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Advanced Accounting - Solution

The document provides solutions to 20 problems related to advanced accounting. It includes calculations for determining recovery percentages in bankruptcy, foreign currency translations, time value and intrinsic value in options, incremental profits from additional processing, overhead rates, percentage of completion for long-term contracts, and adjusting entries between a branch office and home office. The solutions demonstrate techniques for asset valuation, goodwill calculation, installment sales, and deferred revenues/costs in accrual accounting.

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Christian Go
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68 views

Advanced Accounting - Solution

The document provides solutions to 20 problems related to advanced accounting. It includes calculations for determining recovery percentages in bankruptcy, foreign currency translations, time value and intrinsic value in options, incremental profits from additional processing, overhead rates, percentage of completion for long-term contracts, and adjusting entries between a branch office and home office. The solutions demonstrate techniques for asset valuation, goodwill calculation, installment sales, and deferred revenues/costs in accrual accounting.

Uploaded by

Christian Go
Copyright
© © All Rights Reserved
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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ADVANCED ACCOUNTING - ANSWERS AND SOLUTIONS:

Problem 1. D
Fully secured
Cash
Inventory
Receivable
Less:
Unsecured
with priority
Trustees
salary
Salaries
payable
Taxes
Net free assets
Total
unsecured
without priority

P124,200
53,000
13,000

P222,000

Partially
secured
P 59,640
375,000

Unsecured
P

360
79,000

(9,500)

58,500

(50,000)

80,000

(4,000)
126,700
217,860

Recovery percentage: 126,700/217,860 = 58%


Partially secured: 434,640 + 79,360(58%) = P480,669
Problem 2. B
Recovery percentage = 25%
A: P124,000 + 9,920 = 133,920; 133,920 115,000 = 18,920; 18,920 * 25% =
4,730 TOTAL PAYMENT = P119,730
B: P136,000 + 13,600 = 149,600; 149,600 * 25% = P37,400
C: P137,500 + 7,452 = 144,952
D: P12,220
A = partially secured; B = unsecured w/o priority; C = fully secured; D = unsecured
with priority
Problem 3. C

Problem 4. A

Net assets, 1/1/12

115,000

Net income, 2012

90,000

Exchange
rate
45

Peso
P5,175,0
00

43.75
3,937,50
0

Div. declared, 9/1/12

40
(15,000)

Net income, 2013

22,500

(600,000
)
45
1,012,50
0

Net assets translated using the rate at the end


of the year
Exchange difference (Translation adjustment)

212,500

47.50

9,525,00
0
10,093,7
50
56,8750

Problem 5. B

Intrinsic Value
Time Value

Oct. 31, 2013


7,250
1,000

Dec. 31, 2013


14,500
2,500

Jan. 31, 2014


29,000
-

12/31/11 Time value = 1,500 gain


1/31/12 Intrinsic value = 14,500 gain

Page 2
Problem 6. D
Intrinsic value
Time Value

May 1
0
14,000

May 31
12,500
5,000

Equity
Earnings (5000 1500)

June 30
37,500
1,500

37,500 gain
3,500 loss

Problem 7. D
125,000 * (92.20 91.90) = 37,500 loss
Problem 8. A
Hedged item:
2,750 (48 43)
Hedging instrument:
2,750 (43 49)
Net forex loss

13,750 gain
16,500 loss
2,750

Problem 9. C

MV of stocks issued
Contingent
consideration
Total
Goodwill

Cost of
investment
875,000
15,000

You Corp.
Net assets at FV

890,000

660,000
660,000

230,000

Assets:
Loves assets at BV
Add: Goodwill
Less: Cash payments
Yous assets at FV
Total assets

900,000
230,000
(53,000)
695,000
1,772,000

Problem 10. B
FV of net assets
Common stocks issued, at
par
Related APIC
Cost of investment
Goodwill/(income fr. acq.)

Ayiziel
2,990,000

Vianney
903,000

2,843,750

789,250

406,250
3,250,000

112,750
902,000

260,000

(1,000)

Retained earnings:
Acquirers RE + income from acquisition related costs stock issuance costs in
excess of related APIC
4300000 + 1000 118500 69750 = P4,112,750
Problem 11. B

Page 3
Problem 12. C
Direct Cost
Set-up (25*7500)
Utilities (7.60*15000)
No. of parts (20*550)
Total Cost
Cost per Unit (387500/25000)

P75,000
187,500
114,000
11,000
387,500
P15.50

Problem 13. D
Direct materials
Direct labor
FOH
Direct materials rework
Direct labor rework
FOH rework
Total cost
Cost per unit (233150/450)

P42,500
65,250
78,300
13,550
15,250
18,300
233,150
P518.11

Problem 14. C
Direct materials
Direct labor
OH (5.50*120000)
Less: Disposal value
Total cost of good units

P450,000
520,000
660,000
(24,000)
1,606,000

Problem 15. B
(Final selling price Selling price at split-off) Additional processing cost =
Incremental profit
(3 1.50) 2.50 = (1)
Problem 16. D
Let x = Fixed Overhead rate per machine hour
40,000x = 42,000x 28,500
machine hour
28,500 = 2,000x
rate per MH
x = 14.25 per machine hour
Problem 17. B

14.25/60% = 23.75 total OH rate per


23.75 * 40% = 9.50 Variable overhead

GP rates:
2011 = 35%
2012 = 40%
2013 = 35%

Repossessed merchandise
3,400
Deferred gross profit
3,000
Loss on repossession
1,100
Installment AR 2012(3,000/40%)
7,500

Realized gross profit:


2011: 90,000*35% =
33,250
2012: (167,500-7,500)*40% =
64,000
2013 = (600,000 490,000)*35% =
38,500
TOTAL RGP
135,750

Page 4
Problem 18. D
2011: Anticipated total loss
50,000
2012: 28/35 = 80% Percentage of completion
Construction price
33,600,000
Estimated total cost
31,900,000
Gross profit
1,700,000
Percentage of completion
80%
RGP to date
1,360,000
Less: RGP, 2010
(50,000)
RGP, 2011
1,410,000

Problem 19. A
Deferred revenue:
500,000 * 3.60478 = 1,802,390

Problem 20. B
Unadjusted balance
a.
b.
c.
d.
Adjusted balance

Branch Current Manila


522,110
(10,120)
52,920
564,910

Home Office Current


461,490
14,500
36,000
52,920
564,910

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