Reference no: EM133032169

Questions -

Q1. On January 1, Devorak Corporation sold an equipment with a cost of P 500,000 for P 800,000. The buyer, Limbo Company, made a down payment of P 200,000 and signed a non-interest bearing note for P 600,000 payable in equal annual installment of P 200,000 every December 31. The prevailing interest rate for a note of this type is 10%. The present value of an ordinary annuity of 1 for three periods at 10% is 2.4869. The present value of1 for three periods at 10% is 07513. What is the selling price of equipment to be recorded on January 1?

a. P 601,040

b. P 697,380

c. P 800,000

d. P 650,780

Q2. The Retained Earnings of Honesty Corporation as at January 1, 2018 shows a credit balance of P 400,000. During the year, it was discovered that the depreciation of one unit of machinery is overstated by P 200,000 in 2016. Also during the year, cash dividends of P 1.00 per share were paid to shareholders with 1,000,000 outstanding shares. In addition, due to approval by the Board of Directors through a Board Resolution, the Retained Earnings Ledger account shows a credit entry of P 300,000 about change from FIFO to weighted average in costing inventories. The following retained earnings appropriation are presented to you:

- Appropriated for treasury shares, P 600,000, in which the original balance is P 1,000,000 and then reduced by P 400,000 because of treasury shares reissuance during the year.

- Appropriated for contingencies, P 1,600,000, in which the original balance is P 1,400,000 and then increased by P 200,000 because of current appropriation during the year. The statement of comprehensive income during 2018 is presented below:

Net Sales P 20,000,000 Cost of Goods Sold (12,000,000) Gross Profit P 8,000,0000 Operating Expenses (4,285,000) Profit before income tax P 3,715,000 Provision for income tax (1,115,000) Profit after tax P 2,600,000

What is the corrected retained earnings balance as at January 1, 2018?

Q3) Presented below are the selected transactions of JIJOSAND Company regarding noncurrent asset held for sale;

2015

Jan. 1 - Acquired a machinery worth P 5,000,000 to be used in business operations. Its estimated useful life is 10 years with residual value of P 500,000.

2018

Jan. 1 - The management decided to dispose the machinery anytime and to classify it as held for sale. On this date, the fair value of the asset less cost to dispose was estimated at P 1,900,000.

Jun. 30 - The machinery was sold for P 1,500,000.

What is the impairment loss on January 1, 2018?

Q4) The MAPA Company manufactures a single product used in the plastic industry. The company uses the flexible budget in its standard cost system to develop variances. Selected data are as follows: Raw materials input : 4 pounds at P 1.10 per pound, P 4.40 Direct labor per unit : 6 hours at P 2.50 per hour, P 15 Variable factory overhead per unit : P 3.50 per direct labor hour, P 21.00 Fixed factory overhead per month : P 26,250 Normal activity per month : 7,800 direct labor hours Units produced in September : 1,200 Costs incurred for September Raw materials : 4,700 pounds at P 1.15 per pound Direct labor : 7,400 hours at P 2.55 per hour Variable factory overhead : P 25,234 Fixed factory overhead : P 26,400 The labor rate variance for September is:

a. P 630 favorable

b. P 500 unfavorable

c. P 370 favorable

d. P 370 unfavorable

Q5) January 1, 2019, Ben&Ben Corporation signed a lease contract with SB19 Corporation to lease a machinery for a fixed rental payment of P 2,000,000 every December 31 for 10 years. The leased asset has an estimated useful life of 12 years with P 1,200,000 salvage value. The lease contract provides Ben&Ben to purchase the machine upon expiration of the lease contract on January 1, 2029 by paying P 1,000,000. In this regard, Ben&Ben is reasonably certain to exercise the purchase option at the commencement of the lease. Related information are as follows: Incremental borrowing rate 14% Implicit borrowing rate 12% PV of an ordinary annuity of 1 for 10 periods: At 14% 5.216 At 12% 5.650 PV of 1 for 10 periods at; At 14% 0.270 At 12% 0.322 What is the total lease liability as at January 1, 2019?

a. P 11,622,000

b. P 20,000,000

c. P 11,300,000

d. P 21,000,000