1. Complete the table. Note which items are within the scope of Section 11 of the IFRS for SMEs. For those within the scope, indicate whether they should be measured subsequent to initial recognition at fair value through profit or loss, amortized cost or cost less impairment. Accounts W/in Scope of Subs. Measurement Sec. 11? (Y/N) (FVTPL, AC, Cost – Imp.) 1 Share capital 2 Intangible assets 3 Investment in nonputtable ordinary shares in a listed company 4 Investment in fixed term bonds 5 Deposit in a bank (fixed term & fixed interest) 6 Loan receivable from associate (interest-free; repayable on demand; denominated in foreign currency) 7 Inventory 8 Investment in nonputtable nonconvertible preference shares in an unlisted company 9 Bank loans (fixed term & fixed interest) 10 Warranty (Obligation to repair) 11 Deferred tax asset 12 Bank overdrafts (Due on demand; interest payable at variable market rate) 13 Current tax liability 14 Obligations under finance lease 15 Loan receivable from employee (fixed term & fixed interest) 16 Investment in mutual fund (portfolio of equity and debt securities)
2. On January 1, 2011, Hozier Co. purchased bonds with face value of P =4,000,000 for P =3,649,600 in order to collect contractual cash flows that are solely payments of principal and interest. The bonds are purchased to yield 10% interest. The nominal interest rate on the bonds is 8%, which is payable annually every December 31. On December 31, 2012, as a result of a change in the business model for managing financial assets, the entity decided to reclassify bonds from amortized cost to fair value. On such date, the carrying amount of the bonds investment is = P3,744,016 after discount amortization using the effective interest method. The market value of the bonds on January 1, 2013 is 105.
Required: Prepare all appropriate journal entries for years 2011, 2012 and 2013.
3. Paramore Co. had the following transactions: 2011 • August 1: Purchased 1,000 shares of FOB, Inc. for P =60,000. • October 1: Purchased 8,000 shares of FOB, Inc. for P =560,000. 2012 • July 1: Purchased 6,000 shares of FOB, Inc. for P =480,000. • August 1: Sold 5,000 shares of FOB, Inc. for P =500,000. FIFO method is used. 2013 • February 1: Received 50% stock dividend. • November 1: Received stock rights to purchase one new share at P =60 for every 5 rights tendered. On this date, the right is quoted at P=10. • December 1: Sold all stock rights at P =15 per right.
Required: a. Prepare journal entries to record the transactions. Any stock right is accounted for separately. b. Prepare a summary of the noncurrent investments in FOB, Inc. shares by block of acquisition, stating the number of shares and total cost for each block.
4. The Weepies Co. has the following items of inventory:
Raw materials, January 1 = P64,700 Raw materials, December 31 74,560 Work in progress, January 1 97,655 Work in progress, December 31 88,450 Finished goods, January 1 120,000 Finished goods, December 31 115,740 Purchases of raw materials 845,000 Direct labor put into production 655,000 Factory overhead applied to production 455,000
Determine the following: a. Raw materials used in production b. Cost of goods manufactured c. Cost of goods available for sale d. Cost of goods sold
5. Prepare the journal entries for the following transactions from the point of view of the buyer.
A. ABC Company purchased merchandise FOB shipping point from DEF Company for P =85,000. Freight prepaid of = P5,600 is indicated on the shipping document. The merchandise was shipped on December 18, 2018 and received on January 3, 2019. B. GHI Company purchased merchandise FOB shipping point from JKL Company for = P94,000. Freight collect of =P4,300 is indicated on the shipping document. The merchandise was shipped on December 22, 2018 and received on January 2, 2019. C. MNO Company purchased merchandise FOB destination from PQR Company for = P76,000. Freight prepaid of = P2,300 is indicated on the shipping document. The merchandise was shipped on December 28, 2018 and received on January 2, 2019. D. STU Company purchased merchandise FOB destination from VWX Company for = P86,400. Freight collect of =P3,300 is indicated on the shipping document. The merchandise was shipped on December 29, 2018 and received on January 5, 2019.
6. Determine the carrying value of inventory under the following assumptions: a. On a per item basis b. On a per group basis c. Inventory as a whole
Per Unit Item Cost Replacement Sales Price Selling Cost to Normal Quantity Cost Expenses Complete Profit A = P25.00 = P26.00 = P32.00 = P2.50 = P2.00 = P2.00 1,000 B 11.20 10.00 12.80 1.10 2.10 0.70 1,200 C 5.40 5.00 6.80 1.00 0.30 1.00 500 D 7.50 8.50 10.70 1.05 1.25 0.40 2,200 E 16.90 16.00 18.60 2.30 1.50 0.40 1,000 F 20.30 19.50 22.60 1.40 1.20 0.30 1,870 7. Temper Trap Corp. began operations in 2011. In 2011, the corporation incurred the following expenditures in purchasing materials for producing its product: • Purchase price of raw materials: P =30,000 • Import duty and other non-refundable purchase taxes: P =8,000 • Refundable purchase taxes: P =1,000 • Freight costs in bringing the goods from the supplier to the factory raw material storeroom: P =3,000 • Costs of unloading the materials into the raw material storeroom: P =20 • Packaging: P =2,000
On December 31, 2011, Temper Trap Corp. received P =530 volume rebates from a supplier for purchasing more than P =15,000 from the supplier during the year.
The company incurred the following additional costs in the production run: • Salary of the machine workers in the factory: P =5,000 • Salary of factory supervisor: P =3,000 • Depreciation of the factory building and equipment used for production process: P =600 • Consumables used in the production process: P =200 • Depreciation of vehicle used to transport the goods from the raw materials storeroom to the machine floor: P =400 • Factory electricity usage charges: P =300 • Factory rental: P =1,000
Depreciation and maintenance of the entity’s vehicle used by the factory supervisor (50% for official use and 50% for personal use) amounted to P =200. Private use of the vehicle is an employee benefit.
During 2011, Temper Trap Corp. incurred the following administration expenses: • Depreciation of the administration building: P =500 • Depreciation and maintenance of vehicles used by the administrative staff: P =150 • Salaries of the administration personnel: P =3,050
Of the administration expenses, 20% are attributable to administering the factory. The rest of the administration expenses are attributable, in equal proportion, to the sales and other non-production operations (e.g. financing, tax and corporate secretarial functions).
In the same year, the company incurred the following selling expenses: • Advertising costs: P =300 • Depreciation and maintenance of vehicles used by the sales staff: P =100 • Salary of the administration personnel: P =6,000
Required: Prepare the accounting entries to record the inventory in the accounting records of Temper Trap Corp.