QUIZ 2

PROBLEM 1

Hunghang Construction Inc. has consistently used the percentage of completion method of
recognizing income. During 2005, Hunghang started work on a P 3,000,000 fixed-price
construction contract. The accounting records disclosed the following data for the year ended
December 31, 2005.

Cost incurred 930,000

Estimated Cost to complete 2,170,000
Progress billings 1,100,000
Collections 700,000

1. How much loss should Hunghang have recognized in 2005?

a. 230,000 c. 30,000
b. 100,000 d. 0

PROBLEM II

The following information relates to question 36 & 37:

Cooper Construction Company had a contract starting April 2012, to construct a P 9,000,000
building that is expected to be completed in September 2014, at an estimated cost of P 8,250.000.
At the end of 2012, the costs to date were P 3,795,000 and the estimated total costs to complete
had not changed. The progress billings during 2012 were p 1,800,000and the cash collected
during 2012 was 1,200,000.

1. For the year ended December 31, 2012, Cooper would recognize gross profit on the
building of.

a. 316,250
b. 345,000
c. 405,000
d. 0

2. At December 31, 2012 Cooper would report Construction in progress in the amount of:

a. 345,000
b. 3,795,000
c. 4,140,000
d. 3,540,000
PROBLEM III

On September 30, 2015, Barry bought a car for P 3,600,000 costing P2,400,000. A Down
payment of P1,600,000 was made with the balance due in equal monthly installment payments,
each payment to apply first as interest at 12% on the unpaid principal and the balance as a
reduction in principal, such equal payments are calculated to be P211,164.15.

1. What is the realized gross profit on installment sales in 2015?

a. P726,415.50 c. 744,497.48
b. P744,497.48 d. 792,067.70

2. What is the interest income in 2015?

a. P16,157.60 c. P54,245.96
b. P38,088.36 d. P68,453.50

3. What is the unpaid balance of the installment receivable on January 31, 2016?

a. 1,000,000 c. P1,223,196.90
b. P1,200,000 d. P1,420,753.51

4. What is the approximate effective interest rate if monthly payments of P200,000 plus interest
at 12% charged on the original principal amount of P3,600,000.

a. 10% c. 32.73%
b. 12% d. 39.28%

PROBLEM IV

Since there is no reasonable basis for estimating the collectiblity, the Pius Appliance Company
uses the installment method of recognizing revenue for the following sales:

2014 2015
Sales …………………………………P225,000 P337,500
Collection from:
2014 sales ………………………75,000 37,500
2015 sales …………… ………. - 0 - 112,500
Defaults:
2014 sales …………………….. 7,500 15,000
2015 sales ……………………... -0- 30,000
Accounts written-off:
2104 sales ……………………… 18,750 56,250
2015 sales ……………………… .-0- 18,750
Gross Profit Percentage ……………….. 30% 40%
What amount should Pius Appliance Co. report as deferred gross profit, ending balance in its
December 31, 2015 balance sheet?

a. P123,750 b. P93,750 c.75,000 d. P70,500

PROBLEM V

The CC Manufacturing Company delivered ten DVD players to CLTV Company on

consignment. These DVD player cost P3,000 each and are to be sold at P5,000 each. The CC
Manufacturing Co. paid shipment cost of P2,500.

CLTV Co. submitted an account sales stating that it had returned one unit and was remitting
P21,900. This amount represents the total amount due to CC Manufacturing Co. after deducting
the following from the selling price of the DVD player sold:

Commission ………………………20% of selling price

Advertising ……………………… P1,000
Delivery and Installation …………… P 600
Cartage on consigned goods …………. P 500

1. The number of units sold by TV Co. is:

a. 4 c. 6
b. 5 d. None of the above

2. The profit (loss) on consignment realized by CC Manufacturing Company is:

a. P2,300 c. (P2,550)
b. P2,480 d. None of the above

3. The cost of inventory in the hands of CLTV Company is:

a. P10,080 c. P10,200
b. P10,150 d. None of the above

PROBLEM VI

Todd Sweeney is an artist who sells his work under consignment ( he displays his work in local
barbershops and customers purchase his work there). Sweeney recently transferred a painting on
consignment to a local barbershop.
 1. Sweeney most likely should recognize revenue when:

a. He paints the painting because the painting is produced while he works.

b. When he transfers the painting to a barbershop
c. When the barbershop sells the painting.
d. When the Barbershop’s right of return expires.

2. Which is the following is most true regarding consignment arrangement?

a. Revenue is recognized at the point in time when the consignment arrangement

is made.
b. Revenue is recognized when goods are transferred to the consignee.
c. Revenue is recognized upon sale by the consignee to an end customer.
d. Revenue is never recognized because GAAP does not allow such
arrangements.

3. After Sweeney has transferred a painting to a barbershop, the painting:

a. Should be counted in Sweeney’s inventory until the barbershop sells it.

b. Should be counted on the barbershop’s inventory, as the barbershop now
possesses it.
c. Should be counted in either Sweeney’s or the barbershop’s inventory,
depending on which incurred the cost of preparing the painting for display.
d. We lack sufficient information to know who should carry the painting
inventory.

PROBLEM VII

Sulu Company is a dealer of air conditioners. For the period of May 1, 2013 to May 31, 2013
Sulu Company gives a trade discount of 10% to all buyers. On May 1, 2013, five units of air
conditioners with a total list price of P100,000 and total cost of P59,800 were sold to Mr. Ramos.
Sulu Company granted an allowance of P10,000 for Mr. Ramos’ used air conditioners as trade
in although the current fair value is P12,000. The balance was payable as follows: 20% of the
balance paid at the time of purchase; the rest is payable in 10 months starting June 1, 2013. A
15 % gross profit rate is usual from the sale of second hand air conditioners.

After six months of paying, Mr. Ramos defaulted in the payment of December 1, 2013. The five
units were repossessed and it would require P2,000 reconditioning cost for each unit before it
could be resold for P6,000 each.

1. How much is the gain (loss) on repossession to be recognized on December 1, 2013?

a. P 3,360 c. P1,760
b. P(3,360) d.P(1,760)
 2. What is the total realized gross profit under the installment method to be adjusted on
December 31, 2013?

a. P23,240 c. P18,496
b. P19,040 d. P22,576

PROBLEM VIII

The following data pertains to Havaianas Builders, Inc. which uses percentage of completion
method:
______________________________________________________________________________
Project A Project B Project C Project D
Contract price P2,900,000 P3,400,000 P1,700,000 P2,000,000
Cost incurred, 2012 1,680,000 1,440,000 320,000 -0-
Estimated cost to complete, 2012 1,120,000 1,760,000 960,000 -0-
Cost incurred, 2013 960,000 680,000 863,000 560,000
Estimated cost to complete,2013 -0- 1,360,000 117,000 1,040,000
______________________________________________________________________________

General and administrative expenses for 2012 and 2013 were P120,000 for each year.

How much is the net income for the year ended?

2012 2013
a. P135,000 P309,000
b. P135,000 P489,000
c. P195,000 P429,000
d. P369,000 P135,000

BONUS QUESTION:

1. COMPLETE DATE WHEN THE LOCKDOWN (ECQ) STARTED IN LUZON. (1PT)

2. WHO IS THE FATHER OF ACCOUNTING? (1PT)
3. WHAT IS THE TAGALOG TERM FOR ACCOUNTING, ACCOUNTANT AND
AUDITOR (2PTS)