FAR LONG QUIZ 2 Form

During 2016, Cooke Company acquired patent right and remitted

royalties of P3, 000,000. The entity reported prepaid royalties of P550,
000 and P450, 000, royalties payable of P800,000 and P750,000,
respectively, on December 31, 2015 and 2016. What amount should
be reported s royalty expense for 2016? *
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2,050,000
3,300,000
2,950,000
3,100,000
On March 1, 2018, Pyne Furniture Co. issued P700, 000 of 10 percent
bonds to yield 8 percent. Interest is payable semiannually on February
28 and August 31. The bonds mature in ten years. Pyne Furniture Co.
is a calendar-year corporation. The interest expense to be recognized
in 2018 profit or loss is *
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P 53,000
P 52,925
P 58,933
P58, 333
Effective January 1, 2016, King Company adopted the accounting
policy of expensing advertising and promotion costs when incurred.
Previously, advertising and promotion costs applicable to future
periods were recorded in prepaid expenses. The entity can justify the
change, which was made for both financial statement and income tax
reporting purposes. The prepaid advertising and promotion costs
totaled P600, 000 on December 31, 2016. The income tax rate is
30%. What is the net charge against income for 2016 as a result of the
change? *
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180,000
0
600,000
420,000
Excelsia Company issued rights to subscribe to its stock, the
ownership of 4 shares entitling the shareholders to subscribe for 1
share at P100. Healing Company owns 50,000. The share is quoted
right-on at 125. What is the cost of the new investment if all of the
stock rights are exercised by the investor? *
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1,250,000
1,450,000
1,500,000
1,562,500
On December 31, 2017, Ulster Co. issued P 200,000 of 8% serial
bonds, to be repaid in the amount of P40, 000 each year. Interest is
payable annually on December 31. The bonds were issued to yield
10% a year. The bonds proceeds were P 190,280 based on the
present values at December 31, 2017 of the five annual payments. In
its December 31, 2018 statement of financial position, at what amount
should Ulster report the carrying amount of the bonds? *
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P153, 308
P150, 280
P139, 380
P149, 100
Figaro Company acquired land and paid in full by issuing P600, 000
10 percent bonds payable and 40,000 ordinary shares with par value
of P10. The share was selling a P19 and the bonds were trading at
102.16. What amount should be recorded as cost of land? *
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988,000
1,000,000
1,372,000
1,387,000
What is the effect of stock dividend of the same class? *
0/1
Increase in investment account and increase in cost per share
No effect on investment account but decrease in cost per share
No effect on investment account but increase in cost per share
Decrease in investment account and increase in cost per share
Correct answer
Decrease in investment account and increase in cost per share
Bamco Company purchased a new machine on a deferred payment
basis. A down payment of P100, 000 was made and 4 monthly
installments of P250,000 are to be made at the end of each month.
The cash equivalent price of the machine was P950, 000. The entity
incurred and paid installation costs amounting P30, 000.8. What is the
amount to be capitalized as cost of the machine? *
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1,100,000
980,000
950,000
1,130,000
On June 1, 2018, Jefferson Controls, Inc. issued P 12,000,000 of 10
percent bonds at P 10,348,080. Interest is payable semiannually on
May 31 and November 30. The bonds mature in 15 years. Jefferson
Controls, Inc. is a calendar-year corporation. *
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P10, 372,655
P10, 391,103
P 12,000,000
P10, 368,965
Universal Company failed to accrue warranty cost of P10, 000 on
December 31, 2014. In addition, a change from straight line to
accelerated depreciation made at the beginning of 2015 resulted in a
cumulative effect of P60, 000 on retained earnings. *
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160,000
60,000
100,000
0
Which of the following is false? *
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Futures contracts are more liquid than forward contracts.
Futures contracts are marked to market.
Futures contracts allow fewer delivery options than forward contracts.
Futures contracts trade on a financial exchange.
Starlight Company owned a building on January 1, 2016 with historical
cost of P40, 000,000. The property is depreciated over 40 years on a
straight line basis with no residual value. The entity adopted a policy
of revaluation of property. The building has so far been revalued twice
at fair value as follows: January 1, 2017 46,800,000 January 1, 2019
55,500,000 Before income tax, what is the revaluation surplus on
January 1, 2017? *
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7,800,000
6,800,000
4,800,000
5,800,000
On January 1,2015 ,Bing Company purchased 30,000 shares of Latt
Company’s 200,000 outstanding ordinary shares for P6,000,000. On
that date, the carrying amount of the acquired shares on Latt’s books
was P4,000,000. Bing attributed the excess of cost over carrying
amount to patent. The patent has a remaining useful life of 10 years.
During 2015, Bing’s officers gained a majority on Latt’s board of
directors. Latt Company reported earnings of P5,000,000 for the year
ended December 31,2015 ,and declared and paid dividend of
P3,000,000 during 2015. *
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6,100,000
6,000,000
6,300,000
6,750,000
Bravo Company acquired 20,000,000 shared of Alpha Company on
January 1, 2015 at P120 per share. Alpha Company had 80,000
shares outstanding with the carrying amount of P8,000,000. The
difference between the carrying amount and fair value of Alpha
Company of January 1, 2015 is attributable to a broadcast license
which is intangible asset. Alpha Company recorded earnings of
P3,600,000 and 3,900,000 for the 2015 and 2016, respectively, and
paid per-share dividend of P16 in 2015 and P20 in 2016. Bravo
Campany has a 20-year straight line amortization policy for the
broadcast license. What is the carrying amount of the investment in
associate on December 31, 2015? *
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2,800,000
3,300,000
2,060,000
2,960,000
On January 1, 2018, Tinoc Company borrows P2,000,000 from
National Bank at 12% annual interest. In addition, Tinoc is required to
keep a compensatory balance of P200,000 on deposit at National
Bank which will earn interest at 4%. The effective interest that Tinoc
pays on its P2,000,000 loan is *
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10.0%
11.6%
12.0%
12.9%
Correct answer
12.9%
Naga Company produces bottled grape juice. Grape juice concentrate
is typically bought and sold by the pound. The entity uses 50,000
pounds of grape juice concentrate each month. On November 1,
2017, the entity entered into a grape juice concentrate futures contract
as a cash flow hedge to buy 50,000 pounds of concentrate on
February 1, 2018 at a price of P50 per pound.The market price on
December 31, 2017 and February 1, 2018 of the grape juice
concentrate is P38 per pound. The market rate of interest is 11%. The
periodic system is used.6. What amount should be recognized on
December 31, 2017 as derivative asset or liability? *
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540,540 liability
540,540 asset
600,000 liability
600,000 asset

On 1 January 2013, Entity A issued a 10 per cent convertible

debenture with a face value of P10, 000,000 maturing on 31
December 2022. The debenture is convertible into ordinary shares of
Entity A at a conversion price of P25 per share. Interest is payable
half-yearly in cash. At the date of issue, Entity A could have issued
nonconvertible debt with a ten-year term bearing a coupon interest
rate of 11 per cent. On 1 January 2018, the convertible debenture has
a fair value of P11, 200,000. Entity A makes a tender offer to the
holder of the debenture to repurchase the debenture for P11, 200,000,
which the holder accepts. At the date of repurchase, Entity A could
have issued non-convertible debt with a five-year term bearing a
coupon interest rate of 8 per cent. Compute the amount to be
recognized in profit or loss as a result of the repurchase of the
debenture. *
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P1, 577,200
P1, 188,650
P1, 200,000
Nil
Which of the following causes the futures price of an asset to
increase, everything else held constant? *
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Higher income received while carrying the underlying asset.
Lower expected spot price for the underlying asset.
Higher expected spot price for the underlying asset.
Higher costs of carrying the underlying asset.
Which of the following statements is incorrect? *
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An entity’s personnel should be given well- defined responsibilities
The responsibility for receiving merchandise and paying for it should usually
be given to one person
Certain clerical personnel should be rotated among various jobs
The accounting function should be separated from the custodianship of assets
Which of the following is false? *
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1,130,000
1,100,000
980,000
950,000
Correct answer
980,000
On January 1, 2015, Aker Company acquired a machine at a cost of
P2, 000,000. The machine is 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 the 2015
financial statements. The oversight was discovered during the
preparation of the 2016 financial statements. What is the depreciation
expense on the machine for 2016? *
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800,000
500,000
400,000
0
Flakes Company applied revaluation accounting to plant asset with
carrying amount of P4, 000,000 on January 1, 2017, useful life of 4
years, and no residual value. Deprecation is calculated on the straight
line basis. On December 31, 2017, independent appraisers
determined that the asset had a fair value of P3, 750,000. What is the
journal entry to record the revaluation on December 31, 2017?
*
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Credit depreciation P750,000
Debit accumulated depreciation P250,000
Credit plant asset P750,000
Credit revaluation surplus P750,000
On April 1, 2015, Tyrone Company purchased 40% of the outstanding
ordinary shares of Clarke for 10,000,000. On the date, Clarke’s net
assets were P20,000,000 and Ben cannot attribute the excess of the
cost of its investment in Clarke over its equity in Clarke’s net assets to
any particular factor. The investee;s net income for 2015 is
P5,000,000. What is the maximum amount which could be included in
2015income before tax reflect the ‘’equity in net income of
investee’’? *
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1,400,000
1,850,000
1,500,000
2,000,000
On March 1, 2018, Marie Company issued 10,000 of its P 1,000 face
value bonds at 95 plus accrued interest. Marie Company paid bonus
issue cost of P 1,000,000. The bonds were dated November 1, 2017,
mature on November 1, 2027, and bear interest at 12% payable
semiannually on November 1 and May 1. The net amount that Marie
receive from the bond issuance is *
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8, 500,000
9,500,000
9, 900,000
8, 900,000
On 1 January 2013, Entity A issued a 10 per cent convertible
debenture with a face value of P1, 000,000 maturing on 31 December
2022. The debenture is convertible into ordinary shares of Entity A at
a conversion price pf P25 per share. Interest is payable half-yearly in
cash. On 1 January 2018, to induce the holder to convert the
convertible debenture promptly, Entity A reduces the conversion price
to P20 if the debenture is converted before 1 March 2018. The market
price of Entity A's ordinary shares on the date the terms are amended
is P40 per share. Compute the amount to be recognized in profit or
loss as a result of the amendment of the terms. *
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P200, 000
P400, 000
P50, 000
P0
On July 1, 2012 Ecclesiates Corporation issued for P960, 000 one
thousand of its 9 percent, P1,000 bonds. The bonds are dated July 1,
2012, and mature on July 1, 2022. Interest is payable semiannually on
January 1 and July 1. Ecclesiates uses the straight-line method
amortizing bond discount. On July 1, 2018, Ecclesiates reacquired all
of the bonds at 101 and retired them. How much loss should
Ecclesiastes report on this early extinguishment of debt for the year
ended December 31, 2018? *
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P50, 000
P26, 000
P10, 000
P34, 000
The printing costs and legal fees associated with the issuance of
bonds should *
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Not be reported as expense until the period the bonds matured or are retired
Be reported as a deduction from the face amount of bonds payable
Be expenses when incurred
Be recorded as reduction of the bond issue amount and then amortized over
the life of the bonds
During the year ended December 31, 2016, Clay Company paid
interest totaling P100, 000. The prepaid interest expense is P23, 500
and P18, 000, respectively, on December 31, 2015 and 2016. The
interest payable is P45, 000 and P53, 500, respectively on December
31, 2015 and 2016. What amount of interest expense should be
reported for 2016? *
1/1
86,000
97,000
103,000
114,000
Klein Company provided the following information pertaining to
operating segments for the year ended December 31, 2015:
Combined profit of segments reporting profit 30,000,000 Combined
loss of segments reporting loss (20,000,000) Combined profit and loss
of all segments 10,000,000 To qualify as reportable segment, the
segment operating profit or loss should at least be what amount?
*
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2,000,000
3,000,000
1,000,000
1,250,000
Bravo Company acquired 20,000,000 shared of Alpha Company on
January 1, 2015 at P120 per share. Alpha Company had 80,000
shares outstanding with the carrying amount of P8,000,000. The
difference between the carrying amount and fair value of Alpha
Company of January 1, 2015 is attributable to a broadcast license
which is intangible asset. Alpha Company recorded earnings of
P3,600,000 and 3,900,000 for the 2015 and 2016, respectively, and
paid per-share dividend of P16 in 2015 and P20 in 2016. Bravo
Campany has a 20-year straight line amortization policy for the
broadcast license. What is the carrying amount of the investment in
associate on December 31, 2016? *
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3,500,000
2,400,000
3,515,000
4,275,000
On July 1, 2016, Roxy Company obtained fire insurance at an annual
premium of P72, 000 payable on July 1 of each year. The first
premium payment was made July 1, 2016. On October1, 2016, the
entity paid P24, 000 for real estate taxes to cover the period ending
September 30, 2017. On December 31, 2016, what amount should be
reported as prepaid expenses? *
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48, 000
36,000
54,000
60,000
Luffy Company acquired 30% of Naruto Company’s voting share
capital for P2,000,000 on January 1, 2015. Luffy’s 30% interest in
Naruto gave Luffy the ability to exercise significant influence over
Naruto’s operating and financial policies. During 2015, Naruto earned
of P800,000 and paid dividend of P500,000. Naruto reported earnings
of P1,000,000 for the 6 months ended June 30, 2016, and P2,000,000
for the year ended December 31, 2016. On july 1, 2016, Luffy sold half
of the investment in south for P1,500,000 cash. Naruto paid dividend
of P600,000 on October 1, 2016. The fair value of the retained
investment is P1,600,000 on July 1, 2016 and 1,800,000 on
December 31, 2016. The retained investment is to be held as financial
asset at fair value through profit or loss. Before income tax, what
amount should be included in the 2015 income statement as a result
of the investment? *
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140,000
240,000
800,000
500,000
Luffy Company acquired 30% of Naruto Company’s voting share
capital for P2,000,000 on January 1, 2015. Luffy’s 30% interest in
Naruto gave Luffy the ability to exercise significant influence over
Naruto’s operating and financial policies. During 2015, Naruto earned
of P800,000 and paid dividend of P500,000. Naruto reported earnings
of P1,000,000 for the 6 months ended June 30, 2016, and P2,000,000
for the year ended December 31, 2016. On july 1, 2016, Luffy sold half
of the investment in south for P1,500,000 cash. Naruto paid dividend
of P600,000 on October 1, 2016. The fair value of the retained
investment is P1,600,000 on July 1, 2016 and 1,800,000 on
December 31, 2016. The retained investment is to be held as financial
asset at fair value through profit or loss. On December 31, 2015, what
is the carrying amount of the investment in associate?
*
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2,090,000
2,500,000
2,240,000
2,000,000
Adam Company owned 50,000 ordinary shares of Bland Company.
These 50,000 shares were purchased by Adam for P120 per share.
On August 30,2015, Bland distributed 50,000 stock rights to Adam.
Adam was entitled to buy one new share of Bland company for P90
cash and two of these rights. On August 30,2015, each share had
market value of P130 and each right had a market value of P20. What
total cost should be recorded for the new shares that are acquired by
exercising the rights? *
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5,500,000
3,050,000
2,250,000
3,250,000
Which of the following is usually considered cash? *
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Certificate of deposit
Postdated check
Checking account
Money market saving certificate
Flakes Company applied revaluation accounting to plant asset with
carrying amount of P4, 000,000 on January 1, 2017, useful life of 4
years, and no residual value. Deprecation is calculated on the straight
line basis. On December 31, 2017, independent appraisers
determined that the asset had a fair value of P3, 750,000. What is the
journal entry to record depreciation for 2017? *
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Debit depreciation P250,000
Debit depreciation P1,000,000
Credit accumulated depreciation P250,000
Debit accumulated depreciation P1,000,000
During the current year, Cale Company sold a piece of equipment
used in production. The equipment had been accounted for using the
revaluation model and details of the accounts on the date of sale are
as follows. Sale price 5,000,000 Carrying amount 4,500,000
Revaluation surplus 1,000,000 Which of the following s correct about
recording the sale? *
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The gain that should be recorded in profit and loss is P500,000 and the
P1,000,000 revaluation surplus should be transferred to retained earnings
The gain that should be recorded in other comprehensive income is P500,000
The gain that should be recorded in other comprehensive income is
P1,500,000
The gain that should be recorded in profit and loss is P1,500,000
Star Company owned an equipment costing P5, 200,000 with original
residual value of P400, 000. The life of the asset is 10 years and was
depreciated using the straight line method. The equipment has a
replacement cost of P8, 000,000 with residual value of P200,000. The
age of the asset is 4 years. The appraisal of the equipment showed a
total revised useful life of 12 years and the entity decided to carry the
equipment at revalued amount. Before income tax, what amount
should be initially reported as revaluation surplus? *
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1,600,000
1,680,000
2,600,000
6,680,000
On December 31, 2018 , Atimonan Company issued 8,000 of its 8%,
10-year P 1,000 face value bonds with detachable warrants at 120.
Each bond carried a detachable warrant for two shares of Atimonan's
P100 par value ordinary shares at a specified option price P150.
Immediately after issuance, the market value of bonds ex-warrants
was P8, 100,000 and the market value of the warrants was P900, 000.
The issuance of the bonds increased Atimonam's equity by *
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P 1,500,000
P 900,000
P 960,000
0
On July 1,2015, Miller Company purchased 25% of Wall Company’s
outstanding ordinary shares and no good will resulted from the
purchase. Miller appropriately carried this investment at equity and the
balance of Miller’s investment account was P1,900,000 on December
31,2015 , and paid dividend totalling P480,000 on December 31,2015.
How much did Miller pay for the 25% interest in Wall? *
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2,020,000
1,720,000
1,870,000
2,170,000
Which is false concerning measurement of cash and cash
equivalents? *
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If a bank or financial institution holding the funds of the entity is in bankruptcy
or financial difficulty, cash should be written down to estimated realizable
value
Cash is measured at face value
Cash in foreign currency is measured at the current exchange rate
Cash equivalents should be measured at maturity value, meaning face value
plus interest
On January 1, 2011, Clark Company purchased a new building at a
cost of P6, 000,000. Depreciation was computed on the straight line
basis at 4% per year. On January 1, 2016, the building was revalued
at a fair value of P8, 000,000. Before income tax, what is the
revaluation surplus on December 31, 2016? *
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3,072,000
1,920,000
3,040,000
1,900,000
Reid Company. Which began operations on January 1, 2015, has
elected to use cash basis accounting for tax purposes and accrual
basis accounting statements. The entity reported sales of P1, 750,000
and P800, 000 in the tax returns for the years ended December 31,
2016 and 2015, respectively. The entity reported accounts receivable
of P300, 000 and P500, 000 on December 31, 2016 and 2015,
respectively. What amount should be reported as sales in the income
statements for 2016? *
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1,950,000
1,550,000
2,050,000
1,450,000
On January 1,2015 ,Mylene Company purchased 50,000 shares of
another entity for P3,600,000. On October 1,2015 ,the new entity
received 50,000 stock rights from the investee. Each right entitled the
shareholder to acquire one share for P85. The market price of the
investee’s share was P100 immediately before the rights were issued
and P90 immediately after the rights were issued. On December
1,2015 ,the entity exercised all stock rights. On December 31,2015
,the entity sold 25,000 shares at P90 per share. The stock rights are
not accounted for separately. The FIFO approach used. What is the
gain on sale of investment that should be recognized in 2015? *
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125,000
287,000
450,000
700,000
On January 1, 2018, Marimar Company issued 10,000 of its 12%, P1,
000 face values 5- year bonds at 105. Interest on the bonds is payable
annually every December 31. In condition with the sale of these
bonds, Marimar paid the following expenses: Promotion costs P 100,
000 Engraving and printing 400,000 Underwriter's commissions
500,000 Using straight-line method, what amount should Marimar
report as bond interest expense for the year 2018? *
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P 1,600,000
P 1,200,000
P 1,000,000
P 1,300,000
On January 2, 2013, Picard Enterprises issued P2, 400,000 of 8
percent, 15 year semiannual coupon bonds. Each bond is convertible
into 40, P15 par, ordinary shares, which was trading at P20 per share
on the date of the bond issue. The bonds were issued at 106. Without
the conversion feature, the bond would have been issued for 104.5.
On January 2, 2018, all of the bonds were converted into ordinary
shares. The market price of the shares was P28 per share on the date
of conversion. The issue premium is amortized using the straight-line
method. The issuance of the bonds increased the entity's equity by *
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P144, 000
P36, 000
Nil
P108, 000
Thunder Company floated a serial bond issue in 2016. Details of the
issue are as follows: Total amount P 5,000,000 Date of issue October
2, 2016 Proceeds from issue P4, 900,000 Interest rate 5% per annum
Interest payment date October 1 Maturity date P 1,000,000 annually,
starting October 1, 2018 Using the bond outstanding method of
amortizing discount, compute the interest expense to be recognized
for the year ended December 31, 2018. *
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P261, 250
P257, 500
P273,750
P 237, 500
On December 31, 2016, Ashe Company had a P990, 000 balances in
the advertising expense account before any year-end adjustments.
Radio and television advertising spots broadcast during December
2016 were billed to Ashe on January 4, 2017. The invoice cost of P50,
000 was paid on January 15, 2017. Included in the P990, 000 is P60,
000 for newspaper advertising fora January 2017 sales promotional
campaign. What amount should be reported as advertising expense
for 2016? *
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930,000
1,040,000
1,000,000
980,000
What is a compensating balance? *
1/1
Demand deposit account balance
Minimum deposit required to be maintained in connection with a borrowing
arrangement
Saving account balance
Temporary investment serving as collateral for outstanding loan