NAME:___________________________________ bonus.

Determine the bonus under each of the following

independent assumptions:
1. Gold Company provided the following information 6. Bonus is a certain percent of the income before
year-end: bonus and before tax.
Share premium………………..1,000,000 A. 250,000 C. 177,536
Accounts payable……………..1,100,000 B. 262,500 D. 186,548
Preference share 7. Bonus is a certain percent of income after bonus but
capital, at par………………..2,000,000 before tax.
Ordinary share A. 250,000 C. 177,536
capital, at par………………...3,000,000 B. 262,500 D. 186,548
Sales…………………………..10,000,000 8. On December 1, Marble Corp. declared a property
Total expenses…………………7,800,000 dividend of marketable securities to be distributed
Treasury shares-ordinary on December 31, to shareholders of record on
at cost……………………500,000 December 15. On December 1, the trading securities
Dividends………………………...700,000 had a carrying amount of P60,000 and a fair value of
Retained earnings P 78,000. What is the effect of this property
-January1……………….1,000,000 dividend on Nilo’s retained earnings, after all
What is the shareholders' equity at year-end? nominal accounts are closed?
A. 8,000,000 C. 5,800,000 A. P 0
B. 8,500,000 D. 8,700,000 B. P 18,000 Increase
C. P 60,000 Decrease
2. On January 1, MX issued ten-year bonds with a face D. P 78,000 Decrease
amount of P1,000,000 and a stated interest rate of 8 9. On July 1, 2019 Hello Company purchased as a
percent payable annually each January 1. The bonds long-term investment in Hi Company’s 10-year 12%
were priced to yield 10 percent. The total issue price bonds, with face value of P20,000,000, for
(rounded) of the bonds was P18,500,000. Interest is payable semiannually on
A. P1,000,000. C. P920,000. June 30 and December 31. The bonds mature on
B. P980,000. D. P880,000. July 1, 2024. Hello uses the straight line
amortization method. What is the amount of interest
3. Poon Co. offers a three-year warranty on its products. income that Hello should report in its 2019 income
Poon previously estimated warranty costs to be 2% statement?
of sales. Due to a technological advance in A. 1,350,000 C. 1,500,000
production at the beginning of 2019, Poon now B. 1,200,000 D. 1,050,000
believes in 1% of sales to be a better estimate of 10. Jam Company had P5,000,000 note payable that is
warranty costs. Warranty costs of P80,000 and due on March 1, 2017. The entity borrowed
P96,000 were reported in 2018 and 2019, P3,500,000 on February 1, 2017 which has a five-
respectively. Sales for 2019 were P 5,000,000. What
year term and used the proceeds to pay down the
amount should be disclosed in Poon’s 2019 financial
statements as warranty expense? note and used other cash to pay the balance. The
A.P 50,000 C. P 100,000 2016 financial statements were issued on March 31,
B.P 88,000 D. P 138,000 2017. What amount of the note payable should be
classified as noncurrent on December 31, 2016?
For items 4 and 5 A. 5,000,000 C. 1,500,000
Friend Company had 200,000 ordinary shares, 20,000 B. 3,500,000 D. 0
convertible preference shares, and P5, 000,000 of 10%
convertible bonds outstanding during 2016. 11. Dunne Company sells equipment service contracts
The preference shares are convertible into 40,000 that cover a two-year period. The sale price of each
ordinary shares. contract is P600. The past experience is that, of the
Each P1,000 bond is convertible into 50 ordinary shares. total pesos spent for repairs on service contracts, 40%
During 2016, the entity paid dividends of P20 per share is incurred evenly during the first contract year and
on the ordinary shares and P40 per share on the 60% evenly during the second contract year. The
preference shares.
entity sold 1,000 contracts evenly throughout 2016.
The net income for the current year was P8,000,000 and
the income tax rate is 30%. What amount should be reported as deferred service
4. What amount should be reported as basic earnings revenue on December 31, 2016?
per share? A. 540,000 C. 360,000
A. 40.00 C. 33.50 B. 480,000 D.300,000
B. 37.50 D. 36.00 12. Bold Company estimated annual warranty expense
at 2% of annual net sales. The net sales for the
5. What amount should be reported as diluted earnings
current year amounted to P4,000,000. On January 1,
per share?
A. 13.98 C. 17.04 2016, the warranty liability was P60,000 and the
B. 15.61 D. 16.32 warranty payments during the year totalled P50.000.
For items 6 and 7 What is the warranty liability on December 31, 2016?
Spring Breeze Company has an agreement to pay the A. 10,000 C. 80,000
sales manager a bonus of 5% of the entity's earnings. B. 70.000 D. 90,000
The income for the year before bonus and tax is
P5,250,000. The income tax rate is 30% of income after
13. On July 1, 2016, Tara Company issued 4,000 bonds Unrealized holding loss on trading investment (120,000)
of 8%, P1,000 face amount for P3,504,000, The Total share dividends distributed (200,000)
bonds were issued to yield 10%. The bonds are dated Prior period adjustment
recorded January 1, 2015 -credit 75,000
July 1, 2016 and mature on July 1, 2026. Interest is
What amount should be reported as retained earnings on
payable semiannually on January 1 and July 1. December 31, 2015?
Using the effective interest method, what amount of A. 655,000 C. 580,000
the bond discount should be amortized for the six B. 700,000 D. 775,000
months ended December 31, 2016?
A. 30,400 C. 19,840 18. An entity has outstanding a 7%, ten-year
B. 24,800 D. 15,200 P100,000 facevalue bond. The bonds was
14. On January 1, 2016, Moon Company issued 10% originally sold to yield 6% annual interest. The
bonds payable in the face amount of P4,500,000. entity uses the effective interest method to
The bonds mature on January 1, 2026. The bonds amortize bond premium and does not elect the
were issued for P3,987,000 to yield 12%, resulting fair value option for reporting financial
liabilities. On June 30, 2015, the carrying
in bond discount of P5 13,000. The entity used the
amount of the outstanding bond was P105,000.
effective interest method of amortizing bond
What amount of unamortized premium on bond
discount. Interest is payable semiannually on
should be reported on June 30, 2016?
January 1 and July 1. For the six months ended June A. 1,050 C. 4,300
30, 2016, what amount should be reported as bond B. 3,950 D. 4,500
interest expense? 19. An entity reported the following capital
A. 225,000 C. 250,650 structure:
B. 239,220 D. 255,780
15. At the beginning of current year, Daisy Company 2015 2016
began marketing a new beer called "Serbesa". To Outstanding shares:
help promote the product, the management is Ordinary shares 110,000 110,000
offering a special Serbesa beer mugs to each Convertible preference 10,000 10,000
customer for every 20 specially marked bottle caps shares
of Serbesa. The entity estimated that out of the
300,000 bottles of Serbesa sold during the year, only During 2015, the entity paid preference dividends of
50% of the marked bottle caps would be redeemed. P3 per share. The preference shares are convertible
During the year, the entity purchased 8,000 beer
into 20,000 ordinary shares. Net income for 2015
was P850,000. The income tax rate is 30%. What
mugs at a total cost of P360,000 or P45 each and had
amount should be reported as diluted earnings per
already distributed 4,500 mugs to customers. What
share for 2015?
is the estimated premium liability at year-end?
A. 135,000 C. 202,500 A. 6.31 C. 7.08
B. 337,500 D. 360,000 B. 6.54 D. 7.45

16. An entity had the following liabilities on December 20. An entity frequently borrowed from the bank in
31, 2015: order to maintain sufficient operating cash. The
following loans were at a 12% interest rate with
Accounts payable 55,000 interest payable at maturity. The entity repaid
Unsecured notes, 8% due 7/1/2016 400,000 each loan on scheduled maturity date.
Accrued expenses 35,000
Contingent liability 450,000 Date of loan Amount Maturity Term of
Deferred tax liability 25,000 date loan
Senior bonds, 7%, due 3/31/2016 1,000,000 November 500,000 October 1 year
1, 2014 31, 2015
The contingent liability is an accrual for possible loss on February 1,500,000 July 6 months
a P1,000,000 lawsuit filed against the entity. The legal 1, 2015 31, 2015
counsel expects the suit to be settled in 2016 and has
May 800,000 January 9 months
estimated that the entity will be liable for damages in the
range of P450,000 to P750,000. The deferred tax
1, 2015 31, 2016
liability is expected to reverse in 2016. What amount The entity recorded interest expense when the loans
should be reported on December 31, 2015 for current
are repaid. As a result, interest expense of P150,000
liabilities?
A. 515,000 C. 1,490,000
was recorded in 2015. If no correction is made, by
B. 940,000 D. 1,515,000 what amount would interest expense be understated
for 2015?
17. An entity provided the following information on A. 54,000
December 31, 2015: B. 62,000
Total reported income since incorporation 1,700,000
C. 64,000
Total cash dividends paid ( 800,000)
D. 72,000