Reference no: EM133188180
Questions -
Q1. On April 1, 2022, the Bergify Corp., signs a 10-year non-cancelable lease agreement for a storage building owned by Knowie Inc. The following information pertains to the lease agreement:
Annual rental payment is P750,000 beginning April 1, 2022. The rental payment includes P50,000 for taxes and insurance.
The fair value of the building on April 1, 2022 is P4,478,000.
The building has an estimated economic life of 12 years. Unguaranteed residual value at the end of 10 years is P150,000.
Implicit rate is 12%.
How much is the impact of the lease transaction to the income statement of Bergify Corp. dated December 31, 2022?
Q2. On July 1, 2021, the board of directors of ABC Co. declares a 10% share dividend. The market price of ABC's 600,000 outstanding ordinary shares with a par value of P50 on the date of declaration was P80 per share. When the share price was P100 per share on September 1, 2021, the dividend was paid.
As a result of the dividend declaration, how much is the increase in the current liability section of ABC's financial statement?
Q3. ABC Co.'s salaried employees are paid twice a month. Information relating to salaries for the calendar year 2021 is as follows:
Accrued salaries payable, Jan. 1 - P150,000
Salaries expense during the year - P2,450,000
Salaries paid during the year - P2,330,000
On December 31, 2021, what amount should ABC Co. report for accrued salaries payable?
Q4. ABC Co. distributes annual bonus to its sales manager. The company reported P2 million profit for 2021 before bonus and income tax. Income tax of ABC Co. is 25%.
What is the amount of bonus if bonus is computed at 10% of profit after taxes and bonuses?
5. Boyce Company leased a music studio from Justine company on a 6-year lease term at P250,000 annual rental payable in advance. Justine offered Boyce the option to purchase the asset at a bargain price of P200,000 at the end of the lease contract. The estimated economic life of the asset is 10 years, and its estimated residual value is P5,000. the interest implicit in the lease is 12%. At the end of the lease term, Boyce did not purchase the leased asset. (Round off the PV factor to four decimal places, then do not round off during the computation)
How much loss on failure to exercise the bargain purchase option was reported by Boyce?
Q6. Adorable Company owns a car dealership that it uses for servicing a car under warranty. The company's past experience with warranty claims is as follows: 50% of the cars sold in a year have zero defect, 30% of the cars sold in a year have normal defect, and 20% of the cars sold in a year have significant defect. The cost of rectifying the normal defect is P10,000 while the significant defect is P30,000. The company sold 500 cars in 2021.
How much is the amount of provision for warranty in 2021?
Q7. At its meeting on December 1, 2021, the board of directors of ABC Co. declares a cash dividend of P2 per share, payable on February 1, 2022 to shareholders of record on December 25, 2021. The following are the ordinary shares outstanding on different dates:
December 1, 2021 - 40,000 shares
December 25, 2021 - 50,000 shares
December 31, 2021 - 55,000 shares
February 1, 2022 - 60,000 shares
On December 31, 2021, what is the amount of dividend payable that should be recognized in the statement of financial position?
A. P80,000
B. P100,000
C. P110,000
D. P120,000
Q8. In 2021, a lawsuit was filed against Keri Keri Co. for patent infringement. The plaintiff is claiming 400M in damages. Keri Keri's legal counsel believes that it is probable that Keri Keri will lose the lawsuit and pay damages of not less than 40M but not more than 400M. The probability of any amount within the range is as likely as any other amount also within the range. The plaintiff has offered to settle the lawsuit out of court for 360M but Keri Keri did not agree to the settlement.
How much is provision to be reported in Keri Keri's year-end financial statements?
A. P360,000,000
B. P220,000,000
C. P400,000,000
D. P40,000,000