Intermediate Accounting Volume III 2012 edition Suggested Answers

9-1 Angel Company

Angel Company
Income Statement
For the Quarter Ended October 31, 2012

Net sales (30% x 9,000,000) P 2,700,000

Cost of goods sold 1,674,000
Gross profit (38% x 2,700,000) P 1,026,000
Operating expenses * 270,000
Profit from Continuing Operations P 756,000
Income Tax 241,920
Net Profit from Continuing Operations P 514,110
Discontinued Operations, net of income tax savings of P455,000 (845,000)
Net profit (loss) P (330,920)

*Operating Expenses:
Variable = 30% x 600,000 P180,000
Fixed = (960,000 – 600,000) /4 90,000
Total P270,000

9-2 Galaxy Company

Galaxy Company
Income Statement
For the Month of October 2010

Net sales P 239,100

Cost of goods sold:
Merchandise Inventory, October 1 P 280,000
Purchases 215,000
Total goods available for sale 495,000
Merchandise inventory, October 31 372,600
Cost of sales P 122,400
Gross profit P 116,700
Selling expenses (54,700)
General and administrative expenses (19,000)
Net profit P 43,000

9-3 Blue Bay

Considering the criteria, Segment D is not qualified because majority of its revenue
comes from transactions with other segments.

Minimum required assets P5,000,000

Minimum required revenue 8,600,000
Minimum required operating result (profit or loss) 2,000,000

Reportable segments are A, B, C and E. The 75% test has also been met (61M/66M is
92%).
Intermediate Accounting Volume III 2012 edition Suggested Answers

9-4 Minimum operating result (profit or loss) P1,100,000

Reportable segments based on the above test are B, D and E.

9-4 Polygon Corporation

Minimum required revenues P3,275,000

Minimum required operating profit 580,000
Minimum required identifiable assets 6,800,000

Identified reportable segments, based on any of the above tests: A, B, C, D and E

Multiple Choice

Interim Reporting
MC1 A
MC2 D
MC3 B
MC4 B
MC5 A
MC6 B
MC7 B
MC8 C
MC9 B
MC10 A
MC11 B
MC12 B
MC13 B
MC14 C 320,000 X ¼ = 80,000
MC15 A End of January = 200,000 + 50,000 – 192,000 = 58,000
End of February = 58,000 + 380,000 – 411,000 = 30,000
End of March = 30,000 + 704,000 – 604,000 = 130,000
MC16 C (600,000 x ½) + (1,200,000 x ½) = 900,000
MC17 A
MC18 D
MC19 A (25,000,000 X 10%) – (10,000,000 X 5%) = 2,000,000
MC20 D (45,000,000 X 10%) – (20,000,000 X 5%) = 3,500,000

Segment Reporting
MC1 D
MC2 A
MC3 B
MC4 B
MC5 C
MC6 C
MC7 A
MC8 B
MC9 A
MC10 D
Intermediate Accounting Volume III 2012 edition Suggested Answers

MC11 C 10% (1,000,000 + 300,000)

MC12 D 500,000 – 225,000 – (240,000 X 500,000/1,500,000)
MC13 A 2,000,000 – 900,000 – (3,000,000 X 2M/10M)
MC14 C 10% (153,000,000 – 140,000,000)
MC15 B 4,000,000 – 2,200,000 – (1,200,000 X 1,800,000/3,000,000)=1,110,000