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Pre 3 Module 1

Hudson Hotel collects a 15% city sales tax on room rentals and a $2 per room, per night occupancy tax. Hudson paid its November 2020 sales taxes and fourth quarter 2020 occupancy taxes on January

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lairadianaramos
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30 views

Pre 3 Module 1

Hudson Hotel collects a 15% city sales tax on room rentals and a $2 per room, per night occupancy tax. Hudson paid its November 2020 sales taxes and fourth quarter 2020 occupancy taxes on January

Uploaded by

lairadianaramos
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Use the following information for the next two questions:

Eliot Corporation’s liabilities at December 31, 2008 were as follows:

Accounts payable and accrued interest P 2,000,000


5-year 10% Notes payable – due December 31, 2011 5,000,000

Part of the loan agreement is for Elliot to appropriate a fixed amount out of its accumulated profits
and losses annually until the amount of appropriation has equaled the face of the obligation. Failure
to comply with the loan agreement will make the loan payable on demand. As of December 31, 2008,
Elliot Corporation has yet to comply with the loan agreement.

1. In its December 31, 2008 balance sheet, Elliot should report current liabilities at
a. 7,000,000
2. Assuming the lender agreed on December 31, 2008 to provide a grace period of 12 months for
the entity to rectify the breach and assured Elliot Corporation that no demand of payment is to
be made within the grace period, what amount of current liabilities should Elliot Corporation
report in its December 31, 2008 balance sheet?

A. 2,000,000
3. Hudson Hotel collects 15% in city sales taxes on room rentals, in addition to a ₱2 per room, per
night, occupancy tax. Sales taxes for each month are due at the end of the following month, and
occupancy taxes are due 15 days after the end of each calendar quarter. On January 3, 20x1,
Hudson paid its November 20x0 sales taxes and its fourth quarter 20x0 occupancy taxes.
Additional information pertaining to Hudson's operations is:

20x0 Room rentals Room nights


October 100,000 1,100
November 110,000 1,200
December 150,000 1,800

What amounts should Hudson report as sales taxes payable and occupancy taxes payable in its
December 31, 20x0, balance sheet?
Occupancy tax 8200
+x
A.
Use the following information for the next two questions:
BUGS Appliance Company’s accountant has been reviewing the firm’s past television sales. For the
past years, BUGS has been offering a special service warranty on all televisions sold. With the
purchase of a television, the customer has the right to purchase a 3-year service contract for an extra
P600.

Information concerning past television and warranty contract sales is given below:

2007 2006
Television sales in units 550 460
Sales price per unit P5,000 P4,000
Number of service contracts sold 350 300
Expenses relating to television warranties 38,520 13,400

BUGS’ accountant has estimated from past records that the pattern of repairs has been 40% in the
year of sale, 36% first year after sale and 24% on 2nd year of sale. Sales of the contracts are made
evenly during the year.

4. What is the adjusted balance of the unearned service contract as of December 31, 2007?

5. How much profit on service contract would be recognized in year 2007?

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