GERALDINE E.

MARTINEZ, BSA-III
IA3 Semi-Final Exams
1

4-5 SOLUTIONS:
Sales 2,000,000.00
Sales discount - 20,000.00
Net sales 1,980,000.00
Cost of sales - 800,000.00
Gross profit 1,180,000.00
Distribution costs - 96,000.00
Administrative costs - 240,000.00
Casualty loss on typhoon - 40,000.00
Dividends received from investments in FVPL 24,000.00
Dividends received from investment in associate 72,000.00
Unrealized gain on investments in FVPL 30,000.00
Interest expense - 44,000.00
Profit before tax 886,000.00
Income tax expense - 300,000.00
Profit for the year 586,000.00

Other comprehensive income:

Loss on revaluation - 26,000.00
Unrealized gain on investment in FVOCI 38,000.00
Remeasurements of the net defined benefit liability (asset) - gain 22,000.00
Translation adjustment of foreign operation – loss - 8,000.00
OCI for the year 26,000.00 D.

Total comprehensive income for the year 612,000.00 A.

31 SHE, beg. 180,000.00
Add. shares issued 360,000.00
Profit for the year (1M-560k) 440,000.00
Dividends declared (140,000.00)
Shareholder's equity, Dec. 31 840,000.00

32 Profit 340,000.00
Depreciation 100,000.00
Increase in AR (560k-300k) (260,000.00)
Increase in AP (240k-120k) 120,000.00
Net cash from operating activities 300,000.00

33 Cash receipts from sale of goods 650,000.00

Cash paid for purchases of invento (340,000.00)
Cash paid for interest expense (20,000.00)
Net of cash from operating activiti 290,000.00

34 Cash payment for the acquisition (180,000.00)

35 Profit 120,000.00
Depreciation 240,000.00
Loss on sale 40,000.00
Total 400,000.00
Changes in operating assets and liabilities:
Increase in trade and other receiv (10,000.00)
Decrease in inventory 360,000.00
Decrease in prepaid assets 120,000.00
Increase in trade and other payabl 60,000.00
Net cash from operating activities 930,000.00

36 Proceeds from the sale of equipm 200,000.00

Payment for the purchase of equ (800,000.00)
Net cash from investing activities (600,000.00)

37 Net cash from financing activities (90,000.00)

43 Profit 600,000.00
Add: (50,000-40,000) 10,000.00
Correct profit 610,000.00
57 OS TR IA
A 0.29 0.23 0.43
B 0.15 0.14 0.11
C 0.09 0.03 0.09
D 0.15 0.06 0.18
E 0.06 0.07 0.09
F 0.26 0.47 0.11
62 Depreciation (120,000/4) 30,000.00
Inventory cost (600,000-510,000) 90,000.00
Bonuses (60,000/4) 15,000.00
Total Expenses 135,000.00
65 D. 95,000
Prepaid, beg. 65,000 35,000 Accrued payable, beg.
Payments 150,000 95,000 Insurance expense (squeeze)
Accrued payable, end - 85,000 Prepaid, end.

66 C. 665,000
Accrued, beg. 180,000 170,000 Unearned, beg.
Rent income (squeeze) 665,000 560,000 Payments received
Unearned, end. 85,000 200,000 Accrued, end.

67 A. 1,090,000
Income tax payable
- beg.
tax payments 760,000 960,000 Current tax expense (squeeze)
end. 200,000
Income tax expense 1,090,000
68 Unadjusted profit before tax
Write-down of inventory
Impairment of asset (150,000 – 140,000)
Unrealized gain (38,000 – 20,000)
Depreciation (60,000 x 1/4)
Employee benefits (140,000 x 1/4)
Adjusted profit before tax

69 Sales
Cost of sales
Gross profit
Commission (2M*5%)
Bad debts (30,000 - 10,000)
Depreciation (2,400,000 ÷ 5) x 3/12
Insurance (80,000 x 3/12)
Property tax (52,000 x 3/12)
Advertising costs
Staff bonuses (184,000 x 3/12)
Loss on sale
Repairs
Rent (10,000 x 3) + [(2,000,000 – 1,800,000) x 2%]
Other operating expenses
Profit before bonus to key personnel
Bonus to key personnel (323,000 x 10%
Profit for the 1st quarter

70 1st quarter
Unadjusted profit before tax 1,760,000
Unfavorable variance - 48,000
Newspaper advertisement cost (180 x 3/12) -
Unrealized (loss) gain on investment - 200,000
Research and development expense - 20,000
Foreign exchange (loss) gain - 20,000
Impairment loss - 16,000
1,456,000
Unrealized loss and gain on the held for trading securities are computed as follows:
1st quarter
Carrying amount before end of quarter adjustment 400,000
Fair value as of end of quarter 200,000
Unrealized gain (loss) for the quarter - 200,000
*Recovery exceeded previous write-down by P40,000

Foreign exchange loss and gain on the foreign currency denominated receivable is computed as follows:
1st quarter
 Carrying amount before end of quarter adjustment 80,000
Translated at current exchange rate as of end of qtr. 60,000
FOREX (loss) gain - 20,000

71 1st quarter
a. Inventory write-down - 200,000
Reversal of write-down
b. Warranty expense - 100,000
c. Bad debt expense - 40,000
Net effect on profit or loss - 340,000

a. Inventory write-down of 200k is recognize as expense in 1st quarter and recovery of that wite-down of 200k is reductio
b. Warranty expense in the second quarter is computed as follows:
Total warranty expense – 1st and 2nd quarters [(2M + 2.4M) x 10%]
Warranty expense recognized in 1st quarter (2M x 5%)
Warranty expense – 2nd quarter

c. . Bad debt expense in the second quarter is computed as follows:

Allowance for doubtful accounts
10000 1/1/20x1
Write-offs 24000 6000 Recoveries
40000 Bad debt expense 1st quarter (2M*2%)
28000 Bad debt expense 2nd quarter
6/30/20x1 60000

72 Requirement a
Pre-tax profit (first P400,000)
Multiply by: Tax rate applicable for the first P200,000 profit
Income tax expense on the first P200,000 profit

Pre-tax profit (in excess of P400,000) (200,000 per qtr. x 4 qtrs.) minus 400,000
Multiply by: Tax rate applicable for additional earnings
Income tax expense on additional earnings

Total income tax expense for the year

Divide by: Total profit for the year (200,000 per qtr. x 4 qtrs.)
Weighted average annual income tax rate

Requirement b
Quarterly income tax expenses are computed as follows:

1st quarter 2nd quarter 3rd quarter 4th quarter

Pretax profit 200,000 200,000 200,000 200,000
Ave. income tax rate 25% 25% 25% 25%
Income tax expense 50,000 50,000 50,000 50,000
 200,000
-
- 10,000
18,000
- 15,000
- 35,000
158,000

2,000,000
- 900,000
1,100,000
- 100,000
- 20,000
- 120,000
- 20,000
- 13,000
- 100,000
- 46,000
- 60,000
- 24,000
- 34,000
- 240,000
323,000
- 32,300
290,700

2nd quarter
1,840,000
-
- 60,000
240,000
- 24,000
30,000
-
2,026,000

2nd quarter
200,000
440,000
240,000

ed as follows:
2nd quarter
 60,000
90,000
30,000

2nd quarter

200,000
- 340,000
- 28,000
- 168,000

t wite-down of 200k is reduction to expense in 2nd quarter.

440,000
- 100,000
340,000

st quarter (2M*2%)

400,000
20%
80,000

400,000
30%
120,000

200,000
800,000
25%

Annual
800,000
25%
200,000