SUBJECT: ACCOUNTING

Instructions: The question has already answer. Just show your solution on how to solve it.

1. During 2017, Day Company sold 500,000 boxes of cake mix under a new sales promotional program. Each box contains one coupon, which entitle the customer to a baking pan upon remittance of P4.00. Day pays P5.00 per pan and Po.50 for handling and shipping. Day estimates that 80% of the coupons will be redeemed, even though only 300,000 coupons had been processed during 2017. What amount should Day report as premium expense December 31, 2017? Answer: 600,000

2. In an effort to increase sales, Mills Companyinaugurated a sales promotional campaign on June 30, 2018. Mills placed a coupon redeemable for a premium in each package of cereal sold. Each premium cost Mills P20 and a customer to receive a premium must present five coupons. Mills estimated that only 60% of the coupons issued will be redeemed. For the 6 months ended December 31, 2018, the following information is available: Packages of cereal sold - 160,000 Premiums purchased - 12,000 Coupons redeemed - 40,000 What is the estimated liability for premium claims outstanding at December 31, 2018? Answer: 280,000

3. Mill Company sells washing machines that carry a three-year warranty against manufacturer's defects. Based on company experience, warranty costs are estimated at P3o per machine. During 2018, Mill sold 24,000 washing machines and paid warranty costs of P170,000. In its income statement for the year ended December 31, 2018, Mill should report estimated warranty liability of: Answer: 550,000

4. The following items have to be considered infinalizing the financial statements of X, a limited liability company: Item 1 - The company gives warranties on its products. the company's statistics show that about 6% of sales give rise to a warranty claim. Item 2 - The company has guaranteed the overdraft of another company. The likelihood of a liability arising under the guarantee is assessed as possible.

What is the correct action to be taken in the financial statements for these items? Answer: Item 1: Create provision, Item 3: Disclose by note only

5. Ronald Company has an incentive compensation plan under which a branch manager received 10% of the brach income after deduction of income tax. Branch income for the current year before the bonus and income tax was P1,650,000. The tax is30% Answer: 107,944

6. Glaus Corp. signed a three-month, zero-interest- bearing note on November 1, 2012 for the purchase of P250,000 of inventory. The face value of the note was P253,675. Assuming Glaus used a "Discount on Note Payable" account to initially record the note and that the discount will be amortized equally over the 3- month period, the adjusting entry made at December 31, 2012 will include a Answer: Credit to Discount of Note payable for 1,225

7. The effective interest on a 12-month, zero-interest- bearing note payable of P300,000, discounted at the bank at 8% is Formula: Effective interest =(Discount rate x Face value of the note) divided by ( cash proceeds) Cash Proceeds = (Face value of the note - discount) Answer: 8.70%

8. Sodium Inc. borrowed P280,000 on April 1. The note requires interest at 12% and principal to be paid in one year. How much interest is recognized for the period from April 1 to December 31? Answer: 25,200

9. Collier borrowed P350,000 on October 1 and is required to pay P360,000 on March 1. What amountis the note payable recorded at on October 1 and how much interest is recognized from October 1 to December 31? Answer: 350,000 and 6,000

10. On January 1, 2012, Crown Company sold property to Leary Company. There was no established exchange price for the property, and Leary gave Crown a P3,000,000 zero- interest-bearing note payable in 5 equal annual installments of P600,000, with the first payment due December 31, 2012. The prevailing rate of interest for a note of this type is 9%. The present value of the note at 9% was P2,163,000 at January 1, 2012.

What should be the balance of the Discount on Notes Payable account on the books of Leary at December 31, 2012 after adjusting entries are made, assuming that the effective-interest method is used? Answer: 642,330

11. On march 1, 2020, Edu Company borrowedP1,000,000 and signed a 2-year note payable bearing interest art 12% per annum compunded annually. Interest is payable in full at maturity on February 28, What amount should be reported as accrued interest payable on December 31, 2021? Ans: 232,000

12. On January 1, 2021, Kok Comapny borrowedP500,000 8% note payable due in four years. The present value of the note payable on the date ofissuance was P367,500.The entity elected irrevocably the fair value option inmeasuring the note payable. On December 31, 2021,the fair value of the note payable P408,150.What is the carrying amount of the note payable onDecember 31, 2021? Ans: 408,150

13. On January 1, 2021, Kok Comapny borrowed P500,000 8% note payable due in four years. The present value of the note payable on the date of issuance was P367,500. The entity elected irrevocably the fair value option in measuring the note payable. On December 31, 2021, the fair value of the note payable is P408,150. What amount should be reported as interest expense for 2021? Ans: 40,000

14. On January 1, 2021, Kok Comapny borrowed P500,000 8% note payable due in four years. The present value of the note payable on the date of issuance was P367,500. The entity elected irrevocably the fair value option in measuring the note payable. On December 31, 2021, the fair value of the note payable is P408,150. What amount of gain(loss) from change in fair value of the note payable should be reported for 2021? Ans: 0

15. On January 1, 2021, Kok Comapny borrowed P500,000 8% note payable due in four years. The present value of the note payable on the date of issuance was P367,500. The entity elected irrevocably the fair value option in measuring the note payable. On December 31, 2021, the fair value of the note payable is P408,150. At what amount should the discount on note payable be presented on December 31, 2021? Ans: 91,850