SOLUTIONS

ACTIVITY-BASED COSTING
PROBLEM 1 ANSWER B GION CORPORATION
Direct Cost 75,000
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) 15.50

JOB ORDER COSTING

PROBLEM 2 ANSWER C FAITHFULLY INC.
Direct materials 42,500
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) 518.11

PROBLEM 3 ANSWER D SUPERHUMAN CO.

Direct materials 450,000
Direct labor 520,000
OH (5.50*120000) 660,000
Less: Disposal value (24,000)
Total cost of good units 160,6000

PROCESS COSTING
PROBLEM 4 ANSWER A IDOL CO.
AVERAGE Units Materials Conversion
Completed and Transf. 12000 12000 12000
WIP end 7000 7000 4200
Total 19000 19000 16200
Cost per EUP 2.78 (52750/19000) 3.71 (60025/16200)

FIFO Units Materials Conversion

WIP beg. 9500 - 2850
Started and Completed 2500 2500 2500
WIP end 7000 7000 4200
Total 19000 9500 9550
Cost per EUP 4.50 (42750/9500) 5.50 (52525/9550)

PROBLEM 5 ANSWER C SILENT SANCTUARY CORPORATION

Units Materials Conversion
WIP beg. 15000 - 4500
Started and Completed 60000 60000 60000
WIP end 3000 3000 1500
Lost units 2000 2000 2000
Total 80000 65000 68000
Cost per EUP 1.20 (78000/65000) 1.25 (85000/68000)
Total current cost per EUP 2.45

Cost of WIP beg, May 1, 2011 45000

Additional conversion cost (4500*1.25) 5625
Cost of started and completed units (60000*2.45) 147000
Cost of lost units (2000*2.45) 4900
Total cost of completed units 202525
Cost per unit (202525/75000) 2.70

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JOINT AND BY PRODUCTS
PROBLEM 6 ANSWER B ANALOG HEART INC.
(Final selling price Selling price at split-off) Additional processing cost = Incremental profit
(3 1.50) 2.50 = (1)

PROBLEM 7 ANSWER A BREAKOUT CO.

Joint cost 105000
Less: NRV of by-product (4000*4) (16000)
Joint cost to be allocated to joint products 89000

Product NRV Share in the joint cost Addtl processing cost TOTAL

A 20000 35600 6000 41600

B 30000 53400 - -
Total 50000 89000 - -

STANDARD COSTING
PROBLEM 8 ANSWER D GANAREMOS INC.
Let x = Fixed Overhead rate per machine hour
40000x = 42000x 28500 14.25/60% = 23.75 total OH rate per machine hour
28500 = 2000x 23.75 * 40% = 9.50 Variable overhead rate per MH
x = 14.25 per machine hour

PROBLEM 9 ANSWER B EMOTED INC.

Material price variance:
80000 * (5 4.75) = 20000 unfavorable
Material quantity variance:
4.75 * (70000 52500) = 83125 unfavorable

INSTALLMENT SALES
PROBLEM 10 ANSWER B SWEET SERENDIPITY CO.
GP rates: Repossessed merchandise 3400
2010 = 35% Deferred gross profit 3000
2011 = 40% Loss on repossession 1100
2012 = 35% Installment AR 2011(3000/40%) 7500
Realized gross profit:
2010: 90000*35% = 33250
2011: (167500-7500)*40% = 64000
2012 = (600000 490000)*35% = 38500
TOTAL RGP 134000

PROBLEM 11 ANSWER C MURO. CO.

Invoice price 97500
Add: Under allowance (17500-15000) 2500
Adjusted Installment Sales 100000
CGS 65000
Gross profit 35000 (35%)
Repossessed merchandise 15000
DGP 8085
Loss on repossession 15
Installment AR 23100
Net income:
RGP [(24750 + 17500) + (11550*3)] * 35% 26915
Loss on repossession (15)
Net income 26900

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LONG TERM CONSTRUCTION CONTRACTS
PROBLEM 12 ANSWER A BREAKEVEN CORP
2010: 14625000/32500000 = 45%
2010 RGP:
Construction price 34000000
Est. total cost (32500000)
GP 1500000
Percentage of Completion 45%
RGP 675000
2011:
Construction price 34000000
Est. total cost (34250000)
Anticipated total loss (250000)
Less: RGP, 2010 675000
RGP, 2011 (925000)

PROBLEM 13 ANSWER C MABI CORP.

2010: Anticipated total loss 50000
2011: 28/35 = 80% Percentage of completion
Construction price 33600000
Estimated total cost 31900000
Gross profit 1700000
Percentage of completion 80%
RGP to date 1360000
Less: RGP, 2010 (50000)
RGP, 2011 1410000

FRANCHISE
PROBLEM 14 ANSWER B MABETH INC.
Initial franchise fee 1750000
Initial direct costs (912100)
Gross profit 837900 (47.88%)
RGP (850000*47.88%) 406980
Continuing franchise fee 28750
Interest income 27000
Indirect costs (50000)
Net income 412730

PROBLEM 15 ANSWER A DEWYZE INC.

Deferred revenue:
500000 * 3.60478 = 1802390

SALES AGENCY
PROBLEM 16 ANSWER D INFATUATION CO.
Sales, net of discount 516330
CGS (393750)
Samples (42000)
Expenses (35000)
Net income 45580

HOME OFFICE INTERBRANCH

PROBLEM 17 ANSWER C BETTER IN TIME CO.
Branch Current Manila Branch Current Quezon City
9/1 430000 322500 9/1 9/1 22500
11/1 125000 26300 12/1 12/1 24400
Bal 06200 Bal 46900

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HOME OFFICE RECON
PROBLEM 18 ANSWER B ARTEMUS CO.
Branch Current Manila Home Office Current
Unadjusted balance 522110 461490
a. - 14500
b. - 36000
c. (10120) -
d. 52920 52920
Adjusted balance 564910 564910

HOME OFFICE BILLED PRICE

PROBLEM 19 ANSWER D PROF CO.

Mark-up above cost = 25%

Ending inventory, Home office 630000
Ending inventory, Branch, at cost 240000
Total ending inventory 870000

Sales 11250000
CGS
Beginning inventory 1100000
Purchases 7150000
Less: ending inventory (870000) (7380000)
Expenses (570000)
Net income 3300000

PROBLEM 20 ANSWER B AMV BRANCH

Mark-up above cost = 35%
Cost of ending inventory (43750/35%) 125000
Add: mark-up 43750
Ending inventory, billed price 168750

PARTNERSHIP FORMATION
PROBLEM 21 ANSWER D 4A1 AND QUADRIBATCH
4A1 Quadribatch
Net investments before Quadribatchs cash 203000 175000
investment/withdrawal
Capital Credit of Quadribatch (203000*1.20) 243600
Additional Cash investment 68600

Total Cash (34000 + 19000 + 68600) = 121600

PARTNERSHIP OPERATIONS
PROBLEM 22 ANSWER C CC PARTNERSHIP
Caloy Chris
Balance 35000 48000
Additional Investments 30000 24000
Withdrawals (8000)
Ending balance before share in profit 57000 72000

Interest (7 mos.) 3325 4200

Salaries (7 mos.) 7000 8750
Remaining (53275 23275) 18000 12000
Share in profit 28325 24950
Capital balance, end 85325 96950

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PROBLEM 23 ANSWER A AUBREY AND ANN
Aubrey Ann
Salaries 52200 51800
Remaining (115000 104000)
Based on interest:
Aubrey 6000 (50%) 5500
Ann 6000 (50%) 5500
Share in profit 57700 57300

PARTNERSHIP DISSOLUTION
PROBLEM 24 ANSWER D THADDEUS, SIMON AND MARI
Net assets before Thaddeus withdrawal 199000 (450000 251000)
Adjustment for depreciation (15000)
Net assets, adjusted 184000
Payment to Thaddeus (53200)
Net assets after Thaddeus withdrawal 130800

PROBLEM 25 ANSWER A JAMES, PATRICK, AND CASTLE

Patricks capital before Castles admission 75000
Patricks capital after Castles admission (84250)
Increase of 9250
Total bonus to old partners (9250/25%) 37000

Old partners capital, adjusted 252000

Castles capital credit (252000/75%)*25% 84000
Add: bonus to old partners 37000
Cash invested by Castle 121000

LUMPSUM LIQUIDATION
PROBLEM 26 ANSWER D ELAINE, BEE, AND CHUA
Chuas interest before liquidation 225000
Cash received for settlement 52500
Total deduction from Chuas interest 172500
Total loss = 172500/50% 345000
CHECK:
Elaines interest 60000
Share in the total loss (69000)
Elaines interest, after loss (9000)
Bees interest 103500
Share in the total loss (103500)
Bees interest after loss 0
Book value of noncash assets 450800
Total loss from sale of noncash assets (345000 9000) 336000
Cash received from sale of noncash assets 114800

PROBLEM 27 ANSWER C INSTALLMENT LIQUIDATION

Rom Rae Din
Loss absorption 246800 643333 768000
potential
Priority I Din (124667)
Excess of loss
absorption potential of
Din over Rae
Balances 246800 643333 643333
Priority II Rae and Din (396533) (396533)
Excess of loss
absorption potential of
Rae and Din over Rom
Balances 246800 246800 246800

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Priority I Din (124667 * 20%) 24933
Priority II Rae (396533 * 30%) 118960
Din (396533 * 20%) 79307 198267
Total 223200
CASH:
Let x = cash received from sale of noncash assets during January
30000 + x 80000 223200 = 0
x = 273200

JOINT VENTURE
PROBLEM 28 ANSWER C RUVI, KRIS, AND JEREMY
Jeremys capital balance before share in profit 21000
Cash received by Jeremy (22200)
Share in profit 1200
Joint Venture

Balance before adj 15000 18600Cost of unsold merchandise

Joint venture profit (1200*3) 3600

PROBLEM 29 ANSWER D ALYZZA AND BRAVO

Cash (135000 + 65000 + 93600 31000) 262600
AR (312000*70%) 218400
Merchandise (250000 218400) 31600
Total assets 512600
Alyzzas share in the total assets (512600*55%) 281930

CORPORATE LIQUIDATION
PROBLEM 30 ANSWER B ELI CORPORATION
Fully secured Partially secured Unsecured

Cash 124200 222000 59640 360

Inventory 53000 375000 79000
Receivable 13000
Less: Unsecured with priority
Trustees salary (9500) 58500
Salaries payable (50000) 80000
Taxes (4000)
Net free assets 126700
Total unsecured without 217860
priority
Recovery percentage: 126700/217860 = 58%
Partially secured: 434640 + 79360(58%) = 480669

PROBLEM 31 ANSWER B GOODBYE TO YOU INC.

Recovery percentage = 25%
A: 124000 + 9920 = 133920; 133920 115000 = 18920; 18920 * 25% = 4730 TOTAL PAYMENT =
119730
B: 136000 + 13600 = 149600; 149600 * 25% = 37400
C: 137500 + 7452 = 144952
D: 12220
A = partially secured; B = unsecured w/o priority; C = fully secured; D = unsecured with priority

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NONPROFIT ORGANIZATIONS
PROBLEM 34 ANSWER C BLEEDING LOVE HOSPITAL
Amounts charged to patients 384000
Contractual Adjustments (90000)
Net patient service revenue 294000

PROBLEM 35 ANSWER B BROKEN HEART UNIVERSITY

Unrestricted contributions 250000
Contributions from a donor who stipulated that
the money be spent in accordance to the wishes
of the hospitals board of trustees 75000
Contributions used for scholarship 75000
Current fund revenue 400000

FOREX
PROBLEM 36 ANSWER A CINCO CORP.
Exchange rate Peso
Net assets, 1/1/10 115000 45 5175000
Net income, 2010 90000 43.75 3937500
Div. declared, 9/1/10 (15000) 40 (600000)
Net income, 2011 22500 45 1012500
9525000
Net assets translated using the rate at the end of the 212500 47.50 10093750
year
Exchange difference (Translation adjustment) 568750

PROBLEM 37 ANSWER D THE SCRIPT CO.

7850 (11.50 10.75) = (5887.50)

PROBLEM 3 8 ANSWER A PYRAMID PHILIPPINES

Oct. 31, 2011 Dec. 31, 2011 Jan. 31, 2012
Intrinsic Value 7250 14500 29000
Time Value 1000 2500 -

12/31/11 Time value = 1500 gain

1/31/12 Intrinsic value = 14500 gain

PROBLEM 39 ANSWER D PERFECT CO.

May 1 May 31 June 30
Intrinsic value 0 12500 37500
Time Value 14000 5000 1500

Equity 37500 gain

Earnings (5000 1500) 3500 loss

PROBLEM 40 ANSWER C UST COMPANY

125000 * (92.20 91.90) = 37500 loss

PROBLEM 41 ANSWER A KEL CO.

Hedged item:
2750 (48 43) 13750 gain
Hedging instrument:
2750 (43 49) 16500 loss
Net forex loss 2750

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BUSINESS COMBINATION ACQUISITION OF NET ASSETS
PROBLEM 42 ANSWER C LOVE AND YOU CORP.
Cost of investment You Corp.
MV of stocks issued 875000 Net assets at FV 660000
Contingent 15000
consideration
Total 890000 660000
Goodwill 230000

Assets:
Loves assets at BV 900000
Add: Goodwill 230000
Less: Cash payments (53000)
Yous assets at FV 695000
Total assets 1772000

PROBLEM 43 ANSWER D CIDO, AYIZIEL, AND VIANNEY

Ayiziel Vianney
FV of net assets 2990000 903000

Common stocks issued, at par 2843750 789250

Related APIC 406250 112750
Cost of investment 3250000 902000

Goodwill/(income fr. acq.) 260000 (1000)

Retained earnings:
Acquirers RE + income from acquisition related costs stock issuance costs in excess of
related APIC
4300000 + 1000 118500 69750 = 4112750

BUSINESS COMBINATION ACQUISITION OF STOCKS

PROBLEM 44 ANSWER A Aonuevo Corp. and Sy Corp.
Cost of investment Sy Corp.
Cash 2500000 BV of net assets 2800000
FV of NCI 685000 Inventory (90000)
Land 50000
Patent 125000
Total 3185000 FV of net assets 2885000
Goodwill 300000

Goodwill:
Controlling (2500000 2308000) 192000
Non-controlling (685000 577000) 108000

Amortization 2011 2012

Inventory 90000 -
Patent (18750) (25000)
Total 71250 (25000)

Impairment of Goodwill 2011 2012

Controlling (192/300) * 22500 14400 14400
Non-controlling (108/300) 8100 8100
*22500
Total 22500 22500

NCINAS
SHE at date of acquisition 2800000
Excess 85000
Net income, 2011 (from date of acq.) 485000
Amortization 71250
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Dividends declared (35000)
SHE as adjusted (before adj. for goodwill and impairment 3406250
3406250 * 20% 681250
Share in the goodwill 108000
Share in the impairment of goodwill (8100)
NCINAS 781150

JOINT ARRANGEMENT

Problem 45 Answer D
2011: 98,000 (recoverable amount less cost to sell)
2012: 101,000 cost
2013: 86,000 (recoverable amount less cost to sell)

Problem 46 Answer: A (at fair value) no need for impairment testing

BUSINESS COMBINATION

Problem 47 Answer B
CT 1,600,000
FV of net identifiable assets (1,300,000)
Goodwill 300,000
CT = P16 x 100,000 shares = 1,600,000
FV of the accounting acquiree = 500,000 + 1,500,000 300,000 400,000 = 1,300,000

DECONSOLIDATION

Problem 48 Answer C
FV of Proceeds 540,000
FV of Retained Interest 54,000
CA of NCI 45,000
CA of Net Assets (450,000)
Gain 189,000

INSURANCE CONTRACTS

Problem 49 Answer A

SERVICE CONCESSION ARRANGEMENT

Problem 50 Answer C
Intangible asset 310M (110M + 200M)
Financial asset 200M (110M + 90M)
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