DySAS Center for CPA Review

2F & 3F Mitra Building, San Pedro Street, Davao City

Tel. No. (082) 224-43-20: E-mail Address dysasrev@yahoo.com

Practical Accounting 1 John C. Frivaldo, CPA, MBA

FIRST PRE-BOARD EXAMINATION July 5, 2009 @ 10:00 12:00 AM
==========================================================
=

INSTRUCTIONS: Select the best answer by marking with Pencil No. 1 the letter of your choice.
Follow the marking (one vertical line) as indicated on the Answer Sheet provided. Be sure that
you are using the correct Answer Sheet for this subject. Also, mark the proper SET (either SET A
OR SET B) for appropriate computer checking. STRICTLY NO ERASURES ALLOWED.

1. In Bars 2008 single-step income statement, the section title Revenues consisted of the
following:
Net sales revenue P1,870,000
Results from discontinued operations:
Loss from operations of segment
(net of P12,000 tax effect) (P24,000)
Gain on disposal of segment
(net of P72,000 tax effect) 144,000 120,000
Interest revenue 102,000
Gain on sale of equipment 47,000
Cumulative change in 2006 and 2007 income
due to change in depreciation method
(net of P7,500 tax effect) 15,000
Total revenues P2,154,000
In the revenues section of the 2008 income statement, Bar should have reported total
revenues of:
(a) P2,163,000 (b) P2,154,000 (c) P2,037,000 (d) P2,019,000 D

Net sales revenue P1,870,000

Interest revenue 102,000
Gain on sale of equipment 47,000
Total revenues P2,019,000

2. Presented below is information related to Sassa Corporation for the year 2008:
Cost Retail
Inventory, January 1 P 99,000 P 150,000
Purchases 600,000 860,000
Purchase returns 40,000 60,000
Purchase discounts 10,000
Gross sales (after employee discounts) 700,000
Sales returns 65,000
Net markup 50,000
Net markdowns 10,000
Freight in 38,000
Employee discounts granted 4,000
Loss from breakage (normal) 1,000
What is the inventory on December 31, 2008 using the FIFO retail?
(a) P245,000 (b) P242,117.65 (c) P241,500 (d) P240,450 A

Cost Retail Cost ratio

Inventory, January 1 P 99,000 P 150,000
Purchases P 600,000 P 860,000
Purchase returns ( 40,000) ( 60,000)
Purchase discounts ( 10,000)
Net markup 50,000
Net markdown ( 10,000)
Freight in 38,000 _________
Total purchases P 588,000 P 840,000 70%
Goods available for sale P 687,000 P 990,000

Less: Sales P 700,000

Sales returns ( 65,000)
Employee discounts 4,000
 Loss from breakage 1,000 640,000
Inventory, December 31 P 350,000
Inventory at FIFO cost (350,000 x 70%) P 245,000

3. On December 31, 2008, Expressive Corporation had a fire which completely destroyed the
goods in process inventory. The inventory data were:
January 1 December 31
Finished goods P280,000 P200,000
Goods in process 200,000 ?
Raw materials 60,000 120,000
Supplies 8,000 20,000
Data for 2008 were:
Sales P600,000
Purchases 200,000
Freight-in 20,000
Direct labor 160,000
Factory overhead 50% of direct labor
Average gross profit rate 30%
What is the cost of goods in process inventory on December 31, 2008 which were destroyed
by fire?
(a) P420,000 (b) P340,000 (c) P400,000 (d) P260,000 D

Raw materials 1/1 P 60,000

Purchases 200,000
Freight in 20,000
Raw materials available for use P280,000
Less: Raw materials 12/31 120,000
Raw materials used P160,000
Direct labor 160,000
Factory overhead 50% x 160,000 80,000
Total manufacturing cost P400,000
Add: Goods in process 1/1 200,000
Total goods in process P600,000
Less: Goods in process 12/31 (squeeze) 260,000
Cost of goods manufactured P340,000
Add: Finished goods 1/1 280,000
Goods available for sale P620,000
Less: Finished goods 12/31 200,000
Cost of goods sold (70% x 600,000) P420,000

4. A manufacturing company has always inventoried its finished goods at selling price and has
prepared the following statement on this basis:
Sales P700,000
Raw materials (at cost) P250,000
Labor and overhead 420,000
P670,000
Work in process (at cost):
January 1 P306,000
December 31 376,000 70,000
P600,000
Finished goods (at selling price):
January 1 P120,000
December 31 420,000 300,000 300,000
Gross income P400,000
What is the cost of goods sold?
(a) P600,000 (b) P700,000 (c) P420,000 (d) P300,000 C

At Cost At Retail
Finished goods, 1/1 P 72,000 P 120,000
Goods manufactured (squeezed) 600,000 1,000,000
Goods for sale P672,000 P1,120,000
Less: finished goods, 12/31 252,000 420,000
Cost of goods sold P420,000 P 700,000

Cost ratio = Goods manufactured at cost = 600,000 = 60%

Goods manufactured at retail 1,000,000
Finished goods at cost:
January 1 60% x 120,000 P72,000
December 31 60% x 420,000 252,000
5. In December 31, 2008, a significant portion of the inventory of Bay Manufacturing Center
was stolen. The company determined the cost of the stolen inventory not stolen to be
P13,680. The following information was taken from the records of the company:
1/1/2008 to date of theft 2007
Purchases P168,542 P173,230
Purchase returns and allowances 7,952 9,110
Sales 250,606 265,890
Sales returns and allowances 3,106 3,950
Salaries 19,800 20,200
Rent 15,600 15,600
Light and water 5,416 5,597
Advertising 4,980 3,345
Insurance 1,240 1,320
Miscellaneous expenses 475 492
Depreciation expense 1,720 1,750
Beginning inventory 53,965 60,106
What is the estimated cost of the stolen inventory?
(a) P53,680 (b) P40,000 (c) P13,680 (d) P160,875 B

Beginning inventory 2007 P 60,106

Net purchases 2007 164,120
Goods for sale P224,226
Ending inventory 2007 53,965
Cost of sales P170,261

Net sales 2007 P261,940

Cost of sales 170,261
Gross profit P 91,679

Rate (91,679/ 261,940) 35%

Beginning inventory 2008 P 53,965

Net purchases 2008 160,590
Goods for sale P214,555
Less: Cost of sales (247,500 x 65%) 160,875
Ending inventory 2008 P 53,680
Less: Inventory not stolen 13,680
Stolen inventory P 40,000

6. Glide provides the following information for September 2008:

Cost Retail
Inventory September 1 P 500,000 P 650,000
Purchases in September 2,230,000 2,850,000
Purchases in August 2,250,000 2,900,000
Sales in September 2,360,000
Sales in August 2,300,000
Average gross profit rate 26%
The inventory on September 30, 2008, using the gross profit method is:
(a) P983,600 (b) P2,116,400 (d) P1,531,600 (d) P843,600 A

Inventory September 1 P 500,000

Purchases in September 2,230,000
Goods available for sale P2,730,000
Less: Cost of sales (2,360,000 x 74%) 1,746,400
Inventory September 30 P 983,600

For items 7 to 9:
Spike Hardware began the month of November with 150 large brass switchplates on hand at
a cost of P160 each. These switchplates sell for P280. The following schedule presents the
sales and purchases of this item during the month of November.
Purchases
Date Qty. received Unit cost Units sold
November 5 100
November 7 200 P168
 November 9 150
November 11 200 176
November 17 220
November 22 250 192
November 29 100

7. If Spike uses periodic FIFO inventory pricing, the value of the inventory on November 30
would be:
(a) P37,440 (b) P40,480 (c) P41,480 (d) P44,160 D
November 22 purchase (230 x P192) P44,160

8. If Spike uses perpetual moving average inventory pricing, the sale of 220 items on
November 17 will be recorded at a unit cost of:
(a) P160.00 (b) P166.40 (c) P168.00 (d) P172.80 D
Units Unit cost Total cost
Balance, 11/1 150 P160.00 P24,000
Sold, 11/5 (100 units) 50 160.00 8,000
Purchased 11/7
(200 @ P168) 250 166.40 41,600
Sold, 11/9 (150 units) 100 166.40 16,640
Purchased 11/11
(200 @ P176) 300 172.80 51,840
Sold, 11/17 (220 units) 80 172.80 13,824

9. If Spike uses weighted average inventory pricing, the gross profit for November will be:
(a) P41,840 (b) P59,280 (c) P60,640 (d) P61,120 B

Beginning inventory 150 x P160 = P 24,000

November 7 purchase 200 x P168 = 33,600
November 11 purchase 200 x P176 = 35,200
November 22 purchase 250 x P192 = 48,000
Total available 800 P140,800
Weighted average unit cost (140,800 / 800) P176
Sales (570 units x P280) P159,600
Cost of goods sold (570 units x P176) (100,320)
Gross profit P 59,280

10. Ethel Companys inventory at December 31, 2007 was P1,500,000 based on physical count
priced at cost and before any necessary adjustment(s) for the following:
a. Merchandise costing P100,000 shipped FOB destination from a vendor on December 30,
2007 was received and recorded on January 5, 2008.
b. Goods in the shipping area were excluded from inventory although shipment was not
made until January 4, 2008. The goods, billed to customer FOB shipping point on
December 30, 2007 had a cost of P150,000.
What amount should Ethel report as inventory on December 31, 2007?
(a) P1,500,000 (b) P1,650,000 (c) P1,600,000 (d) P1,750,000 B

Per book 1,500,000

Merchandise in transit -
Goods in shipping area 150,000
Correct inventory 1,650,000

Items 11 and 12:

On your examination of the financial statements of Heroes Company for the year ended
December 31, 2008, you obtained the following information on the checking account of the
company:
The bank statement on November 30, 2008 showed a balance of P15,300. Among the
bank credits in November was a customers note for P5,000 collected for the account of the
company which the company recognized in December among its receipts. Included in the
bank debits were cost of checkbooks amounting to P60 and a P2,000 check which was
charged by the bank in error against Heroes account. Also in November, you ascertained
that there were deposits in transit amounting to P4,000 and outstanding checks totaling
P8,500.
The bank statement for the month of December showed total credits of P20,800 and
total charges of P10,200. Company books for December showed total receipts of P36,780
 and disbursements of P20,360. Bank debit memos for December were: No. 001 for service
charges, P80 and No. 002 on a customers returned checks marked refer to drawer for
P1,200.
The bank error of P2,000 in November was corrected by the bank in December.
On December 29, 2008, the company placed with the bank a customers promissory note
with a face value of P6,000 for collection. The company treated this note as part of its
receipts although the bank was able to collect on the note only in January, 2009.
A check for P198 was recorded in the company cash payments book in December 12
P1,980.

11. How much is the deposit in transit in December 31, 2008?

(a) P0 (b) P4,000 (c) P5,620 (d) P10,980 D

Total receipts per books P36,780

Notes collected by bank in November P5,000
Notes with bank treated as receipt by client 6,000 (11,000)
Receipts for December per books P25,780
Receipts for December per bank:
Total receipts per bank P20,800
Deposits in transit ( 4,000)
Check erroneously charged by
bank in November ( 2,000) ( 14,800)
Deposit in transit, December 31, 2008 P10,980

12. How much is the outstanding check in December 31, 2008?

(a) P0 (b) P8,500 (c) P10,220 (d) P18,098 D

Total disbursements per books P20,360

Bank charges in November P 60
Error in recording check (1,980 198) 1,782 ( 1,842)
Disbursements for December per books P18,518
Disbursements for December per bank:
Total bank debits P10,200
NSF check returned ( 1,200)
Bank charge, December ( 80)
Outstanding check, November 30 ( 8,500) ( 420)
Outstanding check, December 31, 2008 P18,098

Items 13 and 14:

On June 1, 2009, Robot Corporation needed cash to meet current operating needs. Robot
decided to factor some of its receivables. Robot factored P588,000 of receivable to Fifth
national Bank for P499,800. An allowance for doubtful accounts of 3% of the receivables
balance is maintained by Robot. The bank withheld 7% of the purchase price as protection
against sales returns and allowances. Sales returns against the factored receivables totaled
P1,776.

13. How much is the cash proceeds from factoring receivables?

(a) P588,000 (b) P464,814 (c) P499,800 (d) P570,360 B

Selling price of receivables (factoring) P499,800

Amount withheld by factor (7% x 499,800) ( 34,986)
Proceeds from factoring accounts receivable P464,814

14. How much loss should Robot recognize from factoring receivables?
(a) P34,986 (b) P87,612 (c) P70,560 (d) P52,626 C
Net realizable value (588,000 (588,000 x 3%)) P570,360
Receivable from factor (amt. withheld, 7% x 499,800) ( 34,986)
Net proceeds from factoring (499,800 34,986) (464,814)
Loss from factoring receivables P 70,560

15. Sherry Company reported the following information for the current year.
Ending goods in process 1,000,000
Depreciation on factory building 320,000
 Sales salaries 270,000
Beginning raw materials 400,000
Direct labor 1,980,000
Factory supervisors salary 560,000
Depreciation on headquarters building 210,000
Beginning goods in process 760,000
Ending raw materials 340,000
Indirect labor 360,000
Advertising 500,000
Purchases on raw materials 2,300,000
What is the cost of goods manufactured for the current year?
(a) P5,340,000 (b) P5,580,000 (c) P5,550,000 (d) P5,820,000 A

Beginning raw materials 400,000

Purchases on raw materials 2,300,000
Ending raw materials ( 340,000)
Direct labor 1,980,000
Depreciation on factory building 320,000
Factory supervisors salary 560,000
Indirect labor 360,000
Beginning goods in process 760,000
Ending goods in process (1,000,000)
Cost of goods manufactured 5,340,000

16. Excel reported P70,000 of inventory on December 31, 2008, based on physical count.
Additional information was given as follows:
a. Included in the physical count were machines billed to a customer, FOB shipping point,
on December 31, 2008. The machines had a cost of P3,000 and had been billed at
P5,000. The shipment is ready for pick-up by the delivery contractor.
b. Goods were in transit from a vendor. The invoice cost was P8,000 and goods were
shipped FOB shipping point on December 31, 2008.
c. Work in process costing P500 was sent to an outside processor for finishing on December
30, 2008.
d. Goods out on consignment amounted to P4,600 (sales price); shipping costs, P120
(markup is 15%).
The correct amount of inventory on December 31, 2008 is:
(a) P85,620 (b) P85,500 (c) P82,620 (d) P82,530 D

Inventory per count, Jan. 1, 2008 P70,000

Goods in transit, shipped FOB shipping point 8,000
Work in process job out for finishing 500
Goods out on consignment [(4,600 x 85%) + 120] 4,030
Inventory as adjusted, Dec. 31 2008 P82,530

17. Estela Company reports the following summarized income statement data for 2008:
Revenue P1,950,000
Expenses (including depreciation of P172,000) 1,500,000
P 450,000
Accounts receivable resulting from revenue-producing transactions increased by P56,000
from January 1 to December 31, 2008.
What is the cash provided by operating activities during 2008, applying the direct
method?
(a) P450,000 (b) P678,000 (c) P566,000 (d) P622,000 C

Revenue collected
(1,950,000 56,000) P1,894,000
Expenses paid (1,500,000 172,000) 1,328,000
Cash provided by operating act. P 566,000

18. Royal Corporations books disclosed the following information as of and for the year ended
December 31, 2008:
Net credit sales P2,000,000
Net cash sales 500,000
Merchandise purchases 1,000,000
 Inventory at beginning 600,000
Inventory at end 200,000
Accounts receivable at beginning 300,000
Accounts receivable at end 700,000
Net income 100,000
Royals accounts receivable turnover is:
(a) 2.9 times (b) 3.6 times (c) 4.0 times (d) 5.0 times C
[2,000,000 / (300,000 + 700,000/ 2) ] 4 times

19. Recto Company is preparing its cash budget for the month ending November 30, 2008. The
following information pertains to Rectos past collection experience from its credit sales:
Current months sales 12%
Prior months sales 75%
Sales two months prior to current month 6%
Sales three months prior to current month 4%
Cash discount( 2/30, net 90) 2%
Doubtful accounts 1%
Credit sales:
November estimated P200,000
October 180,000
September 160,000
August 190,000
How much is the estimated credit to accounts receivable as a result of collections expected
during November?
(a) P170,200 (b) P174,200 (c) P176,200 (d) P180,200 C

November (200,000 x 12%) P 24,000

October (180,000 x 75%) 135,000
September (160,000 x 6%) 9,600
August (190,000 x 4%) 7,600
Estimated credit to accounts receivable P 176,200

20. For the month of December 2008, the records of Magi Corporation show the following
information:
Cash received on accounts receivable P35,000
Cash sales 30,000
Accounts receivable, December 31, 2007 80,000
Accounts receivable, December 31, 2008 74,000
Accounts receivable written off 1,000
The corporation uses the direct write off method in accounting for uncollectible accounts
receivable. What are the gross sales for the month of December 2008?
(a) P59,000 (b) P60,000 (c) P65,000 (d) P72,000 B

Cash sales P30,000

Credit sales during 2008:
Accounts receivable, December 31, 2008 P74,000
Cash received on accounts 35,000
Accounts receivable written off 1,000
Accounts receivable, December 31, 2007 (80,000) 30,000
Gross sales P60,000

21. Certain information relative to the 2008 operations of Duralex Company follows:
Accounts receivable, January 1, 2008 P8,000
Accounts receivable collection during 2008 26,000
Cash sales during 2008 5,000
Inventory, January 1, 2008 12,000
Inventory, December 31, 2008 11,000
Purchases of inventory during 2008 20,000
Gross profit on sales (gross margin) 9,000
What is Duralexs accounts receivable balance at December 31, 2008?
(a) P7,000 (b) P12,000 (c) P17,000 (d) P13,000 A

Inventory, January 1, 2008 P12,000

Purchases of inventory during 2008 20,000
Inventory, December 31, 2008 (11,000)
Gross profit on sales (gross margin) 9,000
 Gross sales P30,000
Cash sales during 2008 ( 5,000)
Credit sales P25,000
Accounts receivable, January 1, 2008 8,000
Accounts receivable collection during 2008 (26,000)
Accounts receivable, December 31, 2008 P 7,000

22. The balance sheet at December 31, 2008 of Lore Company showed a cash balance of
P105,600. An examination of the books disclosed the following:
a. The sales book was left open up to January 5, 2009 and cash sales totaling P15,000 were
considered as sales in December 2008.
b. Checks of P9,300 in payment of liabilities were prepared before December 31, 2008,
recorded in the books, but not mailed or delivered to payees.
c. Customers postdated checks totaling P7,800 are being held by the cashier as part of
cash. The companys experienced shows that post-dated checks are eventually realized.
d. Customers check deposited with but returned by bank, NSF, on December 27, 2008.
Return was not recorded in the books, P1,500.
e. The cash account includes P40,000 earmarked for the purchase of an office equipment
which will be delivered soon.
How much cash balance is to be shown on the December 31, 2008 balance sheet?
(a) P105,600 (b) P60,500 (c) P58,400 (d) P50,600 D

Cash balance, per book P105,600

Cash sales for January ( 15,000)
NSF checks ( 1,500)
Undelivered check 9,300
Customers postdated checks ( 7,800)
Cash for purchase of office equipment ( 40,000)
Adjusted cash balance P 50,600

23. Rodel Company prepared an aging of its accounts receivable at December 31, 2008 and
determined that the net realizable value of the receivables at that date is P50,000.
Additional information is available as follows:
Accounts receivable at December 31, 2007 P48,000
Accounts receivable at December 31, 2008 54,000
Allowance for doubtful accounts at Dec. 31, 2007 - debit 6,000
Accounts written off as uncollectible during 2008 5,000
Rodels bad debt expense for the year ended December 31, 2008 was:
(a) P3,000 (b) P4,000 (c) P7,000 (d) P15,000 D
Accounts receivable at December 31, 2008 P54,000
Accounts receivable, net, December 31, 2008 (50,000)
Allowance for doubtful accounts at December 31, 2007 6,000
Accounts written off as uncollectible during 2008 5,000
Bad debts expense P15,000

24. Art Company incurred the following costs and expenses during the current year:
Raw material purchases 4,000,000
Direct labor 1,500,000
Indirect labor - factory 800,000
Factory repairs and maintenance 200,000
Taxes on factory building 100,000
Depreciation factory building 300,000
Taxes on salesroom and general office 150,000
Depreciation sales equipment 50,000
Advertising 400,000
Office salaries 700,000
Utilities (60% applicable to factory, 25% to
salesroom and 15% to office) 500,000
Beginning Ending
Raw materials 300,000 450,000
Work in process 400,000 350,000
Finished goods 500,000 700,000
The cost of goods manufactured for the current year was:
(a) P6,900,000 (b) P7,200,000 (c) P7,100,000 (d) P7,300,000 C

Raw material purchases 4,000,000

Raw materials - beginning 300,000
Raw materials - ending ( 450,000)
Direct labor 1,500,000
 Indirect labor - factory 800,000
Factory repairs and maintenance 200,000
Taxes on factory building 100,000
Depreciation factory building 300,000
Utilities (60% x 500,000) 300,000
Work in process beginning 400,000
Work in process ending ( 350,000)
Cost of goods manufactured 7,100,000

25. On December 31, 2008, the Forest Company showed a cash balance of P481,900 which was
composed of the following:
Demand deposit P150,000
Time deposit that cannot be withdrawn until 2 years 100,000
Undeposited postdated check 1,500
Customers NSF check 9,000
Customer check dated 20 months ago 300
Deposit in a foreign bank, at current rate of exchange,
but cannot be withdrawn 60,000
Overdraft in another bank ( 7,000)
Cash advances to officers and employees 8,100
Sinking fund cash 100,000
Pension fund cash 59,000
Petty cash fund 1,000
What is the correct cash balance at December 31, 2008 current asset section of the balance
sheet?
(a) P144,300 (b) P151,000 (c) P212,500 (d) P481,900 B

Demand deposit P150,000

Petty cash fund 1,000
Total P151,000

Items 26 to 28:

During your audit of Ant Corp., you established the following data concerning the cash
position as of December 31, 2008:
Cash on hand and in bank per ledger P 8,425
Cash on hand per count 2,302
Unrecorded credit memo from bank 100
Unrecorded debit memo from bank 5
Cash balance per bank statement 6,750
Total outstanding checks 817
The cashier prepared the following reconciliation:
Balance per bank statement P6,750
Add: Unrecorded credit memo P 100
Cash per count 2,302 2,132
Total P8,832
Less: Outstanding checks 457
Cash per ledger, December 31, 2008 P8,425

26. In preparing your own reconciliation, the adjusted cash in bank figure should be:
(a) P4,720 (b) P4,833 (c) P5,933 (d) P6,393 C

Balance per bank statement P6,750

Outstanding checks ( 817)
Adjusted cash in bank balance P5,933

27. The adjusted cash on hand and in bank per ledger should:
(a) P7,713 (b) P8,520 (c) P8,530 (d) P8,882 B
 Cash on hand and in bank per ledger P8,425
Unrecorded credit memo from bank 100
Unrecorded debit memo from bank ( 5)
Adjusted cash on hand and in bank P8,520

28. From your investigation, the cash shortage (if any) is:
(a) P105 (b) P360 (c) P555 (d) P285 D

Cash on hand and in bank P8,520

Cash in bank (5,933)
Cash on hand per audit P2,587
Cash on hand per count (2,302)
Cash shortage P 285

Items 29 to 31:

The differences in Beal Inc.s balance sheet accounts at December 31, 2008 and 2007 are
presented below:
Increase (Decrease)
Assets
Cash and cash equivalents P 120,000
Short-term investments 300,000
Accounts receivable, net -
Inventory 80,000
Long-term investments ( 100,000)
Plant assets 700,000
Accumulated depreciation _________
P1,100,000
Liabilities and Stockholders Equity
Accounts payable and accruals (P 5,000)
Dividends payable 160,000
Short-term bank debt 325,000
Long-term debt 110,000
Common stock, P10 par 100,000
Additional paid in capital 120,000
Retained earnings 290,000
P1,100,000

The following additional information relates to 2008:

Net income was P790,000.

Cash dividends of P500,000 were declared.
Building costing P600,000 and having a carrying amount of P350,000 was sold for
P350,000.
Equipment costing P110,000 was acquired through issuance of long-term debt.
A long-term investment was sold for P135,000. There were no other transactions
affecting long-term investments.
10,000 shares of common stock were issued for P22 a share.

In Beals 2008 statement of cash flows:

29. Net cash provided by operating activities was:

(a) P1,160,000 (b) P1,040,000 (c) P920,000 (d) P705,000 C

Net income P790,000

Depreciation 250,000
Gain on sale of long-term investment ( 35,000)
Increase in inventory ( 80,000)
Decrease in accounts payable ( 5,000)
Net cash from operating activities P920,000

30. Net cash used in investing activities was:

(a) P1,005,000 (b) P1,190,000 (c) P1,275,000 (d) P1,600,000 A

Purchase of plant assets P1,190,000

Purchase of short-term investments 300,000
Proceeds from sale of long-term inv. ( 135,000)
 Proceeds from sale of plant assets ( 350,000)
Net cash used for financing activities P1,005,000

31. Net cash provided by financing activities was:

(a) P20,000 (b) P45,000 (c) P150,000 (d) P205,000 D

Proceeds from issuance of stock P220,000

Proceeds from short-term bank debt 325,000
Dividends paid (500,000 160,000) ( 340,000)
Net cash from financing activities P205,000

32. On December 31, 2008, a fire broke out in the warehouse of Reliable Corporation destroying
its inventory. The information available is presented below:
Inventory 1/1/2008 P 600,000
Accounts receivable 1/1/2008 480,000
Accounts receivable 12/31/2008 440,000
Collections on accounts receivable in 2008 2,640,000
Accounts payable 1/1/2008 400,000
Accounts payable 12/31/2008 500,000
Payments to suppliers in 2008 1,600,000
Sales Gross Profit
2005 P2,500,000 P 860,000
2006 2,700,000 1,080,000
2007 2,800,000 1,260,000
P8,000,000 P3,200,000
Additional information:
a. Goods with sales price of P100,000 are out on consignment on December 31, 2008.
b. Goods purchased costing P50,000 including freight of P5,000 are in transit on December
31, 2008. The goods are shipped on December 28, 2008 FOB shipping point and
properly recorded as purchases.
What is the amount of fire loss?
(a) P630,000 (b) P740,000 (c) P590,000 (d) P635,000 A

Gross profit rate (3,200,000/ 8,000,000) 40%

Accounts receivable 12/31/2008 P 440,000
Collections 2,640,000
Total P3,080,000
Less: Accounts receivable 1/1/2008 480,000
Sales 2008 P2,600,000

Accounts payable 12/31/2008 P 500,000

Payments to suppliers 1,600,000
Total P2,100,000
Less: Accounts payable 1/1/2008 400,000
Purchases 2008 P1,700,000

Inventory 1/1/2008 P 600,000

Purchases 1,700,000
Goods available for sale P2,300,000
Less: Cost of sales (60% x 2,600,000) 1,560,000
Inventory 12/31/2008 P 740,000
Less: Goods out on consignment
(100,000 x 60%) P60,000
Goods purchased in transit 50,000 110,000
Fire loss P 630,000

33. The following is a statement of retained earnings for the current year provided by Laser
Company (in millions):
Balance at beginning of year 85,000
Additions:
Change in estimate of amortization
expense for the year 2,500
Gain on sale of land 18,000
Interest revenue 4,500
 Profit and loss for current year 13,000 38,000
Total 123,000
Deductions:
Increased depreciation due to change in
estimated life 5,000
Dividends declared and paid 11,000
Loss on sale of equipment 3,000
Loss from major casualty 7,000 26,000
Balance at end of year 97,000

What net income should have been reported in the income statement for the year?
(a) P23,000 (b) P13,000 (c) P12,000 (d) P25,500 A

Profit and loss for current year 13,000

Change in estimate of amortization expense 2,500
Gain on sale of land 18,000
Interest revenue 4,500
Increased depreciation due to change in
estimated life (5,000)
Loss on sale of equipment (3,000)
Loss from major casualty (7,000)
Adjusted net income 23,000

34. The following information for the current year is provided by Rose Company:
Sales 5,000,000
Cost of goods sold 2,800,000
Foreign translation adjustment credit 400,000
Selling expenses 700,000
Unusual and infrequent gain 400,000
Correction of inventory error 200,000
General and administrative expenses 600,000

Income tax expense 150,000

Gain on sale of investment 50,000
Proceeds from sale of land at cost 800,000
Dividends 300,000
How much should be reported as income from continuing operations?
(a) P1,200,000 (b) P1,350,000 (c) P1,600,000 (d) P2,000,000 A

Sales 5,000,000
Cost of goods sold (2,800,000)
Unusual and infrequent gain 400,000
Gain on sale of investment 50,000
Selling expenses ( 700,000)
General and administrative expenses ( 600,000)
Income tax expense ( 150,000)
Income from continuing operations 1,200,000

35. The following data pertains to Might Corporation for 2008:

Merchandise inventory:
January 1 P1,000,000
December 31 1,500,000
Freight in 250,000
Purchase returns and allowances 150,000
Inventory turnover rate 5
The cost of sales for 2008 is:
(b) P7,500,000 (b) P5,850,000 (c) P5,000,000 (d) P6,250,000
D

Average inventory (1,000,000 + 1,500,000/ 2) P1,250,000

Cost of sales = Average inventory x Inventory turnover
= P1,250,000 x 5
= P6,250,000

36. On January 1, 2007, Acer Company acquired a machine at a cost of P2,000,000. It was to be
depreciated on the straight line method over a five-year period with no residual value.
Because of a bookkeeping error, no depreciation was recognized in Acers 2007 financial
 statements. The oversight was discovered during the preparation of Acers 2008 financial
statements. Depreciation expense on this machine for 2008 should be:
(a) P800,000 (b) P400,000 (c) P500,000 (d) P 0 B

Depreciation for 2008 (2,000,000/ 5) P400,000

37. Uni Company failed to accrue warranty costs of P100,000 in its December 31, 2007 financial
statements. In addition, a change from straight line accelerated depreciation made at the
beginning of 2008 resulted in a cumulative effect of P60,000 on Unis retained earnings.
Both the P100,000 and the P60,000 are net of related taxes. What amount should Uni report
as prior period adjustment in 2008?
(a) P100,000 (b) P160,000 (c) P60,000 (d) P 0 A

38. On October 15, 2008, a fire destroyed all the stock of equipment of Modern Equipment
Center in its rented stockroom. The records of the firm showed the following information:
2007 2006 2005 2004
Sales 925,000 880,000 790,000 710,000
Cost of sales 758,500 739,200 679,400 624,800
Gross profit 166,500 140,800 110,600 85,200

Inventory, January 1, 2008 130,500

Sales, January 1 October 15, 2008 960,000
Sales return and allowances 15,000
Purchases, January 1 October 15, 2008 890,000
Purchases returns and allowances 12,000
Cost of stock in display room, not destroyed 85,000
How much is the estimated cost of merchandise lost in the fire on October 15, 2008?
(a) P167,500 (b) P148,600 (c) P252,500 (d) P120,250 A

Gross profit rate:

2004 (85,200/ 710,000) 12%
2005 (110,600/ 790,000) 14%
2006 (140,800/ 880,000) 16%
2007 (166,500/ 925,000) 18%
2008 20%
Inventory January 1, 2008 P 130,500
Net purchases, January 1 October 15 878,000
Goods available for sale P1,008,500
Less: Cost of sales:
Net sales (960,000 15,000) P945,000
Cost of sales (945,000 x 80%) 756,000
Inventory October 15, 2008 P 252,500
Less: Inventory not destroyed 85,000
Fire loss P 167,500

39. Max Corporation provides the following information for the year ended December 31, 2008:
Net income P1,882,000
Increase in current assets other than cash 275,000
Increase in current liabilities 122,000
Dividends declared and paid 375,000
Depreciation 256,000
Treasury stock acquired for cash 100,000
Long term debt retired 591,000
Equipment acquired for cash 200,000
The net cash increase for the year ended December 31, 2008 is:
(a) P1,985,000 (b) P719,000 (c) P1,025,000 (d) P872,000 B

Cash flow from operating activities:

Net income P1,882,000
Increase in current assets ( 275,000)
Increase in current liabilities 122,000
Depreciation 256,000 P1,985,000
Cash flow from investing activities:
Equipment acquired ( 200,000)
Cash flow from financing activities:
Dividends paid (P 375,000)
 Treasury stock ( 100,000)
Long-term debt retired ( 591,000) (1,066,000)
Net cash increase P 791,000

40. While preparing its 2008 financial statements, Dek Corporation discovered computational
errors in its 2007 and 2006 depreciation expense. These errors resulted in overstatement of
each years income by P100,000, net of income taxes. The following amounts were reported
in the previously issued financial statements:
2007 2006
Retained earnings, 1/1 P2,800,000 P2,000,000
Net income 600,000 800,000
Retained earnings, 12/31 P3,400,000 P2,800,000
Deks income statement for 2008 is correctly reported at P700,000. The statement of
retained earnings for the year ended December 31, 2008 should report an ending balance
at:
(a) P3,900,000 (b) P4,100,000 (c) P4,300,000 (d) P4,000,000 A

Retained earnings 1/1/08 P3,400,000

Prior period adjustment:
Underdepreciation in 2006 and 2007 ( 200,000)
Corrected beginning balance P3,200,000
Net income for 2008 700,000
Retained earnings 12/31/08 P3,900,000

* End of the Examination PRACTICAL ACCOUNTING 1*