RETAKE: FINANCIAL ACCOUNTING AND REPORTING

Directions: Choose the letter of the correct answer and write the CAPITAL LETTER of
your answer on a separate answer sheet.

1. Under PAS 16, the depreciation charge for a period reflects:

a. The fall in the fair value of the asset across the period
b. A change in the resale value of the asset that has occurred over the period
c. The consumption of economic benefits over the period
d. A reduction in the estimated market value of the asset across the period

2. When a closely held corporation issues equity shares in exchange for land, the land
should be recorded at the
a. Current market value of the land
b. Total par value of the shares issued
c. Current market value of the shares issued
d. Total book value of the shares issued
3. Under PAS 20, government grants related to depreciable assets should be recognized
as income
a. immediately
b. over the useful life on a straight line basis
c. over the useful life in proportion to the depreciation of the related asset
d. In proportion to the compliance of the conditions set for the government grant
4. A company constructed machinery for its own use. A bank loan specifically financed
this property both during and after the construction. How much of the interests incurred
should be reported as interest expense?
a. Interests incurred before completion
b. Interests incurred after completion
c. All interests incurred
d. Zero
5. Earnings
a. Include certain gains that are excluded from comprehensive income
b. Are the same as comprehensive income
c. Exclude certain gains and losses that are included in comprehensive income
d. Include certain losses that are excluded from comprehensive income

6. An entity records all sales using the installment method of accounting. Installment
sales contracts call for 36 equal monthly cash payments. According to the conceptual
framework, the amount of deferred gross profit relating to collections 12 months
beyond the end of reporting period should be reported in the
a. Current asset section as a contra account
b. Noncurrent liability section as deferred revenue
c. Noncurrent asset section as a contra account
d. Current liability section as a deferred revenue

7. Which of the following is a deferred cost that should be amortized over the periods
benefited?
a. Advance from customer to be returned when sale is completed
b. Prepayment of three-year insurance premiums on machinery
c. Property tax for this year payable next year
d. Security deposit representing two months’ rent on leased office space
8. Magazine subscriptions collected in advance should be reported as
a. A contra account to magazine subscriptions receivable
b. Deferred revenue in the liability section
c. Magazine subscription revenue in the period collected.
d. Deferred revenue in the shareholders’ equity section

9. How would the proceeds received from the advance sale of nonrefundable tickets for a
theatrical performance be reported in the seller’s financial statements before the
performance?
a. Unearned revenue to the extent of related costs expended
b. Revenue to the extent of related costs expended
c. Unearned revenue for the entire proceeds
d. Revenue for the entire proceeds.

10. An entity received royalties from the assignment of patent to other entities. In the
period in which the royalties are earned, the royalties should be
a. Netted against patent amortization expense
b. Amortized to income over the remaining useful life of the patent
c. Subtracted from the capitalizable cost of the patent
d. Reported as revenue
11. Under what condition is it proper to recognize revenue prior to the sale of the
merchandise?
a. When management has a long-established policy to do so.
b. When the revenue is to be reported as an installment sale
c. When the ultimate sale of the goods is at an assured sales price
d. When the concept of internal consistency of amounts of revenue must be complied
with.
12. How should an entity treat organization costs in the financial statements?
a. Never amortized
b. Amortized over forty years
c. Expensed immediately
d. Amortized over sixty months

13. Which of the following is allowable for financial reporting under IFRS?
a. Completed contract method
b. Extraordinary items
c. LIFO
d. Lower of cost or net realizable value

14. The effects of a change in accounting principle should be recorded on a prospective

basis when the change is from the
a. The correction of an error in the determination of the last year’s inventory
b. Straight line method of depreciation to the double declining balance method.
c. Cost recovery method of accounting to the percentage of completion method.
d. Presentation of statements of individual entities in consolidated statements.

15. A change in the residual value of an asset depreciated on a straight-line basis arising
because additional information has been obtained is
a. A correction of an error
b. Not an accounting change
 c. An accounting change that should be reflected in the period of change and future
periods if the change affects both
d. An accounting change that should be reported by restating the financial statements
of all prior periods presented.

16. Presenting consolidated financial statements this year when statements of individual
entities were presented last year is
a. An accounting change that should be reported by restating the financial statements
of all prior periods presented.
b. An accounting change that should be reported prospectively
c. Not an accounting change
d. A correction of an error

17. During the current year, the entity voluntarily changed its accounting method because
the new method will provide more reliable and relevant information. The entity can
estimate the effects of the change. How should the entity treat the change in
accounting policy?
a. On a prospective basis
b. By restating the financial statements
c. By a cumulative adjustment on the income statement
d. On a retrospective basis

18. An entity changed from an accounting principle that is not generally accepted to one
that is generally accepted. The effect of the change should be reported, net of tax, in
the current
a. Retained earnings statement as an adjustment of the opening balance
b. Retained earnings statement after net income but before dividends
c. Income statement after extraordinary items
d. Income statement after income from continuing operations

19. Which of the following describes a change in reporting entity?

a. A manufacturing entity expands its market from regional to nationwide.
b. An entity presents consolidated financial statements in place of individual financial
statements.
c. An entity acquires additional shares of an investee and changes to the equity
method of accounting
d. An entity discontinues a product line

20. In which of the following situations should an entity report a prior period adjustment?
a. The correction of a mathematical error in the calculation of prior years’ depreciation
b. A change in the estimated useful life of property, plant and equipment purchased in
prior years
c. A switch from the straight line to double declining balance method of depreciation
d. The scrapping of an asset prior to the end of the expected useful life

21. Under IFRS, changes in accounting policies may occur

a. Either when a change is required by an IFRS or when it provides reliable and more
relevant information
b. Neither when a change is required by an IFRS nor when it provides reliable and
more relevant information
c. Only when a change is required by an IFRS
d. Only when a change provides reliable and more relevant information
22. Under IFRS, a change in accounting estimate is accounted for
a. Retrospectively
b. As a cumulative effect of an accounting change in the income statement
c. Currently in the financial statements.
d. Prospectively in the period of change and future periods.

23. When an investor uses the equity method to account for an investment in ordinary
shares and the fair value option of reporting financial assets is not elected after the
date of acquisition. the investment account of the investor would
a. Be increased by its share of the earnings of the investee but would not be affected
by its share of the losses of the investee.
b. Be increased by its share of the earnings of the investee and decreased by its
share of the losses of the investee.
c. Not be affected by its share of the earnings or losses of the investee.
d. Not be affected by its share of the earnings of the investee but would be decreased
by its share of the losses of the investee.

24. An entity purchased shares of another entity and classified the investment as trading
securities. The entity should report these trading securities at
a. Lower of cost or market with holding gains included in earnings only to the extent of
previously recognized holding losses.
b. Lower of cost or market with holding gains and losses included in earnings.
c. Fair value, with holding gains and losses included in earnings.
d. Fair value with holding gains included in earnings only to the extent of previously
recognized holding losses.

25. An investor uses the equity method to account for investments in ordinary shares. The
purchase price implies a fair value of the investee’s depreciable asset in excess of the
investee’s net asset carrying amounts. The investor’s amortization of the excess
a. Decreases the investment account
b. Decreases the goodwill account
c. Does not affect the investment account
d. Increases the investment revenue account
26. The composite depreciation method
a. Does not recognize gain or loss on the retirement of single asset in the group
b. Does not subtract residual value from the base of the depreciation calculation
c. Is an accelerated method of depreciation
d. Is applied to a group of homogenous assets

27. Which depreciation method is computed in the same way as depletion?

a. Productive output
b. Sum of the years’ digits
c. Straight line
d. Double declining balance

28. What valuation model should an entity use to value property, plant and equipment?
a. The revaluation model or the fair value model
b. The cost model or the revaluation model
c. The cost model or the fair value through profit or loss model
d. The cost model or the fair value model
29. An asset is being constructed for an entity’s own use. The asset has been financed
with a specific new borrowing. The interest cost incurred during the construction period
is
a. A part of the historical cost of acquiring the asset to be written off over the
estimated useful life of the asset
b. A prepaid asset to be written off over the estimated useful life of the asset
c. A part of the cost of the asset to be written off over the term of the borrowing
d. Interest expense in the construction period

Item 31 to 35. The cash account of NUNAL COMPANY shows the following activities:

Date Debit Credit Balance

Nov. 30 Balance P345,000
Dec. 2 November bank charges P 150 344,850
4 November bank credit for notes
receivable collected P 30,000 374,850
15 NSF check 3,900 370,950
20 Loan proceeds 145,500 516,450
21 December bank charges 180 516,270
31 Cash receipts book 2,121,900 2,638,170
31 Cash disbursements book 1,224,000 1,414,170

CASH BOOKS
RECEIPTS PAYMENTS
Date OR No. Amount Check No. Amount
Dec. 1 110-120 P 33,000 801 P 6,000
2 121-136 63,900 802 9,000
3 137-150 60,000 803 3,000
4 151-165 168,000 804 9,000
5 166-190 117,000 805 36,000
8 191-210 198,000 806 57,000
9 211-232 264,000 807 78,000
10 233-250 231,000 808 90,000
11 251-275 63,000 809 183,000
12 276-300 90,000 810 21,000
15 301-309 165,000 811 24,000
16 310-350 24,000 812 48,000
17 351-390 57,000 813 60,000
18 391-420 27,000 814 66,000
19 421-480 51,000 816 108,000
22 481-500 63,000 817 33,000
23 501-525 96,000 818 150,000
23 - - 819 21,000
23 - - 820 12,000
26 526-555 222,000 821 9,000
28 556-611 15,000 822 36,000
28 - - 823 39,000
29 612-630 114,000 824 87,000
29 - - 825 6,000
29 - - 826 33,000
Totals P2,121,900 P1,224,000
 BANK STATEMENT
Date Check Charges Credits
Dec. 1 792 P 7,500 P 25,500
2 802 9,000 33,000
3 - - 63,900
4 804 9,000 60,000
5 EC 243,000 243,000
8 805 36,000 285,000
9 CM 16 - 36,000
10 799 21,150 462,000
11 DM 57 3.900 231,000
12 808 90,000 63,000
15 803 3,000 -
16 809 183,000 255,000
17 DM 61 180 24,000
18 813 60,000 57,000
19 CM 20 - 145,500
22 815 18,000 -
23 816 108,000 141,000
23 811 24,000 -
23 801 6,000 -
26 814 66,000 96,000
28 818 150,000 222,000
28 DM 112 360 -
29 821 9,000 15,000
29 CM 36 - 36,000
29 820 12,000 -
Totals P1,059,090 P2,493,900

Additional information:
1. DMs 61 and 112 are for service charges.
2. EC is error corrected.
3. DM 57 is for an NSF check.
4. CM 20 is for loan proceeds, net of P450 interest charges for 90 days.
5. CM 16 is for the correction of an erroneous November bank charge.
6. CM 36 is for customers’ notes collected by bank in December.
7. Bank balance on December 31 is P1,776,810

Based on the preceding information, determine the following:

30.Outstanding checks at November 30

A. P39,150 B. P28,650 C. P21,150 D. P46,650

31.Outstanding checks at December 31

A. P459,000 B. P477,000 C. P441,000 D. P487,650

32.Deposit in transit at November 30

 A. P58,500 B. P145,500 C. P 0 D. P25,500

33.Deposit in transit at December 31

A. P114,000 B. P139,500 C. P132,000 D. P 0

34.Adjusted book balance at November 30

A. P410,850 B. P345,000 C. P375,000 D. P374,850

Item 36 to 39. On January 1, 2016, Bianca Company purchased an equipment with a cost
of P1,000,000. It is expected that this equipment will be used for 5 years and have a
residual value at that time of P100,000. It is also expected that this equipment can
produce 150,000 units of Bianca’s products. In 2016 and 2017, this equipment produced
20,000 and 25,000 units respectively.

35. What is the accumulated depreciation on this equipment on December 31, 2017
under the straight-line method of depreciation?
a. 270,000 c. 540,000
b. 640,000 d. 360,000

37. What is the accumulated depreciation on this equipment on December 31, 2017 under
the SYD method of depreciation?
a. 270,000 c. 540,000
b. 640,000 d. 360,000

38. What is the accumulated depreciation on this equipment on December 31, 2017 under
the double-declining balance method of depreciation?
a. 270,000 c. 540,000
b. 640,000 d. 360,000

71. What is the accumulated depreciation on this equipment on December 31, 2017 under
the production method of depreciation?
a. 270,000 c. 540,000
b. 640,000 d. 360,000
72. Berto Company received dividends from its ordinary share investments during the
year 2016 as follows:
• A stock dividend of 10,000 shares from Volvo Company when the market price
of Volvo’s shares was P10 per share.
• A cash dividend of P1,000,000 from Opel Company in which Berto owns a 10%
interest.
• 5,000 shares of ordinary shares of Astra Company in lieu of cash dividend of
P20 per share. The market price of Astra Company’s shares was P150. Berto holds
originally 50,000 shares of Astra Company ordinary shares. Berto owns 5% interest in
Astra Company.

What amount of dividend revenue should Berto report in its 2016 income statement?
a. 2,000,000 c. 1,100,000
b. 2,750,000 d. 1,750,000

73. Jessica Company owns 60,000 shares of the outstanding ordinary shares of Chris
Company. These 60,000 shares were originally purchased for P100 per share. On
December 1, 2016, Chris Company distributed 60,000 rights to Jessica. Jessica was
entitled to buy one new share of Chris’ ordinary shares for P120 and five of these rights.
On December 1, 2016, each share has a market value of P150 and each right had market
value of P10. The stock rights are accounted for separately and measured initially at fair
value. On December 31, 2016, Jessica exercised all rights. What total cost should be
recorded for the new shares that Jessica acquired by exercising the rights?

a. 1,440,000
b. 2,040,000
c. 1,560,000
d. 1,840,000

74. On July 1, 2016, Bobby Company purchased as a long-term investment 50,000

shares of Asia Corporation ordinary shares for P80 per share. This purchase represents a
2% interest in Asia. On August 1, 2016, Asia Corporation declared its annual dividend on
its ordinary shares of P10 per share payable on September 10 to shareholders of record
at August 31, 2016. A retirement of an issue of Bobby’s serial bonds payable on August
25, 2016 required additional working capital and Bobby sold all 50,000 shares of Asia’s
stock for P5,200,000 including the accrued dividend. What is the gain on disposal to be
reported by Bobby on this transaction for the year ended December 31, 2016?

a. 700,000
b. 200,000
c. 500,000
d. 1,200,000

Item 43 to 45. Alalay Bank loaned P5,000,000 to Faffy Company on January 1, 2015. The
terms of the loan require the principal payment of P5,000,000 to be made after 5 years on
December 31, 2019 and interest at 12% to be paid annually on December 31. The first
interest payment is due on December 31, 2015. Faffy Company made the required
interest payment during 2015. However, during 2016 Faffy Company began to experience
financial difficulties, which led to the default of the 2016 required interest payment. This
caused Alalay to reassess the collectibility of the loan. On December 31, 2017, Alalay did
not continue to accrue interest and determined that the remaining principal payment will
be collected but it is probable that the accrued interest further interest cannot be collected.
The probable timing and amount of collections is determined as follows:

December 31, 2018 500,000

December 31, 2019 1,000,000
December 31, 2020 1,500,000
December 31, 2021 2,000,000
The present value at 12% is as follows
For one period 0.89
For two periods 0.80
For three periods 0.71
For four periods 0.64

75. What is the loan impairment loss on December 31, 2017?

a. 2,010,000 c. 2,610,000
b. 1,410,000 d. 1,560,000
44. What is the interest revenue to be recognized in 2018?
 a. 600,000 c. 422,496
b. 430,800 d. 660,000
45. What is the carrying amount of this loan in Alalay’s books on December 31, 2018?
a. 4,020,800 c. 4,500,000
b. 3,520,800 d. 3,020,800

Item 46 to 47. On The following expenditures were incurred by Pinky Company in 2017:
Purchase of land with existing building P10,500,000
Fair value of old building 500,000
Land survey 400,000
Fees for title search for title of land 300,000
Building permit 250,000
Temporary quarters for construction crews 100,000
Payments of tenants of old building for vacating the premises 600,000
Payment to demolition company to raze the old building and clean up 400,000
Excavating basement 350,000
Special assessment tax for street project 60,000
Salvage value of materials from old building 110,000
Damages awarded for injuries sustained in construction 90,000
Costs of construction 20,000,000
Cost of paving parking lot adjoining the building 180,000
Cost of shrubs, trees and other landscaping 40,000

46. What is the cost of the land?

a. 11,860,000 c. 11,690,000
b. 11,750,000 d. 10,760,000

47. What is the cost of the building?

a. 20,700,000 c. 20,970,000
b. 20,880,000 d. 21,590,000
Item 48 to 50. On January 1, 2019, Kienn Company provided the following data in
connection with its defined benefit plan:

Fair value of plan assets 10,000,000

Projected benefit obligation 13,000,000
Prepaid /accrued benefit cost ( 3,000,000)

The accountant revealed the following information affecting the plan in 2019:
Current service cost 2,500,000
Past service cost – remaining vesting period of
employees covered by the plan is 5 years 1,000,000
Contribution to the plan 3,500,000
Benefits paid to retirees 3,000,000
Actual return on plan assets 1,500,000
Decrease in projected benefit obligation due to
changes in actuarial assumptions 400,000
Expected rate of return on plan assets 12%
Settlement discount interest rate 10%

48. What is the 2019 total employee benefit expense?

a. 4,800,000
b. 3,000,000
c. 3,800,000
d. 3,600,000

49. What is the remeasurement gain to be recognized in other comprehensive income in

2019?
a. 900,000
b. 800,000
c. 400,000
d. 100,000

50. What is the total or net defined benefit cost for 2019?
a. 3,800,000
b. 4,700,000
c. 2,900,000
d. 3,500,000
 Item 51 to 52. Presented below is information related to Cyril Corporation:

Common Stock, P10 par P480,000

Paid-in Capital in Excess of Par—Common Stock 55,000
Preferred 8 1/2% Stock, P5 par 200,000
Paid-in Capital in Excess of Par—Preferred Stock 40,000
Retained Earnings 150,000
Treasury Common Stock (at cost) 15,000

51. The total stockholders' equity of Hale Corporation is

a. P910,000.
b. P925,000.
c. P760,000.
d. P775,000.

52. The total paid-in capital (cash collected) related to the common stock is
a. P480,000.
b. P535,000.
c. P575,000.
d. P520,000.

53. Don Emilio Company issues 4,000 shares of its P5 par value common stock having a
fair value of P25 per share and 6,000 shares of its P15 par value preferred stock having a
fair value of P20 per share for a lump sum of P204,000. What amount of the proceeds
should be allocated to the preferred stock?

a. P182,750
b. P127,500
c. P111,273
d. P95,625

54. Written, Inc. has outstanding 500,000 shares of P2 par common stock and 100,000
shares of no-par 8% preferred stock with a stated value of P5. The preferred stock is
cumulative and nonparticipating. Dividends have been paid in every year except the past
two years and the current year.

Assuming that P 250,000 will be distributed as a dividend in the current year, how much
will the common stockholders receive?
a. Zero.
b. P130,000.
c. P170,000.
d. P210,000.
55. Assuming that P105,000 will be distributed as a dividend in the current year, how much
will the preferred stockholders receive?
a. P35,000.
b. P40,000.
c. P80,000.
d. P105,000.

56. Assuming that P305,000 will be distributed, and the preferred stock is also
participating, how much will the common stockholders receive?
a. P185,000.
b. P150,000.
c. P155,000.
d. P80,000.

Item 57 to 59 - At the beginning of year 1, an entity grants to a senior executive 30,000

share options. The grant is conditional upon the executive remaining in the entity’s employ
until the end of year 3.

The share options can be exercised if the entity’s share price increases from P20 at the
beginning of year 1 to above P30 at the end of year 3. If the share price is above P30 at
the end of year 3, the share options can be exercised at any time during the next five
years, i.e., by the end of year 8.

The entity estimates the fair value of the share options on grant date to be P5 per option.
This estimate takes into account the following market condition:
The possibility that the share price will exceed P30 at the end of year 3, i.e., the share
options become exercisable; and
The possibility that the share price will not exceed P30 at the end of year 3, i.e., the
share options will be forfeited.

The following actual events occurred in years 1 to 3:

Year 1
The share price has increased to P24. The entity’s estimate of the fair value of the
options is P4 at the end of year 1. This takes into account whether the market condition
will be satisfied by the end of year 3.
Year 2
The share price has decreased to P22. However, the entity remains optimistic that the
share price target will be met by the end of year 3.The estimated fair value of the share
options is P3. Again, this estimate takes into account the market condition noted above.
Year 3
The share price only reaches P28 by the end of year 3.The estimated fair value of the
share options is zero, as the market condition has not been satisfied.
57. Compensation expense for year 1

A. P30,000 B. P40,000 C. P50,000 D. P60,000

58. Compensation expense for year 2

A. P30,000 B. P40,000 C. P50,000 D. P60,000

59. Compensation expense for year 3

A. P 0 B. P30,000 C. P40,000 D. P50,000

Item 60 to 61. On January 1, 2019, an SME acquired 30% of the ordinary shares of an
investee for P1,000,000 plus transaction cost of P10,000. The SME used the cost model to
account for the investment in associate.The investee recognized a net loss of P500,00 for
2019 and paid dividends of P200,000 on December 31, 2019. The fair value of the
investment is P1,020,000 on December 31, 2019 and cost of disposal is estimated at
P40,000.

There is no published quotation for the investment in associate.

60. What is the carrying amount of the investment in associate in December 31, 2019?
a. 1,020,000 c.1,010,000
b. 950,000 d. 980,000

61. What is the carrying amount of investment in associate on December 3, 2019 assuming
there is a published price quotation?
a. 1,020,000 c. 1,010,000
b. 1,000,000 d. 980,000

Item 62 to 67. Word Company accounted for non-current assets using revaluation model.
On October 1, 2019, the entity classified a land as held for sale. At that date, the carrying
amount of the land was P5,000,000 and the balance in the revaluation surplus was
P1,500,000. At same date, the fair value of the land was estimated at P5,500,000 and the
cost of disposal at P100,000. On December 31, 2019, the fair value less cost of disposal
of the land did not change. The land was sold on January 31, 2020 for P6,000,000.

62. What is the adjusted carrying amount of the land on December 31, 2019.
a. 5,000,000 c. 5,400,000
b. 5,500,000 d. 3,500,000

63. What is the impairment loss for 2019?

a. 100,000 b. 400,000 c. 500,000 d. 0

64. What is the revaluation surplus on December 31, 2019?

a. 1,500,000 b. 2,000,000 c. 1,000,000 d. 1,900,000
65. What amount should be reported as gain on disposal of land in 2020?
a. 1,000,000 b. 2,600,000 c. 500,000 d. 600,000

66. What was the revaluation surplus on October 1, 2019?

a. 100,000 b. 400,000 c. 500,000 d. 0

67. What was the total revaluation surplus?

a. 1,000,000 b. 1,500,000 c. 2,000,000 d. 600,000

Items 68 to 72. Clear Company purchased equipment for P5,000,000 on January 1, 2019
with a useful life of 10 years and no residual value on December 31, 2019, the entity
clasiified the asset as held for sale. The fair value of the equipment on December 31, 2019
is P4,200,000 ad the cost of disposal is P50,000. On December 31,2020 the fair value of
equipment is P3,500,000 and the cost of disposal is P100,000. On December 31, 2020, the
entity believed that the criteria for classification as held for sale can no longer be met.
Accordingly, the entity decided not to sell the asset but to continue using it.

68. What is the impairment loss to be recognized on December 31, 2019?

a. 350,000 b. 300,000 c. 800,000 d. 750,000

69. What is the measurement of the equipment that ceases to be held for sale on Dec. 31,
2020?
a. 4,000,000 b. 3,500,000 c. 3,400,000 d. 4,150,000

70. What amount should be recognized as gain or loss as a result of the reclassification in
2020?
a. 750,000 gain b. 750,000 loss c. 150,000 gain d. 150,000 loss

71. What would be the recoverable amount of the equipment that ceases to be held for
sale on December 31, 2020 with the fair value of the equipment also decrease to
P3,000,000?
a. 3,500,000 b. 3,000,000 c. 2,900,000 d. 3,650.000

72. What would be the recoverable amount of the equipment that ceases to be held for
sale on December 31, 2020 with the fair value of P3,500,000?
a. 4,000,000 b. 3,400,000 c. 3,500,000 d. 4,050,000

73. PFRS 8 shall apply to the separate or individual financial statements of an entity, and to
the consolidated financial statements of a group with a parent:
1. Whose debt or equity instruments are traded in public market.
2.The files or is in the process of filing the consolidated financial statements with a
securities commission or other regulatory organization for the purpose of issuing any class
of instruments in a public market.

a. I only b. 2 only c. Neither 1 or 2 d. Both 1 & 2

Item 74 to 78 from Lonrev Company
Lovrev Company provided the following data for the current year.

Segment Revenue Profit (Loss) Assets

1 620,000 200,000 400,000
2 100,000 20,000 80,000
3 340,000 70,000 300,000
4 190,000 ( 30,000) 140,000
5 180,000 ( 25,000) 180,000
6 70,000 10,000 120,000
7 120,000 ( 20,000) 140,000
Others 380,000 ( 25,000) 140,000

* The “others” category includes five operating segments, none of which has revenue or
assets greater than P80,000 and none with an operating profit.

*Operating Segments 1 and 2 produce very similar products and use very similar
production processes, but serve different customer types and use quite different product
distribution system. These differences are due in part to the fact that Segment 2 operates
in a regulated environment while Segment 1 does not.

* Operating Segments 6 and 7 have very similar product distribution systems, but are
organized as separate divisions since they serve substantially different types of customers.
Neither Segments 6 and 7 operate in a regulated environment.

74. The total revenue of all operating segments are;

a. 2,000,000 b. 1,620,000 c. 1,930,000 d. 2,100,000

75. The reportable segments as far as revenue concerns are segments

a. 1, 2, 3, 4 & 5 b. 1, 3, 4 & 5 c. 1,2, 4 & 5 d. 1,2,3 & 5

76. The total revenue of the reportable segments is;

a.1,430,000 b. 1,330,000 c. 1,090,000 d. 1,240,000

77. The total percentage of the revenue of the reportable segments is;
a. 71.5% b. 62% c. 54.5% d. 66.5%

78. Which two reportable segments can be aggregated as one reportable segments based
on the four of five criteria?
a. 2 and 6 b. 2 & 7 c. 6 % 7 d. 6 and others
79. Ortiz Co. had the following account balances:
Sales revenue € 120,000
Cost of goods sold 60,000
Salaries and wages expense 10,000
Depreciation expense 20,000
Dividend revenue 4,000
Utilities expense 8,000
Rent revenue 25,000
Interest expense 12,000
Sales returns 11,000
Advertising expense 13,000

What amount would Ortiz report as other income and expense in its income statement?
a. €29,000 b.€17,000 c.€25,000 d. €13,000

80. Ortiz Co. had the following account balances:

Sales revenue € 180,000
Cost of goods sold 90,000
Salaries and wages expense 15,000
Depreciation expense 30,000
Dividend revenue 6,000
Utilities expense 12,000
Rent revenue 30,000
Interest expense 18,000
Sales returns 16,500
Advertising expense 19,500
What amount would Ortiz report as income from operations in its income statement?
a. €73,500 b.€45,000 c.€33,000 d.€15,000

81. For Mortenson Company, the following information is available:

Cost of goods sold ₤240,000
Sales discounts 8,000
Income tax expense 24,000
Operating expenses 92,000
Sales revenue 400,000

In Mortenson’s income statement, gross profit

a. should not be reported. c. should be reported at ₤152,000.

b. should be reported at ₤36,000. d. should be reported at ₤160,000.
82. For Rondelli Company, the following information is available:
Cost of goods sold €270,000
Sales returns and allowances 12,000
Income tax expense 27,000
Operating expenses 105,000
Sales revenue 450,000

In Rondelli's income statement, gross profit

a. should not be reported. c. should be reported at €168,000
b. should be reported at €36,000. d. should be reported at €180,000.

83. Gross billings for merchandise sold by Lang Company to its customers last year
amounted to €13,720,000; sales returns and allowances were €370,000, sales discounts
were €175,000, and freight-out was €140,000.
Net sales last year for Lang Company were

a. €13,720,000. c. €13,175,000
b. €13,350,000. d.€13,035,000

84.Use the following information (in thousands):

Service Revenue ¥1,600,000
Income from continuing operations 200,000
Net Income 180,000
Income from operations 440,000
Selling & administrative expenses 1,000,000
Income before income tax 400,000

Determine the amount of other income and expense.

a. ¥40,000 b. ¥160,000 c. ¥200,000 d.¥20,000

85.Fulton Company owns the following investments:

Trading securities (fair value) €70,000
Non-trading securities (fair value) 35,000
Held-for-collection securities (amortized cost) 47,000

Fulton will report investments in its current assets section of

a. €0.
b. exactly €70,000.
c. 70,000 or an amount greater than $70,000, depending on the circumstances
d. exactly €105,000.
Item 86 to 87. Ernst Company purchased equipment that cost $750,000 on January 1,
2017. The entire cost was recorded as an expense. The equipment had a nine-year life
and a $30,000 residual value. Ernst uses the straight-line method to account for
depreciation expense. The error was discovered on December 10, 2019. Ernst is subject to
a 40% tax rate.

86. Ernst’s net income for the year ended December 31, 2017, was understated by
a. $402,000. b. $450,000. c. $670,000. d. $750,000.

87. Before the correction was made and before the books were closed on December 31 ,
2019, retained earnings was understated by
a. $332,000. b. $336,000. c. $354,000. d. $450,000.

88. Which of the following should be reported as a prior period adjustment?

Change in Change from
Estimated Lives Unaccepted Policy
of Depreciable Assets to Accepted Policy
a. Yes Yes
b. No Yes
c. Yes No
d. No No

Item 89.The PG13 ledger showed a balance on its cash account at December 31, 2017 of
P363,000 which was determined to consist of the following:

Petty cash fund* 5,000

Payroll Account – Love Bank 60,000
Restricted foreign bank account 25,000
Tbills, due 3/30/2018 (purchased 12/31/16) 70,000
Tbills, due 1/31/2018 (purchased 5/1/16) 40,000
Demand deposit – Trust bank (overdraft) (20,000)
Cash in Bank – Wise Bank** 90,000
Cash set aside for the acquisition of equipment to
Be disbursed 4months after BS date 30,000
Bond sinking fund 45,000
DAUD/DAIF check 10,000
Cash surrender Value 8,000

*Including expense receipts of 1,000, IUO’s of 500 and Employees PDC of 200
**Net of undelivered check payable to creditors of P30,000.

89. How much is the amount of Cash and Cash Equivalents at December 31, 2017?
a. 253,300
b. 183,300
c. 283,300
d. 223,300
Item 90 to 91. You were hired by Russell Corporation to examine their accounts for the
year ended December 31, 2017 and the following are the items disclosed in your
examination of petty Cash account. A surprise count of cash and cash items was
conducted on January 5, 2017. The company has a petty cash fund of P55,000 which is
maintained on an Imprest basis. The cash count sheet disclosed the following:

Bills and coins 28,750

Petty cash vouchers:
Date Description Amount
Dec. 27 Transpo exp 9,800
Dec. 31 Postage stamps 2,700
Jan. 2 Repair of sound system 3,200
Jan. 4 Representation exp 1,250

90. What is the correct amount of petty cash fund on December 31, 2017?
a. 33,200
b. 28,750
c. 42,500
d. 55,000

91. What is the amount of Shortage/Overage?

a. 0
b. 21,800
c. 9,300
d. 12,500

92. Kenya Company prepared an aging of its accounts receivables at December 31, 2017
and determined that the estimated uncollectible on that date was P85,000. During
2017, some customers’ accounts were written off. Additional information is available
as follows:
Allowance for bad debts at 12/31/2017-credit balance P 63,000
Accounts written off 18,000
Accounts receivable at 12/31/17 600,000
Uncollectible accounts recovery during 2017 12,000

How much is the bad debts expense that should be reported in the income statement for
the year 2017?

a. 52,000 c. 28,000
b. 40,000 d. 85,000
93. Japan Company uses the balance sheet approach in estimating uncollectible accounts
expense. An aging analysis of accounts receivable at December 31, 2017 disclosed
the following information:

Age Group Total %considered uncollectible

Not yet due P 500,000 1
1-30 days past due 300,000 3
31-60 days past due 100,000 10

What is the net realizable value for Japan Company’s accounts receivable at December
31, 2017?
a. 19,000 c. 900,000
b. 24,000 d. 876,000

Item 94 to 95. On January 1, 2017, Taiwan Company sold a tract of land for P5,250,000 to
Taipei Company. Taipei Company paid P1,250,000 down and signed a non-interest
bearing note for the balance which is due on January 1, 2021. There was no established
exchange price for the land and the note had no ready market. The prevailing interest rate
for this type of the note was 12%.

94. How much is the interest income for the year 2018?
a.305,040 c. 480,000
b.341,645 d. 382,642

95. How much is the carrying value of the note on December 31, 2017?
a. 4,000,000 c. 2,847,040
b. 3,188,684 d. 2,542,000

96. How much is the current portion of the note on December 31, 2017?
a. 305,040 c. 0
b. 341,645 d. 2,847,040

Item 97 to 98. Russia Company accepted a P400,000 face value six-month 10% note
dated May 15 from a customer. On that same date, Russia discounted the note at Moscow
bank at 12% discount rate.

97. How much cash should Russia receive from the bank on May 15?
a. 376,000 c. 374,800
b. 394,800 d. 369,600

98. Assume that Russia discounted the note four months prior to its maturity date, what is
the proceeds from discounting the note?
a. 403,200 c. 420,000
b. 411,600 d. 386,400
Item 99 to 100. On July 1, 2017, Venezuela Corporation sold (discounted) two, P40,000
interest bearing notes receivable to the Caracas Bank without recourse. Note A as a one-
year, 10% note that will mature on December 1, 2017. Note B was a six-month, 8% note
that will mature on October 31, 2017. The bank’s discount rate was 15%.

99. How much is the net proceeds from the discounting of Note A?
a. 44,000 c. 37,400
b. 40,150 d. 41,250
100. What is the gain or loss on the sale of the Note B?
a. 480 c. 1,546
b. 1,013 d. 0

Trust in the LORD with all your heart and lean not on your own understanding; in
all your ways submit to him, and he will make your paths straight.

Proverbs 3:5-6