Intermediate accounting by robles empleo answers v2chapter 1 2012

Washington Company 1-2... Harrison Company Amount to be accrued on 12/31/10 the best estimate of the obligation P800,000 No obligation is recognized for the suit filed in September 201

CHAPTER 1 CURRENT LIABILITIES, PROVISIONS AND CONTINGENCIES

PROBLEMS 1-1 (Washington Company)

1-2 (Adams Company)

1-3 (Jefferson Corporation)

31 Accounts Payable – Celeron Corporation 72,000

31 Accounts Payable – Celeron Corporation 69,840

(b)

1-4 (Madison Company)

(a)

1,560,000 x 12% x 3/12

187,200 – 46,800

(b) At December 31, 2012:

Current Liabilities:

1-5 (Monroe Corporation)

(a)

120,000 x 7/12

120,000 – 70,000

(b) At December 31, 2013:

Current Liabilities:

1-6 (Unison Company)

(a) Market interest rate is 5%

Stated interest (8,000,000 x 9%) 720,000

05/01/12 Equipment 8,304,928

Premium on Notes Payable (304,928 x 8/12) 203,285

Premium on Notes Payable (304,928 – 203,285) 101,643

*balancing figure (difference is due to rounding off of present value factor)

Carrying value as of December 31, 2012

Interest Payable 480,000

b market rate of interest is 12%

Stated interest (8,000,000 x 9%) 720,000

Discount on Notes Payable (213,912 x

*balancing figure (difference is due to rounding off of present value factor)

Carrying value as of December 31, 2012

Interest Payable 480,000

1-7 (Harrison Company)

Amount to be accrued on 12/31/10 (the best estimate of the obligation) P800,000

No obligation is recognized for the suit filed in September 2012 nor for the suit filed

in October However, disclosure is necessary in the notes to the financial statements for the suit filed in October 2012 by Pasig City government since it is reasonably possible the Pasig City government will be successful

1-8 ( Tyler Corporation)

Estimated Liability for Premium Claims Outstanding 300,000 (40% x 1,000,000)/ 100 = 4,000

4,000 – 1,000 = 3,000; 3,000 x (150 – 50) = 300,000

1-9 (Polk Company)

1-10 Taylor Company

1-11 (Van Department Store)

(a)

Allocation of original consideration received:

Liability for Customer Loyalty Awards (2% x P5,000,000) P 100,000 Revenue in 2011 as a result of redemption

Revenue in 2012 as a result of redemption

Total accumulated revenue from redemption as of

(b)

1-12 (Jackson Company)

Sale of product

Sales 1,000,000 2,500,000 3,500,000 Accrual of repairs

Warranty Liability 60,000 150,000 210,000 6% x 1M

6% x 2.5M

6% x 3.5M

Actual repairs

Cash/ AP, etc 8,000 38,000 112,500

1-13 (Filmore Company)

(a)

(b)

1-14 (Pierce Corporation)

Unearned Revenue from Gift Certificates Outstanding 1,280,000

Note: The gift certificates estimated to expire will be recognized as revenues at the date of actual expiration

1-15 (Buchanan Company)

Unearned Revenue from Gift Certificates Outstanding 2,750,000

Unearned Revenue from Gift Certificates Outstanding 150,000

1-16 (Lincoln Company)

1-17 (Johnson Company)

2011: 720,000 x 20% x ½=72,000 2012: 720,000 x 20% x ½=72,000 720,000 x 30% x ½=108,000 864,000 x 30% x ½=86,400 72,000+108,000+86,400=266,400

Unearned Service Contract Revenue at December 31, 2012 may also be computed as:

1-18 (Grant Publication)

Subscriptions sold in 2009 and 2010

Expired subscriptions in

1,200,000 + 2,000,000 + 1,800,000

1,300,000 + 2,400,000 + 2,000,000

Unearned Subscription Revenue, December 31 P5,000,000 P6,300,000 1-19 (Hayes Co.)

Property Taxes Payable

Property tax expense July 1 to Dec 31

Income Tax Payable

Pretax income before accrued property taxes P1,629,000

2012 payments for 2012 income tax(480,000–

VAT Payable

1-20 (Garfield Company)

a B = 8,000,000 x 8% = 640,000

b B = 8% (8000,000 – B )

B = 640,000 - 08B

B = 640,000/1.08 = 592,593

c B = 08 (8,000,000 – T )

T = 30 (8,000,000 – B )

B = 08 {8,000,000 - 30 (8,000,000 – B ) }

B = 08 {8,000,000 – 2,400,000 + 30B}

B = 448,000 + 024B

B = 448,000/0.976 = 459,016

d B = 08 {8,000,000 – B – T }

T = 30 (8,000,000 – B)

B = 08{8,000,000 – B - 30 (8,000,000 – B)}

B = 08 {8,000,000 – B – 2,400,000 + 30B}

B = 448,000 - 056B

B = 448,000/1.056 = 424,242

1-21 (Arthur Corporation)

Bonus to each sales agent = 06 x 3,000,000 = 180,000

b Total Bonus = 36 {3,000,000 – B – T )

T = 30 {3,000,000 – B }

B = 36 {3,000,000 – B - 30 (3,000,000 – B)}

B = 36 {3,000,000 – B – 900,000 + 30B}

B = 756,000 - 252B

c B = 32 {3,000,000 – B }

B = 960,000 - 32B

B (Each Sales Agent): 727,273 x 10/32 = 227,273 1-22 (Cleveland, Inc.)

B = 06 {9,000,000 – B – T }

T = 30 (9,000,000 – B)

B = 06 (9,000,000 – B - 30 (9,000,000 – B ) }

B = 06 { 9,000,000 – B – 2,700,000 + 30B }

B = 378,000 - 042B

B = 378,000 / 1.042 = 362,764

T = 30 (9,000,000 – 362,764)

T = 2,591,171

1-23 (McKinley Company)

Adjustment in rate for unused vacation pay in previous periods

b Unused vacation pay in previous periods, adjusted to

Liability for vacation pay, 12/31/12 P310,000

1-24 (Roosevelt Corporation)

The full amount of P2,000,000 is classified as current liability because on December 31, 2012 (the reporting date), the enterprise has no unconditional right to defer the settlement of the obligation for a period of at least 12 months

Case 1 Taft, Inc

Case 3 Wilson Corporation

1-26 (Harding Company)

Current Liabilities

14% Notes Payable, refinanced on March 10, 2013 P2,500,000

1-27 (Coolidge Company)

Current Liabilities:

VAT: 2,688,000 / 1.12 = 2,400,000; 2,400,000 x 12% = 288,000

The damages claimed by employees cannot be recognized since the amount is not reasonably estimable

MULTIPLE CHOICE QUESTIONS Theory

Problems

MC23 D 540,000 + 30,000 + 15,000 = 585,000

MC24 C 100,000 + (100,000 x 0.3 x 9/12) = 102,250 x 944 = 96,524

MC25 A Proceeds = 100% - 10% = 90% ; Effective interest = 10%/90% = 11.11% MC26 D P500,000, which is the reasonable estimate

MC28 A 65,000 + 815,000 – 780,000 = 100,000

MC29 D 6% ( 4,500,000-2,500,000) = 120,000 + (8,500 x ½ ) + 2,500 = 126,750 MC30 D 540,000 + 960,000 – 780,000 = 720,000

MC31 D [(1/2 x 35%) + 50% x 2,100,000] + 92.5%(2,730,000) = 3,942,750

MC32 C [½ (15% + 35%) x P2,100,000] + (1/2 x 15% x 2,730,000) = 729,750

MC34 A (½ x 50% x 2,100,000) + (67.5% x 2,730,000) + (92.5% x 2,475,000) =

4,657,125

MC36 B 42,000 + (750,000 x 3/10) = 267,000

MC37 B {(500,000 x 80%) – 300,000} = 100,000; 100,000 x (50+5-40) = 1,500,000 MC38 A { (3,000,000 x 60%) / 10 } – 42,000 = 138,000; 138,000 x P0.50 = 69,000 MC39 A (400,000 x 70%) – 100,000 = 180,000 ; ( 180,000 /5) x 20 = 720,000 MC40 B (180,000 x 50%) – 75,000 = 15,000

MC41 D 24,000 x 300 = 7,200,000

MC42 C 7,200,000 – 1,700,000 = 5,500,000

MC44 C B = 0.45 {2,000,000 – B - 30 (2,000,000 – B}) ; B = 479,087

MC45 C Total B = 0.35 {2,000,000 – B} ; total B = 518,519

B to Sales Manager = 518,519 x 15/35 = 222,222

B to Each Sales Agent = 518,519 x 10/35 = 148,148 MC46 B B = 0.10 {2,500,000 - 30 (2,500,000 – B)} = 180,412

MC47 C 600,000 + 900,000 + 400,000 = 1,900,000

MC48 A 2,400,000 – 1,900,000 = 500,000

MC49 D 3,800,000 + 2,000,000 – 5,000,000 = 800,000 decrease in profit

24,000+48,000+57,500= 1,431,100