted by Louie Lansang at 12:41 AM No comments: Labels: Finacc Volume 1 Chap 1, Finacc Volume 1 Solutions, Valix Solutions Tuesday, May 18, 2010 Valix Finacc vol 1 Problem 1-1 Valix Peralta Financial Accounting Volume 1 2008 Problem 1-1 1. D 2. C 3. D 4. D 5. C 6. C

7. B 8. C 9. D 10. A Valix Finacc vol 1 Problem 2-11 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 2-11

Reliable Company Statement of Retained Earnings Year Ended December 31, 2008

Retained earnings – January 1 Prior period error – overdepreciation in 2007

200,000 100,000

Change in accounting policy from FIFO to weighted average method – credit adjustment Corrected beginning balance

150,000 450,000

Net income

1,300,000

Decrease in appropriation for treasury share

200,000

Total

1,950,000

Cash dividends paid to shareholders

( 500,000)

Current appropriation for contingencies

( 100,000)

Retained earnings – December 31

1,350,000

Problem 2-12

Net income Loss from fire

3,000,000 ( 50,000)

Goodwill impairment

( 250,000)

Loss on sale of equipment

( 200,000)

Gain on retirement of bonds payable

100,000

Gain on life insurance settlement

450,000

Adjusted net income

3,050,000

Gondola Company Statement of Retained Earnings Year ended December 31, 2008

Balance – January 1

2,600,000

Compensation of prior period not accrued

( 500,000)

Correction of prior period error – credit

400,000

Adjusted beginning balance

2,500,000

Net income – adjusted

3,050,000

Stock dividend Loss on retirement of preference share Appropriated for treasury share Balance – December 31

( 700,000) ( 350,000) (1,000,000) 3,500,000

Posted by Louie Lansang at 6:09 AM No comments: Labels: Finacc Volume 1 Chap 2, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 2-10 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 2-10 Problem 2-10

Ronald Company Statement of Cost of Goods Manufactured Year Ended December 31, 2008

Materials – January 1 Purchases Freight on purchases Purchase discounts

1,120,000 1,600,000 220,000 ( 20,000)

Materials available for use

2,920,000

Less: Materials – December 31 Materials used

1,800,000

1,560,000 1,360,000

Direct labor

2,000,000

Factory overhead: Heat, light and power

600,000

Repairs and maintenance

100,000

Indirect labor

360,000

Other factory overhead

340,000

Factory supplies used (300,000 + 660,000 – 540,000)

420,000

Depreciation – factory building Total manufacturing cost Goods in process – January 1 Total cost of goods in process

280,000

2,100,000 5,460,000

360,000 5,820,000

Less: Goods in process – December 31 Cost of goods manufactured

320,000 5,500,000

24

Ronald Company Income Statement Year Ended December 31, 2008

Note Net sales revenue Cost of goods sold

(1) (2)

Gross income Other income

6,980,000 (5,400,000) 1,580,000

(3)

Total income

160,000 1,740,000

Expenses: Selling expenses Administrative expenses

200,000 340,000

540,000

Income before tax

1,200,000

Income tax expense

( 200,000)

Net income

1,000,000

Note 1 – Net sales revenue

Sales Sales returns and allowances

7,120,000

( 140,000)

Net sales revenue

6,980,000

Note 2 – Cost of goods sold

Finished goods – January 1 Cost of goods manufactured Goods available for sale Finished goods – December 31 Cost of goods sold

420,000 5,500,000 5,920,000 ( 520,000) 5,400,000

Note 3 – Other income

Interest revenue

160,000

Posted by Louie Lansang at 6:08 AM No comments: Labels: Finacc Volume 1 Chap 2, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 2-9 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 2-9 Christian Company Statement of Cost of Goods Manufactured Year Ended December 31, 2008

Purchases

1,600,000

Freight in

80,000

Total

1,680,000

Increase in raw materials

( 100,000)

Raw materials used

1,580,000

Direct labor

1,480,000

Factory overhead: Indirect labor Depreciation – machinery Factory taxes

600,000 50,000 130,000

Factory supplies expense

120,000

Factory superintendence

480,000

Factory maintenance

150,000

Factory heat, light and power

220,000

Total manufacturing cost

1,750,000 4,810,000

Decrease in goods in process

90,000

Cost of goods manufactured

4,900,000

Christian Company Income Statement Year Ended December 31, 2008

Note Sales revenue Cost of goods sold

8,000,000 (1)

(5,100,000)

Gross income

2,900,000

Expenses: Selling expenses Administrative expenses

(2)

800,000

(3)

930,000

1,730,000

Income before tax

1,170,000

Income tax expense

( 170,000)

Net income

1,000,000



4,900,000

Decrease in finished goods

200,000

Cost of goods sold

5,100,000

23

Note 2 – Selling expenses

Sales salaries

520,000

Advertising

120,000

Delivery expense

160,000

Total

800,000

Note 3 – Administrative expenses

Office supplies expense

30,000

Office salaries

800,000

Doubtful accounts

100,000

Total

930,000


Youth Company Income Statement Year ended December 31, 2008

Note Net sales revenue Cost of goods sold Gross income Expenses:

(1) (2)

8,870,000 (5,900,000) 2,970,000

Selling expenses Administrative expenses Other expense

(3) (4) (5)

690,000 580,000 340,000

1,610,000

Income before tax

1,360,000

Income tax expense

( 360,000)

Net income

1,000,000 21

Note 1 – Net sales revenue

Sales Sales returns and allowances

9,070,000 ( 200,000)

Net sales revenue

8,870,000


Beginning inventory Purchases Transportation in Purchase discounts Goods available for sale

1,500,000 5,750,000 150,000 ( 100,000)

5,800,000 7,300,000

Ending inventory

(1,400,000)

Cost of goods sold

5,900,000

Note 3 – Selling expenses

Depreciation – store equipment

110,000

Store supplies

80,000

Sales salaries

500,000

Total

690,000

Note 4 – Administrative expenses

Officers’ salaries

400,000

Depreciation – building

120,000

Office supplies

60,000

Total

580,000

Note 5 – Other expense

Uninsured flood loss

340,000

Valix Finacc vol 1 Problem 3-13 to 28

Problem 3-13 Answer B

Problem 3-14 Answer C

Problem 3-15 Answer A


Petty cash fund Undeposited collections

50,000

Payroll account

1,100,000

Value added tax account

2,500,000 1,000,000

Cash in bank

2,500,000

Traveler’s check

300,000

Total

3,650,000

Money order

700,000

Petty cash fund

40,000

Total

4,540,000


Checking account #101

1,750,000

Checking account #201

( 100,000)

Time deposit account

250,000

90-day Treasury bill

500,000

Total cash and cash equivalent

Problem 3-18

2,400,000

Answer B

Cash in First Bank

5,000,000

Change fund

50,000

Petty cash fund

15,000

Total

5,065,000


Cash balance per book

6,000,000

Credit adjustment

(1,600,000)

Adjusted cash balance

4,400,000

33

Note receivable Accounts receivable (400,000 + 200,000) Cash

1,000,000 600,000 1,600,000


Checkbook balance

8,000,000

Postdated customer check

(2,000,000)

NSF check

( 500,000)

Undelivered company check Adjusted balance

1,500,000 7,000,000


Cash on hand

2,400,000

Cash in bank

3,500,000

Petty cash

40,000

Saving deposit

2,000,000

Total deposit

7,940,000





Cash on hand and in bank

5,000,000

Time deposit

6,000,000

Saving deposit

1,000,000

Total

12,000,000


Currencies Coins Accommodation check

4,000 1,000 6,000

Total

11,000

Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 3-28


Coins and currency

2,000

Replenishment check

4,000

Total

6,000


Total petty cash

10,000

Currency and coins

( 3,000)

Amount of replenishment

7,000

Posted by Louie Lansang at 5:39 AM No comments: Labels: Finacc Volume 1 Chap 3, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 3-12 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 3-12 Requirement 1 2008 Dec. 1 Petty cash fund

10,000

Cash in bank

20 Selling expenses

10,000

5,000

Miscellaneous expenses Equipment

2,000 2,000

Cash in bank

9,000

31 Receivable from employee Selling expenses

2,000 1,500

Transportation

500

Petty cash fund

4,000

2009 Jan. 1 Petty cash fund

4,000

Receivable from employee

2,000

Selling expenses

1,500

Transportation

500

32 2009 Jan. 15 No entry

31 Selling expenses Administrative expenses Transportation Purchases Cash in bank

2,000 2,000 1,500 1,200 6,700

Requirement 2

Petty cash

10,000

Less: Petty cash expenses from December 21, 2008 to January 31, 2009:

Selling expenses (1,500 + 500) Administrative expenses Transportation (500 + 1,000) Purchases

2,000 2,000 1,500 1,200

6,700

Petty cash before replenishment

3,300

Posted by Louie Lansang at 5:37 AM No comments: Labels: Finacc Volume 1 Chap 3, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 3-11 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 3-11 2008 Nov. 2

Petty cash fund

10,000

Cash in bank

30

10,000

Postage

2,000

Supplies

5,000

Petty cash fund

10,000

Cash in bank

17,000

Dec. 31 Postage

3,000

Supplies

4,000

Special deposit

2,000

Petty cash fund

9,000

2009 Jan. 1 Petty cash fund

9,000

Postage

3,000

Supplies

4,000

Special deposit

2,000

2 No entry

31 Postage

5,000

Supplies

6,000

Accounts payable

7,000

Cash short or over

1,000

Cash in bank

19,000

Posted by Louie Lansang at 5:36 AM No comments: Labels: Finacc Volume 1 Chap 3, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 3-10 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 3-10 Fluctuating Fund System

May 2 Petty cash fund

Imprest Fund System

10,000

Cash in bank

May 2 Petty cash fund 10,000

10,000

Cash in bank

29 Postage

1,000

Supplies

3,000

Supplies

3,000

Transportation

2,500

Transportation

2,500

Miscellaneous expense Petty cash fund

29 Postage

10,000

1,500

1,000

Miscellaneous expense 1,500 8,000

Petty cash fund

Petty cash fund Cash in bank

8,000

8,000 8,000

June 30 Supplies Accounts payable Transportation

2,000 1,000

1 Petty cash fund

2,000

Accounts payable

1,000

Petty cash fund

July

June 30 Supplies

Transportation 4,000

1,000 1,000

Petty cash fund

4,000

4,000

Supplies

2,000

Postage

1,000

Transportation

1,000

To reverse the adjustment made on June 30.

15 Petty cash fund

5,000

July 15 Supplies

1,500

Supplies

3,500

Postage

500

Postage

1,500

Transportation

500

Transportation

1,500

Miscellaneous expense

Miscellaneous expense 500 Cash in bank

Petty cash fund

3,000

12,000 Petty cash fund Cash in bank

Valix Finacc vol 1 Problem 4-22 to 38 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 4-22 to 38


Balance per book Bank charges

500

4,000,000 (

10,000)

12,000 12,000

Customer note collected by bank

1,500,000

Interest on customer note

60,000

NSF customer check

( 250,000)

Depositor’s note charged to account

(1,000,000)

Adjusted book balance

4,300,000


Balance per bank

2,000,000

Add: Deposit in transit

200,000

Total Less: Outstanding checks Erroneous bank credit Adjusted bank balance

2,200,000 400,000 300,000

700,000 1,500,000

The adjusted cash in bank can also be computed by starting with the balance per book.

Balance per book Add: Proceeds of note collected Total

850,000 750,000 1,600,000

Less: NSF checks (150,000 – 50,000)

100,000


1,500,000


Balance per book

8,500,000

Note collected by bank

950,000

Book error (200,000 – 20,000) NSF check Bank service charge

( 180,000) ( 250,000) (

20,000)


9,000,000




Problem 4-28 Answer D

Balance per ledger Service charges Collection of note Book error Unrecorded check for traveling expenses

3,750,000 (

50,000) 1,500,000

( 100,000) ( 500,000)


4,600,000

Balance per bank

6,200,000

Deposit in transit

1,400,000

Total Outstanding checks (squeeze) Adjusted bank balance




7,600,000 3,000,000 4,600,000

Outstanding checks – May 31

3,000,000

Checks issued by depositor in June: Total credits to cash in June

9,000,000

Service charge in May recorded in June

( 100,000)

Total

8,900,000

11,900,000

Checks paid by bank in June: Checks and charges by bank in June

8,000,000

Service charge in June

(

50,000)

NSF check in June

(1,000,000)

6,950,000

Outstanding checks – June 30

4,950,000


Balance per book – June 30 Service charges Collection by bank NSF check Adjusted book balance

Balance per bank – June 30 Deposits outstanding – June 30

2,100,000 (

50,000) 550,000

( 100,000) 2,500,000

2,400,000 500,000

Checks outstanding – June 30

( 400,000)

Adjusted bank balance

2,500,000

Outstanding checks – May 31 Checks recorded by book in June Total Less: Checks recorded by bank in June Outstanding checks – June 30

100,000 2,500,000 2,600,000 2,200,000 400,000

Deposits outstanding – May 31

300,000

Deposits recorded by book in June

1,800,000

Total

2,100,000

Less: Deposits recorded by bank in June

1,600,000

Deposits outstanding – June 30

500,000


Note collected

1,936,000

Book error (1,930,000 – 1,390,000)

( 540,000)

NSF check

( 840,000)

Service charge

(

Net debt to cash

47,000)

509,000




Balance per bank – November 30 December deposits Total

3,600,000 5,500,000 9,100,000

December disbursements

(4,400,000)

Balance per bank – December 31

4,700,000

Deposit in transit – December

700,000

Outstanding checks – December

( 500,000)

Adjusted bank balance – December 31

Balance per book – December 31 (squeeze)

4,900,000

4,300,000

Note collected by bank

1,000,000

NSF check

( 350,000)

Service charge

( 50,000)


4,900,000


Bank disbursements for July Outstanding checks – June 30 checks – July 31

9,000,000 (1,400,000) Outstanding 1,000,000

Book disbursements for July

8,600,000


Bank receipts for April

6,000,000

Deposits in transit – March 31

(1,000,000)

Deposits in transit – April 30

1,500,000

Book receipts for April

6,500,000


May 31

Receipts

Disbursements

Balance per book

2,500,000

June 30

5,300,000

5,400,000

2,400,000

Bank service charge: May 31

(

20,000)

(

June 30

20,000) 25,000

(

25,000)

NSF check: June 30

200,000

( 200,000)

Interest collected: June 30

75,000

75,000

Book error: June 30

_________

( 300,000)

300,000

Adjusted balance

2,480,000

5,375,000

5,305,000

2,550,000

Balance per bank

2,700,000

5,500,000

5,600,000

2,600,000

625,000

( 625,000)

Deposit in transit May 31 June 30

500,000

500,000

Outstanding checks May 31

( 845,000)

( 845,000)

June 30 Adjusted balance

550,000 2,480,000

5,375,000

( 550,000)

5,305,000

2,550,000

Adjusting entries on June 30:

1. Cash in bank Interest income Equipment

375,000 75,000 300,000

2. Bank service charge

25,000

Accounts receivable

200,000

Cash in bank

225,000

Posted by Louie Lansang at 5:58 AM No comments: Labels: Finacc Volume 1 Chap 4, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 4- 20 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 4-20 Sept. 30

Receipts

Book balance

Disbursements

1,900,000

Oct. 31

1,400,000

2,400,000

900,000

NSF check: September 30

( 60,000)

(

October 31

60,000) 40,000

( 40,000)

Collection of accounts receivable September 30

30,000

October 31

( 30,000) 50,000

50,000

Overstatement of check September 30

90,000

October 31

( 90,000) ________

( 120,000)

120,000

Adjusted balance

1,960,000

1,330,000

2,260,000

1,030,000

Bank balance

2,100,000

1,200,000

2,500,000

800,000

Deposit in transit September 30 October 31

130,000

( 130,000) 260,000

260,000

Outstanding checks September 30

( 270,000)

( 270,000)

October 31 Adjusted balance

30,000 ( 1,960,000

1,330,000

30,000)

2,260,000

1,030,000

Adjusting entries on October 31

1. Accounts receivable

40,000

Cash in bank

2. Cash in bank Accounts receivable Salaries

40,000

170,000 50,000 120,000

Valix Finacc vol 1 Problem 5-30 to 44 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 5-30 to 44 Problem 5-30 Answer B

Accounts receivable-January 1 Credit sales Collections from customers

1,300,000 5,500,000 (5,000,000)

Sales return

( 150,000)

Accounts written off

( 100,000)

Accounts receivable-December 31

1,550,000

Allowance for doubtful accounts

( 250,000)

Allowance for sales return

( 50,000)

Net realizable value

1,250,000


Trade accounts receivable

2,000,000


( 100,000)

Claim receivable

300,000

Total trade and other receivables

2,200,000


Accounts receivable (squeeze)

6,700,000

Allowance for doubtful accounts (900,000 – 200,000)

( 700,000)


6,000,000


Allowance – January 1

300,000

Doubtful accounts expense

650,000

Recovery of accounts written off

100,000

Total

1,050,000


450,000

Allowance – December 31

600,000

70 Problem 5-34 Answer D


280,000

Uncollectible accounts expense (squeeze)

100,000


50,000

Total Accounts written off

430,000 (230,000)

Allowance – December 31 (2,700,000 – 2,500,000)

200,000



180,000


50,000

Total Accounts written off (squeeze) Allowance – December 2008

230,000 30,000 200,000


0 –60 days (1,200,000 x 1%)

12,000

61 – 120 days (900,000 x 2%)

18,000

Over 120 days (1,000,000 x 6%)

60,000

Allowance – December 31, 2008

90,000


60,000


80,000

Recovery Total Accounts written off Allowance – December 31, 2008

20,000 160,000 ( 70,000) 90,000


Allowance for sales discount (5,000,000 x 2% x 50%)

50,000



Doubtful accounts expense (3% x 3,000,000 + 10,000)

100,000


Doubtful accounts expense (2% x 7,000,000)

140,000

71 Problem 5-41 Answer A

Allowance – January 1 Doubtful accounts expense (4% x 5,000,000) Collection of accounts written off Total Accounts written off Allowance – December 31

40,000 200,000 10,000 250,000 30,000 220,000



250,000

Doubtful accounts expense (squeeze)

175,000

Total

425,000


205,000


220,000


Problem 5-44 Answer A Posted by Louie Lansang at 6:33 AM 2 comments: Labels: Finacc Volume 1 Chap 5, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 5-29 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 5-29 12/31/2008

Impairment loss

338,500

Allowance for loan impairment

338,500

The remaining term of the loan is 4 years. Accordingly, the present value factor for 4 periods is used.

Present value of principal (500,000 x .735) Present value of interest (80,000 x 5 = 400,000 x .735) Total present value of loan

367,500 294,000 661,500

Loan receivable

12/31/2009

1,000,000

Present value of loan

661,500

Loan impairment loss

338,500


52,920

Interest income (8% x 661,500)

52,920

Posted by Louie Lansang at 6:32 AM No comments: Labels: Finacc Volume 1 Chap 5, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 5-29 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 5-29 12/31/2008

Impairment loss

338,500


338,500


Present value of principal (500,000 x .735) Present value of interest (80,000 x 5 = 400,000 x .735) Total present value of loan

Loan receivable

367,500 294,000 661,500

1,000,000


661,500


338,500

12/31/2009


52,920


52,920

Posted by Louie Lansang at 6:31 AM No comments: Labels: Finacc Volume 1 Chap 5, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 5-28 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 5-28 December 31, 2011 ( 360,000 x .772)

277,920

Face value of loan

4,000,000

December 31, 2012 ( 360,000 x .708)

254,880


December 31, 2013 ( 360,000 x .650)

234,000

Impairment loss

3,365,360 634,640

December 31, 2014 (4,360,000 x .596) 2,598,560 Total present value of loan

2008

3,365,360

Cash

360,000

Interest income

Impairment loss

360,000

634,640


2009


634,640

302,882

Interest income (9% x 3,365,360)

2010


302,882

331,758

Interest income (634,640 – 302,882)

2011

Cash Interest income

331,758

360,000 360,000

2012

Cash

360,000

Interest income

2013

Cash

360,000

360,000

Interest income

2014

Cash

360,000

4,360,000

Interest income

360,000

Loan receivable

4,000,000

Posted by Louie Lansang at 6:30 AM No comments: Labels: Finacc Volume 1 Chap 5, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 5-27 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 5-27 Requirement 1

December 31, 2009 ( 500,000 x .89)

445,000

December 31, 2010 (1,000,000 x .80)

800,000

December 31, 2011 (2,000,000 x .71)

1,420,000

December 31, 2012 (4,000,000 x .64)

2,560,000

Total present value of loan

5,225,000

Requirement 2

Loan receivable

7,500,000

Accrued interest receivable (12% x 7,500,000)

900,000

Total carrying value

8,400,000


5,225,000

Impairment loss

3,175,000

Requirement 3

2008

Impairment loss

3,175,000

Accrued interest receivable

900,000


2009

2,275,000

Cash

500,000

Loan receivable

500,000


627,000

Interest income (12& x 5,225,000)

2010

Cash

627,000

1,000,000

Loan receivable


1,000,000

642,240

Interest income

Loan receivable – 12/31/2009 Allowance for loan impairment (2,275,000 – 627,000) Carrying value – 12/31/2009

Interest income for 2010 (12% x 5,352,000) Valix Finacc vol 1 Problem 5-30 to 44

642,240

7,000,000 (1,648,000) 5,352,000

642,240

Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 5-30 to 44 Problem 5-30 Answer B

Accounts receivable-January 1 Credit sales Collections from customers

1,300,000 5,500,000 (5,000,000)

Sales return

( 150,000)


( 100,000)

Accounts receivable-December 31

1,550,000


( 250,000)

Allowance for sales return

( 50,000)


1,250,000


Trade accounts receivable

2,000,000


( 100,000)

Claim receivable

300,000

Total trade and other receivables

2,200,000


Accounts receivable (squeeze) Allowance for doubtful accounts (900,000 – 200,000) Net realizable value


6,700,000 ( 700,000) 6,000,000


300,000


650,000


100,000

Total

1,050,000


450,000


600,000

70 Problem 5-34 Answer D


280,000


100,000


50,000

Total Accounts written off Allowance – December 31 (2,700,000 – 2,500,000)

430,000 (230,000) 200,000



180,000


50,000

Total Accounts written off (squeeze) Allowance – December 2008


230,000 30,000 200,000

0 –60 days (1,200,000 x 1%)

12,000

61 – 120 days (900,000 x 2%)

18,000

Over 120 days (1,000,000 x 6%)

60,000


90,000


60,000


80,000

Recovery Total Accounts written off Allowance – December 31, 2008

20,000 160,000 ( 70,000) 90,000


Allowance for sales discount (5,000,000 x 2% x 50%)

50,000



Doubtful accounts expense (3% x 3,000,000 + 10,000)

100,000


Doubtful accounts expense (2% x 7,000,000)

140,000


Allowance – January 1 Doubtful accounts expense (4% x 5,000,000)

40,000 200,000

Collection of accounts written off Total

10,000 250,000


30,000


220,000



250,000

Doubtful accounts expense (squeeze) Total

175,000 425,000


205,000


220,000


Problem 5-44 Answer A Posted by Louie Lansang at 6:33 AM 2 comments: Labels: Finacc Volume 1 Chap 5, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 5-29

Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 5-29 12/31/2008

Impairment loss

338,500


338,500


Present value of principal (500,000 x .735)

367,500

Present value of interest (80,000 x 5 = 400,000 x .735)

294,000


661,500

Loan receivable

12/31/2009

1,000,000


661,500


338,500


52,920


52,920

Posted by Louie Lansang at 6:32 AM No comments: Labels: Finacc Volume 1 Chap 5, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 5-29 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 5-29 12/31/2008

Impairment loss Allowance for loan impairment

338,500 338,500


Present value of principal (500,000 x .735)

367,500

Present value of interest (80,000 x 5 = 400,000 x .735)

294,000


661,500

Loan receivable

12/31/2009

1,000,000


661,500


338,500


52,920


52,920

Posted by Louie Lansang at 6:31 AM No comments: Labels: Finacc Volume 1 Chap 5, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 5-28 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 5-28 December 31, 2011 ( 360,000 x .772)

277,920

Face value of loan

4,000,000

December 31, 2012 ( 360,000 x .708)

254,880


December 31, 2013 ( 360,000 x .650)

234,000

Impairment loss

3,365,360 634,640

December 31, 2014 (4,360,000 x .596) 2,598,560 Total present value of loan

2008

Cash Interest income

3,365,360

360,000 360,000

Impairment loss

634,640


2009


634,640

302,882

Interest income (9% x 3,365,360)

2010


302,882

331,758

Interest income (634,640 – 302,882)

2011

Cash

331,758

360,000

Interest income

2012

Cash

360,000

360,000

Interest income

2013

Cash

360,000

360,000

Interest income

2014

Cash

360,000

4,360,000

Interest income

360,000

Loan receivable

4,000,000


December 31, 2009 ( 500,000 x .89)

445,000

December 31, 2010 (1,000,000 x .80)

800,000

December 31, 2011 (2,000,000 x .71)

1,420,000

December 31, 2012 (4,000,000 x .64)

2,560,000


5,225,000

Requirement 2

Loan receivable

7,500,000

Accrued interest receivable (12% x 7,500,000)

900,000

Total carrying value

8,400,000


5,225,000

Impairment loss

3,175,000

Requirement 3

2008

Impairment loss

3,175,000


900,000


2009

Cash

2,275,000

500,000

Loan receivable


500,000

627,000

Interest income (12& x 5,225,000)

2010

Cash Loan receivable

627,000

1,000,000 1,000,000


642,240

Interest income

642,240

Loan receivable – 12/31/2009

7,000,000

Allowance for loan impairment (2,275,000 – 627,000)

(1,648,000)

Carrying value – 12/31/2009

5,352,000

Interest income for 2010 (12% x 5,352,000)

642,240

Valix Finacc vol 1 Problem 7-61 to 70 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 7-61 to 70 (Multiple Choice) Problem 7-61 Answer B

Units

Unit cost

Total cost

January 1

40,000

5

200,000

January 17

(35,000)

5

(175,000)

Balance

5,000

January 28

20,000

8

160,000

Balance

25,000

7.40

185,000

5

25,000

Problem 7-62 Answer D Units

Total cost

January 1

200

300,000

April

3

300

525,000

October 1

500

1,000,000

1,000

1,825,000

Total

Less: Sales (400 + 400)

800

Ending inventory

200

Average unit cost (1,825,000/1,000)

1,825

Cost of inventory (200 x 1,825)

365,000

106 Problem 7-63 Answer C Units

Unit cost

Total cost

January 1

8,000

200

1,600,000

8

( 4,000)

200

( 800,000)

4,000

200

800,000

20 (3,680,000/16,000 = 230)

12,000 16,000

240

2,880,000 230

3,680,000

Problem 7-64 Answer C Problem 765 Answer B

Estimated selling price Cost of disposal Net realizable value (lower than cost)

4,050,000 ( 200,000) 3,850,000


Estimated sales price Cost to complete

4,000,000 (1,200,000)


2,800,000

FIFO cost (lower than NRV)

2,600,000


Inventory – January 1

700,000

Purchases

3,300,000

Goods available for sale

4,000,000

Less: Inventory – December 31

600,000

Cost of goods sold before inventory writedown

3,400,000

Loss on inventory writedown

100,000

Cost of goods sold after inventory writedown

3,500,000


Sales price

Fraction

Allocated cost

A (100 x 240,000)

24,000,000

24/60

6,000,000

B (100 x 160,000)

16,000,000

16/60

4,000,000

C (200 x 100,000)

20,000,000

20/60

5,000,000

60,000,000

15,000,000


Problem 7-70 Answer B Posted by Louie Lansang at 8:45 PM No comments: Labels: Finacc Volume 1 Chap 7, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 7-51 to 60

Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 7-51 to 60 (Multiple Choice) Problem 7-51 Answer B

List price

1,000,000

Trade discounts 20% x 1,000,000

( 200,000) 800,000

10% x 800,000 Invoice price

( 80,000) 720,000

Cash discount (5% x 720,000) Net amount

( 36,000) 684,000

Freight charge

50,000

Total remittance

734,000



Purchases of IBM compatibles

1,700,000

Purchases of commercial software packages

1,200,000

Total Less: Purchase return Net purchases

Discounts available on purchases (2% x 2,850,000) Less: Purchase discount taken Purchase discount lost

2,900,000 (

50,000)

2,850,000

57,000 17,000 40,000


Accounts payable per book

2,000,000

Goods lost in transit, FOB shipping point

100,000

Purchase return

(

50,000)

Adjusted balance

2,050,000


Accounts payable per book

900,000

Undelivered checks

400,000

Unrecorded purchases on December 28 (150,000 x 98%)

147,000

Purchase on December 20 (200,000 x 95%)

190,000 1,637,000


Net sales per book

5,000,000

Sales return

(

Goods shipped on December 31, 2008

50,000) 300,000

Goods shipped on January 3, 2009 recorded on December 30, 2008 Adjusted balance

( 200,000) 5,050,000


Gross sales Estimated sales return (10% x 4,000,000) Net sales

4,000,000 ( 400,000) 3,600,000


Units

Unit cost

Total cost

January 18

15,000

23

345,000

28

10,000

24

240,000

Total FIFO cost

25,000

585,000


(4,500 x 73.50)

330,750


Units

Unit cost

Total cost

January 10

2,000

100

200,000

February 8

3,000

110

330,000

5,000

Weighted average unit cost (530,000/5,000)

Cost of inventory (3,000 x 106) Posted by Louie Lansang at 8:43 PM No comments: Labels: Finacc Volume 1 Chap 7, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 7-41 to 50 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 7-41 to 50 (Multiple Choice) Problem 7-41 Answer C

530,000

106

318,000

Physical count

1,500,000


Physical count

2,500,000

Merchandise shipped FOB shipping point on December 30, 2008 from a vendor

100,000

Goods shipped FOB shipping point to a customer on January 4, 2009 Correct inventory

400,000 3,000,000

103



Markup (40% x 500,000)

200,000

Goods received on consignment

400,000

Total reduction

600,000


Inventory shipped on consignment

600,000

Freight paid

50,000

Consigned inventory

650,000


Reported inventory

2,000,000

Goods sold in transit, FOB destination Goods purchased in transit, FOB shipping point Correct amount of inventory

200,000 300,000 2,500,000



Consignment sales revenue (40 x P10,000)

400,000


Sales (900 x 1,000)

900,000

Commission (10% x 900,000)

( 90,000)

Payable to consignor

810,000


List price

900,000

Trade discounts 20% x 900,000

(180,000) 720,000

10% x 720,000 Invoice price Freight

( 72,000) 648,000 50,000

Cost of purchase

698,000

Valix Finacc vol 1 Problem 8-37 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 8-37

Cost Inventory, January 1, 2008 Purchases adjusted for markup and markdown

72%


Retail

420,000

600,000

5,011,200

6,960,000

5,431,200

7,560,000

Sales – 2008

(6,839,000)

Inventory, December 31, 2008

721,000

FIFO cost (721,000 x 72%)

519,120

Inventory, January 1, 2009 Purchases adjusted

70%


519,120

721,000

4,970,000

7,100,000

5,489,120

Sales – 2009 Inventory, December 31, 2009

FIFO cost (788,800 x 70%)

7,821,000

(7,033,000) 788,000

551,600

Posted by Louie Lansang at 11:22 PM 1 comment: Labels: Finacc Volume 1 Chap 8, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 8-36

Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 8-36 Cost Inventory – January 1, 2008 Purchases

Retail

556,800

928,000

4,576,000

7,028,000

Net markup Net markdown

42,000 ________

(

30,000)

Net purchases (65%)

4,576,000

7,040,000


5,132,800

7,968,000

Sales

(6,840,000)

Inventory – December 31, 2008

1,128,000

FIFO inventory (65% x 1,128,000)

733,200

1,128,000

119

Cost Inventory – January 1, 2009 Purchases

Retail

733,200 4,760,000

1,128,000 6,812,000

Net markup

56,000

Net markdown

________

Net purchases (70%)

4,760,000

6,800,000


5,493,200

7,928,000

Sales Inventory – December 31, 2009

( 68,000)

(6,928,000) 1,000,000

FIFO inventory (70% x 1,000,000)

700,000

1,000,000

Posted by Louie Lansang at 11:15 PM No comments: Labels: Finacc Volume 1 Chap 8, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 8-35 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 8-35

Cost Finished goods – January 1 Cost of goods manufactured (squeeze Goods available for sale

144,000

240,000

1,200,000

2,000,000

1,344,000

Less: Finished goods – December 31

2,240,000

504,000

Cost of goods sold

840,000

840,000 1,400,000

The amount of goods manufactured at retail is determined by simply working back.

Goods manufactured at cost Cost ratio = ------------------------------------------------Goods manufactured at retail

=

1,200,000/2,000,000

=

60%

Finished goods:

January 1 - 240,000 x 60%

144,000

December 31 - 840,000 x 60%

Posted by Louie Lansang at 11:13 PM No comments: Labels: Finacc Volume 1 Chap 8, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 8-34

504,000

Retail


Cost Inventory, January 1 Purchases

560,000

1,000,000

4,000,000

6,200,000

Markup (5,000 x 100)

500,000

Markup cancelation (1,000 x 100) Goods available for sale – conservative

(60%)

Markdown

_________

( 100,000)

4,560,000

7,600,000

_________

Goods available for sale – average

(64%)

( 475,000)

4,560,000

Net sales

7,125,000

(5,200,000)

Inventory, December 31

1,925,000

Conservative cost (1,925,000 x 60%)

1,155,000

Average cost

1,232,000

(1,925,000 x 64%)

Posted by Louie Lansang at 10:55 PM No comments: Labels: Finacc Volume 1 Chap 8, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 8-33 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 8-33 cost 1. Opening inventory

retail 1,650,000

Purchases

3,700,000

Freight in

200,000

Purchase allowances Departmental transfer – credit

2,200,000 4,950,000

( 100,000) ( 200,000)

( 300,000)

Retail

Additional markup

180,000

Markup cancellation

________

Goods available for sale – conventional

5,250,000

Cost ratio (5,250/7,000)

( 30,000) 7,000,000

75%

Markdown (500,000 – 400,000) Goods available for sale – average

Less: Sales Inventory shortage

________ 5,250,000

6,900,000

4,000,000 100,000

4,100,000

Ending inventory at sales price

Ending inventory at cost (2,800,000 x 75%)

( 100,000)

2,800,000

2,100,000

2. Goods available for sale

5,250,000

Less: Ending inventory

2,100,000

Cost of sales

3,150,000

Posted by Louie Lansang at 10:54 PM No comments: Labels: Finacc Volume 1 Chap 8, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 8-32 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 8-32

Cost Beginning inventory

Retail

168,000

Purchases

2,806,000

Freight in

42,000

Markup Markup cancellation Goods available for sale – conservative

400,000 3,100,000

300,000 _______ 3,016,000

(

30,000)

3,770,000

Cost ratio (3,016/3,770)

80%

Markdown

( 150,000)

Markdown cancellation

_________


3,016,000

Less: Sales

3,000,000

Shrinkage (4% x 3,000,000)

40,000

3,660,000

120,000

Ending inventory

3,120,000

540,000

Conservative cost (540,000 x 80%)

432,000

Physical inventory (500,000 x 80%)

400,000

Shortage

32,000


400,000

Inventory shortage

32,000

Income summary

432,000


Cost Beginning inventory

340,000

Purchases

4,500,000

Freight in

100,000

Purchase returns

( 150,000)

Purchase allowances

(

Departmental transfer in

Retail 640,000 7,300,000

( 250,000)

90,000) 100,000

160,000

Markup

________

Goods available for sale – conventional Cost ratio (4,800/8,000)

4,800,000

________


4,800,000

( 500,000) 7,500,000

64%

Less: Sales

6,600,000

Employee discount

100,000

Spoilage and breakage

200,000

Ending inventory

6,900,000 600,000

Conservative cost (600,000 x 60%) Average cost

8,000,000

60%

Markdown

Cost ratio (4,800/7,500)

150,000

(600,000 x 64%)

360,000 384,000

Posted by Louie Lansang at 7:58 AM No comments: Labels: Finacc Volume 1 Chap 8, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 8-21 to 30 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 8-21 to 30


Raw materials – January 1

300,000

Purchases

1,000,000

Freight in

100,000

Raw materials available for use Less: Raw Materials – December 31 Raw materials used Direct labor

1,100,000 1,400,000 600,000 800,000 800,000

Manufacturing overhead (50% x 800,000)

400,000

Total manufacturing cost

2,000,000

Add: Goods in process – January 1

1,000,000

Total goods in process

3,000,000

Less: Goods in process – December 31 (squeeze)

1,300,000


1,700,000

Add: Finished goods – January 1

1,400,000


3,100,000

Less: Finished goods _ December 31

1,000,000

Cost of sales (70% x 3,000,000)

2,100,000

The amount of goods in process on December 31is computed as simply working back.

Problem 8-22 Requirement a

Physical inventory May 31, 2008 Balances

Purchases up to

Purchases up to

May 31, 2008

June 30, 2008

950,000

6,750,000

8,000,000

1

-

2

-

(

10,000)

(

15,000)

3

-

(

20,000)

(

20,000)

4

( 55,000)

Adjusted

Inventory – July 1, 2007 Purchases up to May 31, 2008 Goods available for sale Less: Inventory – May 31, 2008

895,000

75,000

(

55,000) 6,740,000

-

-_ __ 7,965,000

875,000 6,740,000 7,615,000 895,000

Cost of sales

6,720,000

Sales up to May 31, 2008

8,400,000

Cost of sales

6,720,000

Gross profit

1,680,000

Rate (1,680,000/8,400,000)

20%

Requirement b

Sales for year ended June 30, 2008

9,600,000

Less: Sales for 11 months ended May 31, 2008

8,400,000

Sales for June

1,200,000 113

Cost of goods sold with profit (1,100,000 x 80%)

880,000

Cost of goods sold without profit

100,000

Cost of goods sold during June 2008

980,000

Requirement c

Inventory, July 1, 2007

875,000

Purchases for year ended June 30, 2008 (as adjusted)

7,965,000


8,840,000

Less: Cost of goods sold Sales with profit (9,500,000 x 80%) Sales without profit

7,600,000 100,000

7,700,000

Inventory, June 30, 2008

1,140,000

Problem 8-23

1. Accounts receivable – April 30

1,040,000

Writeoff

60,000

Collections (440,000 – 20,000)

420,000

Total

1,520,000

Less: Accounts receivable – March 31

920,000

Sales for April

600,000

Sales up to March 31

3,600,000

Total sales

4,200,000

2. Accounts payable – April 30 for April shipments

340,000

Payment for April merchandise shipments

80,000

Purchases of April

420,000

Purchases up to March 31

1,680,000

Total purchases

2,100,000

3. Inventory – January 1 Purchases Less: Purchases return

1,880,000 2,100,000 20,000


2,080,000 3,960,000

Less: Cost of sales (4,200,000 x 60%)

2,520,000

Inventory – April 30 Less: Goods in transit Salvage value Fire loss

1,440,000 100,000 140,000

240,000

1,200,000

114 Problem 8-24 Answer B

Cost Inventory – January 1

280,000

Purchases

2,480,000

Freight in

75,000

Markup __ __ __ _

GAS

2,835,000

GAS – Average

5,160,000

( 60,000) 6,300,000

45%

Markdown Markdown cancellation

700,000

500,000

Markup cancellation

Cost ratio (2,835/6,300)

Retail

( 250,000) _

__ _

50,000

2,835,000

6,100,000

Sales

(5,000,000)

Shrinkage (2% x 5,000,000)

( 100,000)

Inventory – December 31

1,000,000

Conservative cost (1,000,000 x 45%)

450,000

The “approximate lower of average cost or market” retail is the same as the conservative or conventional retail.


Cost Inventory – January 1

Retail

720,000

Purchases

4,080,000

Markup __ _____

GAS

4,800,000

( 500,000) 7,500,000

64%

Sales

(5,900,000)

Shoplifting losses

( 100,000)

Inventory

Average cost (1,500,000 x 64%)

6,300,000 700,000

Markdown

Cost ratio (4,800/7,500)

1,000,000

1,500,000

960,000

115



Cost

Retail

Cost

Beginning inventory

Beginning inventory

and purchases

6,000,000 9,200,000

Purchases

Net markup

________

Net markups

GAS

6,000,000 9,600,000

400,000

Retail

600,000 1,500,000 3,000,000 5,500,000 500,000

Net markdown

Net purchases

__ _____ (1,000,000) 3,000,000 5,000,000

Cost ratio (6,000/9,600) = 62.5%

Cost ratio (3,000/5,000) = 60%

Sales Net markdown Ending inventory

(7,800,000) ( 600,000) 1,200,000

GAS

3,600,000

6,500,000

Sales

(4,500,000)

Ending inventory

2,000,000

Conservative cost (1,200,000 x 62.5%)

750,000

FIFO cost (2,000,000 x 60%)

Goods available for sale Less: Ending inventory Cost of sales

1,200,000

6,000,000 750,000 5,250,000

Problem 8-28 Answer A Cost Inventory – January 1

1,200,000

Purchases

5,600,000

Freight in

400,000

Net markup

Retail 1,800,000 7,200,000

1,400,000

Net markdown

________

Net purchases (6,000/8,000)

75%


( 600,000)

6,000,000 7,200,000

Sales

8,000,000 9,800,000

(7,600,000)

Inventory – December 31

2,200,000 FIFO cost (2,200,000 x

75%)

1,650,000


7,200,000

Less: Inventory – December 31

1,650,000

Cost of goods sold

5,550,000

Problem 8-29 Answer C Cost Available for sale

4,900,000

Markdown

7,000,000 ( 100,000)

Sales

(5,500,000)


1,400,000

Average cost (1,400,000 x 71%)

Cost ratio (4,900,000 / 6,900,000)

Retail

994,000

71% 116

Problem 8-30

Cost Inventory, January 1 Purchases

500,000 3,070,000

Retail 770,000 4,300,000

Transportation in

70,000

Purchases return

(

25,000)

Purchase discount

(

45,000)

Markup

40,000)

100,000

Cancelation of markup

________

Goods available for sale – conservative Cost ratio – conservative (357/510)

3,570,000

(

30,000) 5,100,000

70%

Markdown

( 350,000)

Cancelation of markdown

________

Goods available for sale – average cost

Cost ratio – average cost (357/476) Less: Sales

3,570,000

10,000 4,760,000

75% 4,000,000

Sales return

(

80,000)

Inventory, December 31 at selling price

Conservative cost (840,000 x 70%) Average cost

(

(840,000 x 75%)

3,920,000 840,000

588,000 630,000


Problem 9-21

Question 1 – Answer B

Market value – December 31, 2008

1,550,000


1,000,000

Unrealized gain – trading

550,000

127

Question 2 – Answer A


1,300,000


1,200,000

Unrealized gain in 2008

100,000

Unrealized loss – December 31, 2007 (1,500,000 – 1,200,000) Net unrealized loss – December 31, 2008

( 300,000) ( 200,000)


The unrealized loss of P40,000 on trading securities is shown in the income statement.

However, the unrealized loss of P100,000 on available for sale securities is recognized in equity.


Unrealized losses

260,000

Unrealized gains

40,000

Net unrealized loss – December 31, 2008

220,000


Net sales price

1,450,000

Unrealized loss related to B

( 150,000)

Net amount

1,300,000

Carrying amount of B

(1,550,000)

Loss on sale

( 250,000)

Net sales price (1,500,000 – 50,000)

1,450,000

Less: Cost of B

1,700,000

Loss on sale

( 250,000)



850,000


800,000


50,000

Unrealized loss – December 31, 2007

(200,000)

Net unrealized loss – December 31, 2008

(150,000)


Available for sale equity securities, at cost

2,200,000

Unrealized loss

( 200,000)

Market value

2,000,000

128


12/31/2007

Unrealized loss - AFS

200,000

Available for sale securities

12/31/2008

200,000

(2,000,000 – 1,800,000)


50,000

Unrealized loss – AFS (1,850,000 – 1,800,000)

50,000

Posted by Louie Lansang at 3:17 AM No comments: Labels: Finacc Volume 1 Chap 9, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 9-16 to 20 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 9-16 to 20 Multiple Choice

Problem 9-16 Answer A 1,000,000

Cost 800,000

Market

B common

1,500,000

1,800,000

C preferred

2,000,000

1,700,000

D preferred

2,500,000

2,600,000

Total

7,000,000

A common

6,900,000

Problem 9-17 Answer A Cost

Market

Man

1,000,000

900,000

Kemo

900,000

1,100,000

Penn

1,100,000

800,000

Total

3,000,000

2,800,000

Unrealized loss (3,000,000 – 2,800,000)


200,000

Total market value – December 31, 2008

2,000,000


1,650,000

Unrealized gain

350,000



4,500,000


4,800,000

Unrealized loss in 2008

( 300,000)


( 200,000)

Total unrealized loss – December 31, 2008

( 500,000)



1,600,000


1,300,000


300,000


( 200,000)

Net unrealized gain – December 31, 2008

100,000

Posted by Louie Lansang at 3:16 AM No comments: Labels: Finacc Volume 1 Chap 9, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 9-15 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 9-15 01/01/2008 Available for sale securities Cash

6,500,000 6,500,000

12/31/2008 Unrealized loss – AFS

750,000


750,000

(6,500,000 – 5,750,000)

06/30/2009 Unrealized loss – AFS

450,000


450,000

(5,750,000 – 5,300,000)

06/30/2009 Held to maturity securities

5,300,000


5,300,000

12/31/2009 No entry is required to recognize the decrease in value of P400,000 (P5,300,000 – P4,900,000).

The total unrealized loss of P1,200,000 on the reclassification of AFS securities will continue to be reported as part of equity as a deduction. However, it is amortized through interest income over the remaining life of the debt security starting June 30, 2009. Posted by Louie Lansang at 3:15 AM No comments: Labels: Finacc Volume 1 Chap 9, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 9-14 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 9-14 2008 Jan. 1 Held to maturity securities

3,649,600

Cash

Dec. 31 Cash (8% x 4,000,000) Interest income

3,649,600

320,000 320,000

31 Held to maturity securities

44,960

Interest income

44,960

Interest income (10% x 3,649,600) Interest received

364,960 320,000 Amortization

44,960

2009 Dec. 31 Cash

320,000

Interest income

320,000

31 Held to maturity securities

49,456

Interest income

49,456

Interest income (10% x 3,694,560) Interest received

369,456 320,000 Amortization

49,456

31 Available for sale securities

3,744,016

Held to maturity securities

31 Available for sale securities Unrealized gain – AFS

Market value (4,000,000 x 105) Book value

3,744,016

455,984 455,984

4,200,000 3,744,016

Unrealized gain

455,984

Posted by Louie Lansang at 3:15 AM No comments: Labels: Finacc Volume 1 Chap 9, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 9-13 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 9-13 2008 Available for sale securities

6,000,000

Cash

6,000,000

Unrealized loss – AFS

300,000

Available for sale securities (6,000,000 – 5,700,000)

2009 Unrealized loss – AFS

300,000

500,000

Available for sale securities (5,700,000 – 5,200,000)


500,000

5,200,000


5,200,000

The total unrealized loss of P800,000 (300,000 + 500,000) will still be reported in equity but it will be subsequently amortized through interest income over the remaining term of the debt securities. Posted by Louie Lansang at 3:13 AM No comments: Labels: Finacc Volume 1 Chap 9, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 9-12 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 9-12 01/01/2008

Trading securities AFS securities

2,000,000 4,000,000

Cash

12/31/2008

Trading securities

6,000,000

500,000

Unrealized gain – TS

12/31/2008


500,000

700,000

AFS securities

12/31/2009

Trading securities

700,000

200,000

Unrealized gain - TS

Impairment loss – AFS

200,000

700,000


12/31/2010

Unrealized loss – TS

700,000

600,000

Trading securities

AFS securities Unrealized gain – AFS (4,200,000 – 3,300,000)

600,000

900,000 900,000


Sales price (50,000 x 10) Cost of rights sold (10/100 x 3,600,000)

500,000 360,000

Gain on sale of rights

140,000

138


Cost of rights (18/150 x 500,000)

60,000

Cost paid for new shares (2,500 shares x 90)

225,000

Total cost of new investment

285,000

Cost per share (285,000 / 2,500 shares)

114


Cost of 2006 rights (4/100 x 180,000)

7,200

Cost of 2007 rights (4/100 x 330,000)

13,200

Total cost of rights

20,400

900 shares x 5 rights

4,500 rights

Cash paid (900 x 80)

72,000

Cost of rights exercised 2006 – 2,250 rights 2007 – 2,250 rights (2,250/3,750 x 13,200) Total cost of 900 shares Posted by Louie Lansang at 3:39 AM No comments: Labels: Finacc Volume 1 Chap 10, Finacc Volume 1 Solutions, Valix Solutions

7,200 7,920 87,120

Valix Finacc vol 1 Problem 10-21 to 25 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 10-21 to 25 Problem 10-21 Answer D

Cash dividend (10% x 500,000)

50,000


Dividend income (2,000 x 60)

120,000


Sales price (80,000 x 30)

2,400,000

Less: Cost of shares sold (80,000 x 40)

3,200,000

Loss on disposal

( 800,000)

Problem 10-24 Answer A June 1 Original shares Stock dividend – 20% Total shares

December 1

20,000

30,000

4,000

6,000

24,000

36,000

Sales price (30,000 x 125)

3,750,000

Cost of shares sold: From June 1 – 24,000 shares

2,000,000

From December 1 – 6,000 shares (6,000 / 36,000 x 3,600,000) Gain on sale

600,000

1,150,000

2,600,000


Cost of rights (5/100 x 8,000,000)

400,000

Posted by Louie Lansang at 3:39 AM No comments: Labels: Finacc Volume 1 Chap 10, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 10-15 to 20 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 10-15 to 20 Problem 10-15 Answer A

Purchase price (4,000 x P100) Brokerage Total Less: Dividend purchased (4,000 x 5) Acquisition cost

400,000 12,000 412,000 20,000 392,000


Fair value of asset given (land)

3,000,000


Original shares acquired January 15 Stock dividend on March 31 (20% x 50,000) Total shares

Dividend income – cash dividend on December 15 (60,000 x 5)

50,000 10,000 60,000

300,000


Dividend income – cash dividend on July 1

Original shares on March 1

100,000

20,000

Stock dividend on December 1 (10% x 20,000) Total shares

2,000 22,000


Original shares on October 1, 2007 Stock dividend on November 30, 2008 (10%) Total shares Shares sold on December 31, 2008 Balance

Sales price Cost of shares sold (4,000/44,000 x 6,600,000) Gain on sale

40,000 4,000 44,000 ( 4,000) 40,000

1,000,000 ( 600,000) 400,000


Shares received as property dividend (5,000/5)

1,000

Dividend income (1,000 x 100)

100,000

Posted by Louie Lansang at 3:37 AM No comments: Labels: Finacc Volume 1 Chap 10, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 10-14 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 10-14 Jan. 2 Investment in King Corporation

700,000

Cash

Mar. 1 Investment in Plastic Company

700,000

660,000

Cash

Apr. 1 Cash (10,000 x 5)

660,000

50,000

Dividend income

50,000

July 1 Received 2,000 shares as 20% stock dividend on 10,000 Plastic Company shares originally held. Shares now held, 12,000.

Aug. 1 Investment in Makati Corporation

500,000

Cash

500,000

Oct. 1 Received 60,000 new shares of Plastic Company as a result of a 5 for 1 split of 12,000 original shares.

1 Cash (10,000 x 5) Dividend income

50,000 50,000

31 Stock rights (3/33 x 660,000)

60,000

Investment in Plastic Company

Nov. 15 Investment in Plastic Company

60,000

180,000

Cash (6,000 shares x 20)

120,000

Stock rights

Dec. 1 Cash (66,000 shares x 5)

60,000

330,000

Dividend income

15 Cash (10,000 shares x 30)

330,000

300,000

Investment in Plastic Company

100,000

(10,000/60,000 x 600,000) Gain on sale of investment

Summary of investments King Corporation common

200,000

Shares 10,000

Cost 700,000

Plastic Company common Block 1

50,000

500,000

Block 2

6,000

180,000

Makati Corporation common

10,000 76,000

500,000 1,880,000

Of course, the investments will simply be described as “investments in equity securities” in the balance sheet.

Posted by Louie Lansang at 3:36 AM No comments: Labels: Finacc Volume 1 Chap 10, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 10-13 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 10-13 2008 Aug. 1 Investment in equity securities

60,000

Cash

Oct. 1 Investment in equity securities

60,000

560,000

Cash

560,000

2009 July 1 Investment in equity securities

480,000

Cash

Aug. 1 Cash

480,000

500,000

Investment in equity securities Gain on sale of investment

340,000 160,000

Lot 1 (1,000 shares)

60,000

Lot 2 (4,000/8,000 x 560,000) Cost of investment sold

280,000 340,000

2010 Feb. 1 Received 5,000 shares representing 50% stock dividend on 10,000 remaining shares held. Shares now held, 15,000.

Nov. 1 Stock rights

95,000

Investment in equity securities

95,000

Lot 2 – 6,000 rights (10/80 x 280,000)

35,000

Lot 3 – 9,000 rights (10/80 x 480,000)

60,000

Cost of rights received

95,000

135 2010 Dec. 1 Cash (15,000 x 10)

150,000

Stock rights

95,000

Gain on sale of stock rights

Summary of investments

55,000

Shares

Cost

Lot 2 (280,000 – 35,000)

6,000

245,000

Lot 3 (480,000 – 60,000)

9,000

420,000

Total

15,000

665,000

Valix Finacc vol 1 Problem 11-31 to 35 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 11-31 to 35 Problem 11-31 Answer A

Acquisition cost Net assets acquired (30% x 11,800,000) Excess of cost Attributable to depreciable assets (30% x 2,600,000) Attributable to goodwill

5,160,000 3,540,000 1,620,000 780,000 840,000

Acquisition cost

5,160,000

Share in net income (30% x 3,600,000)

1,080,000

Share in dividends (30% x 400,000)

( 120,000)

Amortization (780,000/4)

( 195,000)

Investment balance – December 31

5,925,000


Acquisition cost

2,560,000

Net assets acquired (40% x 5,000,000)

2,000,000

Excess of cost

560,000

150 Attributable to equipment (40% x 800,000)

320,000

Attributable to building (40% x 600,000)

240,000 560,000

Acquisition cost

2,560,000

Net income (40% x 1,600,000) Cash dividend (40% x 1,000,000)

640,000 ( 400,000)

Amortization of excess: Equipment (320,000 / 4)

(

80,000)

Building (240,000 / 12)

(

20,000)

Carrying value of investment – 12/31/2008


2,700,000

Net income Less: Preference dividend (10% x 2,000,000) Net income to ordinary shares Investment income (50% x 4,800,000)

5,000,000 200,000 4,800,000 2,400,000

Problem 11-34


Share in 2008 net income (30% x 800,000)

240,000


Acquisition cost

2,000,000

Share in net income – 2008

240,000

Cash dividends – 2008 (30% x 500,000)

( 150,000)

Book value – December 31, 2008

2,090,000


Book value – December 31, 2008 Share in net income up to June 30, 2009 (30% x 1,000,000) Book value – June 30, 2009

Sales price Book value sold (2,390,000 x ½) Gain on sale

2,090,000 300,000 2,390,000

1,500,000 1,195,000 305,000

151


Acquisition cost (30,000 x 120)

3,600,000

Deficit on January 1, 2008 (30% x 500,000)

( 150,000)


3,450,000

Net income for 2008 (30% x 700,000)

210,000

Net income for 2009 (30% x 800,000)

240,000

Cash dividend on 12/31/2009 (30% x 400,000)

( 120,000)


3,780,000

Another approach

Acquisition cost

3,600,000

Share in retained earnings – 12/31/2009 (30% x 600,000)

180,000


3,780,000


Acquisition cost Share in net income (10% x 5,000,000)

4,000,000 500,000

Share in cash dividend (10% x 1,500,000)

( 150,000)

Carrying value

4,350,000


Acquisition cost (squeeze)

1,720,000


300,000

Share in cash dividend (25% x 480,000)

( 120,000)

Carrying value – December 31

1,900,000


Acquisition cost

2,500,000

Less: Book value of net assets acquired (30% x 5,000,000)

1,500,000

Excess of cost over book value

1,000,000

Less: Amount attributable to undervaluation of land (30% x 2,000,000) Goodwill

600,000 400,000

149

Acquisition cost

2,500,000

Add: Share in net income (30% x 1,000,000) Balance, December 31

300,000 2,800,000

The excess of cost attributable to the land is not amortized because the land is nondepreciable. The goodwill is not amortized.


Acquisition cost – January 1

1,000,000

Acquisition cost – December 31

3,000,000

Total cost

4,000,000


800,000

Carrying value

4,800,000


Investment income in 2008 (30% x 6,500,000)

1,950,000

Investment income in 2007 (10% x 6,000,000)

600,000

Less: Dividend income recorded in 2006 (10% x 2,000,000)

200,000

Understatement of income

Investment in associate Retained earnings

400,000

400,000 400,000

Posted by Louie Lansang at 3:57 AM No comments: Labels: Finacc Volume 1 Chap 11, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 11-21 to 25 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 11-21 to 25 Problem 11-21 Answer B

Investment income (20% x 1,600,000)


320,000


1,200,000


Interest (30,000/100,000)

30%

Investment income (5,000,000 x 6/12 x 30%)

750,000


Cost

4,000,000

Less: Net assets acquired (40% x 8,000,000)

3,200,000

Excess of cost or goodwill

800,000

Share in net income from April 1 to December 31 (1,000,000 x 9/12 x 40%)

300,000


Acquisition cost Share in net income (20% x 1,800,000)

7,000,000 360,000

Share in cash dividend (20% x 600,000)

( 120,000)

Amortization of excess (1,000,000/10)

( 100,000)

Carrying value

7,140,000

Posted by Louie Lansang at 3:56 AM No comments: Labels: Finacc Volume 1 Chap 11, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 11-17 to 20

Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 11-17 to 20 Problem 11-17 Answer D



Investment in Lax Corporation

3,000,000


Total cash dividend

3,000,000

Cumulative net income

2,500,000

Liquidating dividend

Cash (10% x 3,000,000)

500,000

300,000

Dividend income (10% x 2,500,000) Investment in equity securities Posted by Louie Lansang at 3:55 AM No comments: Labels: Finacc Volume 1 Chap 11, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 11-16 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 11-16 Requirement a

1. Memo – Received 500 shares as 10% stock dividend on 5,000 original Dale ordinary shares. Shares now held, 5,500.

250,000 50,000

2. Cash (5,500 x 20)

110,000

Dividend income

110,000

3. Stock rights (15/150 x 1,600,000)

160,000

Investment in equity securities – Ever

Cash

160,000

200,000

Stock rights

160,000

Gain on sale of stock rights

4. Investment in associate

40,000

5,000,000

Cash

5,000,000

1/1/2007 Acquisition cost

1/1/2008

2,000,000

5,000,000

Net assets acquired: 10% x 16,000,000

1,600,000

20% x 20,000,000

________

Goodwill

400,000

4,000,000 1,000,000

Income from Fox investment in 2007 (10% x 4,000,000)

400,000

Less: Dividend income recorded in 2007 – cost method

-___

Understatement of income

400,000

147

5. Investment in associate Investment in equity securities

2,000,000 2,000,000

(Reclassification)


400,000

Retained earnings


400,000

1,800,000


8. Cash (75,000 x 20) Investment in associate

1,800,000

1,500,000 1,500,000

Requirement b

Noncurrent assets: Investment in equity securities (Note)

2,690,000

Investment in associate – Fox Corporation

7,700,000

Note – Investment in equity securities

Dale Corporation, 5,500 shares

1,250,000

Ever Corporation, 10,000 shares

1,440,000

Total cost

2,690,000


Acquisition cost – July 1, 2008

4,614,000

Discount amortization from July 1 to December 31, 2008: Interest accrued (5,000,000 x 8% x 6/12)

200,000

Interest income (4,614,000 x 10% x 6/12)

230,700


30,700 4,644,700


Acquisition cost

4,766,000

Discount amortization: Interest income (4,766,000 x 12%)

571,920

Interest received (5,000,000 x 10%)

500,000

Total

4,837,920

Annual installment on December 31, 2008 Book value –December 31, 2008

71,920

(1,000,000) 3,837,920


Annual effective (5,000,000 x 14%) Annual nominal (5,000,000 x 12%)

700,000 600,000

Difference

100,000

Multiply by present value factor using effective rate of 14% Discount Face value Purchase price

5.216 521,600 5,000,000 4,478,400


12/31/2008 (1,250,000 + 600,000 x .9091)

1,681,835

12/31/2009 (1,250,000 + 450,000 x .8264)

1,404,880

12/31/2010 (1,250,000 + 300,000 x .7513)

1,164,515

12/31/2011 (1,250,000 + 150,000 x .6830)

956,200 5,207,430


Bond year

Bond outstanding

Fraction

Amortization

04/01/2007 – 03/31/2008

4,000,000

4/10

80,000

04/01/2008 – 03/31/2009

3,000,000

3/10

60,000

04/01/2009 – 03/31/2010

2,000,000

2/10

40,000

04/01/2010 – 03/31/2011

1,000,000

1/10

20,000

10,000,000

200,000

Interest for the year 2008: From January 1 to March 31, 2008 (4,000,000 x 12% x 3/12)

120,000

From April 1 to December 31, 2008 (3,000,000 x 12% x 9/12)

270,000

390,000

Amortization of discount for year 2008: From January 1 to March 31, 2008 (80,000 x 3/12)

20,000

From April 1 to December 31, 2008 (60,000 x 9/12)

45,000

Interest income for year 2008

65,000 455,000


Interest income for 2008 (3,756,000 x 10%)

375,600


Interest accrued from July 1 to December 31, 2008 (5,000,000 x 8% x 6/12)

200,000


Interest received (1,000,000 x 10% x 6/12)

50,000


47,920

Premium amortization

Acquisition cost – July 1, 2008

2,080

1,198,000

Premium amortization Book value – December 31, 2008

(

2,080)

1,195,920


Interest accrued (1,000,000 x 8% x 6/12) Interest income (906,000 x 10% x 6/12) Discount amortization

40,000 45,300 5,300

Acquisition cost – July 1, 2008 (946,000 - 40,000)

906,000

Discount amortization

5,300


911,300

Posted by Louie Lansang at 4:25 AM No comments: Labels: Finacc Volume 1 Chap 12, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 12-22 to 25 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 12-22 to 25 Problem 12-22


Acquisition cost (4,400,000 – 100,000) Amortization of premium from Oct. 1, 2007 to Dec. 31, 2008 (4,000 x 15) Book value – December 31, 2008

Monthly amortization (300,000/75 months)

4,300,000 ( 60,000) 4,240,000

4,000


Interest for 2008 (4,000,000 x 10%)

400,000

Amortization of premium (4,000 x 12 months) Interest income

( 48,000) 352,000


Interest for 2008 (2,000,000 x 12%)

240,000

Amortization of discount (100,000/5)

20,000

Interest income

260,000


Premium on sale of bonds

140,000

Unamortized discount (100,000 – 20,000)

80,000

Gain on sale of bonds

220,000


Acquisition cost – 1/1/2008

3,767,000

Discount amortization for 2008: Interest income (14% x 3,767,000)

527,380

Interest received (12% x 4,000,000)

480,000

Book value – 12/31/2008

47,380 3,814,380

Posted by Louie Lansang at 4:23 AM No comments: Labels: Finacc Volume 1 Chap 12, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 12-21 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 12-21 1. The present value of the bonds using the interest rate of 11% is as follows:

PV of principal (5,000,000 x .6587)

3,293,500

PV of interest (500,000 x 3.1024)

1,551,200

Total present value of cash flows

4,844,700

2. The present value of the bonds using the interest rate of 12% is as follows:


3,177,500

PV of interest (500,000 x 3.0373)

1,518,650

Total present value of cash flows

3.

4,696,150

X – 11%____ 12% - 11%

4,700,000 – 4,844,700_ 4,696,150 – 4,844,700

_144,700_ = .97 148,550

Effective rate = 11% + .97 = 11.97%

4. Interest income for 2008 (4,700,000 x 11.97%)

562,590

5. Journal entries


4,700,000

Cash

Cash (10% x 5,000,000)

4,700,000

500,000

Interest income


500,000

62,590

Interest income

62,590

Interest income

562,590

Interest received

500,000

Discounted amortization

62,590

Posted by Louie Lansang at 4:22 AM No comments: Labels: Finacc Volume 1 Chap 12, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 12-20 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 12-20 1. Principal payment

1,000,000

Interest payment (3,000,000 x 12%)

360,000

Total payment on December 31, 2008

1,360,000

Principal payment

1,000,000


240,000


1,240,000

Principal payment

1,000,000


120,000


1,120,000

December 31, 2008 payment (1,360,000 x .91)

1,237,600


1,029,200


840,000

Total present value on January 1, 2008 2. Journal entries

3,106,800

2008 Jan. 1 Held to maturity securities

3,106,800

Cash

Dec. 31 Cash

3,106,800

360,000

Interest income

31 Interest income

360,000

49,320


49,320

Interest received

360,000

Interest income (3,106,800 x 10%)

310,680


Dec. 31 Cash

49,320

1,000,000


1,000,000

3. Acquisition cost – 1/1/2008 Premium amortization for 2008 Annual installment

3,106,800 (

49,320)

(1,000,000)


2,057,480

Posted by Louie Lansang at 4:20 AM No comments: Labels: Finacc Volume 1 Chap 12, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 12-19 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 12-19 Semiannual nominal interest (8,000,000 x 5%)

400,000

Semiannual effective interest (8,000,000 x 4%)

320,000

Difference

80,000

Multiply by PV of annuity of 1 for 10 periods at 4%

8.11

Premium

648,800

Face value

8,000,000

Purchase price

8,648,800

The amount of P648,800 is a premium because the effective rate is lower than nominal rate.

Another approach


5,404,800

PV of semiannual interest payments (400,000 x 8.11)

3,244,000

Purchase price or present value of bonds

8,648,800

Journal entries

2008 Jan. 1 Held to maturity securities

8,648,800

Cash

July 1 Cash

8,648,800

400,000

Interest income

1 Interest income Held to maturity securities

400,000

54,048 54,048

Interest received

400,000


345,952


Dec. 31 Accrued interest receivable

54,048

400,000

Interest income

31 Interest income

400,000

56,210


56,210

Interest accrued

400,000


343,790


56,210

Valix Finacc vol 1 Problem 13-21 to 23 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 13-21 to 23 Problem 13-21 Answer C

Premium paid – January 1 Less: Dividend received Increase in cash surrender value (270,000 – 245,000)

100,000 15,000 25,000

40,000

Life insurance expense for 2008

60,000


Premium paid

200,000

Less: Increase in cash surrender value (540,000 – 435,000) Life insurance expense

105,000 95,000

The dividend of P30,000 is not deducted anymore because it is already part of the increase in cash surrender value.


Sinking fund cash

500,000

Sinking fund securities

1,000,000


50,000

Plant expansion fund

600,000

Cash surrender value

150,000

Land held for capital appreciation

3,000,000

Advances to subsidiary

200,000

Investment in joint venture

2,000,000 7,500,000

Posted by Louie Lansang at 4:47 AM No comments: Labels: Finacc Volume 1 Chap 13, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 13-16 to 20 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 13-16 to 20 Problem 13-16 Answer D

Annual deposit (8,000,000 / 4.78)

1,673,640


Annual deposit (9,000,000 / 6.34)


1,419,560

Principal amount

5,000,000

Multiply by future value of 1 for 6 periods at 10%

1.77

Future amount at maturity

8,850,000


Future amount of maturity

7,160,000

Divide by future value of 1 for 10 periods at 6%

1.79

Initial investment

4,000,000

The annual interest of 12% is compounded semiannually for 5 years. Therefore, there are 10 interest periods at 6%.


Sinking fund balance – January 1 Add: 2007 investment Dividends on investment Interest revenue Total

4,500,000 900,000 150,000 300,000

1,350,000 5,850,000

Less: Administration costs Sinking fund balance – December 31 Posted by Louie Lansang at 4:46 AM No comments: Labels: Finacc Volume 1 Chap 13, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 13-15 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 13-15

100,000 5,750,000

Cost model

2008

Depreciation

1,800,000

Accumulated depreciation

2009

Depreciation

1,800,000

1,800,000


2010

Depreciation

1,800,000

1,800,000


1,800,000

Fair value model

2008

Investment property

5,000,000


2009

Loss from change in fair value

5,000,000

2,000,000


2010

Investment property Gain from change in fair value

2,000,000

7,000,000 7,000,000


1. Land held by Eragon for undetermined use Vacant building

5,000,000 3,000,000

Building owned by a subsidiary Eragon occupied by lessees Total investment property

1,500,000 9,500,000

2. a. The property held by a subsidiary Eragon in the ordinary course of business in included in inventory.

b. The property held by Eragon for use in production is owner-occupied property and therefore part of property, plant and equipment.

c. The land leased by Eragon to a subsidiary under an operating lease is owneroccupied property for purposes of consolidated financial statements. However, from the perspective of separate financial statements of Eragon, the land is an investment property.

d. The property under construction for use as investment property is owner-occupied property until the land is completed. Upon completion, the building becomes investment property.

e. The land held for future factory site is owner-occupied property and therefore part of property, plant and equipment.

f. The machinery leased out to an unrelated party is part of property, plant and equipment because investment property includes only land and building, and not movable property like machinery. Posted by Louie Lansang at 4:44 AM 1 comment: Labels: Finacc Volume 1 Chap 13, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 13-13

Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 13-13 a. Life insurance (10,000 x 6/12)

5,000

Cash surrender value

b. Prepaid life insurance (28,000 x 1/2)

5,000

14,000

Life insurance

c. Interest expense

14,000

4,500

Accrued interest payable (50,000 x 12% x 9/12)

d. Dividend income

4,500

2,000

Dividend receivable

2,000

Current assets: Prepaid life insurance

14,000

Investment: Cash surrender value

85,000

Current liabilities: Loan payable

50,000

Accrued interest payable


4,500

Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 13-12 2008 Jan. 1 Life insurance

80,000

Cash

80,000

2009 Jan. 1 Life insurance

80,000

Cash

Dec. 31 Cash

80,000

5,000

Life insurance

31 Cash surrender value

5,000

42,000

Life insurance (42,000 x 1/3)

14,000

Retained earnings

28,000


80,000

Cash

Dec. 31 Cash

80,000

6,000

Life insurance

31 Cash surrender value Life insurance

Balance – December 31, 2010

6,000

5,000 5,000

47,000

Balance – December 31, 2009

42,000

Increase in cash surrender value

5,000

Posted by Louie Lansang at 4:42 AM No comments: Labels: Finacc Volume 1 Chap 13, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 13-11 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 13-11 2007 April 1 Life insurance

60,000

Cash

Dec. 31 Prepaid life insurance (60,000 x 3/12)

60,000

15,000

Life insurance

15,000


15,000

Prepaid life insurance

April 1 Life insurance

15,000

60,000

Cash

Dec. 31 Prepaid life insurance

60,000

15,000

Life insurance

15,000

2009 Jan. 1 Life insurance Prepaid life insurance

15,000 15,000

April 1 Life insurance

60,000

Cash


60,000

15,000

Life insurance

15,000


15,000


April 1 Cash surrender value

15,000

60,000

Life insurance

5,000

Retained earnings

55,000

April 1, 2007 – December 31, 2009 (33/36 x 60,000) prior years

55,000

January 1, 2010 – April 1, 2010 (3/36 x 60,000) current period

5,000

Total

1 Life insurance

60,000

60,000

Cash


60,000

15,000

Life insurance

31 Cash surrender value Life insurance

Balance – April 1, 2011

15,000

18,000 18,000

84,000


60,000

Increase from April 1, 2010 to April 1, 2011

24,000

Increase from April 1, 2010 to December 31, 2010 (24,000 x 9/12)

18,000


15,000


15,000

April 1 Cash surrender value (18,000 x 3/12)

6,000

Life insurance

1 Life insurance

6,000

60,000

Cash

July 1 Cash surrender value

60,000

8,000

Life insurance

8,000


116,000


84,000

Increase from April 1, 2011 to April 1, 2012

32,000

Increase from April 1, 2010 to July 1, 2010 (32,000 x 3/12)

July 31 Cash Cash surrender value Life insurance (60,000 x 9/12) Gain on life insurance settlement

8,000

2,000,000 92,000 45,000 1,863,000


Problem 14-21

Question 1 Answer B

The notional figure is 8,000 kilos and the notional value is 8,000 kilos times the underlying Fixed price of P1,200 per kilo or P9,600,000.

Question 2 Answer C

Market price – 12/31/2008

1,500

Underlying fixed price

1,200

Derivative asset

300

Forward contract receivable (8,000 x 300)

Present value of derivative asset (2,400,000 x .91)

2,400,000

2,184,000

The present value of P2,184,000 is recognized as forward contract receivable on December 31, 2008 because the amount is collectible on January 1, 2010, one year from December 31, 2008.

Question 3 Answer B

Market price – 12/31/2009 Underlying fixed price

1,000 1,200

Derivative liability

Forward contract payable – 12/31/2009 (8,000 x 200)

200

1,600,000


Fair value of call option (120 – 100 = 20 x 10,000)

200,000


Exchange rate on July 31 (80,000,000 / 92)

869,565

Strike price (80,000,000 / 100)

800,000

Derivative asset

69,565

Call option payment

10,000

Saving

59,565

Problem 14-24

Question 1 Answer A

Camry’s payment to Corolla (5,000,000 x 2%)

100,000

Question 2 Answer C

Fair value of interest rate swap (100,000 x .926)

92,600


Notional amount

435,000

Exchange rate on December 31, 2008 (47,850,000 / 115)

416,087

Fair value of forward contract receivable

18,913

Posted by Louie Lansang at 5:35 AM No comments: Labels: Finacc Volume 1 Chap 14, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 14-20 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 14-20 2008 Dec. 31 Forward contract receivable

50,000

Unrealized gain – forward contract ($50,000 x P1)

50,000

2009 March 31 Forward contract receivable

100,000

Unrealized gain – forward contract ($50,000 x P2)

31 Cash

100,000

150,000 Forward contract receivable

31 Purchases ($50,000 x P43)

150,000

2,150,000

Cash

31 Unrealized gain – forward contract Purchases

2,150,000

150,000 150,000


2008 Sept. 1 Equipment

2,250,000

Accounts payable

Dec. 31 Loss on foreign exchange

2,250,000

50,000

Accounts payable

50,000

Peso equivalent – 12/31/2008

2,050,000


2,000,000

Loss on foreign exchange

50,000

31 Forward contract receivable

50,000

Gain on forward contract

50,000

2009 March 1 Loss on foreign exchange

100,000

Accounts payable

100,000


2,150,000


2,050,000

Loss on foreign exchange

100,000

1 Forward contract receivable

100,000

Gain on forward contract

1 Cash

100,000

150,000

Forward contract receivable

1 Accounts payable (50,000 x 43) Cash

150,000

2,150,000 2,150,000

Posted by Louie Lansang at 5:04 AM No comments: Labels: Finacc Volume 1 Chap 14, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 14-18 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 14-18 2008 Dec. 1 Put option

100,000

Cash

100,000

2009 Feb. 1 Cash (50,000 x 180)

9,000,000

Sales

1 Loss on put option

9,000,000

100,000

Put option

100,000

With the price above the put option price, on the part of the seller, there is no reason to exercise the option. It is better to sell the product on the open market. Thus, the output option is not exercised on February 1, 2009 and has no value. Posted by Louie Lansang at 5:03 AM No comments: Labels: Finacc Volume 1 Chap 14, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 14-17 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 14-17 2008 Dec. 1 Call option Cash

20,000 20,000

Dec. 31 Call option

380,000

Unrealized gain - call option

380,000

Fair value (200,000 x 2)

400,000

Payment for call option

20,000

Increase

380,000

2009 June 1 Call option

200,000

Unrealized gain – call option

200,000

Call option – 6/1/2009 (200,000 x P3)

600,000

Call option – 12/31/2008

400,000

Increase in derivative asset

200,000

1 Cash

600,000

Call option

1 Purchases (200,000 x P28)

600,000

5,600,000

Cash 1 Unrealized gain – call option Gain on call option

5,600,000 600,000 600,000


2008 Dec. 31 Call option

50,000

Cash

50,000

2009 July

1 Call option

700,000

Gain on call option

700,000

Fair value of call option (150,000 x 5)

750,000

Payment for call option

50,000

Increase

700,000

2009 July

1 Cash

750,000

Call option

1 Purchases

750,000

5,250,000

Cash (150,000 x 35)

5,250,000

Requirement 2

2008 Dec. 31 Call option

50,000

Cash

50,000

2009 July 1 Purchases Cash (150,000 x 28)

4,200,000 4,200,000

1 Loss on call option

50,000

Call option

50,000

Posted by Louie Lansang at 5:02 AM No comments: Labels: Finacc Volume 1 Chap 14, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 14-15 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 1 Problem 14-15 2008 Dec. 31 Unrealized loss – futures contract

125,000

Futures contract payable (25,000 x 5)

125,000

2009 June 1 Unrealized loss – futures contract

75,000

Futures contract payable

75,000

Futures contract payable – 6/1/2009 (25,000 x P8)

200,000

Futures contract payable – 12/31/2008

125,000

Increase in derivative liability

75,000

1 Futures contract payable

200,000

Cash

1 Purchases (25,000 x 42)

200,000

1,050,000

Cash

1 Loss on futures contract Unrealized loss – futures contract

1,050,000

200,000 200,000

Valix Finacc vol 1 Problem 15-36 to 40 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 15 Problem 15-36 to 40 Problem 15-36 Answer A

Since the old machine has no available fair value, the new machine received in exchange is recorded at its cash price without trade in of P900,000. The average published retail value of the old machine is not necessarily its fair value.

Problem 15-37 Answer A Average expenditures (20,000,000 / 2) Multiply y capitalization rate Interest on average expenditures

10,000,000 12% 1,200,000

The capitalizable borrowing cost is limited to the actual borrowing cost incurred. In this case, the computed amount of P1,200,000 is more than the actual borrowing cost of P1,020,000. Accordingly, the capitalizable interest is P1,020,000. Note that in computing the average expenditures, the amount of P20,000,000 is simply divided by 2 because the said amount is incurred evenly during the year ended 2008.


Since the actual interest incurred is not given, the interest on the average expenditures is determined.

Average expenditures (9,600,000 / 2)

Interest on average expenditures (4,800,000 x 10%) Interest income on unexpended portion Capitalizable interest


4,800,000

480,000 (320,000) 160,000

Accumulated expenditures at the end of two years

3,000,000

Average expenditures in the third year (8,000,000 / 2)

4,000,000

Total

7,000,000

Capitalizable interest (7,000,000 x 9%)

630,000


Average accumulated expenditures Specific borrowing Applicable to general borrowing

2,500,000 (1,500,000) 1,000,000

Specific (6% x 1,500,000)

90,000

General (9% x 1,000,000)

90,000

Capitalizable interest

180,000


Invoice price Discount (2% x 700,000) Freight and insurance Cost of assembling and installation Total cost

700,000 ( 14,000) 3,000 5,000 694,000


Equipment: Invoice price Discount (5% x 600,000)

600,000 ( 30,000)

Land (at its fair value)

570,000

1,100,000

Machinery: Acquisition cost

275,000

Installation cost

7,000

Trial run and testing cost

18,000

Construction of base

10,000

Total

310,000 1,980,000


Fair value of asset given

700,000

Cash payment

160,000

Total cost

860,000



2,100,000

Cash payment

400,000

Cost of new inventory

2,500,000



1,500,000

Less: Cost of asset given

1,250,000

Gain on exchange

250,000

Posted by Louie Lansang at 5:58 AM No comments: Labels: Finacc Volume 1 Chap 15, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 15-26 to 30 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 15 Problem 15-26 to 30 Problem 15-26 Answer D

Cost of land (5,400,000 x 2/5)

2,160,000


Cash price Installation cost Total cost

950,000 30,000 980,000


Cash price Installation cost Total cost

2,000,000 50,000 2,050,000


Present value of first note payable (500,000 x 5.65)

2,825,000

Present value of second note payable (3,000,000 x .80)

2,400,000

Total cost of machinery

5,225,000


First payment on December 30, 2008

200,000

Present value of next 7 payments (200,000 x 4.712)

942,400

Total cost of machine

1,142,400

Another computation:

PV of annuity of 1 in advance for 8 periods (200,000 x 5.712)

1,142,400

Posted by Louie Lansang at 5:57 AM No comments: Labels: Finacc Volume 1 Chap 15, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 15-25 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 15 Problem 15-25 1. Cash

30,000,000

Deferred income-government grant

Environmental expenses

30,000,000

2,000,000

Cash


2,000,000

3,000,000

Income from government grant (2/20 x 30,000,000)

2. Cash Deferred income-government grant

3,000,000

40,000,000 40,000,000

Building

50,000,000

Cash

Depreciation

50,000,000

2,500,000

Accumulated depreciation (50,000,000 / 20)

2,500,000


2,000,000

Income from government grant (40,000,000 / 20)

3. Land

2,000,000

50,000,000


Building

50,000,000

80,000,000

Cash

Depreciation

80,000,000

3,200,000


3,200,000


2,000,000

Income from government grant (50,000,000 / 25)

4. Cash Income from government grant

2,000,000

10,000,000 10,000,000


Financial Accounting Volume 1 2008 Valix-Peralta Chapter 15 Problem 15-24 Date

Expenditure

Months

Amount

January 1, 2008

4,000,000

12

April 1, 2008

5,000,000

9

45,000,000

December 1, 2008

3,000,000

1

3,000,000

12,000,000

48,000,000

96,000,000

Average expenditures in 2008 (96,000,000 / 12)

8,000,000

Applicable to specific loan

(3,000,000)

Applicable t general loan

5,000,000

Actual expenditures in 2008

12,000,000

Capitalizable interest in 2008 Specific (3,000,000 x 10%)

300,000

General (5,000,000 x 12%)

600,000

Total cost of building

Date

12,900,000

Expenditure

January 1, 2009

12,900,000

March 1, 2009

6,000,000 18,900,000

Average expenditures in 2009 (101,400,000 / 6)

Months

6 4

Amount

77,400,000 _24,000,000 101,400,000

16,900,000


( 3,000,000)

Applicable to general loan

13,900,000

Note that the construction period in 2009 is only 6 months because the building was completed on June 30, 2009. Thus, the average expenditures should be for 6 months only.

Actual expenditures in 2009

18,900,000

Capitalizable interest in 2009 Specific (3,000,000 x 10% x 6/12)

150,000

General (13,900,000 x 12% x 6/12)

834,000

Total cost of new building – 6/30/2009

19,884,000

Posted by Louie Lansang at 5:56 AM No comments: Labels: Finacc Volume 1 Chap 15, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 15-23 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 15 Problem 15-23 Date

Expenditure

Months

Amount 12,000,000

January

1

1,000,000

12

July

1

2,000,000

6

12,000,000

November 1

3,000,000

2

6,000,000

6,000,000

Average expenditures (30,000,000 / 12)

Average expenditures

30,000,000

2,500,000

2,500,000


(1,000,000)

Applicable t general loan

1,500,000

Actual expenditures

6,000,000

Capitalizable interest: Specific (1,000,000 x 10%)

100,000

General (1,500,000 x 12%) Total cost of building

180,000 6,280,000



All expenditures are capitalized.


All costs are capitalized.


Continuing and frequent repairs

400,000

Repainting of the plant building

100,000

Partial replacement of roof tiles

150,000

Repair and maintenance expense

650,000


Problem 16-35 Answer B Posted by Louie Lansang at 6:27 AM No comments: Labels: Finacc Volume 1 Chap 16, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 16-25 to 30

Financial Accounting Volume 1 2008 Valix-Peralta Chapter 16 Problem 16-25 to 30


Allocated cost of land (2,400,000 / 6,000,000 x 5,500,000)

2,200,000

Property taxes (2,400 / 6,000 x 250,000)

100,000

Cost of survey

5,000

Total cost of land

2,305,000

Incidentally, the cost of the building is:

Allocated cost (3,600 / 6,000 x 5,500,000)

3,300,000

Property taxes (3,600 / 6,000 x 250,000)

150,000

Renovation

500,000

Total cost of building

3,950,000 Problem 16-

26 Answer A Purchase price

4,000,000

Payments to tenants

200,000

Demolition of old building

100,000

Legal fees

50,000

Title insurance

30,000

Proceeds from sale of materials

(

Total cost of land

10,000)

4,370,000

Problem 16-27 Answer D Land

Building

Purchase price of land

600,000

Legal fees for contract

20,000

Architect fee

80,000

Demolition of old building

50,000

Construction cost

_______

Total cost

670,000

3,500,000 3,580,000


Acquisition price

7,000,000

Option of building acquired

200,000

Repairs

500,000

Total cost

7,700,000

Problem 1629 Answer D Purchase price

250,000 Shipping 5,000

Installation

10,000

Testing

35,000

Total cost

300,000

Problem 16-30 Answer A Posted by Louie Lansang at 6:26 AM No comments: Labels: Finacc Volume 1 Chap 16, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 16-24 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 16 Problem 16-24

1. Discount on bonds payable

500,000

Machinery

500,000

Interest expense (500,000 / 10 x 9/12)

37,500

Discount on bonds payable

37,500


75,000

Depreciation

75,000

Depreciation for 9 months

600,000

Depreciation for 12 months (600,000 / 9/12)

800,000

Depreciable cost (800,000 x 5 years)

4,000,000

Per book Cost

Adjusted

5,000,000

Less: Residual value Depreciable cost

4,500,000

1,000,000

1,000,000

4,000,000

Correct depreciation for 9 months (3,500,000 / 5 x 9/12)

3,500,000

525,000

Less: Depreciation recorded

600,000

Overstatement

75,000

2. Interest expense

300,000

Machinery (3,500,000 – 3,200,000)

Machinery Freight in

300,000

150,000 150,000


30,000

Depreciation

30,000

Depreciation per book

700,000

Correct depreciation (3,350,000 / 5)

670,000

Overstatement

3. Loss on exchange

30,000

390,000

Machinery

390,000

Cost per book

3,000,000

Correct cost Trade in value

150,000

Add: Cash paid

2,460,000

2,610,000

Overstatement

390,000

Trade in value

150,000

Less: Book value

540,000

Loss on exchange

(390,000)

4. Allowance for doubtful accounts Loss on exchange – accounts receivable

840,000 60,000

Treasury share

900,000

Per book Machinery Accounts receivable

4,200,000 4,200,000

Treasury shares

4,200,000

Machinery

4,200,000

Should be Machinery Allowance for doubtful accounts (20% x 4,200,000) Loss on accounts receivable

3,300,000 840,000 60,000

Accounts receivable

Treasury shares

4,200,000

3,300,000

Machinery

3,300,000

The cost of treasury shares acquired for noncash consideration is usually measured by the recorded amount of the noncash asset surrendered (SFAS No. 18). Posted by Louie Lansang at 6:25 AM No comments: Labels: Finacc Volume 1 Chap 16, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 16-23 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 16 Problem 16-23

1. Depreciation (60,000 x 3/12)

15,000


Accumulated depreciation (480,000 + 15,000) Loss on retirement of store equipment Store equipment

15,000

495,000 105,000 600,000


50,000


50,000

Cash

100,000

Accumulated depreciation (1,050,000 + 50,000) Loss on sale of office equipment

1,100,000 300,000

Office equipment

1,500,000


250,000


250,000

Delivery equipment – new

5,000,000


2,650,000

Cash (5,000,000 – 750,000)

4,250,000

Delivery equipment – old

3,000,000

Gain on exchange (750,000 – 350,000)

400,000

Original cost

3,000,000

Less: Accumulated depreciation to date (2,400,000 + 250,000)

2,650,000

Book value

4. Accumulated depreciation

350,000

1,200,000

Office equipment


1,200,000

675,000


Accumulated depreciation (2,700,000 + 675,000)

675,000

3,375,000

Fire loss

1,125,000

Machinery

4,500,000



Straight line rate (100% / 5 years)

20%

Fixed rate (20% x 2)

40%

2006 depreciation (5,000,000 x 40%)

2,000,000

2007 depreciation (3,000,000 x 40%)

1,200,000

Accumulated depreciation, December 31, 2007

3,200,000

Depreciation for 2008 – straight line (5,000,000 – 3,200,000 / 3) Accumulated depreciation, December 31, 2008

600,000 3,800,000


Cost – 1/1/2005

7,200,000

Accumulated depreciation – 12/31/2007 (7,200,000 / 10 x 3)

2,160,000

Book value – 12/31/2007

5,040,000

SYD for the remaining life of 7 years (1 + 2 + 3 + 4 + 5 + 6 + 7)

Depreciation for 2008 (5,040,000 x 7/28) Problem 17-33 Answer B

1,260,000

28

Annual depreciation (1,536,000 / 8)

192,000

235


Fixed rate (100% / 4 x 2)

Cost

50%

6,000,000

Depreciation for 2007 (50% x 6,000,000) Book value – 1/1/2008 Residual value

3,000,000 3,000,000 ( 600,000)

Maximum depreciation in 2008

Fixed rate in 2008 (100% / 2 x 2)

2,400,000

100%

This means that the computers should be fully depreciated in 2008. Since there is a residual value of P600,000, the maximum depreciation for 2008 is equal to the book value of P3,000,000 minus the residual value of P600,000 or P2,400,000. Posted by Louie Lansang at 7:09 AM No comments: Labels: Finacc Volume 1 Chap 17, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 17-26 to 30 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 17 Problem 17-26 to 30


The first three fractions are:

2006

10/55

2007

9/55

2008

8/55

Thus, the 2008 depreciation of P240,000 is equal to 8/55.

Depreciable cost (240,000 / 8/55) Salvage

1,650,000 50,000

Total cost

1,700,000


April 1, 2006 to March 31, 2007 (5/15 x 3,000,000)

1,000,000

April 1, 2007 to March 31, 2008 (4/15 x 3,000,000)

800,000

Accumulated depreciation, March 31, 2008

1,800,000


The accumulated depreciation on December 31, 2007 is recomputed following a certain method. The same is arrived at following the SYD as follows:

SYD = 1 + 2 + 3 + 4 + 5 = 15

2005 (5/15 x 900,000)

300,000

2006 (4/15 x 900,000)

240,000

2007 (3/15 x 900,000)

180,000

Accumulated depreciation – 12/31/2007

720,000

Accordingly, the SYD is followed for 2008.

2008 depreciation (2/15 x 900,000)

120,000


Straight line rate (100% / 8 years)

12.5%

Fixed rate (12.5 x 2)

25%

2007 depreciation (1,280,000 x 25%)

320,000

2008 depreciation (1,280,000 – 320,000 x 25%)

240,000

Problem 17-30

1. 4,000,000 – 2,560,000 x 40%

2. 1,800,000 x 2/15 (SYD)

(Answer D)

576,000

(Answer A)

3. Sales price

240,000

1,700,000

Book value (2,800,000 – 1,344,000) Gain

1,456,000 (Answer A)

244,000



Cost of machinery (cash price)

1,100,000

Less: Residual value

50,000

Depreciable cost

1,050,000

Straight line depreciation (1,050,000 / 10)

105,000


Sales price

2,300,000

Book value: Cost

4,200,000

Accumulated depreciation (3,600,000 / 5 x 3)

2,160,000

Gain

2,040,000

260,000



3,700,000

Add: Depreciation for 2008

550,000

Total

4,250,000

Less: Accumulated depreciation on property, plant and equipment retirements (squeeze)

250,000


4,000,000

Problem 17-23 Answer B Depreciable Cost A

Salvage

550,000 50,000

cost 500,000

Annual Life

depreciation 20

25,000

B

200,000 20,000

180,000

C

40,000

40,000

790,000

720,000

15

12,000

5

8,000 45,000

Composite life = 720,000 / 45,000

16 years


Invoice price

4,500,000

Cash discount (2% x 4,500,000)

(

90,000)

Delivery cost

80,000

Installation and testing

310,000

Total cost Salvage value

4,800,000 800,000

Depreciable cost

4,000,000

Rate per unit (4,000,000 / 200,000)

20

Depreciation for 2008 (30,000 x 20)

600,000


Cost

4,000,000

Accumulated depreciation 2007 (8/36 x 3,600,000)

800,000

2008 (7/36 x 3,600,000)

700,000

Book value, 12/31/2008

1,500,000 2,500,000

Posted by Louie Lansang at 7:06 AM No comments: Labels: Finacc Volume 1 Chap 17, Finacc Volume 1 Solutions, Valix Solutions

Valix Finacc vol 1 Problem 17-19 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 17 Problem 17-19

1. Old building (4,672,200 x 10%)

467,220

New building Direct cost

2,220,000

Fixed (15,000 x 25)

375,000

Variable (15,000 x 27)

405,000

Total cost

3,000,000

3,000,000 x 10%

300,000

Total depreciation

767,220

Fixed rate (100 / 20 x 2)

10%

2. Old machinery (1,380,000 / 10)

138,000

New machinery Invoice cost Concrete embedding Wall demolition Rebuilding of wall Total cost

356,000 18,000 7,000 19,000 400,000

400,000 / 10 x 6/12 Total depreciation Posted by Louie Lansang at 7:04 AM No comments: Labels: Finacc Volume 1 Chap 17, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 17-18

20,000 158,000


1. Beginning balance

875,000

Acquisition (150,000 / 750,000 x 1,250,000)

250,000

Total cost of land

1,125,000

Technically, the land for undetermined use is an investment property.

2. Old (7,500,000 – 1,644,500 x 8%)

468,440

New (600,000/750,000 x 1,250,000 = 1,000,000 x 8%)

80,000

Depreciation – building

548,440

3. 2,250,000 / 10

225,000

400,000 / 10 x 6/12

20,000

Depreciation – machinery

245,000

4. Depreciation – leasehold improvements (216,000 – 108,000 / 5 years)

21,600

5. Depreciation – land improvements 192,000 / 12 x 9/12)

12,000


1. Land (350,000 + 450,000) Land acquired (380,000 + 25,000 + 45,000)

800,000 450,000

2. Depreciation of land improvements (180,000 / 15)

12,000

3. Depreciation of building (4,500,000 – 1,050,000 x 7.5%) 258,750 231 4. Depreciation of machinery and equipment (1,160,000 – 60,000 / 10)

110,000

(300,000 / 10) 6/12)

30,000

(60,000 / 10 x

3,000 143,000

5. Fixed rate (100% / 3 x 1.5)

50%

(1,800,000 – 1,344,000 x 50%)

228,000



Depletable cost 33,000,000 Depletion for 2007 (33,000,000 / 4,000,000 = 8.25 x 200,000)

( 1,650,000)

Balance – 1/1/2008

31,350,000

Production in 2008

225,000

New estimate – 12/31/2008

5,000,000

New estimate – 1/1/2008

5,225,000

Depletion for 2008 (31,350,000 / 5,225,000 = 6 x 225,000) 1,350,000 Problem 18-17


Purchase price

14,000,000


2,000,000

Depletable cost

12,000,000

Depletion rate (12,000,000 / 1,500,000)

8.00

Depletion for 2008 (150,000 x 8)

Production (25,000 x 6)

1,200,000

150,000

Question 2 – Answer C

Production from July 1 to December 31, 2008 (25,000 x 6)

150,000 tons

Annual production (25,000 x 12)

300,000 tons

Estimated life of mine (1,500,000 / 300,000)

5 years

Since the life of the mine is shorter than the life of the equipment, the output method is used in computing depreciation.

245

Equipment Less: Residual value Depreciable cost

8,000,000 500,000 7,500,000

Rate per unit (7,500,000 / 1,500,000)

5.00

Depreciation for 2008 (150,000 x 5)

750,000


Purchase price

9,000,000

Development costs in 2007 Total cost Residual value Depletable cost

300,000 9,300,000 1,200,000 8,100,000

Rate in 2007 (8,100,000 / 2,000,000)

Depletion for 2007 (200,000 x 4.05)

Depletable cost Depletion in 2007 Balance Development costs in 2008 Depletable cost in 2008

Rate in 2008 (7,425,000 / 1,650,000)

Depletion for 2008 (300,000 x 4.50)

4.05

810,000

8,100,000 ( 810,000) 7,290,000 135,000 7,425,000

4.50

1,350,000



Acquisition cost Development cost Estimated restoration cost Total cost Less: Residual value Depletable cost

Rate per unit (28,800,000 / 1,200,000)

Depletion for 2008 (60,000 x 24)

26,400,000 3,600,000 1,800,000 31,800,000 3,000,000 28,800,000

24

1,440,000


Depletion rate per unit (9,200,000 / 4,000,000)

2.30


Rate per unit (46,800,000 – 3,600,000 / 2,160,000)

20

Depletion in cost of goods sold (240,000 x 20)

4,800,000


Acquisition cost

10,000,000


3,000,000

Depletable cost

7,000,000

Less: Accumulated depletion – 12/31/2007 (7,000,000 / 10,000,000 = .70 x 4,000,000) Remaining depletable cost – 1/1/2008

2,800,000 4,200,000

New depletion rate (4,200,000 / 7,500,000)

.56

Depletion for 2008 (1,500,000 x .56)

840,000


2008

2009

No depletion because there is no production.

Purchase price

28,000,000

Estimated restoration cost

2,000,000

Development cost – 2008

1,000,000

Development cost – 2009

1,000,000

Total cost

32,000,000

Residual value Depletable cost

( 5,000,000) 27,000,000

Rate in 2009 (27,000,000 / 10,000,000)

2.70

Depletion in 2009 (3,000,000 x 2.70) 2010

Tons extracted in 2010

8,100,000 3,500,000

Tons remaining in 12/31/2010

2,500,000

Total estimated output – 1/1/2010

6,000,000

New rate in 2010 (27,000,000 – 8,100,000/6,000,000)

3.15

Depletion in 2010 (3,500,000 x 3.15)

11,025,000


1. Purchase price Road construction Improvements and development costs

50,000 5,000,000 750,000

Total cost

5,800,000

Residual value

( 600,000)

Depletable cost

5,200,000

Depletion rate per unit (5,200,000 / 4,000,000) Depletion for 2008 (500,000 x 1.30)

1.30 650,000

Depletable cost

5,200,000

Depletion in 2008

( 650,000)

Remaining depletable cost

4,550,000

Development costs in 2009

1,300,000

Total depletable cost – 1/1/2009

5,850,000

Original estimated tons

4,000,000

Additional estimate

3,000,000

Total estimated tons

7,000,000

Extracted in 2008

( 500,000)

Remaining tons – 1/1/2009

6,500,000

New depletion rate per unit (5,850,000 / 6,500,000)

Depletion for 2009 (1,000,000 x .90)

.90

900,000

2. Cost of buildings

2,000,000

Residual value

( 200,000)

Depreciable cost

Depreciation rate per unit (1,800,000 / 4,000,000)

Depreciation for 2008 (500,000 x .45)

1,800,000

.45

225,000

In the absence of any statement to the contrary, the output method is used in computing depreciation of mining equipment.

Depreciable cost

1,800,000

Depreciation for 2008

( 225,000)

Remaining depreciable cost

1,575,000

Additional building in 2009 Total depreciable cost – 1/1/2009

375,000 1,950,000

New depreciation rate per unit (1,950,000 / 6,500,000)

.30

Depreciation for 2009 (1,000,000 x .30)

300,000


1. Cash (50,000 x 110)

5,500,000

Share capital (50,000 x 100)

5,000,000

Share premium

500,000

2. Resource property

3,000,000

Cash

3. Mining equipment

3,000,000

800,000

Cash

4. Cash (85,000 x 50)

800,000

4,250,000

Sales

5. Mining and other direct cost Administrative expenses

4,250,000

2,268,000 500,000

Cash

6. Depletion

2,768,000

270,000

Accumulated depletion (3,000,000 / 1,000,000 x 90,000)

7. Depreciation (90,000 x .80)

270,000

72,000

Accumulated depreciation - mining equipment

72,000

Depreciation rate (800,000 / 1,000,000) = .80

8. Inventory, December 31 (5,000 x 29)

145,000

Profit and loss

145,000

Mining labor and other direct costs

2,268,000

Depletion

270,000

Depreciation

72,000

Total production costs incurred

2,610,000

Divide by number of units extracted

90,000

Unit cost

29

Multinational Company Income Statement Year ended December 31, 2008

Sales

4,250,000

Cost of sales Mining labor and other direct costs

2,268,000

Depletion

270,000

Depreciation

72,000

Total production cost

2,610,000

Less: Inventory, December 31

145,000

2,465,000

Gross income

1,785,000

Administrative expenses

500,000

Net income

1,285,000

Multinational Company Statement of Financial Position December 31, 2008

Assets Current assets: Cash

3,182,000

Inventory

145,000

3,327,000

Noncurrent assets: Resource property Less: Accumulated depletion Mining equipment Less: Accumulated depreciation Total assets

3,000,000 270,000

2,730,000

800,000 72,000

728,000

3,458,000 6,785,000

Equity Share capital Share premium

5,000,000 500,000

Retained earnings

1,285,000

Total equity

6,785,000

Retained earnings

1,285,000

Add: Accumulated depletion

270,000

Total

1,555,000

Less: Unrealized depletion in ending inventory (5,000 x 3)

15,000

Maximum dividend

1,540,000

Retained earnings

1,285,000

Capital liquidated

255,000

Dividends payable

1,540,000



Cost – 12/31/2004

2,800,000

Accumulated depreciation – 8/31/2008 (2,400,000 / 96 months x 44)

1,100,000

Book value – 8/31/2008 Fair value loss

1,700,000 1,500,000Impairment 200,000 259


Carrying value

28,000,000

Decommissioning cost

( 8,000,000)

Adjusted carrying value

20,000,000

Fair value less cost to sell – higher (20,000,000 less 1,000,000)

19,000,000

Impairment loss

1,000,000

Value in use

26,000,000

Decommissioning cost

( 8,000,000)

Adjusted value in use

18,000,000


Carrying value – 12/31/2007 Depreciation for 2008 (20%) Carrying value – 12/31/2008 Carrying value – 12/31/2008 (assuming no impairment) Reversal of impairment loss

7,000,000 (1,400,000) 5,600,000 7,200,000 1,600,000



Cost, January 1, 2005 Accumulated depreciation, December 31, 2007 (100,000 x 3) Book value, December 31, 2007

800,000 300,000 500,000

Recoverable value

200,000

Impairment loss

300,000

The loss is recorded as follows:

Impairment loss

300,000


300,000

Cost

800,000

Accumulated depreciation (300,000 + 300,000)

600,000

Recoverable value, January 1, 2008

200,000

Depreciation for 2008 (200,000 / 5)

40,000

Book value, December 31, 2008

160,000


From August 31, 2005 to May 31, 2008 is a period of 33 months. Thus, the remaining life of the machine is 27 months, 60 months original life minus 33.

Depreciation for the month of June 2008 (1,350,000 / 27 months)

50,000

Cost

3,200,000

Accumulated depreciation – 5/31/2008 (3,200,000 – 500,000 x 33/60)

1,485,000

Book value – 5/31/2008

1,715,000

Fair value Impairment loss

1,350,000 365,000 Problem 19-

32 Answer B

Cost – January 1, 2004 Accumulated depreciation, December 31, 2007 (900,000 / 10 x 4)

1,000,000 360,000


640,000

Depreciation for 2008 (640,000 – 40,000 / 4)

150,000


490,000


Book value, 1/1/2008

2,400,000

Depreciation for 2008 (1,600,000 / 4)

400,000

Book value, 12/31/2008 Sales price-recoverable value loss

2,000,000 650,000Impairment 1,350,000


Depreciation for 2008 (10% x 2,000,000)

200,000

Cost – 1/2/2004

2,000,000

Accumulated depreciation - 12/31/08 (200,000 x 5)

1,000,000

Book value-12/31/2008

1,000,000

Estimated cost of disposal

50,000

Impairment loss

1,050,000


Cost

2,000,000

Accumulated depreciation – 1/1/2008 (2,000,000 – 100,000 / 10 x 2.5) Book value – 1/1/2008 Fair value Impairment loss

475,000

1,525,000 600,000 925,000

� J � � � � G ��F

15,000,000

.857

12,855,000

2010

15,000,000

.794

11,910,000

2011

12,000,000

.735

8,820,000

60,000,000 Total value in use

50,325,000

2. The recoverable amount is the value in use of P50,325,000 because this is higher than the fair value less cost to sell of P48,000,000. 3. Impairment loss

14,675,000

Accumulated depreciation (65,000,000 – 50,325,000)

4. Depreciation

14,675,000

12,581,250


12,581,250

Problem 19-20

1. Depreciation

1,000,000


2. Depreciation

1,000,000

1,000,000


3. Impairment loss

1,000,000

2,000,000


4. Depreciation Accumulated depreciation (6,000,000 / 8)

2,000,000

750,000 750,000

5. Accumulated depreciation Gain on impairment recovery

Cost – 1/1/2006

1,750,000 1,750,000

10,000,000


2,000,000

Book value – 12/31/2007

8,000,000

Impairment loss – 2007

2,000,000

Adjusted book value – 12/31/2007

6,000,000

Depreciation – 2008 (6,000,000 / 8)

750,000

Book value – 12/31/2008

Cost – 1/1/2006

5,250,000

10,000,000


3,000,000

Book value – 12/31/2008 (assuming no impairment)

7,000,000

Recorded book value

5,250,000

Gain on reversal of impairment

1,750,000

The fair value or recoverable value of P7,500,000 cannot exceed the “book value” that would have been determined assuming no impairment is recognized. Posted by Louie Lansang at 5:06 AM No comments: Labels: Finacc Volume 1 Chap 19, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 19-29 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 19 Problem 19-29

The primary purpose of the building is to serve as a corporate asset supporting Litmus Company’s manufacturing operations. Therefore, the building in itself cannot be considered to generate cash inflows that are largely independent of the cash inflows from the entity as a whole. In this case, the cash generating unit is Litmus Company as a whole.

The building is not held for investment. Thus, it is not appropriate to determine the value in use of the building based on the cash inflows of related rent.

Posted by Louie Lansang at 5:04 AM No comments: Labels: Finacc Volume 1 Chap 19, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 19-26 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 19 Problem 19-28 Case 1 1.

A is separate cash generating unit because there is an active market for A’s products.

2. Although there is an active market for the products of B and C, cash inflows from B and C depend on the allocation of production across two countries. It is unlikely that cash inflows from B and C can be determined individually. Therefore, B and C, together should be treated as a cash generating unit.

Case 2

a. A cannot be treated as a separate cash generating unit because its cash inflows depend on the sales of the final product by B and C, since there is no active market for A’s product.

b. As a consequence, A, B and C, together, and therefore, Maximus Company, as a whole, should be treated as the largest single cash generating unit.



It is likely that the recoverable amount of an individual magazine title can be assessed. Even though the level of advertising income for a title is influenced to a certain extent by the other titles in the customer segment, cash inflows from direct sales and advertising are identifiable for each title. In addition, decisions to abandon titles are made on an individual basis.

Accordingly, the individual magazine titles generate cash inflows that are largely independentfrom one another and therefore, each magazine title is a separate cash generating unit. Posted by Louie Lansang at 5:02 AM No comments: Labels: Finacc Volume 1 Chap 19, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 19-26 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 19 Problem 19-26

All Unimart’s stores are in different locations and probably have different customer profile. So although Smart is managed at the corporate level, Smart generates cash inflows that are largely independent from those of the other Unimart’s stores. Therefore, it is likely that Smart in itself is a cash generating unit. Posted by Louie Lansang at 5:01 AM No comments: Labels: Finacc Volume 1 Chap 19, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 19-25 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 19 Problem 19-25

1. Carrying amount Value in use Impairment loss

2. Allocation of impairment loss

16,000,000 11,000,000 5,000,000

Building (8/16 x 5,000,000)

2,500,000

Equipment (4/16 x 5,000,000)

1,250,000

Inventory (4/16 x 5,000,000)

1,250,000 5,000,000

Observe that after allocating the P2,500,000 loss to the building, the carrying amount of the building would be P5,500,000 which is lower than its fair value of P6,500,000.

Accordingly, only P1,500,000 loss is allocated to the building and the balance of P1,000,000 is reallocated to the equipment and inventory prorata.

Building Allocated loss

2,500,000

Reallocated loss

(1,000,000)

(4/8 x 1,000,000) (4/8 x 1,000,000) Impairment loss

Equipment

Inventory

1,250,000

1,250,000

500,000 _________ 1,500,000

3. Impairment loss

_________

500,000

1,750,000

1,750,000

5,000,000

Accumulated depreciation – building

1,500,000

Accumulated depreciation – equipment

1,750,000

Inventory

1,750,000


1. Total carrying amount

5,000,000

Value in use

3,600,000

Impairment loss

1,400,000

2. Impairment loss allocated to goodwill

500,000

Impairment loss allocated to the other assets

900,000 1,400,000

When an impairment loss is recognized for a cash generating unit, the loss is allocated to the assets of the unit in the following order:

a.

First, to the goodwill, if any.

b.

Then, to all other assets of the unit prorata based on their carrying amount.

Carrying amount

Fraction

Building

2,000,000

20/45

400,000

Inventory

1,500,000

15/45

300,000

Trademark

1,000,000

10/45

200,000

4,500,000

3. Impairment loss Goodwill Accumulated depreciation – building

900,000

1,400,000 500,000 400,000

Inventory

300,000

Trademark

200,000

Valix Finacc vol 1 Problem 20-46 to 50

Loss

Financial Accounting Volume 1 2008 Valix-Peralta Chapter 20 Problem 20-46 to 50


Depreciation of equipment

135,000

Materials used

200,000

Compensation costs of personnel consulting fees allocated

500,000 Outside 150,000 Indirect costs 250,000 1,235,000


Modification to the formulation of a chemical product Design of tools, jigs, molds and dies Laboratory research Total research and development expense

135,000 170,000 215,000 520,000


All costs are charged to R and D expense.


Trademark Value in use (120,000 / 6%) Impairment loss

3,000,000 2,000,000 1,000,000

Patent

2,000,000

Amortization for 2008 (2,000,000 / 5)

400,000

Book value – 12/31/2008

1,600,000

Value in use (500,000 x 3.47)

1,735,000

Impairment loss

-_ _


Carrying amount of net assets

16,000,000

Value in use (8,000,000 x 1.5)

12,000,000

Impairment loss – applicable to goodwill

4,000,000




Downpayment Present value of annual payment for 4 years (1,000,000 x 2.91) franchise 4,910,000


2,000,000 2,910,000 Cost of

Design costs

1,500,000

Legal fees of registering trademark

150,000

Registration fee with Patent Office

50,000

Total cost of trademark

1,700,000


Original lease

12 years

Extension

8

Total life

20

Less: Years expired (2006 and 2007) Remaining life

2 18 years

Life of improvement (shorter)

15 years

Leasehold improvement

540,000

Less: Depreciation for 2008 (540,000 / 15) Book value

36,000 504,000


Depreciation (3,600,000 / 6) Posted by Louie Lansang at 5:58 AM No comments: Labels: Finacc Volume 1 Chap 20, Finacc Volume 1 Solutions, Valix Solutions Valix Finacc vol 1 Problem 20-35 to 40 Financial Accounting Volume 1 2008 Valix-Peralta Chapter 20 Problem 20-35 to 40

600,000


Cost

357,000

Accumulated amortization from 2005 to 2007 (357,000 / 15 x 3) Book value – 12/31/2007

71,400 285,600

Amortization for 2008 (285,600 / 7) Book value – 12/31/2008

40,800 244,800


Cost 1/1/2003

6,000,000

Accumulated depreciation – 12/31/2007 (6,000,000 / 15 x 5)

2,000,000

Book value – 1/1/2008

Amortization for 2008 (4,000,000 / 5)

4,000,000

800,000


Cumulative earnings

550,000

Less: Gain on sale

50,000

Adjusted cumulative earnings

500,000

Average earnings (500,000 / 5) Divide by capitalization rate Net assets including goodwill

100,000 10% 1,000,000

Less: Net assets before goodwill Goodwill

750,000 250,000


Net assets

1,800,000

Multiply by excess rate (16% minus 10%) Excess earnings

6% 108,000

Multiply by present value factor Goodwill

3.27 353,160


Purchase price

5,000,000

Less: Goodwill

500,000

Net assets before goodwill

4,500,000

Estimated annual earnings (squeeze) Less: Normal earnings (4,500,000 x 10%)

550,000 450,000

Excess or superior earnings

100,000

Divide by capitalization rate

20%

Goodwill

500,000


Accounts receivable

2,000,000

Inventory

500,000

Equipment

500,000

Short-term payable

(2,000,000)

Net assets at fair value

1,000,000

Acquisition cost

5,000,000

Net assets at fair value

(1,000,000)

Goodwill

4,000,000


1.

Designing and planning

1,000,000

Code development

1,500,000

Testing

__500,000

Total R and D expense in 2008

3,000,000

The cost of producing the product master of P2,500,000 is capitalized as software cost to be subsequently amortized.

1.

Cost of producing the software program in 2009 Amortization of software cost (2,500,000 / 4) Total expense in 2009


1. Product costs which are associated wit inventory items are:

1,000,000 625,000 1,625,000

Duplication of computer software and training materials

2,500,000

Packaging product

900,000

Total inventory

3,400,000

2. The costs incurred from the time of technological feasibility to the time when product costs are incurred should be capitalized as computer software cost.

Other coding costs after establishment of technological feasibility

2,400,000

Other testing costs after establishment of technological feasibility

2,000,000

Costs of producing product masters for training materials Total costs to be capitalized

1,500,000 5,900,000

3. Completion of detail program design

1,300,000

Cost incurred for coding and testing to establish technological feasibility Total costs charged as expense

1,000,000 2,300,000


12/31/2008

R and D expense

2,500,000

Cash

1/1/2009

R and D expense Cash

2,500,000

1,200,000 1,200,000

7/1/2009

R and D expense

500,000

Cash

11/1/2009

Patent

500,000

350,000

Cash

11/15/2009

Patent

350,000

800,000

Cash

12/31/2009

Patent

800,000

100,000

Cash

100,000


1. Total carrying amount Value in use

5,000,000 4,230,000

Impairment loss

2. Impairment loss Goodwill

770,000

770,000 500,000

Accumulated depreciation – building (25/45 x 270,000)

150,000

Inventory (15/45 x 270,000)

90,000

Trademark (5/45 x 270,000)

30,000

Valix Finacc Vol 1 Problem 1

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