Bold Company estimated the annual warranty expense at 2% of annual net sales. The net sales for 2016 amounted to P4,000,000.

On January 1, 2016, the warranty liability was P60,000 and the warranty payments during 2016 totaled P50,000.

1.What is the warranty expense for 2016?

a.70,000

b.50,000

c.80,000

d.60,000

2.What is the warranty liability on December 31, 2016?

a.10,000

b.70,000

c.80,000

d.90,000

Chato Company sold electrical goods covered by a one-year warranty for any defects. Of the sales of P70,000,000 for the year the entity estimated that 3% will have no defect.

The cost of repairs would be P5,000,000 if all the products sold had major defect and P3,000,000 if all had minor defect.

1.What amount should be recognized as a warranty provision?

a.8,000,000

b.5,600,000

c.300,000

d.190,000

Cobb Department Store sells gift certificates redeemable only when merchandise is purchased. These gifts certificates have no expiration date. Upon redemption or expiration, the entity recognizes the unearned revenue as realized.

Information for the current year is as follows:

Unearned revenue, January 1, 2016650,000

Gift certificates sold2,250,000

Gift certificates redeemed 1,950,000

Gift certificates expected not to be redeemed100,000

Cost of goods sold60%

2.On December 31, 2016, what amount should be reported as unearned revenue?

a.510,000

b.570,000

c.850,000

d.950,000

Fell Company operates a retail grocery store that is required by law to collect refundable deposits of P5 on soda cans.

Information for the current year follows:

Liability for refundable deposit - January 1150,000

Cans of soda sold100,000

Soda cans returned110,000

During the current year, the entity subleased space and received a P25,000 deposit to be applied against rent at the expiration of the lease in 5 years.

3.What amount should be reported as current liability for deposit on December 31?

a.125,000

b.140,000

c.100,000

d.25,000

Black Company requires advance payments with special orders for machinery constructed to customer specifications. These advances are refundable.

Information for the current year is as follows:

Advances from customers - January 11,180,000

Advances received with orders 1,840,000

Advances applied to orders shipped1,640,000

Advances applicable to orders canceled500,000

4.What amount should be reported as current liability for advances from customers at year-end?

a.1,480,000

b.1,380,000

c.1,640,000

d.500,000

Ronal Company has an incentive compensation plan under which a branch manager received 10% of the branch income after deduction of the bonus but before deduction of income tax.

Branch income for the current year before the bonus and income tax was P1,650,000. The tax rate is 30%.

5.What is the bonus for the current year?

a.126,000

b.150,000

c.165,000

d.180,000

After three profitable years, Cairo Company decided to offer a bonus to the branch manager of 25% of income over P1,000,000 earned by the branch. The income for the branch was P1,600,000 before tax and before bonus for the current year.

The bonus is computed on income in excess of P1,000,000 after deducting the bonus but before deductingthe tax.

6.What is the bonus of the branch manager for the current year?

a.120,000

b.150,000

c.250,000

d.320,000

The bonus agreement of Christian Company provides that the general manager shall receive an annual bonus of 105 of the net income after bonus and tax. The income tax rate is 30%. The general manager received P280,000 for the current year bonus.

7.What is the income before bonus and tax?

a.4,280,000

b.4,000,000

c.2,800,000

d.3,720,000

On February 5, 2017, an employee filed a P2,000,000 lawsuit against Steel Company for damages suffered when one of Steel's plant exploded on December 29, 2016.

The legal counsel believed the entity would probably lose the lawsuit and estimated the loss to be P500,000.

The employee offered to settle the lawsuit out of court for P900,000 but the entity did not agree to the settlement.

8.On December 31, 2016, what amount should be reported as liability from lawsuit?

a.2,000,000

b.1,000,000

c.900,000

d.500,000

During 2016, Beal Company became involved in a tax dispute with the BIR. On December 31, 2016, the tax advisor believed that an unfavorable outcome was probable and a reasonable estimate of additional taxes was P500,000. After the 2016 financial statements were issued, the entity received and accepted a BIR settlement offer of P550,000.

9.What amount of accrued liability should have been reported on December 31, 2016?

a.650,000

b.550,000

c.500,000

d.0

On April 1, 2016, Greg Company issued at 99 plus accrued interest, 2,000 of 8% P1,000 face value bonds. The bonds are dated January 1, 2016, mature January 1, 2026, and pay interest on January 1 and July 1. The entity paid bond issue cost of P70,000.

10.From the bond issuance, what is the net cash received?

a.2,020,000

b.1,980,000

c.1,950,000

d.1,910,000

On March 1, 2016, Cain Company issued at 103 plus accrued interest of 4,000 of 9%, P1,000 face value bonds. The bonds are dated January 1, 2016 and mature on January 1, 2026.

Interest is payable semi-annually on January 1 and July 1. The entity paid bond issue cost of P200,000.

11.What is the net cash received from the bond issuances?

a.4,320,000

b.4,180,000

c.4,120,000

d.3,980,000

On January 31, 2016, Beau Company issued at 99, five thousand of 8%, P1,000 face value bonds.

The bonds were issued through an underwriter to whom the entity paid bond issue cost of P425,000.

On June 30, 2016, what amount should be reported as bond liability?

12.On January 31, 2016, what amount should be reported as bond liability?

a.4,525,000

b.4,950,000

c.5,000,000

d.4,575,000

Aye Company is authorized to issue P5,000,000 of 6%, 10-year bonds dated July 1, 2016 with interest payments on June 30 and December 31. When the bonds are issued on November 1, 2016, the entity received cash of P5,150,000 including accrued interest.

13.What is the discount or premium on bonds payable?

a.150,000 bond premium

b.50,000 bond premium

c.150,000 bond discount

d.No bond premium and discount