SUMMARY OF ANSWERS

FINAL EXAMINATION

1. C 11. D 21. C 31. D 41. C 51. C 61. C 71. D 81. D 91. B

2. B 12. A 22. A 32. C 42. C 52. A 62. D 72. B 82. B 92. C
3. A 13. D 23. A 33. D 43. C 53. B 63. B 73. D 83. C 93. B
4. C 14. C 24. A 34. C 44. B 54. A 64. D 74. A 84. C 94. B
5. C 15. D 25. A 35. B 45. B 55. A 65. C 75. A 85. D 95. A
6. C 16. C 26. B 36. B 46. A 56. A 66. D 76. B 86. C 96. C
7. C. 17. C 27. A 37. C 47. C 57. A 67. A 77. C 87. C 97. D
8. A 18. D 28. E 38. C 48. A 58. D 68. B 78. B 88. B 98. A
9. C 19. B 29. D 39. C 49. D 59. D 69. B 79. A 89. A 99. C
10. C 20. C 30. D 40. B 50. C 60. A 70. D 80. D 90. D 100. A

Solutions:
1. Initial Payments per Child #1 P 7,500
Add: Initial Payment per Child #2 2400
Multiply: 8/12 8/12
TOTAL DEFERRED REVENUE P 6,600

2. Accounts Payable 2000

Utilities Payable 7000
Accrued Interest Expense 6000
Cash Dividend Payable 4000
Fixed Obligation 10000
Discount – Bonds Payable (15000)
Bonds Payable 120000
Finance Lease Liability 35000
Security Deposit 2000
Preference Shares- Redeemable 14000
TOTAL FINANCIAL LIABILITY P 185,000

3. Initial recognition = P 100,000

4. Purchase price P 220,000

Discount (5000)
INITIAL MEASUREMENT P 215,000

5. Present Value (250,000 x 3.4011830) P 850,458

Payment (250000)
Total P 600,458
Multiply: Interest Rate of 12% 12%
INTEREST INCOME P 72,054.96

6. Present Value (Squeezed) P 1,026,296

Payments (600000)
Interest Expense (10%) 102630
TOTAL Carrying Amount P 528,926

7. Present Value P 1,000,000

 Interest Income (1,000,000 x 6.2695%) 62,695
TOTAL Carrying Amount P 1,062,695

8. Future Cash Flow P 1,000,000

Present Value (1,000,000 x .71178) (711,780)
TOTAL Unrealized Gain P 288,220

9. Present Value (Squeezed) P 783,835

Amortization (94,060 – 30,000) 64,060
TOTAL CARRYING AMOUNT P 847,895

10. Borrowed Amount P 100,000

Rate 12%
Time 1/12
INTEREST EXPENSE P 1000

11. Credit Interest Payable = P 260

20. Issue Price P 2,600,000

FV of debt instrument (2,040,000)
EQUITY COMPONENT P 560,000

21. Total Damages (160,000+320,000) P 480,000

PV of 1 @ 10% 0.90909
TOTAL P 436,363
Risk Adjustment (100% + 7%) 107%
TOTAL P 466,909
Probability of Settlement 70%
PROVISION FOR LAWSUIT P 326,836

22. Total Amount of repairs (120,000+720,000) P 840,000

PV Factor 0.95238
Total P 800,000
Risk Adjustment 106%
Total P 848,000
Percentage of amount to be settled in 20x2 50%
WARRANTY PROVISION P 424,000

23. Termination of benefits due to closure = P 4,000,000

24. Units Sold 5,000 u

Warranty Cost/unit P 400
WARRANTY EXPENSE P 2,000,000

25. Total estimated warranty costs (800,000+2M) P 2,800,000

Actual Warranty Cost (1,240,000)
BALANCE, Dec 31 P 1,560,00

26. Unit sales 500,000 u

Percentage of estimate of wrappers redeemed 40%
Estimated wrappers for redemption 200,000 u
 Required number of wrappers for redemption 10
Estimated number of premiums 20,000
Multiply: Net cost/ premium (800-200) 600
PREMIUM EXPENSE P 12,000,000

27. Provision to be recognized = P 4,000,000

30. [(20 employees x 1 day x 12 months) – 150 days] x P 1000 X 105% = P 94,500

32. [(20 employees x 1 day x 12 months) – 150 days] x P 1000 X 105% x 80% = P 75,600

35. PV of DBO P 2,900,000

FVPA (2,600,000)
DEFICIT P 300,000

36. Service Cost P 400,000

Net interest 20,000
DEFINED BENEFIT COST COMPONENT P 420,000

37. Actuarial Losses (gains) P 200,000

Plan Asset amount difference (180K-120K) 60,000
TOTAL P 260,000

38. NDBF, Beg. (1,500,000-1,200,000) P 300,000

NDBF, End (1,800,000-1,310,000) (490,000)
Increase P 190,000

44. Annual Rent P 100,000

PV factor 6.15
PV of Minimum lease payments P 615,000

45. Payment P 100,000

Multiply: PV of ordn. Annuity of 1 @ 10%, n=10
TOTAL P 614,500

46. Total Consideration P 52,000

Payment (2000)
Lease Payments P 50,000
PV Factor 6.5348
Total P 326,740
Advanced Payment (50,000)
LEASE LIABILITY P 276,740

*Answer is P 280,000; the nearest to the computed lease liability above

47. PV of annuity due @ 12% P 63,282

PV of 1 3220
TOTAL P 66,502
48. PV of annuity due P 55,116
PV of 1 6,499
Total P 61, 615
Paid amount due immediately (13,000)
LEASE LIABILITY P 48,615

49. Total lease paid from 2011 to 2014 plus lease bonus (squeeze) P 51,410
Divide: 4 4
Annual Lease Expense P 12,853

50. Lease Payment P 100,000

Term 3
GROSS INVESTMENT P 300,000

51. Fixed Lease Payments P 100,000

PV Factor 2.48685
NET INVESTMENT P 248,685

52. Gross Investment P 300,000

Net Investment (248,685)
UNEARNED INTEREST INCOME P 51,315

58. Excess of CA of software over tax base P 500,000

Excess of CA of machinery over tax base 400,000
Taxable Temporary Difference P 900,000
Multiply: Tax Rate 30%
DEFERRED TAX LIABILITY P 270,000

59. Excess of CA of accrued liability P 200,000

Tax rate 30%
DEFERRED TAX ASSET P 60,000

60. Deferred Tax Liability Increase (P 270,000)

Deferred Tax Asset Increase 60,000
DEFERRED TAX EXPENSE (P 210,000

61. Income tax expense P 300,000

Deferred Tax Liability Increase (P 270,000)
Deferred Tax Asset Increase 60,000
CURRENT TAX EXPENSE P 90,000

62. Taxable Profit P 100,000

Depreciation Excess (10,000)
Bad Debts @ Allowance Method (15,000)
Accrued Revenues net of tax 40,000
Subject to Tax Amount P 115,000
Goodwill Impairment Loss 6000
Non-deductible expense (35,000)
PRETAX INCOME P 86,000

70. Balance, Dec 31 P 2,700,000

 Share premium on original issuance (2,700,000 x 0.11) 300,000
SHARE PREMIUM, Jan 2 P 2,400,000

Balance, Dec 31 P 1,300,000

Retained Earnings 500,000
RETAINED EARNINGS, Jan 2 P 800,000

71. Jan 5 Share Premium P 100,000

Dec 27 Share Premium – Treasury Shares 15,000
SHARE PREMIUM IN EXCESS OF PAR P 115,000

72. Treasury Shares (3000 x 18) P 54,000

Treasury Shares (3000 x 18) P 54,000

Cash paid (3000 x 25) (75,000)
SHARE PREMIUM – TREASURY SHARES P 21,000

75.
76. Declared cash dividend Issued Shares Outstanding Shares
Shares Issued
P 44,000 until year end 100,000 100,000
Treasury Shares
Preference Shareatdividends
year end[(4000x100x6%)+12000] (5000)
Reissuance
(36,000) of treasury shares 1000
New shares issued
ORDINARY SHARE DIVIDENDS 10,000 10,000
TOTAL
P 8,000 110,000 106,000
Share split Nov transaction 2 2
77. END BALANCE
Ordinary Shares (Basic Allocation) (200k x 1 x 220,000
5%) 212,000
P 10,000
Ordinary Shares (Participation) (75,000 x 2/5) 30,000
DIVIDENDS TO ORDINARY SHAREHOLDERS P 40,000

78. Small Dividend @ FV P 15,000

Large Dividend @ par 30,800
RETAINED EARNINGS DEBIT P 45,800

83. 20x5 [(600x100x100) x 94% x 2/3] P 3,760,000

20x4 [(600x100x100) x 95% x 1/3] (1,900,000)
SALARIES EXPENSE P 1,860,000

84. [(10,000x72%) x 15 x 2/3] – [(10,000x75%) x 15 x 1/3] P 34,500

85. [(10,000x72%) x 15 x 2/3] – [(10,000x75%) x 15 x 1/3] – 34,500 P 42,000

86. (750x16x3/3) – (800x15x2/3) – (900x12x1/3) P 4,000

87. Dec 31 20x1 (900x12x1/3) P 3,600

Dec 31 20x3 (750x16x3/3) 4,400
ACCRUED SALARIES PAYABLE P 8,000

88. Ordinary Shareholders Equity [(4.68M+60K)-(10000x120)-(1Mx10%x3)] 3,240,000

Divide: No, of ordinary shares outstanding [(3M/100)+(100k/par)-2000] 29,000
BOOK VALUE PER SHARE P 111.72
89. Ordinary Shareholders Equity [(4.68M+60K)-(10000x120)-(1Mx10%x1)] 3,440,000
Divide: No, of ordinary shares outstanding [(3M/100)+(100k/par)-2000] 29,000
BOOK VALUE PER SHARE P 118.62

90. Ordinary Shareholders Equity [(4.68M+60K)-(10000x120)] 3,540,000

Divide: No, of ordinary shares outstanding [(3M/100)+(100k/par)-2000] 29,000
BOOK VALUE PER SHARE P 122.07

91. Ordinary SHE (7.5M+600,000+1,915,000) 10,015,000

Divide: Outstanding Shares 50,000
Book Value Per Share P 200.30

93. [2,800,000-(100,000x10x10%)/158,000] P 17.09

94. {[800,000+(2,000,000x12%x70%)]/[100,000+[(2,000,000/1000)x30]} P 6.05

98. [(-1,000,000)-50,000]/100,000 -P1,050,000

Divide: 100,000 100,000
BASIC EARNINGS (LOSS) -P10.5

99. 20x2 20x1

Profit after tax 2,200,000 1,800,000
Weighted Ave. No. of Out, Sh 473,000 440,000
(Adjusted) SQUEEZE
BASIC EPS 4.65 4.09
100. Profit per year P 2,900,000
Divide: Weighted Ave. No. of Shares (Adjusted)(70,588+160,000) 230,588
BASIC EPS P 12.58