Problem 1-17 (AICPA Adapted)

Regal Company sells gift certificates, redeemable tor store merchandise. The gift certificates have no expiration date.

The entity has the following information pertaining to the gift certificate sales and redemptions:

Unearned revenue on January 1, 2020750,000

2020 sales2,500,000

2020 redemptions of prior year sales250,000

2020 redemptions of current year sales 1,750,000

What amount should be reported as unearned revenue on December 31, 2020?

a. 1,250,000

b. 1,125,000

c. 1,000,000

d. 500,000

Problem 1-18 (AICPA Adapted)

Dunne Company sells equipment service contract that cover a two-year period. The sale price of each contract is P600.

The past experience is that, of the total pesos spent for repairs on service contracts, 40% is incurred evenly during the first contract year and 60% evenly during the second contract year.

The entity sold 1,000 contracts evenly throughout 2020.

1. What is the contract revenue for 2020?

a. 120,000

b. 240,O00

c. 300,000

d. 150,000

2. What amount should be reported as deferered service revenue on December 31, 2020?

a. 540,000

b. 480,000

c. 360,000

d. 300,000

3. What is the contract revenue for 2021?

a. 180,000

b. 360,000

c. 300,000

d. 120,000

4. Whatt is the contract revenue for 2022?

a. 240,000

b. 360,000

c. 180,000

d.0

Problemn 1-19 (AICPA Adapted)

Cobb Company sells appliance service contracts ageeing to repair appliances for two-year period.

The past experience is that, of the total amount spent for repairs on service contracts, 40% is incurred evenly during the first contract year and 60% is incurred evenly during the second contract year.

Receipts from service contract sales are P500,000 for 2020 and P600,000 for 2021.

Receipts from contracts are credited to unearned servIce revenue. All sales are made evenly during the year.

1. What is the contract revenue for 2020?

a. 100, 000

b. 200,000

c. 250,000

d. 500,000

2. What is the unearned revenue on December 31, 2020?

a. 300,000

b. 400,000

c. 200,000

d. 150,000

3. What is the contract revenue for 2021?

a. 240,000

b. 360,000

C. 370,000

d. 250,000

4. What is unearned revenue on December 31, 2021?

a. 360,000

b. 470,000

C. 480,000

d. 630,000

Problem 1-20 (AICPA Adapted)

Hart Company sells subscriptions to a specialized directory that is published semiannually and shipped to subscribers on April 15 and October 15.

Subscriptions received after the March 31 and September 30 cut-off dates are held for the next publication.

Cash from subscribers is received evenly during the year and is credited to deferred revenue from subscriptions.

Deferred revenue from subscriptions-January 11,500,000

Cash receipts from subscribers during the current year7,200,000

What amount should be reported as deferred revenue from subscription on December 31?

a. 1,800,000

b. 3,300,000

C. 3,600,000

d. 5,400,000

Problem 1-21 (AICPA Adapted)

Weaver Company sells magazine subscriptions for a 1-year, 2-year or 3-year period.

Cash receipts from subscribers are credited to magazine subscriptions collected in advance and this account had a balance of P1,700,000 on danuary 1, 2020.

The entity provided the following information for the year ended December 31, 2020:

Cash receipts from subscribers2,100,000

Magazine subscriptions revenue

credited on December 31, 20201,500,000

On December 31, 2020, what amount should be reported as the balance for magazine subscriptios collected in advance?

a. 1,900,000

b. 2,300,000

C. 1,400,000

d. 2,100,000

Problem 1-22 (AICPA Adapted)

Anette Video Company sells 1- and 2-year subscriptions for the video-of-the-month business.

Subscriptions are collected in advance and credited to sales. An analysis of the recorded sales activity revealed the following:

20202021

Sales 420,000500,000

Less cancelations20,00030,000

Net sales400,000 470,000

Subscription expirations:

2020120,000

2021155,000130,000

2022125,000 200,000

2023140,000

400,000470,000

1. On December 31, 2021, what amount should be reported as unearned subscription revenue?

a. 495,000

b. 470,000

C. 465,000

d. 340,000

2. What amount should be reported as subscription revenue for 2021?

a. 175,000

b. 305,000

C. 285,000

d. 250,000Problem 1-23 (AICPA Adapted)

Farr Company sells products with reusable and expensive containers. The customer is charged a deposit for each container delivered and receives a refund for each container returned within two years after the year of delivery.

Containers held by customers on January 1, 2020 from deliveries in:

201875,000

2019215,000 290,000

Containers delivered in 2020390,000

Containers returned in 2020 from deliveries in:

201845,000

2019125,000

2020143,000313,000

What is the liability for deposits on December 31, 2020?

a. 247,000

b. 292,000

c. 337,000

d. 367,000

Problem 1-24 (AICPA Adapted)

Black Company required nonrefundable advance payments with special orders for machinery constructed to customer specifications.

The entity provided the tollowing intormation for the current year:

Customer advances - beginning of year 1,180,000

Advances received with orders1,840,000

Advances applied to orders shipped1,640,000

Advances applicable to orders canceled500,000

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

a. 1,480,000

b. 1,380,000

c.880,000

d.0

Problem 1-25 (AICPA Adapted)

Kent Company, a realty entity, maintains eserow accounts and pays real estate taxes for the mortgage customers.

Escrow funds are kept in interest-bearing accounts. Interest, less a 10% service fee, is credited to the mortgagee's account and used to reduce future escrow payments.

The entity provided the following additional intormation for the current year:

Escrow accounts liability, January 1700,000

Escrow payments received 1,580,000

Real estate taxes paid1,720,000

Interest on escrow funds50,000

What amount should be reported as escrow accounts liability on December 31?

a. 510,000

b. 515,000

c. 605,000

d. 610,000

Problem 1-26 (AICPA Adapted)

On the first day of each month, Bell Company received from Kaye Company an escrow deposit of P250,000 for real estate taxes. The entity recorded the P250,000 in an escrow account.

Kaye's 2020 real estate tax is P2,800,000, payable in equal installments on the first day of each calendar quarter.

On January 1, 2020, the balance in the escrow account was P300,000.

On September 30, 2020, what amount should be reported as an escrow liability?

a. 1,150,000

b.450,000

c.850,000

d.150,000

Problem 1-28 (AICPA Adapted)

Ronald 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 was 30%.

What is the bonus for the current year?

a. 126,000

b. 150,000

C. 165,000

d. 180,000

Problem 1-29 (AICPA Adapted)

Christian Company has a bonus agreement which provides that the general manager shall receive an annual bonus of 10% of the net income after bonus and tax. The income tax rate is 30%.

The general manager received P280,000 for the current as bonus.

What is the income before bonus and tax?

a. 4,280,000

b. 4,000,000

c. 2,800,000

d. 3,720,000

Problem 1-30 (AICPA Adapted)

After three profitable years, Gretchen Company decided to

offer a bonus to the branch manager ot 25% of income over P1,000,000 earned by the branch during the current year.

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 deducting tax.

What is the bonus for the current year?

a. 120,000

b. 150,000

c. 250,000

d. 320,000

Problem 1-31 (AICPA Adapted)

Jackson Company has an incentive compensation plan under which the president is to receive a bonus equal to 10% of income in excess ot PL,000,000 before deducting income but after deducting the bonus. The income before income tax and the bonus is P3,200,000.

What is the amount of the bonus?

a. 220,000

b. 200,000

c. 320,000

d. 440,000