Quiz No. 3 Accounting and Tax Quiz (CLOSED)

An analysis of the shareholder’s equity of Future CPA Corporation as of January 1, 2006 is as follows:

Ordinary shares, par value P20, authorized 100,000 shares;

                Issue and outstanding 60,000 shares                        1,200,000

Capital in excess of par value                                                    140,000

Accumulated profits                                                                  760,000

Future CPA uses the cost method in accounting for treasury shares and during 2006 entered into the following transactions:

a. Acquired 1,000 of its shares for P35,000.

b. Sold 600 treasury shares at P38 per share.

c. Retired the remaining treasury shares

Question: Assuming no other equity transactions occurred during 2006 what should Medina report at December 31, 2006 as capital in excess of par value?

Answer: P135, 067

Congratulations!

Ms. Meishael Gay Tuliao

Mindanao State University - General Santos City

BS Accountancy

Graduated April 2011

Quiz No. 4 will be posted soon.

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Quiz No. 2 Accounting and Tax Quiz

On January 1, 2005, Happy Corporation's ordinary share is selling for P55 per share.  On this date, Happy creates a compensatory share option plan for its 70 key employees.  The plan document states that each employee may purchase 500 shares of its P10 par ordinary shares for P55 per share after working for the company for three years.  On this date, Happy estimated that each option has a value of P18.  Historically, Happy has experienced an average employee turnover rate of 5% per year and, on the grant date, it expects this rate to continue over the next three years.  Because of lower turnover, at the end of 2006, Happy changes its estimated average turnover rate to 4% for the entire service period.  At the end of 2007, the share options vest for 62 employees.  On January 13, 2008, ten executives exercise their options when the share is selling at P75 per share.  Happy uses the fair value method to account for this plan.

Question: How much is the compensation expense to be reported in relation to the plan for the year 2007?


The correct answer is: P186,411
For this quiz, nobody got the correct answer.  Anyway, this is the solution to the quiz:

                                                                                         2005                            2006                      2007

Estimated (actual compensation)                          P540,146                   P557,384              P558,000

Fraction of service period expired                                   1/3                              2/3                        3/3

Estimated compensation expense to date             180,049                       371,589                 558,000

Accumulated compensation expense recog        _            0                    180,049                  371,589

Current compensation expense                             P180,049                    191,540               P186,411

2005: P18*500sh op*70 employees*95%*95%*95% = P540,146

2006: P18*500sh op*70 employees*96%*96%*96%= P557,384

2007: P18*500sh op*62 employees = P558,000

Quiz No. 1 Accounting and Tax Quiz

Mitsu Busy is an independent traveling salesman, deriving his income solely from commissions and personally bearing all expenses without reimbursement or any kind. During the taxable year 2010, Mitsu Busy incurs the following expenses pertaining directly to his activities as an independent traveling salesman:

Travelling expenses - P650,000; Secretarial expenses - P250,000; Long-distance telephone bills - P150,000; Freight expenses for products sold - P300,000; Insurance from products transported P50,000; Life insurance premiums P25,000; Doctor's fees incurred while he was on one of his sales trips - P15,000.

Question: What amount can Mitsu Busy deduct from his gross income?
Answer: P1,400,000


Solution:
Travelling expenses                                     P650,000
Secretarial expenses                                     250,000
Long-distance telephone bills                          150,000
Freight expenses for products sold                  300,000
Insurance from products transported                  50,000
Total                                                          P1,400,000


Winner of P100 cash:

Quiz No. 1: Grace Claire L. Villamor 
                  Lyceum of the Philippines University - Batangas (BSA III-A)


Congratulations!

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