Problem 1 Classifications of Accounts

Accounts Payable 680,000

Cash balance, ABC Bank 1,240,000
Cash Overdraft with XYZ Bank 80,000
Customer's accounts with credit balances 25,000
Dividends in arrears on preference shares 400,000
Employees' income tax payable 100,000
Estimated warranty payable 50,000
Estimated premium on claims outstanding 90,000
Income Tax payable 400,000
Notes payabe (issued in 2012 maturing on 20 semi-annual installments beginning on
April 1, 2013 4,000,000
Salaries Payable 400,000
The amount to be shown as total current liabilities on AA’s Statement of Financial Position at Dec. 31, 2012.

Problem 2 Premiums
In packages of its products, AA Inc. incudes coupons that may be presented at retail stores to obtain discounts on other AA’s products. Retailers are
reimbursed for the face amount of coupons redeemed plus 10% of that amount of the handling costs. AA honors requests for coupon redemption by
retailers up to 3 months after the consumer expiration date. AA estimates that 60% of all coupons issued will ultimately be redeemed. Information
relating to coupons issued by AA during 2012 is as follows:
Consumer expiration date Dec. 31, 2012
Total payments to retailers as of Dec. 31, 2012 165,000
Liability for unredeemed coupon as of Dec. 31, 2012 99,000
What is the total face amount of coupons issued by AA, Inc. in 2012?

Problem 3 Premiums
BB Co. sells its products in expensive, reusable containers. The customer is charged deposit for each container delivered and receives a refund for
each container returned within two years after the year of deliver. BB Co., accounts for the containers not returned within the limit as being sold at
the deposit amount. Information for 2012 is as follows:
Containers held by customers at Dec. 31, 2011, from
deliveries in: 2010 85,000
2011 240,000 325,000
Containers delivered in 2012 430,000
Containers returned in 2012 from deliveries in 2012: 2010 57,500
2011 140,000
2012 157,000 354,500
A. How much revenue from container sales should be recognized for 2012?
B. What is the total amount of BB’s liability for returnable containers at Dec. 31, 2012?

Problem 4 Accounting for Non-interest bearing Note

CC Inc. purchased machinery on Dec. 31, 2012 paying P80,000 down and agreeing to pay the balance in four equal installments of P60,000 payable
each Dec. 31. Implicit in the purchase price is an assumed interest of 12%.
The following data are abstracted from the present value tables:
Present value of 1 at 12% for 4 periods 0.63552
Present value of an ordinary annuity of 1 at 12% for 4 periods 3.03735

A. What is the cost of the machinery purchased on Dec. 31, 2012?

B. How much interest expense should be reported in the Company’s Income Statement?
C. What is the carrying value of the note at Dec. 31, 2014?

Problem 5 Bonds
The following data were obtained from the initial audit of DD Inc.

15%, 10 year, Bonds Payable, dated January 1, 2011

Debit Credit Balance
Cash proceeds from issue on January 1, 2011 of 1,000, P1,000 bonds. The market rate of
interest on the date of isse was 12%. 1,172,044 1,172,044

Bonds Interest Expense

Cash paid, 1/2/2012 75,000 75,000
Cash paid, 7/1/2012 75,000 150,000
Accrual, 12/21/12 75,000 225,000

Accrued Interest on Bonds

Balance, 1/1/12 75,000 75,000
Accrual, 12/31/12 75,000 150,000

Treasury Bonds
Redemption price and interest to date on 200 bonds permanently retired on
Dec. 31, 2012 265,000 265,000
A. Carrying value of the bonds payable at Dec. 31, 2012.
B. Loss on bond redemption
C. Accrued interest on bonds at Dec. 31, 2012
D. Bond interest expense for the year ended Dec. 31, 2012