ACTBFAR: Exercise Set #1

Term 2, AY2022-2023
Individual output
Source: Dela Cruz, A.L.C., Rabo, J.S., & Tugas, F.C. (2019). Basic financial accounting and reporting.

DEADLINE: February 3, Friday, 11:59PM, AnimoSpace

The worksheets for Exercise 5 will be collected by the professor in class on the day of the scheduled Long Exam.

GENERAL INSTRUCTIONS for Financial Statements:

1. Prepare the financial statements in good form using a blue or black ballpen only.
2. Place heading properly.
3. Include peso sign accordingly.
4. Use money columns correctly.
5. Unless necessary, do not include decimal points for amounts.
6. Rule and double-rule amounts as needed.
7. For proper correcting of errors and other formatting guidance, please observe the “Accounting Dos and Don’ts”
uploaded in the course files section of AnimoSpace.

RUBRICS FOR ASSESSMENT:

Exercise Sets
CRITERIA EXEMPLARY SATISFACTORY DEVELOPING BEGINNING RATING
(97-100) (80-96) (70-79) (Below 70)
Content - The student The student The student The student
Correctness answered all the answered majority answered some of failed to answer
and assigned exercises of the assigned the assigned the assigned
Completeness correctly and exercises correctly exercises correctly exercises
(90%) completely. and completely. and completely. correctly and
completely.
Timeliness The student The student The student The student
(10%) submitted output submitted output a submitted output submitted
on or before the day after the three (3) days after output a week
deadline. deadline. the deadline. or more after
deadline.
TOTAL

EXERCISE 1. True or False. Questions 1-24.

1. Manufacturing is superior over service and merchandising types of business.

2. Manufacturing has a longer accounting cycle than a merchandising type of business.
3. Unlike merchandising, manufacturing companies produce the goods that they sell.
4. Generally, companies which perform substantial alteration of goods are considered as manufacturing.
5. There are different types of costs for different purposes.
6. A material can be classified as indirect, even if the said material can be traced to the final product.
7. All employees’ salaries are considered as product costs in a manufacturing concern.
8. The concept of fixed and variable costs is only applicable to manufacturing concern.
9. All operating expenses are classified as period costs.
10. Labor costs may be part of manufacturing overhead costs.
11. As cost objects expand in scope, more costs become direct than indirect.
12. A company can only have variable or fixed costs, but not both.
13. Depreciation on store furniture is an example of an indirect product cost in a manufacturing concern.
14. A manufacturing company cannot sell partially-completed goods.
15. A manufacturing concern cannot have income other than sales.
16. The cost of sales section in a merchandising concern’s income statement is typically longer than that of a
manufacturing concern.
ACTBFAR Exercise Set 1 - AY 2022-23, Term 2 Page 1
 17. The company’s applied manufacturing overhead cost is computed by multiplying actual rate by estimated activity
levels.
18. A manufacturing concern cannot have a higher Finished Goods Inventory ending balance than its Work-in-
Process Inventory.
19. Period costs are presented in the income statement.
20. A functional format income statement is more applicable to service and merchandising forms of business
organization.
21. The cost of direct materials used increases total manufacturing costs.
22. For a manufacturing concern, inventories which remain on hand as at reporting date are considered as assets.
23. A manufacturing concern still needs to prepare an income statement even if a schedule of cost of goods
manufactured and sold had been prepared.
24. Cost behavior can be used to classify costs in the income statement.

EXERCISE 2. Multiple Choice. Questions 25-34.

25. Which of the following is NOT into manufacturing?

A. Furniture maker
B. Pharmacy
C. A company which prints business forms
D. Car manufacturer

26. The three manufacturing costs are

A. Raw materials, work-in-process, finished goods
B. Raw materials, work-in-process, manufacturing overhead
C. Direct materials, direct labor, manufacturing overhead
D. Direct materials, work-in-process, finished goods

27. In relation to changes in activity level, variable costs vary

A. Inversely when expressed in total
B. Directly when expressed in total
C. Inversely when expressed per unit
D. Directly when expressed per unit

28. Direct materials cost is

A. Included in both prime cost and conversion cost formula
B. Included in prime cost but not in conversion cost formula
C. Included in conversion cost but not in prime cost formula
D. Not included in prime cost nor conversion cost formula

29. Finished goods refer to cost of goods

A. Partially-completed and awaiting further instruction from management
B. Partially-completed and awaiting delivery of additional materials from supplier
C. Fully-completed and awaiting delivery of packaging materials from supplier
D. Fully-completed and awaiting sale to customers

30. The functional-form income statement includes a separate line item for
A. Contribution margin but not gross profit
B. Gross profit but not contribution margin
C. Contribution margin and gross profit
D. Neither contribution margin nor gross profit

31. All other things equal, a higher beginning raw materials inventory balance than the ending balance leads to
A. Higher cost of materials purchased
B. Lower cost of materials purchased
C. Higher total manufacturing costs
D. Lower total manufacturing costs
ACTBFAR Exercise Set 1 - AY 2022-23, Term 2 Page 2
 32. All other things equal, a higher cost of goods manufactured this period compared to prior periods
A. Means a lower net operating income this period
B. Means a higher net operating income this period
C. Means same level of net operating income this period
D. Is meaningless due to lack of given data

33. A normal cost system uses

A. Actual prime costs but budgeted manufacturing overhead costs
B. Budgeted prime costs but actual manufacturing overhead costs
C. Budgeted prime costs but applied manufacturing overhead costs
D. Actual prime costs but applied manufacturing overhead costs

34. Which is part of distribution costs?

A. Insurance on store space
B. Insurance on administrative office
C. Insurance on production facility
D. All of the above

EXERCISE 3-1. Classification I. Questions 35-44. Encode DM for direct materials, DL for direct labor, and MOH for
manufacturing overhead for the following product costs of a shoe manufacturer.

35. Glue
36. Wages of workers who assemble the shoe
37. Foam
38. Salary of factory supervisor
39. Leather
40. Sealant spray
41. Wages of workers who cut out leather
42. Natural rubber
43. Wages of workers who stitch the shoe
44. Salary of shoe designer (assuming there is more than one shoe design)

EXERCISE 3-2. Classification II. Questions 45-54. Indicate the following costs of a candy manufacturer as a product
cost or period cost. For product cost, encode DM for direct materials, DL for direct labor, and MOH for manufacturing
overhead. For period cost, encode A for administrative and D for distribution.

45. Corn syrup

46. Wages of workers who pull candies
47. Candy thermometer
48. Salary of kitchen supervisor
49. Sugar
50. Depreciation on store shelves and cabinets
51. Candy wrapper
52. Advertising
53. Office utilities
54. Depreciation on kitchen equipment

ACTBFAR Exercise Set 1 - AY 2022-23, Term 2 Page 3

EXERCISE 3-3. Classification III. Questions 55-64. Encode D for direct cost and I for indirect cost for the following
costs of a manufacturing company with three production departments and assuming Finishing Department is the cost
object.

55. Salary of Finishing Department’s supervisor

56. Depreciation on Finishing Department’s equipment
57. Salary of company’s research/development staff
58. Salary of production departments’ security personnel
59. Salary of production manager
60. Factory supplies used in Finishing Department
61. Salary of production departments’ maintenance personnel
62. Wages of Finishing Department’s workers
63. Salary of production departments’ clerk
64. Depreciation on office computer

EXERCISE 3-4. Classification IV. Questions 65-74. Encode V for variable cost and F for fixed cost for the following
costs of a manufacturing company.

65. ₱30,000 monthly depreciation on factory building (The company uses straight-line method)
66. ₱100,000 monthly salary of company Vice President
67. ₱8,000 monthly depreciation on office building
68. ₱30,000 monthly rent on store space
69. Wages of production workers which are based on ₱100 per unit of output
70. ₱10,000 monthly insurance on factory equipment
71. ₱40,000 monthly salary of factory manager (there were three products manufactured in the factory and only one
factory manager)
72. Direct materials at ₱200 per unit
73. Indirect materials at ₱20 per unit
74. ₱5,000 monthly depreciation on store equipment

EXERCISE 4. Problem Solving.

EXERCISE 4-1. Problem Solving. Questions 75-76.

75. Raw materials beginning balance is ₱20,000, raw materials ending is ₱34,000, and raw materials purchases is
₱110,000. How much is cost of direct materials used?

76. Raw materials beginning balance is ₱24,000, raw materials ending is ₱30,000, cost of direct materials used is
₱120,000, and cost of indirect materials used is ₱5,000. How much is raw materials purchases cost?

EXERCISE 4-2. Problem Solving. Questions 77-80.

Work-in-process beginning balance is ₱50,000, work-in-process ending is ₱43,000, finished goods beginning is ₱71,000,
finished goods ending is ₱84,000, and total manufacturing costs is ₱220,000.
77. How much is cost of goods placed into process?
78. How much is cost of goods manufactured?
79. How much is cost of goods available for sale?
80. How much is cost of sales?

EXERCISE 4-3. Problem Solving. Questions 81-84.

Finished goods ending balance is ₱98,000 which is 25% more than its beginning balance. Total manufacturing costs is
₱336,000, and work-in-process ending balance is ₱62,000 which is ₱10,000 less than its beginning balance.
81. How much is cost of goods placed into process?
82. How much is cost of goods manufactured?
83. How much is cost of goods available for sale?
84. How much is cost of sales?

ACTBFAR Exercise Set 1 - AY 2022-23, Term 2 Page 4

EXERCISE 4-4. Problem Solving. Questions 85-87.
Cost of direct materials used is ₱77,000, cost of direct materials purchases is ₱122,000, raw materials beginning balance
is ₱25,000, cost of direct labor is ₱180,000, and manufacturing overhead cost is 125% of direct labor cost.
85. How much is raw materials ending balance?
86. How much is applied manufacturing overhead cost?
87. How much is total manufacturing costs?

EXERCISE 4-5. Problem Solving. Questions 88-90.

Total prime costs is ₱200,000, total conversion costs is ₱300,000, and cost of direct materials used is 50% more than
direct labor cost.
88. How much is cost of direct labor?
89. How much is cost of direct materials used?
90. How much is manufacturing overhead cost?

EXERCISE 4-6. Problem Solving. Questions 91-94.

Total estimated overhead costs for the year is ₱1,000,000, total estimated activity level for the year is 20,000 direct labor
hours, actual total direct labor hours is 19,000, actual cost of direct labor is ₱1,520,000, actual cost of direct materials
used is ₱980,000, and actual manufacturing overhead cost is ₱1,020,000.
91. What is the predetermined overhead rate?
92. How much is applied manufacturing overhead cost?
93. How much is total manufacturing costs based on actual cost system?
94. How much is total manufacturing costs based on normal cost system?

EXERCISE 4-7. Problem Solving. Questions 95-104

Sales is ₱250,000, gross profit rate is 18% of sales, net income is 3.5% of sales, finished goods ending balance is ₱75,000
which is 20% less than finished goods beginning balance, work-in-process beginning balance is ₱47,000, total prime costs
is ₱120,000, total conversion costs is ₱150,000, manufacturing overhead is applied at 50% of direct labor cost, cost of raw
materials purchases is ₱50,000, and raw materials ending balance is ₱30,000.
95. How much is cost of sales?
96. How much is operating expenses?
97. How much is cost of goods available for sale?
98. How much is cost of goods manufactured?
99. How much is direct labor cost?
100. How much is total manufacturing costs?
101. How much is work-in-process ending balance?
102. How much is cost of goods placed into process?
103. How much is cost of direct materials used?
104. How much is raw materials beginning balance?

EXERCISE 5. Financial Statements – actual. Questions 105-120.

Using the data given on the last page, answer the following questions for ACTBFAR COMPANY for the month ended
March 31, 2022, assuming actual cost system.

Additionally, using your columnar worksheets, you are required to prepare the following financial statements of
ACTBFAR COMPANY for the month ended March 31, 2022, assuming actual cost system. The worksheets will be
collected by the professor in class on the day of the scheduled Long Exam.

1. Functional-form Statement of Profit or Loss (with supporting notes);

2. Statement of Changes in Equity; and
3. Report-form Statement of Financial Position (with supporting notes).

ACTBFAR Exercise Set 1 - AY 2022-23, Term 2 Page 5

 105. How much is the net sales revenue?
106. How much is the cost of direct materials used?
107. How much is the manufacturing overhead cost?
108. How much is the total manufacturing cost?
109. How much is the cost of goods manufactured?
110. How much is the cost of sales?
111. How much is the total other income?
112. How much is the total distribution costs?
113. How much is the total administrative expenses?
114. How much is the trade and other receivables?
115. How much is the inventories?
116. How much is the prepaid expenses?
117. How much is the total carrying amount of the property, plant, and equipment?
118. How much is the total current liabilities?
119. How much is the total current assets?
120. How much is owner's capital, end?

EXERCISE 6. Financial Statements – normal. Question 121.

Refer to Exercise 5. Assuming normal cost system and the company applies manufacturing overhead cost at 170% of
direct labor cost.

121. How much is the manufacturing overhead cost?

ACTBFAR Exercise Set 1 - AY 2022-23, Term 2 Page 6

 Accounts Payable ₱ 76,000
Accounts Receivable 320,000
Accumulated Depreciation – Machinery 52,000
Accumulated Depreciation – Office Equipment 26,000
Accumulated Depreciation – Store Equipment 24,000
Allowance for Doubtful Accounts 16,000
Cash 488,000
Commissions Income 45,000
Depreciation – Machinery 27,000
Depreciation – Office Equipment 13,000
Depreciation – Store Equipment 12,000
Doubtful Accounts Expense 14,000
Factory Payroll (60% direct, 40% indirect) 400,000
Finished Goods Inventory, Mar 1 40,000
Finished Goods Inventory, Mar 31 37,000
Interest Income 3,000
Machinery 520,000
Notes Receivable 50,000
Office Equipment 240,000
Office Salaries 156,000
Other Costs (30% factory, 40% store, 30% office) 30,000
Prepaid Insurance Expense 60,000
R. Biff, Capital, Mar 1 ???
R. Biff, Drawing 85,000
Raw Materials Inventory, Mar 1 39,000
Raw Materials Inventory, Mar 31 46,000
Raw materials purchases 187,000
Rent (60% factory, 20% store, 20% office) 100,000
Repairs and Maintenance (60% factory, 40% office) 23,000
Salaries and Wages Payable 60,000
Sales 1,500,000
Sales Discount 21,000
Sales Returns and Allowances 15,000
Store Equipment 130,000
Store Salaries 234,000
Supplies Inventory (50% factory, 30% store, 20% office) 20,000
Supplies Used (40% factory, 30% store, 30% office) 48,000
Unearned Sales Revenue 50,000
Utilities (70% factory, 20% store, 10% office) 170,000
Utilities Payable 46,000
Work-in-Process Inventory, Mar 1 61,000
Work-in-Process Inventory, Mar 31 65,000

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