-~~ __..) Excel Professional Services, Inc . . . . .

~ Management Rrm of Professional Review and Training Center {PRTC) \~

Since !977

(Luzon) Mani!a 733-9344173A-7c;()3 Calamba, Laguna (049) 5453807

(Visayas) Bacolvd Cit} (0~4; 4~?14 Cebu City (032) 253-7900 l.oc. 218
~Mindanavi Cagay:~o da Ore City (088) 309-3073 Davao City lt!62) 225-0049

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CPA REVIEW
OPEN
1st

PRE-BOARD EXAMINATIONS

PRACTICAL ACCOUNTING 1
i ExamCoverage___ l Elements vffinanclai
i
i

l statements, lnventoiies,

IBiolog!ca~ assets, Pmperty.

Iplant and equipment.

Ilr.vcstment p:operty,

! lntangible assets. Cash and

i cash equivalents,

IReceivables. Investments and

.
I

'
:
Other
topics
:
____ ___,...
- - - - - - - - - - - -----~
i Exafl'l_Cod~
iP1.0pen_1stPB.10_13
__ j

LQate
==JAugust 4, 2013
______ ~
:Time
'12:00 NN to j:QO PM
'
/_No. g_t5)uestions_ j 50 _____ ..

ISE1-

_____ 1~----

--------=-~-~j

_____________ j

Practical Accounting 1

SETB

INSTRUCTIONS:
Select the best answer for each of the
following questions. Mark onlv oile answer for each item on the
answer sheet provided.
Strictly NO ERASURES ALLOWt:D.
Erasures will r~uder ycur examinatior. answer sheet INVAUD.
Use PE!';Cll NU. 2 onfy. GOODLUCK!@

Practical Accoun!!~g 1

3.

B.ubolegum Company takes a full year's depredation in the

year of an assets acquisition, and no depreciation in the year
of disposition.
Data relating to one aepredc::b!e asset
<Jcouired in 2011, with residual "c:tlue of P400,000 ar.d
estif"'lcted useful iif: of 8 years, ar D"!Cember 31, 2012 are:

P5,400,000
2,362,500

Cost
1.

Accumula~ed deJ.)reciation

On 1 January 2013 The Divine Company took out a 12% PlO

Using rhe same depreciation rYlethod in 2011 and 2012, i-, 0 .,.~,
mucn depreciation should Bubblegum record in 2013 fo ':his
asset?

million loar. to finance the construction vf a building. The key

dates are as follows:
1 January 2013 - Loan interest relating to tne project starts to
- - t>e lneurred ---=~--=,-~- - -- - 1 February 2013 - Technical site p1aru1ing commences
1 March 2013 - Expenditures on the project start to be
incurred
1 April 2013
- Construction work commences
1 Nvv. 2C13
- Substantially all of the activities necessary
to prepare the asset for its intended usc
are complete
1 Dec. 2013
- Building t-roug:-:t ir.to use

What amc~;r.t of
current year?
a. P:i. ,OOO,OOu
b. p 900,000
2.

inter~st

should Davine capitalize for the

c.
d.

P800,00(l
P700,000

The carrying value of company's property a11d equipme!lt was

P/.00,000 at 1 August 2012. Duril')g- ~he ye3r ended 31 July
2013, the company sold equipment for P25,000 on whicr, it
made a ioss of PS,OOO. The depreciation charge for the year
was P20,000. What was the carryir1g value of property and
equipment at 31 July 2013?

a_
b.

P150,000
P155,000

Payi!2 of24

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c.
d.

P160,000
P180,000

P~.Open1stPB10.13

a.

P62.:>,'JOO
P703,125

b.
4_

c.

d.

P659,375
P759,375

On January 15, 2011, Mcuntain Company paid P5,400,000 for

prop-erty containing natural resource of 2,001J,OOO t:ons of ore.
ThE: entity ~ !<::gaily required to restore the site after minir.g
operations. The estimated cost of restonng the Janet after the
resource is extracted is P45Q,GOO and the land will have a
value of P650,000 after it is restored for suitablz use.
Tllimeis, bunk houses and other fixed instailations are
constructed at a cosi_ of P8,000,00U and such expendtt' r~s
are charged to mine impr-ovements.
OiJerati0tl:: began c;-1 jar.Jary 1, 2012 and resources rcmovec
totaled 600,000. ton:;. Durin~ 2013, a discovery was made
indicating that available resource after 20.13 will tc":31
1,875,000 tons. At the beginning of 2013, addirior.a! bunk
houses were constructed in tile amount of P770,000.
In
2013, only 400,000 tons were min~o because of a strike.
Mountain Co'Tlpany should report depletion for 2013 at
P!,560,000
c. P640 000

a.
b.

Pl,040,ooo

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d.

P776:ooo

PJ.O~er.lstFB10.13

~~

_..

....

........,
~

SETB

5.

Booster Co purchased a building on 1 January 2003 for

P1,250,000. At acquisition, the useful life of the building was
50 .years.
Depreciation is calculated on the straight-line
basrs. On 1 January 2013, the building was revalued to
P~,600,000.
~C?st~r Co has a policy of transferring the
excess depreaat1on on revc.luation from the reva!u<'!tion
surpluc; to n::tained earnings.

7.

Level has just acquired the net assets of Complete for

PlOO,OOO. Jr. acquiring Complete, the owners of Level felt
that Cvmplete had unrecorded goodwill. Th.::y decided to
capitalize the estimated annual 5uperior earr.ings of Complete
at 20% to determine the amount of goodwill.
The
compctation resulted in an estimated goodwil! of P10,000. A
rate of 10% or. net assets before ecognition of gl)odwill was
used to determine normal <Jr.nual earnings 0f Cc:no!ete,
because it is the r;::,t~ tha~ is earned on nee as!?ets in the
industry in which C0mplete operates. All other assets of
Complete were properly recorded.
The estimated annuai
earning:; of Complete is
c. p 2,000
a. P10,000
b. p 9,000
d. Pll,OOO

8.

H2mmer Corporation acquired all the assets and liabilities of

New Corporation.
New Corporation has a number of
operating divisicns, including one whose major industry is the
m<1nufacture of toy train, particularly those having historical
significance. The toy trains divisicn :s regarded as a cc.sh')enerating unit. In paying P20 mm;o!1 for the net assiO'ts of
New Corporation, Hammer ca!cuiated that it had acquire(j
goodwill of P2,400,000. The goodwill was allocated to eac!1 of
the divisicns, and the assets and liabilities acquir~J are
measured at fair value at ac~uisition date.

Assuming no further revaluations take place, what is the

balance on the revaluation surpius at 31 December 2013?
a. P341,250
c. P603 000
b. P:1so,ooo
.. d . Psas:ooo ___ .. __ .. _____ _
o.

Minty Corl)orr~cion's investment properties included the

foliow:ng iter:1s:
Land held as potential plant si~e, PS,OOC,OOO.

A V?--:ant building to be ledsed cut under an o~enting

lease, P20,000,000.
Property neld for sale in the ordinary course of its
business, P30,000,0DO.
Property held for 2d:ninistrative purposes, P!o.ooo.noo.
A hotel owned and managed, P~u,ooo,ooo.

A bJ~Iding being leased out to a subsidiary, P8,000,000.

~ bull~rn?, which_ ca~not be soltl or leased out separately,
:.JSed rn lhe proourtron of go:::>ds and a;-ot.JOd 2% of the
area being leased out to canteen operators, P2,000,0UO.
How mu~la wili be reported as investment properties in Mi:-rty
Corporatton's separate finrtnr:al statements?
a. P20,000,000
c. P25,000,DOO
b. P28,000,0u0
d. P33,000,000

SETB

Practical Accounting 1

At the er.d of the period, the carrying <~mounts of the assets

of the toy train division were:
Factory
Inventory
Brand - "Choochoo"
Goodwill
Total

P2,500,000
1,500,000
500,000
500,000
~A!QQ~Q!l

There is a dedi11irrg interest iR toy t;-ains because of the

aggressive marketing of computer-based toys, so the
m::magement of Hammer measured the value in use of the
toy train division a:: P4,230,000.
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Practical Accounting 1

SETB

The ca;rying amount of Brand - "Choochoo"' after allocating

impairment loss, if any, is
a. PSOO,OOO
c. P42:::,ooo
b. P470,000
d. PO
9.

On January 1. 2011, 6ur.ny Inc. purchased a !Jatent with C'l

cost P1,160,000, a useful life of 5 ye~rs. The company uses
straight-line depreciation.
At December 31, 2012, the
con,pany determines that impai;...,.,.;:iit indicators are present.
The fair value les::, cost to seil the patP.nt is estimated to be
P540,000.
The pater.!:'s value-in-use is estimated to be
P565,uOQ. :-he asset's remaining useful life i~_e_stimated__ to b_e _
2 years.
- - - --- The company's
2013 income statement w!ll
amortization expense for the patent of
a. P188,333
c. P2fs2,500
0. P232,0CO
a. P595,000

report

12/31/2012
P71.S,OOC
P750,000

12/31/2013
P420,000
P445,000

No changes were made in the asset's estimated useful life.

The company's 2013 income statement will report
Amortization Expense of P235,000.
b. Amortization
Expense of P250,000 and
Loss
Impairment of PSS,OQO.
c. Amortization Expense of P235,000 and a Loss
Impairment of P25,000.
d. Loss on impairment of P70,000.

a.

Page 6 of 24

www.ortc.coM.,..,

Cash in Bank - checking accour.t of

of PSOO Post-dated chaks received
o;.,d
depcsit total::l9
tota
,
How .ng
much, should
be !"epo rted
- as cash in the statement o.
financial position?
c. Pl37,500
a. P131500
P138,00C
d.
b. P14,GOO

1L Con!;ider the

rollow~ng~

P13,1~oop~~~

a~ertificates ~f

P124,000~

'1 2013
has
12. The cash account of Target Corp._ on Decem~er
L

~.I

f Pl2l 600 and it consrsts of the fohowmg.

b I
a a ance o
'
PS21 780
Bills and coins on hand
., ,...f
~
1 000
1
Petty cash including pe~ cash vouch ..... rs '" P6:>0
Balance ir. s~vLlgS c>ccaunt with a bank closed by
36,QOO
tt:e BSP
5 2014
8,000
Coo-omer'c rheck dated Janu2;y 1
u::>l
- s returns
6,500
Credit memo from suppliers for !JUrcnase

120
Postage ::,ldmps
800
Jllloney order
400
IOU of ~r, employee
22,000
Checking account ba:ant:.e in B2nk of P I.
I

10. On January 2, 2012, Meadow Inc. purchased a patent with a

cost P940,000 a useful life of 4 years. At December 31,
2012, a11d December 31, 20!3, the company determ!nes that
impairment indicators are present. The following informaticn
is available for impairment testing at each year end:
fair value less costs to sell
Value-in-use

.;)CI

Pr-ctical Accounting 1

on
-~

VI

PJ.OpenlstPB:Jn.J3

The correct cash balance

Corp. i~
a. P7f>,580
b. P/6,3::::0

Oil

Decemb...:r 3l, 20!3 ot Target

c.
r1.

P75 130
?75,930
1

.
bank reconoliatiun at the
13. Charm Cc.rpet Cleanmg ~r~are~cl aof Julv the balance in the
end of every month. A .. t e en
. , 750 and the bani<
gen~r;:.l IPriger checking account was :; 98G Outstanding
balance C!. the bank statement -was
., d .
?400 The
d
do sits 1n transtte were

_po . h. k
't~en for P120 was
checks tctaled P680 an
t
nt
revealed
that
a
c
ec
wn
~
k
eme
.
dsbursernent. The
ban sta
~1
ecorrled
by Charm as a P2')0
~
rncorrec~ Y r "
.
d NSF check charges
bank statement listed servrce charges an - .
PlSO The cor:-t!cted cash balance ts.
1tota rng

c. P2,470
a. P2,270
d
P2 700
b. P2,550
.
'

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Practical Accounting 1
SETS

1<1. Certain i11formation

Company follows:

reli'ltive t:o the

Accounts receivable, January 1

-Accour.t receivable collected
Cash sales
invento;y, January 1
Inventory, December 31
Purchases
Gross !)rofit on sales

operation

of

Practical Account:og 1

tnpes

P 80C,ono
2,600,000
soo,oau
1,200,000
1,100,000
2,GJO,OQO
900,0GO

What is tt]~~q:ouot!::.rec~iy(lb!e balance .at December -31.,

a. PL700,DQO
c. P1,200,000
.
b. P1,30G,Gv0
d. p 700,000

~e~nade Corporation had a 1/1/13 balance in the All 0 wa!lce

tor vC_Jtful Accounts of P10,000. During 2013, it wote cff
P7,2~0 of accounts and collected P2,100 on accounts
prevtoJsly wntten off. The balance in Accounts Receivable
was P200,000 at 1/1 and P240,000 at 12/31. At 12/31/13
Lei"T!on-'lde estim3tes that 5% of dCcounts rtceivaiJIP will
prove to be uncollectible. What is Doubtful Accounts Expense
for 2013?
a !>2",000
r_.
P9,200
b. P7,100
d. Pl2,000

Accour.ts receivable - trade

Less albwance for doubtful accounts

P45,000
900
P44.10Q
During 2013, transactions relating to the accounts were as
follows:

SaiP.s on account, P48!l,OOO.

Cash reLeived from collections of current receivables
totaled P392,000, after discounts of P8,000 were allowed
for proi.J).:t payment.

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Customer's accounts of P2,000 were ascertained to b<:!

worthless and were written off.
Bad accounts previous!y written off plior to 2013
amounting to PSOO were reccvered.
The company provided P2,300 for doubtful accounts by a
jQumal entry at the e:1d of the year.
Accounts receiv<:ble of P70,000 have teen pledged to a
local bank on a loan of P40,000. Cullectioros of !'15,000
were made c::-: ~!":cse receivables (not included h the
collec!:ions previously given) and applied as partial
payment to the loan.

The amortizea cost of accounts receivable at December 31,

2013 is
a. P106,800
c. P106,300
b. P105,800
d. p 81,300

15.

16. The _baiance sheet nf Lake Products Co, shows the accounts
recetvable balance at December 31, 2012 as follows:

SETB

17.

lollip~p

Corporation ilad acLounts receivable of PlOO,OOO at

1/1. The only transactions 2ffecting accounts receivable were

sales of P600,000 and cash corlections of P550,000.

accoLJnts rece;;able turnover is
c.. 4.8
a. 4.0
b. 4.4
d. 6.0

The

1&. Assume Swe2t Cup., ar. equipment distributor, sells a piece

of machinery with a list price of P800,000 to Arch Inc. Arch
!nc. will. pay P850,000 in one year. Sweet Corp. norma::y
sells this type of equipment for 90% of lis!: price. How much
should be recorded as revenue?
a. P720,001J
~
P800,000
d. P850,000
b. P765,000

:i.9. On December 1, 2013, Sugar Mortgage Co. gave Crush Corp.

a P200,000, 12% loan. Crush received proceeds of P! 94,000
after the deduction 0f a P6,000 nonrefundable loan orig natio.1
fee. Principal and interest are due in 60 monthly inst2i;, :Ients
of P4,450, beginning January 1, 2014. The repayments yield
an effec!ive i11te:-~st rc:<:e of 12% <:t a :;>resent 'la:uc of

Page

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Practical Accounting 1

SETB

P200,ooo and 13 4 % at a
.
amount o"1
. .
present value of P194 000 Wh t
accrued nterest r:
bl
'

C!
its December 31 2013 t t ecetva ~ shotJ~d Sugar include in
a. P4,450
,
, sa eme.,t of financial position?
b. P2,166
C.
P2,000
d. p
0

20. On January 1, 2008 Tasty r

carrying amount of, P300 ooao:::pany sold a ~achine With 2
promissory note with a fa~
. a.ld f acceptPd m exchange a
December 31 2017 and e value o PSOO,OOO, a due date of
.
'

a stated rate of 4o;,

h .
reo;vable at the end of ea h
~, Wit tnterest
mac~ine is not readily det~rmi::r., The f~,~ ~~~l!e_ ~f t~e rearltly marketaule.
Under th
bk a~d fne- note IS riot
considered to have an app
. e c~rcums~ances, the note is
~%.
ropnate Imputed rate of mt~rest of
The interest inco
t b
me o e recogr,ized m 2013.
a. P20,00Q
IS
b. P29,264
c. ?32,6C4
d. P33.612
21. Wonderful In~ assigns Pl 500 000
.
~... '.
of ~ts act:o:.mts re:.:::eiv3b~E:s
as coiiatcoa! fur a pJ. muuon oan w 1 ~h a ba
-
assesses a 3% fin<mce fee and char
-.
OK.
: ne bank
6%. The journal entrv t
g~s mterest or, the note at
include 3
.
o record thts tratlsaction would not
a. Debit to Cash ior P970 000
b. Debit to Finance Charg~ for P30 000
c. Credtt to Note:s Payable for Pl 000 000
d. Credit to Accounts Receivable for P1,00.0,000.
22. Score Inc. factors P2 000 UO"
f .
without guarantee (rec~urs~) f, \_, o fi Jts accounts receivables
finance company retain
or a tnance charge of 5%. The
.
. s an amount oqual t
too
accounts receivable for possibl
d.
....
o
ro of tile
recorded as a gain {loss'
~he a JUstments. What would be
a. Loss of P1DO,OOO
; on ' e transfer of receivables?
b. Gain of PlOD OOO
c. Loss of PJOO,OOO
'
d. Loss of P2fJO ' J
nn0
J
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Practical Accoonting 1

SETB

23. Mcves Corporation obtained a P40,000 note receivable from a

custom~.- on June 30, 2013. The note, along with interest at
6%, is due on June 30, 2014. On September 30, 2013,
Move!:: discounted the note at Out bank. The bank's disr:ount
rate is 10%. What amount of cash did Moves- rece:ivE: from
O!.Jt Bank?
a. P40,600
c. P39,220
b. P36,000
d. P36,820
24. On January 1, 2013, Next Corporction ptrchased Pl,OOO,OOu
10% bonds for P927,380 (including broker's commission of
P20,000).
Next has the intention t~ hold the bonds
inuefintteiy.
Tne bonds we.e purchased to yield 12%.
Interest is payable annua!ly every Dt!cember 31. The bonds
mature en December 31,2017. On December 31,2013 the
bonds were se!lir.g at 99. Hnw much is the catrying amount
the investment in bortdS on December 31, 2013?

a.

P961,626

c.

P939,226

b.

P9Io,534

d.

P99o,ooo

2 S. Life, Inc. is pre;Jaring it~ fma;odc.i .:;tatements fc; rhe year

en<ied December 31, 2013. Accounts payable amounted to
P200,000 before any necessary year-end adjustment related
to i:he following:
At December 31, 2013, Life has a PSO,OOO debit balance
in its accounts p-3yabie to Tw1st, a supplier, resulting from
a
P50,000 advance payr.1ent for goods to
be
manufactured to Life's specifications.
Checks in the amount of P25,GOO wP.re wntten to vendors
and recorded on December 2S, 2013. The checks were
dated January 5, 2014.
What amount should Life report as accounts payable in its
December 31, 2013 statement of financial position?
a. P275,Cl00
c. P2fJO,OOO
b. P250,000
d. P125,000

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26. On July 1, 2013, Chocolatt:! Company purchased a noncash

asset with a list price of P260,0c.J(} by issJing a five-year
nor.intPr~i:-bearing note.
The market or "going" rate of
interest for this note was 12%. The note will; be paid in f:vc
equal annual P64,000 installments eadl June 30, 2014
thrcugh 201e. The interest expense to be recog:-rized by thf'
~ntity for the year ended December 31, ~013 is
a. P27 ,685
c. P13,842
b. P15,600
d. Nil

27. FOil Electror;!iCS Inc. _ _r~122_rted the follo~in9,. items on its

December 31, 2613; trial balance:
Accou:-~ts

Payable
Advances to Emp:oyees
Unearned Rent Revenue
Estima~ed Liability Under Warranties
Ca:~ Surrender Value of Officers' Life In~urance
Bonds Payable
Discomi. on Bonds PaycJtJ!~
Tradc~drks

P108,900
4,500
28,800
25,800
7,500
555,000
22,50C
3,90C

The arrJount that should be recorded on Full's statement of

financial position zs total liabilities is
a. P696,00C
P703,:J(J0
b. P700,500
d. P741,COO
28. A company who does not keep full accc:..Jnting reLords. The
following ~<?ta~c '""''"!te to transactions with credit customers
and suppi:ers for the year ended December 31, 2013:

Trade receivables, 1/1/13

Trade payables, 1/1/13
Cash received from customers
Cash paid to s:...:pplie:-s
Discounts ailuwed
Discounts recei';ed
Bc;c debts

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P130,000
60,000
686,400
3C2,800
1,4(H)

Practical Acco.mting 1

Amount due from a customer who is also a

supplier offset against an amount due for
goods supplie1 by the oompany
Trade receivables, 12/31/13
TrJde pay'lbles, 12/31/13

SETS

2,0CO
181,000
84,000

Based on the abo\/..! information, what figure should appear in

company's income statement for t:ti~ yea-: ended
December 3i, 2013 for sales revenue?
a. P746,520
c. P748,960
b. P742,961J
d. P744,960
~he

29. The Retry 0Jmp.:n~' uses ca~h-basis acccunting for their

records.
During 2013, Retry collected P~OO,OOC from its
customers, made paym~nts of P200,000 to its suppliers Fer
inJellto:y, aJ"Id paid P140,000 for operating costs.
Retry
wants to ;-repare .accrual-basis statements.
lrt gathering
information for the accrual-basis financi~.l statements, Retry
di:;covered the fol!owing:
a. Customers owed Retry P50,000 at the beginni:-:g and
P35,000 at th~ end of the ye2r.
b. Retry owed suppiiers P20,GOC 3t the beJifining and
P27,000 at the end of the ye2r.
c. Retry's beginning inventory was P42,0GG, and its endir.g
inventory was P44,000.
d. Retry had pre~id exper.ses of PS,OClO at the: beginning
and P/,400 at the end of the year.
e. Retry had accrued exp~nses of i>J2,000 at the IJeginning
and P19,000 at th~ end of ~he year.
f. Depreciation for the year was PS1,000.
Determine the accrual basis net income of Retry Compan',' for
the year P.nded December 31, 2013.
a. P84,400
c. P91, 400
b. P79,600
d. P98,40

2,960
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30. King Company sells appliance service contracts to repair

appliances fer a two-year period. King's past experience is
that, of the total amount spent for repairs on service
cont;acts, 40 percent is incurred evenly dur!:-g the f:rst
contro?ct year and 60% is incurrted evenly during the sAcond
contra~-r year.
Receipts from servi~e contract sale~ for the
two years endea December 31, 2013, are P2So,oca in 2012
afld P300,CIOO in 2013. R2ceipts from contract are credited to
unearned service contra._t revenue. Assume that all ccntrac~
sales are made' evenly during the year. What arr.ount should
Kin:J report 3S unearned service contract revenue at
_December 31, 2013?
a. P18fJ,OOO
c. P315,0(;0
h. P240,000
d. P235,000
31. Loading Corp. i)ays COJTii;J~Ssions to its sales staff at the , ate
of 3% of net saie~. Sales staff are not pa1d salaries but are
given monthly adva:-~ces of P3C!,OOO. Advanc:::s are charged
to
commiSSIOn
e~cens~,
and
rec:mciliations
again~t
commissions are prepared quart~rly. Net sales for th~ year
ended March 31, ='013 w~re P30 rniHiof1. The :..tn"ldju:;ted
bala'lce in the como::issions expense account en March Jl,
2013 was P800,000. March advances were paid on April 3,
201 '3. Ir. its iilcome statement for the year ended March 31,
2013, what a:-nount should Loading Corp. report as
commission expense?
a. P930,000
c. P830,00C
b. P900,000
d. P800,000
J2. PI.Jy Co-.'s profess::>nal fees ex~nse account had a balance of
P92,000 at Dece;nber 31, 2013, before cunsidering year-end
c3djustments relating to the fo!lowing:
Consultants were hired for a special project at a total fee
not to exceed PES,OOO. Play has recorded PSS,COO c:f thi~
fee based on bii!ings for work performed in 2013.

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The attorney's letter requested by the auditors, cated .

January 28, 2C14, inaicat:ed th.Jt legal f~ of P6,000 werE
biiled on January 15, 2014 for wori< peaformed in
November 2013 ar1d that unbill2d fees for December 2013
were P9 ,000.
What amo11nt shculd Play repo;t for professional fees expense
for tl'le year ended Decembe;- 31, 20137
~
P107,0GO
c. P92,000~
b. Pl.L7,000
d. PS2,COO
33. C3ndy Publishing Co. publishes textbooks for colleges and
univer5ities: F3ookc;torec; purchase t>ocks with terms f.o.9.
~hipping point and payment is due 60 dar; after shipment.
The bookstore may return 40% of each order (at the
bookstore's expense). Candy's experience indicates that the
norma! return rate is 10%, and the average collection pt!nod
is 72 days. Candy shipped and invciced P300.Cl00 of books
during August 2013. The books w~r~ recorded on Ccndy's
books for P120,000. What amount of net sales revenl!e will
Car.dy rpcorc for the August 2013 ~les?
a. P180,0U8
c. :>120,000
b. P300,000
d. P270,000
34. Crush Company is an experienced horne appli3nce dealer.
Crush Cor:1pany also offers a ilumber of services together
with the home appliances that it sells (installation ~nd
maintenance}.
Crush Company selfs dishwashers on a
standalone basis, it also sells installat-ion and mai11i.tlldl~Ce
service for the dishwashers.
Pricing for dishwashers is as follows:
Dishwasher only
Oi~hwasher with installation service
Oi~hwasher with maintenance services
Dishwdsher with installation and
maintenance services

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1,950
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In c;:~ses where maintenance services are provided, the

m;;int.::nance service is separ2tel; priced within the
~rr;:J:1Qement at P350.
Dishwashers are c;old subject to a
general !'"ight of return. If a customer purchases a d!shwashe:
witn installation and/or rnamtenance ~erv;ces, in the eve;,t
Crush Company soes not ;::omplei.e the service satisfactorily,
the cuc;tome:- is C!'lly entitled to a refJnd of the portion of the
fee that exceeds P1,600.
On Januar1 1, 2013, Crush
Company se:rs 100 di~hwashers to Condo Comp:ex, Inc. a
developer of high-rise condos. 1 he dishwashers 2re in!>talled
and Condo Complex, Inc. purchases the dishwashers with i:he
ir.stal!atioQ ar:d ,..,.,aintena!<;~ seEVices. Ti1e total price .fpr th_!' ____ .
100 dishwa~hers is P!90,COO. How much revenue sho.uld .
Crush Cornpany allocate to the rlishwashers?
3.

b.

PlSO,OOO
P190,000

c.
d.

P152,000
P160,000

35. The physical inventory of Saga C::>mpany on December 31,

2013, showed merchandise with a cost of P4,000,000 was c:1
hand at that date
You nlso c!!5-::cv~r~d the follow:ng items
were all exciuded from the count:
a. Merchandise costing P16G,OOO, -.vhich .vc.s held by Saga
on consignment. The consignor is a subsidiary.
c. A special machir:e, fabricated to order for a customer
costing
P400,000,
was
finished
al"'ri
specificalry
segregated in i:he back part of tt.e shippi:1g room on
December 31, 2013. The customer was blUed on th:Jt
date and the machine exc~~~=~ ~rorn inven~c;-y ~!:~c~9h it
was shipped on January 4, 2014.
c. Nerchandise costir.g P&O,OOO, which was shipped by Saga
f.o.b. destination to a custcme, on uec2mber 31, 20B.
The customer expects to receive !:he merchandise on
Janua~y 3, 2014.
d. Nerchand!se costing Pl20,000 which was shipped by
Saga f.o.b. shipping point to a customer on December 29,

2013.

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Merchandise costing PSO,OOO '>hipped by a ve'ldor f.o.b.

seller or. Dece:nber 28, 2013 and received by Silga on
Januqry 10, 2014.

The corrected balance of Saga's inventory shcJ!d b::!

a.
b.

P4,530,000
P4,130,000

c
d.

P4,480,000
P4,690,000

36. The Yeti Corporation's inventory at December 31, ~013, was

P325,000 based on a physical count priced at cost, and before
any neces~ary adjustment for the followineJ:
Merchandse costing P30,000, shipped F.o.b. ~hippin~

point from a vendor on December 30, 2013, was received

en January 5, 2014.

Merchandise costiny P/2,QOO, shipped F.o.b. destination

from a vendor on December 28, 2013, was received on
January 3, 2014.

Merchandise costing PJR,COO was sllipped to a customer

F.o.b. desti~atio'l on December 28, 2rrived at the
customer's lccaticn or. J;:m:Ja;y 6, 2fJ14.
M~rchandise
costing Pl2,000 was being he:d on
consignment by ClutJ Company.
What amour.t should Yeti Ccrporatior report as i:-wentcry in
its December 31. 2013, statement of financial position?

c.
b.

P367,000
P427,000

c.
d.

P405,000
P325,000

37. The Shop Compa'ly selts TVs. The perpetual mventory was
stated as P305,000 on the books at Decem9er 31, 2013. At
the clos.: of the year, a new approach for compiling inventory
was used and apparently a satisfactory cut-off for preparation
o~ financial statements was not made.
Some events that
occurrer1 are as follows.
a) TVs shipped to a customer January 2, 2014, costing
PSO,OOO were included in inventory at December 31,
2013. The sale was recorded in 2014.
b) TVs costing P100,000 received December 30, 2013, were
recorded as received on January 2, 2014.
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c)

Tvs received during 2013 costing P46,000 were recorded

twice in the inventory accouot.
d) IVs shit)ped to a customer December 28, 2013, f.o.b.
shipping point, which cost P150,000, were net receivea t>y
the customer until January, 2014. The TVs were included
in the ending inventory.
e) TVs on hand that cost P61.,0CO were never recorded on
the boo!~s.

Compute the correct inventory at DE'cember 31, 2013.

a. P320,000
c. P220,000
!;> . 'P259,0QO___
d. P270,000

38. Cupcake Co. started 2013 with P94,000 of merchandise

inventory on hand. During 2013, P400,000 in merc~dr.d1se
was purchased on account with credit terms of 1/15, n/45.
All discounts were taken. Purchases "''~re all made f.o.b.
ship~ing point.
Cupcake paid frE'Jght charges of P/,500.
i-1Prchandise with an invoice amount of P5,000 was retumE:d
for credit. Cost of 9oods sold for the year was P380,000.
Ct~pca\e u~es a ocr;>etuat inventcry syste111.

What is ending i'lventory assuming Cupcake uses the

method to record purchases?
(.
P116,500
a. P112,490
d. P120,300
b. Pl12,550

~Foss

3Y. The closing inventory at cost of a company 2t 31 December

2013 zmounted to ?284,700.
The following ite:ns were
included at cost in the tota!:
400 coats, which had cost P80 each and normally sold for
PlSO eacl1. Owing to a defect in manufacture, they were
a!! sold after the reporting date at SO% of thf'>ir normal
price. Selling expenses amounted to 5% of thP. P ou.:~eds.
800 skir:ts, which had cost P20 each. These too were
found to be defecti'Je. Remedial work in February 2014
cost PS per skirt, and seliing expenses for the bCltch
totaled P800. iney were sold for P28 edch.

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What should the inventory value be according to PAS 2

Inventories after considering the above items?
a. P281,200
c. P282,800
b.' P282,100
d. P329,200
40. A company has deciJed to switch from using the FIFO method
of inventory valuation to using the average c0st method
(AVC:O). In the first accounting period where the change is
mi'lde, opening inv2ntory volueo by the FIFO method was
P53,200. Closing inventory vaiued by the AVLO mzthod was
P59,800. Total purchases during the period were P136,500.
Using the AVCO mEthod, o!)enir.g inver.tory would have been
valued at P56,200.
What is the cost of goods that should be inclo_oded in the
income staterrot::nt tor th period?
a. PP9,900
c. P135,900
b. P132,900
d. P!40,:!.00
41. On Januar; 1, 7C13, ras~ille Cor;;. sigr>ed a three-year
noncancelable purchase contract, which allows Pastille tv
purchase up to 500,00\) units of a computer part annuaiJy
from Pyrc:;m;d Supply Co. at PlO per unit ar.d guarantees a
rr.inimum annual purchase of 100,000 units. During 2013,
the part unexpectec:y became obsolete. Pastille had 250,000
units of this i~ventory at December 31, 2013, dOd believe~
these parts can be sold as scrap for P2 per unit.
What
amount c,; ...,, uiJabl~ los3 I rom me purchase ccmm1tment
$houid PastiHe report in its 2013 prafrt cr loss?
c. P1,600,000
a. P2,400,00Q
!:>. P2,000,CQO
d. P 800,000

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42. P.. physical inventory tal<en on December 31, 2C13 resulteci in

an ending inventory of Pl,440,000. Circl!s Company suspects
.some- irwcntory may have been t~ke:1 by employ~PS. To
estirr.ate the cost of missing inver.tory, tile following were
g<1thered:
P1,280,000
Inventoy, Dec. 31, 2012
5,640,000
Purchac;es during 2013
1,400,000
Ccsh sales during 2013
Shipment received on Decer.1ber 25, 2013,
inc!uded in physical inventory, but not
40,000
'_recorded_ as purchases
_ _
Deposits made with suppliers. -ent~red as purch2ses- Goods were not recc>ved in
80,000
2013
7,200,000
Collection,.. on accounts receivable, 70! 1
1,000,000
Accou:1ts receivab 1e, January 1, 2013
1,200,000
Accounts receivable, Dec. .Jl, 2013
40%
Gross profit percent3gt: on sales
AC [lece;r,t;e:- 31. 20! 3 w'tct '" the est1mated cos~ of missing

inventory 7
2. P200,000
b. P160,000

c.
d-

P240,000
P320,0CO

43_ A fire destroyed tr;c Glade Company's warehouse causing

damage to 1ts inventories stored in the warehvl!se.
The
company ts~s c:veragc retail inventory method in inventory
estimation.
in con,lection with this, the company's
accountant gather2d the foilowir>g informatio;1 relatir.<;; its
inventories:
Retail PriG~
Cost
300,000
190,000
Inventory, Begin::ing
4,000.000
2,900,000
Purchase Price
100,000
50,000
Purchase Discount
150,000
90,000
Purchase Allmvance
170,000
60,000
Purchase retu;-ns
30,000
20,000
Freight In
60,000
Net Mark-up
"aye ;a;,t 24

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~etaif

Net Mark Down

Departmental Transfer in (Debit)
Departrnentc;l Transfer 0Lit (Credi::)
Abnormal Wastages
Normal Wastages
Employee Discounts
Sales Discount
Sales Allowances
Sa:cs Retums

Price
[:0,000

386,800

430,000

400,000
80,0')0
100,000
6,000
5,000
21,000
5,000

550,000
120,0JO
120,000
9,500
8,200
32,150
6,780

Ti 1: corr.t)any's policy is to record sales adjustments directly

to sales account. The sales account shm:ed e:1ding balance
of P2,~08,000 un the date of fire.
Physical inventory
conducted after the fire disclosed usable damaged yoods
which i:he company estimates can !Je sold at PlOO,OOO. Also,
it is estimated that the company ~,ill incur P4,000 to sell the
goods. r.~te o.-ig:nal cost cf th;s goocs amounted to PSO,OCO.
How much shouid the company recognize as loss on inventory
fi,-e?
a. P556,348
c. P585,400
b. P581,613
d. P611,875
44. The following pertains to Wafer Company's biological a~sets:
Fa:r value of t'"le assets
Estimated commissions to brokers and dealers
Estimated transport and other costs ~ecessary
to get assets to the market
Selling price in a binding contract to sell

PSOO,OOO
50,000
30,000
400,000

The entity's biological assets should be valued at

a. P450,000
c. P350 000
b. P42G,OCO
d. P320:ooo

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45. Wharf C::>rp. boilght a new printing machine. The cost of the
rr3chme was PSO,OOO. The installa!:ion costs were PS,OOO
and the employees received training on how to us~ the
mc:chine, ac a co::;t of P2,000. Before using the machtne to
prini: ct.:stomers' orders, a test was undertzken and the paper
and ink ccst Pl,OOO.
What should be the cost of the machine in the company's
statement of finanoai oosition?
c. P86,ooo
a. P80,000
d. Pss,or.o
b. P85,000
-

..

46. A machine :--.as a ccst of PGO,OOO, ha.:; a;; anr.ual depreciation

of P12,000, and has accurnl!tated depreciation of P30.000 on
December 31, :?012. On April 1, 2013, whEn the machine hcs
a fair value of P24,000, it is ex..:..t-.~.ly~d for a similar machine
with a fair value of P72,000 and the p:-::>oer amount of cash is
paid. The lose:: to be recognized o'l e~change is
a. P6,000
c. P21,000
b. P3,000
d. P
0
4 7. T:-~ January, Peopermint Corpcratior. enteret:! into a ~cntroct_

t?

acq~ire a new macloine for its factory. The mc.chsne, wh:cn

had a cash price of PJOO,UOO, was paid for as fol!aws:
p 30,000
Down payment
240,000
Note payable in 10 eq1 tal monthly installments

1,000 ordi11ary s! tares of Peppermint Nith an

agreed value cf P50 per share
Total

_ :Jc,ooo
EJ2_Q....Q~m

Prior to the machine's use, inc;tal:ation costs of P8,0QO were

incurred. The machine has an estimated useful !ife of ten
years and an est1mateu ~alvage valuP c~ P10,000. What
should Peppermint record uS depreciation expense for the first
year under the straight-line method?
a. P31,800
c. P30,000
b. P31,000
d. P29,800

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48. Palace Inc. purchased land for a buiidlr.g site for P32U,OOO.
On the land was a building with an appraised value of
P120,000. The ~ompany c!emolished the old building at a cost
of P12,000, but was al'lle to sell scrap from the building fnr
Pl,SOO. The cost cf title insurance was P300 and attomey
fees for reviewing the contract was PSOO.. Prcperty taxes paid
were P3,00ll, of which P250 covered the period Sllbsequent to
!:he purchase dat.!. The capitalized cost ot the le:-:d :-:::
a. P336,400
c. P334,650
b. P336,150
d. P201,150
49. Salty Compa_py purchased land for a manufacturing facility for
Pl,lOO,OOO. The company paid P7J,OOO to tear down a
building on the land. Salvage was sold for PlO,SOO. Legal fees
of P6,500 were paid for title :nvestigaticn and making the
purchase. Architect's fees were P40,500. Title insuranc"! cost
P4,500, and liability insurance during constru<.1:icn cost
P13,500. Excavation cost P12,000. The contractor wc>s paid
P1,3S.7,000. A on'c:! -time assessment made by the city for
sidewalks was P7,500. Salty insta!led lighting and s!grage at
a cost of Pll,OOO.
The cost of the b:..~ilding that should be recorded by Salty is
a. P1,505,500
c. Pl,423,000
b. P1,432,000
d. F 1,357,500
50. Canyon Compan): ts engaged in the operation oi public
highways and skyways in the Philippines. On November 2,
2012, a catastrophe devastated the some of the company's
operated highways and skyways. The corr:pany suffered P5.6
billion bss due to catastrophe.
On January 1, 2013, the
Philip!Jine government decided to :ompensate the company
for the incurred loss. The government loaned PS biilion at 5%
per annum with maturity period of 5 years. The current
market r~te for similar type of loan after considering credit
risks attached was 10/;:,. The conditions stipulated on the
loan agreeml!nt provide that the proceeds wiil be used fo:r~cons~ruction of the skyways and_ highways.

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