74 Chapteq 1

oif Comprehensive Income

-.c..__ 51aterr en
1
75
.::.=:---
PROBLEMS: An entity may present its income and expen . .
d• . · ses m a single
statement or m two statements.
PROBLEM 1: TRUE OR FALSE
1. All expenses of an entity are classified as either distribution _ Which of ~he . following is not a component of other
costs (selling expenses) or administrative expenses under the 3
comprehensive mcome?
function of expense method. a. A revaluation ~ncrease in_ an item of property, plant and
2. The only difference between the function of expense and the equipment dunng the penod.
nature of expense methods is the presentation of "cost of b. The difference between the return on plan assets and the
goods sold" under the function of expense method . interest on the plan assets.
3. The main difference between the function and the nature of c. A decrease in the fair value of investment in FVOCI
expense methods is the segregation of operating and non. securities.
operating items under the function of expense method. d. The ineffective portion of a cash flow hedge.
4. Freight-in is presented as distribution cost under the function
of expense method. 4. In which of the following instances may a~ entity make a
5. PAS 1 requires an entity to provide additional disclosures reclassification adjustment?
when it uses the nature of expense method. a. A revalued property is sold at a gain.
b. The entity amends its retirement benefit plan resulting to a
decrease in the present value of defined benefit obligation.
PROBLEM 2: FOR CLASSROOM DISCUSSION c. An entity sells its investment in equity securities measured
1. PAS 1 does not require the presentation of which of the atFV0O .
fo11owing financial statements? d. A hedging relationship ceases and the entity transfers the
a. Balance sheet c. Income statement related cumulative fair value changes accumulated in
b. Notes d. All of these are required equity to profit or loss.
2. Which of the following statements correctly relate to the 5. Total comprehensive income includes which of the following?
provisions of PAS 1? a. Unrealized loss on FVOCI securities
a. According to PAS 1, "cash and cash equivalents" shall b. Unrealized loss on FVPL securities
always be presented as the first line item in the balance c. Profit or loss during the period
sheet. d. All of these
b. The term ''balance sheet" may be used in lieu of the
"statement of financial position" and the term "income 6· An entity is required to present additional disclosures if the
statement" may be used in lieu of the "statement of profit
entity presents its expenses using the
or loss and other comprehensive income." c. Either a or b
a. Nature of expense method
c. An entity is prohibited from presenting extraordinary d. Neither a nor b
b. Function of expense method
items in the financial statements but may disclose those
items in the notes.
76 Cha!>lerl 51ateme1tl of Comprehensive Income 77
7. The records of Lunch Co. on December 31, 20xl show the Prepare the statement of profit or loss and other
following information: a. comprehensive income of Lunch Co. using the single
statement presentation and the function of expense method.
Debits Cr~
Make a proper heading for the financial statement. Apply the
22,00~
Sales general feature _~£ "mate~iality and aggregation."
1,700,000
Beginning inventory b. Make the additional d1Sclosures for the breakdown of line
5,600,000
Purchases items in the financial statement. Make proper cross-
Purchase returns 500,~
400,000 referencing of those notes; use "Note 12" as your first cross-
Freight in reference.
Salaries of sales personnel 670,000
Interest expense · 340,000
Advertising expense 320,000
180,000 PROBLEM 3: EXERCISE
Research and development expense
2,000,000 1. The records of Dinner Co. on December 31, 20xl show the
Directors' remuneration
Salaries of administrative personnel 520,000 following information:
280,000 Debits Credits
Rent expense
160,000 Sales 16,800,000
Depreciation expense
1,100,000 Beginning inventory 2,100,000
Commission expense
190,000 Purchases 6,800,000
Impairment loss on financial assets
50,000 Purchase returns 480,000
Insurance expense
2,000,000 Freight out 870,000
Income tax expense
Freight in 350,000
Unrealized gain on equity securities - FVOCI
Interest expense 280,000
Gain on change in fair value - Cash flow hedge ·30,v
Sales commissions 480,000
Totals 15,510,000 22,730,
Marketing expense 320,000
Salaries of administrative personnel 2,520,000
Additional information: Salaries of sales personnel 670,000
• Ending inventory amounts to Pl,200,000. Impairment of property, plant and equipment 290,000
• One-half of the rent expense pertains to the sales department Rent expense 420,000
• The impairment loss on financial assets pertains Depreciation expense 720,000
impairment of receivables recognized on contracts witli Revaluation decrease during the period 120,000
customers. Translation gain on foreign operation 25,000
• The items of other comprehensive income are net of tax. Totals 15,940,000 17,305,000
• The gain on change in fair value on the cash flow hedge
represents the effective portion. Additional information:
• The cost of inventory on hand at year-end is P380,000.
Requirements: • One-half of the rented premises pertain to the administration
office.
 ~ Q
-
79
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~e~n'..'t_:,
Statem .-!p_r_eh_en
=o~m _e
·ve_ _In_c_om
_s,_ --
. -
• Three-fourths of the deprec iation pertain to depreciatin.. . Debits Credits
J . . vll ~ -
~ - - - - - - - - - - -- - - - - - - - - - SC 0,000
sa es person nel transpo rtation vehicles. 22
'
• Income tax rate is 30%. There are no tempor ary differences. Sales . . Beginning inventory
3,000,00 0
• The items of other compre hensiv e income are already net .11.1 Purchas es
7,400,000
670,000
tax. Purchase returns
320,000
freight in 560,000
Requirements: ~ Interest expense
480,000
a. Prepar e the statem ent of profit or loss and 0 Sales commissions
320,000
compre hensiv e income of Dinner Co. using the sin~ Advertising expense 6,400,000
administrative personnel
statem ent presen tation and the function of expense meth~1 Salaries of 670,000
Make a proper headin g for the financial statem ent. Apply J
Salaries of sales personnel
Gain on impairment recovery of property, 720,000
genera l feature of "mater iality and aggreg ation."
plant and equipm ent
b. Make the additio nal disclos ures for the breakd own of Revalu ation increase during the period 130,000
items in the financial stateme nt. Make proper er 19,150,000 24,320,000
Totals
referencing of those notes; use "Note 12" as your first er
reference.
Additional information:
a. The year-en d invento ry count sheet ·shows a total cost of
invento ry on hand of P370,000. This amoun t is not yet
PROBLEM 4: CLASS ROOM ACTIV ITIES
adjuste d for the freight -in. Freight -in is incurre d evenly on
gross purcha ses during the period. Best Friend s Co. uses the
ACTIV ITY #1
FIFO cost flow formul a.
b. The net realiza ble value (NRV) of the ending invento ry is
INSTR UCTIO NS:
P270,000. The differe nce betwee n the cost and the NRV is
1. Find a study partner . materi al to Best Friend s Co.
2. Imagin e that you and your study partne r are accoun tants. c. No bad debts expens e has yet been recogn ized. Best Friend
3. Answe r the require ments INDIV IDUAL LY FIRST. Ne Co. estima tes its bad debts based on 5% of ending receiva ble.
compa re your answer s with your study partne r. Discuss Accoun ts receiva ble has an ending balanc e of P4,760,000. The
differences betwee n your answer s. Agree on your balanc e of the allowa nce for bad debts accoun t at the start of
answer . You wiJJ be graded as a- couple based on your the year is P280,000. Write-o ffs during the year totaled
answe r. Happy answer ing. P120,000 while recove ries totaled P28,000. Best Friend Co.
presen ts bad debt expens es separa tely in the statem ent of
The unadju sted trial balcll')ce of Best Friend s Co. on Decem ber 311 profit or loss.
20xl is shown below: d. During the year, an investm ent in bonds previou sly classified
as investm ent measu red at amorti zed cost was reclassified to
held for trading securit ies. The carryin g amoun t of the
investm ent on reclass ificatio n date is Pl,000, 000 while the fair
80
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Chapteq statement of Comprehensive Income
:.---- 81
values are PS00,000 on reclassification. date
. and P980,000
. at Defined benefit cost 840,000
year-end . The only entry relating to th1s mvestrnent 1s a debu Dividend income from Hangout Co. 90,000
to "Held for trading securities" for PI,000,000 and a credit to Totals · 8,520,000 12,090,000
"Investment in bonds at amortized cost" for Pl,000,000.
e. Best Friends Co. is subject to an income tax rate of 30% Additional information:
(Assume there are no temporary differences. Assume items~ On July 28, 20xl, Buddies Co. sold its investment in bonds
a.
other comprehensive income are already stated net of tax.) measured at amortized cost for Pl,000,000. Buddies incurred
PS0,000 in broker's commission on the sale. The carrying
Requirements: amount of the investment as at the date of sale is' PS00,000.
a. Prepare the year-end adjusting/correcting entries. Buddies inadvertently recorded the transaction as a net debit
b. Prepare the statement of profit or loss and other to cash for P950,000 and a credit to investment account for
comprehensive income of Best Friends Co. using the singk P950,000.
statement presentation and the function of expense method. b. The year-end carrying amount of Buddies' biological assets is
Make a proper heading for the financial statement. Apply the P2,800,000. The year-end fair value of the biological assets is
concepts of PAS I and other PFRSs on the separate P2,640,000. Costs to sell the biological assets at year-end are
presentation of items. estimated at P140,000.
c. On September 1, 20xl, Buddies Co. acquired 30% interest in
Hangout Co. for P8,000,000. The interest acquired gives
ACTIVITY #2 Buddies significant influence over Hangout. Hangout
reported profit of Pl,000,000 and other comprehensive income
INSTRUCTIONS: of P120,000 in 20xl. Hangout declared_P300,000 dividends at
I. Find a study partner. year-end. The profit was earned evenly throughout the year.
2. Imagine that you and your study partner are accountants. Hangout's other comprehensive income consists of a
3. Answer the requirements INDIVIDUALLY FIRST. Next, revaluation increase recognized on November 1, 20xl.
compare your answers with your study partner. Discuss any d. The actuarial valuation report shows the following
differences between your answers. Agree on your final information:
answer. You will be graded as a couple based on your final Service cost 336,000
answer. Enjoy. Net interest cost in net defined benefit liability (asset) 252,000
Remeasurements to the net defined benefit liability (asset) 252,000
The unadjusted trial balance of Buddies Co. on December 31, 20xl Defined benefit cost 840,000
is shown below:
Debits Credits e. Buddies Co. is subject to an income tax rate of 30%. (Assume
Revenue from service fees 12,000,000 there are no temporary differences. Assume items of other
Contract costs 4,000,000 comprehensive income are already stated net of tax.)
Salaries expense 3,000,000
Advertising expense 680,000 Requirements:
 ...
82 Chapteq
-...;...__ Statement of Comprehensive Jucome 83
a. Prepare the year-end adjusting/correcting/reclassification Accounts receivable 3,900,000
entries. Allowance for bad debts 920,000
b. Prepare the statement of profit or loss and other Inventories 2,300,000
comprehens ive income of Buddies Co. using the singlt Bond sinking fund 800,000
statement presentatio n and the nature of expense method. Current tax asset 750,000
Make a proper heading for the financial statement. Apply the Investment in equity securities - FVOO 1,600,000
concepts of PAS 1 and other PFRSs on the separate Land and building 2,800,000
Land 1,600,000
presentation of items.
Building 4,500,000
Accumulated depreciation - Bldg. 450,000
Equipment 1,400,000
ACTIVITY #3 Accumulated depreciation - Equipt. 400,000
Patent 900,000
INSTRUCTIONS: Accumulated amortization
1. Form a study group composed of three (3) members. Accounts payable 890,000
2. Hold hands together, dose your eyes, take 5 deep breaths and Loans payable 2,000,000
imagine that you and your group members are highly Bonds payable 8,000,000
competent and very successful accountants . Interest payable 1,040,000
3. Answer the requiremen ts INDIVIDUALLY FIRST. Next Accrued liabilities 360,000
compare your answers with your group members. Discu~ Ordinary share capital 6,000,000
any differences between your answers. Agree on your final Retained earnings 4,544,000
Sales 16,800,000
answer. You will be graded as a group based on your final
Cost of sales 7,200,000
answer.
Freight out 870,000
Interest expense 1,040,000
P.S. This activity uses the concept of "Three heads are better 504,000
Sales commissions
than one." If one head in the group is not working, please cut 2,820,000
Salaries of administrative personnel
it off immediately before it affects the other heads .... but do it 870,000
Salaries of sales personnel
gently and with mercy and compassion . Have fun. 260,000
Unrealized gain on equity securities - FVOCI
Totals 41,664,000 41,664,000
The unadjusted trial balance of Colleagues Co. on December 31,
20xl is shown below:
Additional information:
a. The amount of cash in bank shown on the trial balance is the
Debits Cre~
general ledger amount. Deposits in transit and outstanding
Cashon hand 450,000
Cash in bank checks on December 31, 20xl are Pl,000,000 and P800,000,
4,800,000
Money market placements respectively . The money market placements are acquired three
1,700,000
Cash surrender value months before their scheduled maturity date.
860,000
 Chapteq nt rcomprehensive Income
e 0.:: ~~ :_! .-- --- --- --- --. :__ ___:85~
84 ~'.' ..'..
p abl
sure d at FVO Q are as debi t to cash in bank and credit to bonds ay eat face
b. The inve stme nts in equi ty securities mea bonds mature
-end fair value. amount. The face rate on the bonds is 10%· The
acqu ired duri ng the year and are' state d at year sts d
the trial balance is in lum p sum on Janu ary 1, 20x5; however' intere are ue
c. The amo unt of inventories show n on
inclu ded in the annually every Janu ary 1.
deri ved from the year-end physical count. Not amounting to ~
Utility bills in Decembe.r 20xl .-JOU,000 were
£"

coun t is an unre cord ed in-transit ship men

t of inventories J·. .
the trial balanc
point. The entity paid on Janu ary 20x2. This IS not reflected on
costing P200,000 purc hase d FOB ship ping department; th:
One-half of the utilities pertain to the sales
uses a perpetual inventory system. othe r half to administration.
ins to prop erty being
d. The "Land and building" account perta k. The quar terly income taxes paid during the
year are debited to
mea sure d at fair
rent ed out to various tenants. This prop erty is the "Cu rren t tax asset" account. The income
tax rate is 300/4.
is P2,900,000.
value. The fair valu e of this prop erty at year-end (Assume there are no temporary differences durin
g year.)
start the year, is
of
e. The building, which is one year old at the
balance method,
bein g depreciated unde r the double declining Requirements:
.
The building has a residual value of PlS0,000 a. Prepare the year-end adjusting/corre
cting/reclassification
at the start of the
f. The equipment, which is also one year old entries.
ual value of
year, has a useful life of 5 years and a resid b. Prepare the state men t of financial position.
P200,000. Depreciation for the curr ent
year is not yet loss and other
pertain to c. Prep are the state men t of profi t or
recognized. All depreciation expenses comprehensive income of using the
two-statement
administration. presentation and the function of expense meth
od. Make proper
prev ious owner of
g. The patent is acquired on July 1, 20xl . The headings for the financial statements. Apply
the concepts of
r to Colleagues' on of items.
the pate nt has held it for five years prio PAS 1 and othe r PFRSs on the separate presentati
life of the patent
acquisition. Colleague's estimate of the useful d. Prep are note s show ing the brea
kdown of line items in the
nt amortization
is 17 years from acquisition date. Assume pate financial statements. Make proper cross-refe
rencing of those
is charged to administrative expenses . cross-reference in the
notes; use "No te 4" as your first
, bank loan, taken
h. The loans payable account consists of a 12% state men t of financial position.
n of custom-built
on January 1, 20xl to finance the productio
s a substantial
machinery that is held as inventory. It take PROBLEM 5: MULTIPLE CHOICE - THEORY
for its intended t or loss' or 'income
peri od of time to get the inventory read y 1. Presenting a sepa rate 'statement of profi
tured or mass
condition for sale and it is not routinely manufac statement' is
ary 1 and was dal Statements.
produced. The production started on Janu a. required und er p AS 1 Presentation of Finan
20xl. The total cial Statements to
substantially completed on December 31, b. required und er PAS 1 Presentation of Fi11an
duri ng the year. of financial
production cost is Pl,800,000, incurred evenly be pres ente d together with the statement
nts beginning
The loan matures in 5 equal annual installme position.
every year. The a statement of
!anu ary 1~ 20x2. Interests are also due c. perm itted und er PAS 1 as a substitute for
mventory ts on hand at year-end . comprehensive income is still presented .
20xl at a yield to
The b~nd_s payable are issued on January 1,
the bond issue
matu nty interest of 14%. Colleagues recorded
 ~ .api.,
Ch
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ___ O.t Comprehensiv
e /11come
86 1 11 t
.:..
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z._:__ :._. ---- -- - - - -- - - - -- - ~87~
.::- --
,oblem l the
d. permi tted under PAS 1 provi ded a statement Of b. amou nts reclassified to other comprehensive income in
;rora ~m comp rehen sive income is still prese nted. curre nt perio d that were recognized in profit or loss in the
0perat1n( curre nt or previ ous periods.
2. According to PAS 1 Presentation of Financial Statements, ill1 c. amou nts reclassi~ed t~ profit or loss in the current period
entity shall prese nt all items of incom e and
expe~ that were recogruzed m other comprehensive income in
recognized in a period: the curre nt or previ ous periods.
a. in a single statem ent of profit or loss and
other d. a and b
comp rehen sive income ification
'}iat are t1
b. in two statements - an incom e statem ent and a statem
ent 6. Other comp rehen sive income, including reclass
v,w,x of comprehensive income adjustments, are presented
a. net of related taxes c. a orb
V, Wan c. in a single statem ent of chang es in equit y
Vand " b. gross of relate d taxes d. not affected by taxes
d. a orb
. V, W,X,
e and 7. Total comp rehen sive income includes
'roblem 1 3. Other comprehensive income comp rises items of incom
a. all non-o wner changes in equity
expense (including reclassification adjus tment s) that are
tted by b. all owne r changes in equity.
a. not recognized in profit or loss as requi red or permi
c. some non-o wner changes in equity
other PFRSs.
by d. a orb
b. recognized in profit or loss as requi red or permi tted
other PFRSs.
8. Comp rehen sive income comprises
c. a orb net
a. revalu ation surpl us and remeasurements of the
d . none of these
defin ed benefit liability (asset) only.
s of other b. revalu ation surpl us, actuarial gains and some other items.
4. Which of the following is not one of the comp onent c. both owne r and non-o wner changes in equity.
comp rehen sive income?
d. profit or loss and other comprehensive income.
a. chang es in revaluation surpl us
(asset)
b. remea smem ents of the net defin ed benefit liability 9. Prese nting extrao rdinar y items in the financial statem
ents
unrealized gains and losses on FVPL a. is prohi bited on the face of the financial statem ents but is
c. translation gains and losses on foreign opera tion perm itted in the notes.
g
d. effective portio n of gains and losses on hedgin b. is prohi bited on both the face of the financial statem
ents
instru ments in a cash flow hedge . and in the notes.
Statements, c. is perm itted in some rare cases
5. Accor ding to PAS 1 Presentation of Financial d. make s the financial statements totally useless.
reclas sifi cation adjustments are
nts in are
a. assets and expen ses reclassified to other asset accou 10. Additional disclosure is required when expen
ses
the curren t period
prese nted under the
 if Comprehensive Income
~· ~
~ .:.:. :!-- ---- ---- ---- ---~87
d . permitte d under PAS 1 provide d a statement Of amount s reclassified to other comprehensive income in the
b. h
compreh ensive income is still presente d. current period t at were recogni:zed in profit or loss in the
current or previou s periods.
2. According to PAS 1 Presentation of Financial Statements, ~ amount s reclassified to profit or loss in the current period
h
entity shall present all items of income and exp~
C
that were recogniz ed in ot er comprehensive income in
recognized in a period: the current or previou s periods.
a. in a single stateme nt of profit or loss and other d. a and b
compreh ensive income
b. in two statemen ts - an income stateme nt and a statement Other ·c ompreh ensive income, including reclassification
6. d
of comprehensive income adjustm ents, are presente
a. net of related taxes c. a orb
c. in a single statemen t of changes in equity
b. gross of related taxes d . not affected by taxes
d. a orb

3. Other comprehensive income compris es items of income and
expense (including reclassification adjustm ents) that are
a. not recognized in profit or loss as required or permitte d.by
other PFRSs.
b. recognized in profit or loss as required or permitte d by
other PFRSs.
c. a orb
d. none of these
4. Which of the following is not one of the compon ents of other
compreh ensive income?
a. changes in revaluat ion surplus
b. remeasu rernents of the net defined benefit liability (asset)
unrealiz ed gains and losses on FVPL
c, translati on gains and losses on foreign operatio n
di. ~ffective portion of gains and losses on hedging
instrum ents in a cash flow hedge.
5. Accor~i~g .to PAS 1 Presentation of Financial Statements,
rf class1f1cahon adjustm ents are
af assets and expenses reclassified to other asset account s in
the current period
7. Total compreh ensive income includes
a. all non-ow ner changes in equity
b. all owner changes in equity.
c. some non-ow ner changes in equity
d. a orb
8. Compre hensive income compris es
a. revaluat ion surplus and remeasurements of the net
defined benefit liability (asset) only.
b. revaluat ion surplus, actuaria l gains and some other items.
c. both owner and non-ow ner changes in equity.
d. profit or loss and other compreh ensive income.
9. Presenti ng extraord inary items in the financial statements .
a. is prohibi ted on the face of the financial statements but is
permitt ed in the notes.
b. is prohibit ed on both the face of the financial statements
and in the notes.
c. is permitt ed in some rare cases
d . makes the financia l stateme nts totally useless.
10. Additio nal disclosu re is required ·when expenses are
presente d under the
 88 Comprehensive Income
Chapteq
~ :of:;__!..-- --------- ----__8~9
a. Nature of expense method rehensive income given the following net of tax fi gures
corn P .
b. Function of expense method h t represent changes durmg a period?
c. a orb t ~ gain or loss on defined benefit plan
Actuarta 1 .. (6,000)
d. Classified and Unclassified . d gain on FVOCI secunhes 30,000
unre al 1ze . . .
•f'cation ad1ustment for cumulative. gam on
Reclass1 t . .
1 .on of foreign opera hon included m profit or loss
ti (5,000)
trans a .
PROBLEM 6: MULTIPLE CHOICE - COMPUTATIONAL arrants outstanding 13,000
Stock W
1. During 20x3, the "other revenues and gains" section of Profit for the year 154,000
a. 173,000 b. 178,000 c. 179,000 d. 181,000
Totman Company's Statement of Earnings and
in interest revenue, (Adapted)
Comprehensive Income contains PS,000
PlS,000 equity in Harpo Co. earnings, and P60,000 total gain account had a balance of
4. Clark Co.'s advertising expense
on sale of foreign operations. The total gain on sale of foreign P146,000 at December 31, 20x3, before any necessary year-end
'
operations includes P25,000 reclassification adjustment for adjustment relating to the following:
cumulative translation gain. Assuming the reclassification • Included in the P146,000 is the PlS,000 cost of printing
adjustment relating to the sale of the foreign operation catalogs for a sales promotional campaign in January 20x4.
increased the current portion of income tax expense by • Radio advertisements broadcast during December 20x3
Pl0,000, determine the net of tax amount of Totman's were billed to Clark on January 2, 20x4. Clark paid the
reclassification adjustment to other comprehensive income. P9,000 invoice on January 11, 20x4.
a. 5,000 b. 2,500 c. 35,000 d. 15,000
(AJCPA) What amount should Oark report as advertising expense in its
income statement for the year ended December 31, 20x3?
2. A company buys ten shares of securities at P2,000 each on
a. 122,000 b. 131,000 c. 140,000 d. 155,000
December 31, 20xl. The securities are classified to be
subsequently measured at fair value through other
5. In Yew Co.'s 20X5 annual report, Yew described its social
comprehensive income (FVOCI). The fair value of the
awareness expenditures during the year as follows:
securities increases to P2,500 on December 31, 20x2, and to
"The Company contributed P250,000 in cash to youth and
P2,750 on December 31, 20x3. On December 31, 20x3, the
educational programs. The Company also gave P140,000 to heal th
company sells the securities. Assume no dividends are paid
and human-service organizations, of which P80,000 was
and that the company has a tax rate of 30%. What is the . In
contributed by employees through payroll deductions.
amount of the reclassification adjustment for other th
addition, consistent with the Company's commitment to e
comprehensive income on December 31, 20x3? • d ign product
d. (5,250) environment, the Company spent Pl00,000 to re es
c. 5,250

~
a. 0 b. (7,500)
packaging."
(Adapted)

3. What amount of comprehensive income should HUBRlS . ded m

What amount of the above should be mclu · Yew's income
ARROCANCE Corporation report on its statement of statement as charitable contributions expense?
d. 490,000
a. 310,000 b. 390,000 c. 410,000
 _ _ _ _Ch.:--•
__ apterl it 0 rcomprehensive Incom e
_9_0 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ~:.' ..'.':;:2..'l_ : _ _ : . . . . - - - - - - - - -
- - - - - - - ~9~1

.
(AICPA) bala nce ~t Dece mbe r 31, 20xl, included the foll 0 wmg expense
and loss acco unts :
The next two items are based on the following: Accounting and legal fees 120,000
acco unts for the Ye
Van e Co.'s trial bala nce of inco me state men t Adv ertis ing 150,000
: at
ende d Dece mbe r 31, 20xl , inclu ded the follo wing Freight-out 80,000
Deb it c~ 70,000
Interest
575,~ 30,000
Sales Loss on sale of long -term inve stme nt
240,000 225,000
Cost of sales Officers' salar ies
70,000 220,000
Adm inist rativ e expe nses Rent for office spac e
10,000 140,000
Loss on sale of equi pme nt Sales salaries and com miss ions
50,000
Sales com miss ions
25,00) pied by the sales
Interest reve nue One-half of the rente d prem ises is occu
15,000
Freight out depa rtme nt.
20,000
Loss on early retir emen t of long -term debt
15,000 Brock's total selli ng expe nses for 20xl are
• Uncollectible accounts expe nse
420,000 600,000 b. 400,000 c. 370,000 d. 360,000
Totals a. 480,000
(AJCPA)

Other information: 9. The follo wing costs were incurred by Griff Co., a
Finis hed good s inventory: man ufac turer , duri ng 20xl :
...... P400,000 25,000
Janu ary 1, 20xl ... ...... ...... ...... . ...... ... ...... ... Accounting and lega l fees
. .... 360,000 175,000
Dece mbe r 31, 20xl ...... ... ...... .. ...... .. ...... ...... Freight-in
160,000
Freight-out
20xl mult iple step 150,000
Van e's inco me tax rate is 30%. In Van e's Officers' salar ies
inco me state men t, 85,000
Insurance
215,000
Sales repr esen tativ es salar ies
cost of goods
6. Wha t amo unt shou ld Vane repo rt as the
rted as general and
man ufac ture d? What amo unt of these costs shou ld be repo
a. 200,000 b. 215,000 C. 280,000 d. 295,000
adm inist rativ e expe nses for 20xl ?
(AICPA) b 550 000 c 635 000 d. 810,000
a. 260,000 • ' . '
(AICP A)
inco me after income
7. Wha t amo unt shou ld Vane repo rt as
taxe s from cont inuin g oper ation s?
b. 129,500 c. 140,000 d. 147,000
a. 126,000
(AICPA)

in two· categ ories: (1)

8. Brock Corp . repo rts oper ating expe nses
The adju sted tri~
selling, and (2) gene ral and adm inist rativ e.