5.A company records items on the cash basis throughout the year and converts to an accrual basis for year-end reporting. Its cash-basis net income for the year is 70,000. The company has gathered the following comparative balance sheet information: Beginning of yearEnd of yearAccounts payable3,0001,000Unearned revenue300500Wages payable300400Prepaid rent1,2001,500Accounts receivable1,400600What amount should the company report as its accrual-based net income for the current year?a. 68,800 b. 70,200 c. 71,200 d. 73,2006.On December 31, 2014 Colt Company is experiencing extreme financial pressure and is in default in meeting interestpayment on its long term note of P6, 000,000 due on December 31, 2016. The interest rate is 12% payable everyDecember 31.In an agreement with the creditor, Colt obtained the following changes in the terms of note:The present value of 1 at12% for four periods is 0.6355 and the present value of an ordinary annuity of 1 at 12% forfour periods is 3.0373.How much is the gain or loss on extinguishment?7.SEGA Company reported sales revenue of P4,600,000 in the income statement for 2013. Additional information forthe current year is as follows:January 1December 31Accounts Receivable1,000,0001,300,000Allowance for doubtful accounts60,000110,000Advances from customers200,000300,000The entity wrote off uncollectible accounts totaling P50,000 during the current year. Under cash basis, what amountshould be reported as sales revenue for the current year?PRACTICAL ACCOUNTING 12
8.At December 31, year 1, Rama Corp. had 20,000 shares of 1 par value treasury stock that had been acquired in year 1at 12 per share. In May year 2, Rama issued 15,000 of these treasury shares at 10 per share. The cost method is used to record treasury stock transactions. Rama is located in a state where laws relating to acquisition of treasury stock restrict the availability of retained earnings for declaration of dividends. At December 31, year 2, what amount should Rama show in notes to financial statements as a restriction of retained earnings as a result of its treasury stock transactions? a. 5,000b. 10,000 c. 60,000 d. 90,0009.On December 29, 2013, Purple Limited received a 6,000 shipment of merchandise inventory. Themerchandise was correctly included in the December 31, 2013 ending inventory, but was not recordedas a 2013 purchase. The invoice for the merchandise was received and processed on January 10, 2014,and the merchandise was incorrectly included in the 2014 purchases. Purple uses a periodic inventorysystem and has a December 31 year end. Which of the following statements about the errors iscorrect?
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