AEC 217 - Take Home Activity

Instructions: Answer what is required on each problem. Write your answers on YELLOW PAD PAPER. (10pts each)
Problem 15
S Company provided the following information on December 31, 2019:
Current assets 3,100,000 Current liabilities 1,000,000
Other assets 5,900,000 Long term liabilities 1,000,000
Capital 7,000,000
Cash (including P200,000 invested in money market and restricted foreign deposit
of P300,000) 1,000,000
Land held for undetermined use 500,000
Accounts receivable less allowance of P50,000 700,000
Inventories 600,000
S Corporation share capital, at cost 300,000_
Total current assets 3,100,000

Store supplies 50,000

Building less allowance of P500,000 3,000,000
Equipment less allowance of P250,000 750,000
Financial assets at amortized cost 1,000,000
Trademark 300,000
Advances to officers – indefinite repayment 150,000
Patent 250,000
Land 400,000_
Total other assets 5,900,000

Accounts payable 500,000

Notes payable, due December 31, 2020 100,000
Income tax payable 150,000
Share premium 250,000
Total current liabilities 1,000,000

Unearned leasehold income (five years starting 20200 350,000

Stock dividend payable 150,000
Serial bonds payable (P100,000 maturing annually) 500,000
Total long-term liabilities 1,000,000

Retained earnings 1,500,000

Share capital, P100 par 5,000,000
Retained earnings appropriated for plant expansion 500,000_
Total capital 7,000,000
Required:
Prepare statement of financial position with supporting notes.

Problem 16
M Company reported the following statement of financial position on December 31, 2019:
Current assets 2,000,000 Current liabilities 1,500,000
Investments 400,000 Long term liabilities 2,000,000
Tangible assets 7,150,000 Equity 6,450,000
Intangible assets 400,000 _________
9,950,000 9,950,000
 Equity has preference share capital, no par value, P5 stated value, authorized 300,000 shares, issued 150,000 shares
for P1,000,000, ordinary share capital, P20 par value, authorized 400,000 shares, issued 100,000 shares of P30 per
share.
 Tangible assets include building P5,000,000 less accumulated depreciation P1,600,000, equipment P1,400,000 less
accumulated depreciation P400,000, land P1,250,000, and land held for future plant site P1,500,000.
 The current assets include: Cash P400,000, accounts receivable P750,000 less P50,000 for allowance for doubtful
accounts, inventories P800,000, and prepaid expenses P100,000.
 The investments include the cash surrender value of a life insurance contract P50,000, investment in securities,
short-term, P100,000 and long term, P250,000.
 Intangible assets include a franchise P100,000, goodwill P200,000 and discount on bonds payable P100,000.
 Current liabilities include accounts payable P400,000, notes payable-short-term debt P450,000 and long-term
P300,000, taxes payable P150,000, and appropriation for contingencies P200,000.
 Long term liabilities compromised solely of 12% bonds payable due on December 31, 2022.
Required:
Prepare statement of financial position with notes.
Problem 17
D Company provided the following statement of financial position on December 31, 2019:
Current assets 2,700,000 Current liabilities 2,500,000
Other assets 6,600,000 Other liabilities 2,000,000
_________ Equity 4,800,000
9,300,000 9,300,000
 Analysis of current assets discloses the following:
Cash and cash equivalents 500,000
Financial assets held for trading 600,000
Accounts receivable 750,000
Inventories 850,000
2,700,000
 Other assets include:
Property, plant and equipment, cost P6,000,000 4,000,000
Advances to subsidiary 2,250,000
Goodwill recorded on the books to cancel losses
Incurred by the entity in prior years 350,000
6,600,000
 Current liabilities include:
Accrued expenses 100,000
Customer’s deposit 400,000
Advances from officer, not payable currently 200,000
Accounts payable 1,000,000
Note payable-bank due December 31, 2021 800,000
2,500,000
 Other liabilities include:
Bonds payable in annual instalment of P500,000 2,000,000
 Share capital, 50,000 shares, P100 par, was originally issued and credited for a total consideration of P5,500,000 but
the losses of the entity for past years were charged against share capital balance.
Required:
Prepare statement of financial position.

Problem 18
M Company provided the following information for 2019:
Sales 7,500,000
Inventories-January 1:
Raw materials 200,000
Goods in process 240,000
Finished goods 360,000
Inventories-Dec.31:
Raw materials 280,000
Goods in process 170,000
Finished goods 300,000
Purchases 3,000,000
Direct labor 950,000
Indirect labor 250,000
Superintendence 210,000
Light, heat and power 320,000
Rent-factory building 120,000
Repair and maintenance – Machinery 50,000
Factory supplies used 110,000
Sales salaries 400,000
Advertising 160,000
Depreciation-store equipment 70,000
Office salaries 150,000
Depreciation-office equipment 40,000
Depreciation-machinery 60,000
Sales returns and allowances 50,000
Interest income 10,000
Gain on sale of equipment 100,000
Delivery expenses 200,000
Accounting and legal fees 150,000
Office expenses 250,000
Earthquake loss 300,000
Gain from expropriation of asset 100,000
 Income tax expense 320,000
Required:
a. Prepare statement of cost of goods manufactured
b. Prepare an income statement using the “cost of goods sold” method with supporting notes
c. Prepare an income statement using the “nature of expense” method with supporting notes

Problem 19
E Company provided the following information for the year ended December 31, 2019:
Contribution 125,000
Delivery expense 425,000
Depreciation – delivery truck 60,000
Depreciation-office 35,000
Depreciation-store equipment 25,000
Dividends paid 450,000
Dividend revenue 50,000
Doubtful accounts 30,000
Income tax 280,000
Freight in 145,000
Gain on sale of equipment 10,000
Interest revenue 20,000
Loss on sale of trading securities 50,000
Loss from inventory writedown 150,000
Merchandise inventory, January 1 1,100,000
Office salaries 950,000
Purchase discounts 45,000
Purchases 4,600,000
Retained earnings, January 1 550,000
Sales 8,750,000
Sales returns and allowances 150,000
Sales salaries 600,000
Store supplies 150,000

Inventory at year-end was valued at P850,000, P1,000,000 cost less the P150,000 writedown of inventory to net realizable
value. E Company made a prior period error by understating depreciation in 2018 by P200,000.
Required:
Prepare an income statement with supporting notes

Problem 20
On January 1, 2016, M Company had 6,000,000 authorized ordinary shares of P5 par, of which 2,000,000 shares were issued
and outstanding. The shareholder’s equity on same date showed the following balances:
Ordinary share capital 10,000,000
Share premium 7,500,000
Retained earnings 3,250,000
 On January 5, M issued at P54 per share, 100,000 shares of P50 par, 9% cumulative, convertible preference share
capital. M had 250,000 authorized preference shares.
 On February 1, M reacquired 20,000 ordinary shares for P16 per share. M uses the cost method.
 On April 30, M had completed an additional public offering of 500,000 ordinary shares with P5 par value. The shares
were sold to the public at P12 per share.
 On June 17, M declared a cash dividend of P1 per ordinary share, payable on July 10 to shareholders of record on
July 1.
 On November 6, M sold 10,000 shares of treasury for P21 per share.
 On December 7, M declared the yearly cash dividend on preference share, payable on January 7, 2017, to
shareholders of record on December 31, 2016.
 On January 17, 2017, before the books were closed for 2016, M became aware that the ending inventory on
December 31, 2015 was overstated by P200,000.
The after-tax effect on 2015 net income was P140,000. The appropriate correcting entry was recorded. After correction of
the beginning inventory, net income for 2016 was P2,250,000.

Required:
Prepare statement of changes in equity for the year ended December 31, 2016.