(CPA REVIEW SCHOOL OF THE PHILIPPINES Manila AUDITING PROBLEMS: JULY 28, 2019 FIRST PREBOARD EXAMINATION ‘SUNDAY, 8:00AM ~ 11:00AM SETA mm INSTRUCTIONS: CHOOSE THE BEST ANSWER FOR EACH OF THE FOLLOWING. FULLY SHADE ONLY ONE BOX FOR EACH ITEM. STRICTLY NO ERASURES ALLOWED. PROBLEM NO. 1 [At the beginning of year 1, the entity grants 100 shares each to 500 employees, conditional upon the employees remaining in the entity's employ during the vesting pend. “The shares will vest atthe end of year 1 Ifthe entity's earnings increase by more than 18 percent; at the end of year 2 If the entity’s earnings increase by mere than an average of 13 percent per year over the two-year period; and at the end of year 3 ifthe entity's eamings increase by more than an average of 10 percent per year over the three-year period. “The shares have a far value of P30 per share at the start of year 4, which equals the share price at grant date. By the end of year 1, the entity's earings have increased by 14 percent, and 20 employees have left. The entity expects that earnings will conte to increase at a similar rate in year 2, and therefore expects that the shares well ves at the end of year 2. The entty expects, on the basis (of a weighted average probability that 2 further 30 employees wil eave during year 2. By the end of year 2, the entity's earings have increased by only 20 percent end therefore the shares do not vest et the end of year 2. 42 eniployees have lef during the year. The entity expects that a further 1§ employees will leave during year 3, and that the entity's earings will Increase by at east 6 percent, thereby achieving the average 10 percent per year. By the end of year 3, 10 employees have left and the enbty's eamings had increased by 8 percent. Based on the foregoing, answer the following: 1, What amount of compensation expense should he recognized in year 4? A P#23,000 B. P450,000 C P642,000 D. 675,000 2. What amount of compensation expense should be recognized in year 22 A. P173,000 B. P181,000 © P423,000 D. 428,000 3, What amount of compensation expense shoud be recognized in year 3? A. 428,000 B. 438,006 350,000 . P6#2,000 -000000000- ‘At the beginning of year 1, an entity grants to a senior executive 3,000 share eptions, conditional ‘upon the executive remafning in the ensty’s employ until the end of year 3. ‘The exercise price |g P40. rowever, the exercise price drops to P70 + the entty/'s earrings increase by at least an ‘average of 10 percent oer year over the three yaar verod. ‘On grant date, the entity ectimates that the fair value cf the share options, with an exercise price (Of P30, is PIS per option. Ifthe exercise price is P40, the entity esbrnates that the share options: havea fair value of P12 per option. Page Lut 2 Pages‘SPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) - MANILA FIRST PREBOARD EXAMINATION AUDITING PROBLEMS ay 28 2019 / SUNDAY 8:00AM = 1:00 During year 1, the entity's earings increased by 12 percent, and the entity expects that earings will continue to increase at this rate over the next two years. The entity therefore expects that the earings target willbe achieve, and hence the share onions wal have an exercise pie of gyre tyson nny pert nd ef et that the earings tract wil be ochloved 1 ; During year 3, the entity's earnings increased by only 3 percent, and therefore the earnings target was not achieved. The executive completes three years’ service, and therefore satisfies the service condition. Because the earings target was nc achieved, the 3,000 vested share options have an exercise price of P40. Based on the preceding Information, answer the following: 4. What isthe compensation expense in year 2? A 12,000, B. 15,000 c P30,000 D. 40,000 ‘5. What is the compensation expense in year 3? ‘A. P6,000 8. P12,000 © 15,000 D. 60,000 000000000 PROBLEM NO. 2 ‘You are a senior accountant responsible forthe annual audit of JERSAMTAN CO. for the year fended December 31, 2019. The information avaiable to you is presented below. You may ‘assume that any pertinent information not presented below has already been checked and found satisfactory. Excerpts from trial balance, December 31, 2019: ebit Credit Retained Earrings 93,000 ‘Allowance for Decline in Value of Inventory 36,500 ‘Share Capital (5,000 shares) 500,000 “The books have not been closed, but all adjusting entries which the company expects to make have been posted. Their tial balance shows 3 P60,000 net income for the year. Ledger details of Retained Earnings: Retained Eamings | 08/06/19 CD 2,000 | 12/31/48 Balance 134,500 | 20/19/19 10,000 | 04/29/19 CR 500 iaauis 3 30000 | Note: The balance at 12/31/18 aarees with last year’s working papers. Analysis of selected cash recepts: Date Account Credited Amount Explanation 04/29/19 Share Capital 10,000 Sold P100 par stock at 105. Retained earrings ‘500 10/10/19 Building ‘580,000 See corollary entry dated 10/10/19. 1 Page of 12 Pages‘CPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR)- MANILA ‘Anelyss of selected cosh disbursements: Rate Account Debited © Amount Explanation (06/06/19 Retained Earungs 2,000 Freak accident to company ‘truck not covered by insurance; repairs by D) Repairs. ‘Selected entries in the general journal: Pate Entry and Explanation Debit Credit 20/10/19 “Accumulated Depreciation 370,000 Retained Earrings 110,000 Building 360,000 ‘Sale of main ofice busking. 32/31/19 Retained Earnings 30,000 ‘Allowance for Dedine a Value of Inventory 30,000 ‘Prosision to value materials inventory 1a lower of cast and net realizable vate ‘Based on the preceding information, determine the foliowing: 6. Loss on sale of building APO B. P10,000 . P1S0,000 . P220,000 7. The 105s on dectine in value of inventories should be charged to A. Retained earings 1B. Loss on dedine in value of Inventories © Share premium D. Share capital ‘Share capital balance at December 31, 2019 ‘A. 500,000 'B. P595,000 C. 605,000 D. 610,000 ‘9. Share premium balance at December 31, 2019 A P00 8. P9500 . P10,000 D. 10,500 10. Net income for 2019 ‘A. P18,000 8. P20,000 22,000 . 60,000 enn 0000000 PROBLEM NO. 3 | cr sany 3, 2015, ed 7080, 10%, ty bo wen rare ta Of rere ws 8%, Interest payasle cn une 30 and December 31, The following Randal I inrmatin ovate Sales 300,000 Cost of sales 180,000 Gross income 120,000 Interest expense ? i Depreciation expense . (24;800) i Other expenses: (2,000) Net income ? Dec. 31,2019 Jan. 1, 2019 ‘Accounts receivable 55,000 48,000 Inventory 187,000 93,000 ‘Accounts payable 160,000 58,000 Page30f12 Pages(CPA REVIEW SCHOOL OF THE PHILIPPINES (CPR) - MANILA FIRST PREBOARD UMINATION AUDITING PROBLEMS sun 28 2039 / SUNDAY / 8:00AM = 21.0088 ‘Al purcheses of inventory are on account. Other expenses are pald for in cash. 11. What isthe carrying value of the bonds on December 31, 20197 ‘A. P100,000 B. PL12,233, C. PLi2,661 D. P113,592 12, What isthe interest expense for 20197 AL PaS44 B. PaGaL, cc. 79,069 . P10,000 13. How much was paid for inventory purchases? ‘A. P172,000 B P174,000 c. P184,000 . P186,000 14. What is Idahu's net income for 20192 A. P13,500 B. P4431 c P14,859 . 23,000 15. How much was received from customers in 20197 A. P245,000 B. P283,000 C. P293,000 . 307,000 ane nnneen cern 000000000— nan PROBLEM NO. 4 YANG CO. started operations on October 1, 2016. Its accounts at June 30, 2019 included the folowing batances: ‘Mechinery (at cost) 196,000 ‘Accumulated depreciation ~ machinery 95,72 Vehicles (at cost; purchased February 20, 2017) 320,000 ‘Accumulated depreciation ~ vehicles 478,880 Land (at cost; purchased March 20, 2019) 150,000 Building (at cost, purchased March 20, 2019) 581,200 ‘Accumulated depreciation ~ building 6,840 Land improvements (at cost; purchased March 20, 2019) 36,000 ‘Accumulated deprecation ~ land improvements ‘600 Details of machines owned at June 30, 2019 were: Machine Purchase Date Gost, Useful Life Residual value 1 October 2, 2016 50,000 “4 years 5,000 2 December 27,2016 84,000 5 years 8,000 3 uly 29, 2017 62,000 4 years 6,000 Additional information: ‘Yang calculates depreciation to the nearest month and balances the records at month-end, Recorded amounts are rounded to the nearest peso, and the reporting date is June 30. 1b. Yang uses straight-ine depreciation for all depreciable assets except vehicles, which are epreciated on the diminishing balance at 30% p.a. (€ The vehicles account balance reflects the total paid for four identical delivery vehicles, which ‘cost P80,000 each. «. On acquiring the land and building, Yang estimated the buildings useful life and residuel value ‘at 20 years and P34,000 respectively. ‘@. The land improvements account balance reflects a payment of P36,000 made on March 20, 2018 for driveways and a car park. On acquiring these land Improvements, Yang estimated their useful life at 15 years with no residual value. Page 4of 12 Pages(CPAREVIEW SCHOOL OF THE PHILIPPINES (CPAR) = MANILA FIRST PREBOARD EXAMINATION ‘AUDITING PROMLEMS ay 28 2019 SUNDAY / OAM = 11.008 ‘The following transactions occurred tom July 4, 2019: ‘Aug. 03, 2019 Purchased a new machine (machine 4) for a cash price of P72,000. Installation ‘costs of P3,600 were also paid. Yang estimated the useful Ife and residual value at five years and P7,000 respectively, Now. 15,2019 Pad vehicie repairs of P1,200. Dec. 30,2019 Exchanged one of the vehicles for hems of fitures that had a fair value of 34,000 at the date of exchange. The far value of the vehicie atthe date of exchange was P32,000. The Futures originally cost 100,000 and had been depreciated by P62,000 to the date of exchange in the previous owner's Books, ‘Yang estimated the figures’ useful life and residual value at five years and 5,000 respectively. Mar. 10, 2020 Sold machine 1 for P10,000 cash. June 30, 2020 Recorded depreciation expense. Sep. 20, 2020 Traded in machine 3 for 2 new machine (machine 5). A trade-in allowance of 20,000 was received for machine 2 and P68,000 was paid in cash. Yang estimated machine 5's useful fe and residual value at sx years and P20,000 respectively. Dee. 30, 2020 Scrapped machine 2, as It was surplus to requirements and no buyer could be found for it Feb. 08, 2021 Paid P16,000 to overhaul machine 4, after which machine 4's useful ife was ‘estimated at two remaining years and its residual value was revised to P10,000. une 30, 202 Recorded depredation expense. Based on the preceding information, determine the following: 16. Depreciation expense on machinery forthe yeer ended June 30, 2020. AL PAL,I77 B, P49,277 . P50,420 D. P53,027 117, Gain on exchange on December 30, 2019. A PO 8. P2,012 c. 9,000 D. P4012 18. Total depreciation expense on all depreciabie assets tor the year ended June 30, 2020. A. PLLt281 ®. P1348) C. PL8,71 D. Pi25,216 19. Gain on trade In of machine no. 3 on September 20, 2020, APO B P2333 ©. P7667 D. P23,667 20. Total depreciation expense on all epreciatie assets for the year ended June 30, 2024. AL P82,951 1B. 798,951 C. P108,451 D. P106,551 oo-eennenr--- 900000090" PROBLEM NO. 5 Presented below are four independent cases relating to the sucht of shareholders’ equity. Answer the questions at the end of each case. Page Sot 12 Pages(PA REVIEW SCHOOL OF THE PHOLIPPINES (CPAR)- MANILA FIRST PREBOARD EXAMINATION ‘AUDITING PROBLEMS puny 28 2019, Suan / 8008 = 1:004M coset ‘The retained earnings account for CURDAPIA CO. shows the following (debits) and credits: | Jon, 1 Balance | 2.917000 (@) Loss from fre . 3,175) () Goodwill impairment (322,000) (©) Stk avdend | | Goato00) (@) Loss on sale of equipment | (175,500) (@)_ Officers compensation related to income of por periods — \ 2ccrual overooked (2,404,000) | (Q. Share premium—ssuance | "735/000 (9). Stock subscription defaults | | 37250 8 ae | 2a Gain on early retirement of bonds at less than carrying value | 81,000 ). Gain on life insurance policy settlement 76,000 (8) Correction of prior-pertod error | 303500 21, Whats the corrected amount of retained earings? | A P1$7,500 B. P343,500 ‘C. PS3,500 . 952,500 case2 KANDONG COMPANY began operations on January 1, 2018, by issuing at P15 per share one-half Of the 475,000 ordinary shares (Pt par value) that had been authorized for issue. In addition, Kandong has 250,000 6% preference shares (PS par value) authorized. During 2018, Kandong reported net income of P512,500 and declared dividends of P118,750. During 2019, Kandong completed the following transactions: Jan. 10 Issued an additional 50,000 ondinary shares for P47 per share. ‘age. 2 Issued 75,000 preference shares for P8 per share. July 21 Authorized the acquisition of a custom-made machine to be delvered in January 2020., Kandong appropriated P147,500 of retained earings forthe purchase of the machine, Oct. 25 Issued an additional 25,000 preference shares for P9 per share. Dec. 31 Reported P607,500 of net income and dedared a dividend of P317,500 to shareholders of record on January 31, 2020, tobe paid on February 4, 2020. 22. What isthe tal shareholders’ equity on December 31, 20197 ! A, 3,956,250 B. P5,773,750 . P5821,250 , 6,238,750 case [BURDADO CO. is authorized to issue 300,000 of P2 par value ordinary shares. The company has the following transactions: t (a) Issued 60,000 shares at P30 perishare; received cash. (b) Issued 750 shares, selling at P35 per share, to lawyers for services |n connection with the organization ofthe corporation. The value ofthe legal services was 27,000. (©) Issued 900 shares, valued objechvely at P30,000, to the employees instead of payltg them cash wages. (@) Issued 37,500 shares in for a building valve 8t PB8S,000 and land valued et 240,000.” (The building was originally acquired by the Investor for P750,000 and has 300,000 of accumulated depredation; the land was orginally acquired for P90,000.) (©) Received cash for 19,500 shares issued at P38 per share. (© Issued 12,000 shares at P45 per share; received cash. : 23, ‘The statement of financial postion vl report share premium of A. P3,326,700 8. P3,973,900 C. P4,000,950 . P4,001,700 | fee 12 ages(CPA REVIEW SCHOOL OF THE PHOLIPINES (CPAR) - MARILA [FIRST PREBOARD EXAMINATION cose4 1 1 “TAKYO COMPANY has been paying regular quarterly dlvidends of P1.50 and wants to pay the ‘same amount in the third quarter of 2019. The following information relate to the companys equity: a] | Jan. 1 Shares outstanding, 400,000; P2 per (750,000 shares . | Feb. 15 Issued 25,000 new shares at P10.50, | Mar. 31 Paid quarterly dividends ofPi.50 per share. ' Mey 12 Converted P1,000,000 of P1,000 bonds to ordinary shares at the rate of 50 shaves per P1000 bond. ' June 15 Issued an 11% share dividend. 30 Paid quarterty dividends of P50 per share. ! 24. atte wal aeunt that Tayo wl vet py needs the ti querer a ‘order to pay PL.50 per share? AL P637,500 B P712,500 c P749,250 fp. P7s0,875 25. Wats the tal amour of dividends tobe sound during te yer suing no eaaty transactions occur after June 30? ‘A. P3,010,125 B. P3,085,125 © 3,121,875 D. 3,163,500 === 0 00000000- nnn PROBLEM NO. 6 Information concering STA MESA Corporation's Intangible assets i as follows: (On January 1, 2019, Sta Mesa signed an agreement to operate as a franchisee of DBD Copy ‘Service, In. for an Initial franchise fee of P255,000. OF this amaunt, P75,000 was paid when the agreement was signed, and the balance is payable In four anual payments of P4S,000 ‘each beginning January 1, 2020. The agreement provides that the down payment is not refundable and no future services are required ofthe franchisor. The present value at January 2, 2019 ofthe four annual payments discounted at 14% (the Implicit rate fora loan of this ‘ype is P131,100. The agreement also provides that 5% of the revenue from the franchise rust be paid to the franchisor annually. Sta Mesa's revenue from the franchise for 2019 was 2,700,000. Sta Mesa estimates the useful lfe of the franchise to be 10 years. '. Sta Mesa incurred P234,000 of experimental and development costs In Its laboratory £0 ‘develop @ patent, which was granted on January 2, 2019. Legal fees and other costs associated with registration ofthe patent totaled P49,200. Sta Mesa estimates thet the useful Iie ofthe patent will be 8 years. A trademark was purchased from Loose Company for P120,0000n uy 1, 2016. Expenditures for successful tigation in defence oF the racemark totaling F30,000 were pad on July 3, 2018, stm Mesa estimates Dat the usefl fe ofthe trademark wil be 20 years from the date of acqutstion. 26. What isthe patent's carrying value qn December 31, 2019? AL 43,050, 5 ne C. P204,750 . 247,800 27. What Is the franchise's caring value on December 31, 2019? A. PL17,990 B. P1854 c. P189,000 b. p203,844 28, What Is the trademarks carrying value on December 31, 2019? ‘A. P98,000 a rua . P123,750 . P130,000 | \ fee ages 1‘CPA REVIEW SCHOOL OF THE PHILIPPINES (COAR) - ANA FIRST PREBOARD EXAMINATION] 29. What isthe total franchise elated expenses for the year ended December 32, 20187 AL 153,354 B. PIS5,610 C. PI73,964 , P220,854 ‘What isthe toa! intangibles reloted expenses forthe year ended December 31, 20197 AL 195,504 B P216,114 © Pz2i,114 D. P231,114 000000000 PROBLEM NO. 7 ‘You have been appointed as auditor of MARULAS CO. Its bookkeeper reports the following statement of finandal position amounts as of June 30, 2019. Current assets 885,900 Other assets 1,991,890 Current fabilties 502,260 Other jiabiities 500,000 ‘Shareholders’ equity 1,675,440 ‘A review of account balances reveals the following: 2) An analysis of current assets discloses the folowing: cash 178,500 Investment secures - trading 420,000 ‘Accounts receivable 204,900 Inventories, including advertising supplies of 10,500 382.500, aa. 200 ) Other assets include the folowing: Property, plant, and equipment: Deprecated book value (cost, P2,325,000) 1,663,500 Deposit with a supplier for merchandise ordered for ‘August delivery 32,100 (Goodwill recorded on the books to cancel losses incurred ‘by the company in prior years 196200 i.go1.800 ©) Current liabiities incude the folowing: ‘Salaries payable 60,750 ‘Taxes payable 26,610 ‘Accounts payable “Total owed to suppliers on account 333,900 Less: G-month note received from a supplier who purchased some used equipment ‘on June 29, 2019, tno 318,900 Notes payable 26.000 pao260 4), Other abies indude the folowing: 10% mortgage note on propesty, plant, and equiament, payable In semiannual installments of P6000 through June 30, 2024 psgo.c00 Shareholders’ equity includes the folowing: Preference shares, 45,000 shares Issued and outstanding, P20 par value 300,000 Page tot 12 Pages‘CPA REVIEW SCHOOL OF THE PHOLIPINES (CPAR)- MANILA FIRST PREBOARD EXAMINATION ‘AUDITING PRODLpES ny 28 2019 / SUNDAY / SAM = 13-0086 ‘Ordinary shares, 525,000 shores issued and outstanding, Pt par value 525,000 ‘Share premium — 250.840 ‘Ordinary shares were originally issued for P1, 485,000 but the losses of the compart for the past years were charged against share premium. ‘Based on the preceding information, compute the June 30, 2019, adjusted balances of the following: 31, Total current assets. ‘A. PB18,000 B, P922,500 © P930,000 1, 533,000 32. Property, plan, and equipment, net of aecumulated depreciation ‘A. 1,662,000 1,663,900 C. 1,891,800 . 2,325,000 33, Total current liablities A. P517,260 B P549,900 . P637,260 D. P6#2,660 34. Total shareholders’ equity A. P1,317,000 B. 1,479,240 C. 1,485,000 D. P2,385,000 35. Total lables and shareholders’ equity A. 1,217,260) B 1,479,240 P2,595,000 D. P2,596,500 000000000 ae PROBLEM NO. 8 DOMROX CO. reported the following amounts of net income for the years ended December 31, 2017, 2018, and 2019: 2017 190,500 2018 225,000 2019 192,750 ‘You are performing the audit forthe year ended December 31, 2019. During your examination, ‘you discover the Following errors: @) AS a result of errors in the physical count, ending inventories were misstated as follows: December 31,2018 P21,000 understated December 31, 2019 F34,500 overstated 'b)_On December 29, 2019, DOMROX recorded as @ purchase, merchandise In transit which cost 22,500. ‘The merchandise wes shipped FOB Destination and had not arrived by December 31. “The merchandise was nat included in the ending inventory. ©) DOMROX records sales on the accrual basis but failed to record sales on account made near ‘the end of each year as follows: 2017 6,000 2018 7,500 . 2019 5,250 ) The company failed to record sccrued office salaries as folows: December 31, 2017 P35,000 December 31,2018 21,000 Page 9 of 12 Pages‘CPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) - MANILA FIRST PREBOARD EXAMINATION ® 0 9) (On March 1, 2018, @ 10% share dividend was dedared and distributed. ‘The par value ofthe shares amounted to 15,000 and market value was P19,500, The share dividend was recorded 25 follows: Miscellaneous expense 19,500 ‘Ordinary share capital 15,000 Retained earnings 4,500 (On uly 1, 2018, DOMROX acquired a three-year insurance polcy. The three-year premium ‘fF P9,000 was paid on that date, and the entire premium was recorded as insurance expense. On January 1, 2019, DOMROX retired bonds with a book velue of P180,000 for P159,000. ‘The gain was Incorrectly deferred and is belng amortized over 10 years as a reduction of Interest expense on other outstanding obiigations. Questions: %. 7. |What Is the adjusted net income for the year ended December 31, 20177 A. P165,500 8. P175,500 C. PAe,500 D, P199,500 What Is the adjusted net Income for the year ended December 31, 2018? A. P238,500 B. P267,000 C. P268,500 . P280,500 |What Is the adjusted net income for the year ended December 32, 20197 A. P156,600 B. P1940, C P196,500 . 209,400 What adjusting entry should be made on December 31, 2019, to correct the error described Inter 82 ‘A. Recounts payable 2,500 Purchases 22,500 B. Purchases 22,500 ‘Accounts payable 22,500 Accounts payable 22,500 22,500 ©. No sdtng Journal ey is neces. ‘The adiusting entry on December 31, 2016, to correct the error described in item E should Include a debit to ‘A. Ordinary share capital of P15,000 8 Retained earnings of F24,000 CC. Share premium of P4,500 D. Miscellaneous expenses of P4,500 a ‘Shown below isthe Contrbuted Capital section ofthe December 31, 2018, Statement of Financlat Position of CANDABA COMPANY, your audit lent. Preference share capital (636, PSO par, 24,000 shares authorized, 10,200 shares issued and outstanding) 'P510,000 ‘Ordinary share capital (P20 stated value, 90,000 shares authorized, 36,000 shares issued and outstanding) 360,000 Preference shares subscribed (2,400 shares subscribed at PS4 per share) 120,000 Share premium = preference shares 38,400 Share premium — ordinary shares. 216,000 Total contributed capital Pi24s.00 Page 10 0f12 Pages(CPA REVIEW SCHOOL OF THE PHILIPPINES (CPAR) - MAKILA FIRST PREBOARD EXAMINATION ‘AUDITING PRosLEMs ym 2019 SUNN BA = UGA ‘The following equity-related transactions occurred during 2019: ‘after a 3-year service period. The estimated fair valve of the ts ‘The options vest Jan, 3 Granted a compensatory share option plan for its Key executive. vest exercised Is P243,000. Mer, 6 Recetved the remaining M0 per share onthe subscribed preference shares and ese the shares. i} | ‘Apt. 24 Sold 900 preference shares at PSS per share. {| May 5. Racelved a subscription down payment of 6 per shere on 3,000 drdnary shares. The remaining PLL per share balance ls due in 60 days. | June 6 Sold 1,800 ordinary shares at P17 per share. | duly 3. Received the remaining blance on subscribed ordinary shares assed the shares. Seok. 22. Purchased an equpment by paying 27,000 and issuing 2,400 ornary shares and {S350 preference shares. Ordinary and preference shares arecuentiseling for P19 and P57 per sare, respectively. Oct. 13. Reacquired 2,700 ordinary shares at P19.50 per share. The company uses the cost ‘method to account for treasury shares. e 14 Issued for P96,000 a combination of 2,100 ordinary shares and 12% bonds with @ ‘ace value of P60,000. The ordinary share is currently seling for P18 per share. No market value exsts forthe bonds. Dec, 15. Relssued the 2,700 treasury shares at P20.50 per share. Dec. 28 istibuted a P3 per share dividend to all outstanding preference shares and 2 P1.50 per share divigend to all ordinary shares outstanding on this date (debit Reteined ‘earrings and credit cash for each dividend). Based on the preceding information, determine the following: 41. Preference share capital a peaz,s00 8. P718,s00 72,500 . 751,950 42. Ordinary sare copa 5 a ps50,000| 8. 453,000 c. F474,500 2, pss.50 43. Share premium — preference apaas00 3. P52,350 © 55080. 764.950 44. Share premium — treasury aro ©. 92,700 c. 2,680 ©. ps5.as0 +45. Total contributed capital AL P1,538,550 B. 1,616,850 P1,619,550 D. 71,739,550 20000000- nnn PROBLEM NO. 10 i i On January 1, 2018, DELILAH MFG. CO. construction of a building to be used as its office headquarters. The building was completed on June 30, 2019. wo‘GPA REVIEW SCHOOL OF THE PHOLIPINES (CPAR)- MANILA [FIRST PREBOARD EXAMDUATION AUDITING PROBLEMS any 28 2019 SDA / OAM = 11-008 Expenditures on the profect were as follows: January 3, 2018. 2,500,000 Morch 31, 2018 3,000,000, June 30, 2018 4,000,000 ‘October 31, 2018 3,000,000 January 31, 2019, 34,500,000 March 31, 2919 2,500,000 May 31, 2019 3,000,000 ‘On January 3, 2018, the company obtained a PS milion construcon loan with a 10% interest Fate The loan was outstanding alt of 2018 and 2019. The company’s other interest-bearing ‘debts induded a long-term note of F25 milion with an 8% Interest rate, and a mortgage of PLS "milion on anther building with an interest rate of 6%. Both debts were outstanding during all Ff 2018 and 2019. The company's fiscal year-end is December 31. Questions: 46. What is the amount of capialzable interest In 20187 D. 1,043,750 D. P799,663 < P2,900,000 0. 73,038,293 1D. 724,600,000 ‘A. P500,000 2. P663,125 CC. P3,400,000 447, What is the amount of capitalzable interest mn 2019? A. P361,707 8. P630,625 C. P6S4,663, 48. What amount of interest should be expenses in 20187 APO 8. P2,356,250 ©. 72,736,875 49, What amount of mterest should be exnensed in 2019? ‘A. 2,600,337 8. 2,745,337 C. P2769,375 ‘50, What isthe total ost ofthe nullsing (incusing the intrast capitalized in 2018 and 2019)? A. P2O830,625 —B, P2O,BI7,788 ——C. —P20,905457 -~END OF EXAMINATION-- Page 120612 Pages