ACCTG 12 FINAL EXAM Your email will be recorded when you submit this form Not [email protected]? Switch account In the audit of the ILLUMINATE Corporation's financial statements at December 31, 2020, the chief accountant of the said corporation provided the following information: + Employees’ income tax withheld, 5,000 + Note payable arising from advances by officers, due June 30, 2006, 12,500 + Containers’ deposit 12,500 + Advances received from customers on purchase orders, 16,000 + Estimated premiums payable 18,750, + Cash dividends payable P 20,000 + Deferred revenue. 21,750 + Overdraft with Allied Bank, 22,600 + Stock dividends payable. 25,000 + Estimated expenses on meeting guarantee for service requirements on merchandise sold. 30,000 + Common stock warrants outstanding 30,000 + Estimated damages to be paid as a result of unsatisfactory performance on a contract, 40,000 + Accounts payable arising from purchase of goods, net of debit balances of P30,000. 42,500 + Dividends in arrears on preferred stock, not yet declared. --P50,000, + Notes receivable discounted. 50,000, + Common stock options outstanding.......P$2,500 + Notes payable arising from purchase of goods. 73,500 + Accounts receivable, net of credit balances P40,000........P 90,000 + Accrued interest on bands payable 90,000 + Cash in bank balance with PNB. 97,500 + Reserve for general contingencies. 100,000 + Unused letters of credit. 100,000 + Notes payable arising from § year-bank loans, on which marketable securities valued at 150,000 have been pledged as security, P100,000 due on June 30, 2021; P25,000 due on Dec. 31, 2021....P 125,000 + Deficiency VAT assessment being contested........P125,000 + Convertible bonds, due January 31, 2022. 250,000 + First mortgage serial bonds, payable in semi-annual installments of P20,000, due April 1 and October 1 of each yeatan.-P500,000 (On March 31, 2021, the P100,000 note payable was replaced by an 18-month note for the same amount. ILLUMINATE is considering similar action on the P25,000 note payable due on December 21, 2027, The 2020 financial statements were issued on March 31, 2021 (On December 19, 2020, a former employee filed a lawsuit seeking P50,000 for unlawful dismissal ILLUMINATE’s attorneys believe that the suit is without merit. No court date has been set, (On January 21, 2021, the BIR assessed Heats an additional income tax of P75,000 for the 2078 tax year. ILLUMINATE’s attorneys and tax accountants have stated that itis likely that the BIR will agree to a 200,000 settlement.How much is the total current liabilities as of December 31, 2020? © a.Ps75,000 © b.P600,000 @ «.P710,000 © 4.P62s,.000 Clear selection How much is the total noncurrent liabilities as of December 31, 2020? © a.P825,000 b. P750,000 c, P850,000 @®@©oo .P710,000 Clear selection How much is the total liabilities as of December 31, 2020? © @.P1,460,000 @ ».P1,420,000 O «.P1,285,000 © 4.P1,335,000 Clear selectionExcel Company is a domestic corporation operating in the Philippines for the first time this 2018. Since April 15, 2019 is fast approaching, Excel Company is in the process of preparing the reconciliation of income per books with income per income tax return for its first year of operations the year ended December 31, 2018. Data below were gathered by the Company: Excel Company acquired an equipment at a cost of P500,000 on January 1, 2018, Depreciation was recorded using the straight-line method with no expectes residual value for an estimated useful ife of 5 years. For income tax purposes, the double-declining balence method was used. The carrying amount ‘and tax base of the sald equipment were P400,000 and P300,000, respectively Sales, cost of sales, operating expenses are recognized under the accrual method for both financial and income tax reporting purposes, except for the following items: Rent income is recognized for financial reporting under PAS 17 while for income tax purposes rent income is recognized when collected. In 2018, Jam Company reported rent income of P140,000, while rent collected totaled to P90,000. The Company recognized a Rent receivable amounting to P50,000 based on PAS 17. Warranty costs are recognized for financial reporting purposes under the acerval method and provide an expense equal to 5% of sales. For income tax purposes, warranty costs are recognized when actual payment is made. Total warranty expenditures incurred for 2015 was P320,000. At year end, Excel ‘Company reported an estimated warranty obligation of P40,000, Bad debts expense reported during the year for financial reporting was P65,000. For income tax purposes, bad debts are recognized as deductions only upon actual write-off which amounted to P30,000 during the year. The carrying amount and tax base of the receivables were P200,000 and P235,000, respectively. Current and future regular income tax rate is 20%. Excel Company's estimate, itis probable that future taxable income will be available against which the future deductible amounts, any unused tax losses and unused tax credits can be utilized. Net income before income tax was determined to be P50,000, Required: Applying PAS 12 ~ Income Taxes, determine the following items: Temporary difference resulting into future taxable amounts in 2018 is © 125.000 © 135,000 © 140,000 © 150,000 Clear selectionThe deferred tax liability reported in the December 31, 2018 statement of financial position is © 15000 © 22,500 O 30,000 © 45000 Clear selection Temporary difference resulting into future deductible amounts in 2018 is © 85,000 © 140,000 © 75.000 O 150,000 Clear selection The deferred tax asset reported in the December 31, 2018 statement of financial position is © 30.000 © 15000 O 22,500 © 45000 Clear selectionRabiya Corporation asked you to review its records and prepare corrected financial statements. The books of accounts are in agreement with the following balance sheet: Rabiya Corporation Balance Sheet December 31, 2006 Assets Cash P 40,000 ‘Accounts receivable 80,000 Notes receivable 24,000 Inventories 200,000 Total assets 344,000 Liabilities and Owner's Equity ‘Accounts payable P 16,000 Notes payable 32,000 Capital stock 80,000 Retained earnings 216,000 Total liabilities and owners’ equity 344,000 A review of the company’s boos indicates that the following errors and omissions had not been corrected during the applicable years: 2003 2004 2005 2008 Ending inventory - overstated Pp 56,000 64,000 P Ending inventory - understated 48,000 - 72,000 Prepaid expense 7,200 5,600 4,000 4,200 Unearned income - 3,200 - 2,400 Accrued expense 1,600 600 00 ‘400 Accrued income - 1,000 - 1,200 No dividends were declared during the years 2003 to 2006 and no adjustments were made to retained earnings. The company’s books reported the follawing net income: 2003 60,000 2005 52,000 2008 144,000 2006 60,000 Based on the above and the result of your audit, determine the adjusted amounts of the following (Disregard tax implications)Net income in 2003 @ P113,600 99,200 P116,800 P17,600 ooo Net income (loss) in 2004 O (P14,800) © (59,600) © (P62,800) © P145200 Net income (loss) in 2005 @ 44400 © 60,400 © P44,800 O (P11,600) Clear selection Clear selection Clear selectionNet income (loss) in 2006 @ 196,000 © 76,000) © P194,400 © 195,200 Clear selection Retained earnings as of December 31, 2006 © 281,600 292,000 291,200 Oo@o 147,200 Clear selection The following information relates to the defined benefit pension plan of Haven ‘Company for the year ended December 31, 2018: Projected benefit obligation, January 1 5,600,000 Projected benefit obligation, December 31 6,730,000 Fair value of plan assets, January 1 5,000,000 Fair value of plan assets, December 31 5,485,000 ‘Actual return on plan assets. 450,000 ‘Actuatial gain during the year. 150,000 Employer contribution 425,000 Benefits paid to retirees. 390,000 Settlement rate 10%What amount should be reported as total defined benefit cost for 20187 O 1,120,000 © 1,100,000 @ 1,070,000 © 1,170,000 Clear selection The following information relates to the defined benefit pension plan of the Yap Corporation for the year ended December 31, 2015: Defined benefit obligation, January 1 13,800,000 Defined benefit obligation, December 31 13,150,000 Fair value of plan assets, January 1 111,500,000 Fair value of plan assets, December 31 13,600,000 Contributions to the plan 2,000,000 Benefits paid to retirees. 1,800,000, ‘Actuarial change decreasing BPO. 906,000 Present value of available refunds and reductions in future contributions to the plan, 250,000 Expected return on plan assets. 14% Settlement rate. 12% Expected average remaining working lives of the employees participating in the plan. 10 years Required: Based on the above and the result of your audit, determine the following: Service cost for 2015 © 400,000 P506,000 1,778,000 oOo 650,000 Clear selectionActual return on plan assets in 2015 @ 1,900,000 100,000 1,610,000 2,100,000 ooo Clear selection Amount to be recognized in the statement of financial position as of December 31, 2015 © 250,000 © 650,000 © P754,000 © 450,000 Clear selectionSenpai Company provided the following information on December 31, 2021 + Accounts receivable with credit balance.......P750,000 + Income taxes withheld from employees......P800,000 + Cash overdraft at Onion Bank 1,300,000 + Estimated damages as a result of unsatisfactory performance on a contract.....P7,500,000 + Stock dividends payable P2,000,000 + Cash balance at Union Bank 2,500,000 + Accounts payable 3,000,000 + Deferred serial bonds, issued at per and bearing interest at 12%, payable in semiannual installment ‘of P500,000 due April 1 and October 1 of each year, the last bond to be paid on October 1, 2026. Interest is also paid semi-annually. 5,000,000) Other relevant information: + Senpai has an incentive compensation plan under which the President is to receive a bonus equal to 12% of income in excess of P800,000 before deducting income tax but after deducting the bonus. Income before bonus and tax is P3,600,000. Income tax rate is 32% + During the year, Senpai began including one coupon in each package of Product A that it sold and offering a toy in exchange for P50 and five coupons. The toys cost P80 each. Eventually, 60% of the coupons will be redeemed. During the year, it sold 110,000 packages of Product A and no coupons were redeemed, + Senpai carries a three-year warranty against manufacturer's defects on its Product 8. Based on previous experience, warranty costs are estimated at P300 per unit. During the year, the entity sold 2,400 units of Product 8 and paid warranty costs of P170,000. + Senpai became involved in a tax dispute with the BIR. On December 31, 2020, the entity's tax advisor believed that an unfavorable outcome was probable and the best estimate of additional tax was 500,000 but could not be as much as P650,000. After the 2020 financial statements were issued, the entity received and accepted a BIR sertlement offer of PS50,000 + Atyear-end, Senpai issued a P1,000,000 face amount note payable in exchange for services rendered. The note, made at usual trade terms, i due in nine months and bears interest, payable at maturity, at the annual rate of 2%. The market interest rate is 8%. The compound interest factor of 1 due in nine months at 8% is 944 At what amount should the note payable be reported at year-end? © Pe4a000 P1,000,000 1,000,640 oOo ®@ 965,240 Clear selectionWhat amount of provision against BIR tax dispute should be reported at year- end? @ 500,000 © Ps75,000 © 550,000 Oo Clear selection What amount should be reported as estimated liability for coupons at year-end? © P198,000 528,000 P660,000 396,000 @oo Clear selection What is the amount of bonus payable at year-end? © 200,000 204,000 336,000 OoOoO°o 228,480 Clear selectionWhat amount should be reported as total current liabilities at year-end? O P'10,396,000 P10,346,000 10,246,000 P10,196,000 CoO ®@ Clear selection ‘On January 2, 2020, the Suns, Inc. issued P2,000,000 of 8% convertible bonds at par. The bonds will mature on January 1, 2024 and interest is payable annually every January 1. The bond contract entitles the bondholders to receive 6 shares of P100 par value common stock in exchange for each P1,000 bond. On the date of issue, the prevailing market interest rate for similar debt without the conversion optior 10%. On December 31, 2021, the holders of the bonds with total face value of P1,000,000 exercised their conversion privilege. In addition, the company reacquired at 110, bonds with a face value of P500,000. The balances in the capital accounts as of December 31, 2020 were: + Common stock, P100 par, authorized 50,000 shares, issued and outstanding, 30,000 shares. 3,000,000 + Premium on common stock. ...-.--P500,000 Market value of the commen stock and bonds were as follows: Date Bonds Common stock December 31, 2020 8 40 December 31, 2021 110 42How much of the proceeds from the issuance of convertible bonds should be allocated to equity? © 34,000 P126,816 P221,664 oOo ®@ Po Clear selection How much is the carrying value of the bonds payable as of December 31, 2020? © 2,000,000 O 1,389,400 © P1796.170 @ 1,900,502 Clear selection How much is the interest expense for the year 2021? O P160,000 P138,940 P179,617 @®@©oo P 190,050 Clear selectionThe entry to record the conversion on December 31, 2021 will include a credit to APIC of O Po 365,276 400,000 307,893 Co0®@ Clear selection How much is the loss on bond reacquisition on December 31, 2021? O po 50,000 96,053 @oo P67,362 Clear selection Which of the following is not an objective of the auditor's examination of notes payable? © To determine whether internal controls are adequate. To determine whether client's financing arrangements are effective and efficient. properly authorized. To determine whether the liability for notes and related interest expense and accrued © T2determine whether transactions regarding he principal and interest of notes are O iiabiities are property stated Clear selectionThe primary focuses of the audit of debt are @ accuracy and completeness. accuracy and existence. completeness and valuation. ooo accuracy and valuation, Clear selection When auditing interest-bearing debt, the auditor should _verify the related interest expense and interest payable. not attempt to simultaneously Oo@oO0°o never Clear selection ‘An auditor would most likely verify the interest earned on bond investments by CO testing the internal controls over cash receipts. © vouching the receipt and deposit of interest checks. © confirming the bond interest rate with the issuer of the bonds. @ {PeamPuting the interest earned on the basis of face amount, interest rate, and period held. Clear selectionDuring the course of an audit, a CPA observes that the recorded interest expense seems to be excessive in relation to the balance in the long-term debt account. This observation could lead the auditor to suspect that © long-term debt is understated © discount on bonds payable is overstated, CO long-term debt is overstated. © premium on bonds payable is understated. Clear selection The auditor's program for exami ing long-term debt should include CO Verification of the existence of the bondholders, © Examination of any bond trust agreement. © Inspection of the accounts payable subsidiary ledger. © Imestigation of credits to the bond interest income account. Clear selection The auditor's program for testing long-term debt should include steps that require © Verifying the existence of the bondholders, © Examining any bond trust indenture. © Inspecting the accounts payable subsidiary ledger. © Investigating credits to bond interest income. Clear selection‘company holds bearer bonds as a short-term investment. Responsibility for custody of these bonds and submission of coupons for periodic interest collections probably should be delegated to the CO Chief accountant. O internal auditor. © Cashier. @ Treasurer. Clear selection Confirmation of accounts payable balances © |s usually performed at interim dates rather than at year-end. CO |s not effective in testing for unrecorded liabilities, @ Saticularly useful when the autor suspects labilties may be materially understated. CO Is required by generally accepted auditing standards. Clear selectionIn substantive tests of purchases and accounts payable, which of the following audit procedures is most appropriate for addressing the assertions of existence or occurrence? @ Test cutoff. O Verify accounts payable tial balance CE Test for unrecorded liabilities. © Perform analytical procedures Clear selection Which of the following is not an exception for application of IFRS 15? © Insurance contracts O Lease contracts @ Financial audit contracts O Aandc Clear selection Entity shall recognise revenue to depict the transfer of promised goods or services to customers in the amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. © Sross Residual Net Cumulative ooo Clear selectionA contract is wholly unperformed if © The entity has not yet transferred any promised goods or services to the customer © Theentty has not yet received any consideration in exchange for promised goods or services © Trent i not yet ented to rcsive any consideration In exchange for promised goods or services @ Allofthe above Clear selection How was the exam? : O bread pie It was a piece of cake Oo@o sugar Clear selection Submit This form was created inside of Christ the King College- Gingoog City. 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