Professional Documents
Culture Documents
Process Costing
Paul Corporation has the following information for the current month:
All materials are added at the start of the production process. Paul corporation
inspects goods at 75% completion as to conversion.
Installment Accounting
Apple Inc. Manufactured ten units of Iphone 7 with total production costs of
P630,000. On January 1, 2021, Apple Inc. sold all ten units of Iphone 7 at a total
price of P980,000 with the term of payment as follows: (1) cash down-payment
of P200,000, (2) pre-owned Iphone 6 with trade-in allowance of P80,000 and (3)
the balance payable in four equal annual installment every December 31 . The
customer issued a four-year non-interest bearing note for the balance with
effective interest rate at 10% and the notes discounted value is P554,726 . The
fair value of the trade in Iphone 6 is P145,274. for the year ended December 31,
2021, Apple Inc. collected all the installment due and reported operating
expenses in the amount of P50,000.
On December 31, 2022, 2 out of ten customers defaulted on the installment due
which resulted ti the repossession of two units of Iphone 7 . Each repossessed
units has an estimated selling price of P20,000 after reconditioning costs of
P5,000. the estimated costs to sell of each repossessed unit is P3,000 with
normal profit of 10%. On the sale date, one of the two repossessed units was
reconditioned at a cost of P5,000 and was sold at a bargain price of P18,000 .
For the year ended 2022, Apple Inc. collected all the installment due except
those defaulted contracts and reported operating expenses in the amount of P
40,000.
Page 1 of 4
What is the net income/loss to be reported by apple Inc. For the year ended
2021 and 2022, respectively.
a. What is the net income to be reported by Starbeans for the year ended
December 31, 2016 if the collection of the notes receivable is (1) reasonably
assured? 629,079
b. What is the net income to be reported by Starbeans for the year ended
December 31, 2016 if the collection of the notes receivable is (2) not
reasonably assured? 375,490
Construction contracts
On January 31, 2031, Megaworld Inc. entered into a construction contract with
an owner to build an oil refinery. The contract has the following characteristics.
The oil refinery is highly customized to the owners specifications and changes
to these specifications by the owner are expected over the contract term. The
oil refinery does not have an alternative use to the contractor. Non-refundable
interim progress payments are required as a mechanism to finance the
contract. The owner can cancel the contract at any time (with a termination
penalty); any work in process is the property of the owner. As a result, another
entity would not need to perform the tasks performed to date. Physical
possession and title do not pass until the completion of the contract. The
contractor determines the contract has a single performance obligation to build
the refinery. The preponderance of evidence suggests that the contractors
performance creates an asset that the customer controls and control is being
transferred over time. Megaword Inc. concluded that input method (cost to cost)
instead of output method is more reasonable method for measuring the
progress toward satisfying its performance obligation.
Corporate Liquidation
Because of inability to pay its debts, the Bakit-kaya Manufacturing Company has
been forced into
bankruptcy as of April 30, 2010. The balance sheet on that date shows:
ASSETS
Cash P2,700
Accounts Receivable 39,350
Notes Receivable 18,500
Inventories 87,850
Prepaid expenses 950
Land and building 61,250
Equipment 48,800
P259,400
LIABILITIES
Accounts payable P52,500
Notes payable PNB 15,000
Note payable suppliers 51,250
Accrued wages 1,850
Accrued taxes 4,650
Mortgage bond payable 90,000
Common stock P10 par 75,000
Retained earnings (30,850)
P259,400
Additional information:
a. Accounts receivable of P16,950 and notes receivable of P12,500 are expected
to be collectible. The good notes are pledged to PNB.
b. Inventories are expected to bring in P45,100 when sold under bankruptcy
condition.
c. Land and buildings have an appraised value of P95,000. they serve as security
on the bonds.
d. The current value of the equipment, net of disposal cost is P9,000.
Shipments from home office to Manila branch costing P72,500 were in transit
as of year-end. Manila recorded the said transfer twice at cost: one on
December 31, 2013 and the other on January 1, 2014.
The home office allocated to thePage 3 ofbranch
Manila 4 of the rent expenses it paid
for the year ended 2013. The rent expense was P24,000. The home office
sent a debit memo to Manila for the allocated amount, but the branch
recorded the said debit memo by debiting the home office current account
and crediting rent payable.
It is the policy of the home office to bill its branches at 20% above cost. What is the
unadjusted balance of the home office-current account in the books of Manila
branch on December 31, 2013? P461,490
Page 4 of 4