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ACCOUNTANCY DEPARTMENT
COMPREHENSIVE EXAMINATION 1 PROBLEMS
INSTRUCTIONS: On the answer sheet provided, legibly shade the letter of your answers.
1. On December 31, 2014, the following information was available from Jersey Companys
accounting records:
Cost
Retail
Inventory
220,500
304,500
Purchases
1,249,500
1,732,500
Additional mark-up
63,000
Sales for the year totalled P1,660,000. Mark down amounted to P140,000. Under the
average cost retail method, what is the inventory on December 31, 2014?
a. 210,000
c. 225,000
b. 330,000
d. 308,000
2. Golden Company developed a new machine for manufacturing baseballs. Because the
machine is considered very valuable, the entity had it patented. The following
expenditures were incurred in developing and patenting the machine:
Purchase of special equipment to be used solely for development
of the new machine
1,820,000
Research salaries and fringe benefits for engineers and scientists
171,000
Cost of testing prototype
236,000
Legal cost of filing patent
127,000
Fees paid to government patent office
25,000
Drawing required by patent office to be filed with patent application
47,000
What amount of research and development cost should be expensed in the current year?
a. 2,227,000
c. 2,426,000
b. 1,820,000
d. 1,991,000
3. On January 1, 2014, Brazilia Company purchased a parcel of land as a factory site for
P3,200,000. An old building on the property demolished and construction started on a new
warehouse that was completed December 31, 2014. Cost incurred on the construction
project are as follows:
Demolition of old building
210,000
Architect fee
317,000
Legal fee title investigation
41,000
Construction costs
9,500,000
Imputed interest based on share financing
140,,000
Landfill for building site
193,000
Clearing of trees from building site
96,000
Temporary building for construction activities
290,000
Land survey
40,000
Excavation for basement
132,000
Salvage materials from demolition
18,000
Timber sold
33,000
What is the cost of the land?
a. 3,536,000
b. 3,780,000

c. 3,689,000
d. 3,729,000

4. The following information is available for Thor Company:

Credit sales during 2016

500,000

Allowance for doubtful accounts, 1/1/2016

Accounts receivable written off during 2016

180,000
190,000

As a result of a review and aging of account receivable, it has been determined that the
allowance for doubtful accounts should have a balance of P210,000 on December 31,
2016. What amount should be reported as bad debt expense for the period ended
December 31, 2016?
a. 200,000
c. 190,000
b. 210,000
d. 220,000
5. In an effort to increase sales, Blazer Company inaugurated a sales promotional campaign
on June 30, 2016, whereby Blazer placed a coupon in each package of razor blades sold,
the coupon being redeemable for a premium. Each premium costs P50 and five coupon
must be presented by a customer to receive a premium. Blazer estimated that only 60% of
the coupon issued will be redeemed. For six month ended December 31, 2016, the
following information is available:
Packages of razor blades sold
400,000
Premiums purchased
30,000
Coupons redeemed
100,000
What is the estimated liability for premiums on December 31, 2016?
a. 1,000,000
c. 1,400,000
b. 1,800,000
d. 2,400,000
6. In January 2016, Glaiza Company acquired 20% of the outstanding voting shares of Lake
Company for P2,800,000. This investment enable Glaiza to exercise significant influence
over Lake. The caarying amount of the acquired shares was P2,100,000. The excess of
cost over carrying amount was attributable to an identifiable intangible asset that was
undervalued in Lakes statement of financial position and that had a remaining life of 10
years. For the year ended December 31, 2016, Lake reported income of P630,000 and paid
cash dividend of P140,000 on its ordinary shares. What is the proper carrying amount of
Glaizas investment in Lake on December 31, 2016?
a. 2,828,000
c. 2,730,000
b. 2,800,000
d. 2,700,000
7. Violet Companys inventory at December 31, 2015 was P5,000,000 based on physical
count priced at cost and before any necessary adjustment for the following:
Merchandise costing P200,000, shipped FOB shipping point from a vendor on
December 31, 2015 was received and recorded on Jan. 5, 2016.
Goods in the shipping area were excluded from inventory although shipment was
not made until Jan. 2, 2016. The goods billed to the customer FOB shipping point on
December 30, 2015, had a cost of P800,000.
What amount should Violet report as inventory in its December 31, 2010 statement
financial position?
a. 5,000,000
c. 5,800,000
b. 5,200,000
d. 6,000,000

8. Heart Company sold selected merchandise on a consignment basis during the current
year. The accounting records showed the following information:
Inventory, 1/1
244,000

Inventory on hand, 12/31

Inventory out on consignment, 12/31
Purchases
Freight in
Freight out
Freight out to consignees

290,000
40,000
1,080,000
20,000
70,000
10,000

What amount should be reported as cost of goods sold for the current year?
a. 1,014,000
c. 1,024,000
b. 1,094,000
d. 1,054,000
9. The following information is shown in the accounting records of Hachibi Company:
Balances 1/1
Cash
620,000
Accounts receivable
670,000
Merchandise inventory
860,000
Accounts payable
530,000
Balances 12/31
Accounts receivable
Merchandise inventory
Accounts payable

910,000
780,000
480,000

The total sales and cost of goods sold for the current year were P7,980,000 and
P5,830,000 respectively. All sales and all merchandise purchases were made on credit.
Various expenses of P1,070,000 were paid in cash. There were no other pertinent
transactions. What is the cash balance of December 31?
a. 1,080,000
c. 1,490,000
b. 2,560,000
d. 3,050,000
10.On January 1, 2014, Jenny Company acquired equipment to be used in its manufacturing
operations. The equipment has an estimated useful life of 10 years and an estimated
residual value of P50,000. The depreciation applicable to this machine was P240,000 for
2016 computed under the sum of the years digits method. What was the acquisition cost
of the equipment?
a. 2,450,000
c. 2,400,000
b. 1,700,000
d. 1,650,000
11.The following accounts appear in the unadjusted trial balance of Grand Company on
December 31, 2014:
Cash
800,000
Accounts receivable
4,000,000
Inventory
1,000,000
Accounts payable
600,000
Notes payable
400,000

The cash account includes collection in January 2015 of P400,000 account from
customer who has given cash discount of P20,000.
The cash account also includes a January 2015 cash sale of P100,000. Gross profit
on the sale was 40%.
From the amount collected, the entity paid a bank loan of P200,000 with interest of
P40,000 accruing January 2015.

What total amount should be reported as current assets?

a. 5,960,000
c. 6,020,000
b. 5,780,000
d. 5,800,000
12.Using information #11, the total amount of current liabilities is:
a. 1,200,000
c. 1,000,000
b. 1,240,000
d. 1,160,000

13.Kent Company provided the following on December 31, 2016:

Cash in bank, net of bank overdraft of P500,000

5,000,000

Petty cash fund (unreplenished petty cash expenses, P10,000)

50,000
Notes receivable
4,000,000
Accounts receivable, net of accounts with a credit balances of
P1,500,000
6,000,000
Inventory
3,500,000
Bond sinking fund
3,000,000
Accounts payable, net of accounts with a debit balances of
P1,000,000
7,000,000
Notes payable
4,000,000
Bonds payable, due June 30, 2017
3,000,000
Accrued expenses
2,000,000
What amount should be reported as total current assets on December 31, 2016?
a. 19,040,000
c. 20,050,000
b. 20,040,000
d. 21,540,000
14.Using the information in # 13, what amount of total current liabilities on December 31,
2016?
a. 19,000,000
c.16,000,000
b. 15,500,000
d. 15,000,000
15.Gong Company started construction of its administration building at an estimated cost of
P50,000,000 on January 1, 2015. The construction is expected to be completed by
December 31, 2018. Gong has the following debt obligation outstanding during 2011:
Construction loan 12% interest, payable semi-annually, issued on
12/31/2014
20,000,000
Short-term loan 10% interest, payable monthly, and principal
payable at maturity on May 31, 2015
14,000,000
Long-term loan 11%, payable on January 1 of each year. Principal
payable on January 1, 2016

10,000,000

Assume that the weighted-average accumulated expenditures during 2015 was

P36,000,000. What amount of interest incurred in 2015 would be included in the cost of
the building?
a. 1,200,000
c. 4,047,200
b. 4,067,200
d. 3,237,600
16.Caloy Company acquired a new processing machine on June 30, 2016. Details of the
acquisition were:
Invoice cost
1,600,000
Cost of transportation to the entitys factory
50,000
Cost of installation
50,000
Payment for strengthening the floor to support the weight
of the new machine
80,000
The term of the acquisition includes a 3% discount if payment is made in 10 days. The
entity paid on July 28, 2016. The entitys chief engineer spent 2/3 of his time during trial
run if the new machine. The monthly salary is P60,000. On August 1 , 2016, the entity
requested an allowance to be of less than standard performance capability. The supplier
granted a cash allowance of P100,000. The cost of removing the old machine before the
new machine was acquired amounted to P10,000. The operator of the old machine who
was laid off due to the acquisition of the new machine was paid a gratuity of P30,000.
What is the correct cost of the new machine?
a. 1,592,000
c. 1,622,000
b. 1,640,000
d. 1,552,000

17.Brigette Company uses the composite method of depreciation based on a composite rate
of 25%. At the beginning of 2016, the total cost of equipment was P5,000,000 with a total
residual value of P600,000. The accumulated depreciation was P3,000,000 at that time. In
January 2016, Brigette purchased an equipment for P2,500,000 with no residual value. At
the end of 2016, Brigette sold an equipment with an original cost of P1,000,000 and a
residual value of P200,000 for P350,000. This asset was acquired on January 1, 2014. What
is the gain or loss from the disposition of the asset on December 31, 2016?
a. 100,000 gain
c. 150,000 loss
b. 50,000 loss
d. 0
18.On January 1, 2015, Melissa Company purchased a large quantity of personal computers.
The cost of these computers was P6,000,000. On that date of purchase, the management
estimated that the computer would last approximately 4 years and would have a residual
value at that time of P600,000. The entity used the double declining balance method.
During 2016, the management realized that technological advancements had made the
computers virtually obsolete and that they would have to be replaced. Management
proposed changing the remaining life of the computers to 2 years. What is the
depreciation expense for 2016?
a. 1,200,000
c. 2,400,000
b. 1,500,000
d. 3,000,000
19.Sarah Corporation purchased in 2015 a property contained certain mineral deposit for
P9,000,000. Estimated recovery was 1,000,000 tons of deposits. Development cost of
P300,000 was also incurred in the same year. The mining property was expected to be
worth P1,200,000 after the mineral deposits had been all removed. During 2015, the entity
extracted and sold 200,000 metric tons of mineral. Further development cost of P945,000
was incurred in 2016 and the estimate of total recoverable deposit including the amount
extracted in 2015 was revised to 1,850,000 metric tons. During 2016, the entity recovered
and sold 300,000 metric tons. What amount was recorded as depletion expense for 2016?
a. 1,179,000
c. 1,350,000
b. 1,203,000
d. 2,430,000
20.The long-term debt section of Key Companys statement of financial position as of
December 31, 2015, included 9% bonds payable of P400,000, less unamortized discount
of P32,000. Further examination revealed that these bonds were issued to yield 10%. The
amortization of the bond discount was recorded using the effective interest method.
Interest was paid on January 1 and July 1 of each year. On July 1, 2016, Key retired the
bonds at 105 before maturity. What is the amount of loss to be recognized on the
retirement of bonds?
a. 52,400
c. 50,400
b. 51,600
d. 45,600
21.On December 31, 2016 G Companys general ledger of its trade account receivable
showed an outstanding balance of P2,000,000. Below is a summary of the aging schedule
of the said general ledger.
Classification
Balance
% of Collectability
1-60 days
1,000,000
100%
61-120 days
400,000
90%
121-180 days
300,000
80%
181-360 days
200,000
70%
More than 1 year

100,000
2,000,000

10%

What amount should be reported as the amortized cost of the receivable in the statement
of financial position as of December 31, 2016?
a. 1,750,000
c. 1,900,000
b. 1,850,000
d. 2,000,000

22.Blue Company acquired the following portfolio of equity instruments during 2015 and
reported the following balances at December 31, 2016. No sales occurred during 2014. All
declines are considered to be temporary.
SECURITY
COST
MARKET VALUE 12/31/16
ADB
350,000
360,000
PNB
425,000
400,000
LBP
525,000
640,000
What is the carrying value of the securities on Dec.31,2016 on Blues balance sheet?
a. 1,275,000
c. 1,400,000
b. 1,300,000
d. 1,425,000
23.April Company specializes un the sales of Microsoft and software packages. It had the
following transactions with one of its suppliers:
Purchases of Microsoft compatibles
1,700,000
Purchases of commercial software packages
1,200,000
Purchase return and allowances
50,000
Purchase discounts taken
17,000
Purchases were made throughout the year in terms 2/10, n/30. All returns and allowances
took place within 5 days of purchased and prior to any payment on account. How much is
the discount lost?
a. 17,000
c. 41,000
b. 40,000
d. 57,000
24.Jane Companys accounts payable on December 31, 2016, totalled P4,500,000 before any
necessary year-end adjustment relating to the following informations:
On December 27, 2016, Jane wrote and recorded checks to creditors totalling
P2,000,000 causing an overdraft of P500,000 in Janes bank account on
December 31, 2016. The checks were mailed on January 10, 2017.
On December 28, 2016, Jane purchased and received goods for P750,000,
terms 2/10, n/30. Jane records purchases and accounts payable at net
amount. The invoice was recorded and paid January 3, 2017.
Goods shipped F.O.B destination on December 20, 2016 from a vendor to Jane
were received
January 2, 2017. The invoice cost was P325,000.
What amount should Jane report as account payable on December 31, 2016?
a. 7,575,000
c. 7,250,000
b. 7,553,500
d. 7,235,000
25.Based on a physical inventory taken on December 31, 2016, Jessica Company determined
its chocolate inventory on a FIFO basis at P5,200,000 with a replacement cost of
P4,000,000. Jessica estimated that, after further processing costs of P2,400,000, the
chocolate could be sold as finished candy bars for P8,000,000. Jessica normal profit margin
is 10% of sales. Using the measurement at the lower of cost or net realizable value, what
amount should Jessica report as chocolate inventory on December 31, 2016?
a. 5,600,000
c. 4,800,000
b. 5,200,000
d. 4,000,000
26.Emmaflor Company operates a retail store and must determine the proper December 31,
2016, year-end accrual for the following expenses:
The store lease calls for fixed rent of P6,000 per month, payable at the
beginning of the month, and an additional rent equal to 6% on the net sales
over P1,250,000 per calendar year, payable on January 31, of the following
year. Net sales for 2016 were P2,250,000.
An electric bill of P4,250 covering the period December 17, 2016 through
January 16, 2017 was received January 23, 2017.
A P2,000 telephone bill was received on January 2, 2017 covering:
Service in advance for January 2017
750
Local and toll calls for December 2016
1,250

In its December 31, 2016, statement of financial position, what amount of accrued
liabilities should Emmaflor
report?
a. 75,375
c. 64,125
b. 65,500
d. 63,375

27.Sitar Company commenced operation on January 1, 2015. During the following year, the
company acquired a tract of land, demolished the building on the land and built a new
factory. Equipment was acquired for the factory and, in September 2016, the plant was
ready to commence operation. A gala opening was held on September 18, with the City
Mayor opening the factory. The first items were ready for sale on September 25. During
this period, the following cash inflows and outflows occurred:
While searching for a suitable block of land, Sitar placed an option to
buy with three real estate agents at a cost of P1,000 each
3,000
Receipt of loan from bank
3,000,000
Payment to settlement agent for title search, stamp duties, and
settlement fees
100,000
Payment of delinquent property taxes assume by Sitar
50,000
Payment of land
1,000,000
Payment for demolition of old building
120,000
Proceeds from sale of material from old building
55,000
Payment to architect
230,000
Payment to City Hall for approval of building construction
120,000
Payment for safety fence around construction site
34,000
Payment to construction contractor for factory building
2,400,000
Payment for external driveways, parking bays and safety lighting
540,000
Payment of interest on construction
400,000
Payment for safety inspection on building
30,000
Payment for equipment
640,000
Payment for freight and insurance cost on delivery
56,000
Payment of installation cost
120,000
Payment for safety equipment surrounding equipment
110,000
Payment for removal of safety fence
20,000
Payment for new fence surrounding the factory
80,000
Payment for advertisements in the newspaper about the forthcoming
factory and its benefits to the community
5,000
Payment for opening ceremony
60,000
Payment to adjust equipment to more energy efficient
33,000
What is the cost of the building?
a. 1,271,000
b. 1,218,000

c. 1,216,000
d. 1,166,000

28.Ethelyn Corp. had an outstanding P6,000,000 of 11% bonds (interest payable July 31 and
January 31) due in 10 years. On July 1, it issued P9,000,000 of 10%, 15-year bonds
(interest is payable July 1 and January 1) at 97. A protion of the proceed was used to call
the 11% bonds at 103 on August 1. Unamortized bond discount and issue cost applicable
to the 11% bonds were P240,000 and P60,000, respectively. What is the amount of gain
(loss) on the redemption of these bonds?
a. (480,000)
c. 480,000
b. (270,000)
b. 270,000
29.Kesiah, president of Apple Company, has a bonus arrangement with the company under
which she receives 10% of the net income (after deducting taxes and bonuses)) each year.
For the current year net income before deducting either the provision for income taxes or

bonus is P4,650,000. The bonus is deductible for tax purposes, and the tax rate is 35%.
What is the amount of bonus?
a. 465,000
c. 283,803
b. 302,250
d. 238,305

30.Williamson Corporation purchased a depreciable asset for P300,000 on January 1,2010.

The estimated salvage value is P30,000, and estimated useful life is 9 years. The straightline method is used for depreciation. In 2013, Williamson change its estimates to a total
useful life of 5 years with a salvage value of P50,000. What is 2013 depreciation expense?
a. 30,000
c. 80,000
b. 50,000
d. 90,000
31.Paki Company sold 700,000 boxes of puto mix under a new sales promotional program.
Each box contains one coupon, which if submitted with P40, entitles the customers to a
kitchen knife. Paki pays P60 per knife and P5 for handling and shipping. Paki estimates
that 70% of the coupon will be redeemed, even though only 250,000 coupons had been
process during 2016. How much should Paki report as liability for unredeemed coupons at
December 31, 2016?
a. 6,000,000
c. 12,250,000
b. 9,600,000
d. 15,600,000
32.On December 31, 2016, Charmy Company showed the following information:
Ordinary share capital, no par, 50,000 shares issued at a ;price of P12 per share;
preference share capital, par P5,
10,000 shares issued and outstanding, issued at P15 per
share; unrealized gain on available for sale securities,
P180,000; accumulated profits and
losses, P200,000; preference share subscribed (4000 shares not yet issued), subscription price
P20 per share; subscription receivable on preference share, P50,000 to be collected on
Jan.2017; revaluation reserve, P250,000; reserve for treasury share, P100,000 and
treasury share, ordinary share, 10,000 shares, P100,000.
Charmy Company has a total shareholders equity of:
a.1,160,000
c. 1,410,000
b.1,210,000
d. 1,460,000
33-35: Kevin Corp. has provided information on intangible assets as follows:
A patent was purchased from Patintero Company for P6,000,000 on January 1, 2015. On
the acquisition date, the patent was estimated to have a useful life of 10 years. The patent
had a net book value of P6,000,000 when Patintero sold it to Kevin.
On February 1, 2016, a franchise was purchased from the Franchisor Company for
1,440,000. The contract which runs for 20 years provides that 5% of revenue from the
franchise must be paid to Franchisor. Revenue from the franchise for 2014 was
P7,500,000.
The following research and development costs were incurred by Kevin in 2016:
a. Materials and equipment
426,000
b. Personnel
567,000
c. Indirect costs
306,000
Because of recent events, Kevin, on January 1, 2016, estimates that the remaining useful
life of the patent purchased on January 1, 2015, is only 5 years from January 1, 2016.
33. On December 31, 2016, the carrying value of the patent should be:
a. 4,320,000
c. 5,380,000
b. 4,440,000
d. 5,620,000
34.20. The unamortized cost of the franchise at December 31, 2016, should be:
a.
999,000
c. 1,374,000
b. 1,356,250
d. 1,440,000

35.21. How much should be charged against Camerons income for the year ended December
31, 2016?
a. 2,820,000
c. 2,826,000
b. 2,280,000
d. 1,725,000

36.On January 1, 2016, Orchid Co. sells its equipment with a carrying value of 160,000. The
company receives a non-interest bearing note due in 3 years with a face amount of
200,000. There is no established market value for the equipment. The prevailing interest
rate for this type of note is 12%. The following are the present value factors of 1 at 12%
Present value of 1 for 3 periods
.71178
Present value of an ordinary annuity of 1 for 3 periods
2.40183
How much is the discount on note receivable on January 1, 2016 is:
a, 57,644
c. 17,644
b. 40,000
d. 0
37.Tzarro Company had a machinery costing P3,000,000 when purchased on January 2, 2009.
Estimated useful life of the asset was for 20 years with no salvage at the end of its useful
life. Tzarro uses the straight line method of depreciation. On January 2, 2014, Tzarro is
evaluating machinery for possible impairment. The machinery has a remaining useful life
of 5 years and is expected to generate cash inflows of P500,000 per year. Tzarro has
determined that the rate implicit in current market transaction for similar asset is 10%.
The present value factor of 10% for 5 periods is 3.79. Available information as of January
2,2014 also showed that the appropriate market price for the same asset is P1,800,000.
Estimated cost of disposal, P150,000. What amount of impairment loss, if any, is to be
recognized?
a. none
c. 450,000
b. 355,000
d. 600,000
38.On July 1, 2014, Fantastic Company has 200, 000 shares of P10 par ordinary shares
outstanding and the market price is P12 per share. On the same date, Fantastic declared a
1 for 2 reverse share splits. The par of the share was increased from P10 to P20.
Immediately before the split, the total Share Premium Reserve was P900, 000. What
should be the balance in Fantastics Share Premium Reserve account after the reverse
share split is effected?
a. 0
c. 1, 300, 000
b. 900, 000
d. 1, 700, 000
39.The following are the cash balances of Leo Inc. at December 31, 2016:
Undeposited collection (currency and coins)
40,200
Current account unrestricted
620,000
Disbursement checks written and recorded in December
2016 but are to be released in 2017
130,000
Restricted time deposit
2,000,000
Leo agreed to maintain a P200,000 compensating balance in its unrestricted current
account in accordance with the loan covenant. How much should Leo Inc. report as cash
on its December 31, 2016 statement of financial position?
a. 590,200
c. 750,200
b. 2,790,200
d. 790,200
40.The shareholders equity of Pasar Company shows the following balances on December 31,
2016:
10% preference share capital, cumulative and non-participating,
P100 par with a liquidation value of P 110, 20,000
P 2,000,000
Ordinary share capital, P 100 par, 30,000 shares
3,000,000
Subscribed ordinary shares
1,000,000
Subscription receivable
600,000
Treasury stock, 5,000 shares, at cost, (Ordinary)
400,000

Share premium reserve

Retained earnings

660,000
1,360,000

What is the book value per share of ordinary share, assuming preference dividends are in
arrears in 2015?
a. 115.50
c. 154.00
b. 132.00
d. 184.80
_end_