Simulated Qualifying Examination Reviewer

1. On January 1, 2014, ANGANDAKO Company bought machinery under a contract that required a down payment of
P100,000, plus 24 monthly payments of P50,000 each, for total cash payments of P1,300,000. The cash price of the
machinery was P1, 100,000. The machinery has a useful life of 10 years and residual value of P50,000. The entity used
straight line depreciation. What amount should be reported as depreciation for 2014?
a. P105,000
b. P110,000
c. P125,000
d. P130,000

2. GORABELS Company followed the procedure of debiting bad debt expense for 2% of all new sales.

Sales Allowance for Bad Debts

2012 P 3,000,000 P 40,000

2013 2,800,000 60,000
2014 3,500,000 80,000

a. P50,000
b. P70,000
c. P10,000
d. P86,000
3. DOTA Company started its business on January 1, 2012. After considering the collections experience of other companies
in the industry, De leon established an allowance for doubtful accounts estimated at 5% of credit sales. Outstanding
accounts receivable recorded on December 31, 2012 totaled P460,000, while the allowance for doubtful accounts had a
credit balance of P50,000 after recording estimated doubtful accounts expense for December and after writing off
P10,000 of uncollectible accounts. Further analysis of the Company’s accounts showed that merchandise purchased in
2012 amounted to P1,800,000 and ending merchandise inventory was P300,000. Goods were sold at 40% above cost.
80% of total sales were on account. Total collections from customers, on the other hand, excluding proceeds from cash
sales, amounted to P1,200,000, Considering the given data, accounts receivable and allowance for doubtful accounts are

Accounts Receivable Allowance for doubtful Accounts

a. 10,000 understated 24,000 understated
b. 20,000 understated 34,000 understated
c. 330,000 understated 40,000 understated
d. 330,000 understated 50,400 understated

4. An examination of insurance policies of P-POP Marketing is presented below:

Policy Date of Purchase life of Policy Cost

A September 1,2013 4 years P25,920
B May 1, 2014 2 years P18,960
C July 1, 2014 1 year P9,720
Prepaid insurance was debited for the cost of each policy at the time of its purchase. Expired insurance was correctly
recorded at the end of 2013.
How much is the balance of prepaid insurance at the end of 2014?
a. P39,910
b. P34,780
c. P35,590
d. P16,850

5. HUGOT Company started business at the beginning of current year. The entity established an allowance for doubtful
accounts estimated at 5% of credit sales. During the year, the entity wrote-off P50,000 of uncollectible accounts. Further
analysis showed that merchandise purchased amounted to P9,000,000 and ending merchandise inventory was
P1,500,000. Goods were sold at 40% above cost. The total sales comprised 80% sales on account and 20% cash sales.
Total collections from customers, excluding cash sales, amounted to P6,000,000. What is the net realizable value of
accounts receivable at year-end?
a. P2,400,000
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 b. P1,930,000
c. P2,350,000
d. P1,980,000

Use the following information for questions 6-13.

The adjusted trial balance of KAPITLANG Corporation on December 31, 2014 includes the following account balances:

Dividends Payable P40,000

Ordinary share capital (P5 par, 500,000
shares authorized) 750,000
Ordinary share capital subscribed (10,000 shares) 25,000
Ordinary share premium 50,000
10% Preference share capital (25,000
shares authorized, 12,000 shares outstanding) 300,000
Preference share premium 30,000
Retained Earnings Appropriated for Contingencies 150,000
Retained Earnings Appropriated for Bond Retirement 100,000
Retained Earnings- Unappropriated 450,000
Ordinary Share Capital Dividends Distributable 105,000
Paid-in Capital from Share Capital Dividend 63,000

6. What is the number of Ordinary shares issued and outstanding?

a. 5
b. 150,000
c. 500,000
d. 750,000
7. What is the par value for each Preference share capital?
a. P10
b. P12
c. P25
d. P40
8. What is the market value for each Ordinary share capital upon the declaration of the share capital dividend?
a. P5
b. P8
c. P10
d. P25
9. How much is the total amount of Retained Earnings?
a. P100,000
b. P150,000
c. P450,000
d. P700,000
10. What is the total amount of Share Capital?
a. P1,050,000
b. P1,075,000
c. P1,138,000
d. P1,180,000
11. What is the total amount of Contributed Capital?
a. P1,050,000
b. P1,323,000
c. P1,363,000
d. P2,063,000
12. What is the total amount of Retained Earnings available for dividend distribution?
a. P450,000
b. P550,000
c. P600,000
d. P700,000
13. What is the total amount of Shareholders’ Equity?
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 a. P1,363,000
b. P2,000,000
c. P2,023,000
d. P2,063,000

Use the following information for questions 14-15

PASITIB Company provided the following selected accounts, cash receipts and disbursements for 2014:

January 1 December 31 Cash Receipts for 2014:

Accounts Receivable 500,000 450,000
Notes Receivable 200,000 250,000 Cash Sales 450,000
Collections of accounts,
Accounts Payable 100,000 60,000 net of discounts of P30,000 1,250,000
Notes Payable 100,000 150,000 Collections of notes receivable 20,000
Prepaid Insurance 20,000 40,000 Purchase returns and allowances 55,000

14. Under accrual basis, what amount should be reported as gross sales?
a. P1,250,000 Cash Disbursements for 2014:
b. P1,720,000
Cash Purchases 230,000
c. P1,750,000
Payments of accounts payable,
d. P1,805,000
net of discounts of P26,000 1,233,000
15. Under accrual basis, what amount should be reported as gross purchases?
Payments of Notes Payable 357,000
a. P1,449,000
Insurance 220,500
b. P1,830,000
Other expenses 500,000
c. P1,800,000
Sales Returns and Allowances 40,000
d. P1,856,000

16. The directors of SNSD Company wish to declare a dividend whereby ordinary shareholders are to receive a total per
share dividend of P4.00. The equity on December 31, 2014 appears as follows:

Preference share capital, P100 par, 7% participating up to

10%, non-cumulative, 100,000 shares authorized,
25,000 shares issued 2,500,000
Ordinary share capital, P25 par, 250,000 shares authorized
and issued 6,250,000
Share Premium 1,250,000
Retained Earnings 5,000,000

What is the total amount of the dividend that must be declared to meet the per share goal of the board of directors?
a. P1,175,000
b. P1,700,000
c. P1,000,000
d. P1,250,000

17. I DO Company had the following information relating to its account receivable:

Accounts receivable at 12/31/2013 P 1,300,000

Credit sales for 2014 5,400,000
Collection from customers for
2014, excluding recovery 4,750,000
Accounts written off 9/30/2014 125,000

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 Collection of accounts written off in
prior year ( customer credit was
not re established) 25,000
Estimated uncollectible receivables
per aging of receivables at
12/31/2014 165,000

On December 31, 2014 the amortized cost of accounts receivables is

a. P1,600,000
b. P1,825,000
c. P1,800,000
d. P1,525,000

18. PETIKS Company operates in an industry that has a high rate of bad debts. On December 31, 2014, before any year end
adjustment, the accounts receivable balance was P 8,000,000 and its allowance for doubtful accounts was P 800,000.
The yearend balance reported for the allowance for doubtful accounts is based on the following schedule.

Time outstanding Accounts Receivable Percent Collectible

Below 30 days 5,000,000 90%

31-180 days 1,500,000 80%
181-360 days 1,000,000 50%
More than 1 year 500,000 0%

Accounts of P 40,000 were written off during the year. What should be the doubtful accounts expense for 2014?
a. P840,000
b. P1,040,000
c. P1,000,000
d. None of the above

19. HAYAHAY Company’s December 31, 2013 statement of financial position reported the following shareholder’s equity:

5% cumulative preference share capital, par value

P100 per share; 25,000 shares issued
and outstanding 2,500,000
Ordinary share capital, par value P35 per share;
100,000 shares issued and outstanding 3,500,000
Share premium 1,250,000
Retained Earnings 3,000,000

Dividends in arrears on the preference share amount to P250,000. If Hayahay were to be liquidated, the preference
shareholders would receive par value plus a premium of 500,000. What is the book value per ordinary share?
a. P70
b. P60
c. P50
d. P40

Use the following information for questions 20-21.

HOPIA Corporation began operations in January 2012, and reported the following results for each of its three years of
operations.
2012 300,000 net loss
2013 30,000 net loss
2014 3,950,000 income
At December 31, 2013, the company’s capital accounts were as follows:
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 5% cumulative preference shares, par value P100 authorized
100,000 shares; issued and outstanding 60,000 shares 6,000,000
Ordinary shares, par value, P10; authorized 1,000,000 shares;
issued and outstanding 800,000 shares 8,000,000
The company has never paid a cash or stock dividend and there has been no change in the capital accounts since it began
operations.

20. What is the book value of the preference shares on December 31, 2014?
a. P115
b. P13.4
c. P134.43
d. P11.94
21. Assume that the preference shares have a liquidation value P105 per share and are participating, what is the book value
of the ordinary shares on December 31, 2014?
a. P12.94
b. P11.94
c. P13.40
d. P10.40

22. On June 1, 2014, MORAYTA Corp. sold merchandise with a list price of P15,000 to ESPANYA on account. Morayta
allowed trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made f.o.b. shipping point.
Morayta prepaid P300 of delivery costs for Espanya as an accommodation. On June 12, 2008, Morayta received from
Espanya a remittance in full payment amounting to
a. P8,232
b. P8,526
c. P8,532
d. P8,397

23. BOGART Company started operations on January 01, 2014. The following are available as of June 30, 2014:

Purchase of merchandise P450,000

Inventory, June 30, 2014 75,000
Goods were sold at 50% above cost; 75% of sales were on account
Estimated bad debts 1% of credit sales
Collections from charge customers 315,000
Allowance for doubtful accounts, June 30,2014
after write off of uncollectible accounts 3,903.75

The outstanding accounts receivable as of June 30, 2014 were:

a. P110,000
b. P106,875
c. P106,560
d. P285,000

24. In analyzing the shareholders’ equity section of the FORDAWIN Company. The following information was abstracted
from the accounts at December 31, 2014:

Total income since incorporation P7,875,000

Total cash dividends paid 2,437,500
Proceeds from sale of donated stock 843,750
Total value of stock dividends distributed 562,500
Excess of proceeds over cost of treasury stock sold 131,250

What should be the balance of the Retained earnings account as of December 31, 2014?

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 a. P4,875,000
b. P6,218,750
c. P7,031,250
d. P10,031,250

Use the following information for questions 25 and 26.

CHICHAY Company's December 31 year-end financial statements contained the following errors:
Dec. 31, 2007 Dec. 31, 2008
Ending inventory P3,000 understated P4,400 overstated
Depreciation expense P 800 understated

An insurance premium of P7,200 was prepaid in 2007 covering the years 2007, 2008, and 2009. The prepayment was
recorded with a debit to insurance expense. In addition, on December 31, 2008, fully depreciated machinery was sold for
P3,800 cash, but the sale was not recorded until 2009. There were no other errors during 2007 or 2008 and no
corrections have been made for any of the errors. Ignore income tax considerations.

25. What is the total net effect of the errors on the amount of Chichay's working capital at December 31, 2008?
a. Working capital overstated by P2,000
b. Working capital understated by P1,800.
c. Working capital overstated by P600.
d. Working capital understated by P4,800

26. What is the total effect of the errors on the balance of Chichay's retained earnings at December 31, 2008?
a. Retained earnings understated by P4,000
b. Retained Earnings understated by P1,800.
c. Retained earnings understated by P1,000
d. Retained earnings overstated by P1,400.

27. SABLAY Corporation uses the cash basis of accounting. Sablay collected a P1,400,000 from its customers during the
year. Balances of certain accounts follow:

Beginning Balances Ending Balances

Accounts Receivable 100,000 180,000
Allowance for Bad Debts 40,000 50,000

What is the sales revenue under the accrual basis of accounting assuming the company wrote-off P30,000 of its account
during the year and subsequently recovered P10,000 of these later during the year?
a. P1,440,000
b. P1,450,000
c. P1,500,000
d. P1,510,000

28. JEJEMON Company reported the following balances after adjustment at the end of 2014 and 2013.

2014 2013
Accounts Receivable 5,250,000 4,800,000
Net Realizable Value 5,100,000 4,725,000

During 2014, the entity wrote-off customer accounts totaling P160,000 and collected P40,000 on accounts written-off in
previous years. What amount should be reported as doubtful accounts expense for the year ended December 31, 2014/
a. P195,000
b. P150,000
c. P120,000
d. P170,000
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29. KOKEY Co. reports operating expenses in two categories: Selling and General & Administrative. The adjusted trial
balance at December 31, 2014 includes the following expenses and loss accounts:

Accounting and Legal Fees P1,200,000

Advertising 1,500,000
Contributions (SSS, PhilHealth ) 690,000
Depreciation- Office Equipment 80,000
Depreciation- Store Equipment 88,000
Doubtful Accounts 65,000
Freight-out 800,000
Interest 700,000
Loss on sale of long term investment 300,000
Officer’s Salaries 2,250,000
Rent for Office space 2,200,000
Sales Salaries and Commissions 1,400,000

One half of the rented premises were occupied by the Sales Department.
Kokey’s total selling expenses should be
a. P4,000,000
b. P5,100,000
c. P4,888,000
d. P4,800,000

Use the following information for questions 30-34.

The following data presented below are about the operation of Sahara May Nerpio Co. for the period ending December
31,2014. The company is using the periodic inventory method.

Sales P450,000 Purchase Discounts P4,000

Sales Returns and Allowances 3,500 Freight-In 1,500
Sales Discounts 3,500 Selling Expenses 65,000
Beginning Inventory 60,00 General and Administrative Expenses 70,000
Purchases 300,000 Ending Inventory 110,000
Purchase Returns and Allowances 12,000

30. The amount to be debited to Income Summary account is

a. P333,500
b. P500,000
c. P526,000
d. P443,500
31. The amount to be credited to Income Summary account is
a. P466,000
b. P82,500
c. P526,000
d. P443,500
32. The cost of goods sold is
a. P285,000
b. P345,500
c. P235,500
d. Answer not given
33. The gross profit is
a. P108,000
b. P285,500
c. P235,500
d. Answer not given
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34. The Net Income/Net Loss for year 2014 is
a. P27,000
b. P243,000
c. P73,000
d. Answer not given

Use the following information for questions 35-38.

Mega Theater and Mega Bookstore entered into separate transactions with Fortune Insurance Corporation and insured
their buildings by paying an annual premium of P2,400 on May 31, 2013. Mega Theater used the expense method while
Mega Bookstore used the asset method.

35. If both of the company desires to prepare financial statements at the end of June 30, 2013, the Statement of
comprehensive income would show insurance expense of:
a. P2,200
b. P200
c. P1,400
d. None of the above

36. At the end of the year, the adjusting entry of Mega Theater will include
a. A debit to Insurance expense, P1,400
b. A debit to Prepaid Insurance, P1,400
c. A credit to Insurance Expense, P1,000
d. A credit to Prepaid Insurance, P1,000

37. At year- end, the adjusting entry of Mega Bookstore for the said transaction will include:
a. A debit to Insurance Expense for unexpired portion.
b. A credit to Prepaid Insurance for unexpired portion
c. A credit to Prepaid Insurance for expired portion
d. A debit to Insurance expense for the whole amount paid

38. The reversing entry of Mega Bookstore to be prepared on January 1, 2014 will include
a. A debit to Insurance Expense, P1,000
b. A credit to Prepaid Insurance, P1,400
c. A debit to Insurance Expense, P1,400
d. Reversing entry is not applicable

39. The following data are available for the months of April and May of the current year:

April May
Merchandise inventory, beg P7,000 ?
Merchandise inventory, end 6,500 P7,500
Net purchases 19,500 18,500
Net sales 36,000 38,500
Operating expenses 12,200 14,900

How much is the gross profit/ gross margin for the month of April?
a. P17,000
b. P16,000
c. P4,800
d. P17,500
e.
40. KALOKALIKE Company provided the following information for the year:

Cash Balance, January 1 130,000 Accounts Receivable, January 1 190,000

Collections from Customers 2,100,000 Shareholder’s Equity, January 1 380,000
Total Assets, January 1 750,000 Total Assets, December 31 880,000
Cash Balance, December 31 160,000 Accounts Receivable, December 31 360,000
Total Liabilities, December 31 390,000

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 What is the net income for the current year?
a. P70,000
b. P110,000
c. P490,000
d. P150,000

Use the following information to answer nos. 41-45.

CPATAYO Company provided the following information:

December 31, 2013 December 31, 2014

Merchandise Inventory 560,000 530,000
Accounts Receivable 230,000 115,000
Accounts Payable 50,250 43,000
Cash ? 350,000

Total Sales and Cost of sales for 2014 were P1,245,000 and P790,000, respectively. Various operating expenses of
P200,000 were paid in cash.

Additional Information: (for the current year)

Purchase Returns and Allowances 25,000 (pertaining to credit purchase)
Sales Returns and Allowances 15,000 (pertaining to credit sale)
25% of the sales was made on credit.
50% of the purchases was made on cash.

41. What is the cash balance on January 1, 2014?

a. P725,000
b. P890,000
c. P709,750
d. P707,250

42. What is the amount of accounts receivable during the year?

a. P311,250
b. P411,250
c. P296,250
d. P111,250

43. What is the amount of accounts payable during the year?

a. P742,250
b. P760,000
c. P767,250
d. P810,250

44. What is the net income of the company during 2014?

a. P255,000
b. P455,000
c. P1,320,000
d. None of the above

45. The merchandise inventories of the entity were sold at what mark-up?
a. 150%
b. 158%
c. 163%
d. 100%

46. WOW MALI Company’s beginning inventory on January 1 was understated by P260,000 and the ending inventory was
overstated by P520,000. What was the effect of the errors on the cost of sales for the current year?
a. P260,000 understated
b. P260,000 overstated
c. P780,000 understated

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 d. P780,000 overstated

47. The Cash Receipts Journal of INSTA Marketing shows the following accounts and account balances:

Sundry Accounts (Credit) P180,265

Accounts Receivable P6,500
Sales P12,500
Sales Discount P ?

If Sales Discount is 4% of sales balance, how much is the cash balance per cash receipts journal?
a. P198,765
b. P199,265
c. P185,765
d. P173,765

48. NEGHIE Company made two purchases during the month: (1) from West-Side Trading, terms: 3/25, n/EOM, FOB
Shipping point,P250 freight was paid by West-side Trading; (2) from Eastern Business terms: 2/15 FOB Destination,
P150 freight was paid by Eastern Business. Also, Neghie Company made two sales on account:
(1) to Victoria Company, terms 2/10, FOB Shipping Point, P300 freight was paid by Neghie Company and (2) Vera
Company, terms 3/10, FOB Destination, P200 freight was paid by Neghie Company. How much is the total
transportation-in charged to Benita Company?

a. P300
b. P400
c. P250
d. P550

49. At the beginning of year 2013, KOPIKO Company has accounts receivable of P120,000. During the year, the company’s
sales amounts to P950,000, all of which were on account subject to 2% cash discount if paid within 10 days from the
invoice date. Cash payments received from customers during the year were as follows:

From those who availed of 2% cash discount P343,000

From those who paid after the discount period 450,000
What was the balance of Accounts Receivable at the end of the year?

a. P137,000
b. P157,000
c. P270,000
d. P277,000

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