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PROBLEM NO. 1 - Cavaliers Corporation

1 Warranty payable, 3/31/04 Add warranty expense accrued during 2004-2005 Total Less payments during 2004-2005 Warranty payable, 3/31/05

 

252,000

630,000

882,000

537,000

345,000

2 Bond discount, 10/1/99 (P5,000,000 x .04)

200,000

Discount amortization, 10/1/99 to 3/31/05 (P200,000/10 x 5.5)

(110,000)

Bond discount, 3/31/05

90,000

3 Bond interest payable, 10/1/04 to 3/31/05 (P5,000,000 x 12% x 6/12)

 

300,000

4 Notes payable - current (maturing up to 3/31/06) Accounts payable Estimated warranty payable (see no. 1) Cash dividends payable (5 million shares x P0.30) Accrued interest:

 

2,400,000

560,000

345,000

1,500,000

Notes payable

340,000

Bonds payable (see no. 3) Total current liabilities

 

300,000

640,000

 

5,445,000

5 Bonds payable:

Face value Unamortized bond discount (see no. 2)

 

5,000,000

(90,000)

4,910,000

Notes payable - non current Total non current liabilities

 

2,700,000

7,610,000

PROBLEM NO. 2 - Pirates' Music Emporium

Question No. 1 - A Warranty expense (P5,400,000 x 2%)

108,000

Question No. 2 - D Estimated liability from warranties, 1/1/05 Add warranty expense for 2005 Total

 

136,000

108,000

 

244,000

Less actual expenditures for 2005 Estimated liability from warranties, 12/31/05

164,000

 

80,000

Question No. 3 - A Premium expense [(1,800,000 x 60%)/200 x P14]

75,600

Question No. 4 - D Inventory of premium, 1/1/05 Add premium purchases (6,500 x P34) Total premium available

 

39,950

221,000

 

260,950

Less premiums issued (1,200,000/200 x P34) Inventory of premium, 12/31/05

204,000

 

56,950

Question No. 5 - C Estimated premium claims outstanding, 1/1/05 Add premium expense for 2005 Total Less premiums issued (1,200,000/200 x P14) Estimated premium claims outstanding, 12/31/05

44,800

75,600

 

120,400

84,000

 

36,400

B

D

B

C

D

PROBLEM NO. 3 - Spurs Company

Date

Voucher No.

Creditor

Amount

Amount

Discount

 

Per sked

As adjusted

Lost

Nov. 27

797

Duncan Supply Co. Ginobili Distributors

78,400

80,000

1,600

Dec. 02

821

19,600

-

-

11

829

Parker Sales

44,100

45,000

900

20

836

Mohamed Dealers

17,150

-

-

21

842

Bowen Merchandising

22,050

22,500

450

22

856

Horry Mercantile

80,850

80,850

-

31

865

Jackson Traders

78,400

78,400

-

 

340,550

306,750

2,950

Note: All invoices dated prior to Dec. 22 are not entitled to discount anymore.

 

Adjustment

Purchase discount lost Vouchers payable

8,000

8,000

Unpaid vouchers as adjusted

306,750

Balance of control account (P1,645,000-P1,309,500-P36,750) Total purchase discount lost

298,750

8,000

Analysis

Original net vouchers payable Less cancelled vouchers Net vouchers payable Less net vouchers payable still unpaid (P340,550-P36,750) Payment that should have been made if all dicounts were taken Less actual cash disbursements (per control account) Dicount lost on paid vouchers Dicount lost on unpaid vouchers Total purchase discount lost

1,645,000

36,750

1,608,250

303,800

1,304,450

1,309,500

5,050

2,950

8,000

ANSWERS: 1) B; 2) B; 3) C; 4) C

PROBLEM NO. 4 - Bulls Finance Company

Question no. 1 - A Total bonds issued

1,600,000

Face value of bonds retired {P216,000/[1.05 + (.12 x 3/12)]}

 

200,000

Adjusted balance of bonds payable, 12/31/03

1,400,000

Question no. 2 - C

Unamortized bond premium, 12/31/03 (P80,000 x 14/16 x 20/25)

56,000

Question no. 3 - B Nominal interest P1,400,000 x 12%

168,000

P200,000 x 12% x 9/12 Total Less premium amortization Bonds retired (P80,000/25 x 2/16 x 9/12)

 

18,000

186,000

 

300

Remaining bonds (P80,000/25 x 14/16) Bond interest expense

2,800

3,100

 

182,900

Question no. 4 - A Redemption price (P200,000 x 1.05) Book value of bonds retired Face value Unamortized bond premium (P80,000 x 2/16 x 20.25/25) Loss on bond redemption

210,000

 

200,000

8,100

208,100

 

1,900