1 - Heats Corporation
Requirement no. 1
Notes payable:
Arising from purchase of goods
Arising from bank loans, on which marketable securities valued
at P600,000 have pledged as security, due Dec. 31, 2005
Arising from advances by officers, due June 30, 2005
Employees income tax withheld
Advances received from customers on purchase orders
Containers deposit
Accounts payable arising from purchase of goods (P170,000 + P30,000)
Customers' account with credit balance
Cash dividends payable
Current portion of serial bonds (P50,000 x 2)
Overdraft with Allied Bank
Est. damages to be paid as a result of unsatisfactory performance on a contract
Est. expenses on meeting guarantee for service requirements on mechandise sold
Estimated premiums payable
Deferred revenue
Accrued interest on bonds payable
Provision - deficiency income tax assessment
TOTAL CURRENT LIABILITIES
500,000
50,000
20,000
64,000
50,000
200,000
40,000
80,000
100,000
90,000
160,000
120,000
75,000
87,000
360,000
200,000
2,500,000
1,000,000
1,900,000
2,900,000
5,400,000
304,000
Item no. 6
Item no. 8
Item no.10
Item no.11
Item no.12
Item no.19
1,000
5,000
Vouchers payable
Inventory
1,000
5,000
111,500
111,500
46,000
Medical expense
Vouchers payable
25,000
Inventory
Vouchers payable
55,000
46,000
25,000
55,000
254,000
254,000
5,440,000
240,000
192,000
(160,000)
5,712,000
96,000
33,600
5,841,600 D
776,000
56,000
64,000
16,000
912,000
-
D
A
B = 10% (P9,600,000 - B - T)
T = 30% (P9,600,000 - B)
T = P2,880,000 - .3B
B = 10% [P9,600,000 - B - (P2,880,000 - .3B)]
B = 10% (P9,600,000 - B - P2,880,000 + .3B)
B = 10% (P6,720,000 - .7B)
B = P672,000 - .07B
1.07B = P672,000
B = P628,000 (rounded off)
800,000
72,000
872,000
192,000
416,000
1,504,000
1,920,000
1,408,000
512,000
96,000
64,000
32,000
5
6,400
90
576,000
1,280,000
500,000
500,000
68,627
58,824
127,451
100,000
100,000
7,317
7,317
200,000
240,000
200,000
240,000
Requirement no. 2
a) Bonds payable (P10,000,000 + P2,000,000)
12,000,000
372,549
92,683
240,000
1,200,000
120,000
58,824
(7,317)
1,371,506
Bond year
1st
2nd
3rd
4th
5th
6th
10.02.03
10.01.04
10.01.05
10.01.06
10.01.07
10.01.08
09.30.04
09.30.05
09.30.06
09.30.07
09.30.08
09.30.09
Amount
Outstanding
Percent
to total
5,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
20,000,000
25%
25%
20%
15%
10%
5%
100%
6,250
18,750
6,250
18,750
5,000
15,000
3,750
11,250
2,500
7,500
1,250
25,000
23,750
18,750
13,750
8,750
3,750
100,000
Requirement no. 1
a)
b)
Bond discount
Original amount
Amortization : Prior years (2003 and 2004)
Current year (2005)
c)
e)
Interest expense
P4,000,000 x 5%
P1,000,000 x 5% x 9/12
Bond discount amortization (see letter b above)
4,000,000
100,000
31,250
23,750
55,000
45,000
50,000
200,000
37,500
23,750
261,250
Requirement no. 2
1)
2)
3)
4)
100,000
100,000
Retained earnings
Bond interest expense
Discount on bonds payable
31,250
23,750
62,500
50,000
55,000
62,500
50,000
187,318
190,050
193,055
196,361
Int. exp.
Int. paid
160,000
160,000
160,000
160,000
Int. paid
2,000,000
1,366,000
507,184
Amort.
27,318
30,050
33,055
36,361
126,785
Amort.
Jan. 1, 2004
Dec. 31. 2004
Dec. 31. 2005
187,318
190,050
160,000
160,000
27,318
30,050
48,264
49,090
40,000
40,000
8,264
9,090
74,723
Question no. 2 - D
Carrying value, 1/1/04 (see no. 1)
Add discount amortization for 2004:
Effective interest (P1,873,184 x 10%)
Nominal interest (P2,000,000 x 8%)
Carrying value, 12/31/04
CV
1,873,184
1,900,502
1,930,553
1,963,608
1,999,969
CV
1,873,184
1,900,502
1,930,553
965,276
482,638
490,902
499,992
1,873,184
187,318
160,000
Question no. 3 - D
Effective interest (P1,900,502 x 10%)
Question no. 4 - A
Bonds Payable
Discount on bonds payable (P1,000,000 - P965,276)
Common stock
APIC
Question no. 5 - C
Reacquisiton price (P500,000 x 110%)
Carrying value of bonds reacquired (P1,930,553 x 1/4)
Loss on bond reacquisition
27,318
1,900,502
190,050
1,000,000
34,724
600,000
365,276
1,873,184
126,816
965,276
600,000
365,276
1,900,502
190,050
160,000
30,050
1,930,553
550,000
482,638
67,362
430,000
100,000
60,200
Question No. 2 - D
15% Note payable, bank
Balance, 12/31/05 (P5,600,000 - P1,400,000)
Less installment due on April 1, 2006
Liability under capital lease
Balance, 1/1/05
Less principal payment on 12/31/05:
Total payment
100,000
Applicable to interest (P430,000 x 14%)
60,200
Balance, 12/31/05
Less principal payment due on 12/31/06:
Total payment
100,000
Applicable to interest (P390,200 x 14%)
54,628
10% bonds payable due 7/1/2014
Carrying value, 7/1/05
Add discount amortization:
Effective interest (1,774,000 x 12% x 6/12)
106,440
Nominal interest (2,000,000 x 10% x 6/12)
100,000
Deferred income tax liability
Balance, 1/1/05
Provision for deferred income tax (P312,500 x 32%)
Total noncurrent liabilities, 12/31/05
39,800
390,200
4,200,000
1,400,000
430,000
39,800
390,200
45,372
Question No. 5 - C
Note payable, bank
(P5,600,000 x 12% x 3/12)
(P4,200,000 x 12% x 9/12)
Liability under capital lease (see no. 1)
Bonds payable
Nominal (P2,000,000 x 10% x 6/12)
Discount amortization (see no. 2)
Total interest expense for 2005
6,440
700,000
100,000
PROBLEM NO. 8
CBBCD ACBBB AADCB ADCAA
378,000
100,000
478,000
168,000
378,000
100,000
6,440
344,828
1,774,000
Question No. 3 - A
Note payable, bank - due 4/1/06
Capital lease liability - principal payment due on 12/31/06 (see no. 1)
Current portion of long-term liabilities, 12/31/05
Question No. 4 - D
Note payable, bank (P4,200,000 x 12% x 9/12)
Bonds payable (P2,000,000 x 10% x 6/12)
Accrued interest payable, 12/31/05
2,800,000
546,000
60,200
106,440
712,640
1,780,440
800,000
5,725,268
1,400,000
45,372
1,445,372