Practical Accounting 1: La Consolacion University Philippines
Practical Accounting 1: La Consolacion University Philippines
Practical Accounting 1: La Consolacion University Philippines
Practical Accounting 1
Name: __________________________________
Date: _______________
MULTIPLE CHOICE . Write t e letter of you ans!er in t e s"a#e "ro$ided %efore t e num%er. &. On 'anuary &,()&* + yriel Co. signed a &),year o"erating lease for offi#e s"a#e at P-./,))) "er year. T e lease in#luded a "ro$ision for additional rent of -0 annual #om"any sales in e1#ess of P*,))),))). + yriel2s sales for t e year ended 3e#em%er *&, ()&* !ere P*,/)),))). U"on e1e#ution of t e lease, + yriel "aid P&44,))) as a %onus for t e lease. Ho! mu# s ould %e + yriel2s rent e1"ense for t e year ended 3e#em%er *&, ()&*5 a. P-6),4)) %. P/)/,))) #. P.-),))) d. P/(),4))
(. Batman Co. leased a ne! ma# ine to Cat!oman Co. on 'anuary &, ()&*. T e lease e1"ires on 'anuary &, ()&7. T e annual rental is P&)7,))). Additionally, on 'anuary &, ()&*, Cat!oman Co. "aid P/),))) to Batman Co. as a lease %onus and P*),))) as a se#urity de"osit to %e refunded u"on e1"iration of t e lease. In Batman2s ()&* in#ome statement, o! mu# s ould %e t e rental re$enue5 a. P&)7,))) %. P&-),))) #. P&(),))) d. P&/7,)))
*. 8u9i Co., a lessor of offi#e ma# ines, "ur# ased a ne! ma# ine for P/)),))) on 'anuary &, ()&* ! i# !as leased t e same day to Boo. T e ma# ine !ill %e de"re#iated at P--,))) "er year. T e lease is for a four,year "eriod e1"iring 'anuary &, ()&. and "ro$ides for annual rental "ayments of P&)),))) %eginning 'anuary &, ()&*. In addition Boo "aid P/4,))) to 8u9i Co. as a lease %onus. In its ()&* in#ome statement, ! at amount of re$enue and e1"ense s ould 8u9i Co. re"ort on t is leased asset5 a. %. #. d. :e$enue &)),))) &&/,))) &&/,))) &/4,))) E1"ense ) --,))) ) --,)))
4. 3lora Co. leased offi#e "remises to Lora# In#. for a -,year term %eginning 'anuary (, ()&*. Under t e terms of t e o"erating lease, rent for t e first year is P&-),))) and rent for years ( t roug - is &7.,-)) "er annum. Ho!e$er, as an indu#ement to
enter t e lease 3lora granted Lora# t e first / mont s of t e lease rent,free and "ro$ided an allo!an#e of P7,))) as an additional in#enti$e. In its 3e#em%er *&, ()&* in#ome statement, ! at amount s ould 3lora re"ort as rental in#ome5 a. P&/*,4)) %. P&-),))) #. P&/-,))) d. P&//,/))
-. On 'anuary (, ()&*, 'elly,C ;lessee< entered into a -,year lease for drilling e=ui"ment. 'elly,C a##ounted for t e a#=uisition as a finan#e lease for P(,4)),))), ! i# in#ludes a P&)),))) %argain "ur# ase o"tion. 'elly,C estimates t at t e e=ui"ment2s fair $alue !ill %e P()),))) at t e end of its 7,year e#onomi# life. 'elly,C regularly uses straig t,line de"re#iation on similar e=ui"ment. >or t e year ended 3e#em%er *&, ()&*, ! at amount s ould 'elly,C re#ogni?e as de"re#iation e1"ense on t e leased asset5
a. P(.-,))) %. P*)),)))
#. P4/),))) d. P47),)))
/. : eg Co. leased a ne! ma# ine from B am Cor". on May &, ()&* under a lease !it t e follo!ing information@ Annual rental "aya%le at %eginning of ea# lease year Lease term E#onomi# life of ma# ine Im"li#it interest rate PA of an annuity "f & in ad$an#e for &) "eriods at &40 PA of & for &) "eriods at &40 4)),))) &) years &( years &40 -.6).(.
: eg as t e o"tion to "ur# ase t e ma# ine on May &, ()(* %y "aying P-)),))), ! i# a""ro1imates t e e1"e#ted fair $alue of t e ma# ine on t e o"tion e1er#ise date. On May &, ()&*, o! mu# s ould : eg re#ord t e leased asset5
a. P&,67),))) %. P(,*7),)))
#. P(,(4-,))) d. P(,-&-,)))
.. Maya In#. leases #om"uter e=ui"ment to #ustomers under dire#t finan#ing leases. T e e=ui"ment as no residual $alue at t e end of t e lease and t e leases do not #ontain %argain "ur# ase o"tions. Maya In#. !is es to earn 70 interest on a -,year lease of e=ui"ment !it a fair $alue of P*(*,4)). T e "resent $alue of an annuity due of & at 70 for - years is 4.*&(. W at is t e total amount of interest re$enue t at Maya !ill earn o$er t e term of t e lease5 a. P&(6,*/) #. P-&,/))
%. P.-,)))
d. P&*6,4-)
7. 3addy :o%2s Co. leased e=ui"ment from Mommy 32s Cor". on 'uly &, ()&* for an 7, year "eriod e1"iring 'une *), ()(&. E=ual "ayments under t e lease are P/)),))) and are due on 'uly & of ea# year. T e first "ayment !as made on 'uly &, ()&*. T e rate of interest #ontem"lated %y 3addy :o%2s Co. and Mommy 32s Cor". is &)0. T e #as selling "ri#e of t e e=ui"ment is P*,-(),))), and t e #ost of t e e=ui"ment on Mommy 32s Cor". a##ounting re#ords is P(,7)),))). T e lease is a""ro"riately re#orded as a sales,ty"e lease. W at is t e amount of "rofit on t e sale and interest re$enue t at Mommy 32s Cor". s ould re#ord for t e year ended 3e#em%er *&, ()&*5 a. %. #. d. Profit on +ale 4-,))) 4-,))) .(),))) .(),))) Interest :e$enue &4/,))) &./,))) &./,))) &4/,)))
6. On 'une *), ()&*, +na$$y Co. sold e=ui"ment !it an estimated e#onomi# life of ten years and immediately leased it %a#9 for 7 years. T e e=ui"ment2s #arrying amount !as P4-),)))B t e sales "ri#e !as P4*),)))B and t e "resent $alue of t e lease "ayments. W at amount s ould +na$$y Co re"ort as deferred loss on its 'une *), ()&* %alan#e s eet5
a. Cone %. P&-,)))
#. P(),))) d. P*-,)))
&). T e follo!ing information "ertains to a sale and o"erating lease%a#9 of e=ui"ment %y Aritina Cor". on 3e#em%er *&, ()&*@
+ales "ri#e Carrying amount Mont ly lease "ayment Estimated remaining life Lease term Im"li#it rate >air $alue
W at amount of deferred gain on t e sale s ould Aritina re"ort at 3e#em%er *&, ()&*5
a. Cone
#. P66,())
%. P4),7))
d. P&4),)))
&&.
In A"ril ()&(, Dyle Com"any %e#ame in$ol$ed in litigation. In 3e#em%er ()&(, t e #ourt assessed a Eudgement forP(,*)),))) against Dyle Com"any. Dyle Com"any is a""ealing t e amount of t e Eudgement. Dyle2s attorneys %elie$e it is "ro%a%le t at t ey #an redu#e t e assessment on a""eal %y *-0. In Co$em%er ()&(, Paom%ong City %roug t a#tion against Dyle for "olluting t e ri$er !it its !aste "rodu#ts. It is "ro%a%le t at Dyle mig t lose t e #ase and !ill "ay not e1#eeding (,.)),))). W at amount s all %e a##rued as "ro$ision on 3e#em%er *&, ()&(5 a. ) %. (,.)),))) #. *,-)-,))) d. 4,&6-,)))
&(.
Tra#y Com"any determined t at, due to o%soles#en#e, e=ui"ment !it an original #ost of .,()),))) and remaining useful life of . years as of 'uly &, ()&( ad suffered "ermanent im"airment. Its 3e#em%er *&, ()&( %oo9 $alue is &.0 of its #arrying $alue !it im"airment. After adEustments, its ()&( finan#ial "osition re$ealed e=ui"ment;net< is $alued at 4,))),))). W at is t e Im"airment loss5 a. *,()),))) %. (,-(),))) #. &,)4),))) d. /7),)))
&*. On 'anuary &,()&( :ui? Com"any as se$eral #ontingent lia%ility as follo!s@ Case & Case ( Case * P -.),))) P&,))),))) P 6-),)))
:ui?2 attorneys found out t at Case & and * is no! #onsidered "ro%a%le %y -)0 and /-0 res"e#ti$ely. Case ( is #onsidered remote o%ligation. Ho! mu# "ro$ision s ould %e re#ogni?ed on 3e#em%er *&, ()&(5 a. 6-),))) %. 6)(,-)) #. /&.,-)) d. ) &4. On 3e#em%er *&, ()&( Lili! Com"any s o!ed t e follo!ing intangi%le assets@ Trademar9 Patent /,))),))) *,))),)))
T e trademar9 as 7years remaining in its legal life. Ho!e$er, it is anti#i"ated t at t e trademar9 !ill routinely rene!ed in t e future. T us, t e trademar9 is #onsidered to a$e an indefinite life.
Be#ause of an inflationary e#onomy, t e trademar9 is e1"e#ted to generate #as flo!s of ()),))) "er year. T e a""ro"riate dis#ount rate is &)0. Mat emati#ally, t e dis#ounted $alue of a stream of indefinite annual #as flo!s is sim"ly #om"uted %y di$iding t e annual #as flo! %u t e dis#ount rate. T e "atent as a remaining e#onomi# life of - years %e#ause of t e mar9et #onditions. It e1"e#ted t at t e "atent !ill generate #as flo!s of -)),))) "er year. T e a""ro"riate dis#ount rate is also &)0. T e "resent $alue of an ordinary annuity of & at &)0 foe - "eriods is *..6. W at total amount s ould %e re#ogni?ed as im"airment loss in ()&(5 a. &,&)-,))) %. -,&)-,))) #. 4,))),))) d. ) &-. TeEada Com"any re"orted an im"airment loss of (,))),))) in its in#ome statement for ()&&. T is loss !as related to an item of "ro"erty, "lant and e=ui"ment ! i# !as a#=uired on 'anuary &, ()&) !it #ost of P&),))),))), useful life of &) years and no residual $alue. On 3e#em%er *&, ()&&, TeEada re"orted t is asset at /,))),))) ! i# is t e fair $alue on su# date. On 3e#em%er ()&(, TeEada determined t e fair $alue on its im"aired asset ad in#reased to .,-)),))). T e straig t line met od is used for de"re#iation. W at amount of gain on re$ersal of im"airment s ould TeEada re"ort in ()&( in#ome statement5 a. (,(-),))) %. &,.-),))) #. &,-)),))) d. ) &/. On Co$em%er (*, ()&&, an e1"losion o##urred at a D ar Com"any "lant #ausing e1tensi$e "ro"erty damage to area %uildings. By Mar# &), ()&(, #laims ad %een asserted against D ar. D ar2s management and #ounsel #on#luded t at it is "ro%a%le D ar !ill %e res"onsi%le for damages, and t at *,-)),))) !ould %e a reasona%le estimate of its lia%ility. D ar2s &),))),))) #om"re ensi$e "u%li# lia%ility as a -)),))) dedu#ti%le #lause. W at s ould %e re"orted in 3e#em%er *&, ()&& finan#ial statements, issued on A"ril (., ()&(, in relation to t is item5 a. A dis#losure indi#ating t e "ro%a%le loss of *,-)),))). %. An a##rued lia%ility of *,-)),))). #. An a##rued lia%ility of -)),))). d. A footnote dis#losure indi#ating t e "ro%a%le loss of -)),))). &.. :eyes Com"any re$ealed t is follo!ing information on 3e#em%er *&, ()&(@ Ma# inery Cet +elling Pri#e Aalue in use A#=usition date :emaining life 7,))),))) *,-)),))) *,--),))) 'an &,())7 -years
3ue to " ysi#al damage, t e ma# inery is found to %e im"aired. W at is t e %alan#e of a##umulated de"re#iation,ma# inery for ()&(5 a. -,))),))) %. 4,4-),)))
#. 4,&-),))) d. *,-)),))) &7. >ly Bla9e Com"any "ur# ased a %uilding on 'anuary &, ())6 for &),))),))). T e %uilding gas %een de"re#iated using t e straig t line met od !it a (-,year useful life and no residual $alue. On 3e#em%er *&,()&(, >ly Bla9e is e$aluating t e %uilding f"r "ossi%le im"airment. T e %uilding as a remaining useful life of Fyears and e1"e#ted to generate #as inflo!s of .)),))) "er year. T e a""li#a%le dis#ount rate is 70. :ound off "resent $alue fa#tor to t!o de#imal "la#es. T e fair $alue of t e %uilding on 3e#em%er *&, ()&( is -,*)),))). W at amount s ould %e re#ogni?ed as im"airment loss for ()&(5 a. (,4)7,))) %. *,&)),))) #. 4,.)),))) d. ) &6. In May ()&(, Ui Com"any filed suit against Wi Com"any see9ing &,6)),))) damages for "atent infringement. A #ourt $erdi#t in Co$em%er ()&( a!arded Ui &,-)),))) in damages, %ut Wi2s a""eal is not e1"e#ted to %e de#ided %efore ()&*. Ui2s #ounsel %elie$ed it is "ro%a%le t at Ui !ill %e su##essful against Wi for an estimated amount in t e range %et!een 7)),))) and &,&)),))). Wit &,))),))) #onsidered is t e most li9ely amount. W at amount s ould Ui re#ord as in#ome from t e la!suit for t e year ended 3e#em%er *&, ()&(5 a. ) %. &,))),))) #. &,&)),))) d. &,-)),))) (). 3uring ()&(, In Com"any filed suit against Out Com"any see9ing damages for dis"uting t e $alidity of #o"yrig t eld %y Out Com"any. On de#eme%r *&, ()&(, In Com"any2s Legal #ounsel %elie$ed t at it !as "ro%a%le t at In Com"any !ould %e su##essful t an Out Com"any for an estimated amount of &,-)),))). In Mar# ()&*, In Com"any !as a!arded &,))),))) and re#ei$ed full "ayment t ereof. In t e ()&( In Com"any finan#ial statements issued >e%ruary ()&*, o! s ould t is a!ard re"orted5 a. As a re#ei$a%le and re$enue of &,))),))) %. As a re#ei$a%le and deferred re$enue of &,-)),))) #. As a dis#losure of a #ontingent asset of &,-)),))) d. As a dis#losure of a #ontingent asset of &,))),))) (&. I#e%erg Com"any "ur# ased a "atent on 'anuary &, ())4 for P/,))),))). T e original useful life !as estimated to %e &- years. Ho!e$er, in 3e#em%er ())6, I#e%erg2s #ontroller re#ei$ed information "ro$iding #on#lusi$ely t at t e "rodu#t "rote#ted %y t e I#e%erg "atent !ould %e o%solete !it in four years. A##ordingly, t e entity de#ided to !rite off t e unamorti?ed "ortion of t e "atent #ost o$er fi$e years %eginning in ())6. Ho! mu# !ould %e t e "atent amorti?ation for ())65 a. &,()),))) %. &,))),))) #. 7)),))).. d. 4)),))) ((. On 'anuary &, ())/, Taft Com"any "ur# ased a "atent for P.,&4),))). T e "atent is %eing amorti?ed o$er its remaining legal life of &- years e1"iring on
'anuary &, ()(&. 3uring ())6, Taft determined t at t e e#onomi# %enefits of t e "atent !ould not last longer t an ten years from t e date of a#=uisition. W at amount s ould %e re"orted in t e statement of finan#ial "osition for t e "atent, net of a##umulated amorti?ation, at 3e#em%er *&, ())65 a. 4,(74,))) %. 4,76/,))) #. -,)-),))) d. -,(*/,))) (*. On 'anuary &, ())6, Paye Com"any "ur# ased C e Com"any at a #ost t at I resulted in re#ognition of good!ill of P(,))),))). 3uring t e first =uarter of ())6, Paye s"ent additional P7)),))) on e1"enditures designed to de$elo" and maintain good!ill %y training and iring ne! em"loyees. 3ue to t ese e1"enditures, at 3e#em%er *&, ())6, Paye estimated t at t e %enefit "eriod of good!ill !as indefinite. In its 3e#em%er *&, ())6, statement of finan#ial "osition, ! at amount s ould Paye re"ort as Good!ill5 a. &,7)),))) %. &,6)),))) #. (,))),))) d. (,//),))) (4. Mayer Com"any "ur# ased Tara Com"any for P7,))),))) #as . Tara #om"any ad total lia%ilities of P*,))),))). Mayer Com"any2s assessment of t e fair $alue it o%tained ! en it "ur# ased Tara Com"any is as follo!s@ Cas &,))),))) In$entory -)),))) In,Pro#ess :esear# and de$elo"ment -,))),))) Assem%led Wor9for#e &,()),)))
W a. %. #. d.
(-. Tris a Com"any, a maEor !inery, %egins #onstru#tion of a ne! fa#ility in Mindanao. T e follo!ing #osts are in#urred in #onEun#tion !it t e start,u" a#ti$ities of t e ne! fa#ility@ Produ#tion e=ui"ment 7,&-),))) Tra$el Costs of +alaried em"loyees 4)),))) Training of Lo#al Em"loyees for "rodu#tion And maintenan#e o"erations &,()),))) Li#ense fee &4),))) Ad$ertising #osts 7-),))) W a. %. #. d. at "ortion of t e organi?ation #osts s ould %e e1"ensed5 6,.-),))) &,/)),))) &,*6),))) )