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Theory of Accounts
1.
Under
I)
II)
III)
a.
PFRS 10, an investor controls an investee if and only if the investor has:
Power over the investee
Exposure, or rights, to variable returns from its involvement with the investee
The ability to use its power over the investee to affect the amount of the
investors returns
I, II and III
b.
I, II or III
c.
II and III
d.
I and II
Business Law
2.
A issued a check in the amount of 20,000 payable to B. B endorsed the check but
only to the extent of 10,000. Which statement is most accurate?
a.
b.
c.
d.
Auditing Theory
3. Valmid, CPA, had not agreed to a change in audit engagement due to lack of a reasonable
basis for the change. Upon returning to the clients premises the next day, client
management informed him that he will not be permitted to continue the original
engagement. Valmid in this case should:
A.
Report the days developments immediately to the clients board of directors for
consideration and proceed with the original engagement
B.
Issue a qualified opinion due to a scope limitation and consider whether there is
any obligation, either contractual or otherwise, to report to other parties, such as
the board of directors or shareholders, the circumstances necessitating the
qualified opinion
C.
Issue an adverse opinion due to a material departure from GAAS and consider
whether there is any obligation, either contractual or otherwise, to report to other
parties, such as the board of directors or shareholders, the circumstances
necessitating the adverse opinion
D.
Withdraw from the engagement and consider whether there is any obligation,
either contractual or otherwise, to report to other parties, such as the board of
directors or shareholders, the circumstances necessitating the withdrawal (X)
Practical Accounting 2
6. As of July 1, 2007, FF and GG decided to form a partnership. Their balance sheets on this
date are as follows:
FF
GG
P 15,000
P 37,500
540,000
225,000
-0-
202,500
150,000
270,000
Total
P705,000
P735,000
Accounts payable
P135,000
P240,000
570,000
-0-
-0-
495,000
P705,000
P735,000
Cash
Accounts receivable
Merchandise inventory
Machinery and equipment
FF, capital
GG, capital
Total
The partners agreed that the machinery and equipment is underdepreciated by P15,000
and that of GG by P45,000. Allowance for doubtful accounts is to be set up amounting to
P120,000 for FF and P45,000 for GG. The partnership agreement provides for a profit and
loss ratio and capital interest of 60% to FF and 40% to GG. How much cash FF must
invest to bring the partners capital balances proportionate to their profit and loss ratio?
MAS
7. At the beginning of the year, Basilica initiated a quality improvement program. The
program was successful in reducing scrap and rework costs. To help assess the impact of
the quality improvement program, the following data were collected for the current and
preceding years:
Current year
Preceding year
Quality training
10,000
15,000
Materials inspection
20,000
35,000
Scrap
200,000
180,000
Rework
250,000
200,000
40,000
60,000
300,000
250,000
Product inspection
Product warranty
AP
8. You are the risk management partner of RT & Company. The following issues relating to
property and equipment were brought to your attention. For each of the following issue,
determine the amount of depreciation expense that should be recognized each year.
1. As part of their remuneration package an entity provides each senior manager with
the private use of a luxury motor vehicle of the managers choice. The executive
motor vehicles cost P2,000,000 each and are replaced every two years irrespective of
usage. The entity sells its motor vehicles at 25% if its original price after two years
when the vehicles are expected to be economically usable by other users for at least
another three years.
2. An entity bought an equipment for P300,000. An entity does not service its
equipment regularly. With regular servicing the equipment would be available for use
for five years. However, the expected equipment servicing pattern is expected to
render the equipment unusable in three years.
3. An entitys equipment used to manufacture a patented drug is expected to be
capable of producing the drug for ten years. However, the entity expects to stop
manufacturing the drug and scrap the equipment after five years of production when
its patent expires and low cost generic drugs are expected to render the entitys
manufacturing of this drug unprofitable. The cost of this equipment is P4,000,000.
4. An entity has the right to use an item of equipment in accordance with the terms of a
finance lease. The equipment is capable of operating for 15 years. However, the
lease term is 10 years and the entity is required to return the equipment to the lessor
at the end of the lease term. The fair value of the equipment at the inception of the
lease is P600,000.
How much should be recognized as depreciation expense for the luxury motor
vehicle?
Practical Accounting 1
9. In December 2011, Judith Company began including one coupon in each package of
candy that it sells and offers a toy in exchange for P5 and 5 coupons. The toys cost
P12 each and an additional P4 to deliver it to customers. Eventually, 80% of the
coupons will be redeemed.
During December, Judith Company sold 220,000
packages of candy, 70,000 coupons were already sent for redemption of which
20,000 is still under processing by year end..
The amount of estimated liability in the December 31, 2011 balance sheet of Judith
Company is
a.
233,200
b.
277,200
c.
330,000
d.
387,200
13. A 20 million year-old Sirena Fossil was found in the Puerto Princesa Underground
River that was a remain of which sea creature?
Business Law
14. What is the nature of the remedies under Article 1484 of the Civil Code, namely:
exact fulfillment, cancellation of the sale and foreclosure of the chattel mortgage on
the thing sold?
a. Cumulative
c. Facultative
b. Alternative
d. Speculative
Practical Accounting 2
15. The approved appropriation of Department U for 2011 is P 15,000,000. Eighty five
percent of this appropriation was released by the Department of Budget and
Management (DBM) accompanied by Notice of Cash allocation (NCA). During the
year, the amount of obligations incurred was equivalent to ninety percent of the NCA
but only seventy percent of these obligations were paid by checks.
Determine which of the following is incorrect
A. Department U records the receipt of NCA by debiting an a amount equivalent to
P 12,750,000.
B. The receipt of the allotment is recorded by means of a memorandum entry
C. At the end of the year, Subsidy Income from National Government would be
credited P 6,967,500
D. None of the above
16. What is the full name of Ms. World 2013 (include all names)?
MAS
17. Rochelle Block Co. produces cement blocks used in the foundation for buildings. The
process takes place in two sequential departments. The following data pertain to the
month of October.
Pouring Dept.
Finishing
Dept.
Direct materials entered into production
25,000
Direct labor
P 70,000
340,000
P
280,000
680,000
900,000
18. The process of identifying, measuring and relating revenue and expenses of an
enterprise for an accounting period is known as
19. The best and most beautiful things in the world cannot be seen or even touchedthey must be felt with the heart. Is the quote of which famous author?
Practical Accounting 1
20. Lyn
Company introduced in 2011 a new TV model with a two-year warranty
against defect. Lyn Company estimates the warranty costs at 2% of sales within 12 months
following the sales and 4% in the second 12 months following the sale. Sales and actual
warranty costs for the year ended December 31, 2011 are P3,000,000 and P45,000
respectively. Lyn Company should report an estimated warranty liability in its December 31,
2011 balance sheet of
Practical Accounting 1
21. On January 1, 2011 Ply Company purchased a 30% interest in Wood Company for
P300,000 which gave Ply Company significant influence over Wood Company. The excess of
the acquisition cost over the net assets acquired was attributed to goodwill in the amount of
P30,000 since the carrying amounts of the identifiable assets and liabilities of Wood
Company were equal to their fair values.
In 2011 Wood Company reported income of P400,000 and declared dividends of P120,000.
At December 31, 2011, the fair value of the investment in Wood Company was P305,000
while the estimated cost to sell the holdings was P15,000.
Assuming that Ply Company does not have any public accountability and was considered an
SME, the investment income for 2011 and the investment in Wood account at December 31,
2011, assuming further that Ply Company chose to use the cost method
MAS
23. N Company has total fixed assets of P100,000 and no current liabilities. The table below
displays its wide variations in current assets components:
1Q
2Q
3Q
4Q
Cash
P 20,000
P 10,000
P 15,000
P 20,000
Accounts receivable
66,000
25,000
47,000
88,000
Inventory
20,000
65,000
59,000
10,000
P106,000
P100,000
P121,000
P118,000
Total
If Ns policy is to finance all fixed assets and half the permanent current assets with longterm financing and rest with short-term financing, what is the level of long-term
financing?
24. Which country gave the Statue of Liberty to the USA as a gift?
Taxation
25. During 2011, Philip, a resident citizen, received the following income:
Interest from Philippine treasury certificates
Refund pertaining to 2010 income tax
P4,000
500
The total amount of income subject to tax in Philips 2011 income tax return was: