1. Smart company has the following financial assets as of Dec. 31, 2013: A P300,000 a/r that is not held for trading An P800,000 investment in an equity instrument quoted in an active market that is not held for trading. A 500,000 investment in equity instrument that is not held for trading does not have a quoted price, and

whose fair value cannot be reliably measured. A 600,000 purchased debt security with the objective to hold the asset to collect the contractual cash flows

that are solely payment of interest and principal. A 700,000 purchased debt security in an active market that Smart Company plans to hold to maturity. Smart

Company has a business model with the objective of trading the security to make profit for changes in the fair value of debt securities.

A 400,000 investment in an equity instrument that is quoted in an active market. Smart Company has no intention to sell the investment.

A 600,000 investment in an equity that is held for trading.

Q1. What amount of financial assets- measured at amortized cost?a. 300,000 b. 600,000 c. 700,000 d. 900,000

Q2. What amount of financial asset under the category – investment in equity through profit or loss should be separately reported in the Dec. 31, 2013 statement of financial position?

a. 300,000 b. 600,000 c. 700,000 d. 900,000Q3. What amount of financial asset under the category – investment in equity through other comprehensive income should be separately reported in the Dec. 31, 2013 statement of financial position?

a. 1,200,000 b. 1,300,000 c. 1,700,000 d. 2,400,000

2. The financial records of Food, Inc., were destroyed by fire at the end of 2013. Fortunately, the controller had kept certain statistical data related to the income statement as presented below:

The beg merchandise inventory was 92,000 and decreased by 20% during the year. Sales discounts amount to 17,000. 20,000 ordinary shares were outstanding for the entire year. Interest expense was 20,000. The income tax rate is 35%. Cost of goods sold amounts to 500,000. Administrative expenses are 20% of cost of goods sold but only 8% of gross sales. 4/5 of the operating expenses relate to sales activities.

How much is the net profit in the year 2013?a. 113,000 b. 132,400 c. 138,450 d. 213,000

3. Video Company began operation in 2009. An examination of the company’s allowance for bad debts reveals the following:

Estimated Bad Debts Actual Bad Debts2009 44,000 27,0002010 52,000 40,8002011 66,000 53,7002012 No adjustment yet 57,000

In the past, the company estimated that 3% of credit sales will be uncollectible. The company has determined that the percentage used in estimating bad debts has been inappropriate; the new estimate revealed that bad debts should be 1.5% of sales.

What is the net amount of adjustment to the beginning balance of the accumulated profits on January 1, 2012 as a result of the change in accounting estimate?

a. None b. 12,300 c. 40,500 d. 42.000

4. On January 1, 2008, Ortiz Company purchased heavy equipment for P10, 560,000 and it is the company’s policy to depreciate under the straight line method. The heavy equipment has a useful economic life of eight years. On Jan. 1, 2011, due to the physical wear of the equipment, the company determined that the said asset had the remaining useful life of 3 years from the change and will the company reliably determined that the asset have a salvage value of 960,000. An accounting change was made in 2011 to reflect these additional data.

How much should be the balance of the accumulated depreciation for this asset on Dec. 31, 2011?a. 5,840,000 b. 6,160,000 c. 6,400,000 d. 7,040,000

5. During 2012, Chooks Company decided to change from FIFO method to weighted average method of inventory valuation. Inventory balances under each method were as follows:

FIFO Weighted-Average MethodJan. 1 1,420,000 1,540,000Dec. 31 1,580,000 1,660,000Income tax rate is 35%

In its year 2012 statement of retained earnings, what amount should Chooks report as the effect of this accounting change?

a. None b. 78,000 c. 80,000 d. 120,000

6. Paula Company’s 190,000 net income for the quarter ended Sept. 30,2011 included the following after tax items: A 120,000 gain on disposal of equipment, realized on April 30, 2011 was allocated equally to the 2nd, 3rd, and

4th quarters. A 32,000 cumulative effect loss resulting from a change in inventory valuation method was recognized on

August 4, 2011.In addition, Paula paid 96,000 on Feb. 1, 2011 calendar year property taxes, of this amount, 24,000 was allocated to the 3rd quarter of 2011.

For the quarter ended Sept. 30, 2011, how much should Paula report as net income?a. 182,000 b. 206,000 c. 222,000 d. 230,000

7. On March 15, 2011, Paula Company paid property taxes of 180,000 on its factory building for calendar year 2011. On April 1, 2011, Paula made 300,000 in anticipated repairs to its plant equipment. The repairs will benefit operations for the remainder of the calendar year.

How much should be the total expenses to be included in Paula’s quarterly income statement for the three months ended June 30, 2011?

a. 75,000 b. 145,000 c. 195,000 d. 345,000

8. Friends Company and its divisions are engaged solely in manufacturing operations. The following data pertain to the industries in which operations were conducted for the year ended Dec. 31, 2013:Segments Revenue from outsiders Revenue from within Operating Profit Identifiable assets A 18,000,000 2,000,000 3,600,000 40,000,000 B 13,000,000 3,000,000 2,800,000 36,000,000 C 5,000,000 7,000,000 2,400,000 28,000,000 D 4,500,000 1,500,000 1,200,000 16,000,000 E 5,400,000 3,600,000 1,400,000 14,000,000 F 3,000,000 ------0------ 600,000 6,000,000Total 48,900,000 17,100,000 12,000,000 140,000,000

In its segment information for 2013, how many reportable segments does Friends have?a. 6 b. 5 c. 4 d. 3

9. June Company has three lines of business, each of which was determined to be reportable segment. June sales aggregated 15,000,000 in 2014 of which segment #1 contributed 40%. Traceable costs were 3,500,000 for September to November out of a total of 10,000,000 for the company as a whole. For internal reporting, June allocates common costs of 3,000,000 based on the ratio of a segment’s income before common costs.

In its 2014 financial statements, how much should June report as operating profit for segment #1?a. 750,000 b. 1,000,000 c. 1,500,000 d. 2,000,000

10. On December 31, 2011, Ako Company has the following information concerning its cash and cash equivalents and some other items:

Coins and currency 50,000Checks received from customers 600,000Certificate of deposit, term: 12 months 800,000Petty cash fund 4,000Postage stamps 600Bank A, checking account balance 2,100,000Post-dated check, customer 10,000Money order from customer 15,000Cash in savings account 100,000Bank draft from customer 40,000Utility deposit to Gas Company, refundable 5,000Cash advance received from customer 8,000NSF check, C. Company 20,000Cash advance to company executive, collectible upon demand 200,000Bank B, checking account, overdraft 20,000IOUs from employees 12,000

What amount of cash and cash equivalents should Ako Company report in its December 31, 2011 statement of financial position?

a. 2,869,000 b. 2,874,000 c. 2,882,000 d. 2,909,000

11. While checking the cash accounts of Roneal Company on December 31, 2014, you find the following information:Balance per books 67,760Balance in checking account (outstanding checks per books of 9,876) 65,323Deposit in bank closed by BSP 16,000Deposit in transit 12,345Currency and coins counted 9,500Petty cash fund (of which 450 is in the form of paid vouchers) 1,000Bank charges not yet taken up in the books 58Bond sinking fund- cash 10,000Receivables from employees 700Book error in recording a check, the correct amount as paid by the bank

is 890 instead of 980 as recorded in the books, or a difference of 90

Q1. What is the correct cash in bank balance for Roneal Company on December 31, 2014?a. 55,415 b. 67,792 c. 70,229 d. 83,792

Q2. What is the correct cash on hand balance for Roneal Company on December 31, 2014?a. 9,500 b. 10,050 c. 12,895 d. 19,500

12. Ladlad Corporation keeps all its cash in checking account. An examination of the company’s accounting records and bank statement for the month ended December 31, 2014 revealed the following information:

The cash balance as of December 31, 2014 represents:Bank statement balance 84,690Book balance 85,240

A deposit of 9,500 through the bank’s night depository box on December 29, 2014 did not appear on the bank statement. The bank statement shows that on December 28, 2014, the bank collected a note for Ladlad and credited the proceeds of 9,350 to the company’s account. The proceeds include

13. Shown below is the bank reconciliation for Central Company for May 2014:Balance per bank, May 31, 2014 300,000Deposit in transit 48,000Outstanding checks (56,000)Bank credit recorded in error (20,000)Cash balance per book, May 31, 2014 328,000

The bank statement for June 2014 contains the following data:Total deposits 220,000Total charges, including an NSF of 16,000

and service charge of 800 192,000

All outstanding checks on April 30, including the bank credit, were cleared in May 31. There were outstanding checks of 60,000 and deposit in transit of 76,000 on May 31, 2014.

What is the cash balance per bank on June 30, 2014?a. 300,000 b. 328,000 c. 344,000 d. 344,800

14. On December 31, 2011, the “Receivables” account of Con Company shows an amortized cost of 1,950,000. Subsidiary details show the following:

Trade accounts receivable, 775,000; trade notes receivable, 100,000; installment receivable, normally due one year to two years, 300,000; customer’s accounts reporting credit balances arising from sales returns, 30,000; advance payments for purchase of merchandise, 150,000; customer’s accounts reporting credit balances arising from advance payments, 20,000; cash advances to subsidiary, 400,000; claims from insurance company, 15,000; subscription receivable due in 60 days, 300,000; accrued interest receivable, 10,000.

How much should be presented as “trade and other receivables” under current assets?a. 725,000 b. 1,125,000 c. 1,290,000 d. 1,650,000

15. The balances of selected accounts taken from the December 31, 2010 of Adventure Company are shown below:Accounts receivable 674,000Allowance for bad debts 24,000

The following transactions (in summary) affecting A/R occurred during the year ended December 31, 2011:Sales (all on account, terms, 2/10, 1/15, n/60) 3,000,000Cash received from customers 3,200,000The cash received includes the following: Customers paying w/in the 10-day discount period 1,764,000 Customers paying w/in the 15-day discount period 990,000 Recovery of accounts written off 6,000

Customers paying beyond discount period ?A/R written off as worthless 22,000Credit memo for sales return 12,000

It is the company’s policy to provide for uncollectible accounts equal to 1% of sales.How much is the carrying value of the A/R as of December 31, 2011?

a. 362,000 b. 368,000 c. 400,000 d. 406,000

16. On December 1, 2011, Hero Company assigned 400,000 of A/R to Halo Company as a security for a loan of 335,000. Hero charged a 2% commission on the amount of the loan; the interest rate on the note was 10%. During December, Hero collected 110,000 on assigned A/R after deducting 380 discounts. Hero accepted returns worth 1,350 and wrote off A/R totaling 2,980.

What is the carrying value of the A/R assigned as of December 31, 2011?a. None b. 285,290 c. 289,620 d. 290,000

17. The following information for 2006 is provided by Guam Company: Sales 50,000,000 Cost of Sales 30,000,000 Selling Expenses 5,000,000 General and Administrative Expenses 4,000,000 Interest Expense 2,000,000 Gain on early extinguishment of long term debt 500,000

Correction of Inventory error, net of income tax-credit 1,000,000Investment Income-equity method 3,000,000Gain on expropriation 2,000,000Income tax expense 5,000,000

Dividends declared 2,500,000What is the amount of finance cost?

a. 1,200,000 b. 2,000,000 c. 1,500,000 d. 1,800,000

18. On January 1, 2004, Loyal Company purchased an equipment for P8, 000,000. The equipment is depreciated using straight line method based on a useful life of 8 years with no residual value. On January 1, 2007, after 3 years, the equipment was revalued at a replacement cost of 12,000,000 with no change in residual value. On June 30, 2007, the equipment was sold for 10,000,000. What is the effect of the June 30, 2007 transaction to the retained earnings?

a. 2,500,000 increase c. 5,000,000 increaseb. 3,250,000 increase d. 5,750,000 increase

19. A natural resources property was purchased by Nge Wang Company for 6,000,000. The output was estimated to be 1,500,000 tons. Nge Wang Company purchased a mining equipment at a cost of 8,000,000 and has a useful life of 10 years but is capable of exhausting the resource in8 years. Production is as follows: 1st Year 150,000 tons 2nd Year 225,000 tons 3rd Year None 4th Year 225,000 tonsWhat is the carrying amount of the mining equipment at the end of four years?

a. 4,800, 000 b. 4,000,000 c. 4,200,000 d. 4,500,000

20. Lathan Company was organized on January 1,2006 with the following capital structures:12%Cumulative preference share,P100 par ,with liquidation value of P120,50,000 shares authorized, issued

and outstanding 20,000 shares,P2,500,000. Ordinary Share Capital, par value P50, authorized 80,000 shares, issued and outstanding 20,000 shares,

P1, 200,000.The net income for the years December 31, 2006 and December 31, 2007 were P2, 000,000 and 3,000,000, respectively. No dividends were declared. What is the December 31, 2008 book value per ordinary share?

a. 256 b. 260 c. 291 d. 285

21. Felicia Co. owns 20% royalty interest in an oil well. Felicia receives royalty payments on January 31 for the oil sold between June 1 and November 30, and July 30 for oil sold between December 1 and May 31 Production report shows the following sales: June 1, 2006-November 30, 2006 4,050,000 December1, 2006-December 31, 2006 675,000 December 1, 2006-may 31, 2007 5,400,000 June 1, 2007-November 30, 2007 4,387,500 December 1, 2007-December31, 2007 945,000What amount should Felicia report as royalty revenue for 2007? a. 1, 890,000 b. 1, 944,000 c. 2, 011,500 d. 2, 146,000

22. Assume the following balances at the end of the current year: Capital Liquidated 1,800,000 Accumulated Depletion 2,500,000 Retained Earnings 1,500,000 Depletion based on 50,000 units extracted @P20 per unit 1,000,000 Inventory of resource deposit 5,000 units What is the maximum dividend that can be declared by the company?

a. 2,100,000 b. 2, 000,000 c. 2, 200,000 d. 1, 500,000

23. Marie Company sells gift certificates redeemable only when merchandise is purchased. These gift certificates have an expiration date of two years after issuance date. Upon redemption or expiration, Marie recognizes the unearned revenue as realized. Information for 2007 as follows: Gift certificate payable 12/31/2006 520,000 Gift certificate payable 12/31/2007 680,000 Gift certificate redeemed 1,560,000 Expired gift certificates 80,000 Cost of goods sold 80% How much Gift certificates sold during the year?

a. 1,800,000 b. 1,500,000 c. 1,640 ,000 d. 1,760,00024. Zee Company provided the following informations concerning its defined benefit plan in its memorandum records on

January 1, 2007. Fair Value of plant assets 5,100,000 Unamortized past service cost 210,000 Unrecognized Actuarial Loss 610,000 Projected Benefit Obligation (4,500,000) Prepaid/Accrued benefit cost 1,410,000During the current year, the entity determined that its Current service cost was 600,000 and the interest cost is 10%. The expected return was 10% but the actual return was 12%. Past service cost and any actuarial gain or loss should be amortized over 10 years. Other related information is as follows: Contribution to the plan 720,000 Benefits paid to retirees 900,000 Decrease in PBO due to changes in actuarial assumptions 120,000What is the balance of prepaid/ accrue benefit cost account on December 31, 2007?

a. 1,530,000 b. 1,560,000 c. 1,770,000 d. 1,680,000

25. PRC Company began selling a new calculator that carried a two year warranty against defects in 2007. PRC projected the estimated warranty cost (as a percent of sales) as follows: First year warranty 4% Second year warranty 10%

Sales and actual warranty repairs were: 2007 2008

Sales 5,000,000 9,000,000 Actual warranty repairs 390,000 900,000

What is the estimated warranty liability on December 31, 2007?a. 670,000 b. 790,000 c. 700,000 d. 650,000

26. On December 31, 2007 Colt Company is experiencing extreme financial pressure and is in default in meeting interest payment on its long term note of P6, 000,000 due on December 31, 2009. The interest rate is 12% payable every December 31.

In an agreement with the creditor, Colt obtained the following changes in the terms of note:a. The accrued interest on December 31, 2007 is forgiven.b. The principal is reduced by 500,000.c. The new interest rate is 8%.d. The new date of maturity is December 31, 2011.

The present value of 1 at12% for four periods is 0.6355 and the present value of an ordinary annuity of 1 at 12% for four periods is 3.0373.

How much is the gain or loss on extinguishment?a. 2,504,750 b. 1,168,338 c. 1,888,338 d. 0

27. East Company leased machinery from Chin Company on January 1, 2007 for a 10-year period (useful life of 20 years) Equal annual payments under the lease are P200,000 and are due on January 1 of each year starting January 1, 2007.The present value at January 1, 2007 of the lease payments over the lease term discounted at 10% was 1,352,000. The lease was appropriately accounted for as finance lease by East because there is a very nominal bargain purchase option.

What is interest expense for 2008?a. 106,720 b. 115,200 c. 200,000 d. 0

28. The Cloak Corporation received the following report from its actuary at the end of the year:01/01/06 01/31/06

Unrecognized past service cost 500,000 450,000 Accumulated benefit obligation 6,000,000 6,400,000 Fair Value of pension plan assets 5,800,000 6,276,000 Actuarial net gain 800,000 ? Benefits paid during the year 680,000 Contribution made during the year 520,000 Current service cost 495,000 Expected rate of return 10% Settlement rate 12% Ave. working lives of employees 20 years

What is the amount of net benefit expense to be charged against income for the year 2006?a. 675,000 b. 685,000 c. 716,000 d. 875,000

29. In 2004, Power Designs Corporation sold a layout design to Mass,Inc. and will receive royalties of future revenues associated with the said layout design. On December 31,2005, Power Designs reported royalties receivable of

P75,000 from Mass, Inc. During 2006, Power Designs received royalty payments of P200,000. Mass,Inc. reported revenues of P1,500,000 in 2006 from the layout design.

In its 2006 Income Statement, what amount should Power Designs report as royalty revenue?a. 125,000 b. 175,000 c. 200,000 d. 300,000

30. The Puncher Co. launched a sales promotional campaign on June 30, 2006. For every ten empty packs returned to Puncher, customers will receive an attractive food container. The company estimates that only 30% of the packs reaching the market will be redeemed. Additional information are as follows:

Units Amount Sales of food packs 3,000,000 P9,000,000Food containers purchased 60,000 180,000Prizes distributed to customers 37,000

At the end of the year, Puncher recognized a liability equal to the estimated cost of potential prizes outstanding.What is the amount of this estimated liability?

a. 69,000 b. 90,000 c. 159,000 d. 180,000

31. Green Company has 2,000,000 shares of ordinary shares outstanding on December 31, 2005. An additional 100,000 shares are issued on April 1, 2006 and 240,000 more on September 1. On October 1, Green issued P3,000,000 of 9% convertible bonds. Each bond is convertible into 40 shares of ordinary shares. At the time of issue of the convertible bonds, the market rate of the bonds without conversion option is equal to its nominal rate. No bonds have been converted.

The number of shares to be issued in computing basic earnings per share and diluted earnings per share on December 31, 2006 would be:

a. 2,155,000 & 2,155,000 b. 2.155.000 & 2,275,000 c. 2,155,000 d. 2,540,000

32. The following differences between financial and taxable income were reported by Dider Corporation for the current year:

(a) Excess of tax depreciation over book depreciation P60,000(b) Interest revenue on municipal bonds 9,000(c) Excess of estimated warranty expense over actual expenditures 54,000(d) Unearned rent received 12,000(e) Fines paid 30,000(f) Excess of income reported under percentage-of-completion accounting for financial

reporting over completed-contract accounting used for tax reporting . 45,000(g) Interest on indebtedness incurred to purchase tax-exempt securities 3,000(h) Unrealized losses on marketable securities recognized for financial reporting 18,000

Assume that Dider Corporation had pretax accounting income [before considering items (a) through (h) of P900,000 for the current year. Compute the taxable income for the current year.

a. 903,000 b. 990,000 c. 870,000 d. 750,000

33. On January 1, 2008, Bray Company purchased for 240,000 a machine with a useful life of ten years and no salvage value. The machine was depreciated by the double declining balance method and the carrying amount of the machine was 153,600 on December 31, 2009. Bray changed retroactively to the straight-line method on January 1, 2010. Bray can justify the change. What should be the depreciation expense on this machine for the year ended December 31, 2010?

a.15,360 b.19,200 c.24,000 d.30,720

34. During 2010, Orca Corp. decided to change from the FIFO method of inventory valuation to the weighted-average method. Inventory balances under each method were as follows:

FIFO Weighted-averageJanuary 1, 2010 71,000 77,000December 31, 2010 79,000 83,000Orca’s income tax rate is 30%.

In its 2010 financial statements, what amount should Orca report as the cumulative effect of this accounting change?a.2,800 b.4,000 c.4,200 d.6,000

35. Down Co. bought a trademark from Cater Corp. on January 1, 2008, for P112,000. An independent consultant retained by Down estimated that the remaining useful life is 50 years. Its unamortized cost on Cater's accounting records was P56,000. Down decided to write off the trademark over the maximum period allowed. How much should be amortized for the year ended December 31, 2008?

a. P1,120. b. P1,400. c. P2,240. d. P2,800.

Use the following information for questions 36 and 37

On January 2, 2008, Hernandez, Inc. signed a ten-year non-cancelable lease for a heavy duty drill press. The lease stipulated annual payments of P70,000 starting at the end of the first year, with title passing to Hernandez at the expiration of the lease. Hernandez treated this transaction as a capital lease. The drill press has an estimated useful life of 15 years, with no salvage value. Hernandez uses straight-line depreciation for all of its plant assets. Aggregate lease payments were determined to have a present value of P420,000, based on implicit interest of 10%.

36. In its 2008 income statement, what amount of interest expense should Hernandez report from this lease transaction?a. P0. b. P26,250 c. P35,000. d. P42,000.

37. In its 2008 income statement, what amount of depreciation expense should Hernandez report from this lease transaction?

a P70,000. b. P46,667. c. P42,000. d. P28,000.

38. On October 31, 2008, Beta Company engaged in the following transactions:

Obtained a P500,000, six-month loan from City Bank, discounted at 12%. The company pledged P500,000 of accounts receivable as security for the loan.

Factored P1,000,000 of accounts receivable without recourse on a non notification basis with Hype Company. Hype charged a factoring fee of 2% of the amount of receivables factored and withheld 10% of the amount factored.

What is the total cash received from the financing of receivables?a. P1,320,000 b. P1,350,000 c. P1,380,000 d. P1,470,000

39. The closing inventory of Gandhi Company amounted to P284,000 at December 31, 2008. This total includes two inventory lines about which the inventory taker is uncertain.

Item 1- 500 items which had cost P15 each and which were included at P7,500. These items were found to have been defective at the balance sheet date. Remedial work after the balance sheet date cost P1,800 and they were then sold for P20 each. Selling expenses were P400.

Item 2- 100 items that had cost P10 each but after the balance sheet date, these were sold for P8 each with selling expenses of P150.

What figure should appear in Gandhi’s balance sheet for inventory?a. P283,650 b. P283,950 c. P284,000 d. P284,300

40. In reconciling the Cash in bank of Yna Company with the bank statement balance for the month of November 2008, the following data are summarized:

Book debits for November, including October CM for note collected, P60,000 P 800,000Book credits for November, including NSF of P20,000 and service charge of P800 for October 620,000Bank credits for November including CM for November for bank loan

of P100,000 and October deposit in transit for P80,000 700,000

Bank debits for November including October outstanding checks of P170,800 and November service charge of P200 600,000

What is the amount of outstanding checks for November ? a. P 20,000 b. P170,200 c. P171,000 d. P191,000

41. On April 1, 2012, GRINGOTS Company established an imprest petty cash fund for P10,000 by writing a check drawn against its general checking account. On April 30, the fund contained the following:

Currency and coins P3,000Receipts for Office Supplies 4,000Receipts for postage (still unused) 2,000Receipts for transportation 600

On April 25, the company wrote a check to replenish the fund. What is the amount of replenishment under the imprest fund system?

a. P7,000 b. P6,600 c. P10,000 d. P3,000

42. Loeb Corp. frequently borrows from the bank in order to maintain sufficient operating cash. The following loans were at a 12% interest rate, with interest payable at maturity. Loeb repaid each loan on its scheduled maturity date.

Date of loan Amount Maturity date Term of loan11/1/2009 5,000 10/31/2010 1 year2/1/2010 15,000 7/31/2010 6 months5/1/2010 8,000 1/31/2011 9 months

Loeb records interest expense when the loans are repaid. As a result, interest expense of 1,500 was recorded in 2010. If no correction is made, by what amount would 2010 interest expense be understated?

a. 540 b. 620 c. 640 d. 720

43. During 2010, Paul Company discovered that the ending inventories reported on its financial statements were incorrect by the following amounts:

2008 $60,000 understated2009 75,000 overstated

Paul uses the periodic inventory system to ascertain year-end quantities that are converted to peso amounts using the FIFO cost method. Prior to any adjustments for these errors and ignoring income taxes, Paul’s retained earnings at January 1, 2010, would be

a. Correct. b. 15,000 overstated. c. 75,000 overstated. d. 135,000 overstated

44. The Atikako Company commenced the construction of a new packaging plant on 1 February 2011. The cost of 1,800,000 was funded from existing borrowings. The construction was completed on 30 September 2011. Atikako’s borrowings during 2011 comprised:

Loan from Largo Bank: 800,000 at 6% per annum;Loan from Andante Bank: 1 million at 6.6% per annum; andLoan from Allegro Bank: 3 million at 7% per annum.

In accordance with PAS23 Borrowing costs, the amount of borrowing costs to be capitalized in relation to the packaging plant is

a. 0 b. 121,500 c. 81,000 d. 91,125

45. During the year ended 31 December 2011 the following events occurred at The Unggoy Company: It was decided to write off 80,000 from inventory which was over two years old as it was obsolete. Sales of 60,000 had been omitted from the financial statements for the year to 31 December 2010.

According to PAS8 Accounting policies, changes in accounting estimates and errors, how much should be shown as a prior period adjustment in Unggoy's financial statements for the year to 31 December 2011?

a. 60,000 b. 140,000 c. 80,000 d. 20,000

46. On 1 January 2012 The Deca Company borrowed 6 million at an annual interest rate of 10% to finance the costs of building an electricity generating plant. Construction commenced on 1 January 2012 and cost 6 million. Not all the cash borrowed was used immediately, so interest income of 80,000 was generated by temporarily investing some of the borrowed funds prior to use. The project was completed on 30 November 2012. What is the carrying amount of the plant at 30 November 2012?

a. 6,000,000 b. 6,470,000 c. 6,520,000 d. 6,550,000

47. The Rattigan Company purchases PHP20,000 of bonds. The asset has been designated as one at fair value through profit and loss. One year later, 10% of the bonds are sold for PHP4,000. Total cumulative gains previously recognized in Rattigan's financial statements in respect of the asset are PHP1,000. In accordance with IAS39 Financial instruments: recognition and measurement, what is the amount of the gain on disposal to be recognized in profit or loss?

a. 1,900 b. 900 c. 2,000 d. 1,000

48. The Boys Company leased a freehold building for 20 years, the useful life of the building, with effect from 1 January 2012. At that date the fair value of the leasehold interest was 7.5 million of which 6.0 million was attributable to the building. Annual rentals of PHP800,000 are payable in advance on 1 January.

How much should Minor recognized as an operating lease expense in the year ended 31 December 2012, according to PAS17 Leases?

a. Nil b. 640,000 c. 160,000 d. 800,000

49. An entity grants to an employee the right to choose either 1,000 phantom shares, ie a right to a cash payment equal to the value of 1,000 shares or 1,200 shares. The grant is conditional upon the completion of three years service.

At grant date, the entity’s share price is P 50 per share. At the end of years 1 and 2, the share price is P 52 and P 55 respectively. The entity estimates that the grant date fair value of the share alternative is P 48 per share.

Computer for the amount to be recognize as compensation expense in year 2.a. 21,867 b. 15,750 c. 14,000 d. 15,050

50. On January 1, 2009 Nestorio Company purchased a uranium mine for 800,000. On that date, Nestorio estimated that the mine contained 1,000 tons of ore. At the end of the productive years of the mine, Nestorio Company will be required to spend 4,200,000 to clean up the mine site. The appropriate discount rate is 8%, and it is estimated that it will take approximately 14 years to mine all of the ore. Major uses the productive output method of depreciation. During 2009, Nestorio extracted 100 tons of ore from the mine. Compute the amount of depreciation for 2009.

a. 114,408 b. 80,000 c. 223,000 d. 500,000

51. The Bading Company uses cash basis accounting for their records. During 2009, Bading collected 500,000 from its customers, made payment of P 200,000 to its suppliers for inventory, and paid 140,000 for operating costs. Bading wants to prepare accrual basis statements. In gathering information for the accrual bass financial statements, Bading discovered the following:

Customers owed Evita 50,000 at the beginning of 2009 and 35,000 at the end of 2009. Bading owed suppliers 20,000 at the beginning of 2009 and 27,000 at the end of 2009. Bading’s beginning inventory was 42,000 and its ending inventory was P44,000. Bading had prepaid expenses of 5,000 at the beginning of 2009 and 7,400 at the end of 2009. Bading had accrued expenses of 12,000 at the beginning of 2009 and 19,000 at the end of 2009. Depreciation for 2009 was 51,000.

Determine the accrual basis net income of Bading Company for the year ended December 31, 2009a. P 84,400 b. P 79,600 c. P 91,400 d. P 98,400

52. On December 1, 2009, Supportme Co. gave Supportyou Co . a 200,000 11% loan. Supportme paid proceeds of 194,000 after the deduction of a 6,000 non refundable loan origination fee. Principal and interest are due in 60 monthly present value of 200,000 and 12.4% at a present value of 194,000. What amount of income from this loan should Supportme report in its 2009 income statement?

a. 0 b. 1,833 c. 2,005 d. 7,833

53. On January 1, 2009, the lending company made a P 200,000 8% loan. The interest is receivable at the end of each year, with the principal amount to be received at the end of 5 years. As of December 31, 2009, the interest for the current year has not been received nor recorded because the borrower is experiencing financial difficulties. The lending company negotiated a restructuring of the loan. The payment of all of the interest based on the original will be delayed until the end the 5 year loan term. In addition, the amount of principal repayment will be dropped from P 200,000 to P 100,000. The prevailing interest rate for similar type of the loan as of December 31, 2009 is 10%.

The loan impairment loss to be recognize in 2009 profit or loss isa. P 67,700 b. P 73,506 c. P 77,492 d. P 0

54. Windom Corp. on January 1, 2007 granted share options for 100,000 share of its P10 par value ordinary shares to its key employees. The market price of the ordinary share on that date was P 23 per share and the option price was P 20. The Black Scholes option pricing model determines total compensation expense to be P 600,000. The options are exercisable beginning January 1, 2010 provided those key employees are still in Windom’s employ at the time the options are exercised. The options expire on January 1, 2011.

On January 1, 2010 when the market price of the share was P29 per share, all 100,000 options were exercised. The amount of compensation expense Windom should record for 2009 is.

a. P 100,000 b. P 200,000 c. P 150,000 d. P 700,000

55. Tayone Bank granted an 8%, 3 year 6,000,000 loan to Paula Company on January 1, 2010. The interest on the loan is payable every December 31. Tayone Bank incurred 520,000 of direct origination cost but an origination fee of 200,000 was charged against Paula Company. The effective interest rate on the loan as a result of the origination fee and cost is now 6%.

What is the carrying value of the loan on December 31, 2011 in Tayone Bank’s accounting books?a. 6,000,000 b. 6,113,026 c. 6.219,836 d. 6,320,600

56. On September 14, 2011, a typhoon damaged a warehouse of Abbs Corporation. The entire company and many accounting records stored in the warehouse were completely destroyed. Although the inventory was not insured, a portion could be sold for scrap. Through the use of microfilmed records, the following data were gathered:

Inventory, Jan. 1 375,000Purchases, Jan to Sept. 14 1,385,000Cash sales, Jan to Sept. 14 225,000Collection of A/R, Jan 1 to Sept. 14 2,115,000A/R, Jan 1 175,000A/R, Sept 14 265,000Salvage value of damaged inventory 5,000Gross profit percentage on sales 32%

How much is the value of inventory loss?a. 102,600 b. 105,600 c. 107,600 d. 112,600

57. On October 15, 2011, a fire destroyed all the stock of equipment of Paula Victoria Equipment Center in its rented stockroom. The records of the firm show the following information:

2010 2009 2008 2007Sales 925,000 880,000 790,000 710,000Cost of sales 758,000 739,200 679,400 624,800Gross Profit 116,500 140,800 110,600 85,200

Inventory, Jan 1, 2011 130,500Sales, Jan 1 to Oct 15, 2011 960,000Sales returns and allowances 15,000Purchases, Jan 1 to Oct 15, 2011 890,000Purchase returns and allowances 12,000Cost of stock in display room, not destroyed 85,000

How much is the estimated cost of merchandise lost in the fire of October 15, 2011?

a. 120,250 b. 148,600 c. 167,500 d. 252,500

58. A Co. uses the retail inventory method to estimate its inventory for interim statement purposes. Data relating to the inventory computation at June 30, 2011 are as follows:

COST RETAILInventory, Jan 1 820,000 1,262,800Net purchases 2,280,000 3,607,200Net markups 450,000Net markdowns 320,000Sales 4,350,000Sales returns 300,000Employee discount 100,000Sales discount 80,000Normal shrinkage 50,000

What is the estimated cost of June 30, 2011 inventory using the average approach?a. 466,000 b. 496,000 c. 616,000 d. 800,000

59. Presented below is information related to B Co.:COST RETAIL

Inventory, Jan 1 250,000 390,000Purchases 914,500 1,460,000Purchase returns 60,000 80,000Purchase discounts 18,000 Gross sales (after employee discounts) 1,260,000Sales returns 97,500Markups 120,000Markup cancellations 40,000Markdowns 45,000Markdown cancellations 20,000Freight in 79,000Employee discount granted 8,000Loss from breakage 2,500

Assuming that B Co. uses the conventional retail inventory method, how much would be the cost of its ending inventory at December 31, 2011?

a. 365,085 b. 391,200 c. 410,760 d. 420,280

60. Nestorio Company has the following information pertaining to its biological assets for the year 2014:

A herd of 100, 2- year old animals was held at Jan 1, 2014. Ten animals aged 2.5 years were purchased on July 1, 2014 for 5,400, and ten animals were born on July 1, 2014. No animals were sold or disposed of during the period. Per unit fair values less estimated point-of-sale costs were as follows:

2.0- year old animal at January 1, 2014 5,000Newborn animal at July 1, 2014 3,5002.5- year old animal at July 1, 2014 5,400Newborn animal at December 31, 2014 3,6000.5- year old animal at December 31, 2014 4,0002.0- year old animal at December 31, 2014 5,2502.5- year old animal at December 31, 2014 5,5503.0- year old animal at December 31, 2014 6,000

Q1. How much of the increase in the fair value of the biological assets due to price change?a. None b. 25,000 c. 26,500 d. 27,500

Q2. How much of the increase in the fair value of the biological assets due to physical change?a. 75,000 b. 79,500 c. 110,000 d. 118,500

Q3. What is the fair value of the biological assets as of December 31, 2014?

a. 554,000 b. 581,500 c. 700,000 d. 735,000

61. Ikaw Company has 60,000 ordinary shares of Brand Corporation that has been designated as fair value to other comprehensive income. These shares were acquired at fair market value, which was P80 per share on May 2, 2011. On December 31, 2011, the market value of these shares is P90 per share. On January 22, 2012, Ikaw Company sold 42,000 shares of its investment in Brand Corporation for P85 per share.

Q1. What amount of loss should Ikaw Company recognize in selling those shares?a. None b. 210,000 c. 300,000 d. 420,000

Q2. What amount of unrealized gain or loss that should be transferred to retained earnings?a. None b. 180,000 c. 210,000 d. 420,000

Q3. What amount of unrealized gain or loss should Ikaw Company carry over to the next measurement date?a. None b. 180,000 c. 210,000 d. 420,000

62. Crush Company purchased 20,000 shares out of 200,000 shares outstanding of Basted Company’s ordinary shares on Feb 23, 2014 for 924,000. Crush Company has designated the equity security at fair value to other comprehensive income. Crush Company received a P40,000 cash dividend on Basted Company on July 1, 2014. Basted Company declared a 10% share dividend on December 1, 2014. The dividend was distributed on January 31, 2015. The market price of the share was P38 on December 1, 2014, P40 on December 31, 2014 and P42 on January 31, 2015.

What amount should Crush Company report the investment in its 2014 balance sheet?a. 800,000 b. 836,000 c. 880,000 d. 924,000

63. On January 2, 2014, P Inc. acquired 20% of the outstanding ordinary shares of Q Company for 700,000. The investment gave P the ability to exercise significant influence over Q. The book value of the acquired shares was 600,000. The excess of cost over book value was attributed to a depreciable asset which was undervalued on Q’s balance sheet and which had ten years useful life remaining. For the year ended December 31, 2014, Q reported net income after tax of 180,000, unrealized gain on its investment in available for sale of 100,000; foreign translation loss of 200,000 and paid cash dividends of 60,000 on its ordinary.

How much is the carrying value of P’s investment in Q at December 31, 2014?a. 678,000 b. 694,000 714,000 d. 717,200

64. On Jan 1, 2012, Imo Company invested in a 10-year 10% debt instrument with a face value of 3,000,000 in which interest is to be received every December 31. The debt instrument has an effective rate of 8% and was acquired for 3,402,000. Imo Company has a business model of collecting all the contractual cash flows related to the instrument.

On December 31, 2015, the debt instrument has a prevailing market rate of 9%,

The following are relevant present value factors: PV factor of 8% after 6 years 0.630PV factor of annuity of 8% after 6 years 4.623PV factor of 9% after 6 years 0.596PV factor of annuity of 9% after 6 years 4.486

What amount should the debt instrument be reported in the December 31, 2015 balance sheet?a. 3,133,800 b. 3,276,900 c. 3,344,093 d. 3.374,160

65. On December 31, 2014, Imohanana Company purchased a 4,000,000 tract of land for a factory site. Imohanana razed an old building on the property and sold the materials it salvaged from the demolition. Imohanana incurred additional costs and realized salvaged proceeds during December 2014 as follows:

Payments to tenants to vacate the premises 200,000Demolition of old building 100,000Legal fees for purchase contract and recording ownership 50,000Title guarantee insurance 30,000Proceeds from sale of salvaged materials 10,000

In its December 31, 2014 balance sheet, at what amount should the land be reported?

a. 4,350,000 b. 4,370,000 c. 4,380,000 d. 4,390,000

66. During 2014, Imolagina Company installed a production assembly line to manufacture furniture. In 2014, Imolagina Company purchased a new machine and rearranged the assembly line to install this machine. The rearrangement did not increase the estimated useful life of the assembly line, but it did result in significantly more efficient production. The following expenditures were incurred in connection with this project:

Machine 150,000Labor to install the machine 28,000Parts added in rearranging the assembly line to provide future benefits 80,000Labor and overhead to rearrange the assembly line 36,000

What amount of the above expenditures should be capitalized in 2014?a. 150,000 b. 178,000 c. 214,000 d. 294,000

67. On December 31, 2011, Samoka Company’s warehouse has a carrying value of 3,500,000 with a remaining useful life of 10 years, but its fair market value was 3,300,000. As of December 31, 2011, Samoka Company intends to sell the warehouse to a buyer after it vacates the warehouse. The time necessary to vacate the warehouse is usual and customary for sales of such assets.

In its December 31, 2011 balance sheet, Samoka Company should include the warehouse asa. PPE valued at 3,300,000b. PPE valued at 3,500,000c. Non-current asset held for sale and valued at 3,300,000d. Non-current asset held for disposal and valued at 3,500,000

68. Samokanimopaw Company has developed a database of names and addresses of professional people who reach their 25th birthdays between the years 2008 and 2014 and intends to exploit this by selling the information to suppliers of life enhancement products and solutions for junior executives. The company has incurred a total of 500,000 to develop the database.

The company has also incurred a total of 800,000 of promoting the databases to vendors of such solutions, such as adventure holiday companies. The company has also incurred 500,000 losses as there are substantial administrative costs and no income as yet. Samokanimopaw Company intends to capitalize all the costs incurred in relation to the database promotion and administrative costs.

What amount of intangible asset should Samokanimopaw Company recognize?a. 500,000 b. 1,000,000 c. 1,300,000 d. 1,800,000

69. Samokjudkapaw Company purchased a patent on January 1, 2011 for 428,400. The patent was being amortized over its remaining legal life of 15 years expiring on January 1, 2023. Early 2014, Samokjudkapaw Company determined that the economic benefits of the patent would not last longer than 10 years from the date of acquisition.

What amount should be reported in the statement of financial position as patent, net of accumulated amortization at December 31, 2014?

a. 257,040 b. 293,760 c. 302,400 d. 314,160

70. Ikawjudpaw Company incurred the following costs during 2012:Trouble shooting in connection with breakdowns during commercial production 450,000Modification for the formulation of a chemical product 405,000Design of tools, jigs, molds dies involving new technology 510,000Seasonal or other product design changes to existing products 645,000Laboratory research aimed at discovery of new technology 555,000

How much research and development costs Ikawjudpaw Company incurred in 2012?a. 1,005,000 b. 1,155,000 c. 1,470,000 d. 1,560,000

71. During 2014, Naopaw Corporation issued at 95, one thousand of its 8%, P5,000 bonds due in ten years. One detachable stock purchase warrants entitling the holder to buy 20 shares of Naopaw Corporation’s ordinary shares was

attached to each bond. Shortly after issuance, the bonds are selling at 10% ex-warrant, and each warrant was quoted at P60. The present value factors are the following:

PV of 10% for an ordinary annuity of 1 after 10 periods 6.145PV of 10% after 10 interest periods 0.385

What amount, if any, of the proceeds from the bond issuance should be recorded as part of Naopaw Corporation shareholder’s equity?

a. None b. 225,000 c. 250,000 d. 367,000

72. Paolonapod Company leased a new machine from End Company on December 31, 2014 under a lease agreement with the following pertinent information:

Lease term 10 yearsAnnual rental payable at the beginning of each year 200,000Economic life of the machine 15 yearsImplicit interest rate 10%PV of an annuity of 1 in advance for periods at 10% 6.76PV of 1 for 10 periods at 10% 0.39

Paolonapod Company has the option to purchase the machine on December 31, 2024 by paying 250,000, which is significantly less than the 500,000 expected fair market value of the machine on the option exercise date. Assume that, at the inception of the lease, the exercise of the option appears to be reasonably assured.

At the inception of the lease, how much should Paolonapod Company record as lease liability?a. 1,254,500 b. 1,352,000 c. 1,449,500 d. 1,547,000

73. The following facts relate to Kapaolo Company for the year 2014:Deferred tax liability, January 1, 2014 864,000Deferred tax asset, January 1, 2014 576,000Taxable income for 2014 2,500,000Cumulative timing difference at 12/31/2014 giving use to future taxable amount 2,220,000Cumulative timing difference at 12/31/2014 giving use to future deductible amount 1,000,000Income tax rate for all years 32%

There were no permanent differences in 2014.What is the amount of pretax financial income in 2014?

a. 2,500,000 b. 2,800,000 c. 3,500,000 d. 3,700,000

74. Akonapod, Inc. received the following information from its pension plan trustee concerning the operation of the company’s defined benefit pension plan for the year ended December 31, 2014:

Dec. 31, 2013 Dec. 31, 2014Market value of plan assets 3,500,000 3,750,000Present value of benefit obligation 4,000,000 4,300,000Unrecognized net (gains) and losses -0- ( 75,000)Unrecognized prior costs 500,000 450,000

The service cost component of pension expense for 2014 is 300,000 and the amortization of unrecognized prior service cost is 50,000. The settlement rate is 10% and the expected rate of return is 9%.

What is the amount of net benefit expense for 2014?a. 300,000 b. 360,000 c. 435,000 d. 442,500