Ace 14] Practice Problems MODULATE Co. has the following assets, Vacant building to be leased out under operating lease 4,000,000 Building being constructed for TO ADJUST, Inc. 800,000 Building under construction to be used as office 1,600,000 Building under construction to be rented out under operating lease 400,000 Building rented out to MODULATE’s employees who pay rent at market rates 3,200,000 Office building awaiting disposal 200,000 How much is the total investment property? a. 4,200,000 'B, 4,400,000 4,600,000 <. 7,600,000 On January 1, 20x1, NURTURE REAR Co. acquired a building with an estimated useful life of 10 years and residual value of P400,000 for a total cost of P4,000,000. The fair value of the building on January 1, 20x1 is P4,800,000 while the fair value on December 31, 20x1 is 5,200,000. NURTURE estimates that if the building is sold currently on December 31, 20x1, costs to sell amount to P200,000. NURTURE uses the straight line method in depreciating its PPE, NURTURE uses the fair value model for its investment properties. The year-end adjusting entry will include a. 360,000 depreciation . 200,000 unrealized gain . 400,000 unrealized gain 4G. 1,200,000 unrealized gain (On December 31, 20x1, DECAPITATE BEHEAD Co. decided to lease out under operating lease one of its buildings that was previously used as office space. The building has an original cost of 12,000,000 and accumulated depreciation of *8,000,000 as of January 1, 20x1 Annual depreciation is 400,000, DECAPITATE Co. uses the fair value model for investment property. The fair value of the building on December 31, 20x1 is P6,000,000, The entry to record the transfer of the building to investment property includes a credit to gain on reclassification for 2,000,000. b. credit to revaluation surplus for 2,000,000. ©. debit to building for 12,000,000. @ credit to revaluation surplus for 2,400,000, PERIODIC REGULAR Co. acquired a building on January 1, 20x1 for a total cost of £P24,000,000 and classified it as investment property. PERIODIC Co. uses the fair value model for its investment property. On January 1, 20X5, when the carrying amount of the building is 16,000,000, the elevator in the building was replaced for a total cost of 3,200,000. It is impracticable to determine the fair value of the replaced part. The fair value of the building con December 31, 20%5 is P17,200,000, How much is the loss recognized during the year? a. 3,200,000 6. 2,000,000 no loss. 4. indeterminable Use the following information for the next twvo questions: VISAGE APPEARANCE Co. is committed to a plan to sell its headquarters building and has initiated actions to locate a buyer. As of this date, the building has a carrying amount of P5,000,000, a fair value of P6,000,000 and estimated costs to sell of P200,000. VISAGE Co. has an intention to transfer ownership of a building to a buyer after it vacates the building, How should VISAGE Co. classify the headquarters building? a. Included under property, plant and equipment at P5,000,000. [email protected]Ace 14] Practice Problems b. Included under ia ii and Shae at P5,800,000. . Classified as held for sale at P5,800,000 VISAGE Co. will continue to use the building until the construction of a new headquarters is man How should VISAGE Co. ‘aie the aca building? b. Included under property, plant and equipment at P5,800,000. ©. Classified as held for sale at 5,000,000 d._ Classified as held for sale at P5,800,000 PERAMBULATE STROLL Co. is a commercial leasing and finance company. As of year-end, PERAMBULATE holds equipment that is available either for sale or lease. PERAMBULATE is not yet decided whether to sell or to lease the equipment. The equipment has a carrying amount of 1,000,000, fair value of P1,200,000 and costs to sell of P50,000. How should PERAMBULATE Co. classify the equipment? c. Held for sale, P1,150,000 b. Investment property, 1,250,000 d. Held for sale, 1,000,000 In Baer Food Co.'s 20x3 single-step income statement, the section titled “Revenues” consisted of the following: Net sales revenue 187,000 Results from discontinued operations: Loss from discontinued component Z including loss on disposal of P1,200 16,400, Less: Tax benefit 4,000 (12,400) Interest revenue 10,200 Gain on sale of equipment 4,700 Cumulative change in 20e1 and 20%2 income due to change in depreciation method ier of 750 ax tea) 1,500 Total revenues 191,000, In the revenues section of the 20x3 income statement, Baer Food should have reported total revenues of 215,400 203,700. 201,900 During 20x4, Lopez Corporation disposed of Pine Division, a major component of its business. Lopez realized a gain of 500,000, net of taxes, on the sale of Pine’s assets. Pine's operating losses, net of taxes, were P600,000 in 2004. How should these facts be reported in Lopez's income statement for 2004? Total Amount to be Included i Income from| Results of Continuing Operations _ Discontinued Operations a. {600,000 loss 500,000 gain b. 100,000 loss 0 a. 500,000 gain £600,000 loss [email protected]Ace 14] Practice Problems A patent infringement suit may be either successful or unsuccessful. Which of the following statements is correct? a If the lawsuit is successful, the cost of the lawsuit is expensed. b. If the lawsuit is unsuccessful, the cost of the lawsuit is recognized as additional amortization expense. If the lawsuit is unsuccessful, the cost of the lawsuit is written-off from the carrying amount of the related patent. d. Tithe lawsuit is unsuccessful, the carrying amount of the related patent is amortized over its remaining economic life. An entity that incurs costs in defending a patent in an infringement suit should expense the costs of all suits in the period in which they are incurred. b. capitalize only the costs of unsuccessful suits. © capitalize only the costs of successful suits. 4. capitalize the cost of all suits regardless of the outcome. A purchased patent has a remaining legal life of 15 years. It should be a, expensed in the year of the acquisition. d. not amortized. The cost of a franchise is classified in the statement of financial position as a(n) a. operational asset. b. deferred oa 4. current asset. Silverchair Airlines purchased airline gate rights from Tomorrow International Airport for 12,000,000. The rights have a legal life of five years; however, Silverchair can extend the rights for another ten years over an indefinite number of extensions at a nominal cost. Silverchair intends and has the ability to make the extensions, Other owners of similar rights have made the right extensions in the past. Over what period of time should Silverchair amortize the gate rights? a Syears, b. 15 years c_ 40 years. VENERABLE RESPECTED Co. has the following liabilities as of December 31, 20x1 a, Trade accounts payable, net of debit balance in supplier’s account of P10,000, net of unreleased checks of P8,000, and net of postdated checks of 4,000. +P600,000 b. Credit balance in customers’ accounts 4,000 © Financial lability designated at FVPL 100,000 Bonds payable maturing in 10 equal annual installments of P200,000 2,000,000 12%, 5-year note payable issued on Oct. 1, 20x1 200,000 Deferred tax liability 10,000 Unearned rent 8,000 ene e [email protected]Ace 14] Practice Problems h. Contingent liability 20,000 i Reserve for contingencies 50,000 How much is the total current liabilities? a. 896,000 b.918,000 940,000. 960,000 PALLID DULL PALE Co, has a 10%, #2,000,000 loan payable as of December 31, 20x1 which will be maturing on July 1, 20x2, Interest on the loan is due every July 1 and December 31 and all the interests that have accrued in 20x1 were paid on these scheduled dates. On February 1, 20x2, PALLID Co, entered into a refinancing agreement with a bank to refinance the loan on a long- term basis. Both parties are financially capable of honoring the agreement's provisions. The contract on the P2,000,000 loan payable does not state any refinancing or roll over option. PALLID’s 20x! financial statements were authorized for issue on March 15, 20x2. In PALLID's 20x1 financial statements, how much is presented as current liability in relation to the loan payable? a. 2,100,000 2,000,000 <.100.000 0 Eliot Corporation's liabilities at December 31, 2008 were as follows: Accounts payable and accrued interest 2,000,000 S-year 10% Notes payable - due December 31, 2011 5,000,000 Part of the loan agreement is for Elliot to appropriate a fixed amount out of its accumulated profits and losses annually until the amount of appropriation has equaled the face amount of the obligation. Non-compliance will render the note as payable on demand by the lender. As of December 31, 2008, Elliot Corporation has not yet complied with the loan agreement. What amount of current liabilities should Elliot Corporation report in its December 31, 2008 statement of financial position? a 2000000 b.5,000.000 SA00RHH a0 On December 31, 20x1, THESPIAN ACTOR Co. has accounts payable of 2,000,000 before possible adjustment for the following: a) Goods in transit from a vendor to THESPIAN on December 31, 20x1, with an invoice cost ‘of P100,000 and purchased FOB shipping point, was not yet recorded b) Goods shipped FOB shipping point from a vendor to THESPIAN was lost in transit. The invoice cost of P40,000 was not yet recorded. ©) Goods shipped FOB shipping point from a vendor to THESPIAN on December 31, 20x1 amounting to 16,000 was recorded and included in the year-end physical count as “goods in transit.” @) Goods in transit from a vendor to THESPIAN on December 31, 20x1 with an invoice cost of P20,000 purchased FOB destination was not yet recorded. The goods were received in January 20x2. ©) Goods with invoice cost of P30,000 was recorded and included in the year-end physical count as “goods in transit.” It was found out that the goods were shipped from a vendor under FOB destination. f) Checks drawn but not yet released to payees amounted to P24,000 while checks drawn and released to payees but were postdated amounted to P10,000. 8) On December 28, 20x1, a vendor authorized THESPIAN to return for full credit goods shipped and billed at 50,000 on December 14, 20x1. THESPIAN shipped the returned goods an. December 31, 20x1 but the credit memo was received and recorded only on January 3, 20x2. [email protected]Ace 14] Practice Problems h) Goods shipped FOB shipping point, freight prepaid from a vendor on December 28, 20x1 was recorded at invoice cost at shipment date. The invoice cost is 28,000, while the freight cost is P6,000. i) Goods shipped FOB destination, freight collect were received on December 29, 20x1. The invoice cost of P80,000 was credited to accounts payable on date of receipt and the related freight of P10,000 was debited to an expense account. How much is the adjusted accounts payable on December 31, 20x1? c. 2,270,000 b. 2,130,000 4. 2,330,000 Offset Co. sells gift certificates as part of its sales promotion. During the year, Offset Co. sells gift certificates worth 500,000, of which P360,000 were redeemed. Based on Offset Co’s past experience, 10% of gift certificates sold are never redeemed. Under PERS 15, what amounts of (1) total revenue and (2) liability should be reported in Offset Co’s 20x1 financial statements? c. 410,000; 90,000 b. 360,000; 90,000 _ 360,000; 100,000 FLUNK TO FAIL Co. requires advance payments for custom-built guitar effects, gadgets, and racks, The records of FLUNK show the following; + Uneamed revenue, January 1, 20x1 2,000,000 + Advances received during 20x1 20,000,000 + Advances applied to orders shipped in 20x1 16,000,000 + Advances pertaining to orders cancelled in 20x1 600,000 How much is presented as current liability assuming the advance payments received are non- refundable? a. 450000 —BIBOGHHH «6.000.000. 6,600,000 WAIVE TO GIVE UP Co. maintains escrow accounts and pays real estate taxes for its customers. Escrow funds are kept in interest-bearing accounts. Interest, less a 10% service fee, is credited to the mortgagee’s account and used to reduce future escrow payments. Information on escrow accounts are shown below: Escrow accounts liability, January 1, 20x1 400,000 Escrow payments received during 20x1 3,000,000 Real estate taxes paid during 20x 1,000,000 Interest on escrow funds during 20x1 200,000 How much is the current liability for the escrow accounts on December 31, 20x1? a) 2580,000 2,600,000 «2,400,000 4. 2420,000 [email protected]Ace 14] Practice Problems On January 1, 20x1, Beautiful Morning Co. acquired a machine in exchange for a P4,800,000 noninterest-bearing note due as follows: Date Amount December 31, 20x1 2,400,000 December 31, 20x2 1,600,000 December 31, 203 800,000 Total 4,800,000 The effective interest rate is 10% How much is the carrying amount of the note on initial recognition? a ios c 3980504 b. 4,100,341 3,086,394 On January 1, 20x1, Unforgiven Co. purchased an inventory with a list price of P4,400,000 and a cash selling price of P4,000,000 in exchange for a P4,800,000 noninterest-bearing note due on December 31, 20x3. The effective interest rate on the note is most approximately equal to a. 5.2659%. B.6.2695%. — c. 8.7893%. —d. 9.2625%. On January 1, 20x1, DWINDLE DECREASE Co. acquired a vehicle in exchange for cash of 'P400,000 and a noninterest-bearing note of P4,000,000 due in 4 equal annual installments starting on December 31, 20x1. The prevailing rate of interest for this type of note is 12%, How much is the current portion of the note on December 31, 20x1? a. 613,409 814,342 4,718,324 On January 1, 20x1, VELVETY SMOOTH Co. acquired an intangible asset by paying cash of 400,000 and issuing a noninterest-bearing note payable of P4,000,000 due in 4 equal annual installments. The first installment is due on January 1, 20x1. The prevailing rate of interest for this type of note is 12%. How much is the interest expense in 20x1? 2.0 334,357 <4. 432,000 STUNTED Co. issued a 3-year, noninterest-bearing note of 4,000,000 to DWARFISH, Inc, a related party. The proceeds from the issuance of the note were P2,847,120. The note matures on December 31, 20x3. The prevailing interest for similar type of obligation is 12%. The entry on. initial recognition of the note includes a a. credit to notes aan for P2,847,12 credit to discount on notes payable for P1,152,880. 4 aandb On January 1, 20x1, SHABBY WORN OUT Co. acquired a machine by issuing a 3-year, 3%, 4,000,000 note payable. Principal and interest are due on January 1, 20x4. The prevailing interest rate for this type of note is 12%, How much is the carrying amount of the note on initial recognition? oats 3111126 b. 4,370,908 43,114,879 [email protected]Ace 14] Practice Problems The following information is taken from the actuarial valuation report for an entity's defined benefit plan: Fair value of plan assets, Jan. 1 2,100,000 obligation, Jan. 12,400,000 Past service cost (vesting period is 5 yrs.) 300,000 Current service cost 600,000 Benefits paid to retirees during the year 450,000 Net gain on settlement of plan during the year60,000 Actuarial gain during the period 15,000 Retum on plan assets during the period 270,000 Discount rate based on high quality corporate bonds 12% Present value of defined ben How much is the defined benefit cost? 876,000 861,000 . 879,000 Use the following information for the next two questions: Information on STATUTE LAW Co's defined benefit plan is shown below: +The fair value of the plan assets on January 1, 20x1 was P7,200,000. + The actuarial valuation of the defined benefit obligation on January 1, 20x1 was 1P8,000,000. The actuarial present value of future benefits earned by employees for services rendered in 20x1 amounted to P 1,200,000. + On July 1, 20x1, STATUTE Co, amended its retirement plan. The amendment increased the present value of the defined benefit obligation by 1,600,000, 20% of which relates to benefits that have already vested. The remaining portion will vest in 5 years, + Changes in actuarial assumptions resulted to a decrease of P640,000 in the present value of the defined benefit obligation. It was also determined that there was an P80,000 decrease in the fair value of the plan assets due to changes in fair values, foam nin es Gt ange aN _eeceanc nly ha acu net nd other investment income in 20x1. deen ea amounted to #20000, No contiutans were made t the fund during 20x1. . The discount rate is 9%. ‘How much is the net defined benefit liability (asset) on December 31, 20x1? 2 out ase aesnou tty 1,040,000 liability 4. 2,640,000 asset What amounts of the total defined benefit cost for the period are recognized in: increase/(decrease) eae oa a. 2,624,000 248,000 b. 2,764,000 d. 2,872,000 1,032,000, On January 1, 20x1, BESET TO TROUBLE Co, had the following information regarding its defined benefit plan: [email protected]Ace 14] Practice Problems © Fair value of plan assets (FVPA), Jan. 1 +P480,000 © Present value of the defined benefit obligation, Jan. 1 360,000 ® Discount rate based on high quality corporate bonds 5% Information regarding the defined benefit plan as of December 31, 20x1 is as follows: © Contributions made to the fund, July 1, 20x1 800,000 ® Benefits paid to retirees, September 30, 20x1 200,000 ® Fair value of plan assets (FVPA), Dec. 311,128,000 © Present value of the defined benefit obligation, Dec. 31 720,000 How much is the remeasurement to the net defined benefit liability (asset) to be recognized in other comprehensive income? a. 5,000 loss €. 6,500 loss 5,000 gain 5On January 1, 20x1, Row Co. leased a machine from Boat, Inc. Information on the lease is as follows: Annual rent payable at the beginning of each year 200,000 Lease term 10 years Useful life of machine 12 years Implicit interest rate 10% The lease contract provides Row Co. an option to purchase the machine at the end of the lease term for 100,000. The option price approximates the machine’s expected fair value at the end of the lease. Row Co. is reasonably certain to the exercise the option, What amount of interest expense should Row Co. recognize on the lease in 20x1? a. 139,036 b. 135,181 119086 =. 115,181 On January 1, 20x1, Lock Co. enters into a 4-year lease of office equipment. The rent in 20x1 is 10,000 and this will increase by 10% annually starting on January 1, 20x2. Lock Co. pays the lessor a lease bonus of P5,000 on January 1, 20x1. Lock Co. opts to use the practical expedient allowed under PFRS 16 for leases of low value assets. How much is the lease expense in 20x1? a. 10,000 11,608 b. 11,000 On January 1, 20x6, Day Corp. entered into a 10-year lease agreement with Ward, Inc. for a piece of industrial equipment. Annual lease payments of 10,000 are payable at the end of each year. Day knows that the lessor expects a 10% return on the lease. Day has a 12% incremental borrowing rate. The equipment is expected to have an estimated useful life of 10 years. In addition, a third party, unrelated to Day, has guaranteed to pay Ward a residual value of P5,000 at the end of the lease, In Day's January 1, 20x6 balance sheet, the principal amount of the lease obligation was a. 63,374 ©. 58,112 b. 61,446 . 56,502 On January 1, 20x1, Fingerstyle Co, (lessee) enters into a ten-year lease of equipment, with fixed annual payments of #200,000 due at the start of each lease year. The contract itemizes the fixed annual payments as follows: 156,000 for rent, 39,000 for maintenance and P5,000 of administrative tasks, The itemized amounts reflect the relative stand-alone prices of the [email protected]Ace 14] Practice Problems components. The lessor’s implicit interest rate in the lease, known to Fingerstyle Co, is 10%. How much are the (1) lease liability as of January 1, 20x1 and (2) total lease-related expenses for 20x1? a. 1,080,366; 236,074 921,444; 240,289 b. 1,080,366; 241,074 . 921,444; 245,289 Use the information in the preceding problem. In addition, the contract requires Fingerstyle Co. to restore the equipment to its original condition at end of the lease term. At contract inception, Fingerstyle Co. estimates that the fair value of its restoration obligation is 100,000. How much are the (1) right-of-use asset and (2) lease liability as of January 1, 20x1? c. 1,180,366; 1,080,366 b. 1,021,444; 921,444 d. 1,180,366; 1,180,366 On January 2, 20x9, Nori Mining Co. (lessee) entered into a 5-year lease for drilling equipment Nori recognized a lease liability of P240,000 at the commencement date. This amount includes the P10,000 exercise price of a purchase option, At the end of the lease, Nori expects to exercise the purchase option. Nori estimates that the equipment's fair value will be P20,000 at the end of its 8-year life. Nori regularly uses straight-line depreciation on similar equipment, For the year ended December 31, 20x9, what amount should Nori recognize as depreciation expense on the eased asset? a. 48,000 , 46,000 30,000 Use the following information for the next two questions: On January 1, 20x1, POLTROON Co. leased a piece of equipment to COWARD, Inc. Information on the lease is as follows: Cost of equipment —P1,200,000 Useful life of equipment 5 years Lease term 4 years Annual rent payable at the end of each year 400,000 Interest rate implicit in the lease 10% Residual value *80,000 The equipment will revert back to POLTROON at the end of the lease term, The lease is classified as sales type lease. How much is the gross investment in the lease on January 1, 20x1 assuming the residual value is guaranteed? a. 1,600,000 1,520,000 1,680,000 1,267,948, How much are the sales and cost of sales the residual value is unguaranteed? Sales Cost of sales Sales Cost of sales Siz679H6 1,145,359 1,322,587 1,200,000 b. 1,267,946 1,200,000 d. 1,322,587, 1,145,359 [email protected]Ace 14] Practice Problems On June 1, 20x0, Oren Co. entered into a five-year nonrenewable lease, commencing on that date, {for office space and made the following payments to Cant Properties: Bonus to obtain lease 30,000 First month's rent 10,000 Last month’s rent 10,000 In its income statement for the year ended June 30, 20x0, what amount should Cant report as rent income? a. 10,000 ©. 40,000 a0 The stockholders’ equity section of Peter Corporation's balance sheet at December 31, 20x2 was as follows: Ordinary shares (P10 par, authorized IM sh, issued and outst. 900K sh) 9,000,000 Share premium 2,700,000 Retained earnings 1,300,000 On January 2, 20x3, Peter purchased and retired 100,000 shares of its stock for 1,800,000. Immediately after retirement of these 100,000 shares, the balances in the share premium and retained earnings accounts should be Share premium Retained earnings Share premium Retained earnings a.P 900,000 1,300,000 c. P1,900,000 1,300,000 b.P1,400,000 800,000 On April 1, 20x9, Hyde Corp,, a newly formed company, had the following stock issued and outstanding: + Ordinary shares, P1 par value, 20,000 shares originally issued for P30 per share. + Preference shares, P10 par value, 6,000 shares originally issued for P50 per share. Hyde's April 1, 20x9, statement of shareholders’ equity should report oem hares Preference shar Se b. £20,000 1P300,000 580,000 c. P600,000 1P300,000 PO 4. 600,000 'P60,000 £240,000 Asp Co. was organized on January 2, 20x1, with 30,000 authorized shares of P10 par ordinary shares. During 20x1 the corporation had the following capital transactions: Jan.5 Issued 20,000 shares at PIS per share. July 14 Purchased 5,000 shares at P17 per share. Dec. 27 Reissued the 5,000 shares held in treasury at P20 per share. Asp used the cost method to record the purchase and reissuance of the treasury shares. In its December 31, 20x1, balance sheet, what amount should Asp report as additional paid-in capital in excess of par? a, 100,000 b. 125,000 140,000 715/000 (On March 1, 20x1, Rya Corp. issued 1,000 shares of its P20 par value ordinary shares and 2,000 shares of its P20 par value convertible preference shares for a total of P80,000, At this date, Rya’s [email protected]Ace 14] Practice Problems ordinary share was selling for P36 per share, and the convertible preference share was selling for 27 per share. What amount of the proceeds should be allocated to Rya’s convertible preference share? a. 60,000 b, 54,000 c. 48,000 4. 44,000 In 20x1, Fogg, Inc, issued P10 par value ordinary share for P25 per share. No other share transactions occurred until March 31, 20x1, when Fogg acquired some of the issued shares for P20 per share and retired them, Which of the following statements correctly states an effect of this acquisition and retirement? a. 20x! profitis decreased «Share premium is decreased, b. 20x profit is increased. 4d. Retained earnings is increased. On June 27, 20x1, Brite Co. distributed to its ordinary shareholders 100,000 shares of Quik, Inc., an unrelated party, held as investment in held for trading securities. The carrying amount of the investment on June 27, 20x1 was Pl per share, while the fair value was P2 per share. On distribution date, the fair value of Quik’s stock was P2.50 per share. In its income statement for the year ended June 30, 20x1, what amount should Brite report as gain relating to the disposal of the stock? a, 250,000 b. 200,000 150,000 ao The Gradison Corporation had the following classes of shares outstanding as of December 31, 2002. + Ordinary shares, P20 par value, 20,000 shares outstanding + Preference shares, 6 percent, #100 par value, cumulative, 2,000 shares outstanding No dividends were paid on preference shares for 2000 and 2001. On December 31, 2002, a total cash dividend of #200,000 was declared. What amount of dividends is payable to the ordinary shareholders? a 156,00 © 176,00 b. 167,000 4. 184,000 Late Co. has the following shareholders’ equity: Share capital, P100 par, 10,000 shares 1,000,000 Share premium 200,000 Retained earnings 300,000 Total shareholders’ equity 1,500,000 Late Co. recalled the 10,000 outstanding shares and replaced them with 20,000 no-par shares with stated value of P5 per share. How much is the share premium after the recapitalization? a. 200,000 b. 1,000,000 0 During 2002, the following transactions related to the capital stock of the Buffet-Line Corp. occurred: Jan.7 Declared a ®.75 cash dividend on 150,000 shares of preferred stock. Feb. 7. Paid dividends on preferred stock [email protected]Ace 14] Practice Problems March 4 Declared a P.50 cash dividend on 200,000 shares of common stock with a P20 par value. Mar. 18Paid dividends on common stock. June 30 Split common stock 4-for-1. July 9 Purchased 12,000 shares of Buffet-Line's own common stock at P32 per share; acquisition recorded at cost. Sept. 10 Declared a cash dividend of #40 per share on common stock outstanding, Sept. 18 Paid dividends on common stock What total amount is debited to retained earni for the transactions above? > 82a “527700. b. 498,700, d. 614,700 ‘The stockholders’ equity section of Brown Co.'s December 31, 20x1, balance sheet consisted of the following: Ordinary shares, P30 par, 10,000 shares authorized and outstanding P300,000 Share premium 150,000 Retained earnings (deficit) (210,000) On January 2, 20x2, Brown put into effect a stockholder-approved quasi-reorganization by reducing the par value of the stock to 5 and eliminating the deficit against share premium. Immediately after the quasi-reorganization, what amount should Brown report as share premium? 2. (60,000) ©. 190,000 b. 150,000 0 ‘The reported net incomes for the first 2 years of Care Less, Inc., were as follows: 2014, P147,000; 2015, P185,000, Early in 2016, the following errors were discovered. 1. Depreciation of equipment for 2014 was overstated P17,000. 2. Depreciation of equipment for 2015 was understated P38,500. 3, December 31, 2014, inventory was understated P50,000. 4, December 31, 2015, inventory was overstated P16,200. At what amount should the retained earnings be adjusted to correct the above errors? debit bb) 38,500 debit ©) 33,000 credit 4) 50,000 credit [email protected]Ace 14] Practice Problems Which of the mies is false? in previously issued financial statements. (b) The accounting for changes in estimates is similar between GAAP and IFRS. (©) Under IFRS, the impracticability exception applies both to changes in accounting principles and to the correction of errors. (4) GAAP has detailed guidance on the accounting and reporting of indirect effects; IFRS does not. Which of the following is not classified as an accounting change by IFRS? (a) Change in accounting policy) ics nan tae (b) Change in accounting estimate. (d) None of the above. IFRS requires companies to use which method for reporting changes in accounting policies? (a) Cumulative effect approach. (c) Prospective approach. Sea (4) Averaging approach Under IFRS, the acon sina should not be used if (b) the company does not have trained staff to perform the analysis. (0) the effects of the change have counterbalanced. (d) the effects of the change have not counterbalanced. Which of the following is true regarding whether IFRS specifically addresses the accounting and. reporting for effects of changes in accounting policies? Direct effects Indirect effects () Yes Yes (e) No No f No ‘Yes [email protected]