H0032 I. Solve the Problem and give what is asked for. 1. Octagon Data Computer Corporation reported a net loss for the year. In its financial statements, the company noted: Balance Sheet: Current assets: Inventories (notes 1C and 2) …………………………………P 48,051,000 Note 1C: Inventories are stated at the lower of cost or market. Cost is determined on a firstin, first-out (FIFO) basis. Note 2: Declining…..market conditions during the fiscal year adversely affected anticipated sales of the Company’s older printing products; Accordingly, the statement of loss…. Includes a (debit) of P 9,600,000. Required: a. At which amount did Octagon report its inventory, cost or market value? How can you tell? b. If the reported inventory of P 48,051,000 represents market value, what was the cost of the inventory? 2. Amsterdam Hospital Supply Corporation reported using the LIFO inventory method. Its inventory amount was P 490.5 million. Required: a. Suppose that during the period covered by this report, the company made an error that understated its inventory by P 15 million. What effect would this error have on cost of goods sold and gross margin of the period? On cost of goods sold and gross margin of the following period? On total gross margin on both periods combined? b. When Amsterdam Hospital Supply reported the above amount for inventory, prices were rising. Would FIFO or LIFO have shown a higher gross margin? Why? 3. Glen Retail Store has a beginning inventory of P 200,000 at cost and P 400,000 at retail. Purchases were P 1,200,000 at cost and P 2,100,000 at retail. Sales were P 2,000,000. How much is ending inventory at cost and at retail? 4. King’s Beginning inventory was P 350,000, purchases were P 1,460,000 and sales totaled to P 2,400,000. With a normal gross margin rate of 35 percent, how much is ending inventory? Assignment 6 * Property of STI Page 1 of 1 H0032 I. Solve the Problem and give what is asked for. 1. Dizon Company, a furniture wholesaler, acquired new equipment at a cost of P 1,500,000 at the beginning of the fiscal year. The equipment has an estimated life of 5 years and an estimated residual value of P 120,000. Elaine Dizon, the president, has requested information regarding alternative depreciation methods. Required: a. Determine the annual depreciation for each of the five years of estimated useful life of the equipment, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by: b. o Straight-line method o Declining-balance method (at twice the straight-line rate) Assume that the equipment was depreciated under the declining-balance method. In the first week of the fifth year, the equipment was traded in for similar equipment priced at P 1,750,000. The trade-in allowance on the old equipment was P 100,000 and cash was paid for the balance. Journalize the entry to record the exchange. 2. Harold Company purchased equipment on January 1, 2007 for P 440,000. The expected life of the equipment is 10 years and its residual value is P 40,000. See other details below: Required: a. Identify the depreciation method used in each instance and show the computation for each. b. Assume continued use of the same method through year 2009. Determine the annual depreciation expense, accumulated depreciation and book value of the equipment for 2007 through 2009 under each method. Assignment 7 * Property of STI Page 1 of 1 H0032 Instructions: Solve the Problem and give what is asked for. The partnership of Trinidad and Villanueva is considering admitting Vergara as a partner on January 1, 2006. The partnership general ledger includes the following balances on that date: Cash Other assets P 90,000 1,100,000 Total assets P 1,190,000 Total liabilities Trinidad, capital Villanueva, capital Total liabilities & capital P 500,000 450,000 240,000 1,190,000 Trinidad’s share of profits and losses is 60 percent, and Villanueva’s share is 40 percent. Required: 1. Suppose Vergara pays Villanueva P 310,000 to acquire Villanueva’s interest in the business. Trinidad approves Vergara as a partner. a. Record the transfer of owner’s equity on the partnership books b. Prepare the partnership balance sheet immediately after Vergara is admitted as a partner. 2. Suppose Vergara becomes a partner by investing P 310,000 cash to acquire a one-fourth (¼) interest in the business. a. Compute Vergara’s capital balance, and record his investment in the business. b. Prepare the partnership balance sheet immediately after Vergara is admitted as a partner. Include the heading. 3. Which way of admitting Vergara to the partnership increases its total assets? Give your reason. Assignment 9 * Property of STI Page 1 of 1