Intermediate accounting by robles empleo ch 3 answers 2008

CHAPTER 3 THE BALANCE SHEET AND NOTES TO THE FINANCIAL STATEMENTS 3-1 Gates Company Gates Company Balance Sheet December 31, 2007 Assets Cash and cash equivalents P 35,000 Noncurrent as

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CHAPTER 3 THE BALANCE SHEET AND NOTES TO THE FINANCIAL STATEMENTS 3-1 (Gates Company)

Gates Company Balance Sheet December 31, 2007

Assets

Cash and cash equivalents P 35,000

Noncurrent assets:

Property, plant and equipment (2) P1,483,000

Liabilities and Shareholders’ Equity

Current liabilities:

Noncurrent liabilities:

Shareholders’ equity:

1,534,000

TOTAL LIABILITIES AND

Note 1 – Trade receivables

Note 2 – Property, plant and equipment

Less accumulated depreciation 530,000 910,000

Less accumulated depreciation 351,000 273,000 Total property, plant and equipment P1,483,000 Note 3 – Intangibles

Patents, net of accumulated amortization of

P22,000

P 98,000 Trademarks, net of accumulated amortization of

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Note 4 – Trade and other payables

Note 5 – Bonds payable

Note 6 – Share capital

Note 7 – Reserves

Paid-in capital in excess of par-preference P 81,000 Paid-in capital in excess of par-ordinary 240,000

3-2 (Starbucks Company)

Starbucks Company Balance Sheet December 31, 2007

Cash and cash equivalents P 116,000

Noncurrent assets:

Property, plant and equipment (4) P2,248,000

Liability for product warranty 73,000 P 962,000 Noncurrent liabilities:

Stockholders’ equity:

Note 1 – Temporary investments

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The trading securities, costing P150,000, are reported at market values.

Note 3 – Inventories (at lower of cost or NRV)

Less accumulated depreciation 622,000 1,202,000

 Land Held for Future Use, which conventionally was classified as long-term investment, is not qualified to be reported as Investment Property under par 9

of PAS 40 Thus, property held for future development and subsequent use as owner-occupied property is part of property, plant and equipment

Note 5 – Other financial assets

Held to Maturity Securities, at amortized cost P250,000

Note 6 – Non-current Assets Held for Sale

This classification represents a unit of machinery with

carrying amount of P240,000 and fair value less cost to sell

of P210,000 The sale is expected to be consummated in

May 2008

Note 8 – Share Capital

Note 9 – Reserves

Paid-in capital in excess of par-preferred P234,000

Paid-in capital in excess of par-common 303,000

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Retained earnings is adjusted by a decrease of P30,000 representing loss from measurement to fair value less cost to sell of asset held for sale, thus retained earnings balance is P1,204,000

3-3 (Bill Company)

Bill Company Balance Sheet December 31, 2007

Assets

Noncurrent assets:

Property, plant and

equipment

(3) P3,450,000 Available for sale securities 1,030,000

Trade and other payables (4) P1,390,000

0 Noncurrent liabilities:

Shareholders’ equity:

Ordinary Share Capital, P10

par

P1,200,000

Less Treasury shares, at cost 330,000 4,330,000

Note 2 – Prepaid expenses

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Less accumulated depreciation 920,000 2,640,000

3-4 (Net Company)

Net Company Balance Sheet December 31, 2007

Assets

Current marketable securities 460,000

6,960,000 Noncurrent assets:

7,100,000 Other financial assets (3) 1,600,000

0

2,750,000

3,470,000 Noncurrent liabilities:

4,430,000

Stockholders’ equity:

1,700,000 Paid-in capital in excess of par 1820,000

7,300,000

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Less Treasury stock, at cost 180,000 7,120,000 TOTAL LIABILITIES AND SHAREHOLDERS’

0 Note 1 – Trade receivables

Accounts receivable (1,850,000 + dishonored

0 Less accumulated depreciation 2,100,000 4,240,000

0 Less accumulated depreciation 1,300,000 1,660,000

Note 3 – Other financial assets

Investment in Day Corporation bonds P 900,000

Note 4 – Intangibles

Less accumulated amortization 230,000 P 590,000

Less accumulated amortization 150,000 370,000

Note – Share capital

3-5 (Makati Company)

Current assets consist of:

Trading securities (900,000 + 500,000) 1,400,000 Trade accounts receivable (net of P60,000 allowance

for bad debts) 1,220,000 + 70,000 – 60,000 1,230,000

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Notes receivable 920,000

Creditor’s account with debit balance 120,000

Current liabilities consist of:

Trade accounts payable (750,000 + 150,000 +

Notes payable (1,500,000 – 300,000) 1,200,000

3-6 (Internet Company)

Current liabilities consist of:

VAT payable (2,688,000/1.12) x 12 288,000

Income taxes payable (86,500 – 55,000) 31,500

Note: The entire amount of Mortgage notes payable is classified as current liabilities because as of December 31, 2007, the company has no discretion yet to refinance the obligation on a long-term basis The refinancing of the mortgage payable in 2008 is non-adjusting event that requires disclosure in the notes to the financial statements

3-7 (Jig Company)

Current assets consists of:

Cash (400,000 + 20,000 + 35,000 +

Inventories (1,200,000 – 40,000) 1,160,000 Prepaid insurance (250,000 – 50,000) 200,000 Total current assets at December 31, 2007 P3,005,000 or

Unreplenished petty cash expenses ( 5,000)

Cash surrender value of life insurance ( 50,000) Total current assets at December 31, 2007 P3,005,000

3-8 (Streamer Company)

Current assets

Non-current assets

Current liabilities

Non-current liabilities Reported totals P3,500,00

0 P8,000,000 P2,400,000 P2,700,000

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(a) Retirement fund

cash

(d) Advances and

Correct totals P3,850,00

0 P7,880,000 P2,750,000 P3,080,000

3-9 (Ping Company)

Receivable Inventories

0 P3,285,000 P3,500,000

(b) Goods shipped FOB

destination

(180,000) 120,000

Correct balances, Dec 31,

3-10 (Lime Company)

Current assets:

Accounts receivable (net) P136,000

Accrued interest on bonds payable 17,000

367,000

84,500

MULTIPLE CHOICE QUESTIONS

MC1 D MC11 C MC 21 D

MC2 A MC12 D MC 22 C

MC3 A MC13 C MC 23 C

MC4 C MC14 D MC 24 A

MC5 A MC15 B MC 25 B

MC26 A (200,000-50,000) + 120,000 + 80,000 + (280,000– 60,000) –

1,000=569,000 MC27 B 374,000 + 5,000 – 400 + 10,000 – 18,000 + 5,000 = 3,750,600 MC28 B 268,000 + 5,000 + 10,000 +5,000 – 100,000 = 1,880,000

MC29 D 401,400 – 900 - 15,000 = 3,855,000

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MC30 C (124,000 + 3,000) + 90,000 + 92,000 + (122,000 + 7,000) – 6,000

+ 136,000 + 12,000 = 590,000 MC31 B 13,000 + (75,000 + 12,000 + 15,000) + 7,000 + (150,000 – 30,000)

+ 4,000 + 50,000 + 28,000 = 324,000 MC32 B (1,125,000+65,000) + 136,000 + 96,000 + 150,000 +

(750,000/5)=1,722,000 MC33 C 376,000 + (2,000,000+100,000 – 8,000) = 2,468,000

MC34 A 360,000 + 480,000 – 30,000 – 12,000 + 90,000 + 120,000 =

1,008,000 MC35 A 450,000 + 750,000 – 90,000 + 240,000 = 1,350,000

Correction: Bonds payable due 2008

MC36 A 2,160,000 – 250,000 + 224,000 + 830,000 + 970,000 = 3,934,000 MC37 C 980,000 + 108,000 + 720,000 = 1,808,000

MC38 A (490,000 – 25,000) + (380,000 – 200,000) + (1,250,000 – 500,000)

+ 100,000 + 900,000 + 80,000 = 2,475,000 MC39 B 25,000 + 200,000 + 500,000 + 200,000 + 3,750,000 = 4,675,000 MC40 D 160,000 + 50,000 + 110,000 + 300,000 + 10,000 = 630,000

MC41 D 675,000 + (2,695,000 – 500,000) + 2,185,000 = 5,055,000

MC42 A 1,801,000 + (763,000 – 475,000) = 2,089,000

MC43 D 13,360,000 – 11,180,000 – 763,000 = 1,417,000;

1,417,000 + 3,350,000 = 4,767,000 MC44 B 1,000,000 + 1,500,000 + 25,000 = 2,525,000

MC45 C 500,000 + 550,000 – 250,000 = 800,000 + 1,000,000 + 250,000 +

450,000 = 2,500,000 MC46 B 150,000 + (2,100,000 – 500,000 – 80,000) + (1,600,000 – 200,000) MC47 B (550,000 – 95,000) + 800,000 + (800,000 X 12% X 7/12) + 6,500 MC48 C 8,700,000 – (4,000,000 – 2,000,000 + 5,000,000 – 1,000,000)

=2,700,000 MC49 B 175,000 + 136,000 + 820,000 + 153,000 + 366,000 = 1,650,000 MC50 A 250,000 + 140,000 + 228,000 + 248,000 = 866,000

MC51 C 525,000 – 400,000 + 300,000 + 1,020,000 + 1,2000,000 + 450,000

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