Professional Documents
Culture Documents
Problem 2 (Total
(Total assets)
An entity was incorporated on January 1, 2015 with proceeds fro$ the issuance of "&,500,000 in
shares and borrowed funds of "1,100,000/ uring the first year of operations, revenue fro$ sales
and consulting a$ounted to "420,000, and operating costs and e'penses totaled "()0,000/ n
ece$ber 15, the entity declared a "30,000 cash dividend, payable to shareholders on January 15,
201(/
201(/ o additi
additional
onal activi
activitie
tiess affec
affected
ted owners6
owners6 e#uity
e#uity in 2015/
2015/ he liabi
liabilit
lities
ies increa
increased
sed to
"1,200,000 by ece$ber 31, 2015/ 7hat a$ount should be reported as total assets on ece$ber
31, 2015
a/ 4,450,000
b/ 4,420,000
c/ &,4&0,000
d/ 4,&50,000
he contingent liability is an accrual for possible loss on a "1,000,000 lawsuit filed against the
entity/ he legal counsel e'pects the suit to be settled in 201( and has esti$ated that the entity will
be liable for da$ages in the range of ")50,000 to "&50,000/ he deferred ta' liability is e'pected to
reverse in 201(/ 7hat a$ount should be reported on ece$ber 31, 2015 for current liabilities
a/ 515,000
b/ %)0,000
c/ 1,)%0,000
d/ 1,515,000
"age 2
An entity reported
reported the chec.boo. balance
balance on ece$ber 31, 2015 at "4,000,000/ *n addition,
addition, the
entity held the following ite$s in the safe on that date:
Chec. payable to the entity, dated January 2, 201( in pay$ent of a sale,
not !n#lu%e% in
in ece$ber 31 chec. boo. balance 1,000,000
Chec.
Chec. payabl
payablee to the entity
entity, deposit
deposited
ed ece$ber
ece$ber 15 and includ
included
ed in
ece$ber 31 chec.boo. balance, but returned by ban. on
ece$ber 30 sta$ped ?+@/ he chec. was redeposited on
January 2, 201( and cleared on January 5, 201( 3,000,000
Chec. drawn on the entity6s account, dated and recorded on
ece$ber 31, 2015 but not $ailed until January 15, 201( 2,500,000
Coins and currencies on hand 400,000
hree>$onth $oney $ar.et instru$ents 1,500,000
7hat is the correct a$ount of ?cash on ece$ber 31, 2015
a/ &,500,000
b/ %,300,000
c/ 4,300,000
d/ %,400,000
"age 2
An entity reported
reported the chec.boo. balance
balance on ece$ber 31, 2015 at "4,000,000/ *n addition,
addition, the
entity held the following ite$s in the safe on that date:
Chec. payable to the entity, dated January 2, 201( in pay$ent of a sale,
not !n#lu%e% in
in ece$ber 31 chec. boo. balance 1,000,000
Chec.
Chec. payabl
payablee to the entity
entity, deposit
deposited
ed ece$ber
ece$ber 15 and includ
included
ed in
ece$ber 31 chec.boo. balance, but returned by ban. on
ece$ber 30 sta$ped ?+@/ he chec. was redeposited on
January 2, 201( and cleared on January 5, 201( 3,000,000
Chec. drawn on the entity6s account, dated and recorded on
ece$ber 31, 2015 but not $ailed until January 15, 201( 2,500,000
Coins and currencies on hand 400,000
hree>$onth $oney $ar.et instru$ents 1,500,000
7hat is the correct a$ount of ?cash on ece$ber 31, 2015
a/ &,500,000
b/ %,300,000
c/ 4,300,000
d/ %,400,000
"age 3
n ece$ber 31, 2015, an entity received two "2,000,000 notes receivable fro$ custo$ers/ n
both notes, interest is calculated on the outstanding principal balance at the annual rate of
o f 39 and
a nd
payable at $aturity/
$aturity/ he first note, $ade under custo$ary trade ter$s, is due in nine $onths and the
second note is due in five years/ he $ar.et interest rate for si$ilar notes on ece$ber 31, 2015
was 49/ he " of 1 at 49 due in nine $onths is /%)), and the " of 1 at 49 due in 5 years is /(4/
n ece$ber 31, 2015, what total carrying a$ount should be reported for the two notes receivable
a/ 3,2)4,000
b/ 3,)%),)00
c/ 3,3(0,000
d/ 3,5(),000
"age )
A ban. granted a 10>year loan to a borrower in the a$ount of "1,500,000 with stated interest rate of
(9/ "ay$ents are due $onthly and are co$puted to be "1(,(50/ he ban. incurred ")0,000 of
direct loan origination cost and "20,000 of indirect loan origination cost/ *n addition, the ban.
charged the borrower a )>point nonrefundable loan origination fee/ 7hat is the carrying a$ount of
the loan receivable to be reported initially by the ban.
a/ 1,))0,000
b/ 1,)40,000
c/ 1,500,000
d/ 1,520,000
An entity reported inventory on ece$ber 31, 2015 at "(,000,000 based on a physical count at cost
and before any necessary year>end ad=ust$ents relating to the following:
*ncluded in the physical count were goods billed to a custo$er @B shipping point on
ece$ber 30, 2015/ hese goods had a cost of "125,000 and were pic.ed up by the carrier on
January &, 201(/
<oods shipped @B shipping point on ece$ber 24, 2015 fro$ a vendor to the entity were
received on January ), 201(/ he invoice cost was "300,000/
7hat a$ount should be reported as inventory on ece$ber 31, 2015
a/ 5,4&5,000
b/ (,000,000
c/ (,1&5,000
d/ (,300,000
An entity reported accounts payable on ece$ber 31, 2015 at "),500,000 before any necessary
year>end ad=ust$ents relating to the following transactions:
n ece$ber 2&, 2015, the entity wrote and recorded chec.s to creditors totaling "2,000,000
causing an overdraft of "500,000 in the entity6s ban. account on ece$ber 31, 2015/ he
chec.s were $ailed on January 10, 201(/
n ece$ber 24, 2015, the entity purchased and received goods for "&50,000, ter$s 210, n30/
he entity recorded purchases and accounts payable at net a$ount/ he invoice was recorded
and paid January 3, 201(/
<oods shipped @B destination on ece$ber 20, 2015 fro$ a vendor to the entity were
received January 2, 201(, he invoice cost was "325,000/
n ece$ber 31, 2015, what a$ount should be reported as accounts payable
a/ &,5&5,000
b/ &,250,000
c/ &,235,000
d/ &,553,500
"age 5
Problem / (Reta!l !n,entor1 meto%)
n +epte$ber 1, 2015, an entity purchased a new $achine on a deferred pay$ent basis/ A down
pay$ent of "200,000 was $ade and ) annual install$ents of "(00,000 each are to be $ade beginning
on +epte$ber 1, 201(/ he cash e#uivalent price of the $achine was "2,300,000/ ue to an e$ployee
stri.e, the entity could not install the $achine i$$ediately and thus incurred "30,000 of storage cost/
Cost of installation e'cluding the storage cost a$ounted to "40,000/ 7hat is the total cost of the
$achine
a/ 2,300,000
b/ 2,340,000
c/ 2,)10,000
d/ 2,(00,000
"age (
uring 2015, an entity constructed an asset costing "10,000,000/ he weighted average
accu$ulated e'penditures on the asset during the year totaled "(,000,000/ o help pay for
construction, "),)00,000 was borrowed at 109 on January 1, 2015, and funds not needed for
construction were te$porarily invested in short>ter$ securities, yielding "%0,000 in interest
revenue/ ther than the construction funds borrowed, the only other debt outstanding during the
year was a "5,000,000, 10>year, %9 note payable dated January 1, 2012/ 7hat is the a$ount of
interest that should be capitali;ed during 2015
a/ (00,000
b/ 300,000
c/ )%),000
d/ %)),000
Problem /- (6elet!on)
*n 2015, an entity purchased property with natural resources for "24,000,000/ he property had a
residual value of "5,000,000/ Fowever, the entity is re#uired to restore the property to the original
condition at a discounted a$ount of "2,000,000/ *n 2015, the entity spent "1,000,000 in
develop$ent cost and "3,000,000 in building/ *n 201(, an a$ount of "),000,000 was spent for
additional develop$ent on the $ine/ "roduction began in 201( and the tons e'tracted totaled
3,000,000 in 201( and 2,500,000 in 201&/ he re$aining tons totaled &,000,000 and 3,500,000,
respectively on ece$ber 31, 201( and ece$ber 31, 201&/ 7hat a$ount of depletion should
recogni;ed in 201&
a/ 10,500,000
b/ 12,250,000
c/ %,000,000
d/ 4,&50,000
Problem /. (Re,aluat!on)
uring the current year, an entity incurred the following costs to develop and produce a routine,
low>ris. co$puter software product:
An entity, a $a=or winery, begins construction of a new facility in Dindanao/ he following costs
are incurred in con=unction with the start>up activities of the new facility:
"roduction e#uip$ent 4,150,000
ravel costs of salaried e$ployees )00,000
icense fees 1)0,000
raining of local e$ployees for production and $aintenance operations 1,200,000
Advertising costs 450,000
7hat a$ount of start up costs should be e'pensed
a/ %,&50,000
b/ 1,(00,000
c/ 1,3%0,000
d/ 0
n January 1, 2013, an entity purchased patent at a cost of "1,%20,000 at which date the re$aining
legal life was 1( years/ n January 1, 2015, the useful life of the patent was deter$ined to be only 4
years fro$ the date of ac#uisition/ n January 1, 2015, the entity paid "400,000, of which
three>fourths was for a trade$ar., and one>fourth was for the other entity6s agree$ent not to
co$pete for a 5>year period in the line of business covered by the trade$ar./ he entity considered
the life of the trade$ar. indefinite/ Doreover, the entity agreed to pay "50,000 to the other entity as
consulting fee each year for 5 years payable every January 1/ 7hat is the a$orti;ation of intangible
assets for 2015
a/ 320,000
b/ 240,000
c/ 250,000
d/ 3&0,000
"age 4
Problem 2 (Goo%3!ll)
n ece$ber 31, 2015, an entity purchased for ")0,000,000 cash all of the outstanding ordinary
shares of another entity when the subsidiary6s state$ent of financial position showed net assets of
"32,000,000/ he subsidiary6s assets and liabilities had fair value different fro$ the carrying
a$ount as follows:
Problem 2" (F!nan#!al asset at +a!r ,alue trou& oter #omreens!,e !n#ome)
n January 1, 2015, an entity purchased nontra%!n& e#uity securities which are irrevocably
designated at fair value through other co$prehensive inco$e:
Pur#ase r!#e Transa#t!on #ost Mar7et 8 /29/920/$
+ecurity A 1,000,000 100,000 1,500,000
+ecurity B 2,000,000 200,000 2,)00,000
+ecurity C ),000,000 )00,000 ),&00,000
n July 1, 201(, the entity sold +ecurity C for "5,200,000/ 7hat a$ount should be credited to
retained earnings as a result of the sale of the invest$ent in 201(
a/ 400,000
b/ 500,000
c/ 300,000
d/ 0
An entity fre#uently borrowed fro$ the ban. in order to $aintain sufficient operating cash/ he
following loans were at a 129 interest rate with interest payable at $aturity/ he entity repaid each
loan on scheduled $aturity date/
he entity recorded interest e'pense when the loans are repaid/ As a result, interest e'pense of
"150,000 was recorded in 2015/ *f no correction is $ade, by what a$ount would interest e'pense
be understated for 2015
a/ 5),000
b/ (2,000
c/ (),000
d/ &2,000
"age %
An entity has 35 e$ployees who wor. 4>hour days and are paid hourly/ n January 1, 2013, the
entity began a progra$ of granting the e$ployees 10 days of paid vacation each year/ acation days
earned in 2013 $ay first be ta.en on January 1, 201)/
:ourl1 4a#at!on 6a1s Earne% 4a#at!on 6a1s Use%
;ear <a&es b1 Ea# Emlo1ee b1 Ea# Emlo1ee
2013 25/40 10 0
201) 2&/00 10 4
2015 24/50 10 10
he entity has chosen to accrue the liability for co$pensated absences at the current rate of pay in
effect when the co$pensated ti$e is earned/ 7hat is the accrued liability for co$pensated absences
on ece$ber 31, 2015
a/ %),%20
b/ %0,&20
c/ &%,400
d/ %5,&(0
An entity leased e#uip$ent for the entire nine>year useful life, agreeing to pay "1,000,000 at the
start of the lease ter$ on January 1, 2015, and "1,000,000 annually on each January 1 for the ne't
eight years/ he present value on January 1, 2015 of the nine lease pay$ents over the lease ter$
using the rate i$plicit in the lease which the lessor .nows to be 109 was "(,330,000/ he January
1, 2015 present value of the lease pay$ents using the incre$ental borrowing rate of 129 was
"5,%&0,000/ he entity $ade a ti$ely second lease pay$ent/ 7hat a$ount should be reported as
finance lease liability on ece$ber 31, 201(
a/ 5,330,000
b/ ),4(3,000
c/ ),%&0,000
d/ ),)(&,000
An entity leased e#uip$ent to an unrelated party on July 1, 2015 for an eight>year period e'piring
June 30, 2023/ G#ual pay$ents under the lease are "(00,000 and are due on July 1 of each year/ he
first pay$ent was $ade on July 1, 2015/ he i$plicit rate of interest conte$plated is 109/ he cash
selling price of the e#uip$ent is "3,500,000 and the carrying a$ount is "2,400,000/ he lease is
appropriately recorded as a sales type lease/ 7hat total a$ount of inco$e should be recorded for
the year ended ece$ber 31, 2015
a/ &00,000
b/ 525,000
c/ %%0,000
d/ 4)5,000
"age 10
n January 1, 2015, an entity sold a $achine for "5,000,000/ he fair value of the $achine was
"(,500,000 on the date of sale/ he $achine had a carrying a$ount of "&,000,000 and re$aining
life of 15 years/ he entity i$$ediately leased bac. the $achine for 5 years at an annual rental that
was deter$ined to be sufficiently lower than the $ar.et rent/ 7hat total a$ount of loss should be
recogni;ed i$$ediately in 2015
a/ )00,000
b/ 400,000
c/ 500,000
d/ 0
An entity grants all e$ployees two wee.s of paid vacation for each full year of e$ploy$ent/
8nused vacation ti$e can be accu$ulated and carried forward to succeeding years and will be paid
at the salaries in effect when vacations are ta.en or when e$ploy$ent is ter$inated/ here was no
e$ployee turnover in 2015/ Additional infor$ation relating to the year ended ece$ber 31, 2015 is
as follows:
iability for accu$ulated vacations on January 1, 2015 350,000
"re>2015 accrued vacations ta.en fro$ January 1, 2015 to +epte$ber 30, 2015
the authori;ed period for vacations! 200,000
acations earned for wor. in 2015 ad=usted to current rate 300,000
he entity granted a 109 salary increase to all e$ployees on ctober 1, 2015, the annual salary
increase date/ 7hat a$ount should be reported as vacation pay e'pense for 2015
a/ )50,000
b/ 335,000
c/ 315,000
d/ 300,000
An entity is co$$itted to close a factory in 10 $onths and shall ter$inate the e$ploy$ent of all the
re$aining e$ployees of the factory/ 8nder the ter$ination plan, an e$ployee lea,!n& be+ore
#losure o+ +a#tor1 shall receive on ter$ination date a cash pay$ent of "20,000/ Fowever, an
e$ployee that ren%ers ser,!#e unt!l #losure of the factory shall receive "(0,000/ here are 120
e$ployees at the factory/ he entity e'pects 20 e$ployees to leave before closure and 100
e$ployees to render service until closure/ 7hat a$ount should be recogni;ed as ter$ination
benefit
a/ 2,)00,000
b/ (,)00,000
c/ 2,000,000
d/ ),000,000
An entity reported "%,000,000 inco$e before provision for inco$e ta'/ he following data are
provided for the current year:
-ent received in advance 1,(00,000
*nco$e fro$ e'e$pt $unicipal bonds 2,000,000
epreciation deduction for inco$e ta' purposes in e'cess of depreciation
reported for financial reporting purposes 1,000,000
a' pay$ent during the current year 500,000
*nco$e ta' rate 309
7hat a$ount of current inco$e ta' liability should be reported at year>end
a/ 1,&40,000
b/ 2,240,000
c/ 2,540,000
d/ 2,440,000
"age 12
An entity has outstanding a &9, ten>year "100,000 facevalue bond/ he bonds was originally sold
to yield (9 annual interest/ he entity uses the effective interest $ethod to a$orti;e bond pre$iu$
and does not elect the fair value option for reporting financial liabilities/ n June 30, 2015, the
carrying a$ount of the outstanding bond was "105,000/ 7hat a$ount of una$orti;ed pre$iu$ on
bond should be reported on June 30, 201(
a/ 1,050
b/ 3,%50
c/ ),300
d/ ),500
n January 1, 2015, an entity granted to e$ployees 10,000 share options/ n January 1, 201(, the
entity granted to e$ployees an additional 20,000 share options/
6ate Fa!r ,alue o+ sare
January 1, 2015 20
ece$ber 31, 2015 22
January 1, 201( 25
ece$ber 31, 201( 30
he shares vest at the end of a four>year period/ here are no forfeitures/ 7hat a$ount should be
recorded as co$pensation e'pense for 201(
a/ 1&5,000
b/ 205,000
c/ 225,000
d/ 500,000
An entity provided the following data for the year ended ece$ber 31, 2015:
-etained earnings unappropriated, January 1 200,000
verdepreciation of 201) due to prior period error 100,000
et inco$e for 2015 1,300,000
- -etained earnings appropriated for treasury shares original balance is "500,000
but reduced by "200,000 by reason of reissuance of the treasury shares! 300,000
-etained earnings appropriated for contingencies beginning balance "&00,000/
but increased by current appropriation of "100,000! 400,000
Cash dividends paid to shareholders 500,000
Change in accounting policy fro$ @*@ to average H credit ad=ust$ent 150,000
uring 2015, the entity paid preference dividends of "3 per share/ he preference shares are
convertible into 20,000 ordinary shares/ et inco$e for 2015 was "450,000/ he inco$e ta' rate is
309/ 7hat a$ount should be reported as diluted earnings per share for 2015
a/ (/31
b/ (/5)
c/ &/04
d/ &/)5
An entity had the following beginning and ending balances in prepaid e'penses and accrued
liabilities for the current year:
Prea!% eenses A##rue% l!ab!l!t!es
Beginning balance 5,000 4,000
Gnding balance 10,000 20,000
ebits to operating e'penses totaled "100,000/ 7hat a$ount was paid for operating e'penses
during the current year
a/ 43,000
b/ %3,000
c/ 10&,000
d/ 11&,000
An entity disclosed supple$ental infor$ation on the effects of changing prices/ he entity
co$puted the increase in current cost of inventory as follows:
*ncrease in current cost no$inal peso! 1,500,000
*ncrease in current cost constant peso! 1,200,000
7hat a$ount should be disclosed as the inflation co$ponent of the increase in current cost
a/ 2,&00,000
b/ 1,500,000
c/ 1,200,000
d/ 300,000
"age 1)
An entity ac#uired rights to a patent under a licensing agree$ent that re#uired an advance royalty
pay$ent when the agree$ent was signed/ he entity re$itted royalties earned and due under the
agree$ent on ctober 31 each year/ Additionally, on the sa$e date, the entity paid, in advance,
esti$ated royalties for the ne't year/ he entity ad=usted prepaid royalties at year>end/ he entity
provided the following infor$ation for the year ended ece$ber 31, 2015:
An entity had a balance of "420,000 in the professional fees e'pense account on ece$ber 31,
2015, before considering year>end ad=ust$ents relating to the following:
Consultants were hired for a special pro=ect at a total fee not to e'ceed "(50,000/ he entity had
recorded "550,000 of this fee based on billings for wor. perfor$ed in 2015/
he attorney6s letter re#uested by the auditors dated January 31, 201(, indicated that legal fees
of "(0,000 were billed on January 15, 201( for wor. perfor$ed in ove$ber 2015, and
unbilled fees for ece$ber 2015 were "&0,000/
7hat a$ount should be reported for professional fees e'pen se for 2015
a/ 1,050,000
b/ %50,000
c/ 440,000
d/ 420,000
An entity reported net inco$e of "3,000,000 for the current year/ Changes occurred in certain
accounts as follows:
G#uip$ent 250,000 increase
Accu$ulated depreciation )00,000 increase
ote payable 300,000 increase
uring the year, the entity sold e#uip$ent costing "250,000 with accu$ulated depreciation of
"150,000 for a gain of "50,000/ *n ece$ber of the current year, the entity purchased e#uip$ent
costing "500,000 with "200,000 cash and a 129 note payable of "300,000/ 7hat a$ount should
be reported as net #as ro,!%e% b1 oerat!n& a#t!,!t!es
a/ 3,)00,000
b/ 3,500,000
c/ 3,550,000
d/ 3,(00,000
An entity reported net inco$e of "5,000,000 for the current year/ epreciation e'pense was
"1,%00,000/ he following wor.ing capital accounts changed:
Accounts receivable 1,100,000 increase
ontrading e#uity invest$ent 1,(00,000 increase
*nventory &30,000 increase
ontrade note payable 1,500,000 increase
Accounts payable 1,220,000 increase
8nder the indirect $ethod, what net a$ount of ad=ust$ents is re#uired to reconcile net inco$e to
net cash provided by operating activities
a/ ),%50,000
b/ 1,050,000
c/ 1,2%0,000
d/ 310,000
"age 1(
SOLUTIONS
Problem / Ans3er A
Cash (00,000 >200,000 overdraft! )00,000
Accounts receivable &00,000
*nventory 1,200,000
"repaid e'penses 200,000
and held for resale 2,000,000
otal current assets ),500,000
Problem 2 Ans3er A
iabilities 1,200,000
+hare capital &,500,000
-etained earnings 150,000
otal liabilities and e#uity 4,450,000
-evenue fro$ sales and consulting 420,000
perating costs and e'penses ()0,000!
et inco$e 140,000
ividend declared 30,000!
-etained earnings 150,000
Problem Ans3er C
Accounts payable 55,000
8nsecured notes )00,000
Accrued e'penses 35,000
+erial bonds 1,000,000
otal current liabilities 1,)%0,000
he contingent liability is only disclosed/
8nder *@-+, the deferred ta' liability is noncurrent regardless of the reversal period/
Problem $ Ans3er 6
otal reported inco$e 1,&00,000
otal cash dividends paid 400,000!
otal share dividends distributed 200,000!
"rior period ad=ust$ent H credit &5,000
-etained earnings H ece$ber 31, 2015 &&5,000
he unreali;ed holding loss on trading invest$ent is ignored because it is already included in the
reported inco$e since incorporation/
"age 1&
Problem * Ans3er A
Custo$er A 1,000,000
Custo$er B &00,000
otal other receivables 400,000
otal i$pair$ent loss 2,500,000
Custo$er C 2,000,000
Custo$er 2,500,000
ther accounts receivable 3,500,000
otal other receivables for collective assess$ent of i$pair$ent 4,000,000
8nder *@-+ significant accounts receivable not i$paired should be co$bined with other accounts
receivable not individually significant for collective assess$ent of i$pair$ent/
Problem - Ans3er 6
rade accounts receivable %30,000
Allowance for uncollectible accounts 20,000!
Clai$ against shipper 30,000
otal current net receivables %)0,000
he selling price of unsold goods on consign$ent should be e'cluded fro$ accounts receivable but
the cost should be included in inventory/
he security deposit is classified as noncurrent/
Problem . Ans3er 6
ong>ter$ note receivable H second note 2,000,000
*nterest on note 2,000,000 ' 39 ' 5 years! 300,000
otal $aturity 2,300,000
Dultiply by " factor /(4
"resent value of note receivable 1,5(),000
+hort>ter$ note receivable H first note 2,000,000
otal carrying a$ount of notes receivable 3,5(),000
he long>ter$ note receivable should be discounted even if is interest>bearing because the interest
rate is unreasonably low co$pared to the $ar.et rate/
he short>ter$ note receivable is reported at face a$ount because the discount is usually not
$aterial/
"age 14
Problem /0 Ans3er B
@ace a$ount 1,500,000
irect origination cost )0,000
rigination fee charged against borrower )9 ' 1,500,000! (0,000!
*nitial carrying a$ount 1,)40,000
he direct origination cost is a deferred charge and the origination fee received fro$ the borrower
is unearned inco$e and the two should be included in the $easure$ent of loan receivable/
he indirect origination cost is an outright e'pense/
Problem // Ans3er 6
"hysical count (,000,000
<ood in transit purchased @B shipping point 300,000
otal inventory (,300,000
he goods billed to a custo$er are properly included in inventory because the ter$ is @B shipping
point and the goods are delivered January &, 201(/
Problem /2 Ans3er C
Accounts payable per boo. ),500,000
-eversal of undelivered chec.s 2,000,000
<oods purchased, received and recogni;ed at net a$ount &50,000 ' %49! &35,000
Accounts payable to be reported &,235,000
he undelivered chec.s should be restored to the cash balance and accounts payable/
he goods purchased and received on January 2, 201( should be e'cluded fro$ accounts payable
because the ter$ is @B destination/
Problem / Ans3er 6
Cost -etail
*nventory H January 1 &35,000 1,015,000
"urchases ),1(5,000 5,&&5,000
Additional $ar.up 210,000
<oods available for sale ),%00,000 &,000,000
Conservative cost ratio ),%00,000 &,000,000! &09
+ales 5,500,000!
Dar.down 100,000!
Gnding inventory at retail 1,)00,000
At cost &09 ' 1,)00,000! %40,000
he lower of average cost or - retail $ethod is the sa$e as the conservative or conventional
$ethod/ hus, the $ar.down is ignored in co$puting the cost ratio/
"age 1%
Problem /$ Ans3er A
@reestanding trees 5,000,000
he land under trees and roads in forest should be included in property, plant and e#uip$ent/
8nder *@-+, ani$als related to recreational activities as in ga$e par.s, and bearer plants, such as
rubber trees and grape vines should be accounted for as property, plant and e#uip$ent/
Problem /* Ans3er C
Average e'penditures (,000,000
+pecific borrowing ),)00,000!
<eneral borrowing 1,(00,000
Problem /- Ans3er 6
"urchase price 24,000,000
evelop$ent cost H 2015 1,000,000
evelop$ent cost H 201( ),000,000
Gsti$ated restoration cost 2,000,000
otal cost 35,000,000
-esidual value 5,000,000!
epletable a$ount 30,000,000
Problem /. Ans3er C
Accu$ulated depreciation H (302015 10,500,000
epreciation fro$ July 1 to ece$ber 31, 2015 30,000,000 10 ' (12! 1,500,000
Accu$ulated depreciation H 12312015 12,000,000
Cost 30,000,000
Accu$ulated depreciation 12,000,000!
Carrying a$ount 14,000,000
@air value 2&,000,000
-evaluation surplus %,000,000
eferred ta' liability 309 ' %,000,000! 2,&00,000!
et revaluation surplus (,300,000
Problem 20 Ans3er C
ther coding cost after establish$ent of technological feasibility 2,)00,000
ther testing costs after establish$ent of technological feasibility 2,000,000
Costs of producing product $asters 1,500,000
otal capitali;ed cost of co$puter software 5,%00,000
he co$pletion of detailed progra$ design and the cost incurred to establish technological
feasibility should be e'pensed i$$ediately/
he duplication of co$puter software and pa c.aging product should be charged to inventory/
"age 21
Problem 2/ Ans3er B
ravel costs of e$ployees )00,000
raining of local e$ployees 1,200,000
otal start up costs to be e'pensed 1,(00,000
he production e#uip$ent should be capitali;ed/
he license fees and advertising costs should be e'pensed but not within the purview of start up
costs/
Problem 22 Ans3er A
"atent > January 1, 2013 1,%20,000
A$orti;ation for 2013 and 201) 1,%20,000 1( ' 2! 2)0,000!
Carrying a$ount H January 1, 2015 1,(40,000
"urchase price 400,000
rade$ar. 3) ' 400,000! (00,000!
onco$petition agree$ent 200,000
"atent 1,(40,000 ( years re$aining! 240,000
onco$petition agree$ent 200,000 5 years! )0,000
otal a$orti;ation for 2015 320,000
he patent has a re$aining life of ( years because the revised life is 4 years fro$ the date of
ac#uisition and two years already e'pired/
he trade$ar. is not a$orti;ed because the life is indefinite/
he annual consulting fee is an outright e'pense/
Problem 2 Ans3er A
et assets per boo. 32,000,000
@air value of property, plant and e#uip$ent greater &,500,000
@air value of other assets ;ero 5,000,000!
@air value of long>ter$ debt lower 2,000,000
et assets at fair value 3(,500,000
Ac#uisition cost )0,000,000
<oodwill 3,500,000
he net assets should be recogni;ed at fair value in a business co$bination/
8nder the final version of *@-+ %, any change in fair value of an e#uity invest$ent $easured at
@C* is per$anently e'cluded fro$ profit or loss under all circu$stances but $ay transferred to
e#uity or retained earnings/
"age 22
Problem 2$ Ans3er A
January 1, 2015 to ctober 31, 2015 500,000 ' 129 ' 1012! 50,000
@ebruary 1, 2015 to July 31, 2015 1,500,000 ' 129 ' (12! %0,000
Day 1, 2015 to ece$ber 31, 2015 400,000 ' 129 ' 412! (),000
Correct interest e'pense 20),000
-ecorded interest e'pense 150,000
*nterest e'pense understated 5),000
@ro$ 201) 2
@ro$ 2015 10
otal unused vacation days > @*@ 12
Problem 2* Ans3er B
Problem 2- Ans3er 6
*nterest inco$e fro$ July 1, 2015 to June 30, 201( 109 ' 2,%00,000! 2%0,000
Problem 2. Ans3er B
*f the leasebac. is an operating lease and the sale price is below fair value of the asset co$pensated
by below $ar.et rent:
a/ he difference between the sale price and the fair value is a deferred loss to be a$orti;ed over
the lease ter$/
b/ *f the fair value is below the carrying a$ount, the carrying a$ount is written down to fair value
and the writedown is recogni;ed i$$ediately as an i$pair$ent loss/
Problem 0 Ans3er A
Problem / Ans3er B
he actual return or plan assets is ? sueee% by wor.ing bac. fro$ ending plan assets at fair
value/
Problem 2 Ans3er C
Problem Ans3er A
8nder *@-+, the additional a$ount paid to e$ployees who render service until closure is no longer
a ter$ination benefit but short>ter$ benefit/
Problem $ Ans3er C
he share options are $easured at fair value on the date of grant and allocated over the vesting
period/
Problem * Ans3er B
Problem - Ans3er B
Problem . Ans3er B
he entity already recorded "550,000 out of total consultants6 fee of "(50,000/ he balance of
"100,000 is not recogni;ed because no wor. has been perfor$ed as yet/
*@-+ re#uires the following disclosures when preparing the state$ent of cash flows:
epreciation 1,%00,000
*ncrease in accounts receivable 1,100,000!
*ncrease in inventory &30,000!
*ncrease in accounts payable 1,220,000
et ad=ust$ent to net inco$e as an addition 1,2%0,000
he increase in nontrading e#uity invest$ent is an investing activity/
he increase in nontrade note payable is a financing activity/
"age 2&
3/ 7hat is the a$ount of cash receipts for boo. for the $onth of July
a/ %,400,000
b/ 4,(00,000
c/ %,)00,000
d/ %,(00,000
)/ 7hat is the a$ount of cash disburse$ents per boo. for the $onth of July
a/ &,300,000
b/ (,&00,000
c/ (,450,000
d/ (,550,000
"age 24
?uest!on / Ans3er B
?uest!on 2 Ans3er A
he balance per boo. on July 31 is ?s#uee;ed by wor.ing bac. fro$ the ad=usted balance/
?uest!on Ans3er C
@ro$ inception of operations, an entity provided for uncollectible accounts e'pense under the
allowance $ethod and provisions were $ade $onthly at 29 of credit sales/ o year>end
ad=ust$ents to the allowance account were $ade/ he balance in the allowance for doubtful
accounts was "1,000,000 on January 1, 2015/ uring 2015, credit sales totaled "20,000,000, interi$
provisions for doubtful accounts were $ade at 29 of credit sales, "200,000 of bad debts were
written off, and recoveries of accounts previously written off a$ounted to "50,000/ An aging of
accounts receivable was $ade for the first ti$e on ece$ber 31, 2015 as follows:
Class!+!#at!on Balan#e Un#ollet!ble
ove$ber H ece$ber (,000,000 109
July H ctober 2,000,000 209
January H June 1,500,000 309
"rior to January 1, 2015 500,000 509
Based on the review of collectibility of the account balances in the ?prior to January 1 2015 aging
category, additional accounts totaling "100,000 are to be written off on ece$ber 31, 2015/
Gffective ece$ber 31, 2015, the entity adopted the aging $ethod for esti$ating the allowance for
doubtful accounts/
1/ 7hat is the re#uired allowance for doubtful accounts on ece$ber 31, 2015
a/ 1,(50,000
b/ 1,%50,000
c/ 1,&00,000
d/ 1,)50,000
2/ 7hat a$ount should be reported as doubtful accounts e'pense in the inco$e state$ent for
2015
a/ 1,200,000
b/ 1,(50,000
c/ %00,000
d/ %50,000
3/ 7hat is the year>end ad=ust$ent to the allowance for doubtful accounts on ece$ber 31, 2015
a/ %00,000 debit
b/ %00,000 credit
c/ 500,000 debit
d/ 500,000 credit
)/ 7hat is the net reali;able value of accounts receivable on ece$ber 31, 2015
a/ %,%00,000
b/ 4,250,000
c/ 4,350,000
d/ 4,200,000
"age 30
?uest!on / Ans3er A
?uest!on 2 Ans3er C
he doubtful accounts e'pense is sueee% by wor.ing bac. fro$ the ending allowance for
doubtful accounts/
?uest!on Ans3er 6
n ece$ber 31, 2015, a fire da$aged the warehouse and factory of an entity co$pletely
destroying the goods in process inventory/ here was no da$age to the raw $aterials, finished
goods and factory supplies he physical inventory revealed the following/
5anuar1 / 6e#ember /
-aw $aterials 1,&00,000 2,000,000
<oods in process ),300,000 0
@inished goods (,000/000 ),500,000
@actory supplies 500,000 )00,000
he gross profit $argin historically appro'i$ated 0 o+ sales / he sales for the year a$ounted to
"20,000,000/ -aw $aterial purchases totaled "),000,000/ irect labor costs for the year a$ounted
to "5,000,000, and $anufacturing overhead has been applied at (09 of direct labor/
1/ 7hat is the cost of raw $aterials used
a/ 5,&00,000
b/ 3,&00,000
c/ 3,400,000
d/ 3,(00,000
?uest!on / Ans3er B
?uest!on 2 Ans3er C
he change in the factory supplies is no longer considered because it is already part of the
$anufacturing overhead applied/
?uest!on Ans3er 6
he cost ratio is &09 because the gross profit rate is 309 on sales/
he cost of ending goods in process is co$puted by wor.ing bac. fro$ the cost of goods sold/
"age 33
n January 1, 2015, an entity ac#uired a 109 interest in an investee for "3,000,000/ he invest$ent
was accounted for under the #ost meto% / uring 2015, the investee reported net inco$e of
"),000,000 and paid dividend of "1,000,000/ n January 1, 201(, the entity ac#uired a further 159
interest in the investee for "4,500,000/ n such date, the carrying a$ount of the net assets of the
investee was "3(,000,000 and the fair value of the 109 e'isting interest was "3,500,000/ he fair
value of the net assets of the investee is e#ual to carrying a$ount e'cept for an e#uip$ent whose
fair value was "),000,000 greater than carrying a$ount/ he e#uip$ent had a re$aining life of 5
years/ he investee reported net inco$e of "4,000,000 for 201( and paid dividend of "5,000,000 on
ece$ber 31, 201(/
)/ 7hat is the carrying a$ount of the invest$ent in associate on ece$ber 31, 2015
a/ 12,550,000
b/ 12,350,000
c/ 11,%50,000
d/ 12,&50,000
"age 3)
?uest!on / Ans3er B
8nder cost $ethod, the invest$ent inco$e is based on dividend declared or paid/
?uest!on 2 Ans3er B
?uest!on Ans3er C
*f the invest$ent in associate is achieved in stages the old interest is re$easured at fair value
through profit or loss/
and ),000,000
and i$prove$ents 1,300,000
Buildings 20,000,000
Dachinery and e#uip$ent 4,000,000
L A plant facility consisting of land and building was ac#uired in e'change for 200,000 shares of
the entity/ n the ac#uisition date, each share had a #uoted price of ")5 on a stoc. e'change/
he plant facility was carried on the seller6s boo.s at "1,(00,000 for land and "5,)00,000 for
the building at the e'change date/ Current appraised values for the land and the building,
respectively, are "2,000,000 and "4,000,000/ he building has an e'pected life of forty years
with a "200,000 residual value/
L *te$s of $achinery and e#uip$ent were purchased at a total cost of "),000,000/ Additional
costs incurred were freight and unloading "100,000 and installation "300,000/ he e#uip$ent
has a useful life of ten years with no residual value/
L G'penditures totaling "1,200,000 were $ade for new par.ing lot, street and sidewal.s at the
entity6s various plant locations/ hese e'penditures had an esti$ated useful life of fifteen years/
L A $achine costing "200,000 on January 1, 2004 was scrapped on June 30, 2015/ +traight line
depreciation had been recorded on the basis of a 10>year life with no residual value/ A $achine
was sold for "500,000 on July 1, 2015/ riginal cost of the $achine sold was "&00,000 on
January 1, 2012, and it was depreciated on the straight line basis over an esti$ated useful life of
eight years and a residual value of "50,000/