INTERMEDIATE ACCOUNTING 3

CHAPTER 10

PROBLEM 10 – 1

Cost Machine 2,640,000

Accumulated Depreciation( 2,640,000/8*3) 990,000
Carrying Amount for jan.1,2019 1,650,000
Accumulated Depreciation for jan.1,2019 990,000
Depreciation for 2019( 1,650,000 – 240,000) 470,000
Total 1,460,000

PROBLEM 10 – 2

1. Cost 4,000,000
Accumulated Depreciation( 4,000,000) 1,600,000
Carrying Amount 2,400,000

2. 2,400,000/8yrs = 300,000

PROBLEM 10 – 3

Cost 3,000,000
Accumulated Depreciation 1,500,000
Carrying Amount 1,500,000

Accumulated Depreciation 1,500,000

Residual value 100,000
Total 1,400,000
Divided by: 2years
Accumulated Depreciation – Dec. 31,2019 700,000

PROBLEM 10 - 4

(1,536,000/8yrs) = 192,000
PROBLEM 10 – 5

Cost 2,750,000
Accumulated Depreciation ( 10/55*2,750,000) 500,000
Carrying amount 2,250,000
Straight line Depreciation ( 2,250,000/9yrs) 250,000

PROBLEM 10 – 6

2017 Depreciation ( 5,000,000 * 40%) 2,000,000

2019 Depreciation ( 3,000,000 * 40%) 1,200,000
Accumulated Depreciation 2017 3,200,000

Depreciation for 2019 straight Line

( 5,000,000 – 3,200,000/3 600,000
Accumulated Depreciation 3,800,000

PROBLEM 10 – 7

Cost 7,200,000
Accumulated depreciation ( 7,200,000/10*3) 2,160,000
Depreciation – 2019 ( 5,040,000*7/8) 1,260,000

PROBLEM 10 – 8

Accumulated depreciation 960,000

Depreciation – 2019 (3,840,000 – 200,000)/8 455,000
Depreciation – 2019 1,415,000

PROBLEM 10 – 9
Cost 6,000,000
Depreciation – 2018 (50% * 6,000,000) 3,000,000
Carrying Amount 3,000,000
Residual Value ( 600,000)
Depreciation 2,400,000
PROBLEM 10 – 10

Patent 3,000,000
Accumulated amortization 1,500,000
Carrying amount 1,500,000
Amortization of Patents ( 1,500,000/3) 500,000
Depreciation ( 4,600,000 – 200,000/10) 440,000
Total 940,000

PROBLEM 10 – 11
1. A
2. A
3. B
4. B
5. D

PROBLEM 10 – 12
1. D
2. A
3. D
4. B
5. C
 CHAPTER 12

PROBLEM 12 – 1

Depreciation (500,000 x 6/12) 250,000

Bonuses (1,200,000 x 6/12) 600,000
Total 850,000

PROBLEM 12 -2

5% x 40,000,000 2,000,000

PROBLEM 12 – 3

Property taxes (600,000 / 4) 150,000

Repairs 900,000
Expense for second quarter 1,050,000

PROBLEM 12 – 4

Net income 950,000

Gain from expropriation (600,000 / 3) (200,000)
Change in accounting policy deducted from income 150,000
Total net income 900,000

PROBLEM 12 – 5

Advertising cost 2,000,000

Bonuses 3,000,000
Total 5,000,000

PROBLEM 12 – 6

Total warranty (10% x 25,000,000) 2,500,000

Warranty recognition in first quarter (5% x 10,000,000) 500,000
Warranty expense for second quarter 2,000,000

PROBLEM 12 - 7

35% x 5,000,000 1,750,000

PROBLEM 12 – 8

First quarter (30% x 6,000,000) 1,800,000

Second quarter (30% x 7,000,000) 2,100,000
Total 3,900,000

Cumulative for three quarters (25% x 21,000,000) 5,250,000

Total tax first two quarters (3,900,000)
Total 1,350,000

PROBLEM 12 – 9

First quarter (30% x 1,000,000) 300,000

Second quarter (30% x 1,500,000) 450,000
Third quarter (25% x 2,500,000) 625,000
Fourth quarter (25% x 4,000,000) 1,000,000
Total income tax expense 2,375,000

PROBLEM 12 – 10

Bad debt expense for the year 450,000

Bad debt expense:
First quarter (5% x 2,000,000) 100,000
Second quarter (5% x 1,500,000) 75,000
Third quarter (5% x 2,500,000) 125,000 300,000
Bad debt expense for fourth quarter 150,000

PROBLEM 12 – 11

1. First quarter – gross income (20,000,000 – 15,000,000) 5,000,000

Percentage of completion 10%
Income earned 500,000
2. No work performed
3. Third quarter – gross income (20,000,000 – 19,200,000) 800,000
Percentage of completion 25%
Cumulative income 200,000
Income earned – first quarter ( 500,000)
Loss in third quarter 300,000
4. no work performed
PROBLEM 12 – 13

Charmaine Company
Income statement
March 31, 2019

Sales 25,000,000
Cost of sales (60%) 15,000,000
Gross income 10,000,000
Interest income (5,000,000 x 12% x 3/12) 150,000
Total income 10,150,000
Selling expenses ( 3,350,000)
Administrative expenses ( 3,050,000)
Income before tax 3,750,000
Income tax (30%) ( 1,125,000)
Net income 2,625,000

Distribution cost 3,200,000

Depreciation (450,000 x 1/3) 150,000
Total 3,350,000

Administrative expenses 2,400,000

Depreciation (450,000 x 2/3) 300,000
Insurance (400,000 / 4) 100,000
Doubtful accounts (25,000,000 x 1%) 250,000
Total 3,050,000
 Charmaine Company
Statement of Financial Position
March 31, 2019

Assets

Current assets:
Cash 1,000,000
Trade and other receivables 1,900,000
Inventory 3,500,000
Prepaid insurance 300,000 6,700,000

Noncurrent assets:
Note receivable 5,000,000
Property, plant and equipment 19,050,000 24,050,000
Total assets 30,750,000

Liabilities and Equity

Current liabilities:
Accounts payable 8,500,000
Income tax payable 1,125,000 9,625,000

Shareholders’ equity
Share capital 5,000,000
Share premium 4,000,000
Retained earnings 12,125,000 21,175,000
Total liabilities and equity 30,750,000

Accounts receivable 2,000,000

Allowance for doubtful accounts ( 250,000)
Accrued interest on Note receivable 150,000
Total trade and other receivables 1,900,000
Inventory - 1/1
1,500,000
Purchases 17,000,000
GAS 18,500,000
Cost of sales (15,000,000)
Inventory – 12/31 3,500,000

Land 1,500,000
Buildings and equipment 18,000,000
Accumulated depreciation ( 450,000)
Net carrying amount 19,050,000

Retained earnings – 1/1 9,500,000

Net income 2,625,000
Total 12,125,000

PROBLEM 12 – 14

Dunhill Company
Income statement
Six months ended June 30, 2019

Sales 20,000,000
Cost of sales (11,500,000)
Gross income 8,500,000
Interest revenue 250,000
Dividend revenue 500,000
Total income 9,250,000
Distribution costs ( 2,500,000)
General expenses ( 1,100,000)
Depreciation ( 700,000)
Interest expense ( 300,000)
Income before tax 4,650,000
Income tax expense ( 1,300,000)
Net income 3,350,000
 Dunhill Company
Income statement
three months ended June 30, 2019

Sales 12,500,000
Cost of sales ( 7,000,000)
Gross income 5,500,000
Interest revenue 250,000
Dividend revenue 200,000
Total income 5,950,000
Distribution costs ( 1,600,000)
General expenses ( 600,000)
Depreciation ( 300,000)
Interest expense ( 200,000)
Income before tax 3,250,000
Income tax expense ( 900,000)
Net income 2,350,000

PROBLEM 12 – 15

1.
First quarter (70% x 10,000,000) 7,000,000
Loss on inventory write down 100,000
Cost of goods sold after inventory write down 7,100,000

First and second quarters (65% x 18,000,000) 11,700,000

Cost of goods sold for first quarter before inventory write down ( 7,000,000)
Cost of goods sold before reversal of write down – second quarter 4,700,000
Gain on reversal of write down ( 100,000)
Cost of goods sold after reversal of write down 4,600,000

Third quarter (70% x 7,000,000) 4,900,000

Loss on inventory write down 150,000
Cost of goods sold after inventory write down 5,050,000

Cost of goods sold for entire year (45% x 40,000,000) 30,000,000

Cost of goods sold before write down and reversal:
First quarter ( 7,000,000)
Second quarter ( 4,700,000)
 Third quarter ( 4,900,000)
Cost of goods sold before reversal of write down – fourth quarter 13,400,000
Gain on reversal of write down ( 150,000)
Cost of goods sold after reversal of write down – fourth quarter 13,250,000

2.
Sales Cost of goods sold Gross income

First quarter 10,000,000 7,100,000 2,900,000

Second quarter 8,000,000 4,600,000 3,400,000
Third quarter 7,000,000 5,050,000 1,950,000
Fourth quarter 15,000,000 13,250,000 1,750,000
Total 40,000,000 30,000,000 10,000,000

PROBLEM 12 – 16

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

CHAPTER 13

PROBLEM 13 – 1 (A)

Total revenue
Bix 12,000
Dill 59,000
71,000
PROBLEM 13 – 2

ANSWER: C. FIVE

PROBLEM 13 – 3 ( B )

V 3,400,000
W 1,000,000
X 2,000,000
Y 400,000
Z 200,000
4,800,000 2,200,000

PROBLEM 13 – 4
ANSWER : B. Profit

PROBLRM 13 – 5 ( B )

Sales to unaffiliated customers 20,000,000

Intersegment sales 5,000,000
Interest earned on loans 1,000,000
Total segment revenue 26,000,000

Revenue criterion (10% x 26,000,000) 2,600,000

PROBLEM 13 – 6 ( 1.D.,2.C.,)

1.) 10% x 45,000,000 = 4,500,000

2.) 75% x 45,000,00 = 33,750,000

PROBLEM 13 – 7 ( D.)
 Sales 3,000,000
Traceable expenses (1,500,000)
Indirect expenses (25% x 1,800,000) ( 450,000)
General Corporate expenses (25% x 1,200,000) ( 300,000)
Interest expense (25% x 600,000) ( 150,000)
Income tax expense (25% x 400,000) ( 100,000)
500,000

PROBLEM 13 – 8 ( D.)

Segment 1 Total revenue

Sales 3,000,000 7,500,000
Traceable costs (1,750,000) (5,000,000)
Profit before common cost 1,250,000 2,500,000
Common cost (1,250,000/2,500,000 x1,500,000) ( 750,000) (1,500,000)
Segment profit 500,000 1,000,000

PROBLEM 13 – 9 ( D.)

Sales – Segment A 3,000,000

Expenses:
Traceable cost 1,900,000
Allocated indirect cost (25% x 500,000) 125,000
Interest expense 300,000 2,325,000
Segment profit 675,000

PROBLEM 13 – 10 ( D.)

Sales – Segment 1 (25% x 14,000,000) 3,500,000

Specific cost – Segment 1 (1,100,000)
Allocated common costs (25% x 6,500,000) (1,625,000)
Operating profit 775,000

PROBLEM 13 – 11 ( D.)

Sales – Delta’s 8,000,000

Traceable costs (4,800,000)
Interest expense ( 640,000)
Incurred cost (40% x 800,000) ( 320,000)
Profit 2,240,000
PROBLEM 13 – 12 ( A.)

Total profit or loss 1,500,000

Common cost ( 100,000)
Segment profit 1,400,000

PROBLEM 13 – 13

Disclosure of profit or loss and assets

Segment A Segment B Others Total

Sales 25,000,000 15,000,000 5,000,000 45,000,000

Profit or loss 7,000,000 6,000,000 1,000,000 14,000,000
Total assets 35,000,000 18,000,000 7,000,000 60,000,000

Reconciliation

Revenue

Revenue of reportable segments 40,000,000

Revenue of nonreportable segments 5,000,000
Entity revenue shown in income statement 45,000,000

Profit and loss

Profit or loss of reportable segments 13,000,000

Profit or loss of nonreportable segments 1,000,000
Corporate expenses ( 2,000,000)
Unallocated income tax expense ( 3,800,000)
Entity net income shown in income statement 8,200,000

Total assets

Total assets of reportable segments 53,000,000

Total assets of nonreportable segments 7,000,000
General corporate assets 5,000,000
Entity total assets shown in statement of financial position 65,000,000
PROBLEM 13 – 14

Segment X Segment Y Others Total

Sales 24,000 27,000 9,000 60,000
Cost of goods sold ( 9,800) (14,000) (4,200) (28,000)
Gross income 14,200 13,000 4,800 32,000
Segment expenses ( 4,800) ( 4,800) (2,400) (12,000)
Depreciation ( 1,200) ( 1,350) ( 450) ( 3,000)
Income tax expense ( 2,000) ( 1,600) ( 400) ( 4,000)
Segment profit or loss 6,200 5,250 1,550 13,000

Disclosure of segment profit or loss

Segment X Segment Y Others Total

Sales 24,000 27,000 9,000 60,000
Profit or loss 6,200 5,250 1,550 13,000
Depreciation 1,200 1,350 450 3,000

Reconciliation

Revenue

Revenue of reportable segments 51,000,000

Revenue of nonreportable segments 9,000,000
Entity revenue shown in income statement 60,000,000

Profit and loss

Profit or loss of reportable segments 11,450,000

Profit or loss of nonreportable segments 1,550,000
Unallocated depreciation ( 1,000,000)
General corporate expenses ( 2,000,000)
Entity net income shown in income statement 10,000,000
PROBLEM 13 – 14

Segment profit or loss

Furniture Stationery Computer Others Total

External sales 800,000 500,000 400,000 100,000 1,800,000

Intersegment 200,000 150,000 50,000 - 400,000
sales
Total revenue 1,000,000 650,000 450,000 100,000 2,200,000
Cost of sales (600,000) (300,000) (240,000) (60,000) (1,200,000)
– external
Cost of sales (120,000) (96,000) (24,000) - (240,000)
– internal
Gross profit 280,000 254,000 186,000 40,000 760,000
Distribution (100,000) (50,000) (40,000) (10,000) (200,000)
cost
Administrative (50,000) (25,000) (20,000) (5,000) (100,000)
expense
Finance cost (30,000) (15,000) (12,000) (3,000) (60,000)
Segment profit 100,000 164,000 114,000 22,000 400,000
or loss

Minimum disclosures

Furniture Stationery Computer Others Total

External 800,000 500,000 400,000 100,000 1,800,000

sales
Intersegmen 200,000 150,000 50,000 - 400,000
t sales
Profit or loss 100,000 164,000 114,000 22,000 400,000
Finance cost 30,000 15,000 12,000 3,000 60,000

Reconciliation

Revenue

Sales of reportable segments 2,100,000

Sales of nonreportable segments 100,000
Elimination of intersegment sales ( 400,000)
Entity sale in income statement 1,800,000

Profit and loss

Profit or loss of reportable segments 378,000
Profit or loss of nonreportable segments 22,000
Elimination of intersegment profit (160,000)
Share in profit of associate 10,000
Unallocated items:
Other income 60,000
Other expenses (50,000)
Income tax expense (90,000)
Entity net income in income statement 170,000

Intersegment sales 400,000

Cost of sales – intersegment sales (240,000)
Intersegment gross profit 160,000

Total assets

Total assets of reportable segments 710,000

Total assets of nonreportable segments 5,000
Investment in associate 70,000
General corporate assets 15,000
Entity total assets 800,000

Total liabilities

Total liabilities of reportable segments 140,000

Total liabilities of nonreportable segments 3,000
General corporate liabilities 7,000
Entity total liabilities 150,000

PROBLEM 13 -16
Segments Revenue Profit (loss) Assets

1 620,000 200,000 400,000

2 100,000 20,000 80,000
3 340,000 70,000 300,000
4 190,000 ( 30,000) 140,000
5 180,000 ( 25,000) 180,000
6 70,000 10,000 120,000
7 120,000 ( 20,000) 140,000
Others 380,000 ( 25,000) 140,000
Total 2,000,000 200,000 1,500,000
 1. The information above shows that any operating segment with revenue equal to or
greater than P200,000 is a reportable segment (segments 1 and 3). Any segment with
identifiable assets greater than P150,000 is a reportable segments 1, 3, and 5). The total
profit for all segments with profit totals P300,000. As a result, any segment with an
operating profit or loss equal to or greater than an absolute amount of P30,000 is a
reportable segment (segments 1, 3 and 4). Thus, Segments 1, 3, 4 and 5 are reportable
segments.

2.The revenue of the reportable segment

Segment 1 620,000
3 340,000
4 190,000
5 180,000
Total revenue 1,330,000

Percentage (1,330,000 / 2,000,000)

If the total external revenue attributable to reportable segments constitutes less than
75% of the total entity revenue, additional segment shall be identified even if they do
not meet the 10%, threshold segments that are below the 10% threshold can be
aggregated as one segment if they share a majority of the five factors in identifying a
business segment, namely:
a. Nature of product
b. Nature of production process
c. Class of customer
d. Method of distributing product
e. Regulated environment

PROBLEM 13 – 17

1. Minimum disclosures under PFRS:

Product A Product B Total

Revenue 2,500,000 6,000,000 8,500,000
Segment profit or loss 650,000 700,000 1,350,000
Depreciation 350,000 1,300,000 1,650,000
Total assets 2,600,000 10,000,000 12,600,000
Total liabilities 1,300,000 6,000,000 7,300,000
Capital expenditures 600,000 1,300,000 1,900,000
 2. Entity-wide disclosure about geographical areas:

Philippines Japan Total

Revenue 5,000,000 3,500,000 8,500,000
Noncurrent assets - PPE 3,000,000 2,100,000 5,100,000

PROBLEM 13 – 18

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