(HAP, Ry, RU AL Basis pasic Problems tem 39-1 (ATCp, prob ‘A Ate geid Company, Whig}, qeeted t0 USe cash bagi. i Dera wis accounting for the e fing unt; if on J, MANCial g ca, tements Noses» 203 the entity reporteg Sales 9 acens ems for the Years enge tl 750.009 ona oS. “ember 3) 2a ar ind ry The entity reported accoy abl E cember 31, 2, su 5 BiDe 024 an nd 3058 a 0 an sto 49 What amount should be reporte for2024 under acer ales j Intl ‘ual asia he income satenen 1,450,000 1,550,000 1,950,000 2,050,000 Solution 39-7 Answer b 300,000 24 750,000 Accounts receivable - December Fe ae ; if 71050000 Sales in 2024 under eash basis rn Tol 2023 35000 31, 21 1,550 Accounts receivable - Decembe yee Scanned with Camscannerm 39-2 (AICPA Adapted) ypany maintained the accounting records onthe J sae the financial statements t0 the ual i The entity had 6,000,000 in cash basis pret Problet = Ze. Class C but re accounting: for 2024. ng ovided the following information at year-end: The entity PY 2024 20 ‘ 4,000.0 Accounts receivable Neen 2 Accounts pay able what amount of income before tax ait tatement for 2024? Under ace rual b: reported in the income St d. 9,500,000 Solution 39-2 Answer" ad Cash basis income Add: Accounts receivable - 2024 4,000,000 ‘Accounts payable - 2023 3,000,000 Total Less: Accounts receivable - 2023 2,000,000 Accounts payable - 2024 1,500,000 Accrual basis income Guideline - Cash basis income to accrual basis Ending current asset is added to cash basis income Beginning current asset is deducted from cash basis income — Ending current liability is deducted from cash basis income — . Beginning current liability is added to cash basis income ; wy ‘Scanned with CamScanners0S 80, amosrs pjos spoo8 J° OR 000) T¢ Jaquisoed ~ AsOUSAUT m8 ayes Joy apqelten® spoon, aus saseyoing do 0062 | Asenuer - M0,UOAUT p dansup 7 uolsang 0000s T'S. siseq jenss9" — SaSByInd (oo0'v0s ) | Auenueg - ajqexed syunoooy piace BOL, 00 siaijddns 0} juowAed BC 1¢ aquiacaq - ajqeAed syunoooy quamsup | uoysend) ) £-6E UOLN}OS o00'ose'r “P 000°0S8* °o 000°0S6P “4 + 000'osr’s (leat ee YU} UI pjos spoo8 Jo PU siseq ensooe apa, 7 pose Pp 00'0s9's 9 tseq [en. v4 we I sa O00‘0ST's “4 000'006'r ® a 000'00s emp 009, Ys junowre ywy\ Pd siande, a ‘Tedns pred Aqua oul 319eXed syunoo¥ Kaoquanll ‘Scanned with CamScannerProblem 39-4 (PHILCPA Adapted) Calapan Company provided the following dat: January 1 Inventory 1,200,000 Cost of goods sold 5,500,000 Accounts receivable 1,200,000 Accounts payable 1,500,000 During the current yeat, accounts written off amounted to p Sales returns with credit memo totaled P250,000. 1 sustomers for returned goods of P50,000 was go Cash refund to ¢ to accounts receivable. customers Cash receipts from after P500,000 sales discounts to P8,000,000. Cash payments to trade discounts of 200,000. P to P400,000. 1. Under accrual, what amo" a. 8,900,000 b. 8,950,000 ¢, d. unt should be reported as gross sal 8,250,000 | 8,850,000 2. Under accrual, what amount SI purchases? a, 5,250,000 b. 5,950,000 c, 5,750,000 d, 5,650,000 3, What amount should be accrual basis? a. 5,550,000 b. 5,750,000 c. 4,950,000 d. 5,500,000 hould be reported as gr reported as cost of goods sold 506 ‘Scanned with CamScannersolo" 39-4 estion 1 AnsWep 5 counts Teceivaby Ace nts Wri < counts Written opp Deeg, Tes FOUUENS With crag Mer uy ast FECCHDLS From oy Me , gales discounts CUstomen 1,350,000 100,000 ota! 250,000 cast refund to custo 8,000,000 accounts receivahia Cronous, 500,000 accounts receivable Y debiteg j, 1020000 Gross sales Mary | ( te ; (1,200,000) Question 2 Answer 5 Gam Accounts payable — Decemb er 3] urchase returns with debit payments to trade credit, memo 1,850,000 purchase discounts me 400,000 5,000,000 Total 200,000 Accounts payable ~ January | 7,450,000 Gross purchases : (1,500,000) 5,950,000 Gross purchases . Purchases returns 5,950,000 Purchase discounts, (0.00) 200,000) Net purchases 5,350,000 Question 3 Answer c Inventory ~ January | 1,200,000 Net purchases 5,350,000. i 6,550,000 Goods available for sale 1550 Inventory ~ December 3! (1,600,000) ‘ 4.950,000. Cost of goods sold ‘Scanned with CamScannerProblem 39-5 (AICPA Adapted) During 2024, Cooke Company acquired patent rightan royalties of| p3,000,000. Me eported prepaid royalties of P550,000 ay payable ‘of P800,000 and P750,000, respe 450 1, 2023 and 2024. cli royalties December 3 4 What amount should be reported as royalty expense for 24 pa ws d333 Solution 39-5. Answer b Royalties paid Prepaid royalties - 2023 4 Prepaid royalties - Royalties payable - 2024 (4504 ; on Royalties payable - 2023 (ai — Royalty expense for 2024 30519 ee) Problem 39-6 (AICPA Adapted) Based on 2023 sales of compact discs recorded by an artist ung acontract with Laser Company, the artist earned P1,000,000 an adjustment of P80,000 for anticipated returns. ; ‘The entity paid the artist P750,000 in 2023 as a reasonable estimateo the amountrecoverable from future royalties to be eamed by the ats What amount should be reported as royalty expense for 2023? a. 1,000,000 b. 1,080,000 ec. 1,750,000 d. 1,830,000 Solution 39-6 Answer a Royalty expense for 2023 (earned by artist in 2023) 508 ‘Scanned with CamScannerplem 39-7 (AICPA ag, AD Led) jg COMPANY ACqUired righ required an advang ran The oy rer Underg a es ay Alicen, “october $ 31 each yea 1 ales ct heen a ) Khe nt was due itionally, the entity p Paid Underthe agreement 1, The entity did nog _ Madvance g sat ¢ stin " adjusted at year eng, “Pare y reverse Mated royal NE enipy "y, A forthenext repaid royalties phe enuly Provided the fol ct pecember 31: Owing inform, ation for the year ended ie. Prepaid royalties 1 ost. 31 Royalty payment op : harge: Re. 31 Year-end credit aie 10 royalty expense | a0 nt to BP inoune should eae expense 250,000 December 31? Ported as prepaid royalties on , 250,000 5, 400,000 «, $50,000 4, 900,000 Solution 39-7 Answer d Prepaid royalties = January 1 650,000 _ Add: Increase in prepaid royalties on December 31 250,000 Prepaid royalties - December 31 900,000 Journal entries during the year 1 No reversing entry 1,100,000 Oct. 31 Royalty expense , Cash 1,100,000 Dec.31 Prepaid royalties 250,000 Royalty expense 250,000 509 7. > ‘Scanned with CamScannerors : “£207 ut pasuadxa e SI €ZOT ‘| Atenuer uo Q90‘0SId Jo aouvsnsur predesd ayy, €Z0Z ‘I ¢ Jaquiacag - sasuadxa predaud jeio], quos predaig (Z1/9 X 000°0ZE) aouesnsuy predoig q 4aMSUP 6-6E UOLNIOS: 000‘09T 'P c 000;00¢ 9 00009 “4 ooo‘ocs gsasuadxa se poyodar ag pynoys yuMoUre Jey A “€ZOT ‘TE Joquissaq] UO “pez ‘| Arenues SuruUts9q teak UO 1OJ asnoyarem v oj JuauIXed [eiua1 aouLApe 000'00Zd V 2] Ang yuourked umrwrasd aouvsmsur enuue 000'07Ed V 41 Aine uo ygo‘o0¢d Jo wnruzaud penuue ue pred pey Arua njod aouemsut ue JOJ 0OO‘'OS 1d FO 9°UFTEA Suuedouy + :SurmoT]oy ayy pastsduoo Yyoryar £7 Z “T¢ 1aquiscaq] dxa predaid paysnipeun ayy paviodas Auedwo) YY. (pardepy VAI) 6-6£ M194 qq - sasuadxo predaid [exo £207 “1€ 4oquiae (Z1/6 X 000'F2) soxe} predard (Z1/9X 000°ZL) eouBAnsU! predoig q saMSUV 8-6E uoLnjos o00'9¢ 'P 000°8h ‘> 00'S “4 000°09 © gsasuadxa 8° Payiodar aq pinoys junowre wy “EOC | ¢ 10qutiaoa¢q UO, J manufactures, ‘Akins Company i cone oy sesequal to 10% of companys required to pay Denver jns Company guaranteed Denver Comat aP1,200,000 minimum avalty over thelif ofthe agree i Paid Denver ‘Company the minimum ane! -ginning ©) Paz Akins Company's sn 000.000 for the current yeat- i yssikes What amount of royalty income should Denver Company report for current year? i a 300,000 b 500,000 c 300.000 1,200,000 Solution 39-20 Answer b Royalty revenue for current year (10% X 5,000,000) 500.000 Since the pa minimum annual royalty is 300,000 yearis 00.000. years), the royalty revenue for current year 519 (1,200,000 aaa ‘Scanned with CamsCHAPTER 40 ACCRUAL BASIS Comprehensive problems Problem 40-1 (IAA) Reina Company maintains its book: i S$ 01 i current year, the entity collected 736:000.000 een Duting stom paid P42,000,000 in expenses. January December 31 nen Accounts receivable 23000000 1700000 ¢ an Prepaid expenses 500000 300,000 300 ‘Advances from customers 900,000 sooo) 00 Accrued expenses 1,000,000 go0o00 mmenc sars at an annual rental of aa thea 1,2003,is 900, Lake Company y qhe Day gor 1098 res ed 480,000 rent from Day Company in 2023. In addition, on January 1, 2023 Day Company pai osit of 500,000, as well as a Suny hah ,000 to be refunded upon expiration of lease. jemark was licensed to Barr Company for royalti , trademarked items. ay ae 1 nnually on March | for sales inJuly through December of prior year, and on September | for sales in January through June of the same yeat- Lake Company received the following royalties from Barr Company: March 1 2022 300,000 2023 400,000 Barr Company reported that sales of the trademarked items totaled 2,000,000 for ‘the last half of 2023. he trad! ofsales of the Royalties are payable semial September 1 525 iy _ ‘Scanned with Cama1. Whatamount should bereported for dividend reveniyy 160,000 . 24,000 ¢. 10,000 a 1,500 2, Whatamount should a, 430,000 b. 480,000 c. 530,000 d. 538,000 3, What amount should bere] a; 1,400,000 b. 1,300,000 c. 1,100,000 ~ d 900,000 be reported for rental revenue? ported for royalty revenue? Solution 40-4 Question | Answer iG Cash dividend from Kar Company The cash dividend of P150,000 received from Aub Compan not recognized as dividend revenue because the interest in fore the equity method is used. Company is 30% and there! dividend is a reduction of investment under equity method, Question 2 Answer ¢ 480, Rental for 2023, ‘Amortization of nonrefundable deposit (500,000 / 10) E 530 Total rental revenue Question 3 Answer d Royalty revenue from January to June 2023 700 paid on September 1, 2023 Royalty from July to December 2023 (10% x 2,000,000) 200 Total royalty revenue 526 ‘Scanned with CamScanneryoorem AN AIC ds iI COMPANY has yo D “Dted) ce December 31, 203 Pated fran i the three. “ "al mpursements Were maj, ly into an ace, ice ry OUNtS py a ale powevet NO general jg, xia ee ppecember 31, 2022 clog Pg . examination oft] reo, e beginning and end ofthe te ie ess than | year olq to 2 years old 7,009 Decems, to 3 years old 6,009 "31 over 3 years old fotal accounts receivable ‘Big 000 $3,009 Javentory ae ‘Accounts payable 58,009 25,000 Noaccount balances hay, been vy, ‘The ratio of gross profit tos sales ten off du inte te. Temaing “Year Other data available are: “Onstanfom 0 Year rh Cash received applied to 2023 224 ay, Current year 744,000 . Accounts of prior year 67.000 909,000 1,044.00 Accounts of two years prior 3.000 ne Ho a 0 Total collections —ume 814,000 886,000 1,138,000 Cash sales 85,000 130,000 156000 Payment of accounts payable 625,000 706,000 869,000 Required: Compute total sales, total purchases and cost of goods sold for 2023, 2024 and 2025. ‘Scanned with CamScanner 527Solution 40-5 Computation of sales 2023 202 4 AR — December 31, 2025 4000 9.005 Cash received applied to: Current year 744,000 899 75,000 g. 4.009 Accounts of prior year Accounts of two years prior _ 10,000 833,000 902.995 Sales on account 2 Cash sales _ 85,000 —130,009 918,000 1,03 I36 218.000 1.032.009 Se Total sales Total amount (918,000 + 1,032,000 + 1341000) Computation of purchases Accounts payable — December 31, 2 Payment of accounts pay able: 2023 2024 2025 025 Total Accounts payable - December 31, 2022 Purchases — 2023, 2024 and 2025 Computation of cost of goods sold Inventory - December 31, 2022 Purchases — 2023, 2024 and 2025 Goods available for sale Inventory - December 31, 2025 Cost of goods sold - 2023, 2024 and 2025 ‘Scanned with CamScanner