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) Discount amortization, 10/1/99 to 3/31/05 (P200,000/10 x 5.5) Bond discount, 3/31/05
200,000 (110,000) 90,000 D
3 Bond interest payable, 10/1/04 to 3/31/05 (P5,000,000 x 12% x 6/12) 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: Notes payable Bonds payable (see no. 3) Total current liabilities 5 Bonds payable: Face value Unamortized bond discount (see no. 2) Notes payable - non current Total non current liabilities
300,000 B 2,400,000 560,000 345,000 1,500,000 340,000 300,000
5,000,000 (90,000)
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 Less actual expenditures for 2005 Estimated liability from warranties, 12/31/05
136,000 108,000 244,000 164,000 80,000
Question No. 3 - A Premium expense [(1,800,000 x 60%)/200 x P14]
B
75,600
Question No. 4 - D Inventory of premium, 1/1/05 Add premium purchases (6,500 x P34) Total premium available Less premiums issued (1,200,000/200 x P34) Inventory of premium, 12/31/05
39,950 221,000 260,950 204,000 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
640,000 5,445,000 C
4,910,000 2,700,000 7,610,000 D
PROBLEM NO. 3 - Spurs Company Date
Voucher No.
Creditor
Nov. 27 Dec. 02 11 20 21
797 821 829 836 842
Duncan Supply Co. Ginobili Distributors Parker Sales Mohamed Dealers Bowen Merchandising
22 31
856 865
Horry Mercantile Jackson Traders
Amount Per sked 78,400 19,600 44,100 17,150 22,050
Amount As adjusted 80,000 45,000 22,500
Discount Lost 1,600 900 450
80,850 78,400 340,550
80,850 78,400 306,750
2,950
Note: All invoices dated prior to Dec. 22 are not entitled to discount anymore.
Adjustment Purchase discount lost Vouchers payable
8,000
Unpaid vouchers as adjusted Balance of control account (P1,645,000-P1,309,500-P36,750) Total purchase discount lost
8,000 306,750 298,750 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 Face value of bonds retired {P216,000/[1.05 + (.12 x 3/12)]} Adjusted balance of bonds payable, 12/31/03
1,600,000 200,000 1,400,000
Question no. 2 - C Unamortized bond premium, 12/31/03 (P80,000 x 14/16 x 20/25) Question no. 3 - B Nominal interest P1,400,000 x 12% P200,000 x 12% x 9/12 Total Less premium amortization Bonds retired (P80,000/25 x 2/16 x 9/12) Remaining bonds (P80,000/25 x 14/16) Bond interest expense 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
56,000
168,000 18,000 186,000 300 2,800
3,100 182,900
210,000 200,000 8,100
208,100 1,900
