REVIEW 105 – DAY 17 5.

On November 17, 2005, Solana Airways entered in to a commitment to purchase

3,000 barrels of aviation fuel for P9,000,000 on March 23, 2006. Solana entered into
this purchase commitment to protect itself against the volatility in the aviation fuel
P1 market. By December 31, 2005, the purchase price of aviation fuel had fallen to
P2,200 per barrel. However, by March 23, 2006, when Solana took delivery of the
3,000 barrels, the price of aviation fuel had risen to P2,500 per barrel. How much
1. On January 2, 2005, the Santiago, Inc. issued P2,000,000 of 8% convertible should be recognized as loss on purchase commitment on December 31, 2005?
bonds at par. The bonds will mature on January 1, 2009 and interest is payable a. P1,500,000 c. P2,400,000
annually every January 1. The bond contract entitles the bondholders to receive b. P 900,000 d. P 0
6 shares of P100 par value common stock in exchange for each P1,000 bond.
On the date of issue, the prevailing market interest rate for similar debt without
the conversion option is 10%. 6. Bran Company leased equipment for its entire 10 year economic life, agreeing to
pay P1,000,000 at the start of the lease term on January 1, 2005 and P1,000,000
How much of the proceeds from the issuance of convertible bonds should be annually on each January 1 for the next nine years. The present value factors using
allocated to equity? the implicit rate in the lease which is 10% for an annuity due with ten payments: 6.76
a. P634,000 b. P126,816 c. P221,664 d. and for an ordinary annuity with ten payments: 6.15. Bran properly recorded the
P0 finance lease and depreciated the asset using the straight line method. What is the
current portion of the lease liability on December 31, 2005?
2. Using the same information is no. 15 above, how much is the carrying value a. P424,000 c. P324,000
of the bonds payable as of December 31, 2005? b. P466,400 d. P516,040
a. P2,000,000 b. P1,389,400 c. P1,796,170 d.
P1,900,502 7. Bulacan Corporation's checkbook balance on December 31, 2005, was P800,000.
In addition, Bulacan held the following items in its safe on December 31:
3. On April 1, 2004, Jerry Company sold 12,000 of its P1,000 11%, 5-year face
value bonds at 96. The bonds are dated April 1, 2004 and interest payment Check payable to Bulacan Corporation, dated January 2, 2006, not
dates are April 1 and October 1, and the company uses the straight-line method included in December 31 checkbook balance P200,000
of bond discount amortization. On March 31, 2005, Jerry took advantage of Check payable to Bulacan Corporation, deposited December 20, and
favorable prices of its stock to extinguish all of the bonds by issuing 800,000 included in December 31 checkbook balance, but returned by bank
shares of its P10 par value common stock. At this time, accrued interest was paid on December 30, stamped "NSF." The check was redeposited
in cash. The company’s stock was selling for P30 per share on March 1, 2005. January 2, 2006, and cleared January 7 40,000
The increase in additional paid in capital due to the conversion of Jerry’s bonds is Post-dated checks 15,000
a. P4,000,000 c. P3,616,000 Check drawn on Bulacan Corporation's account, payable to a vendor,
b. P3,520,000 d. P 0 dated and recorded December 31, but not mailed until January 15,
100,000
2006
4. On June 1, 2005 Amulung Company sold merchandise with a list price of
P5,000,000 to ABC. Amulung allowed trade discounts of 20% and 10%. Credit The proper amount to be shown as cash on Bulacan's balance sheet at
terms were 5/10, n/30 and the sale was made FOB shipping point. Amulung prepaid December 31, 2005, is
P200,000 of delivery cost for ABC as an accommodation. On June 11, 2005, a. P760,000 c. P860,000
Amulung received from ABC full remittance of b. P800,000 d. P975,000
a. P3,420,000 c. P3,600,000
b. P3,620,000 d. P3,800,000 8. Total debits and total credits in selected accounts of Piat Company, after closing
entries were posted on December 31, 2005 are given below.
 12. Using the same information in no. 20, how much should be reported by Rebasa
Debits Credits
Co. as liability under finance lease as of December 31, 2005?
Materials P 600,000 P 200,000
a. P4,143,593 b. P4,273,410 c. P4,446,613 d. P0
Goods in process 500,000 300,000
Material purchases 2,500,000 2,500,000
Purchase discounts 100,000 100,000 13. Cabusao Company is indebted to Ragay Company under a P5,000,000, 10%
Transportation in 200,000 200,000 three-year note dated December 31, 2002. Because of financial difficulties, Cabusao
Direct labor 3,000,000 3,000,000 owed accrued interest of P500,000 on the note at December 31, 2005. Under a debt
Manufacturing overhead 1,500,000 1,500,000 restructuring on December 31, 2005, Ragay Company agreed to settle the note and
Finished goods 700,000 400,000 accrued interest for a tract of land having a fair value of P3,500,000. The acquisition
cost of the land is P1,000,000. The income tax rate is 32%. In its 2005 income
Cost of goods sold was statement Cabusao should report gain on restructuring at
a. P7,100,000 c. P6,900,000 a. P4,000,000 c. P1,020,000
b. P7,000,000 d. P7,400,000 b. P2,720,000 d. P2,000,000

14. Baggao Company’s accounts payable balance at December 31, 2005 was
9. On January 2, 2005, Trent Company signed an 8-year noncancelable lease for a P8,000,000 before considering the following data:
new machine requiring P1,500,000 annual payments at the beginning of each year.
The machine has a useful life of 12 years with no residual value. Title passes to  Goods shipped to Baggao FOB shipping point on December 15, 2005
Trent at the lease expiration date. Trent uses the straight-line depreciation for all of were lost in transit. The invoice cost of P500,000 was not recorded by
its plant assets. Aggregate lease payments have a present value on January 2, Baggao. On January 15, 2006, Baggao filed a P500,000 claim against
2005 of P5,400,000 based on an appropriate interest rate. For 2005, Trent should the common carrier.
record depreciation expense for the leased machine at
 On December 30, 2005, a vendor authorized Baggao to return for full
a. P1,500,000 c. P675,000
b. P 450,000 d. P325,000
credit goods shipped and billed at P200,000 on December 15, 2005.
The returned goods were shipped by Baggao on December 31, 2005.
Sabarre Inc. leases equipment to its customers under noncancelable leases. On A P200,000 credit memo was received and recorded on January 5,
January 1, 2005, Sabarre leased equipment costing P4,000,000 to Rebasa Co., for 2006.
nine years. The rental cost was P440,000 payable in advance semiannually What should Baggao report as accounts payable on December 31, 2005?
(January 1 and July 1), plus P20,000 semiannually for executory costs. The a. P8,300,000 c. P7,800,000
equipment had an estimated life of 15 years and sold for P5,330,250 with an b. P8,500,000 d. P7,500,000
estimated unguaranteed residual value of P800,000. The implicit interest rate is 12
percent.
15. Manapla Company computed a pretax financial income of P15,000,000 for the
10. How much is the total interest income from lease that will be earned by Sabarre, year ended December 31, 2005. In preparing the tax return, the following
Inc.? differences are noted between financial income and taxable income.
a. P2,869,988 b. P3,675,616 c. P3,389,748 d. P0
Nondeductible expense
11. Using the same information in no. 20, Sabarre, Inc. should report profit on the 2,000,000
sale at Nontaxable revenue
a. P1,330,252 b. P1,050,012 c. P1,044,384 d. 1,000,000
P1,338,492
 Estimated warranty cost that was recognized as expense in 2005 but
deductible for tax purposes when paid 1,500,000 4. A working capital technique that increases the payable float and therefore delays the
Excess tax depreciation over financial depreciation 500,000 outflow of cash is
What is the current tax expense for 2005 if the tax rate is 32%? a. Concentration banking.
b. A draft.
a. P5,440,000 c. P4,800,000
c. Electronic Data Interchange (EDI).
b. P5,600,000 d. P5,120,000 d. A lockbox system.

5. Newman Products has received proposals from several banks to establish a lockbox
MAS system to speed up receipts. Newman receives an average of 700 checks per day averaging
$1,800 each, and its cost of short-term funds is 7% per year. Assuming that all proposals will
1. An individual receives an income of $3,000 per month, and spends $2,500. An increase in produce
income of $500 per month occurs, and the individual spends $2,800. The individual’s equivalent processing results and using a 360-day year, which one of the following proposals
marginal propensity to save is is optimal for Newman?
a. 0.2 a. A $0.50 fee per check.
b. 0.4 b. A flat fee of $125,000 per year.
c. 0.6 c. A fee of 0.03% of the amount collected.
d. 0.8 d. A compensating balance of $1,750,000.

2. In any competitive market, an equal increase in both demand and supply can be expected 6. The return paid for the use of borrowed capital is referred to as
to always a. Cash dividends.
a. Increase both price and market-clearing quantity. b. Stock dividends.
b. Decrease both price and market-clearing quantity. c. Interest.
c. Increase market-clearing quantity. d. Principal payment.
d. Increase price.
7. In valuing interest rate swaps, the zero-coupon method uses all of the following variables
3. An organization has an opportunity to establish a zero balance account system using four except
different regional banks. The total amount of the maintenance and transfer fees is estimated a. Discount rate.
to be $6,000 per annum. The organization believes that it will increase the float on its b. Timing of cash flows as specified by the contract.
operating disbursements by an average of four days, and its cost of shortterm funds is 4.5%. c. Estimated net settlement cash flows.
Assuming the organization estimates its average daily operating disbursements to be d. Underlying assets.
$40,000 what decision should the organization make regarding this opportunity?
a. Do not establish the zero balance account system because it results in estimated 8. Which of the following risks relates to the possibility that a derivative might not be
additional net costs of $6,000. effective at hedging a particular asset?
b. Do not establish the zero balance account system because it results in estimated a. Credit risk.
additional net costs of $1,200. b. Legal risk.
c. Establish the zero balance account system because it results in estimated net savings of c. Market risk.
$1,200. d. Basis risk.
d. Establish the zero balance account system because it results in estimated net savings of
$7,200.
9. A firm has daily cash receipts of $100,000. A bank has offered to reduce the collection methodology, if the company wants to reduce these costs, the most likely place to incur
time on the firm’s deposits by two days for a monthly fee of $500. If money market rates are costs would be for
expected to average 6% during the year, the net annual benefit (loss) from having this a. Prevention.
service is b. Appraisal.
a. $ 3,000 c. Internal failure.
b. $12,000 d. External failure.
c. $0
d. $ 6,000 15. In the cost of quality, costs incurred in detecting individual units of product that do not
conform to specifications are
10. A minimum checking account balance that a firm must maintain with a commercial bank a. Prevention costs.
is a b. Appraisal costs.
a. Transaction balance. c. Internal failure costs.
b. Compensating balance. d. External failure costs.
c. Precautionary balance.
d. Speculative balance.
TOA
11. Which of the following will cause a shift in the supply curve of a product? 1. Receivables denominated in a foreign currency should be
a. Changes in the price of the product. a. Translated to local currency using the exchange rate at the time the
b. Changes in production taxes. receivables arise
c. Changes in consumer tastes. b. Shown at face value of the foreign currency
d. Changes in the number of buyers in the market. c. Translated to local currency using the exchange rate at balance sheet date
d. Translated to local currency using the exchange rate when the balance sheet
12. In the cost of quality, which of the following is an example of an “internal failure”? is issued
a. Cost of inspecting products on the production line by quality inspectors.
b. Labor cost of product designers whose task is to design components that will not break 2. Trade receivables are classified as current assets when they are reasonably
expected to be collected
under extreme temperature conditions.
a. Within one year
c. Cost of reworking defective parts detected by the quality assurance group.
b. Within the normal operating cycle
d. Cost of parts returned by customers. c. Within one year or within the normal operating cycle whichever is shorter
d. Within one year or within the normal operating cycle whichever is longer
13. In the cost of quality, which of the following is an example of a “prevention cost”?
a. Cost of inspecting products on the production line by quality inspectors.
b. Labor cost of product designers whose task is to design components that will not break 3. Which statement is incorrect concerning the reversal of an impairment loss?
under extreme temperature conditions. a. The increased carrying amount due to reversal should not be more than what
c. Cost of reworking defective parts detected by the quality assurance group. the depreciated historical cost would have been if the impairment had not been
d. Cost of parts returned by customers. recognized.
b. Reversal of an impairment loss is recognized as income in the income
14. Delta Manufacturing Co. has had a problem with its product quality. The company has statement.
had a large amount of costs related to product recalls. In considering cost of quality c. Adjust depreciation for future periods.
d. Reversal of an impairment loss for goodwill is recognized as income in the
income statement.
4. An entity shall choose either the cost model or revaluation model as its
accounting policy in measuring intangible asset. Which statement is correct?
I. The cost model means that an intangible asset shall be carried at cost less
any accumulated amortization and any accumulated impairment loss.
II. The revaluation model means that an intangible asset shall be carried at
revalued amount less any subsequent accumulated amortization and any
subsequent accumulated impairment loss.
a. I only b. II only c. Both I and II d.
Neither I nor II
1. Which is not within the definition of an intangible asset?
a. Held for use in the production or supply of goods or services, for rental to
others, or for administrative purposes.
b. Identifiable nonmonetary asset without physical substance.
c. A resource controlled by an enterprise as a result of past events.
d. A resource from which future economic benefits are expected to flow to the
enterprise.
2. Which is incorrect concerning the recognition and measurement of an
intangible asset?
a. If an intangible asset is acquired separately, the cost comprises its
purchase price, including import duties and taxes and any directly attributable
expenditure of preparing the asset for its intended use.
b. If an intangible asset is acquired in a business combination that is an
acquisition, the cost is based on its fair value at the date of acquisition.
c. If an intangible asset is acquired free of charge or by way of government
grant, the cost is equal to its fair value.
d. If payment for an intangible asset is deferred beyond normal credit terms,
its cost is equal to the total payments over the credit period.
3. The appropriate method of amortizing intangible asset is best described
by which of the following?
a. The straight line method, unless the pattern in which the asset’s economic
benefits are consumed by the enterprise can be determined reliably.
b. The double declining balance in all circumstances
c. Management can make a subjective amount of periodic amortization
without regard to any particular method
d. The straight line method in all circumstances
4. The best definition of useful life of an intangible asset is
a. The legal life of the intangible.
b. The period over which management believes the intangible asset will
contribute to the revenue-producing process.
c. Twenty years.
d. The period over which the cost of the asset can be deducted for income tax
purposes.
5. Which of the following factors should not be considered in estimating the
useful life of intangible asset?
a. Legal, regulatory or contractual provision
b. Expected action by competitors or potential competitors
c. Residual value
d. Typical product life cycle of the asset
6. It is the systematic allocation of the cost of an intangible asset less any
residual value as an expense over the asset’s useful life?
a. Depreciation c. Depletion
b. Realization d. Amortization
11. Characteristic(s) common to all joint ventures include
a. Two or more venturers are bound by a contractual arrangement.
b. The contractual arrangement establishes joint control.
c. The use of proportionate consolidation.
d. Both a and b.
12. Investment property excludes
a. Land held for long-term capital appreciation.
b. Building leased out under an operating lease.
c. Property that is being redeveloped for continuing use as investment property.
d. Property that is being constructed or developed for use as an investment
property.
13. Which statement is correct regarding the application of the equity method of
accounting for investments in associates?
a. The equity investment is initially recorded at cost.
b. The equity investment is increased by the investor's share of the net loss of
the associate.
 c. Distributions received from the investee increase the carrying amount of the
investment.
d. The investor's share of profit or loss of the investee and of changes in the
investee's equity is determined on the basis of total potential ownership interests.
14. Which is incorrect concerning depreciation of PPE?
a. The depreciation method used should reflect the pattern in which the asset's
economic benefits are consumed by the enterprise.
b. The depreciation method should be reviewed at least annually and, if the
pattern of consumption of benefits has changed, the depreciation method should
be changed currently and prospectively as a change in estimate.
c. Depreciation should be charged to the income statement, unless it is included
in the carrying amount of another asset.
d. Depreciation begins when the asset is available for use and continues until the
asset is derecognized and became idle.
15. The residual value of an intangible asset should be presumed zero, unless
I. There is a commitment by a third party to purchase the asset at the end of
its useful life.
II. There is an active market for the asset and residual value can be
determined by reference to that market and it is probable that such market
will exist at the end of the asset’s useful life.
a. Both I and II b. Neither I nor II c. II only d. I only
* Post dated checks totaling P37,900, were included in the deposits in transit.
This represents collection of accounts receivables from customers. The
checks were actually deposited on January 5, 2011.
* On December 28, 2010, the company issued checks to creditors totaling
P115,000. These checks were released on January 5, 2011.
* A check dated December 12,2010 in payment of accounts payable was
recorded as P12,000. Upon examination of the checks returned by the bank,
the actual amount was P21,000.
* A check for P4, 750 in payment of a minor repair of office equipment was not
recorded on the company books.
* Transfer of fund of P59,300 to Secured Bank Current account of DBS
Securities was not recorded. This pertains to purchase of 5,000 shares of
William Lines to be held as trading securities. Based on quoted price as of
December 21,2010, the market value per share is P8.20.
* Interest earned amounting to P5,720, was not recorded.
* Deposits in transit and outstanding checks at December 31,2010, amounted
to P89,200 and P132,000 respectively.
* The cash in bank balance per book on December 31,2010 is P681,200.
The petty cash fund of P35,000 maintained on an imprest basis was counted on
January 2,2011. Unreplenished expenses include petty cash vouchers for various
expenses totalling P19,300 and employees' advances for P5,800 all dated
December 2010.

San Felipe purchased several marketable securities during 2010. at December

AP 31,2010, the company had the investments in equity securities listed below. None
SAN FELIPE TRADING CORPORATION was incorporated three years ago as a was held at the last reporting date, and all securities are considered as available-for-
trading company engaged in the sale and distribution of hardware and electrical sale.
supplies. It's office and store is located in Batangas City.
No. of Shares Cost Market Value per
You were given by your client's controller a copy of the unadjusted trial balance as of Share
December 31,2010. San Miguel “A” 2,000 P150,000 P58.50
Seniority Bank 2,00 110,000 P49.25
The company maintains its bank account with Secured Bank. Your review of the Multivit 5,000 54,600 P9.10
bank reconciliation statement disclosed the ff information: Total P314,600
* On December 22, 2010, the bank erroneously credited the account of San your physical count of stock certificates disclosed that stock dividend of the ff issues
Felipe Trading for P195,000 representing deposit for the account of another were not yet recorded.
company.
Issue No. of Shares
Seniority Bank 500
Multivit 200 * Goods purchased in cash for P41,700 were returened to the supplier on
December 22,2010. These goods were still included in the inventory schedule
the unadjusted trial balance of the company at December 31,2010 included the ff and the refund was received and recorded on January 10,2011.
accounts: * Goods consigned to san Felipe totaling P89,500 were included in the physical
count.
* Included in the physical count were goods sold to a customer on FOB
Debit Credit shipping point on December 27,2010. These goods with a selling price
Accounts Receivable P1,452,700 P52,830 and a cost of P35,600 were already recorded as sales on account
Allowance for Doubtful Accounts P10,200 but were shipped only on January 5,2011.
Sales P4,820,000
Prepayments consists of:
Prepaid advertising P144,000
Your review of the accounts receivable schedule disclosed that various collections Prepaid rent 165,000
totaling P17,350 were not recorded in the books but already reflected in the Unused office and store supplies 129,000
subsidiary ledgers. You also noted the ff information: Total P438,000

* the customer's deposit of P38,000 for goods to be delivered on January 2011 Prepaid advertising consists of payment to an advertising agency for the design of
was deducted from accounts receivable. newspaper ad which will run for period of one year from July 31,2010.
* A cash advance to an officer of P75,000 was included as part of accounts
receivable. san Felipe renewed its 5-year lease contract on the opffice building which expired on
* Goods sold on account and delivered on December 21,2010 amounting to October 31,2010. total advance rental for 3 months was made amounting to
P31,810 were not recorded. P165,000 was booked as prepaid rent.
* Collection of P15,275 on October 31,2010 from Cathay Trading was credited
to the account of Supreme Merchantile. The company books purchased office supplies as inventory, the expense is normally
* A promissory note was issued by a customer to San Felipe Trading for goods taken up after the physical count is made at year end. On July 9,2010, a total of
purchased worth P168,000. The promissory note carries an intererest of 12% P38,450 worth of supplies was bought and included in the inventory, as of year end,
per annum with a term of 60 days, value dated November 15,2010. This was unused supplies inventory per physical count amounted to P53,200. No entry to set
reflected as part of accounts receivable. No interest was accrued as of year- up the expense was recorded.
end.
* Bad debts are provided based on 2% of outstanding accounts receivable at San Felipe's PPE consist of the ff:
the end of the year.
Furniture and Equipment P1,045,000
A physical count of merchandise on hand was made on December 30 and 31, 2010, Delivery Equipment 1,637,000
which reflected a balance of P3,873,000. Your review of inventory list disclosed the Leasehold Improvements 363,000
ff: Total P3,045,000
Accumulated depreciation (936,500)
* Goods costing P148,000 shipped FOB shipping point on December 30,2010 Net Book Value P2,108,500
by a supplier to San Felipe was received on January 3,2011. the purchase
was recorded on December 30,2010. the building under this lease was renovated at a cost of P363,000 which was booked
* Goods costing P195,000, shipped FOB destination by the supplier on as leasehold improvements on september 30,2010. These improvements will be
amortized over 5 years. No amortization was recorded as at December 31,2010.
December 28,2010, were recorded and received on January 5,2011.
 Value Date Due date Principal Interest Rate
On May 31,2010, the company bought new computers toatling P325,000. In addition Maturity Value
to the cost, it paid additional charges which were taken up as Re[pairs Expense. July 1,2010 Feb 1, 2011 P500,000 13 1/8%
These are delivery chareges- P12,500; installation cost- P11,300; and testing cost- P539,193
P6,520. The estimated useful life of these computers is 4 years. No depreciation was Sept. 15,2010 March 16,2011 2,300,000 14 3/8%
provided on the equipment as of December 31,2010. 2,467,149
Dec. 5,2010 April 4,2011 1,800,000 15 1/2%
San Felipe Trading opoened additional stores in nearby localities. To service more 1,893,000
deliveries, additional 3 units of delivery equipment were bought on installment basis 4,600,000
on December 29,2010. The installment price was P1,200,000 but the cash price was P4,899,342
P1,000,000. The terms are P200,000 down paymebt and the balance payable in 4
equal quaterly installments. A non interest bearing promissory note was issued for Interests are paid on scheduled maturity dates. No accrual was madev as of year
the unpaid portion on December 30,2010. The downpayment of P200,000 was end.
recorded as a debit to delivery equipment and a credit to cash.
The company issued P1.2M face value of 12% bonds at par on july 1,2010 maturing
Included in the company's unadjusted trial balance on December 31,2010 are on July 1, 2015 and paying interest semi annually on January 1 and July 1.
accounts payable and accrued expenses of P523,100 and P63,100, respectively.
Upon verification, the ff information was discovered:
1. The cash balance per bank statement on December 31,2010 is
* On December 26,2010, the company purchased on account goods worth A. P946,120 C. P984,020
P215,000, but no entry was madde on the books. The goods were already B. P988,770 D. P993,020
included in the year end physical count. 2. the adjusted cash in bank balance at December 31,2010 is
* The ff items were erroneously included in accounts payable: A. P708,320 C. P726,320
* Accrued expenses totaling P37,450 B. P746,220 D. P702,600
* A cash advance from the president of San Felipe amounting to P350,000 to 3. The adjusted petty cash balance at December 31,2010 is
be used as working capital. This will be repaid within 6 months without A. P15,700 C. P35,000
interest. B. P29,200 D. P9,900
* A debit balance of P87,250 representing advance payment for goods 4. What is the carrying value of the investment in William Lines on December
oredered to be shipped by the su[pplier on January 12,2011. 31,2010?
* Your review of subsequent payment from January 2-15,2011 revealed that no A. P41,000 C. P0
accrual was made on December 31,2010 for the ff: B. P59,300 D. P156,312
* Light and water for November and December 2010, P21,200 5. What amount of unrealized loss should be shown in 2010 Statement of
* Telephone bills for December 2010, P18,150. Comprehensive Income asd component of other comprehensive income?
A. P0 C. P8,855
* Representation expenses for December 2010, P11,990.
B. P27,155 D. P45,455
* Minor repair of a delivery car on December 26,2010, P3,180. 6. The accounts receivable balance at December 31,2010 should ne
* Transportation expenses for 2011, P2,560. A. P1,300,060 C. P1,262,160
* Total, P57,080. B. P1,247,230 D. P1,209,330
San Felipe Trading was granted a credit limit of up to P5M by Secured Bank. As of 7. What is rthe year end adjustment to the allowance for doubtful accounts?
year end, availments are as follows: A. P14,745 C. P35,145
B. P15,801 D. P15,043
8. What is the adjusted Inventory on December 31,2010?
A. P3,979,300 C. P3,889,800 be maintained on the imprest basis. During the month of April, the agency
B. P3,854,200 D. P4,084,800 transmitted to the home office sales orders that cost at P468,750. However, the
9. How much sales should be reported in the 2010 income statement? home office was able to fill-up only 80% of the orders. Total cash of P250,000 was
A. P4,820,000 C. P4,709,480 collected from the customers. A home office disbursement chargeable to the sales
B. P4,798,980 D. P4,816,210
10. The total Prepayments at December 31,2010 should be agency includes the acquisition of equipment for Bulacan, P180,000 to be
A. P153,750 C. P247,200 depreciated at 10% per annum. The agency paid expenses of P43,700 and received
B. P252,200 D. P192,200 replenishment thereof from the home office. The agency samples are good until
11. The total cost of company's PPE at December 31,2010 is February 28, 2009. It was estimated that the gross profit on goods shipped to bill
A. P3,868,800 C. P4, 238,320 agency sales orders averages 25%. Net income (loss) for the month ended April 30,
B. P4,075,320 D. P3,875,320 2008 is
12. What is the net book value of the company's PPE at December 31,2010?
A. P2,862,332 C. P3,231,852 a. (P19,200) b. P72,300 c. (P2,700) d. P55,800
B. P2,868,852 D. P2,938,820
13. The adjusted balance of accounts payable at December 31,2010 is
A. P437,900 C. P395,900
B. P543,900 D. P738,900
14. The adjusted balance of Accrued expenses on December 31,2010 is
A. P157,630 C. P155,070 Problem 48. On January 01, 2008, P Company acquired 75% interest in S Company
B. P54,520 D. P57,080 for P4,700,000 cash. The shareholder’s equity of S at the time of acquisition is
15. The interest payable at December 31, 2010 should be P5,200,000. The excess of cost over book value of interest acquired is allocated to
A. P151,778 C. P321,342
the following: Inventories P350,000 (sold in 2008), Building P250,000 ( 4 year
B. P249,342 D. P223,778
remaining life), Goodwill P200,000 (not amortized). During 2008, S company
reported Net income of P800,000 and paid dividends of P200,000. Retained
P2 earnings of parent on January 1,2008 is P1,000,000, Common stock is P2,000,000
Problem 46. On July 31, 2008, YES Corporation issued 150,000 shares of its P22 and additional paid in capital is P500,000. Net income from own operations and
par value common stock in exchange for the P4.3 million net identifiable assets of dividends paid by P during 2008 are P950,000 and P400,000 respectively.
YUP Company. The market value of YES’s common stock on July 31 was P25 per Determine the consolidated Retained earnings as of December 31, 2008:
share. YES paid a fee of P200,000 to the consultant who arranged the acquisition.
Costs of issuing the securities amounted to P90,000. Additional costs were incurred a. P1,737,500 b. P1,587,500 c. P1,840,625 d. P1,690,625
directly attributable to the acquisition. Income from acquisition of P200,000 was
involved in the purchase. How much is the cost of acquisition?

a. P4,100,000 b. P3,950,000 c. P4,040,000 d. P4,500,000

Problem 49. EFG Corporation’s shipments to and from its Quezon City branch are
billed at 125% of cost. On December 31, 2008, QC branch reported the following
data at billed price: Inventory January 1, P56,250; shipments received from home
office, P1,156,250; shipments returned P156,250; and Inventory December 31,
Problem 47. On April 1, 2008, the AA Company established an agency in Bulacan,
sending its merchandise samples costing P82,500 and a working fund of P65,000 to
P306,250. What is the balance of the allowance for over- valuation of branch
inventory on December 31 before adjustments?

a. P150,000 b. P211,250 c. P231,250 d. P242,500

Problem 50. UVW Corporation and its branch in Manila maintain their respective
books of accounts. At close of books on December 31, 2008, Manila branch account
in the home office books showed a balance of P142,500. The interoffice accounts
were in agreement at the beginning of the year. For purposes of reconciling the
interoffice accounts, the following were ascertained:

a. Merchandise billed at P50,000 was shipped by the home office to the

branch on December 27. The goods were in transit as of the end of
the year and the branch did not recognize the transfer in its books.
b. The branch collected a home office account receivable of P35,000 but
such transaction is not known to the home office.
c. The home office recorded in error the branch net income at P119,000.
It should have been P191,000.
d. The home office is charged P83,000 by the branch due to returned
merchandise to home office on December 28 which was in transit as
of December 31.
e. Home office credit memo for P5,400 is recorded twice by the branch.
Determine the balance in the home office books of the branch account before
adjustments as of December 31,2008:

a. P166,500 b. P111,100 c. P221,900 d. P142,500

1. A
2. B
3. A
4. B
5. D