CHAPTER 1

Problem 1-2 Problem 1-3 Problem 1-6

1. D 1. D 1. D
2. C 2. D 2. D
3. B 3. D 3. C
4. B 4. D 4. A
5. B 5. A 5. A
6. A 6. D
7. D 7. A
8. A 8. A
9. D 9. A
10. B 10. A
 CHAPTER 2
Problem 2-1 Problem 2-11 Problem 2-13 Problem 2-23
1C 1B 1C 1D
2A
3D
4D
5A
6A
7A
8A
9D
10 C
 CHAPTER 2
SOLUTION
PROBLEM 2-11

Cash 1,500,000
Accounts Receivable 3,200,000
Inventory 1,000,000
Financial asset, for trading 300,000
Equipment held for sale 2,000,000
TOTAL CURRENT ASSETS 8,000,000 B

PROBLEM 2-13

Cash in general checking account 3,500,000

Cash held to pay value added taxes 500,000
Total Cash 4,000,000
Accounts Receivable 2,000,000
Inventory (800,000-200,000) 600,000
Prepaid expenses (150,000-50,000) 100,000
Equity Investment at FVPL 1,000,000
TOTAL CURRENT ASSETS 7,700,000 C

PROBLEM 2-23

Accounts Payable 500,000

Accrued Expenses 300,000
Cash dividends payable (100 000 outstanding shares*P7) 700,000
Accrued interest payable (5 000 0000 x 8% x 6/12) 200,000
Income tax payable (6 000 000 x 25% - 1 000 000) 500,000
TOTAL CURRENT LIABILITIES 2,200,000 D
 CHAPTER 3
Problem 3-3 Problem 3-5 Problem 3-8 Problem 3-13
1 C 1 D 1 D 1 B
2 D 2 B
3 D 3 C
4 C 4 B
5 C 5 D
6 B
7 C
8 D
9 B
10 C
 CHAPTER 3
SOLUTION

PROBLEM 3-5
Key officers' salaries
Dean 750,000
Morey 500,000
Loan to officers
Dean 1,250,000
Morey 500,000
Total Related Party Disclosures 3,000,000 D

PROBLEM 3-13
The income before tax will remain 9,000,000 as the subsequent events occurred will not take effect in Financial Statement yet.
The insurance will only be expensed on January 2024)
B
ot take effect in Financial Statement yet.
 CHAPTER 4
Problem 4-1 Problem 4-13 Problem 4-17 Problem 4-20
1 C 1 C 1 D 1 D
2 C 2 B
3 D
4 B
5 D
 CHAPTER 4
SOLUTION

PROBLEM 4-13
Advertising 1,500,000
Freight out 750,000
Rent for office space (1,800,000*50%) 900,000
Sales salaries and commissions 1,400,000
TOTAL DISTRIBUTION EXPENSES 4,550,000 C

PROBLEM 4-13
Net income 7,500,000
Add: Unrealized loss on foreign currency translation 500,000
Debit adjustment of profit of prior year for error 750,000
Adjusted Net Income 8,750,000 D

PROBLEM 4-20
1. Net Income 2,250,000
Divide by: income tax rate 75%
Profit before tax 3,000,000

Sales % 100%
Less: COGS (20%/40%) 50%
Operating expenses 20%
Interest expense 5%
Income before tax 25%

Profit before tax 3,000,000

Divided: Income before tax % 25%
Sales 12,000,000 D

2. Sales 12,000,000.00
Multiply by: COGS/Sales 50%
COGS 6,000,000
Purchases 120%
7,200,000 B
 CHAPTER 5
Problem 5-1 Problem 5-2 Problem 5-4 Problem 5-8
1 A 1 A 1 A 1 1,350,000
2 A
3 D
4 B
5 A
 CHAPTER 5
SOLUTION

PROBLEM 5-2
Net Income Dividends
2020 800,000 -
2021 2,500,000 1,000,000
2022 3,000,000 1,000,000
6,300,000 2,000,000

Net Income, 2020-2022 6,300,000

Less: Dividends, 2020-2022 2,000,000
Retained Earnings, Jan. 1, 2023 4,300,000
Income before income tax of 25% 3,600,000 4,800,000 x 75%
less: Prior period error 300,000 400,000 x 75%
decrease in income from change in inventory 525,000 700,000 x 75%
Dividend declared for 2023 2,000,000
Retained Earnings, Dec, 31, 2023 5,075,000 A

PROBLEM 5-4
Share capital 5,000,000
Share premium 2,000,000
Retained earnings 500,000
Less: cost of shares repurchase 300,000
Total shareholders' equity, year end 7,200,000 A

PROBLEM 5-8
Reliable Company
Statement of Retained earnings
For the year ended December 31, 2023

Retained earnings, Jan. 1, 2023 200,000

Add: overdepreciation 100,000
Change in accounting policy 150,000
Beg. Bal 450,000

Net Income for the period 1,300,000

Less: Cash dividends paid 500,000
Appropriation for contingencies 100,000
Add: Appropriation for treasury shares 200,000
Retained earnings, Dec. 31, 2023 1,350,000
Dividends
-
1,000,000
1,000,000
2,000,000
 CHAPTER 6
Problem 6-1 Problem 6-10 Problem 6-8
1 A 1 A 1 C
2 D 2A 2 C PROBLEM 6-10
3 B 3C 3 B
4 D 4A 4 J/E 1
5 C 5 J/E
6 B
7 C
8 A 2
9 C
10 D

5 6/30/2023

12/31/2023

Problem 6-8
1
2

4 1/1/2023

12/31/2023

12/31/2024

12/31/1935

12/31/2026
 CHAPTER 6

ROBLEM 6-10

Fair value at classification 3,300,000

Less: cost of disposal 200,000
Adjusted carrying amount 3,100,000 A

Fair value at classification 3,300,000

Land held for sale 2,900,000
Revaluation surplus 400,000
Add: revaluation surplus, beg. 200,000
Total revaluation surplus 600,000 A

Carrying amount 3,300,000

Less: FV less cost of disposal 3,100,000
Impairment loss 200,000 C

Carrying amount 3,100,000

Less: FV less cost of disposal (3.25M-250K) 3,000,000
Impairment loss 100,000 A

Land held for sale 400,000

Revaluation surplus 400,000
Rev surplus on June 30

Impairment loss 200,000

Land held for sale 200,000
Cost of Disposal

Impairment loss 100,000

Land held for sale 100,000
Rev loss pluss COD

Carrying amount (5M - 1M Accum. Dep. 2023 2024) 4,000,000

Less: FV less disposal cost 3,200,000
Impairment loss 800,000 C
Carrying amount, Dec 31, 2024 4,000,000
Less: depreciation exp. 500 000
CA, Dec 31, 2025 3,500,000
Fair Value less COD, Ced 31, 2025
Lower: CA, Dec 31, 2025 3,500,000 C

Carrying amoount, Dec 31, 2025 3,500,000

Fair Value less COD 3,200,000
Gain on reclassification 300,000 B

Equipment 5,000,000
Cash 5,000,000

Depreciation (5 000 000/10) 500,000

Accumulated depreciation 500,000

Depreciation (5 000 000/10) 500,000

Accumulated depreciation 500,000

Equipment held for sale 4,000,000

Accumulated depreciation 1,000,000
Equipment 5,000,000

Impairment loss (4 000 000 - 3 200 000) 800,000

Equipment held for sale 800,000

Equipment held for sale 300,000

Gain on reclassification 300,000

Equipment 3,500,000
Equipment held for sale 3,500,000

Depreciation (5 000 000/10) 500,000

Accumulated depreciation 500,000
 CHAPTER 7
Problem 7-1 Problem 7-10 Problem 7-13
1 D 1 A 1 A
2 A
3 D
4 D
5 A
CHAPTER 7
SOLUTION

PROBLEM 7-10
Trading loss incurred by disposal group 2,000,000
loss on remeasurement 1,500,000
Pretax loss 3,500,000 A

PROBLEM 7-13
Loss of disposition of asset 700,000
Operating loss 200,000
Pretax loss 900,000 A
 CHAPTER 8
Problem 8-1 Problem 8-4 Problem 8-27
1 D 1 B 1 975,000 increase in retained
2 B 2 C earnings
3 A 3 A
4 A 4 B
5 A 5 B
6 C
7 D
8 C
9 D
10 B
CHAPTER 8
SOLUTION

PROBLEM 8-27
Cumulative gross income, 2017 & 2018 - percentage of completion 3,500,000
Cumulative gross income, 2017 & 2018 - cost of recovery 2,200,000
Cumulative increase 1,300,000
Less: Tax effect (1.3M x 75%) 325,000
Addition to retained earnings on 2023 975,000
 CHAPTER 9
Problem 9-2 Problem 9-15 Problem 9-17 SOLUTION
1 B 1 B 1 C
2 D 2 D PROBLEM 9-15
3 A 3 D
4 C 4 D Bad debt expense - entire year
5 B 1st quarter
6 D 2nd quarter
7 C 3rd quarter
8 A 4th quarter
9 C
10 D PROBLEMT 9-17
Quarter
1
2
3
4
CHAPTER 9

Sales Quarterly Bad Debt Expense Bad debt expense

450,000
2,000,000 5% 100000
1,500,000 5% 75000
2,500,000 5% 125000
150,000 B

Completion % Profit/income total income/quarter Cumulative income

10% 20 000 000 - 15 000 000 = 5,000,0000 500,000 500,000
- - 0 0
25% 20 000 000 - 19 200 000= 800,000 200,000 200k-500k= (300 000)
- - 0 0
C
D
D
D