Professional Documents
Culture Documents
Adv 1 - Dept 2010
Adv 1 - Dept 2010
13. Using the same information in No. 12 , Compute the realized gross profit in 2008
a. P 14,384 c. P 37,184
b. P 22,800 d. P 39,600
3
14. Use the following information for questions 14 to 16
The trial balance of Madalilang Appliance Corporation as of the end of the fiscal year on September 30,
2008 is:
Debit Credit
Accounts receivable P 100,000
Accounts payable..................................................... P 100,000
Allowance for depreciation....................................... 33,750
Capital Stock........................................................... 125,000
Cash....................................................................... 46,250
Deferred gross profit - 2007..................................... 50,000
Equipment............................................................... 112,500
Installment contract receivable - 2007....................... 12,500
Installment contract receivable - 2008....................... 150,000
Installment sales...................................................... 375,000
Inventory, Sept 30, 2007........................................... 62,500
Loss on repossessions.............................................. 3,750
Prepaid expenses.................................................... 3,750
Purchases.............................................................. 435,000
Repossessions........................................................ 2,500
Retained earnings................................................... 30,000
Sales..................................................................... 312,500
Selling and administrative expenses......................... 97,500
Total..................................................................... P 1,026,250 P 1,026,250
======== ========
The post-closing trial balance on Sept. 30, 2007 shows the following balances of certain accounts:
Installment contract receivable - 2007..............................................P 100,000
Deferred gross profit - 2007............................................................ 50,000
The gross profit percentage on regular sales during the year was 30%.
The accountant made the following entry for a repossession on a sale of 2007 towards the end of fiscal
year:
Repossessions........................................................P 2,500
Loss on repossessions............................................. 3,750
Installment contract receivable - 2007............. P 6,250
The inventory of new and repossessed merchandise on Sept. 30, 2008 amounted to P 75,000.
The total realized gross profit for the fiscal year September 30, 2008 is:
a. P 93,750 c. P 141,875
b. P 101,250 d. P 235,625
15. Using the same information in number 14, the correcting entry for repossession made on a sale of 2007 is:
a. no entry
b. Deferred gross profit - 2007...........................3,125
Loss on repossession........................... 3,125
c. Deferred gross profit - 2007...........................3,750
Loss on repossession........................... 3,750
d. Loss on repossession....................................3,125
Installment contract receivable............. 3,125
16. Using the same information in number 14, compute the net income for the fiscal year September 30,
2008:
a. P 137,500 c. P 235,000
b. P 138,125 d. P 235,625
4
17. Items 17 and 18 are based on the following data
The following selected accounts are taken from the trial balance on December 31, 2008 of
Cagayan Company:
Accounts receivable - charge sales P 75,000
Installment receivables - 2006 15,000
Installment receivables - 2007 45,000
Installment receivables - 2008 270,000
Merchandise inventory 52,500
Purchases 390,000
Freight-In 3,000
Repossessed merchandise 15,000
Repossession loss 24,000
Cash sales P 90,000
Charge sales 180,000
Installment sales 446,400
Deferred gross profit - 2006 22,200
Deferred gross profit - 2007 39,360
Additional information:
a. Gross profit rate on 2006 installment sales was 30% and for 2007, the rate was 32%.
b. Installment sales prices exceed cash sales prices by 24% while charge sales prices
exceed cash sales prices by 20%.
c. The entry for repossessed goods was:
Repossessed merchandise............................P 15,000
Repossession loss........................................ 24,000
Installment receivables - 2006................ P 18,000
Installment receivables - 2007................ 21,000
d. Merchandise on hand at th end of 2008 (new and repossessed was P 70,500.
(1) If all sales were on cash basis, the total sales for 2008, and (2) The cost of goods sold
on installment sales for 2008:
a. (1) P600,000; (2) P272,160 c. (1) P516,328; (2) P390,000
b. (1) P600,000; (2) P 234,000 d. (1) P800,000; (2) P267,624
18. Using the same information in Number 17, the cash collections on Installment sale for
Also during 2008 a customer defaulted and the company repossessed merchandise appraised at P4,000
after costs of reconditioning estimated at P400. The merchandise had been purchased in 2006 by a
customer who still owed P5,000 at the date of repossession. The entry made was:
Compute the (1) total realized gross profit on installment sales for the years 2008, and (2) The gain (loss)
on repossession:
a. (1) P157,156; (2) (P 960) c. (1) P 86,176; (2) (P 960)
b. (1) P 70,986; (2) P 600 d. (1) P157,156; (2) P 600
20. Using the same information in Number 19, the correcting entry for write-offs:
The entry to adjust the branch inventory in the books of the home office will include
1. ANS: B
Particulars Por Payb Siks
Total
Capital b4 admission P140,000 P100,000 P240,000
Contribution of new partner P100,000 100,000
Goodwill to new partner _______ _______ __20,000 20,000 B
Capital balance P140,000 P100,000 P120,000 P360,000
======= ======= ======= =======
2. ANS: B
Particulars Por Payb Siks Total
Capital b4 admission P 140,000 P100,000 P240,000
Contribution of new partner P100,000 100,000
Bonus to new partner (6,666.67) (6,666.67) 13,333.33 --
Capital balance B P133,333.34 P 93,333.34 P113,333.33 P340,000
========= ========= ========= =======
3. ANS: B
Cash Priority Program
Partners Interest Payments
Particulars Sharon Hilda Angel Sharon(30%) Hilda(50% Angel(20%)
Capital balance P90,000 P60,000 P 30,000
Loan Balance ______ (10,000) 20000
Partners Interest P90,000 P50,000 P 50,000
P & L Rate 30% 50% 20%
Loss capacity of partners P300,000 P100,000 P250,000
1st priority to Sharon (50,000) _______ ______ P15,000
P250,000 P100,000 P250,000
2nd priority to Sharon & Angel (150,000) ______ (150,000) 45,000 P30,000
P100,000 P100,000 P100,000
Subsequent payment at P&L rates 30% 50% 20%
4. ANS: D
Particulars Creditors Sharon Hilda Angel Total
Available cash P130,000
Payment to outside creditors P100,000 ( 100,000)
1st priority to Sharon P15,000 ( 15,000)
2nd priority to Sharon & Angel _______ 9,000 _____ P 6,000 ( 15,000)
Payment to partners P100,000 P 24,000 P -0- P 6,000 P -0- D
======= ======= ======= ====== ==========
5. ANS: A
see cash priority in number 3 above
6. ANS: D
Particulars Heart John Bea Lloyd Total
Capital balance P 30,000 P 20,000 (P 40,000) (P60,000) (P 50,000)
Absorption of Lloyd deficit (20,000) ( 20,000) ( 20,000) 60,000 -0-
Balance P 10,000 P -0- (P 60,000) P -0- (P 50,000)
======= ======== ======== ====== ========
Note: Heart & Bea have sufficient personal assets
7. ANS: D
8. ANS: B
Mi, capital P 108,000 loss on realization (15,750 / 20%)
Mi, drawing ( 9,000) P 78,750 B
Total interest 99,000 =======
cash received 83,250
loss share (20%) P 15,750
=======
9. ANS: D
Pls Capital P 123,000
Pls, drawing ( 24,000)
Total interest 99,000
Loss share (P 78,750 x 50%) ( 39,375)
Cash received by Pls P 59,625 D
11
========
10. ANS: C
Bonus required ( P40,000 - P 25,000) P 15,000
Divided by 10%
Net profit after bonus and salaries 150,000
Add back: Salaries (P25,000 + P100,000) P125,000
Bonus 15,000 140,000
Net profit before bonus and salaries P290,000 C
=======
11. ANS: A
Deferred gross profit (gain) P 270,000
Realized Gross profit:
Downpayment P 150,000
Installment collections excluding
interest:(P325,000 - P 75,000) 250,000
Total collections 400,000
Gross profit rate (P270,000/900,000) 30% 120,000
Deferred gross profit, 12/31/08 P 150,000
========
12. ANS: C
2007 Sales: {P100,000 - [P40,000 - (18% x P100,000)]}x 18%............... P 14,040
2008 sales: P120,000 x 18%................................................................. 21,600
P 35,640 (c)
========
13. ANS: C
2007 Sales: [P50,000 - 14,040 (refer to #12)] x (P100,000-P60,000)/P100,000............P14,384
2008 Sales: [P90,000 - (P120,000 x 18%)] x (P120,000-P80,000)/P120,000................ 22,800
Realized Gross profit on installment sales in 2008................................................P 37,184(c)
=======
14. ANS: D
2007 sales 2008 sales Total
Installment contract receivable,
9/30/2007 (Installment sales)..................... P 100,000 P 375,000
Less: Installment contract receivable
9/30/2008................................................. 12,500 150,000
Decrease in installment contract receivable..... P 87,500 P 225,000
Less: Defaults, unpaid balance....................... 6,250 -0-
Collections in 2008........................................ P 81,250 P 225,000
Multiplied by: Gross profit rate...................... 50% 45%
Realized gross profit on installment sales....... P 40,625 P 101,250 P 141,875
======= ========
Add: Gross profit on cash sales - 2008 (P312,500 x 30%) 93,750
Realized gross profit in 2008....................................................................... P 235,625 (d)
========
*Gross profit rates:
2007 Sales (prior year sales): Deferred gross profit - 2007 sales, 9/30/2007
Installment Contract Receivable -
2007, 9/30/2007
: P 50,000 = 50%
P100,000 ====
2008 Sales:
Inventory, Sept. 30, 2007................................................................ P 62,500
Add: Purchases............................................................................ 435,000
Repossessions...................................................................... 2,500
Cost of goods available for sale....................................................... P 500,000
Less: Inventory of new and repossessed merchandise,at 9/30/2008... 75,000
Cost of goods sold - 2008............................................................... P 425,000
Less: Cost of the regular sales - 2008 (P312,500 x 70%)................. 218,750
Cost of Installment sales - 2008...................................................... P 206,250
========
Installment sales - 2008................................................................... P 375,000
Less: Cost of installment sales......................................................... 206,250
Gross profit.................................................................................... P 168,750
12
========
Gross profit rate (P168,750 / P375,000)........................................... 45%
=========
15. ANS: B
Value of repossessed merchandise.................................................................. P 2,500
Less: Unrecovered cost:
Installment contract receivable - 2007, unpaid balance.......P 6,250
Less: Deferred gross profit - 2007 (P6,250 x 50%)............ 3,125 3,125
Loss on repossession....................................................................................... P( 625)
=======
Correcting Entry: (b)
Deferred gross profit - 2007 3,125
Loss on repossession (P3,750 - P625) 3,125
Entry Made:
Repossessions................................................................ 2,500
Loss on repossessions..................................................... 3,750
Installment contract receivable - 2007.................... 6,250
Should be/Correct entry:
Repossessions................................................................ 2,500
Deferred gross profit - 2007........................................... 3,125
Loss on repossessions.................................................... 625
Installment contract receivable - 2007................... 6,250
16. ANS: A
Realized gross profit in 2008 ( refer to # 14)..................................... P 235,625
Less: Loss on repossession (refer to # 15)........................................ 625
Selling and administrative expenses......................................... 97,500
Net Income.................................................................................. P 137,500 (a)
========
17. ANS: B
(1) Total sales for 2008:
Cash sales (equivalent to 100%).........................................P 90,000
Installment sales (P446,400 / 124% = equivalent to 100%)... 360,000
Charge sales )P180,000 / 120% = equivalent to 100%)........ 150,000
P600,000 (b)
========
(2) Cost of Installment sales for 2008:
Merchandise Inventory, 12/31/07......................................P 52,500
Add: Purchases............................................................... 390,000
Freight-In............................................................... 3,000
Repossessed merchandise........................................ 15,000
Cost of goods available for sales....................................... P460,500
Less: Merchandise Inventory, 12/31/08
(new & repossessed).............................................. 70,500
Cost of goods sold.......................................................... P390,000
Multiplied by: Based on sales amount (equivalent to cash
sales price which is 100%)..................................... 360 / 600
Cost of installment sales................................................. P234,000 (b)
18. ANS: C
2006 sales 2007 sales 2008 sales
Installment Accts Rec’ble, 01/01
2008 (Installment sales) P446,400
2007: P39,360 32% P123,000
2006: P22,200 30% P 74,000
Less: Installment AR, 12/31/2008 15,000 45,000 270,000
Decrease in Installment AR P 59,000 P 78,000 P176,400
Less: Defaults, unpaid balance 18,000 21,000 0
Collections in 2008 P 41,000 P 57,000 P176,400 (c)
19. ANS: D
(1)
2006 sales 2007 sales 2008 sales Total
Realized gross profit in 2008:
13
Installment AR, 01/01/08
(Installment Sales) P110,000 P250,000 P420,000
Less: Installment AR, 12/31/08 28,000 92,000 238,000
Decrease in Installment AR P 82,000 P158,000 P182,000
Less: Defaults, unpaid balance 5,000
Write-off 9,000 2,800 0
Collections in 2008 P 68,000 P155,200 P182,000
Multiplied by: gross profit rate 40% * 38% * 39% *
Realized gross profit in 2008 P 27,200 P 58,976 P 70,980 P157,156 (d)
Ordinarily, however, conservatism would suggest that no more than the unrecovered cost, the
difference between the receivable balance and the deferred gross profit balance, be assigned to the
repossessed goods. No gain, then, would be reported at the time of the repossession; recognition of
any gain would await the sale of the repossessed goods.
20. ANS: A
(a)
Correcting entry for write-offs:
Deferred gross profit - 2006 3,600
Deferred gross profit - 2007 1,064
Operating Expenses 4,664
Entry made:
Operating Expenses 11,800
Installment Contract Rec’ble - 2006 9,000
Installment Contract Rec’ble - 2007 2,800
21. ANS: C
(c) Shipments to Ilagan branch 2,400
Allowance for overvaluation of branch inventory 2,400
22. ANS: C
(c) Shipments to Ilagan branch 12,600
Branch income 12,600
23. ANS: D
Sales P 300,000
Cost of Sales:
Beginning Inventory P 45,000
Shipments from Home Office 240,000
Goods available for sale P 285,000
Ending Inventory 60,000 225,000
14
Gross Profit P 75,000
Expenses 50,000
Net Income P 25,000 (d)
24. ANS: C
Shipments from Home Office P240,000 120% (c)
Shipments to Branch 200,000 100%
Overvaluation of branch shipments P 40,000 20%
25. ANS: A
Goods Available for Sale at billed price P285,000
Goods Available for Sale at cost (P285,000 120%) 237,500
Unrealized profit on branch inventory P 47,500 (a)
26. ANS: C
Cost of Sales Home Office Branch @ cost Combined
Beginning Inventory P 50,000 P 37,500 P 87,500
Purchases 500,000 500,000
Shipments from Home Office 200,000*
Goods Available for Sale P550,000 P237,500 P587,500
Shipments to Branch (200,000)*
Ending Inventory ( 70,000) ( 50,000) (120,000)
Cost of Sales P 280,000 P 187,500 P 467,500 (c)
* Eliminated in CFS
27. ANS: C
(see computation in item # 26)
28. ANS: A
Home office account is eliminated in the combined financial statements.
29. ANS: D
Particulars Branch Account Home Office
Account
Unadjusted balance P 8,400 P 9,375
a. Merchandise shipment in transit 615
b. Home Office receivable collected by branch 2,500
c. Erroneous entry of branch net income ( 90)
d. Merchandise returns in transit ( 640)
Adjusted Balance P 10,350 P 10,350
30. ANS: B
(see computation in item # 29)
31. ANS: A
Joint Venture Jose Capital
11/6 P 8,500 P20,400 11/10 12/30 P 540 P8,500 11/6
11/8 7,000 4,200 11/12 1,320 profit (2/10)
11/10 200 1,210 11/28 P 540 P9,820
12/8 3,500 540 12/30 P9,280 to Jose (c) 32
12/14 550 =====
19,750 26,350
6,600 JV profit (a) 31
32. ANS: C
refer to number 31 for computations
33. ANS: C
Joint Venture
before P/L P15,000 P25,000 unsold merchandise
P10,000 JV Profit (c)
34. ANS: D
Joint Venture
P 30,000 before P/L
25,000 unsold merchandise
P 55,000 JV profit ( d)
======
35. ANS: D
Joint Venture
Purchases P25,000 P92,650 (?) Sales (d)
25,000
15
Expenses 1,850
2,650
P 54,450 P 92,650
P 38,200 ( 18,000 + 20,200) unsold merch
2,800 (P 1,000 + P 1,800)
P 41,000 JV gain (b)
======
36. ANS: B
refer to number 35 computation
37. ANS: C
Joint Venture Ok, Capital Joint Venture Ka, Capital
(1) P4,000 P6,500 (2) (2) P6,500 P 4,000 (1) (3) P2,500 P6,500 (4) (4) P6,500 P2,500 (3)
P2,500 P2,500 P4,000 P4,000
====== ====== ====== ======
Therefore,as a result of the cash settlement Ok pays P2,500 to Lang, while Ka pays Lang P4,000 (c)
38. ANS: A
see midtems # 41
39. ANS: A
see computations on midterms # 42
40. ANS: B
see midterm exams # 43
41. ANS: A
see computation midterm examination # 44
42. ANS: A
see computation on midterm exams # 48
43. ANS: C
Progress billings (P2,500,000 x 30%)........................................................P 750,000
Less: Construction in progress
Costs incurred to date...................................................P 440,000
Gross profit recognized:
Contract price.................................P 2,500,000
Total costs (P1,560,000+ 440,000).... 2,000,000
Gross profit.................................... 500,000
% of completion(440,000/2,000,000) 22% 110,000 550,000
Current asset..........................................................................................P 200,000
=======
44. ANS: A
Construction in progress:
Cost incurred to date, 2004 P 2,625,000
Gross profit (loss) earned to date, 2004
(P3,375,000- P3,250,000) 125,000
Balance as of December 31, 2004 P 2,500,000
Less: Contract billings, 2004 (3,250 x 75%) 2,437,500
Current asset P 62,500
========
45. ANS: D
46. ANS: D
Initial franchise fee..............................................................P 50,000
Continuing franchise fee (55 x P400,000).............................. 20,000
Revenue from franchise......................................................P 70,000 (d)
======
47. ANS: B
16
The P30,000 down payment received by Panaginip, Inc. represents the earned franchise fee revenue in
2004 since the problem already stated that the nonrefundable downpayment represents a fair measure of
the service already performed by Panaginip, Inc. the franchisor. However, since substantial future
services are still to be performed by Panaginip, Inc. the present value of the three annual payments to be
received in the future, of P 36,000, should be reported as of December 31, 2006 as unearned franchise
fees.
Incidentally, the entry would be:
Cash............................................................................. 30,000
Notes receivable............................................................ 45,000
Unearned Interest Income.......................................................9,000
Franchise revenue.................................................................30,000
Unearned Franchise revenue..................................................36,000 (b)
48. ANS: C
Goods available for sale (billed price):
Beginning inventory............................P 150,000
Shipments from home office................ 888,000 P 1,038,000
Allowance for overvaluation of branch inventory........................... 173,000
Goods available for sale (cost).....................................................P 865,000
=========
Billing on cost (P 1,038,000)......................................................... 120%
=========
49. ANS: D
Shipments from home office...................................P 888,000
Divide: billing on cost............................................. 120%
Shipment to branch...............................................P 740,000 (d)
========
50. ANS: A
Sales............................................................................................P 1,200,000
Cost of Sales:
Inventory, 1/1/2003.......P 150,000 P 125,000
Shipments from HO...... 888,000 740,000
GAS...........................P1,038,000 P 865,000
Inventory, 12/31/2003 (168,000) (140,000) 725,000
Gross profit...................................................................................P 475,000
Expenses....................................................................................... 400,000
Net Income...................................................................................P 75,000 (a)
========