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5. Which of the following disclosures must be made when the fair value model is
used for investment property?
a. depreciation method
b. the amount of impairment loss recognized
c. useful life or depreciation rate
d. net gains or losses from fair value adjustments
6. A government grant that becomes repayable shall be accounted for as
a. change in accounting estimate
b. change in accounting policy
c. both change in accounting estimate and change in accounting policy
d. neither change in accounting estimate nor change in accounting policy
7. Which of the following research and development related costs should be
capitalized and depreciated over current and future periods?
a. Research and development general laboratory building which can be put to
alternative uses in the future
b. Inventory used for a specific research project
c. Administrative salaries allocated to research and development
d. Research findings purchased from another company to aid a particular
research project currently in process
8. If bonds are issued initially at a premium and the effective-interest method of
amortization is used, interest expense in the earlier years will be
a. greater than if the straight-line method were used
b. greater than the amount of the interest payments
c. the same as if the straight-line method were used
d. less than if the straight-line method were used
9. Which of the following best describes the cash-basis method of accounting for
warranty costs?
a. Expensed based on estimate in year of sale
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(REVIEW SME)
11.Esther Co. provided the following information about the composition of its
cash on Dec 31 2014:
Commercial savings account of P600,000 and a commercial checking account
balance of P900,000 are held at BPI
Money market fund account held by Citibank that permits Esther to write
checks in this balance, P5,000,000
Travel advances of P180,000 for executive travel for the first quarter of next
year (employee to pay through salary deduction)
A separate cash fund in the amount of P1,500,000 is restricted for the
retirement of long term assets
Petty cash fund, P10,000
Undeposited coins and currency, P35,000
Company checks written (and deducted from the demand deposits amount)
but not scheduled to be mailed until Jan 2 next year, P270,000
Time deposit, P3,000,000
What is the correct cash Esther Co should report in its December 31 2014
statement of financial position?
a. 9,995,000
b. 6,815,000
c. 1,815,000
d. 9,815,000
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d.
5,000,000
c. 3,750,000
c. 8,540,000
d. 3,825,000
of a new home office
2,000,000
10,000
50,000
20,000
30,000
5,000
15,000
200,000
8,000,000
300,000
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10,000
40,000
55,000
5,000
25,000
60,000
d. 8,530,000
d.
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8 years
12%
Jan 1,
d. 1,500,000
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29.Tan Company reported the following current assets on December 31, 2014:
Cash
500,000
3,500,00
Accounts receivable
0
2,000,00
Inventory
0
Prepaid expenses
100,000
Deferred tax asset
400,000
3,000,00
Noncurrent asset classified as "held for sale"
0
6,500,00
Total current assets
0
Cash on hand, including customers' postdated check of P20,000 and
employee IOU of P10,000
Cash in bank per bank statement (outstanding checks on December 31,
2014, P70,000
Total cash
Customers' debit balances, net of customers' deposit of P50,000
Allowances for doubtful accounts
Selling price of goods invoiced to customers at 150% of cost on
December 29, 2014 but delivered on January 5, 2015 and excluded
from reported inventory
130,000
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370,000
500,000
1,900,00
0
( 150,0
00)
750,000
1,000,00
Subscription receivable, collectible currently
0
3,500,00
0
30.On December 31, 2014, what amount should be reported as total current
assets?
a. 6,230,000
b. 5,830,000
c. 5,900,000
d.
5,800,000
31.Benedict Company had the following bank reconciliation on June 30, 2011:
3,000,0
Balance per bank statement, June 30
00
400,00
Deposit transit
0
3,400,0
Total
00
900,00
Outstanding checks
0
2,500,0
Balance per book, June 30
00
The bank statement for the month of July showed the following:
Deposits (including P200,000 note collected for Benedict)
9,000,0
7
00
7,000,0
00
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All reconciling items on June 30 cleared through the bank in July. The
outstanding checks totaled P600,000 and the deposit in transit amounted to
P1,000,000 on July 31. What is the cash balance per book on July 31?
a. 5,400,000
b. 5,350,000
c. 5,550,000
d.
4,500,000
34.The records of Shoe Department Store report the following date for the month
of July 2011:
13,500,00
0
250,000
500,000
Mark down
Mark down cancelations
Freight on purchases
Employee discounts
Theft and other losses
Initial markup on
purchases
Additional mark up
200,000
300,000
Purchases at cost
Purchases returns at cost
5,400,000
500,000
Mark up cancelations
200,000
Sales
Sales Allowance
Sales returns
1,200,00
0
200,000
200,000
9,400,00
0
480,000
700,000
880,000
1,600,00
0
Using the average retail inventory method, what is the estimated ending
inventory?
a.937,500
b. 1,000,000
c. 1,093,750
d.
1,125,000
35.Pillar Company acquired a 30% equity interest in an investee for P400,000 on
January 1, 2013. For the year ended December 31, 2013, the investee
earned profit of P80,000 and paid no dividend. For the year ended
December 31, 2014, the investee incurred loss of P32,000 and paid a
dividend of P10,000.
38.Bona Company and its subsidiaries own the following properties that are
accounted for in accordance with PAS 40
Land held by Bona for undetermined use
5,000,000
A vacant building owned by Bona and to be leased out under
an operating lease
3,000,000
Property held by a subsidiary of Bona, a real estate firm, in the
ordinary course of business
2,000,000
Property held by Bona for use in production
4,000,000
Building owned by a subsidiary of Bona and for which the
subsidiary provides security and maintenance
services to the lessees
1,500,000
Land leased by Bona to a subsidiary under an operating lease
2,500,000
Property under construction for use as investment property
6,000,000
Land held for future factory site
3,500,000
Machinery leased out by Bona to an unrelated party under an
Operating lease
1,000,000
What is the investment property that should be reported in the consolidated
statement of financial position of the parent and its subsidiaries?
a. 15,500,000
b. 12,000,000
c. 10,500,000
d. 9,500,000
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37.On October 1, 2013, Yesterday Company purchased 4,000 of the P1,000 face
value, 10% bonds of Fell Company for P4,400,000 which includes accrued
interest of P100,000. The bonds, which mature on Jan 1, 2020, pay interest
semiannually on Jan 1 and July 1. Yesterday Company used the straight line
method of amortization and appropriately recorded the bonds as long term
investment. What is the carrying amount of the bonds on Dec 31 2013?
a. 4,284,000
b. 4,288,000
c. 4,300,000
d. 4,400,000
39.On Jan 1 2014m Charis Company adopted a plan to accumulate funds for a
new building to be erected beginning Jan 1 2018 at an estimated cost of
P20,000,000. The entity intends to make four equal annual deposits in a fund
beginning December 31 2014 that will earn interest at 12% compounded
annually. The future value of an ordinary annuity of 1 at 12% for 4 periods is
4.78, and the future value of an annuity of 1 in advance at 12% for 4 periods
is 5.35. what is the annual deposit to the fund?
a. 5,000,000
b. 4,184,100
c. 3,738,318
d. 3,149,606
40.On Jan 1 2014, Jane Company borrowed P5,000,000 from a bank at a variable
rate of interest for 2 years. Interest will be paid annually to the bank on Dec
31 and the principal is due on Dec 31 2015. Under the agreement, the market
rate of interest every Jan 1 resets the variable rate for that period and the
amount of interest to be paid on Dec 31. In conjunction with the loan, the
entity entered into a receive variable, pay fixed interest rate swap
agreement with another bank speculator as a cash flow hedge. The market
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d.
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What is the measurement of the equipment that ceases to be held for sale on
December 31, 2014?
a. 4,000,000
b. 3,400,000
c. 3,500,000
d.
4,150,00
Borrowed P550,000 under a long-term loan agreement. Used the cash from
the loan proceeds as follows: P150,000 for purchase of additional inventory,
P300,000 to pay cash dividends and P100,000 to increase the cash balance.
What amount should be reported as net cash used in investing activities?
a. 1,200,000
b. 2,200,000
c. 400,000
d. 750,000
Purchase of bldg
Purchase of land
Total
400,000
350,000
750,000
12/31/13 (15*50,000)
750,000
12/31/14 (10*50,000 rights)
750,000
750,000
2013: Salaries
500,000
250,000
Acc
salaries
Payable
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45.On Jan 1 2013, SVJ Company granted the chief executive officer (CEO) 50,000
share appreciation rights for past services. The rights are exercisable
immediately and expire on Dec 31 2014. On exercise, the CEO is entitled to
receive cash for the excess of the share market price on exercise date over
the market price on grant date. The CEO did not exercise any of the rights in
2013. The market price of the share P100 on Jan 1, 2013 and P115 on Dec 31
2014 when the market price was P110. What amount should be recognized as
gain on reversal of share appreciation rights in 2014?
a. 0
b. 250,000
c. 500,000
d. 750,000
Gain on reversal
250,000
46.Cam Company reported the following balances for the current year:
December 31
January 1
Inventory
2,600,000
2,900,000
Accounts Payable 750,000
500,000
The entity paid suppliers P4,900,000 during the current year. Under the
accrual basis, what amount should be reported as cost of goods sold for the
current year?
a. 5,450,000
b. 4,950,000
c. 4,850,000
d. 4,350,000
750k+4.9M-500k=5,150,000(purchases)+2.9M2.6M=5,450,000
47.Shara Company reported that the financial statement contained the following
errors
December 31 2013
December 31 2014
Ending inventory
P950,000 overstated
P800,000 understated
Depreciation
P250,000 understated
An insurance premium of P600,000 was prepaid in 2013 covering the years
2013, 2014, and 2015. The entire amount was charged to expense in 2013.
No corrections have been made for any of the errors. Ignore income tax.
What is the total effect of the errors on retained earnings on December 31
2014?
a. understatement of P1,550,000
b. overstatement of P1,550,000
c. overstatement of P750,000
d. understatement of 750,000
Ending invty
2013
(950,000)
2014
950,000
Net effect
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(250,000)
400,000
(800,000)
(200,000)
1,550,000
750,000
5.6M
4.2M
3.5M
49.Caroline Company provided the following events that occurred after Dec 31
2013:
1/15/2014 P3,000,000 of accounts receivable was written off due to the
bankruptcy of a major customer
2/14/2014 A shipping vessel of the entity with carrying amount of
P5,000,000 was completely lost at sea because of a hurricane
3/11/2014 A court case involving the entity as the defendant was settled
and the entity was obligated to pay the plaintiff P1,500,000. The
entity previously has not recognized a liability for the suit
because management deemed it possible that the entity would
lose the case
3/15/2014 One of the entitys factories with a carrying mount of P4,000,000
was completely razed by forest fire that erupted in its vicinity
The management completed the draft of the financial statements for 2013 on
Feb 10,2014. On March 20, 2014, the board of directors authorized the
financial statements for issue. The entity announced its profit and other
selected information on March 22, 2014. The financial statements were
approved by shareholders on April 2, 2014 and filed with the SEC the very
next day. What total amount should be reported as adjusting events on
December 31 2013?
a. 9,500,000
b. 8,500,000
c. 9,000,000
d. 4,500,000
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Purchases
Beg invty
Ending invty
4.2M+5.6M-3.5M=6.3M
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END OF EXAM
VMBM,CPA
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