Chapter 18: BOOK VALUE PER SHARE

Problem 18-14: D
Total shareholders’ equity: ₱10,250,000.00
Preference shareholders’ equity:
Preference share capital 2,500,000.00
Preference dividend in arrears 250,000.00
Liquidation premium 500,000.00 3,250,000.00
Ordinary shareholders’ equity: 7,000,000.00
Ordinary shares outstanding ÷ 100,000
Book value per ordinary share ₱70.00

Problem 18-15: A
Preference share capital ₱ 1,000,000.00
Liquidation premium 100,000.00
Preference dividend- current year 120,000.00
Total Preference shareholders’ equity 1,220,000.00
Preference share outstanding ÷ 20,000
Book value per Preference share ₱ 61.00

Problem 18-16: C
Total Equity ₱ 3,900,000.00
Preference shareholders’ equity:
Preference share capital 1,000,000.00
Liquidation premium 100,000.00
Preference dividend in arrears 160,000.00 1,260,000.00
Ordinary shareholders’ equity 2,640,000.00
Ordinary share ÷ 100,000
Book value per ordinary share 26.40

Problem 18-17: B
Total shareholders’ equity: ₱ 4,950,000.00
Preference shareholders’ equity:
Preference share capital 1,000,000.00
Liquidation premium 50,000.00 1,050,000.00
Ordinary shareholders’ equity 3,900,000.00
Ordinary share ÷ 30,000
Book value per OS ₱130.00

Problem 18-18: A
Total shareholders’ equity: ₱1,608,000.00
Preference shareholders’ equity:
Preference share capital 500,000.00
Preference dividend in arrears 40,000.00 540,000.00
Ordinary shareholders’ equity 1,068,000.00
Ordinary share outstanding ÷ 89,000
BV per OS ₱ 12.00

Problem 18-19: C
Total shareholders’ equity per book ₱1,910,000.00
Preference shareholders’ equity per book:
Preference share capital 500,000.00
Preference dividend for 2018 & 2019 80,000.00 580,000.00
Ordinary shares equity 1,330,000.00
OS outstanding ÷ 10,000
BV per OS ₱ 133.00

Problem 18-20: A
Balance ₱ 5,000,000.00
12% x 5m x 1 600,000.00
Balance prorate 1,000,000.00
Total 6,600,000.00
Share outstanding ÷ 50,000
BV per OS ₱ 132.00

Problem 18-21: C
Total shareholders’ equity ₱ 10,600,000.00
Preference shareholders’ equity:
Preference share capital 2,000,000.00
Preference dividend for 2017, 2018, 2019 600,000.00 2,600,000.00
Ordinary shareholders’ equity 8,000,000.00
OS outstanding ÷ 50,000
BV per OS ₱ 160.00

Problem 18-22: B
Total dividend declared ₱ 440,000.00
Preference dividend:
In arrears on December 31, 2018 120,000.00
2019 dividend 240,000.00 360,000.00
Ordinary ₱ 80,000

Problem 18-23: D
Ordinary dividend (250k x 4) ₱ 1,000,000.00
Preference dividend (2.5m x 10%) 250,000.00
Total dividend ₱ 1,250,000.00

Problem 18-24: C
Preference share capital (20k x 100) ₱ 3,000,000.00
Ordinary share capital (200k x 10) 2,000,000.00
Total ₱ 5,000,000.00

Preference dividend (3/5 x 1m) ₱ 600,000.00

Ordinary dividend (2/5 x 1m) 400,000.00
Dividend payable ₱ 1,000,000.00

Problem 18-25: C
Dividend Preference Ordinary
Amount 900,000.00
6% x 1m x 3 (180,000.00) 180,000.00
6% x 4m (240,000.00) 240,000.00
Balance pro rata 480,000.00
1/5 x 480,000 96,000.00
4/5 x 280,000 384,000.00
Total dividend ₱ 276,000.00 ₱ 624,000.00

Problem 18-26: B, A
1) 2019 (6m x 6%) ₱ 360,000.00
2018 60,000.00
₱ 420,000.00
2) ₱ 900,000.00
(420,000.00)
₱ 480,000.00

Problem 18-27: A, B
1) (100m x 5%) ₱ 5,000,000.00

2017 3m 2,000,000.00 (5m-3m)

2018 4m 1,000,000.00(4m-3m)
2019 12m 5,000,000.00 (12m-4m-3m)
₱ 8,000,000.00
2) ₱ 12,000,000.00
(8,000,000.00)
₱ 4,000,000.00

Problem 18-28: B, A, B
Total income (2018 & 2019) ₱ 8,000,000.00
Total loss (2015, 2016, 2017) (3,000,000.00)
₱ 5,000,000.00

Retained earnings 12% preference 10% preference ordinary

Dividend 5,000,000.00
12% x 1m (120,000.00) 120,000.00
10%x2.5mx5 (1,250,000.00) 1,250,000.00
10%x 7.5m (750,000.00) 750,000.00
Balance 2,880,000.00 - 720,000.00 2,160,000.00
Total dividend ₱ 120,000.00 ₱ 1,970,000.00 2,910,000.00

Problem 18-29: MCQ Theories

1. C
 2. B
3. D
4. A
5. A

Chapter 19: BASIC EARNINGS PER SHARE

Problem 19-9: A
Net income ₱750,000.00
Preference dividend 120,000.00
NI to OS 630,000.00
÷ 60,000
BEPS ₱10.50

Problem 19-10: D
Ordinary Share 200,000
Total OS outstanding 20,000
220,000

Net Income ₱1,920,000.00

Preference dividend (200,000)
NI to OS 1,720,000.00
÷ 220,000
BEPS ₱7.82

Problem 19-11: A
OS outstanding (1m/5) = 200,000
BEPS (4.3m 200k) = ₱21.50

Problem 19-12: B
Net Income ₱5,000,000.00
Preference dividend for 1 year (100,000.00)
Net income to OS 4,900,000.00
÷ 200,000
BEPS ₱ 24.50

Problem 19-13: D
1,800,000

Problem 19-14: A
OS issued (30m/100) 300,000
Treasury shares issued (50,000)
OS outstanding 250,000

Net income ₱15,000,000.00

Preference dividend (500,000)
Net income to OS 14,000,000.00
÷ 250,000
BEPS ₱ 58.00

Problem 19-15: C
₱7,100,000.00
÷ 400,000
BEPS ₱17.75

Problem 19-16: B, B
1. January 1 (200,000 x 12/12) 200,000
April 1 (20,000 x 2 x 9/12) 30,000
230,000
BEPS for 2020 410,000/230,000 = ₱1.78

2. 100,000
100,000
200,000

BEPS for 2019 350,000/ 200,000 = ₱1.75

Problem 19-17: B
January 1 (100,000 x 2 x 1.20 x 12/12) 240,000
June 1 (30,000 x 1.20 x 7/12) 21,000
261,000
Problem 19-18: B
January 1(100,000 x 2 x 1.20 x 3 x 12/12) 720,000
April 1 (30,000 x 2 x 1.20 x 3 x 9/12) 162,000
June 30 (10,000 x 1.20 x 3 x 6/12) (18,000)
864,000
Problem 19-19: A
January 1 (44,000 x 1.25 x 3 x 12/12) 165,000
February 1 (56,000 x 1.25 x 3 x 11/12) 192,000
May 1(25,000 x 1.25 x 3 x 8/12) (62,500)
September 1 (10,000 x 3 x 4/12) 10,000
305,000
Problem 19-20: B
January 1 (200,000 x 2 x 12/12) 400,000
July 1 (100,000 x 6/12) 50,000
450,000
Problem 19-21: A, A
1. January 1 (250,000 x 1.20 x 12/12) 900,000
March 1 (24,000 x 1.20 x 3 x 10/12) 72,000
October 1 (16,000 x 3 x 3/12) 12,000
December 1 (15,000 x 3 x 1/12) (3,750)
980,250

2. January 1 (329,800 x 3 x 12/12) 989,400

September 1 (60,000 x 4/12) 20,000
1,009,400

Problem 19-22: C
January 1 (1,250,000 x 2) 2,500,000
April 1 (200,000 x 2 x 9/12) 300,000
October 1 (100,000 x 2 x 3/12) (50,000)
Average shares 2,750,000

Problem 19-23: A
January 1 (300,000 x 160/150 x 3/12) 80,000
March 31 (360,000 x 9/12) 270,000
Average number of shares 350,000

BEPS 6,000,000/350,000 = 17.14

Problem 19-24: B, B
Ordinary share 200,000
Bonus issue 400,000
Total share outstanding 600,000
BEPS:
2019 (18,000,000/600,000) = ₱30,000
2020 (60,000,000/600,000) = ₱100,000

Problem 19-25: MCQ Theories

1. B
2. D
3. B
4. A
5. C
6. A
7. B
8. D
9. A
10. B

Chapter 20: DILUTED EARNINGS PER SHARE

Problem 20-11: D
Ordinary share outstanding 1,200,000
Potential ordinary share to be issued
in the acquisition of subsidiary. 50,000
Total ordinary shares. 1,250,000

Total income. ₱3,400,000.00

Preference dividends. (200,000.00)
Net income to ordinary share. 3,200,000.00

Diluted EPS= 3,200,000/1,250,000 = ₱2.56

Problem 20-12: B
Ordinary share outstanding 200,000
Potential ordinary share to be issued
For conversion of preference shares (20,000×5). 100,000
Total ordinary shares. 300,000

Diluted EPS= 840,000/300,000= ₱2.80

Problem 20-13: D, A

1. Jan. 1 outstanding. 100,000

Sept.1 conversion (10k×6×4/10). 20,000
Average share outstanding. 120,000

Net income. ₱2,000,000

Preference dividends (5%×1M). (50,000)
NI-ordinary shares. 1,950,000

Basic EPS= 1,950,000/120,000= ₱16.25

2. Jan.1 outstanding. 100,000

Sept. 1 conversion (10k×6). 60,000
Total ordinary share. 160,000

Diluted EPS = 2,000,000/160,000 = 12.50

Problem 20-14: A
January 1. 500,000
October 1(120,000×3/12). 30,000
530,000
Problem 20-15: B
Jan 1 (2,500,000×12/12). 2,500,000
April 1 (500,000 ×9/12). 375,000
July 1 (250,000×6/12). 125,000
Oct. 1 (5,000×40×3/12). 50,000
3,050,000
Problem 20-16: A
January 1. 100,000
July 1-conversion (200×200). 40,000
Total ordinary share. 140,000

Net income. ₱5,551,000

Interest of bonds from Jan. 1
to July 1,2019 (2M×7%×70%×6/12) 49,000
5,600,000
Diluted EPS= 5,600,000/140,000= ₱40

Problem 20-17: A
January 1. 600,000
April 1(180,000×9/12). 135,000
735,000
Problem 20-18: A, A
1. Jan 1 outstanding. 800,000
May 1 (60,000×8/12). 40,000
 July 1(100,000×6/12). (50,000)
Oct. 1 (2M×80×3/12). 40,000
Average number of shares. 830,000

Basic EPS = 9,500,000/830,000 = ₱11.45

2. Jan 1 outstanding 800,000

Jan1 (5k bonds ×80) 400,000
May 1 (60,000×8/12) 40,000
July 1 (100,000×6/12) (50,000)
Average number of shares 1,190,000

Net income ₱ 9,500,000

Interest on bonds actually converted
on Oct 1(2M×12%×9/12). 180,000
Interest on bonds not converted
(3,000,000×12%). 360,000
Total Interest. 540,000
Tax effect (30%×540,000). (162,000) 378,000
₱9,878,000
Diluted EPS= 9,878,000/1,190,000= ₱8.30

Problem 20-19: A
Jan 1 outstanding. 200,000
Jan 1 (5k bonds ×2k) 10,000
210,000

Net income. ₱6,000,000

(20,000,000×7%×6/12). 700,000
Total interest. 6,700,000
Tax rate (700,000×30%). (210,000)
₱6,490,000/210,000= ₱30.90
Problem 20-20: A
Jan 1 outstanding. 200,000
Oct 1 conversion (4,000×40). 160,000
Total ordinary share. 360,000

Net income. 5,000,000

Interest on bonds net of tax from
Jan 1 to Oct 1(4M×10%×9/12×70%). 210,000
5,210,000/360,000= ₱14.47
Problem 20-21: C
Ordinary share outstanding on Jan 1. 500,000
Ordinary share issued on Oct 1(100,000×3/12). 25,000
Potential ordinary share for bond conversion. 225,000
Average ordinary share 750,000

Net income. 6,000,000

Interest on bonds (6%×20M×70%). 840,000
Adjusted Net income 6,840,000/750,000= ₱9.12

Problem 20-22: B
Jan 1 outstanding. 300,000
July 1 (50,000×6/12). 25,000
Share options outstanding. 40,000
Assumed TS (600k/20). (30,000)
335,000
Problem 20-23: C
Share options 40,000
Assumed TS (40k/16). (25,000)
Potential ordinary share. 15,000

Outstanding share. 100,000

Exercise share option. 40,000
140,000
Diluted EPS= 2,000,000/140,000= ₱14.29

Problem 20-24: B, A

1. Ordinary share outstanding. 100,000

Exercise share options on April 1
(40k×9/12). 30,000
Average number of shares. 130,000

Basic EPS= 2,000,000/130,000 = ₱15.38

2. Share options. 40,000

Assumed TS (40k×10=400k/16). (25,000)
Potential ordinary share. 15,000

Outstanding shares on Jan 1. 100,000

Exercise of share options on April. 30,000
Potential shares from Jan 1 to April 1
(15,000×3/12). 3,750
133,750
Diluted EPS = 2,000,000/133,750 = ₱14.95

Problem 20-25: D
Jan 1 to March 31 (150,000×3/12). 37,500
April 1 to May 31 (120,000×2/12). 20,000
June 1 to December 31 (180,000× 7/12). 105,000
Weighted Average share outstanding. 162,500

Basic EPS = 2,500,000/162,500 = ₱15.38

Problem 20-26: MCQ Theories

1. D
2. C
3. C
4. C
5. C
6. B
7. A
8. D
9. A
10. A

Chapter 21: DILUTED EARNINGS PER SHARE

Multiple potential ordinary share

21-7: D, B, C
1. Net income. 8,000,000
Preference dividend (20,000×40). (800,000)
7,200,000/200,000= ₱36
2. Effect on net income:
Preference dividend (20,000 shares ×40). 800,000
Interest on bonds (10%×5,000,000×70%). 350,000
Incremental EPS:
Preference shares (800,000/40,000). 20
Bonds payable (350,000/25,000). 14

Potential ordinary share from conversion of preference shares. 40,000

Potential ordinary share from bond conversion (5,000*5). 25,000
Total potential dilutive ordinary share. 65,000
 3.
Net Income Shares EPS
Basic EPS 7,200,000 200,000 33.00
Convertible bonds
350,000 25,000
payable
Diluted EPS 7,550,000 225,000 33.56
Convertible preference
800,000 40,000
share
Diluted EPS ₱8,350,000 ₱265,000 ₱31.5

21-8: A, B
1. Basic EPS = 11,000,000/1,500,000 = ₱7.33
2. Diluted EPS = 11,000,000/1,600,000= ₱ 6.88

Outstanding shares. 1,500,000

Potential ordinary shares. 100,000
Total ordinary shares. 1,600,000

21-9: C, C
1. Jan 1 outstanding. 100,000
March 1(24,000×10/12). (20,000)
Oct 1. (8,000×3/12). 2,000
Average shares outstanding. 82,000

Net income. 5,400,000

Preference dividend (7%×5M). (350,000)
Net income ordinary share. 5,050,000

Basic EPS = 5,050,000/82,000 = ₱61.59

2. Net income. ₱ 5,400,000

Dividends on nonconvertible preference shares (350,000)
Net income- ordinary shares. 5,050,000
Interest on bonds (6%×5M×70%) 210,000
Adjusted net income. ₱ 5,260,000

Average ordinary share outstanding. 82,000

Potential ordinary share. 35,000
Total ordinary share. 117,000

Diluted EPS = 5,260,000/ 117,000= ₱44.96

21-10: A, A
1. Jan 1 (200,000×1.10×12/12×2) 440,000
April 1 (125,000×1.10×9/12×2) 206,250
Oct 1 (7,000×3/12×2) 3,500
₱649,750.00

2. Jan 1 (200,000×1.10) 220,000

April 1 (125,000×1.10) 137,500
Oct 1 (7,000) 7,000
364,500

Jan 1 (364,500× 2) 729,000

Oct 1 (170,000× 3/12) 42,500
₱771,500.00

21-11: B, B
1. Jan 1 (100,000×1.25×12/12) 125,000
March 1 (3,000×1.25×10/12) (3,125)
Sept 1 (3,000×1.25×4/12) 1,250
Dec 1 (66,000×1.25×1/12) 6,875
Average shares outstanding 130,000
Basic EPS = 2,600,000/130,000 = ₱20.00

2. Jan 1 outstanding 100,000

 March 1 TS purchased (3,000)
Sept 1 resale of TS 3,000
Dec 1 new issue 66,000
Outstanding shares 166,000

Average share outstanding for 2020(166,000×1.25) 207,500

Basic EPS = 4,000,000/207,500= ₱19.28

21-12: A
Basic EPS 150
Effect of possible bond conversion (8)
₱142.00
21-13: A, D
1. ₱120
2. Basic EPS ₱ 120.00
Effect of possible conversion of preference shares (1)
Effect of possible exercise of share warrants (2)
Diluted EPS ₱117.00

Chapter 22: HYPERINFLATION

Problem 22-1: B

Accounts payable ₱ 1,000,000.00

Accrued expenses 500,000.00
Bonds payable 3,000,000.00
Finance lease liability 4,000,000.00
Monetary liabilities ₱ 8,500,000.00

Problem 22-2: A

Cash in bank ₱ 2,000,000.00

Accounts receivable 4,000,000.00
Advances to employees 200,000.00
Monetary assets ₱ 6,000,000.00

Problem 22-3: B, B, A

1. ₱ 2,400,000.00 X 300/120= ₱6,000,000.00

2. ₱ 1,200,000.00 X 300/150= ₱2,400,000.00
3. ₱ 1,600,000.00 X 300/120= ₱4,000,000.00

Problem 22-4: A, B, B

1. Historical fraction restated

Cash 350K 350K

Inv. 2,700K 300/270 3M
PPE 900K 300/150 1.8M
Total assets 3,950K 5,150K

2. Historical fraction restated

CL 700K - 700K
NCL 500K - 500K
Total Liab 1,200K 1,200K

3. Historical fraction restated

Shr. Cap 400K 300/100 1,200K

RE 2,350K - 2,750K
Total liab 3,950K 5,150K
& equity

Problem 22-5: A, B, A
Historical fraction restated

Sales 5M 360/250 1.) 7.2M

COS:
Inv.-beg 350K 360/140 900K
Purchases 2,500K 360/250 3.6M
TGAS 2,850K 4.5M
Inv.-end (500K) 360/360 (500K)
COGS (2,350K) 2). (4M)
G.I 2,650K 3.2M
Expenses:
Expense 2M 360/250 2,880K
Depreciation 2M 360/125 5,760K
(4M) (8,640K)
Net loss (1,350K) 3). (5,440K)

Problem 22-6: C

Historical fraction restated

NMA-beg 880k 140/110 1,120K

Sales 3M 140/125 3,360K
Purch. (1.2M) 140/125 (1,344K)
Exp. (900K) 140/125 (1,008K)
Inc.tax (600K) 140/125 (672K)
Cash div.
Dec.31 (200K) 140/140 (200K)
980K 1,256K

Net monetary asset at cost ₱ 980,000.00

Less: net monetary asset restated (1,256,000.00)
Loss on purchasing power (₱276,000.00)

Problem 22-7: B

Monetary asset jan.1 ₱250,000.00

Monetary liabilities jan.1 (100,000.00)
Net monetary asset at cost ₱ 150,000.00

Restated (150K x 300/125) ₱360,000.00

Add: increase in monetary 3,500,000.00
Total 3,860,000.00
Less: decrease in monetary (3,000,000.00)
NMA Dec. 31 restated ₱860,000.00

Monetary asset Dec. 31 ₱700,000.00

Monetary Liabilities Dec. 31 (300,000.00)
NMA at cost Dec. 31 400,000.00
Less:
Net monetary restated (860,000.00)
Loss on purchasing power (₱460,000.00)

Problem 22-8: B

Monetary asset ₱5,000,000.00

Monetary liabilities (3,000,000.00)
Net asset at cost 2,000,000.00
Net asset restated (4,480,000.00)
(2M x 280/125)
Loss on purchasing power (₱2,480,000.00)

Problem 22-9: A

Monetary asset:
Cash 250,000.00
AR 500,000.00 ₱750,000.00

Monetary liabilities:
AP 1,500,000.00
MP 500,000.00 ₱2,000,000.00

Net monetary
Liabilities at cost Dec.31 ₱1,250,000.00

Net monetary
Liabilities restated
(1,250k x 300/120) ₱3,125,000.00
Net monetary
Liabilities at cost Dec.31 (1,250,000.00)
Gain on purchasing power ₱1,875,000.00

Problem 22-10: D, B

1. Revaluation surplus should be eliminated.

2. ₱16M less (2.5M + 8.5M)= ₱5M

Problem 22-11: A

Demand bank deposit ₱3,000,000.00

Net long-term receivables 2,000,000.00
Loans to employees 300,000.00
Monetary asset ₱5,300,000.00

Problem 22-12: A

2017 ₱3M X 10% 300/100 ₱900,000.00

2018 2M X 10% 300/125 480,000.00
2019 1M X 10% 300/300 1,000,000.00
Total ₱1,480,000.00

Problem 22-13: C

2016 (4M less 1.6M X 350/120) ₱7,000.000.00

2018 (1M less 200K X 350/125) 2,240,000.00
Carrying Amount ₱9,240,000.00

Problem 22-14: A, A, A

Historical fraction restated

Cash 2M 2M
Trade &
Other
Receivables 2.6M 2.6M
PPE 4.6M 280/125 10,304K
Total assets 9.2M 1). 14,904K

Trade &
Other
Payables 1.8M 1.8M
Share cap. 4M 280/112 10M
Rev. Surplus 400K -
RE 3M 2).3,104K
Total
Liab & equity 9.2M 14,904K

3). Total shareholder’s equity:

10M + 3,104k= 13,104K

Problem 22-15: B, B, B

Historical fraction restated

Cash 100K 100K

AR 1.2M 1.2M
Inv. 800K 800K
Land 400K 260/100 1,040K
Bldg. 1M 260/100 2.6M
Accum. Dep (200K) 260/100 (260K)
Equip. 500K 260/125 1,040K
Accum. Dep (250K) 260/125 (520K)
Total assets 3,550K 1).6M

AP 600K 600K
Share cap. 2M 260/100 5.2M
RE 950K 2.)200K
Total
Liab & equity 3,550K 6M

3). Total shareholder’s equity:

5.2M + 200K= 5.4M

Problem 22-16:

- Not a MCQ

Problem 22-17: MCQ Theories

1. D
2. C
3. D
4. A
5. A
6. A
7. C
8. D
9. A
10. A

Problem 22-18: MCQ Theories

1. B
2. A
3. D
4. D
5. C
6. A
7. A
8. C
9. D
10. A

Problem 22-19: MCQ Theories

1. B
2. A
3. B
4. C
5. C

Chapter 23: CURRENT COST ACCOUNTING

Problem 23-1: C, B, C, C

1. Current cost Dec.31 ₱600,000.00

Historical cost (500,000.00)
Unrealized holding gain ₱100,000.00

2. Current cost ₱750,000.00

Historical cost (500,000.00)
Cumulative
Unrealized
Holding gain 2020 ₱250,000.00
Less:
Unrealized
Holding gain 2019 (100,000.00)
Unrealized
Holding gain 2020 ₱150,000.00

3. Current cost ₱800,000.00

Historical cost (500,000.00)
Cumulative
Unrealized
Holding gain 2021 ₱300,000.00
Less:
 Unrealized
Holding gain 2019 & 2020 (250,000.00)
Realized holding gain 2021 ₱50,000.00

4. Sales price ₱1,000,000.00

Less: current cost (800,000.00)
Gain on sale of land ₱200,000.00
Problem 23-2: A, B, B, C

1. Depreciation on historical cost

5M/5yrs= ₱1,000,000.00

2. Current cost ( 5M x 225/150) ₱7.5M

Ave. current cost (6,250K)
(5M + 7.5M/ 2)
Depreciation on
Ave. current cost ₱1,250K

3. Depreciation on
Ave. current cost ₱1,250k
Depreciation on
Historical cost (1M)
Realized holding gain ₱250K

4. Current cost ₱7.5M

Accum. Dep. (1.5M)
(7.5M/5)
Net current cost ₱6M

Historical cost ₱5M

Accum. Dep. (1M)
(5M/5)
Carrying amount ₱4M

Net current cost ₱6M

Carrying amount (4M)
Unrealized holding gain ₱2M

Problem 23-3: A, C, C, C

1. Depreciation on historical cost:

(1,150K/5yrs)= ₱230,000.00

2. Historical cost Jan. 1 ₱1,150k

Current cost Dec.31 1,250k
Total ₱2.4M

Ave. current cost 1.2M

(2.4M/2)

Depreciation (1.2M/5yrs) ₱240K

3. Depreciation ₱240K
On Ave. current cost
Depreciation on historical cost (230K)
Realized holding gain ₱10K

4. Current cost ₱1,250k

Accum. Dep (250k)
(1,250K/5)
Net current cost ₱1M

Historical cost ₱1,150K

Accum. Dep (230K)
Carrying amount ₱920K

Net current cost ₱1M

Carrying amount (920K)
Unrealized holding gain ₱80K

Problem 23-4: C
2017 (1.4M x 70%) = ₱980,000.00
2018 (380K x 80%) = 304,000.00
2019 (440K x 90%) = 396,000.00
Net current cost ₱1,680,000.00

Problem 23-5: A

Equipment ₱95,000.00
Inventory 80,000.00
Total ₱175,000.00

Problem 23-6: A, B, C, A

1. Inventory, Dec 31 at current cost

(15,000 x 72) = ₱1,080,000.00

2. Inventory Dec. 31:

Current cost ₱1,080,000.00
Historical cost (945,000.00)
Unrealized
Holding gain ₱135,000.00

3. COGS ave. current cost

(4,000 x 65) = ₱2,600,000.00

Average unit cost:

[(58 + 72)/2] = 65

4. COGS:
Average current cost ₱2,600,000.00
Historical cost (2,375,000.00)
Realized holding gain ₱225,000.00

Problem 23-7: D, C, A, B

1. Inventory, Dec 31 at current cost

(9,000 x 71) = ₱639,000.00

2. Inventory, Dec 31:

Current cost ₱639,000.00
Historical cost-FIFO (630,000.00)
(9,000 from 4th qtr.)
Unrealized gain ₱9,000.00

3. COGS ave. current cost

(30,000 x 64) = ₱1,920,000.00

Average unit cost:

[(57 + 71) /2] = 64

4. COGS:
Average current cost ₱1,920,000.00
Historical cost-FIFO (1,785,000.00)
Realized holding gain ₱135,000.00

Problem 23-8: A, B, B, C

1. Current cost (40,000 x 72) = ₱2,880,000.00

2. Current cost ₱2,880,000.00

Historical cost (2,520,000.00)
Unrealized holding gain ₱360,000.00

3. COGS ave. current cost

(70,000 x 65) = ₱4,550,000.00

Average unit cost: [(58 + 72) /2] = 65

4. Average current cost ₱4,550,000.00
Historical cost (4,120,000.00)
 Realized gain ₱430,000.00

Problem 23-9: B, C, D, A

1. COS at ave. current cost ₱5M

Historical cost (4M)
Realized holding gain ₱1M

2. Inv. 12/31 at current cost ₱1.5M

(10,000 x 150)
Inv. 12/31 at cost (1M)
Unrealized holding gain ₱500K

3. Sales ₱7.2M
COS (40,000 X 125) (5M)
G.I 2.2M
Other income:
Realized + unrealized 1.5M
Total income 3.7M
OPEX (700K)
Net income ₱3M

4. Sales ₱7.2M
COS:
Purchases 5M
Less: inv. 12/31 (1M) 4M
GP 3.2M
OPEX (700K)
Net income ₱2.5M

Problem 23-10: A, C

1. Land 12/31 at current cost ₱2.2M

Land 12/31 at historical cost (2M)
Unrealized gain ₱200K

2. Sales price ₱2,250K

CA on at current cost (2,200K)
Gain on sale ₱50k

Problem 23-11: D

1.5M less 1.2M = ₱300,000.00

Problem 23-12

- Not a MCQ

Problem 23-13: MCQ Theories

1. D
2. C
3. A
4. C
5. C

Chapter 24: SMEs- DEFINITION

Problem 24-1: MCQ Theories

1. D
2. A
3. D
4. D

Problem 24-2: MCQ Theories

 1. D
2. D
3. A
4. C
5. A

Problem 24-3: MCQ Theories

1. B
2. C
3. C
4. B

Chapter 25: SMEs- FINANCIAL STATEMENTS

Problem 25-4: C, D, D

1. Revenue ₱5,500,000.00
Other Income 100,000.00
5,600,000.00
Less:
Purchases 1,100,000.00
Change in inventory-decrease 130,000.00
Wages, salaries and benefits 2,260,000.00
Depreciation 520,000.00
Other Expenses 380,000.00
Advertising 150,000.00
Finance Cost 60,000.00
Income tax expense 300,000.00
Net Income ₱700,000.00

2. Exchange difference on translating ₱10,000.00

foreign operation, net of tax-credit
Decrease in the FV of hedging (6000.00)
instruments, net of tax-loss
TOCI ₱4,000.00

3. Net Income ₱700,000.00

OCI 4,000.00
TOCI ₱704,000.00

Problem 25-5: B, A, B

1. Total Income ₱6,700,000.00

2. Sales 6,700,000.00
Less: Cost of Goods Sold (5,100,000.00)
Gross Income 1,600,000.00
Add: Royalties 120,000.00
Gain on disposal of property 25,000.00
Total 1,745,000.00
Less:
Distribution expenses (175,000.00)
Administrative expenses (810,000.00)
R and D cost (70,000.00)
Int. On bank overdraft (20,000.00)
Interest on finance lease (5,000.00)
Current tax expense (270,000.00)
Foreign exchange loss (30,000.00)
 Net Income 435,000

3. Net Income 435,000.00

Gain on disposal of property 60,000.00
RE, beginning 2,100,000.00
Less:
Deferred tax benefit (10,000.00)
Dividends (150,000.00)
R and D costs (70,000.00)
Retained Earnings, End 2,385,000.00

Problem 25-6: MCQ Theories

1. A
2. A
3. A

Problem 25-7: MCQ Theories

1. A
2. D
3. A
4. D
5. D

Problem 25-8: MCQ Theories

1. B
2. D
3. C
4. D

Problem 25-9: MCQ Theories

1. B
2. B
3. B
4. D
5. D

Chapter 26: SMEs- ASSETS Part 1

Problem 26-1: A
Purchase Price ₱500.00
Volume Discount (100.00)
Additional Volume Discount (50.00)
Net Purchase Price ₱350.00

150 x ₱ 350= ₱ 52,500

Problem 26-2: D
Purchase Price ₱1,000,000.00
Refundable Purchase Taxes (50,000.00)
Net Purchase Price 950,000.00
x PV of 1 @ 10% for 1 period .909
Cash Price 863,550.00
Freight 20,000.00
Cost of Purchase ₱883,550.00

Problem 26-4: C, A
Cost ₱ 1,000,000 .00
Transaction cost 10,000.00
Dividends Receive (60,000.00)
CA ₱950,000.00
Problem 26-5: B, C, A
1. Cost ₱15,000,000.00
CA (13,250,000.00)
1,750,000.00
₱ 2.5M x 30% (750,000.00)
₱1,000,000.00

2. Share in NI (20M x ₱6,000,000.00

30%)
Amort- equip (750k x 5) (150,000.00)
Amort- goodwill (1M/10) (100,000.00)
₱5,750,00.00

3. Cost ₱ 15,000,000.00
Investment Income 5,750,000.00
Divd Received (7.5Mx30%) (2,250,000.00)
₱18,500,000.00

Problem 26-7: MCQ Theories

1. B
2. A
3. A
4. A
5. D

Problem 26-8: MCQ Theories

1. D
2. B
3. B
4. A
5. D
6. A
7. D
8. B
9. C
10. B

Problem 26-9: MCQ Theories

1. D
2. C
3. D
4. B
5. D
6. B
7. D
8. B

Problem 26-10: MCQ Theories

1. D
2. C
3. D
4. D
5. D

Chapter 27: SMEs-ASSETS Part 2

Problem 27-4: B, D, C
1. Legal cost ₱ 30,000.00
Payment to the taxi licensing 100,000.00
Initial cost ₱ 130,000.00
 2. ₱ 130,000 x 6/60= ₱13,000.00

3. Initial Costs ₱ 130,000.00

Less:
Amortization 13,000.00
Dep’n (100k/5) 20,000.00
Advance payment (50k x 6/12) 25,000.00
Printing 10,000.00
₱ 62,000.00

Problem 27-5: MCQ Theories

1. C
2. A
3. C
4. C

Problem 27-6: MCQ Theories

1. D
2. D
3. A
4. B
5. D

Problem 27-7: MCQ Theories

1. B
2. B
3. D
4. B
5. B

Problem 27-8: MCQ Theories

1. C
2. B
3. A
4. C
5. C

Chapter 28: SMEs LIABILITIES

Problem 28-1: D

Minor repairs ₱30,000.00

(3% x 10M=300K X 10%) 180,000.00
Major repairs
(2%x10M=200K X 90%)
Weighted probabilities ₱210,000.00
Multiply by risk adj. factor 1.06
Adjusted cash flows 222,600.00
Paid in 2019 50% (111,300.00)
Balance 12/31 111,300.00
x FV factor 0.95238
Warrant provision 12/31 ₱106,000.00

Problem 28-2: D, D

20% X 200K X 70% ₱28,000.00

80% X 100K X 70% 56,000.00
Weighted cash flows 84,000.00
Multiply by risk adj. factor 1.07
Adjusted cash flows 1). 89,880.00
x PV factor 0.95
Provision for lawsuit 2). ₱85,386.00
Problem 28-3: MCQ Theories

1. A
2. D
3. D
4. B
5. B

Problem 28-4: MCQ Theories

1. A
2. B
3. C
4. A
5. D

Problem 28-5: MCQ Theories

1. B
2. B
3. C
4. B
5. A

Problem 28-6: MCQ Theories

1. D
2. A
3. A
4. C
5. B
6. C
7. A
8. D
9. D
10. A

Problem 28-7: MCQ Theories

1. D
2. C
3. B
4. D

Chapter 29: SMEs- EQUITY

Problem 29-1: MCQ Theories

1. A
2. C
3. B
4. C
5. B

Problem 29-2: MCQ Theories

1. B
2. C
3. B
4. A
5. C
6. B
7. D
8. D
9. B
10. B

Problem 29-3: MCQ Theories

1. D
2. D
3. B
4. C
5. A
6. D
7. A
8. D
9. C
10. A