295310256 PAS 1 Quizzer 2 with answer key docx PDF

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PROBLEMSItems 1-19 ( Source : Practical Accounting 1 by Condrado o. Uberita)1-4. The accounts and balances shown below were taken from basic company’s trial balance on December 31, 2011. All adjusting entries have been made. Wages payable, P250,000; Cash, P175,000; Bonds Payable, P600,000; Dividends...

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PROBLEMS Items 1-19 (Source: Practical Accounting 1 by Condrado o. Uberita) 1-4. The accounts and balances shown below were taken from basic company’s trial balance on December 31, 2011. All adjusting entries have been made. Wages payable, P250,000; Cash, P175,000; Bonds Payable, P600,000; Dividends Payable, P140,000; Prepaid Rent, P136,000; Inventory,P820,000; Sinking Fund Assets, P525,000; Trading Securities, P153,00; Premium on Bonds Payable, P48,000, Investment in Subsidiary, P1,020,000; Taxes Payable, P228,000; Accounts Payable, P248,000; Accounts Receivable, P366,000; Property, plant and equipment, P1,200,000; Patents Net, P150,000; Accumulated Depreciation-PPE, P400,000; Land Held for future business site, P900,000. 1. How much should be reported in Basic’s December 31, 2011 balance sheet as current assets? a. P1,660,000 c. P1,860,000 b. P1,650,000 d. P1,850,000 Cash P175,000 Prepaid rent 136,000 Inventory 820,000 Trading Securities 153,000 Accounts receivable 366,000 Total P1,650,000 2. How much should be reported in Basic’s December 31, 2011 balance sheet as noncurrent assets? a. P2,375,000 c. P2,225,000 b. P3,395,000 d. P3,705,000 Sinking fund asset Investment in Subsidiary Property, plant and equipment Patent-net Accumulated Depreciation Land held for future business site Total

P 535,000 1,020,000 1,200,000 150,000 (400,000) 900,000 P3,395,000

3. How much should be reported in Basic’s December 31, 2011 balance sheet as current liabilities? a. P776,000 c. P916,000 b. P866,000 d. P966,000 Wages Payable

P250,000

Dividends Payable Taxes Payable Accounts Payable Total

140,000 228,000 248,000 P866,000

4. How much should be reported in Basic’s December 31, 2011 balance sheet as noncurrent liabilities? a. 552,000 b. 648,000 c. Bonds Payable Premium on bonds payable Total

c. 640,000 d. 648,000 P600,000 48,000 P648,000

5. Beloved Corporation’s trial balance contained the following account balances at December 31, 2011: Trading Securities 150,000 Prepaid insurance 30,000 Cash 330,000 Inventory 900,000 Equipment and furniture-net 990,000 Patent 120,000 Accounts receivable-net 480,000 Land (held for capital appreciation) 1,200,000 How much is the total current assets in Beloved’s December 31,2011 balance sheet? a. P1,890,000 c. P2,190,000 b. P2,010,000 d. P2,430,000 Cash Trading Securities Accounts receivable-net Inventory Prepaid insurance Total current assets

P 330,000 150,000 480,000 900,000 30,000 P1,890,000

6. Head Company prepared a draft of its 2011 balance sheet. The draft statement reported current liabilities totalling P2, 000,000. However, none of the following items were included in this preliminary total at December 31,2011. Accounts payable P300,000 Bonds payable, due 2012 500,000 Discounts on Bonds payable, due 2012 60,000 Dividends payable-January 31, 2012 160,000

Notes payable, due 2013 Bond issue costs

400,000 20,000

At which amount should Head’s current liabilities be correctly reported in December 31, 2011 balance sheet? a. P2,880,000 c. P2,960,000 b. P2,900,000 d. P3,020,000 Balance per books Accounts payable Bonds payable, due 2012 Discounts on Bonds payable Dividends payable Bond issue costs Total 7-10. The following balance balances of Prince Company Cash Trading securities Accounts receivable-net 3,275,000 Inventory 450,000 Other current assets PPE-net Other noncurrent assets

P2,000,000 300,000 500,000 ( 60,000) 160,000 (20,000) P2,880,000

sheet accounts and their respective unadjusted was made available on December 31, 2011: 1,250,000 Accounts payable 340,000 800,000 Other current liabilities 200,000 2,135,000 Long-term liabilities 3,100,000

Treasury share

1,420,000 6,480,000 1,360,000

The following information relate to the December 31, 2011 balance sheet: 1. Cash includes P400,000 that has been restricted for the purchase of manufacturing equipment. 2. Trading securities include P275,000of shares that was purchased in order to give the company significant ownership and a seat on the board of directors of a major suppliers. 3. Other current assets include P400,000 advance to the President of the company, no due date has been set. 4. Long term liabilities include bonds payable of P1,000,000, of this amount P250,000 represents bond scheduled to be redeemed in 2012. 5. Long term liabilities also include P700,000 bank loan. On May 15,2012, the loan will become due on demand. 6. Cash in the amount of P1,900,000 has been placed in a restricted fund for the redeemed of the preference shares. In 2012, both the cash and the preference shares have been removed from the balanced sheet.

7. PPE includes land costing P800,000 is an investment property. Company’s policy is to measure investment property under the cost model. 7. How much should be the current assets? a. P7,630,000 b. P8,305,000

c. P8,430,000 d. P8,705,000

8. How much should be the non-current assets? a. P7,840,000 c. P10,150,000 b. P8,515,000 d. P10,815,000 c. Current Non-current Total per book: P8,705,000 * P7,840,000 ** Cash restricted for the purchase of manufacturing equipment (1) (400,000) 400,000 Investment in securities to give the company significant ownership (2) (275,000) 275,000 Advance to President (3) (400,000) 400,000 Cash restricted for the redemption of preference share (6) 1,900,000 Correct current and non-current assets P7,630,000 P10,815,000 *includes cash, investments, accounts receivable, inventory and other current liabilities **includes PPE and other non-current assets The investment property is classified as non-current asset

9. How much should be the current liabilities? a. P540,000 b. P790,000

c. P 950,000 d. P1,940,000

10. How much should be the non-current liabilities? a. P2,325,000 c. P3, 275,000 b. P2,575,000 d. P3,275,000

Balance per book

Current P 540,000

Non-current * P3,275,000

Current portion of bonds payable (250,000) Bank loan (700,000) Correct balances P2,325,000

250,000 700,000 P1,490,000

*includes accounts payable and other current liabilities 11-13. Below are the account balance prepared by the bookkeeper for Jack and Jill Company as of December 31, 2011: Cash Accts receivable, net 1,000,000 Inventories Investments Equipment (net) Patents

P 800,000 Accounts payable P 750,000 522,000 Long-term liabilities 570,000 Residual interest 763,000 960,000 320,000 P3,935,000

2,185,000

---

P3,935,000 Additional information:  Cash includes the cash surrender value of a life insurance policy for P94,000, and bank overdraft of P25,000 has been deducted.  The net receivable balance includes: o Accounts receivable-debit balances P600,000 o Accounts receivable-credit balances P40,000  Inventories do not include goods costing P30,000 ship out on consignment. Receivables of P30,000 were recorded of these goods.  Investment include investments in ordinary shares, trading-P190,000, available-for-sale-P483,000, and sinking fund of P90,000. 11. How much should be the current assets? a. P1,063,000 c. P2,053,000 b. P1,873,000 d. P2,091,000 Current Assets: Cash (P800,000-P94,000+P25,000) Trading securities Accounts Receivable (600,000-30,000) Inventories (570,000+30,000) Correct total current assets 12.

How much should be the total current assets?

P731,000 190,000 570,000 600,000 P2,091,000

a. P1,753,000 b. P1,847,000 Investments: Available for sale securities Cash surrender value Sinking fund Property, plant and equipment Intangibles Total non-current assets P1,947,000

c. P1,937,000 d. P1,947,000

P483,000 94,000 90,000

P667,000 960,000 320,000

13. How much should be the total current liabilities? a. P750,000 c. P 815,000 b. P775,000 d. P1,815,000 Accounts payable Customer’s account with credit balances Bank overdraft Total current liabilities

P 750,000 40,000 25,000 P815,000

14-15. On January 1, 2011, Glow Company leased a building to Blow Corporation for ten year term at an annual rental of P75,000. At inception of the lease, Glow received P300,000 covering the first two years rent of P150,000 and a deposits of P150,000. This deposits will not be returned to Blow upon expiration of the lease but will be applied to payment of rent for the last two years of the leased. 14. What portion of the P300,000 should be shown as a current liability in Glow’s December 31, 2011 balance sheet? a. 0 c. P150,000 b. P75,000 d. P300,000 Annual rental of P75,000 15. What portion of the P300,000 should be shown as a long-term liability in Glow’s December 31, 2011 balance sheet? a. P300,000 c. P 75,000 b. P150,000 d. P225,000 First 2 years rent of P150,000

16.18. The following trial balance of Food Corporation at December 31, 2011 has been properly adjusted except for the income tax expense adjustment: Debit Credit Cash Accounts receivable (net) Inventory Property, plant and equipment (net) Accts payable and accrued liabilities P1,701,000 Income taxes payable 697,600 Deferred income tax liability 85,000 Ordinary share capital 2,350,000 Share premium 3,680,000 Accumulated profit, Jan. 1, 2011 Net sales and other revenue 13,360,000 Costs and Expenses Income tax expenses .

P 775,000 2,695,000 2,085,000 7,366,000

3,450,000

11,180,000 1,222,600 P25,323,600

P25,323,600 Other financial data for the year ended December 31, 2011 are as follows: o Included in accounts receivable is P1,200,000 due from a customer and payable is quarterly instalments of P150,000. The last payment is due December 29, 2013. o The balance in the deferred income tax liability account pertains to a temporary difference that arose in a prior year, of which P20,000 will reverse within one year. o During the year, estimated tax payments of P525,000 where charge to income tax expense. The current and future tax rate on all types of income is 30%. In Food Corporation’s December 31, 2011 balance sheet. 16. How much should be the total current assets? a. P4,955,000 c. P5,555,000 b. P5,405,000 d. P6,080,000

Cash Accounts receivable Less: Amount collectible in 2013 (P150, 000 x 4) 2,095,000 Inventory Total current assets

P

775,000

P2,695,000 600,000 2,085,000 P4,955,000

17. How much should be the total current liabilities? a. P1,873,600 c. P2,375,000 b. P1,893,600 d. P2,440,000 Accts payable and accrued liabilities P1,701,000 Income tax payable (P697,600-P525,000) 172,600 Total current liabilities P1,873,600 18. The accumulated profit balance shall be a. P4,536,000 b. P4,905,000

c. P4,932,400 d. P4,976,000

Accumulated profits, January 1, 2011 P3,450,000 Add. Net income after tax: Net sales and other revenues P13,360,000 Less: Cost and expenses 11,180,000 Net income P 2,180,000 Less: Income tax (P2,180,000 x 30%) 654,000 1,526,000 Accumulated profits, December 31, 2011 P4,976,000 19. Merit Corporation has an arrangement with its customers that, in any 12-month period ending March 31, if they purchase goods for a value of at least P2,000,000, they will received retrospective discount of 2%.at the end of the year December 31, 2011, Merit Corporation has made sales to a customer during the period April to December 31, 2011 of P1,800,000. What amount of revenue should Merit Corporation report in its December 31, 2011income statement retailed to the above arrangement. a. P1,323,000 c. P1,800,000 b. P1,764,000 d. P1.960,000 P1,800,000 x 98% = P1,764,000

Items 20-30 (source KIESO) 20. Stine Corp.'s trial balance reflected the following account balances at December 31, 2010: Accounts receivable (net) $24,000 Trading securities 6,000 Accumulated depreciation on equipment and furniture15,000 Cash 11,000 Inventory 30,000 Equipment 25,000 Patent 4,000 Prepaid expenses 2,000 Land held for future business site 18,000 In Stine's December 31, 2010 balance sheet, the current assets total is a. $90,000. b. $82,000. c. $77,000. d. $73,000. Cash

$11,000

Accounts receivable (net) Inventory Trading securities Prepaid expenses Total current assets $73,000

24,000 30,000 6,000 2,000

Use the following information for questions 17 through 19. The following trial balance of Reese Corp. at December 31, 2010 has been properly adjusted except for the income tax expense adjustment. Reese Corp. Trial Balance December 31, 2010 Dr. Cr. Cash Accounts receivable (net) Inventory Property, plant, and equipment (net) Accounts payable and accrued liabilities Income taxes payable

$

775,000 2,695,000 2,085,000 7,366,000 $ 1,701,000 654,000

Deferred income tax liability Common stock Additional paid-in capital Retained earnings, 1/1/10 Net sales and other revenues Costs and expenses Income tax expenses

85,000 2,350,000 3,680,000 3,450,000 13,360,000 11,180,000 1,179,000 $25,280,000 $25,280,000

Other financial data for the year ended December 31, 2010: •Included in accounts receivable is $1,200,000 due from a customer and payable in quarterly installments of $150,000. The last payment is due December 29, 2012. •The balance in the Deferred Income Tax Liability account pertains to a temporary difference that arose in a prior year, of which $20,000 is classified as a current liability. •During the year, estimated tax payments of $525,000 were charged to income tax expense. The current and future tax rate on all types of income is 30%. In Reese's December 31, 2010 balance sheet, 21. The current assets total is a. $6,080,000. b. $5,555,000. c. $5,405,000. d. $4,955,000. $775,000 + [$2,695,000 – ($150,000 × 4)] + $2,085,000 = $4,955,000. 22. The a. b. c. d.

current liabilities total is $1,850,000. $1,915,000. $2,375,000. $2,440,000. $1,701,000 + ($654,000 – $525,000) + $20,000 = $1,850,000.

23. The a. b. c. d.

final retained earnings balance is $4,451,000. $4,536,000. $4,976,000. $4,905,000.

$3,450,000 + $13,360,000 – $11,180,000 – ($1,179,000 – $525,000) = $4,976,000. 24. Ortiz Co. had the following account balances: Sales $ 120,000 Cost of goods sold 60,000 Salary expense 10,000 Depreciation expense 20,000 Dividend revenue 4,000 Utilities expense 8,000 Rental revenue 20,000 Interest expense 12,000 Sales returns 11,000 Advertising expense 13,000 What would Ortiz report as total revenues in a single-step income statement? a. $133,000 b. $ 10,000 c. $144,000 d. $120,000 $120,000 + $4,000 + $20,000 – $11,000 = $133,000. 25. Ortiz Co. had the following account balances: Sales $ 120,000 Cost of goods sold 60,000 Salary expense 10,000 Depreciation expense 20,000 Dividend revenue 4,000 Utilities expense 8,000 Rental revenue 20,000 Interest expense 12,000 Sales returns 11,000 Advertising expense 13,000 What would Ortiz report as total expenses in a single-step income statement? a. b. c. d.

$127,000 $134,000 $123,000 $ 63,000

$60,000 + $10,000 + $20,000 + $8,000 + $12,000 + $13,000 = $123,000. 26.

An income statement shows “income before income taxes and extraordinary items” in the amount of $2,055,000. The income taxes

payable for the year are $1,080,000, including $360,000 that is applicable to an extraordinary gain. Thus, the “income before extraordinary items” is a. b. c. d.

$1,335,000. $615,000. $1,395,000. $675,000. $2,055,000 – ($1,080,000 – $360,000) = $1,335,000.

27.

Dole Company, with an applicable income tax rate of 30%, reported net income of $210,000. Included in income for the period was an extraordinary loss from flood damage of $30,000 before deducting the related tax effect. The company's income before income taxes and extraordinary items was a. b. c. d.

$240,000. $300,000. $330,000. $231,000. $210,000 + ($30,000 × .7) = $231,000 $231,000 ÷ .7 = $330,000.

28.

A review of the December 31, 2010, financial statements of Somer Corporation revealed that under the caption "extraordinary losses," Somer reported a total of $515,000. Further analysis revealed that the $515,000 in losses was comprised of the following items: (1)Somer recorded a loss of $150,000 incurred in the abandonment of equipment formerly used in the business. (2)In an unusual and infrequent occurrence, a loss of $250,000 was sustained as a result of hurricane damage to a warehouse. (3)During 2010, several factories were shut down during a major strike by employees, resulting in a loss of $85,000. (4)Uncollectible accounts receivable of $30,000 were written off as uncollectible. Ignoring income taxes, what amount of loss should Somer report as extraordinary on its 2010 income statement? a. b. c. d.

$150,000. $250,000. $400,000. $515,000.

$515,000 – $150,000 – $85,000 – $30,000 = $250,000. Use the following information for questions 29 and 30. At Ruth Company, events and transactions during 2010 included the following. The tax rate for all items is 30%. (1) Depreciation for 2008 was found to be understated by $30,000. (2) A strike by the employees of a supplier resulted in a loss of $25,000. (3) The inventory at December 31, 2008 was overstated by $40,000. (4) A flood destroyed a building that had a book value of $500,000. Floods are very uncommon in that area. 29.

The effect of these events and transactions on 2010 income from continuing operations net of tax would be a. b. c. d.

$17,500. $38,500. $66,500. $416,500. $25,000 – $7,500 = $17,500.

30.

The effect of these events and transactions on 2010 net income net of tax would be a. b. c. d.

$17,500. $367,500. $388,500. $416,500. $17,500 + ($500,000 × .7) = $367,500....