IEMANAC PROBLEM SET Problem 1 : May Corporation Following are the accounts of May Corp.

as of May 31, 1995: Accounts Payable Accounts Receivable Accrued Wages Payable Accumulated Depreciation on Bldg. Accumulated Depreciation on Eqpt. Bank Notes Payable Building Capital Stock Cash Equipment (at cost) Land Merchandise Inventory Note Receivable Other Assets Other Liabilities Prepaid Insurance Retained Earnings Supplies on Hand Taxes Payable Amount in (000) P 2,839 P 7,266 P 658 P 52,000 P 1,768 P 2,795 P 195,000 P 130,000 P 11,661 P 4,420 P 29,900 P 9,945 P 3,900 P 1,619 P 817 P 1,033 P 73,822 P 1,853 P 1,898

Reqd: 1. Prepare the balance sheet of May Corp. as of May 31, 1995. Use proper format. 2. If you are going to buy May Corp., how much is the fair price? Problem 2: Campus Pizzeria Meredith Snelson started Campus Pizzeria, Inc. on August 1, 1998. Transactions for August are: 1. Snelson invested $5000 in the business as owner. 2. The firm paid $750 rent for the month of August. 3. The firm borrowed $4000 from a bank on a 3% note payable, with interest payable monthly and the principal to be paid in full at the end of 2 years. 4. Equipment costing $7200 was purchased for cash. The expected life of the equipment was 10 years. 5. An initial inventory of pizza ingredients and boxes was purchased on credit for $6550. 6. Pizzerias employees were paid $3000 in wages. 7. Pizza sales for August were $12000, all for cash. 8. Sales in August consumed $6000 worth of ingredients and boxes.
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9. At the end of the month, bills for various utilities totaled $450. 10. $4800 of accounts payable was paid. 11. The firm catered a party for a fee of $200. Since the customer was a friend of Snelson, the customer was told that payment could be made some time later in the month. 12. A check was received from Snelsons friend for the party that they catered. Prepare the balance sheet as of the end of August and income statement for the month of August. Problem 3: Makapal Merchandising Mr. Kapal started a business called Makapal Merchandising, he is hoping and praying for the business to be successful. During the month of September he wanted to see all the transactions that has transpired. The following are the transactions that have occurred during September. Prepare a balance sheet for the as of the end of September and the income statement. a. He opened a bank account in the name of the entity amounting to P15,000. b. Makapal Merchandising was granted a bank loan worth P10,000. c. The business purchases merchandise inventory for P5,500. The P5,500 was paid in cash. d. The entity sold merchandise costing P600 for P1,000. The P1,000 was paid in cash. e. The entity purchased more merchandise for P3,000, agreeing to pay the amount within 60 days. f. Merchandise costing P1,200 was sold for P1,850 which was all received in cash. g. Merchandise costing P500 was sold for P800 with the customer agreeing to pay within 90 days. h. The store acquired a five-year fire insurance policy for P500 paid in cash. i. Mr. Kapal received an offer to sell his business for a total of P40,000. j. Mr. Kapal withdrew P1,500 for his personal expense. k. The entity bought a tract of land which will serve as a parking lot for customers. The land costs P10,000, to be paid in cash. l. Mr. Kapal took merchandise costing P100 which could have been sold for P160 to customers. m. The business paid P1,000 of its Loans Payable. n. Merchandise costing P400 was sold for P600 received in cash. Problem 4: Cobra Corporation Cobra Corporation Balance Sheet As of Jan 31, 1996 Liabilities Accrued Wages Payable Owners Equities
2

Currant Assets Cash Inventory Fixed Assets

P200,000 P 60,000

P90,000

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Equipment Less: Acc. Depn Total

P500,000 (50,000) P710,000

Capital Stock R?E Total

P200,000 P420,000 P710,000

The following transactions occurred in the life of Cobra Corporation in the month of February 1996: a. Merchandise worth Php 300,000 was purchased with an initial downpayment of Php 60,000. The rest is to be paid in 3 equal monthly installments. b. Inventory worth Php 270,000 was sold at a marked-up price of 40%. 4/5 of these were paid in cash. c. Equipment depreciation for one year is estimated at P20,000. d. Salaries of employees worth P115,000 was paid in cash. This includes the wages earned over from last month. e. Utility bills amounting to P10,000 were paid in cash. f. The Cobra Corporation falls in the 30% bracket of taxable income. Set up the Balance Sheet and Income Statement for Cobra Corporation as of Feb. 28, 1996. Problem 5: XYZ Co. Trace the effects (+ or - ) on the different balance sheet and income statement accounts of the following transactions. Prepare a balance sheet and income statement in proper form for the year 1997. Balance sheet as of Dec 31, 1996 is given below: XYZ Co. Balance Sheet As of Dec. 31, 1996 Assets Cash P10,000 Accts. Receivables 5,000 Inventory 15,000 Land 50,000 Equipment 20,000 Building 100,000 Acc. Depn (10,000) Total P190,000 Liabilities and Equities Accts. Payable P 20,000 Bank Loan 15,000 Common Stocks 100,000 Retained Earnings 55,000

Total

P190,000

Transactions during the year 1997 are as follows: a. Office equipment was purchased on credit for P10,000. b. Merchandise worth P15,000 was sold for P20,000 with customer paying in cash. c. XYZ bought additional merchandise for P50,000 on credit. d. The company paid P20,000 for salaries. e. XYZ bought goods costing P50,000 for P 70,000, 50% paid in cash and 50% on credit. f. XYZ collected P30,000 from its customers.
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g. h. i. j.

Depreciation for 1997 amounted to P 15,000. Inventory at the end of 1997 amounted to P20,000 (all paid for in cash). The company pay 30% of its net income as income tax. Other expenses amounted to P10,000 paid for in cash.

Problem 6: Sari-Sari Store, Inc. The account balances in the ledger of Sari-Sari Store Inc. on December 31, 1996 were as follows: Entry Cash Accounts Receivable Mdse. Inventory Land Building Accumulated Depreciation Accounts Payable Notes Payable Capital Stock Retained Earnings Total Debit Php 3,600 30,000 156,300 200,000 500,000 Credit

Php 889,900

100,000 48,600 350,000 300,000 91,300 Php 889,900

The following transactions occured during the year 1997: 1. Sales totaled Php 815,000, 40% of which was received in cash. The cost of merchandise sold amounted to 50% of sales. However, sales returns amounted to Php 5,000. This was to be deducted from the customers account. 2. Fire insurance for 1998 amounting to Php 10,000 was paid. 3. Inventory amounting to Php 500,000 was purchased on credit. 4. Sari-Sari Store Inc. secured a bank loan amounting to Php 100,000 at an interest of 12% per year. Interest is to be paid every three months. The loan was signed on September 1, 1997. 5. The following expenses were paid for in cash: Sales Salaries Php 100,000 Supplies 50,000 Utilities 70,000 Miscellaneous 15,000 Total Php 235,000 6. Wages representing salary of casual employees for the last two weeks of December 1997 amounted to Php 25,000. This is to be paid only on January 15, 1998. The company was forced to hire additional workers during the peak season. 7. The company declared on November 10, 1997 a cash dividend of Php 100,000 to its stockholders which is to be paid on February 1, 1998. 8. Depreciation for the year was estimated at Php 10,000. 9. The company issued additional stocks amounting to Php 30,000 at par value but which were bought for Php 50,000.
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10. The company belongs to the 35% government tax bracket. Taxes on a firms earnings for the accounting period are paid during April of the following year. Requirments: a. Journalize all transactions. b. Prepare the Balance Sheet and Income Statement for Sari-Sari Store Ince, as of the end of the year 1997. Problem 7: Blackie Superstore After a year of operations, Mr. Terence Hill wanted to analyze the performance of his supermarket. He wanted to know where the supermarket stood as of September 30, 1983 and what its future prospects were. Blackie Superstore (BS) was a supermarket organized by Mr. Hill on October 1, 1982. The following list summarizes the transactions for the first year of business which ended September 30, 1983. (1) For its initial capital, Mr. Hill took out a P300,000 mortgage on his own land. He invested P200,000 of this in common stock of the supermarket. (2) Mr. Bud Spencer, Mr. Hills close friend and neighbor, invested P150,000 in cash, receiving stocks in return. (3) A building and equipment were brought for P90,000, P30,000 of which was paid in cash. The balance was paid in cash by borrowing from a bank. This amount was paid at the end of the fiscal year together with a 10% interest. (4) Merchandise costing P221,250 was bought on account. (5) Merchandise costing P189,100 was sold for P437,250. P125,500 was received in cash and the balance on credit, P1,000 of which was deemed to be uncollectible. (6) P42,450 cash was paid as employees wages. (7) BS was billed P15,750 for other expenses, paid for in cash. (8) BS received P1,500 cash for the rent of the storage space in the supermarket left during the fiscal year. (9) BS suffered an uninsured loss by fire of merchandise costing P10,000 and equipment costing P5,200. All losses were charged against income. (10) Accounts payable of P197,500 was paid in cash. (11) BS collected P107,500 of the amount owed by customers. (12) At the end of the fiscal year, the supermarket owed its employees P500 for wages during September. (13) Mr. Hill withdrew P12,000 in cash and took merchandise costing P5,250 from BSs inventory for his personal use without Mr. Spencers knowledge. (14) BS paid P1,100 in cash for supplies (paper bags, boxes, etc.) (15) Depreciation of the building and equipment during the period was estimated to be P2,000. (16) P5,000 of insurance for BSs building has expired. The four-year policy was originally bought for P20,000 in cash on October 1, 1982. (17) A customer made an advance deposit of P5,000 for goods to be delivered in early October during the business second year of operations. (18) Merchandise sold for P1,000 was returned to Mr. Hill because of defects.
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(19) Mr. Hill estimated that P200 of supplies were still on hand and BS owed P250 for supplies. Mr. Hill contributed an additional P50,000 for the supermarkets purposes. (20) Mr. Hill is considering the purchase of a new building that will cost P350,000. If the building is purchased, a P50,000 downpayment will be made with the balance financed by a note payable due at the end of five years. Prepare a balance sheet and an income statement for Blackie Superstore. Assume a tax rate of 40%.

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IEMANAC Accounting Records and Systems (Problem Set)

Problem 1: Denby Corporation Denby Company operates a retail store in which it sells household appliances. Denbys ledger had the following account balances as of January 1, 1997: Cash $230,000 Accounts Receivable 350,000 Inventory 300,000 Prepaid Rent 60,000 Equipment 600,000 Accumulated Depreciation 150,000 Accounts Payable 130,000 Salaries Payable 10,000 Dividends Payable 15,000 Capital Stock 850,000 Retained Earnings 385,000 The company had the following transactions in 1997: 1. Sales on account, $2,500,000. 2. Collection from customer accounts, $2,400,000. 3. Purchase of merchandise, on account, $1,600,000. 4. Cost of merchandise sold, $1,550,000. 5. Salaries earned by employees, $380,000. 6. Salaries paid to employees, $385,000. 7. Cost of other services purchased on account and used, $130,000. 8. Payments to suppliers of other merchandise purchase on account, $1,450,000. 9. Payments to the owner of the building in which the Denby store was located, for the right to use store premises for one year (from July 1, 1997 to June 30, 1998), $132,000. (Fixed rental cost per month.) 10. Rental costs applicable to 1997 (to be calculated). The beginning balance in Prepaid Rent was the rent for six months ending June 30, 1997. 11. Delivery vans purchased for cash $80,000. The company classify delivery vans as equipment. 12. Depreciation on equipment, $40,000. 13. Dividends declared, $80,000. 14. Dividends paid, $75,000. a. Prepare the balance sheet for January 1, 1997. b. Set-up T-accounts and enter the opening balances. Be sure to enter each balance on the correct side of its account. c. Prepare the journal entries in general form for Denby Companys transactions in 1997, using the account titles provided above and any new accounts you find necessary. d. Post these entries to the appropriate T-accounts.
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e. Make an unadjusted trial balance. f. Prepare an income statement for the year 1997. g. Prepare a balance sheet as of Dec 31, 1997. Problem 2 : Dover Corporation Dover Corporation sells wine racks and publishes a wine industry newsletter. The companys fiscal year ends on December 31, and adjusting entries are prepared only at that time. Dovers unadjusted trial balance as of Dec. 31, 1997, is as follows: Account Cash Accounts Receivable Allowances for Uncollectibles Notes Receivable Merchandise Inventory Prepaid Rent Prepaid Insurance Furniture and Equipment Accumulated Depreciation Accounts Payable Liability for Warranty Claims Notes Payable Capital Stock Retained Earnings Revenue from Sales Revenue from Subscriptions Salaries and Wages Expense Printing Expense Income Tax Miscellaneous Expense Dividends Declared Total Debit $7,600 $51,300 $12,000 $88,000 $3,500 $1,700 $16,600 $3,400 $7,700 $900 $5,000 $34,000 $29,500 $190,700 $14,300 $44,600 $6,200 $17,000 $13,800 $24,000 $286,300 Credit $800

$286,300

Dividends declared is a temporary account in the stockholders equity section of the chart of accounts. The following information had not yet been recorded when the trial balance was prepared: 1. The banks verified that the balance in Dovers cash account was correct. 2. The $12,000 notes receivable were 180 day notes, received on October 2, 1997 and carrying an interest at an annual rate of 12% based on a 360 day year and with both principal payable at the notes maturity date. (Use 30 days per month calendar. Interest charges will start a day after notes is received.) 3. Accrued interest as of December 31, 1997, on the $5,000 notes payable amounted to $250. Although the notes were to mature 1999, Dover was required to pay the interest accrued in 1997 during January 1998.
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4. Dover expected to spend $2,500 in 1998 and later to satisfy warranty claims on product warranties in force on December 31, 1997. 5. On the basis of the aging on the $51,300 accounts receivable, Dovers management estimated that $3,100 of these receivables eventually would prove to be uncollectible. 6. Dover conducts all its operations in one rented building, for which rental cost was $250 a month. No rental expense was recognized as yet in 1997. 7. Depreciation on Dovers furniture and equipment amounted to $150 a month in 1997. 8. The past year, 1997, was the first the Dover had published its newsletter. Subscriptions were received at various times during the year, each of 12 monthly issues, and the accompanying payments were recorded as revenue from subscriptions. The newsletters Dover actually delivered to subscriber in 1997 earned the company $11,900 of the amounts it had recorded as revenue for subscription during the year. 9. Salaries and wages earned but unpaid as of December 31 totaled $800. 10. Data in the insurance file showed that Dover began 1998 with $300 of prepaid coverage. 11. A physical count revealed that merchandise that had cost Dover $15,900 was still in the merchandise inventory on Dec. 31, 1997. 12. Income Tax for 1997 was calculated at a rate of 40% of NIBT. Additional income tax arising from adjusting entries was not yet paid by the end of the year. a. b. c. d. Prepare a journal entry for each-year end adjustment. Prepare an adjusted trial balance. Make appropriate set of closing entries as of Dec. 31, 1997. Prepare Dover Corporations 1997 income statement and balance sheet as of Dec. 31, 1997.

Problem 3: Sun and Sand Corporation The account balances in the ledger of Sun and Sand Corporation on December 31, 1997 were as follows: Account Debit Balances (Php) Credit Balances (Php) Cash 18600 Accounts Receivable 30000 Merchandise Inventory 156300 Land 200000 Building 500000 Accumulated Depreciation 100000 Accounts Payable 48600 Notes Payable 350000 Taxes Payable 15000 Capital Stock 300000 Retained Earnings 91300 TOTAL 904900 904900 The following transactions occurred in 1998:

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1. Sales with 30-day credit term totalled Php 815,000. Returns amounted to Php 5000. Returns were to be deducted from the customers account. 2. Fire insurance for two years amounting to Php 10000 was paid on January 1, 1998. 3. Inventory amounting to Php 500000 was purchased on credit. 4. The land owned by Sun and Sand was offered as a security for a bank loan amounting to Php 100000 at an interest of 12% per year. Interest is payable every 3 months. The loan was signed on September 1, 1998. 5. Additional 100000 shares with a par value of Php 1 per share was sold for Php 1.50 per share. This result to a total outstanding shares equal to 400000 shares. 6. The following expenses were paid for in cash: sales salaries Php 200000; supplies Php 50000; utilities Php 70000; miscellaneous expense Php 15000; property taxes Php 30000. 7. Cash sales for the year amounted to Php 250000. 8. Wages representing salary of casual employees for the last 2 weeks of December, 1998 amounted to Php 25000. This will be paid on January 7, 1999. The company was forced to hire additional employees due to the Christmas season. 9. The company declared on December 15, 1998 a cash dividend of Php 34000 to be paid on February 14, 1999. 10. Php 50000 of the notes payable was paid as of December 31, 1998. 11. Allowances for bad debt was estimated to be Php 5000. Following are data for adjustments: a. Outstanding accounts receivable as of December 31, 1998 amounted to Php 70000. b. Supplies left at the end of the year 1998 totaled Php 15000. Inventory of merchandise at year end amounted to Php 200000. c. Bills still to be paid to suppliers amounted to Php 65000. d. Notes payable bears an interest of 10% per year to be paid at year end. All interests on loans are paid on time. e. Depreciation amounted to Php 50000. f. Insurance premium covers the period January 1, 1998 to December 31, 1999. Cost of insurance yearly is fixed. g. Income taxes for 1998 is 30% of income before tax. Half of this is paid at year-end and the other half on March 31, 1999. Requirements: 1. Journalize and post above events and transactions. 2. Journalize and post adjusting entries. 3. Post closing entries. 4. Prepare the income statement and balance sheet for Sun and Sand Corporation as of December 31, 1998.

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10

IEMANAC PROBLEM SET 3 (1) ROTC Corporation recently acquired land worth twelve million pesos to begin its operations in producing world-class combat boots. They constructed a building that cost P4,750,000 which they estimated would have a service life of 25 years. They imported a special machine for their operations from Germany worth US$43,000, which was installed at an additional cost of P25,000, and which has a scrap value of $4,000 at the end of its useful life of 4 years. Assuming that the conversion rate of US$ to Philippine pesos is 25:1, prepare the following: (a) depreciation schedule for the machine using (a1) straight line method (a2) sum-of-the-years digit (a3) declining balance (b) if the building is to be depreciated using the straight line method to zero value after its useful life, while the machinery is to be depreciated using sum-of-the-years digit method, what is the value for total net fixed assets at the end of the third year of operations? (2) Consider a project that will be completed in four years. Total Project Cost=P140M Fixed Project Revenue=P210M Year Projects Costs Incurred 1 40M 2 25M 3 45M 4 30M Total 140M Given the above information and assuming that things will happen as projected, what would be the amount of revenues to be recognized for each of the four years for the following conditions: (a) using percentage-of-completion method (b) using completed contract basis (c) using straight cost plus contract with a mark-up of 25% (d) if after the first year of operations, costs were found to be only half of the projected cost, would revenue for the first year be the same as in (a)? If not, what would be the amount of revenue that should be recognized for the first year? (3) ACES Company began its manufacture and sale of stainless steel kitchen accessories on January 1, 1995, with the owner, Christopher Jao, putting in P2,000,000 worth of cash and P500,000 worth of treasury bills. Along with this, Jao issued a P1,000,000 5-year 8% bond with interest payable annually. With this he paid advance rent for two years on the factory, worth P500,000, and he purchased equipment worth P1,500,000, which has an estimated useful life of 10 years and no scrap value. Merchandise inventory worth P3,000,000 were purchased on account with terms 5/10, n/30. The company also purchased supplies worth P500,000 at the beginning of the year. Christopher Jao registered the company with the Securities and Exchange Commission and secured the necessary licenses at a cost of P40,000, which the company will amortize over a period of 20 years. Production orders started coming in and at the year, cash receipts totaled P4,524,000, while credit sales totaled P1,250,000. It is estimated that 4% of outstanding credit sales would not be recovered. Supplies at the end of the year were worth P150,000 and the total cost of goods sold corresponding to sales was P2,584,000. Wages paid throughout the year totaled P1,258,000. By the end of the year, the company had also sold the treasury bills for P650,000. All merchandise inventory were paid for in cash. Use straight-line depreciation, and allowance method of recording bad debts. Income tax is 35% payable annually. Required: __________________________________________________________________________________ IEMANAC : Problem Set 11

(a) Journalize and post adjusting entries. (b) Prepare the trial balance as of Dec. 31, 1995. (c) Journalize and post closing entries. (d) Prepare the balance sheet as of Dec. 31, 1995. (e) Prepare the income statement for the year. (4) AV Company is a local contractor specializing in installing air-conditioning ducts. They have been commissioned to install ducts in the new Glorietta 4 building over a span of three years of construction. The contract calls for the payment of P2,500,000 to AV Company. The annual costs are given below. How would revenue and eventually profit be recognized if (a) the delivery method or (b) the percentage of completion method was used? Year 1 2 3 Total Annual Costs P450,000 P300,000 P750,000 P1,500,000

(5) Eastern Electronics sells most of its appliances on installment basis. How would the revenue from an P84,000 entertainment system (originally costing P68,000) payable in four equal annual installments be recognized if (a) delivery basis is used? or (b) installment basis is used? (6) Excel Corporations credit sales for different months and terms on credit sales are given below: Credit Sales Credit Terms Jan P100,000 50% within the month of invoice Feb P200,000 30% within the month after Mar P250,000 20% within 2 months after date of invoice May P300,000 Prepare a collection schedule for January to July. Given that total payments received as of May 31 amounted to 625,000, what should be the adjusting entry for bad debts, assuming that all scheduled receivables not received are considered bad debts. Use the allowance for uncollectible method of accounting for bad debts. (7) With the following data, prepare a collection schedule for July to December. Credit Sales July P300,000 Aug P175,000 Oct P225,000 Credit Terms 25% within the month of invoice 30% within the month after 45% within 2 months after invoice

a. Given the total payments received as of Dec. 31 amounted to P500,000, what should be the adjusting entry for bad debts assuming that all scheduled receivables not received are considered bad debts? b. On Jan. 20, 10% of the bad debts are deemed to be uncollectible. What would be the appropriate adjusting entry? c. On jan. 31, 50% of the account written off was collected in full. What would the appropriate adjusting entry? (8) Pottery Stables uses the aging method to estimate its bad debts. Sherman Potter, the company president, has given you the following aging of accounts receivable as of December 31, 2000, along with estimates of the percentage of accounts that are deemed uncollectible. Account Age Balance Percent Deemed Uncollectible 12

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Current 1-45 days 46-90 days past due Over 90 days past due

$290,000 110,000 68,000 40,000

2% 5% 8% 15%

Compute total receivables and expected bad debts as of Dec 31, 2000. What would be the adjusting entry if: (a) allowance method of accounting for uncollectibles is used? (b) direct write-off method is used?
(9) ABC Corp. bought a filing cabinet worth P850, 2/10, n/30, invoice date: June 10 (a) What would be the journal entry in ABC Corp.s journal in June 10. (b) If ABC Corp. paid for the filing cabinet on June 15, what would be the appropriate entry into its journal? (c) If ABC Corp. paid on June 30, what would be the corresponding entry into its journal? (10) Assume that Seller Company sells goods on account with a gross sales price of $1,000 to Buyer Company on Dec. 15 ,1999 (terms 2/10, n/30). (a) What is the journal entry in Sellers Company books on Dec 15, 1999? (b) Give the corresponding entry if Seller Company receives full payment on Dec. 20? (c) Assume Seller Company receives full payment on Jan 3, 2000, what would be the entry?

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13

IEMANAC Problem Set (Quiz No. 3)

(1) Evergreen Co. purchased a patent on 1/1/81 for P178,500. The patent was being amortized over its remaining life of 15 years expiring 1/1/96. During 1984, Evergreen determined that the economic benefits of the patent would not last longer than 10 years from the date of acquisition. What amount should be charged to patent amortization expenses for the year end 12/31/84?
(2) The company purchased an indefinite franchise for a lump sum at P150,000. The estimated useful life of the franchise on the acquisition date was 20 years. After 10 years, the management determined that the franchise would be of economic value for an additional 50 years. What is the franchise amortization in the 11th year assuming SLM procedure?

(3) Consider the following data of the Laimon Company for the year 1991:
Indirect materials Direct labor Direct materials, 1/1 Direct materials, 12/31 Depreciation-eqpt. Factory rent Fire insurance on eqpt. Sales Shipping expenses $ 7,000 300,000 40,000 50,000 40,000 50,000 3,000 60,000 70,000 Indirect labor Finished goods, 1/1 Finished good, 12/31 Work in process, 1/1 Work in process, 12/31 Property taxes on eqpt. Direct materials purchased Sales salaries Administrative expenses $110,000 150,000 100,000 10,000 14,000 4,000 460,000 100,000 100,000

Finished goods inventory, Jan. 1: 600 units; Dec 31: 720 units, all from year 1991 production. Sold during the year: 4,180 units. The company uses FIFO method in costing its inventory. Required: (a) Prepare a detailed cost of goods manufactured and sold statement. (b) The unit cost of finished goods inventory on Dec 31. (4) Requirements: Journalize all the following transactions and set up the Income Statement. Also, provide all the necessary closing entries.

The beginning balances of the inventories of Cycle Mfg. Corp. are as follows: Raw Materials P 15,000 Work-in-process 21,000 Finished Goods 18,000 Transactions & events for the fiscal year ended Dec. 31, 1998 are summarized as follows: 1. Raw Materials purchased P220,000; 25% was on account 2. Direct labor (paid in cash) applied to convert raw materials to finished goods P72,000
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3.

4. 5. 6. 7. 8.

9. 10. 11.

Other wage expenses paid in cash P75,000 1/3 of this was used to pay for the salaries of production personnel, inspectors & supervisors. The rest was used to pay for the wages of administrative officers. Utilities expense incurred for factory use all paid in cash P60,000 Supplies requisitioned during the year P60,000 1/3 of this was used in the factory. Purchase discounts availed of, P15,000, deductible from A/P. Repairs & maintenance expense incurred (all paid in cash) for: a) factory equipment - P25,000 b) office equipment - 12,000 Depreciation Expense of: a) factory building - P20,000 b) factory equipment - 25,000 c) office building - 8,000 Bad debt expense is estimated to be 2% of total credit sales. Total sales revenue generated for the year is P600,000, half on account and half paid in cash. Purchase Returns amounted to P7,500, (deductible from accounts payable). Ending balances: Raw Materials P 18,000 W/P 25,000 Finished Goods 20,000

(5) Requirements: Determine the Cost of Goods Sold as well as the cost of Ending Inventory for each year using each of the following methods: (a) Average Cost; (b) First In, First Out; and (c) Last In, First Out. Assuming that the company originally used FIFO costing, determine if tax savings will be realized if a switch is made from FIFO to LIFO. How much tax savings will be realized for each of the three years, if any?

ZIP Corporation had traditionally used the FIFO method of inventory valuation. You are given the following information on transactions affecting ZIPs inventory account:
1995 Beginning Balance Purchases 7,500 cases @ P 24.50 500 cases @ 25.00 1,500 cases @ 28.25 1,500 cases @ 24.75 3,500 cases @ 29.00 12,500 cases @ 35.75 2,000 cases cases @ 28.75 cases @ 27.75 cases @ 30.75 cases @ 26.00
15

Sales 1996 Beginning Balance Purchases

3,500 5,500 4,000 5,000

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Sales 1997 Beginning Balance Purchases

2,500 cases @ 27.50 15,500 cases @ 38.50 7,000 cases 10,000 cases @ 35.75 cases @ 37.75 cases @ 34.50 cases @ 31.25 cases @ 32.50 cases @ 35.05 cases @ 37.75 20,000 cases @ 40.00

500 7,500 8,500 9,500 300 5,500 Sales

(6) Listed below in alphabetical order are certain accounts of the Olson Company with balances for the year ended December 31, 1998:
Administrative expense Customer returns and allowances Depreciation---plant and equipment Depreciation---selling Direct labor cost Dividends Factory heat, light, and power Factory supplies cost Finished goods inventory, 1/1 Finished goods inventory, 12/31 Freight-in Gain on disposal of machinery Goods in process inventory, 1/1 Goods in process inventory, 12/31 Income tax expense Indirect labor Insurance and taxes (factory) Interest expenses Purchases Raw materials inventory, 1/1 Raw materials inventory, 12/31 Sales Selling expense $40,780 63,050 41,600 3,780 207,320 13,000 93,540 26,500 78,650 82,130 9,840 13,600 30,970 31,920 4,600 26,150 13,860 10,950 302,320 185,680 162,100 913,990 441,480

Prepare a detailed cost of goods manufactured and sold statement for the year ended December 31, 1998. (7) ACES Company acquired and retails a certain product X. At the end of the year, it was found that they had on hand 12 units of inventory. The following data exist: Jan 1 Beginning Inventory 10 units @ P10.00 Mar 13 Purchases 15 units @ P11.50 Aug 8 Purchases 20 units @ P12.50
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Nov 16 Purchases

10 units @ P12.00

Determine CGS and Ending Inventory using the following methods: (a) Specific Invoice (given that 6 units of the Aug purchase and 6 of the Nov purchase are left) (b) Average Cost (c) FIFO (d) LIFO (8) The records of the Libis Corporation show the ff. Information as of March 31, 19B: Raw Material Used P440,000 Direct Factory Labor P290,000 Indirect Factory Labor P46,000 Light and Power P4,260 Depreciation P4,700 Repairs to Machinery P5,800 Misc. Factory Overhead P29,000 Work-in-Process Inventory, April 1, 19A P41,200 Finished Goods Inventory, April 1, 19A P34,300 Work-in-Process Inventory, March 31, 19B P42,500 Finished Goods Inventory, March 31, 19B P31,500

A total of 18,000 units were completed during the year.

Required: 1. A cost of goods statement for the year ended March 31, 19B. 2. The unit cost of goods manufactured. (9) The records of the Liwanag Refrigerator Company show the following information for the three months ended March 31, 19A: Materials Purchased Inventories, Jan 1, 19A: Materials Finished Goods (100 ref.) Direct Labor Factory Overhead Marketing Expenses General and Administrative Expenses Sales Inventories, March 31, 19A: Materials Finished Goods (200 ref.) No unfinished work on hand. P1,946,70 0 P268,000 P43,000 P2,125,80 0 P764,000 P516,000 P461,000 P6,634,00 0 P167,000

Required: 1. Income statement for the period. 2. The number of units manufactured. 3. The unit cost of refrigerators manufactured.
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4. The gross profit per unit sold. 5. The net profit per unit sold.

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18