1.

Impressed Company, a division of Philippine Realty Corporation maintains escrow accounts

and pays real estate taxes for Philippine’s mortgage customers. Escrow funds are kept in
interest-bearing accounts. Interest, less a 10% service fee, is credited to the mortgagee’s account
and used to reduce future escrow payments. Additional information follows:

Escrow accounts liability, January 1, 2008 P 900,000

Escrow payments received during 2008 1,500,000
Real estate taxes paid during 2008 1,900,000
Interest on escrow funds during 2008 90,000

What amount should Impressed report as escrow accounts liability in its December 31, 2008 balance
sheet?
a. 491,000
b. 500,000
c. 581,000
d. 590,000

2. Inter Company sells its products in reusable, expensive containers. The customer charged a
deposit for each container delivered and receives a refund for each container returned within
two years after the year of delivery. Inter accounts for the containers not returned within the
time limit as being retired by sale at the deposit amount. Information for 2006 is as follows:

Deposits for containers at December 31, 2005 from deliveries in:

2004 P 160,000
2005 420,000 P 580,000
Deposits for containers delivered in 2006 780,000
Deposits for containers returned in 2006 form deliveries in:
2004 P 90,000
2005 260,000
2006 276,000 626,000

What amount should Inter Company report as a liability for deposits on returnable containers at
December 31, 2006?
a. 494,000
b. 644,000
c. 674,000
d. 734,000

3. Ivy Co. operates a retail store. All items are sold subject to a 6% state sales tax, which Ivy collects
and records as sales revenue. Ivy files quarterly sales tax returns when due, by the 20th day
following the end of the sales quarter. However, in accordance with state requirements, Ivy
remits sales tax collected by the 20th day of the month following any month such collections
exceed ₱500. Ivy takes these payments as credits on the quarterly sales tax return. The sales taxes
paid by Ivy are charged against sales revenue. Following is a monthly summary appearing in
Ivy's first quarter 2002 sales revenue account:
 Debit Credit
January - 10,600

February 600 7,420

March - 8,480
600 26,500

In its March 31, 20x2, balance sheet, what amount should Ivy report as sales taxes payable
a. 600 b. 900 c. 1,500 d. 1,590

4. On January 1, 20x1 WRECK RUIN Co. acquired land by issuing a three-year, 12%, ₱4,000,000
note payable. Principal and interest are due on December 31, 20x3. How much is the interest
expense in 20x2?
a. 1,017,600 c. 537,600
b. 960,000 d. 764,213

5. Gallery Department Store sells gift certificates, redeemable for store merchandise that expires
one year after their issuance. Gallery has the following information pertaining to its gift
certificates sales and redemptions:

Unearned at December 31, 2005 P 600,000

2006 sales 2,000,000
2006 redemptions of prior-year sales 200,000
2006 redemptions of current-year sales 1,400,000

Gallery’s experience indicates that 10% of gift certificates sold will not be redeemed.

In its December 31, 2006 balance sheet, what amount should Gallery report as unearned revenue?
a. 400,000
b. 600,000
c. 800,000
d. 1,000,000