AP-5902 liability-supporting notes PDF

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Summary

PROBLEM NO. 1 - Heats CorporationArising from advances by officers, due June 30, 200 5 50,Employees’ income tax withheld 20,Advances received from customers on purchase orders 64,Containers’ deposit 50,Accounts payable arising from purchase of goods (P170,000 + P30,000) 200,Customers' account with c...

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PROBLEM NO. 1 - Heats Corporation Requirement no. 1 Notes payable: Arising from purchase of goods Arising from bank loans, on which marketable securities valued at P600,000 have pledged as security, due Dec. 31, 2005 Arising from advances by officers, due June 30, 2005 Employees’ income tax withheld Advances received from customers on purchase orders Containers’ deposit Accounts payable arising from purchase of goods (P170,000 + P30,000) Customers' account with credit balance Cash dividends payable Current portion of serial bonds (P50,000 x 2) Overdraft with Allied Bank Est. damages to be paid as a result of unsatisfactory performance on a contract Est. expenses on meeting guarantee for service requirements on mechandise sold Estimated premiums payable Deferred revenue Accrued interest on bonds payable Provision - deficiency income tax assessment TOTAL CURRENT LIABILITIES

500,000 50,000 20,000 64,000 50,000 200,000 40,000 80,000 100,000 90,000 160,000 120,000 75,000 87,000 360,000 200,000 2,500,000 A

Convertible bonds, due January 31, 2007 Noncurrent portion of serial bonds (P2,000,000 - P100,000) TOTAL NONCURRENT LIABILITIES

1,000,000 1,900,000 2,900,000

B

5,400,000

C

TOTAL LIABILITIES (Requirement no. 2)

304,000

PROBLEM NO. 3 - Pistons Company Item no. 2

Item no. 6

Item no. 8

Item no.10

Item no.11

Item no.12

Item no.19

Insurance expense (P24,000/12 x 1/2) Prepaid insurance

1,000

Prepaid dues and subscription Dues and subscription exp

5,000

Vouchers payable Inventory

1,000

5,000 111,500 111,500

Legal and professional expense Vouchers payable

46,000

Medical expense Vouchers payable

25,000

Inventory Vouchers payable

55,000

Machinery and equipment Vouchers payable

46,000

25,000

55,000 254,000 254,000

PROBLEM NO. 2 - Sonic Corporation 1 Accounts payable per general ledger Debit balances in suppliers' accounts Goods in transit on 12/31/05, FOB shipping point Unrecorded purchase return Adjusted accounts payable Accrued janitorial expenses (P144,000 x 2/3) Accrued utilities (P67,200 x 15/30) Total 2 Accrued salaries and wages Income taxes withheld SSS contributions payable Philhealth contributions Total 3 Since the outcome is only possible, the matter will only be disclosed. 4

5,440,000 240,000 192,000 (160,000) 5,712,000 96,000 33,600 5,841,600 D 776,000 56,000 64,000 16,000 912,000 D -

A

B = 10% (P9,600,000 - B - T) T = 30% (P9,600,000 - B) T = P2,880,000 - .3B B = 10% [P9,600,000 - B - (P2,880,000 - .3B)] B = 10% (P9,600,000 - B - P2,880,000 + .3B) B = 10% (P6,720,000 - .7B) B = P672,000 - .07B 1.07B = P672,000 B = P628,000 (rounded off)

D

5 Principal amount due, 10/1/06 Accrued interest payable (P1,600,000 x 18% x 3/12) Total

800,000 72,000 872,000 D

6 Estimated liability on purchase commitment [320,000 x (P5 - P4.40)]

192,000 D

7 Deferred tax assets and liabilities should not be presented as current 8 Warranty payable, 12/31/04 Add warranty expense accrued during 2005 Total Less payments during 2005 Warranty payable, 12/31/05 9 Estimated coupons to be redeemed (160,000 x 60%) Less coupons redeemed Coupons outstanding Divide by exchange rate Premiums to be issued Multiply by net premium cost (P100+P20-P30) Estimated liability for coupons, 12/31/05 10 Advances against accounts receivable assigned are generally classified as borrowing and treated as current liabilities.

-

D

416,000 1,504,000 1,920,000 1,408,000 512,000 D 96,000 64,000 32,000 5 6,400 90 576,000 D

1,280,000 D

PROBLEM NO. 4 - Rockets Company Requirement no. 1 1) Discount on bonds payable (P10,000,000 - P9,500,000) Bonds payable To correct the original entry on issuance of 10,000 bonds Retained earnings (P500,000 x 14/102) Interest expense (P500,000 x 12/102) Discount on bonds payable To record discount amortization for the prior and current years 2) Bonds payable (P2,100,000 - P2,000,000) Premium on bonds payable To recognize premium on bonds payable Premium on bonds payable (P100,000 x 6/82) Interest expense To record premium amortization for the year

500,000 500,000

68,627 58,824 127,451

100,000 100,000

7,317 7,317

3) Retained earnings (P10,000,000 x 12% x 2/12) Interest expense To correct interest exp pertaining to year 2004

200,000

4) Interest expense (P12,000,000 x 12% x 2/12) Accrued interest payable To record accrual of interest

240,000

200,000

240,000

Requirement no. 2 a) Bonds payable (P10,000,000 + P2,000,000) b) Bond discount (P500,000 x 76/102) c) Bond premium (P100,000 x 76/82) d) Accrued interest (P12,000,000 x 12% x 2/12) e) Interest expense P10,000,000 x 12% P2,000,000 x 12% x 6/12 Bond discount amortization (P500,000 x 12/102) Bond premium amortization (P100,000 x 6/82)

12,000,000 372,549 92,683 240,000

1,200,000 120,000 58,824 (7,317) 1,371,506...