IGNOMINY DISGRACE Co.’s profits before tax for the 1st and 2nd quarters of 20x1 were ₱1,760,000 and ₱1,840,000 before any necessary adjustments for the items listed below. 1. Total unfavorable manufacturing cost variances amounted to ₱48,000 in the 1st IGNOMINY expects that the manufacturing cost variances will be absorbed by year-end. There were no work-in-process inventories as of the end of the 1st and 2nd quarters. 2. Newspaper advertisement costs of ₱180,000 were paid on April 1, 20x1. The advertisement shall appear in the weekly newspaper publications over the remaining months of the year. 3. IGNOMINY’s held for trading securities acquired on February 4, 20x1 for ₱400,000 had a fair value of ₱200,000 on March 31, 20x1. IGNOMINY had expected that the fair value decline was only temporary. In fact, on June 30, 20x1, the recovery exceeded the previous write-down in investment by ₱40,000. 4. Research and development costs incurred during the 1st and 2nd quarters totaled ₱20,000 and ₱24,000, respectively. In July 20x1, technical feasibility has been established and, therefore, development costs of ₱10,000 and ₱14,000 expensed in the 1st and 2nd quarters would have qualified for capitalization. 5. On January 20x1, IGNOMINY recognized an account receivable denominated in US dollars amounting to $2,000. The exchange rate on that date was ₱40:$1. On March 31, 20x1, the exchange rate was ₱30:$1. IGNOMINY had expected that the change in the exchange rate was only temporary. In fact, on June 30, 20x1, the exchange rate was ₱45:$1. The receivable is collectible on September 2, 20x1. 6 A land with a carrying amount of ₱400,000 had a recoverable amount of ₱384,000 on March 31, 20x1. Requirement: Compute for the adjusted profits before tax for the 2nd quarter
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
IGNOMINY DISGRACE Co.’s profits before tax for the 1st and 2nd quarters of 20x1 were ₱1,760,000 and ₱1,840,000 before any necessary adjustments for the items listed below.
1. Total unfavorable
2. Newspaper advertisement costs of ₱180,000 were paid on April 1, 20x1. The advertisement shall appear in the weekly newspaper publications over the remaining months of the year.
3. IGNOMINY’s held for trading securities acquired on February 4, 20x1 for ₱400,000 had a fair value of ₱200,000 on March 31, 20x1. IGNOMINY had expected that the fair value decline was only temporary. In fact, on June 30, 20x1, the recovery exceeded the previous write-down in investment by ₱40,000.
4. Research and development costs incurred during the 1st and 2nd quarters totaled ₱20,000 and ₱24,000, respectively. In July 20x1, technical feasibility has been established and, therefore, development costs of ₱10,000 and ₱14,000 expensed in the 1st and 2nd quarters would have qualified for capitalization.
5. On January 20x1, IGNOMINY recognized an
6 A land with a carrying amount of ₱400,000 had a recoverable amount of ₱384,000 on March 31, 20x1.
Requirement: Compute for the adjusted profits before tax for the 2nd quarter.
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