ADVANCED ACCOUNTING - ANSWERS AND SOLUTIONS:

Problem 1. D

Fully secured Partially Unsecured

secured
Cash P124,200 P222,000 P 59,640 P 360
Inventory 53,000 375,000 79,000
Receivable 13,000
Less:
Unsecured
with priority
Trustees (9,500) 58,500
salary
Salaries (50,000) 80,000
payable
Taxes (4,000)
Net free assets 126,700
Total 217,860
unsecured
without priority

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

Exchange Peso
rate
Net assets, 1/1/12 115,000 45 P5,175,0
00
Net income, 2012 90,000 43.75
3,937,50
0
Div. declared, 9/1/12 40
(15,000) (600,000
)
Net income, 2013 22,500 45
1,012,50
0

9,525,00
0
Net assets translated using the rate at the end 212,500 47.50 10,093,7
of the year 50
Exchange difference (Translation adjustment)
56,8750

Problem 5. B
 Oct. 31, 2013 Dec. 31, 2013 Jan. 31, 2014
Intrinsic Value 7,250 14,500 29,000
Time Value 1,000 2,500 -

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

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

Page 2

Problem 6. D

May 1 May 31 June 30

Intrinsic value 0 12,500 37,500
Time Value 14,000 5,000 1,500

Equity 37,500 gain

Earnings (5000 1500) 3,500 loss

Problem 7. D

125,000 * (92.20 91.90) = 37,500 loss

Problem 8. A

Hedged item:
2,750 (48 43) 13,750 gain
Hedging instrument:
2,750 (43 49) 16,500 loss
Net forex loss 2,750

Problem 9. C

Cost of You Corp.

investment
MV of stocks issued 875,000 Net assets at FV 660,000
Contingent 15,000
consideration
Total 890,000 660,000
Goodwill 230,000

Assets:
Loves assets at BV 900,000
Add: Goodwill 230,000
Less: Cash payments (53,000)
Yous assets at FV 695,000
Total assets 1,772,000

Problem 10. B

Ayiziel Vianney
FV of net assets 2,990,000 903,000

Common stocks issued, at 2,843,750 789,250

par
Related APIC 406,250 112,750
Cost of investment 3,250,000 902,000

Goodwill/(income fr. acq.) 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 P75,000

Set-up (25*7500) 187,500
Utilities (7.60*15000) 114,000
No. of parts (20*550) 11,000
Total Cost 387,500
Cost per Unit (387500/25000) P15.50

Problem 13. D

Direct materials P42,500

Direct labor 65,250
FOH 78,300
Direct materials rework 13,550
Direct labor rework 15,250
FOH rework 18,300
Total cost 233,150
Cost per unit (233150/450) P518.11

Problem 14. C

Direct materials P450,000

Direct labor 520,000
OH (5.50*120000) 660,000
Less: Disposal value (24,000)
Total cost of good units 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 14.25/60% = 23.75 total OH rate per

machine hour
28,500 = 2,000x 23.75 * 40% = 9.50 Variable overhead
rate per MH
x = 14.25 per machine hour

Problem 17. B
GP rates: Repossessed merchandise 3,400
2011 = 35% Deferred gross profit 3,000
2012 = 40% Loss on repossession 1,100
2013 = 35% 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

Branch Current Manila Home Office Current

Unadjusted balance 522,110 461,490
a. - 14,500
b. - 36,000
c. (10,120) -
d. 52,920 52,920
Adjusted balance 564,910 564,910