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Problem 12: The following asset side of the SFP was provided by the MB Corporation on December 31,2018:
MB Corporaiojn
December 31,2018
Assets
CASH 20,000
TEMPORARY MARKETABLE SECURITIES -TRADING(MARKET- P16,000) 22,000
INVENTORY 30,000
CURRENT ASSETS 72,000
NON CURRENT INVESTMENT IN 8%, 10 YR. BONDS (AT FACE VALUE; 100,000
COST- P87,711)
NONCURRENT MARKETABLE SECURITES (AT MARKET; COST-P62,000) 75,000
PLANT ASSETS (LESS ACCUMULATED DEPRECIATION OF P25,000) 75,000
TOTAL ASSETS 322,000
The long-term investment in bonds (held to maturity) was purchased on Jan.1,2018. The difference between cost and
face value was ecognized on acquisition date as unrealized gain. The interest on the bonds is payable annually on January 1.
The non marketable equity securities (available for sale) include a 30% interest in the Alomar Company. This investment
(with a P45,000 market value on Dec.31,2018) was purchased on Jan.2,2018 for P40,000, and represents a significant
interest. Alomar had net income of P50,000 and dividends of P20,000 in 2018. MB reported net income of P57,000 in 2018.
The books of MB had not been closed; assume that all items are material.
1) Provide correcting/adjusting entries for MB Corp. based on rhe informatiion given. Any discount or premium on bond
investment is to be carried in a separate account from face valuie.
2) What is MB's correct net income for 2018?
3) Re-state the asset side of the Statement of Financial Position according to generally accepted acctg. principles.
Problem 13: The White Corporation purchases life insurance policies on its officers,and these policies all carry a cash
surrender value clause.At the beginning of 2018, White paid P13,300 in life insurance premiums for one year
During 2018 the cash surrender value of the policies increased form P98,450 to P103,900 . At the beginning of 2019,the
corporation's vice president died in an automobile accident. The policy carried on this officer paid P50,000, and the cash
surrender value of the policy was P6,480.
Prepare journal entries to record the above information.
Problem 14- Ramses Company retires a machine from aciive use on Jan.2,2018 for the express purpose of leasing it.
The machine had a carrying value of P900,000 after 12 years of use and is expected to have 10 more years of economic life.
The machine is depreciated on straight line basis. On March 2,2018, Ramses leases the machine to Osaka Company for
P180,000 a year for a 5-year period ending on February 28,2023. Under the provisions of the lease, Ramses incurs total
maintenance and other related costs of P20,000 for the year ended Dec.31,2018. Osaka company pays P180,000 to Ramses
on March 2,2018. The lease was properly classified as an operating lease.
Ramses' entry upon retirement of the machine on Jan.2,2018 was:
Investment Property-Leased Machinery 900,000
Machnery (net) 900,000
1) Compute the income before income taxes derived by Ramses Company from this lease for the year 2018.
2) How should the leased machine be presented in the SFP as of Dec.31,2018.