PRTC - FIRST PREBOARD (SOLUTION GUIDE)

FEBRUARY 5 - 6,2011
KEY ANSWERS (SET B)
MANAGEMENT SERVICES
1B
36 C
2D
37 A
3A
38 C
4A
39 A
5D
40 D
6D
41 A
7A
42 B
8B
43 B
9A
44 C
10 A
45 B
11 B
46 C
12 A
47 C
13 B
48 D
14 C
49 A
15 D
50 D
16 D
51 C
17 D
52 B
18 A
53 A
19 A
54 B
20 D
55 D
21 D
56 A
22 B
57 D
23 BONUS
58 A
24 A
59 B
25 B
60 B
26 A
61 B
27 A
62 D
28 C
63 A
29 B
64 B
30 A
65 D
31 D
66 D
32 B
67 D
33 A
68 C
34 A
69 C
35 C
70 B

BUSINESS LAW & TAXATION

1B
36 D
2B
37 C
3A
38 A
4B
39 A
5B
40 D
6A
41 D
7B
42 D
8C
43 B
9B
44 B
10 D
45 A
11 D
46 B
12 D
47 C
13 A
48 D
14 D
49 C
15 A
50 D
16 C
51 A
17 C
52 B
18 B
53 D
19 C
54 C
20 C
55 D
21 D
56 C
22 C
57 C
23 A
58 C
24 D
59 C
25 D
60 B
26 B
61 D
27 C
62 B
28 B
63 C
29 C
64 D
30 B
65 C
31 B
66 B
32 A
67 D
33 C
68 D
34 D
69 D
35 D
70 B

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40

AUDITING THEORY
D
41 D
A
42 C
D
43 B
A
44 C
B
45 A
C
46 B
B
47 A
D
48 D
C
49 A
B
50 B
C
51 B
C
52 D
B
53 C
D
54 C
A
55 B
C
56 D
B
57 C
D
58 C
D
59 D
C
60 B
D
61 D
B
62 B
D
63 D
C
64 D
C
65 A
B
66 D
D
67 A
A
68 D
A
69 B
A
70 B
C
71 A
B
72 B
B
73 D
C
74 D
D
75 C
D
76 C
B
77 C
D
78 C
B
79 C
A
80 C

THEORY OF ACCOUNTS
1B
41 D
2D
42 B
3D
43 B
4A
44 C
5B
45 C
6D
46 B
7A
47 D
8B
48 B
9D
49 D
10 C
50 D
11 A
51 C
12 C
52 C
13 C
53 D
14 C
54 C
15 B
55 C
16 D
56 D
17 D
57 A
18 A
58 D
19 A
59 A
20 B
60 B
21 D
61 A
22 A
62 A
23 A
63 B
24 B
64 D
25 B
65 B
26 C
66 C
27 D
67 D
28 A
68 B
29 C
69 B
30 A
70 C
31 C
71 A
32 C
72 A
33 D
73 D
34 C
74 B
35 D
75 B
36 A
76 C
37 B
77 B
38 B
78 B
39 C
79 D
40 C
80 C

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50

AP
A
D
C
D
B
A
C
D
A
B
B
D
D
A
D
B
C
A
A
B
B
C
A
D
B
C
A
B
B
D
D
A
B
C
A
C
B
B
A
B
C
B
D
B
A
B
D
B
B
C

P1
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50

P1
B
A
D
C
C
B
B
A
A
D
A
D
D
B
C
D
A
C
B
A
D
D
B
D
B
A
D
A
A
A
B
D
D
B
D
A
A
C
B
D
A
D
C
D
A
C
B
A
D
D

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40

P2
C
D
B
A
C
A
A
D
C
D
C
B
C
A
C
B
A
A
D
A
D
A
B
B
A
A
D
D
B
D
C
B
D
C
D
C
C
D
B
B

PRTC FIRST OPEN PREBOARD - SET B

AUDITING PROBLEMS
FEBRUARY 6,2011
SUGGESTED SOLUTION - SET 2 STARTS AT PROBLEM NO. 6
PROBLEM 1 - MANILA CORPORATION

ITEM (ERROR)
A
B
C
D
E
F

INVENTORY
OVER (UNDER)
(180,000.00)
200,000.00
150,000.00
(400,000.00)
250,000.00
(160,000.00)
(140,000.00)
1-C

COS
OVER (UNDER)
180,000.00
(200,000.00)
0.00
400,000.00
(250,000.00)
160,000.00
290,000.00
2-A

PROFIT
OVER (UNDER)
(180,000.00)
(100,000.00)
0.00
200,000.00
250,000.00
(160,000.00)
10,000.00
3-B

PROBLEM 2 - MORNING CORPORATION

6-D
SALES PROCEEDS
CARRYING AMOUNT, 02.28.11
CA AMOUNT 01.01.11 (P180,000-168,750)
DEPRECIATION - 2011 (P180,000X.25X2/12)
GAIN (LOSS) ON SALE
7-A
TRADE IN VALE
CARRYING AMOUNT, 09.01.11
CA AMOUNT 01.01.11 (180,000-67500)
DEPRECIATION - 2011 (P180,000X.25X8/12)
GAIN (LOSS) ON TRADE-IN
8-B
MACHINE 1 SOLD 02.28
MACHINE 2 DESTROYED 12.01
MACHINE 3 TRADED IN 09.01
MACHINE 4
MACHINE 5 - ACQUIRED 02.28
MACHINE 6 - ACQUIRED 09.01
MACHINE 7 - ACQUIRED 12.01
ADJUSTED BALANCE, 12.31.11
RECORDED (DEBITS - CREDITS)

11,250.00
(7,500.00)

112,500.00
(30,000.00)

SHOULD BE
OVER (UNDER)
9-C
10 - A
MACHINE
MACHINE
MACHINE
MACHINE
MACHINE
MACHINE
MACHINE

1
2
3
4
5
6
7

DA
180,000.00
180,000.00
180,000.00
180,000.00
396,000.00
216,000.00
432,000.00

FRACTION
2/12
11/12
8/12
12/12
10/12
4/12
1/12

DEPRECIATION
7,500.00
41,250.00
30,000.00
45,000.00
82,500.00
18,000.00
9,000.00
233,250.00

11 - C
FAIR VALUE
CA, 12.10
COST
ACCUMULATED DEPR.
INCREASE (DECREASE)
TO BE RECOGNIZED IN

MACHINE A
84,000.00
100,000.00
20,000.00
80,000.00
4,000.00
OCI

12 - B
PROFIT OR LOSS
OTHER COMPREHENSIVE INCOME (OCI)
COMPREHENSIVE INCOME
13 - B
SALES PROCEEDS
LESS CARRYING AMOUNT 07.01.11
CARRYING AMOUNT 12.31.10
DEPRECIATION UP TO 07.01 (38000/2 X 6/12)
GAIN ON SALE OF MACHINE B

38,000.00
(9,500.00)

14 - A
MACHINE A
(84000 / 4)
MACHINE B
(38000 / 2 X 6/12)
MACHINE C
(80000 /4 X 6/12)
TOTAL DEPRECIATION - 2011
15 - B

MACHINE 1

FAIR VALUE
CA 12.31.10
PREVIOUS CA
DEPRECIATION - 2011
INCREASE (DECREASE)
TO BE RECOGNIZED IN
PROBLEM 4 - EVENING CORPORATION
16 - C
COST OF LAND - 2006
2007 COST TO BUILD ROAD
2007 MINE IMPROVEMENTS
TOTAL 2006- 2007 COST
LESS RESIDUAL VALUE
COST SUBJECT TO DEPLETION
DIVIDE BY TOTAL ESTIMATED RESERVES
2009 DEPLETION PER TON
DEPLETION FOR 2009 (5000 X 1.30)
17 - B
ORIGINAL COST TO BE DEPLETED
LESS 2009 DEPLETION
REMAINING DEPLETABLE AMOUNT, 1.01.10
2010 MINE IMPROVEMENTS
NEW COST TO DEPLETE
DIVIDE BY REMAINING EST. RESERVES, 1/1/10
(4,000,000-5,000 + 3,000,000)
2010 DEPLETION PER TON
DEPLETION FOR 2010 (1,000,000 X P0.78)
18 - D
BUILDING COST (2008)
LESS: RESIDUAL VALUE
ORIGINAL COST TO BE DEPRECIATED
LESS 2009 DEPRECIATION (5,000XP0.31)
REMAINING DEPRECIABLE AMOUNT, 1.1.10
2010 NEW BUILDINGS
NEW COST TO DEPRECIATE
DIVIDE BY REMAINING EST. RESERVES (SEE NO. 17)
2010 DEPRECIATION PER TON
DEPRECIATION FOR 2010 (1,000,000 X P0.21)

61,000.00
84,000.00
(21,000.00)
63,000.00
(2,000.00)
OCI

19 - B
NEW COST TO DEPLETE, 01.01.10
LESS 2010 DEPLETION
REMAINING DEPLETABLE AMOUNT, 01.01.11
2011 MINE IMPROVEMENTS
NEW COST TO DEPLETE
DIVIDE BY REMAINING EST. RESERVES,01.01.11
(6,995,000-1,000,000)
2011 DEPLETION PER TON
DEPLETION FOR 2011 (P2,500,000 X P0.21)
20 - A
DEPRECIATION FOR 2010 (P2,500,000 X P0.21)
PROBLEM 5 - WEEKEND CORPORATION
21 - B
PRESENT OF NOTE RECEIVED (95,000,000 X .675)
LESS CARRYING AMOUNT OF PATENT, 05.01.11
CARRYING AMOUNT, 01.01.10
AMORTIZATION UP TO 05.01.11 (P3,150,000/15X3)
GAIN ON SALE OF PATENT
22 - D
NOTE RECEIVABLE FROM SALE OF PATENT (P3,375,000X14% X8/12)
INSTALLMENT CONTRACT
01.01 TO 03.31(P7.2M X .13 X 3/12)
04.01 TO 12.31(P5.4 X .13 X 9/12)
TOTAL INTEREST INCOME - 2011
23 - B
INSTALLMENT CONTRACT RECEIVABLE, 12.31.10
LESS PRINCIPAL PAYMENT RECEIVED, 03.31.11
BALANCE, 12.31.11
LESS PRINCIPAL PAYMENT TO BE RECEIVED, 03.31.12
NONCURRENT PORTION
24 - B
CA, 05.1.11
AMORTIZATION OF DISC. ( 05.01 TO 12.31 P3,375,000 X .14 X 8/12)
NONCURRENT PORTION
25 - C
ACQUISITION COST

2,450,000.00
(70,000.00)

234,000.00
526,500.00

DIVIDENDS RECEIVED (750K X 2)

SHARE OF PROFITS (7,040,000 X .25)
CARRYING AMOUNT, 12.31.11
PROBLEM 6 - DAVAO COMPANY (START OF SET B)
26 -A
PURCHASES / TGAS
LESS MI, 12.31
COST OF SALES
ADD GROSS PROFIT (220,000 X 1.20)
SALES
LESS: AR 12.31
COLLECTIONS FROM SALES
27 - D
CASH RECEIPTS:
OWNERS INVESTMENT
PROCEEDS FROM LOAN
COLLECTIONS FROM CUSTOMERS (SEE NO 26)
TOTAL
CASH DISBURSEMENTS:
PURCHASES (P250 - 15K)
STORE FIXTURES ( 50K-5K)
LOAN PAYMENT
EXPENSES PAID
CASH BALANCE PER BOOKS, 12.31

235,000.00
45,000.00
80,000.00
180,000.00

28 - C
UNADJUSTED BALANCE PER BANK, 12.31
OC , 12.31
UNDEPOSITED COLLECTIONS, 12.31
ADJUSTED BALANCE PER BANK, 12.31 (CASH ACCOUNTED)
CASH BAL. PER BOOKS, 12.31 (CASH ACCOUNTABILITY)
CASH - OVER (SHORT)
29 - D
30 - B
PROBLEM NO 7 - CEBU COMPANY
BALANCES PER BANK (A,G)
DIT (B)
NOV 30

11.30.11
14,010.00
2,740.00

RECEIPTS
281,070.00
(2,740.00)

DEC 31
OC
NOV 30
DEC 31(P3,870 - 700)
BANK COLLECTIONS NOT IN BOOKS (D)
NOV 30
DEC 31
BANK CHARGES NOT IN BOOKS (E)
NOV 30
DEC 31
DAIF CHECKS
RETURNED IN DEC (H)
RETURNED IN NOV (I)
RETURNED & RECORDED IN DEC (J)
BANK ERROR (K)
CASH RECEIPTS USED FOR PAYTS (L)
BOOK ERRORS (M,N)
CUSTOMERS CHECKS (465-165)
DISB. CHECKS (3,250-325)
BALANCES PER BOOKS

3,110.00
(4,260.00)

(1,200.00)

1,200.00
(1,600.00)

950.00

1,050.00

(1,050.00)
(900.00)
750.00
(300.00)

13,290.00
31 - A

279,540.00
32 - C

36 - B
37 - D
38 - D
39 -A
ROBINSON (70,000 - 30,000)
TRIPPER (RECEIVED PDC ON 11/1)
ADJUSTED NOTES RECEIVABLE - TRADE 12.31.11
40 - D
ROBINSON
JAN TO AUG - 70,000 X .06 X 8/12
SEPT TO DEC - 40,000 X .06 X 4/12
TRIPPER P8,000 X 0.06 X 12/12
PEPPER - P42,437 - P40,500
ANNA - 25,000 X .06 X 2/12
JULIA (NON INTEREST)
TOTAL INTEREST INCOME
41 - B

2,800.00
800.00

42 - C
PRINCIPAL
DIRECT ORGANIZATION COST
ORIGINATION FEE RECEIVED FROM BORROWER (10M X .05)
CARRYING AMOUNT, 01.01.11
43 - A
CA, 12.31.12
LESS PV OF EXPECTED CASH FLOWS:
12.31.14 - P4M X .8116
12.31.16 - P4M X .6587
LOAN IMPAIRMENT
44 - A
45 - B
46 - B
UNADJUSTED CASH BALANCE
CASH SALES
UNDELIVERED CHECKS
POST DATED CHECKS
COMPENSATING BALANCE - RESTRICTED
ADJUSTED CASH BALANCE
47 - C
UNADJUSTED BAL.
CLAIMS AGAINST SHIPPER
SP OF UNSOLD GOODS OUT ON CONSIGNMENT
SECURITY DEPOSIT ON LEASE WAREHOUSE
POST DATED CHECKS
UNRECORDED SALE - P46,000 X 1.3)
ADJUSTED AR
48 - A
AR, NET (SEE NO. 47)
CLAIMS AGAINTS SHIPPER
TRADE & OTHER RECEIVABLES, NET
49 - D
UNADJUSTED INVENTORY
GOODS SOLD FOB DESTINATION - IN TRANSIT
GOODS PURCHASED FOB SHIPPING POINT - IN TRANSIT
ADJUSTED INVENTORY

3,246,400.00
2,634,800.00

50 - B
CASH - SEE NO. 46
TRADE & OTHERS - SEE NO. 48
INVENTORY - SEE NO. 49
INVESTMENTS
PREPAID INSURANCE
CASH HELD AS COMPENSATING BALANCE
CURRENT ASSETS

WORKING CAP
OVER (UNDER)
(180,000.00)
(100,000.00)
0.00
200,000.00
250,000.00
(160,000.00)
10,000.00
4-B

6,000.00

3,750.00
2,250.00

24,000.00

82,500.00
(58,500.00)
COST
0.00
0.00
0.00
180,000.00
396,000.00
216,000.00
432,000.00
1,224,000.00
1,734,000.00

5-D

1,224,000.00
510,000.00

A/D
0.00
0.00
0.00
90,000.00
82,500.00
18,000.00
9,000.00
199,500.00
MACHINE B
38,000.00
60,000.00
20,000.00
40,000.00
(2,000.00)
P/ L

(2,000.00)
4,000.00
2,000.00

32,000.00

28,500.00
3,500.00

21,000.00
9,500.00
10,000.00
40,500.00
MACHINE C

CA
90,000.00
313,500.00
198,000.00
423,000.00
1,024,500.00

68,500.00
80,000.00
(10,000.00)
70,000.00
(1,500.00)
P/ L

50,000.00
5,000,000.00
750,000.00
5,800,000.00
600,000.00
5,200,000.00
4,000,000.00
1.30
6,500.00

5,200,000.00
6,500.00
5,193,500.00
275,000.00
5,468,500.00
6,995,000.00
0.78
780,000.00

1,500,000.00
250,000.00
1,250,000.00
1,550.00
1,248,450.00
225,000.00
1,473,450.00
6,995,000.00
0.21
210,000.00

5,468,500.00
780,000.00
4,688,500.00
1,100,000.00
5,788,500.00
5,995,000.00
0.97
2,425,000.00

525,000.00

3,375,000.00

2,380,000.00
995,000.00

315,000.00

760,500.00
1,075,500.00

7,200,000.00
1,800,000.00
5,400,000.00
1,800,000.00
3,600,000.00

3,375,000.00
315,000.00
3,690,000.00

18,800,000.00

(1,500,000.00)
1,760,000.00
19,060,000.00

250,000.00
30,000.00
220,000.00
264,000.00
484,000.00
70,000.00
414,000.00

150,000.00
98,000.00
414,000.00
662,000.00

540,000.00
122,000.00

91,500.00
(4,500.00)
5,000.00
92,000.00
122,000.00
(30,000.00)

DISBURSEMENTS
275,450.00

12.31.11
19,630.00

3,110.00
(4,260.00)
3,170.00

(3,170.00)

(1,600.00)
950.00
(640.00)

640.00

(800.00)

800.00

(900.00)
(2,010.00)
750.00

2,010.00

2,925.00
274,635.00
33 - D

40,000.00
8,000.00
48,000.00

3,600.00
480.00
1,937.00
250.00
0.00
6,267.00

(300.00)
(2,925.00)
18,195.00
34 - A

35 - B

10,000,000.00
130,900.00
(500,000.00)
9,630,900.00

9,756,232.00

5,881,200.00
3,875,032.00

1,056,000.00
(150,000.00)
93,000.00
(78,000.00)
(400,000.00)
521,000.00

1,220,000.00
(30,000.00)
(260,000.00)
(300,000.00)
78,000.00
59,800.00
767,800.00

767,800.00
30,000.00
797,800.00

441,000.00
38,000.00
51,000.00
530,000.00

521,000.00
797,800.00
530,000.00
200,000.00
50,000.00
400,000.00
2,498,800.00

PRTC FIRST OPEN PREBOARD - SET B

PRACTICAL ACCOUNTING 1
FEBRUARY 6,2011

SUGGESTED SOLUTION - SET B STARTS AT PROBLEM NO. 18

1-C
SERVICE CONTRACT SOLD
EARNED IN 2010 FROM:
2010 (250T X .4 X 1/2)
EARNED IN 2011 FROM:
2010 (250T X .4 X 1/2)
2010 (250T X .6 X 1/2)
2011 (300T X .4 X 1/2)
UNEARNED, 12.31.11
2-B
3-A
4-D
COST OF GOODS SOLD - B GRADE (1M+8.8M-1.25M)
COST RATION (1-.25)
SALES REVENUE
5-D
UNADJUSTED NET SALES
UNRECORDED SALES RETURN - AUTHORIZED 12.27.11
UNRECORDED SALES - SHIPPED 12.30.11
UNSHIPPED GOODS RECORDED AS SALES
GOODS LOST IN TRANSIT
ADJUSTED NET SALES
6-B
DM
DM PURCHASES IN TRANSIT
WIP
FG
COST OF GOODS OUT ON CONSIGNMENT (27T X .80)
TOTAL INVENTORY
7-D
INVENTORY PER RECORDS
B
C

YR 2010
250,000.00
(50,000.00)
(50,000.00)
(75,000.00)
75,000.00

D
E
CORRECTED INVENTORY
8-B
INVENTORY, 12.31.10
PURCHASES
TOTAL
LESS: INVENTORY, 12.31.11 - 8.5M + 6.0M
COST OF INVENTORY BEF LOSS ON INVENTORY WRITEDOWN
LOSS ON INVENTORY WRITEDOWN - 500K - 300K
COST OF SALES AFTER WRITEDOWN
9-A
10 - D
11 - A
12 - A
13 - A
INVENTORY BEGINNING
PURCHASES
PURCHASE DISCOUNT
PURCHASE ALLOWANCE
PURCHASE RETURNS
FREIGHT IN
NET MARK UP
NET MARK DOWN
DEPARTMENTAL TRANSFER - IN
DEPARTMENTAL TRANSFER - OUT
ABNORMAL WASTAGES
GOODS AVAILABLE FOR SALE
COST RATIO
GOODS AVAILABLE FOR SALE AT RETAIL
LESS:
NET SALES
SALES DISCOUNT
SALES ALLOWANCE
NORMAL WASTAGES
EMPLOYEE DISCOUNTS
ESTIMATED INVENTORY, 09.30.10 AT COST
X COST RATIO

EST. INVENTORY 09.30.10 AT COST

COST OF USABLE DAMAGED GOODS
ESTIMATED INVENTORY FIRE LESS
14 - B
15 - D
16 - D
17 -B
18 - D

Principal
Interest

Maturity Amount
PV of Cash flows at grant date
Government grant, 1/1/11
19-D
Nominal Interest (P7M x .12)
Amortization of bond issue cost [(P7M x .015)/3.5]
Capitalized Interest
20 - A
Carrying amount, 1/1/11 (P600,000 x 10/20)
Add overhaul costs
Total remaining carrying amount, 1/1/09
Divide by remaining life, 1/1/11 (20-10+5)
Depreciation for 2011
21 - C
Depreciation amount - original asset
(P650,000+P5,000+P20,000+P4,000-P50,000)
Divide by useful life
Depreciation expense - original asset
Depreciation expense - accessories (P48,600/18)
Total depreciation expense for 2011
22 - B

Cash flow
5,000,000,000.00
250,000,000.00

PVF@10%
0.6209
3.7908

Depreciation expense for 2011 (P340,000 x .25 x 6/12)

23 - D
Depreciable amount (P20,000,000+P70,000-P100,000)
Divide by useful life
Depreciation for 2011
24 - A
Main machine (P62,400/10)
First component (P10,000/6 x 3/12)
Second component [(P15,250 x .75)/4x9/12]
Total Depreciation-2011
25 - D
Depletion expense [12,500 tons x (P3.5M/1M) x7]
26 -C
Depreciation expense [12,500 tons x (P90,000/1M) x 7]
27 - D
Cost of natural resources, net of residual value (P10M - P2M)
Mine improvements
Cost subject to depletion
Divide by total estimated reserves in 201
Depletion rate in 2010
Number of tons mined in 2010
Depletion for 2010
Original cost subject to depletion
Less depletion in 2010
Remaining cost to deplete, 1/1/11
Remaining tons of ore, 1/11/11 (3,000,000+150,000)
Depletion rate in 2011
Number of tons mined in 2011
Depletion for 2011
28 - A
CA of building, 12/31/11 (P100,000 x 49/50)
29 - C
Patent (at cost)
License (government grant, at fair value)
Prepaid advertising (P5M x 3/6)
Total assets

30 - B
Patent amortization - 2011 (P330,000/10)
31 - B
R & D expense (Include all except equipment)
32 - D
Excess annual earnings (P10,000 x .2)
Normal return on net assets [(P100,000 -P10,000) x .1]
Annual earnings
33 - D
Buildings
Factory machinery
Goodwill
Inventory
Receivables
Cash

CA
240,000.00
180,000.00
15,000.00
80,000.00
35,000.00
20,000.00
570,000.00

I.L. Allocation*
(9,600.00)
(7,200.00)
(15,000.00)
(3,200.00)

(35,000.00)

*Charged the impairment loss first to goodwill. The balance (P20,000) will be allocated pro rata to o
assets in the unit except cash and receivables.
Computation of limit on the extent of reversal
BUILDINGS
CA, 12.31.10 - W/O IMPAIRMENT
BUILDINGS (240T-60T)
MACHINERY (180T - 45T)
CA, 12.31.10 - WITH IMPAIRMENT
BUILDINGS (230,400T-65T)
MACHINERY (172,800T - 50T)

BUILDINGS
FACTORY MACHINERY

MACHINERY

180,000.00
135,000.00
165,400.00
14,600.00

122,800.00
12,200.00

CA *
165,400.00
122,800.00
288,200.00

ALLOCATION **
11,478.00
8,522.00
20,000.00

* SINCE THE REVERSAL LOSS OF GOODWILL IS NOT ALLOWED & THE INVENTORY AS OF 12.31.10
WAS SOLD ALREADY, THE REVERSAL WILL BE ALLOCATED ONLY TO THE BLDG & MACHINERY.
** SINCE THE EXCESS OF RA OVER THE CA DID NOT EXCEED THE LIMIT, THE REVERSAL WOULD BE BA
ON A PRO RATA ALLOCATION ON CARRYING AMOUNTS AT TIME OF REVERSAL.

34 - B
TOTAL CASH (925T - 17T + 9.8T +800)
35 - A
LOAN AMOUNT (900 T - 50T) / .85
ANNUAL INTEREST PAYMENT (P1M X .12)
ANNUAL INTEREST INCOME ON INCREMENTAL CB (100T X .04)
NET INTEREST PAYMENT
NET LOAN PROCEEDS (1M - 100T)
EFFECTIVE INTERST RATE
36 - D
37 - C
38 -C
AR , 01.01.11
ADD: DEBITS TO AR
SALES ON ACCOUNT
RECOVERY OF ACCOUNTS WRITTEN OFF
TOTAL
LESS: CREDITS TO AR
CASH RECEIVED FROM CUSTOMERS
SALES DISCOUNT
P1,411,200 / .98 X .02
P792,000 / .99 X .01
ACCOUNTS WRITTEN OFF
ACCOUNTS RECEIVABLE, 12.31.11
ALLOW FOR DA, (P270,400 X .05)
NRV, 12.31.11

2,400,000.00
4,800.00

2,560,000.00
28,800.00
8,000.00

39 - B
TOTAL AMOUNT TO BE RECEIVED (P5,009 X 5)
LESS INITIAL CARRYING AMOUNT
TOTAL INTEREST INCOME OVERTERM OF NOTE
40 -B
41 -A
ERRONEOUS CREDIT TO GAIN ON SALE OF MACHINE (800T - 640T)
UNRECOGNIZED LOSS (SEE COMPUTATION BELOW)
UNRECOGNIZED INTEREST INCOME (P569,440 X .12 X 6/12)

36,800.00
17,600.00

NET OVERSTATEMENT
COMPUTATION ON LOSS ON SALE OF MACHINE:
SALES PRICE (PV OF NR) P800 X .7118
CARRYING AMOUNT
LOSS ON SALE
42 -A
CASH (1.5M X .75)
RECEIVABLE FROM FACTOR (1.5M X .1)
ALLOWANCE FOR DA
LOSS ON FACTORING
ACCOUNTS RECEIVABLE

1,125,000.00
150,000.00
35,000.00
190,000.00

43 - D
AR FACTORES
FACTORS HOLDBACK - 110,000 X.08
COMMISSION - 110,000 X .015
NET AMOUNT BEFORE INTEREST
INTEREST CHARGE (99,550 X .16 X 60/360)
NET PROCEEDS
44 - A
ACQUISITION COST
CASH DIVIDENF RECEIVED (1M X .25 XP2.2)
SHARE OF PROFIT - P4.8M X .25
CARRYING AMOUNT, 12.31.11
45 - D
46 -D
CASH (5,912 + 450 - 190)
AR (5,240 - 450)
SUPPLIES ON HAND
FURNITURE & FIXTURE (6,100 + 3,200)
AP
SHARE CAPITAL
RETAINED EARNINGS
SERVICE REVENUE - P5,200 + 2,025 + 80
OFFICE EXPENSE - P4,320 - 3,200
TOTAL
47 -B
48 - C

DEBIT
6,172.00
4,790.00
2,967.00
9,300.00

1,120.00
24,349.00

49 - D
50 - A
CASH
AR, NET
INVTRY
EQUIPMENT
BUILDING, NET
LOANS PAYABLE
ACCOUNTS PAYABLE
NET INCREASE IN EQUITY
CONTRIBUTIONS FROM OWNERS
DISTRIBUTION TO OWNERS
NET INCOME - 2011

EFFECT ON
EQUITY
800,000.00
(40,000.00)
300,000.00
360,000.00
600,000.00
(1,000,000.00)
300,000.00
1,320,000.00
(800,000.00)
250,000.00
770,000.00

M NO. 18
YR 2011
300,000.00

(60,000.00)
240,000.00

8,550,000.00
0.75
11,400,000.00

1,300,000.00
(50,000.00)
80,000.00
(100,000.00)
1,230,000.00

99,000.00
16,200.00
68,400.00
81,000.00
21,600.00
286,200.00

305,000.00
100,000.00
(46,000.00)

TOTAL

315,000.00

(150,000.00)
61,000.00
270,000.00

19,450,000.00
127,850,000.00
147,300,000.00
14,500,000.00
132,800,000.00
200,000.00
133,000,000.00

COST
190,000.00
2,900,000.00
(50,000.00)
(90,000.00)
(60,000.00)
20,000.00

386,800.00
(400,000.00)
(80,000.00)
2,816,800.00

RETAIL
300,000.00
4,000,000.00

(120,000.00)
60,000.00
(80,000.00)
430,000.00
(550,000.00)
(120,000.00)
3,920,000.00
0.72
3,920,000.00

2,908,000.00
8,200.00
32,150.00
120,000.00
9,500.00

3,077,850.00
842,150.00
0.72

606,348.00
(50,000.00)
556,348.00

PV 1/1/11
3,104,500,000.00
947,700,000.00
4,052,200,000.00
5,000,000,000.00
4,052,200,000.00
947,800,000.00

840,000.00
30,000.00
870,000.00

300,000.00
120,000.00
420,000.00
15
28,000.00

629,000.00
20
31,450.00
2,700.00
34,150.00

42,500.00

1,970,000.00
10
197,000.00

6,240.00
417.00
2,145.00
8,801.00

306,250.00

7,875.00

8,000,000.00
750,000.00
8,750,000.00
2,000,000.00
4.38
50,000.00
219,000.00
8,750,000.00
219,000.00
8,531,000.00
3,150,000.00
2.71
150,000.00
406,500.00

98,000.00

12,000,000.00
10,000,000.00
2,500,000.00
24,500,000.00

33,000.00

11,000,000.00

2,000.00
9,000.00
11,000.00

CA after
230,400.00
172,800.00
76,800.00
35,000.00
20,000.00
535,000.00

ocated pro rata to other

TOTAL

26,800.00
CA AFTER
176,878.00
131,322.00
308,200.00

S OF 12.31.10
ACHINERY.
RSAL WOULD BE BASED

918,600.00

1,000,000.00
120,000.00
(4,000.00)
116,000.00
900,000.00
12.90%

480,000.00

2,404,800.00
2,884,800.00

2,614,400.00
270,400.00
(13,520.00)
256,880.00

25,045.00
19,485.00
5,560.00

160,000.00
70,560.00
(34,166.00)

196,394.00
569,440.00
640,000.00
(70,560.00)

1,500,000.00

110,000.00
(8,800.00)
(1,650.00)
99,550.00
2,655.00
96,895.00

5,000,000.00
(550,000.00)
1,200,000.00
5,650,000.00

CREDIT

7,044.00
8,000.00
2,000.00
7,305.00
24,349.00

PRTC FIRST OPEN PREBOARD - SET B

PRACTICAL ACCOUNTING 2
FEBRUARY 6,2011

SUGGESTED SOLUTIONS - SET B STARTS AT PROBLEM NO. 20

1 A
CONSTRUCTION IN PROGRESS (24M X 60%) - (19.5M X 20%)
MISCELLANNEOUS ACCOUNTS
2B
THE INDICATED GAIN OF P2,080 WILL NOT BE RECOGNIZED AT DATE OF REPOSSESSION. IT WILL
BE DEFERRED TO THE POINT OF SALE, BY LOWERING THE FAIR VALUE TO EQUAL THE UNRECOVERED
OF THE MERCHANDISE.
UNPAID BALANCE (32T-6.4T-6.4T)
LESS: DEFERRED GP (19,200 X 40%)
UNRECOVERED COST
LESS: FAIR VALUE
GAIN
3B
REVENUE RECOGNIZED - 8.4M X 580/725
LESS: COST INCURRED TO DATE
PROFIT TO DATE
LESS: PROFIT RECOGNIZED - 2010
REVENUE RECOGNIZED - 8,400,000 X 32/64=
LESS : COST INCURRED TO DATE
PROFIT - 2010
ENTRY : CONSTRUCTION COST (P5,800,000 - P3,200,000)
CONSTRUCTION IN PROGRESS
CONSTRUCTION REVENUE (P6,720,000- P4,200,000)

2,600,000

4A
REVENUE RECOGNIZED TO DATE
LESS : COST INCURRED TO DATE (3,200,00 = 2,600,000 + 1,450,000)
PROFIT TO DATE
LESS : PROFIT RECOGNIZED PRIOR YEARS
PROFIT RECOGNIZED - 2011
ENTRY : CONSTRUCTION COST (P7,250,000 X 20%)
CONSTRUCTION IN PROGRESS (p1,150,000 X 20%)
CONSTRUCTION REVENUE (P8,400,000 X 20%)

NOTE ; 20% IS A WORK ACCOMPLISHED IN 2011

5A
REALIZED GROSS PROFIT (200,000 X 30%)
6
INTEREST ON THE FIRST PAYMENT (1,000,000 X 3%)
INTEREST ON THE SECOND PAYMENT (929,537.86)
TOTAL COLLECTIONS APPLYING TO THE INTEREST
7D
BALANCE PRINCIPAL
(1,400,000 - 400,000)
LESS :PAYMENT APPLIED TO PRINCIPAL {100,462.10 - (1,000,000 X 30%)}
BALANCE PRINCIPAL
LESS :PAYMENT APPLIED TO PRINCIPAL {100,462.10 - (929,537.86 X 3%)}
UNPAID BALANCE
LESS : DEFERRED GROSS PROFIT (35%)
UNRECOVERED COST
LESS : VALUE OF REPOSSESSED MERCHANDISE
LOSS
8-B
ENTRY : INVESTMENT IN QUEZON BRANCH
INVESTMENT IN NAGA BRANCH
TO REVERSE THE ERRONEOUS CREDIT TO THE QUEZON BRANCH AND TO
REFLECT REMITTANCE OF NAGA BRANCH
9- D
REALIZED GROSS PROFIT - REGULAR SALES (385,000 X 30%)
REALIZED GROSS PROFIT - IS - 2010 54/135 = 40%(135,000-15,000-7,800)
REALIZED GROSS PROFIT - IS - 2011-263,500/425,000 = 38% (425,000-200,000)
TOTAL REALIZED GROSS PROFIT
LESS : LOSS ON REALIZATION
TOTAL REALIZED GROSS PROFIT, NET OF LOSS ON REPOSSESSION
10 - C
BILLED PRICE OF SHIPMENTS TO BRANCH (150,000 X 120%)
SHIPPING CHARGES
AMOUNT DEBITED TO THE HOME OFFICE ACCOUNT

11 - B
SALES
COST OF SALES (70,000/125%)
HOME OFFICE DISBURSEMENT CHARGEABLE TO SALES AGENCY
SAMPLE EXPENSE (15,750-10,000)
DEPRECIATION OF FURNITURE AND FIXTURES (25,000 X 1%)
NET INCOME - AGENCY
12 - D
SHIPMENT TO BRANCH
MERCHANDISE RETURNED
MERCHANDISE INVENTORY, END
COST OF GOODS SOLD AT BILLED PRICE
LESS : COST OF GOODS SOLD AT COST (25,380/120%)
REALIZED PROFIT TO BE TAKEN UP IN THE HOME OFFICE BOOKS
13 - C
SALES
COST OF GOODS SOLD AT COST (168,000 - 50,400) 117,600
140%
EXPENSES
TRUE NET INCOME - BRANCH
14 - D
TOTAL ALLOWANCE FOR OVERVALUATION
LESS : ALLOWANCE FOR OVERVALUATION ON CURRENT SHIPMENT (288,000-240,000)
PROFIT IN BEGINNING INVENTORY
WPEE: ALLOWANCE FOR OVERVALUATION
12,000
MERCHANDISE INVENTORY, DECEMBER 1, 2010
TO ELIMINATE THE OVERSTATEMENT OF THE BRANCH BEGINNING INVENTORY
15 - C
CONSTRUCTION REVENUE

(21,000,000 X 14,250,000)
19,000,000
LESS : REVENUE RECOGNIZED - 2009 (20,000,000 X 4/16)
CONSTRUCTION REVENUE - 2010
CONSTRUCTION PROFIT (10,750,000-10,250,000)

12,000

16 - C
TOTAL CAPITAL AFTER Z's ADMISSION (37,000 + 65,000 + 48,000)
80%
SHARE OF NEW PARTNER
AMOUNT THAT PARTNER Z SHOULD INVEST
17 - D
INITIAL FRANCHISE FEE
CONTINUING FRANCISE FEE ( 2,702,500 X 5%)
TOTAL FRANCHISE REVENUE
18 - B
DOWN PAYMENT
GROSS PROFIT RATE

(5,000,000 - 500,000)
5,000,000.00

REALIZED GROSS PROFIT

19 - B
DOWN PAYMENT
PV OF INSTALLMENTS (2,000,000 X 2.40)
TOTAL
FRANCISE COST
REALIZED GROSS PROFIT - COLLECTION OF NOTES REASONBLY ASSURED
GP RATE = 5,750,000/6,800,000 = 85%
DOWN PAYMENT
FIRST INSTALLMENT 2,000,000 - (4,800,000 X 24%)
TOTAL
X GP RATE
REALIZED GROSS PROFIT - COLLECTION OF NOTES NOT REASONABLE ASSURED
20 - C
ACTUAL COST-TO-DATE, 12/31/10 (p24,000,000 X 60%)
ADD PROFIT-TO-DATE, 12/31/10 [(P26,000,000 X 60%)-P14,400,000]
CIP, 12/31/10
LESS PROGRESS BILLINGS TO-DATE, 12/21/10
DUE FROM CUSTOMERS (A CURRENT ASSETS)
21 - D
FACE AMOUNT OF NR (P3,000,000 - P1,200,000)
PRESENT VALUE (P600,000 X 2.17)
UNEARNED INTEREST AT DECEMBER 31, 2009
EARNED INTEREST DURING 2010 (1,302,000 X 18%)
UNEARNED INTEREST AT 12.31.10

22 - B
PASIG PROJECT: IGNORE THE INITIAL PROFIT
CAINTA PROJECT (P7.5M - 8M)
23 - A
REVENUE TO DATE
LESS: REVENUE RECOGNIZED TO END OF 2009 (8.4M X 80%)
RECOGNIZED REVENUE FOR 2010
24 - C
COST (800T + 1.320M)
LESS FV OF NA (1.760M - 280T)
GOODWILL
DAVID CORP (3,040,000-800,000-32,000)
ACQUIRED ASSETS (160T + 400T + 80T + 1.120M)
GOODWILL (SEE 24 - C)
TOTAL ASSETS AFTER COMBINATION
25 - A
TOTAL SHE (1.680M +400T+1.320T-32T)
STOCKHOLDERS EQUITY :
CAPITAL STOCK (1,680,000 + 900T)
APIC (1,320,000 - 900T - 12T)
RE (400T - 20T)
TOTAL
26 - A
TA (3.5M + (2.1M X 50%)
27 - D
UNDER EQUITY METHOD HER OWN LIABILITIES IS ONLY P1,800,000.00
28 - C
NET INCOME FROM own operations (3.0M -1.5M)
Add Share in JV net income (250t x 50%)
NET INCOME REPORTED BY THE VENTURER
29 - D
COST (100,000 + 363,636)
LESS FV OF NET ASSETS (100T + 360T + 100T -20T -110T)
GOODWILL EXCESS OF COST OVER ASSETS
30 - C

COST @ FV ((860T + ( 50T X 2%))

FV OF NA ACQUIRED
IFA
RE (5.5M + 39T - 7T)
31 - B
COST
LESS FV OF NA (220T + 550 T +60T -50T -95T)
GOODWILL
NET CHANGE IN TOTAL ASSETS (220T + 550T + 60T +40 T -725T)
32 - C
PERSONAL ASSETS
PARTNERSHIP ASSETS
TOTAL AMOUNT AVAILABLE TO PERSONAL CREDITORS AT THIS POINT
33 - A
34 - C
SALARIES (40T + 35T + 24T)
INTERESTS ( 9600 + 14400 + 21600)
BALANCE / 3
REQUIRED PARTNERSHIP INCOME
35 - B
LITAS CONTRIBUTION
BERTA'S CONTRIBUTION
CARLA'S CONTRIBUTION
TOTAL CONTRIBUTION
DIVIDE BY
CAPITAL CREDIT TO CARLA (& THE TWO OTHERS)
36 - A
37 - A
BANK LOAN
196,250.00
130,000.00
66,250.00

38 - D
TOTAL BOOK VALUES
RV OF ASSETS PLEDGED
BALANCE (UNSECURED)
TOTAL ESTIMATED PAYMENTS TO 2 PARTIALLY SECURED CREDITORS
39 - A
40 - D

TOTAL BOOK VALUE

REALIZABLE VALUE OF PLEDGED ASSETS
BALANCE
ESTIMATED PAYMENT TO PARTIALLY SECURED CREDITORS

AT PROBLEM NO. 20
10,500,000.00
10,500,000.00

TE OF REPOSSESSION. IT WILL
LUE TO EQUAL THE UNRECOVERED COST

19,200.00
7,680.00
11,520.00
13,600.00
(2,080.00)

4,200,000.00
3,200,000.00

1,000,000.00
(80,000.00)

80,000.00
2,520,000.00

8,400,000.00
7,250,000.00
1,150,000.00
920,000.00
230,000.00
1,450,000.00
230,000.00
1,680,000.00

60,000.00

30,000.00
27,886.14
57,886.14

1,000,000.00
70,462.14
929,537.86
72,576.00
856,961.86
299,936.65
557,025.21
500,000.00
57,025.21

P30,000.00
P30,000.00

ZON BRANCH AND TO

,000-200,000)

115,500.00
49,880.00
85,500.00
245,880.00
1,680.00
244,200.00

180,000.00
4,000.00
184,000.00

70,000.00
(56,000.00)
(3,600.00)
(5,750.00)
(250.00)
4,200.00

125,000.00
(15,260.00)
(84,000.00)
25,380.00
21,150.00
4,230.00

134,400.00
(84,000.00)
(10,800.00)
39,600.00

60,000.00
48,000.00
12,000.00

(288,000-240,000)
12,000
12,000

NG INVENTORY

15,750,000.00
5,000,000.00
10,750,000.00
500.00

000 - 500,000)

BLE ASSURED

187,500.00
20%
37,500.00

4,000,000.00
135,125.00
4,135,125.00

2,000,000.00
90%
1,800,000.00

2,000,000.00
4,800,000.00
6,800,000.00
(1,020,000.00)
5,780,000.00

2,000,000.00
848,000.00
2,848,000.00
85%
2,420,800.00

14,400,000.00
1,200,000.00
15,600,000.00
13,000,000.00
2,600,000.00

1,800,000.00
1,302,000.00
498,000.00
234,360.00
263,640.00

(500,000.00)

8,400,000.00
6,720,000.00
1,680,000.00

2,120,000.00
1,480,000.00
640,000.00
2,208,000.00
1,760,000.00
640,000.00
4,608,000.00

3,368,000.00
2,580,000.00
408,000.00
380,000.00
3,368,000.00

4,550,000.00

1,500,000.00
125,000.00
1,625,000.00

463,636.00
430,000.00
33,636.00

861,000.00
900,000.00
(39,000.00)
5,532,000.00

725,000.00
685,000.00
40,000.00
145,000.00

200,000.00
120,000.00
320,000.00

99,000.00
45,600.00
(27,750.00)
116,850.00

1,477,700.00
477,050.00
323,750.00
2,278,500.00
3.00
759,500.00

AP
150,000.00
114,000.00
36,000.00

TOTAL PSC
325,000.00
244,000.00
102,250.00

X 100%
X 37%

244,000.00
37,832.50
281,832.50

87,700.00
84,000.00
3,700.00

X 100%
X 68%

84,000.00
2,516.00
86,516.00