ASSIGNMENT NO.
IV
ACCRUED LIABILITIES
Problem 1
Kemp Company must determine the December 31, 2024 accruals for the following expenses:
* A P500,000 advertising bill was received January 7, 2025, comprising cost of P350,000 for
advertisement in December 2024 issues, and P150,000 for advertisement in January 2025 issues
of the newspaper.
* A one-year lease, effective December 16, 2024, calls for fixed rent of P120,000 per month,
payable one month from the effective date and monthly thereafter.
* The entity has real property subject to real property tax. The city's fiscal year runs July 1 to
June 30 and the tax assessed at 3% of real property on hand is payable on June 30, 2025. The
entity estimated that the real property tax will amount to P600,000 for the city's fiscal year
ending June 30, 2025.
On December 31.2024, what amount should be reported as accrued expenses?
a. 950,000
b. 770,000
c. 650.000
d. 710,000
Problem 2
Chester Company reported the following payroll for the month of January:
Total wages 500,000
Income tax withheld 60,000
All wages paid were subject to SSS. The SSS tax rates were 7% each for employee and employer.
Chester remits payroll taxes on the 15th of the following month.
In the financial statements for the month ended January 31, what amount should be reported
respectively as total payroll tax liability and payroll tax expense?
a. 60,000 and 70,000
b. 95,000 and 70,000
C. 95,000 and 35,000
d. 130,000 and 35,000
Problem 3
Miyuki Company operates a retail store. All items are sold subject to a 12% value added tax,
which the entity collects and records as sales revenue.
The entity files quarterly sales tax returns when due by the twentieth day following the end of
the sales quarter.
However, in accordance with state requirements, the entity remits value added tax collected by
the twentieth day of the month following any month such collections exceed P50,000.
The entity takes these payments as credits on the quarterly sales tax return. The value added
taxes paid by the entity are charged against sales revenue.
Following is a monthly summary appearing in the first quarter sales revenue account:
Debit Credit
January - 560,000
February 60,000 392,000
March - 448,000
What amount should be reported as value added taxes payable on March 31?
a. 150,000
b. 168,000
c. 108,000
d. 90,000
Problem 4
Kent Realty Company maintains an escrow account 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.
Escrow account liability - January 1 700,000
Escrow payments received during the year 1,580,000
Real estate taxes paid during the year 1,720,000
Interest on escrow funds 50,000
What amount should be reported as escrow account liability at year-end?
a. 510,000
b. 515,000
c. 605,000
d. 610.000
Problem 5
On the first day of each month, Bell Company received from Carr Company an escrow deposit of
P250,000 for real estate taxes. Bell Company recorded the P250,000 in an escrow account.
The real estate tax for the current year current year is P2,800,000 payable in equal installments
on the first day of each calendar quarter. On January 1, the balance in the escrow account was
P300,000.
What amount should be reported as escrow liability on September 30?
a. 1,150,000
b. 2,250,000
c. 850,000
d. d. 450,000
Problem 6
On July 1, 2023, the Quezon City government issued realty tax assessment for the fiscal year
ended June 30, 2024. On September 1, 2023, Zuma Company purchased a land in Quezon City.
The purchase price was reduced by a credit for accrued realty taxes.
The entity does not record the entire year's real estate tax obligation but instead records tax
expenses at the end of each month by adjusting prepaid real estate taxes or real estate taxes
payable as appropriate.
On November 1, 2023, the entity paid the first of two equal installments of P600,000 for realty
taxes.
What amount of the payment should be recorded as a debit to real estate taxes payable?
a. 200,000
b. 400,000
c. 500,000
d. 600,000
Problem 7
Nature Company had an agreement to pay the sales manager a bonus of 10% of the entity's
income. The income for the year before bonus and tax was P4,400,000. The income tax rate is
25%.
Determine the bonus under each of the following independent assumptions:
1. Bonus is a certain percent of the income before bonus and before tax.
2. Bonus is a certain percent of income after bonus but before tax.
3. Bonus is a certain percent of income after bonus and after tax.
4. Bonus is certain percent of income after tax but before bonus.
Problem 8
Christian Company had a bonus agreement which provided that the general manager shall
receive an annual bonus of 10% of the net income after bonus and after tax. The income tax
rate is 25%. The general manager received-P300,000 for the current year as bonus.
What amount should be reported as income before bonus and before tax?
a. 4,300,000
b. 4,000,000
c. 3,000,000
d. 3,700,000
Problem 9
After three profitable years, Cairo Company decided to offer a bonus to the branch manager of
25% of income over P5,000,000 earned by the branch.
The income for the branch was P8,000,000 before tax and before bonus for the current year.
The bonus is computed on income in excess of P5,000,000 after deducting the bonus but before
deducting tax. The income tax rate is 25%.
What amount should be reported as bonus of the branch manager for the current year?
a. 1,250,000
b. 2,000,000
c. 600,000
d. 750,000
Problem 10
Tobruk Company had an agreement to pay its sales manager a bonus of 5% of the income. The
income for the current year before bonus and before tax is P5.250.000. The income tax rate is
25%.
1. What amount should be reported as bonus based on income after bonus but before tax?
a. 262,500
b. 250,000
c. 210,000
d. 237,500
2. What amount should be reported as bonus based on income after bonus and after tax?
a. 262,500
b. 196,875
c. 189,799
d. 252,012
