Problem 1-10 (Polk Company)
a) Basis of allocation of sales price of main product
Selling price of main product (300,000 x 30) P 9,000,000
Selling price of premium (300,000 x 30%)/20 = 4,00 x 40 180,000
TOTAL P 9,180,000
Allocation of sales price
To main product (9,000,000 / 9,180,000) x 9,000,000 P 8,823,529
To premium (180,000 / 9,180,000) x 9,000,000 176,471
TOTAL P 9,000,000
Unearned revenue for unredeemed coupons before redemtion P 176,471
Less: Reduction resulting from redemption (4,000/4,500) x 176,471 156,863
Unearned Revenue for Unredeemed Coupons, December 31, 2020 P 19,608
b) Additional sales upon redemption (4,000/4,500) x 176,471 P 156,863
Problem 1-11 (Taylor Company)
1) 2019
Basis of allocation of sales price of main product
Total sales price of main product (140,000 x 500) P 70,000,000
Total sales price of premiums (40,000 + 30,000)/5 = 14,000 x 100 1,400,000
TOTAL P 71,400,000
Allocation of sales price
To main product (70,000,000/71,400,000) x 70,000,000 P 68,627,451
To premium (1,400,000/71,4000,000) x 70,000,000 1,372,549
TOTAL P 70,000,000
Provision for uinredeemed coupons at the end of 2019 (6,000/14,000) x
1,372,549 P 588,235
2020
Basis of allocation of sales price of main product
Total sales of main product (200,000 x 500) P 100,000,000
Total sales of premium (90,000 - 30,000 + 80,000)/5 = 28,000 x 100 2,800,000
TOTAL P 102,800,000
Allocation of sales price
To main product (100,000,000/102,800,000) x 100,000,000 P 97,276,265
To premium (2,800,000/102,800,000) x 100,000,000 2,723,735
TOTAL P 100,000,000
Provision for unredeemed coupons at the end of 2020
(16,000/28,000) x 2,723,735 P 1,556,420
2) 2019
Sales of main product P 68,627,451
Redemption of period
Cash received
8,000 x 50 400,000
12,000 x 50
1,372,549 x (8,000/14,000) 784,314
1,372,549 x (6,000/14,000)
2,723,735 x (12,000/28,000)
TOTAL Revenue P 69,811,765
2020
P 97,276,265
600,000
588,235
1,167,315
P 99,631,815
Problem 1-12 (Van Department Store)
a) Allocation of original consideration received
2019
Sales revenue (5,000,000 x 98%)
Liability for Customers Loyalty Award (5,000,000 x 2%)
Revenue in 2019 as a result of redemption (100,000 x 25,000)/90,000
2020
Total accumulated revenue redemption as of Dec. 31, 2020
(100,000 x 60,000)/95,000
Less: Revenue earned in 2019
Revenue in 2020 as a result of redemption
b)
Liability as of December 31, 2019 (100,000 - 27,778)
Liability as of December, 31, 2020 (100,000 - 63,158)
P 4,900,000
100,000
27,778
P 63,158
27,778
P 35,380
P 72,222
P36,842
Problem 1-14 (Buchanan Company)
Cash P 3,000,000
Unearned Revenue from Gift Certificiates Outstanding
Unearned Revenue from Gift Certificiates Outstanding 2,750,000
Cash
Unearned Revenue from Gift Certificiates Outstanding 150,000
Revenue from Forfeited Gift Certificates
Unearned revenue for unredeemed gift certifates, beg.
Add: Gift certificates sold during the period
Total Outstnading Gift Certificates
Less: Gift certificates redeemed during the period
Expired Gift certicates
Liability for unredeemed Gift Certificates, December 31
P 3,000,000
2,750,000
150,000
P 750,000
3,000,000
P 3,750,000
(2,750,000)
(150,000)
P 850,000
Multiple Choices (MC15 - MC41)
MC15 B (5,000,000 + 6,500,000) / 2
MC16 C
MC17 A Accrued salaries payable, December 31, 2019
Salaries expense during the year
Salaries paid during the year
Accrued salaries payable, December 31, 2020
MC18 B Accrued electricity expense (8,500 x 1/2)
Accrued telephone bill
Total accrued liabilities
MC19 D Unearned service contract revenue, January 1
Cash receipts from service contracts sold
Service contract revenue recognized during the year
Unearned service contract revenue, December 31, 2020
MC20 C Unearned revenue from 2018 sales (2,100,000 x 67.5%)
Unearned revenue from 2019 sales (2,100,000 x 92.5%)
Unearned revenue, December 31, 2019
MC21 D From 2018 contracts 2,100,000 x ½ x (35% + 50%)
From 2018 contracts 2,100,000 x ½ x (35% + 50%)
From 2020 contracts 2,475,000 x ½ x 15%
Revenue from service contracts recognized in 2020
Revenue from service contracts sold in 2020 realized in 2021 2,475,000
MC22 B x ½ x (15% + 35%)
MC23 A From 2018 contracts (2,100,000 x ½ x 50%)
From 2019 contracts (2,730,000 x ½ x 67.5%)
From 2020 contracts (2,475,000 x 92.5%)
Unearned revenue from service contracts, December 31, 2020
MC24 D Warranty contracts (500 x 2,250)
Earned during 2020 (1,125,000 x ½ x 30%)
Unearned revenue from service contracts at Dec. 31, 2020
Revenue earned from service contracts
Cost of servicing contracts
Profit from service contracts
(20,000 X 75%)/20 = 750 premiums x 300 = 225,000
MC25 225,000/12,225,000
MC26 (500/750) x 220,859
MC27 D Deferred revenue from gift certificates outstanding (1,000 x 750)
MC28 B Accrued biweekly salaries (3/10 x 1,125,000)
Accrued overtime pay
Accrued salaries, July 31, 2020
MC29 B Est. number of coupons to be redeemed (80% x 500,000)
Less: Number of coupons already processed
Estimated unredeemed coupons
Multiply: Cost per premium (50 + 5 – 40)
Estimated liability for unredeemed coupons
Estimated total number of premiums 60% x 3,000,000 = 1,800,000;
MC30 A 1,800,000/10
Less: Number of premiums already distributed
Estimated outstanding premiums
Multiply: Cost per premium (40,000/80,000)
Estimated cost of potential prizes outstanding
MC31 A Estimated total coupons (400,000 x 70%)
Coupons redeemed
Outstanding coupons
Estimated outstanding premiums (180,000/5)
Multiply: Cost per premium
Estimated liability for premiums outstanding
MC32 B Estimated value of redemptions (720,000 x 50%)
Amount already disbursed for redemptions
Liability for unredeemed coupons, December 31, 2020
MC33 D Warranty expense for 2020 (24,000 units x P300)
MC34 C Total warranty expense
Less: warranty costs paid
Estimated liability for warranty
MC35 D 1,500 x 4%
MC36 C B = .45 {2,000,000 – B - .30 (2,000,000 – B)}
MC37 C Total Bonus = 0.35 {2,000,000 – B)
Bonus to Sales Manager (518,519 x 15/35)
Bonus to Each Sales Agent (518,519 x 1/35)
MC38 B Bonus: B = 0.10 {2,500,000 - 0.30 x (2,500,000 – B)}
Outstanding subscriptions expiring in 2021, 2022 and 2023: (600,000 +
MC39 C 900,000 + 400,000)
MC40 A Magazine subscriptions received in advance before adjustments
Less: Unearned subscriptions as of December 31, 2020
Magazine subscriptions revenue for year 2020
MC41 D Cash payment
Add: Carrying amount of patent transferred
Total payment
Less: Accrued loss reported on December 31, 2019
Decrease in profit at December 31, 2020
Answers
P 5,750,000
P 5,500,000
P 130,000
1,630,000
(1,560,000)
P 200,000
P 4,250
2,500
P 6,750
P 1,080,000
1,920,000
(1,560,000)
P 1,440,000
P 1,417,500
2,525,250
P 3,942,750
P 892,500
682,500
185,625
P 1,760,625
P 618,750
P 525,000
1,842,750
2,289,375
P 4,657,125
P 1,125,000
168,750
P 956,250
P 168,750
95,000
P 73,750
P 220,859
P 147,239
P 750,000
P 337,500
63,000
P 400,500
P 400,000
(300,0000
100,000
P 15.00
P 1,500,000
P 180,000
(42,000)
138,000
P 0.50
P 69,000
P 280,000
(100,000)
P 180,000
36,000
P20.00
P 720,000
P 360,000
300,000
P 60,000
P 7,200,00
P 7,200,000
(1,700,000)
P 5,500,000
P 60,000
P 479,087 36) B = 0.45 {2,000,000 – B - 0.30 (2,000,000 – B)}
B = 0.45 (2,000,000 - B - 600,000 + 0.30B)
B = 630,000 - 0.315B
P 518,519 1.315B = 630,000
P 222,222 1.315 1.315
P 148,148 B = 479,087
P 180,412 38) B = 0.10 {2,500,000 - 0.30 (2,500,000 – B)}
B = 0.10 (2,500,000 - 750,000 + 0.30B)
B = 175,000 + 0.03B
0.97B = 175,000
P 1,900,000 0.97 0.97
B = 180,412
B = 0.10 (2,500,000 - 750,000 + 0.30B)
B = 175,000 + 0.03B
0.97B = 175,000
0.97 0.97
B = 180,412
P 2,400,000
(1,900,000)
P 500,00
P 3,800,000
2,000,000
P 5,800,000
5,000,000
P 800,000
(2,000,000 – B)}
00 + 0.30B)
37) B = 0.35 {2,000,000 – B)
B = 700,000 - 0.35B
1.35B = 700,000
1.35 1.35
B = 518,519
00,000 – B)}
+ 0.30B)
+ 0.30B)
