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UNIVERSITY OF SAN CARLOS SCHOOL OF BUSINESS AND ECONOMICS DEPARTMENT OF ACCOUNTANCY COMPRHENSIVE EXAM ONE PRACTICAL ACCOUNTING ONE A.Y. 2012-2013
INSTRUCTIONS: Read each of the questions carefully. Shade the letter of your corresponding choice in the answer sheet. Refrain from talking to your seatmates, as such will be construed as cheating. Avoid making any erasures. Be wary of the time. Always do your best.
1. THISISIT! Corporation had the following transactions in its first year of operations: Sales (90 percent collected in the first year) Disbursements for costs and expenses Purchases of equipment for cash Proceeds from issuance of common stock Payments on short-term borrowings. Proceeds from short-term borrowings Depreciation on equipment Disbursements for income taxes Bad debt write-offs What is the cash balance at December 31 of the first year? A. P 75,000 C. P 85,000 B. P105,000 D. P140,000 2. FOCUS Company had the following bank reconciliation on June 30, 2012: Balance per bank statement, June 30 Add: Deposits in transit Total Less: Outstanding Checks Balance per book, June 30 The bank statement for the month of July 2012 showed the following: Deposits (including P200,000 note collected for FOCUS) Disbursements (including P140,000 NSF check and P10,000 service charge) 9,000,000 7,000,000 3,000,000 400,000 3,400,000 900,000 2,500,000 P750,000 600,000 200,000 250,000 25,000 50,000 40,000 45,000 30,000
All reconciling items on June 30, 2012 cleared through the bank in July. The outstanding checks totalled P600,000 & the deposits in transit amounted to P1,000,000 on July 31, 2012. What is the cash balance per book on July 31, 2012? A. P5,400,000 C. P5,550,000 B. P5,350,000 D. P4,500,000 3. Petty cash fund account of QUANDARY Company showed its composition as follows: Coins and currency Paid vouchers: Transportation Gasoline Office Supplies Postage Stamps Due from employees Managers check returned by bank marked NSF Check drawn by company to the order of petty cash custodian P3,300 P600 400 500 300 1,200
What is the correct amount of petty cash fund for statement of financial position purposes? A. P10,000 C. P6,000 B. P7,000 D. P9,000
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CATCH22 provides for doubtful accounts expense at the rate of 10% of net sales. At December 31, 2012, the allowance for doubtful accounts balance should be A. P3,200,000 C. P2,800,000 B. P2,600,000 D. P2,000,000 5. STICKY Company factored P5,000,000 of accounts receivable to SITUATION Bank on July 1, 2012. Control was surrendered by STICKY. The bank assessed a fee of 5% and retains a holdback equal to 20% of the accounts receivable. In addition, the bank charged 12% computed on a weighted average time to maturity of the receivables of 30 days. Assuming all receivables are collected, STICKY Companys cost of factoring the receivables would be A. P250,000 C. P49,315 B. P299,315 D. P 0 6. The UNBELIEVABLE Corporation provided for uncollectible accounts receivable under the allowance method since the start of its operations to December 31, 2012. Provisions were made monthly at 2 percent of credit sales; bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account; and no year-end adjustments to the allowance account were made. UNBELIEVABLEs usual credit terms are net 30 days. The credit balance in the allowance for doubtful accounts was P260,000 at January 1, 2012. During 2012, credit sales totaled P18,000,000, interim provisions for doubtful accounts were made at 2 percent of credit sales, P180,000 of bad debts were written off, and recoveries of accounts previously written off amounted to P30,000. UNBELIEVABLE installed a computer system in November 2012 and an aging of accounts receivable was prepared for the first time as of December 31, 2012. A summary of the aging is as follows: Classifications by Month of Sale November-December 2012 July-October 2012 January-June 2012 Prior to January 1, 2012 Balance in Each Category P2,280,000 1,200,000 800,000 260,000 Estimated % Uncollectible 2% 15% 25% 80%
Based on the review of collectibility of the account balances in the "prior to January 1, 2012" aging category, additional receivables totaling P120,000 were written off as of December 31, 2012. Effective with the year ended December 31, 2012, UNBELIEVABLE adopted a new accounting method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable. How much is the adjusted balance of the allowance for doubtful accounts as of December 31, 2012? A. P537,600 C. P350,000 B. P633,600 D. P753,600 7. On December 31, 2012, GUESS Company received two P5,000,000 notes receivable from customers in exchanged for consulting services rendered. On both notes, interest is calculated on the outstanding principal balance at the annual rate of 4% and payable at maturity. The note from SORRY Corporation, made under customary trade terms, is due on October 1, 2013 and the note from TARRY Corporation is due on December 31, 2017. The market interest rate for similar notes on December 31, 2012 was 10%. The compound interest factors to convert future value into present value at 10% follow: present value of 1 due in nine months, 0.93, and present value of 1 due in five years, 0.62. At what amounts should these two notes receivable be reported in GUESSs December 31, 2012 statement of financial position? SORRY A. P4,650,000 B. P5,000,000 TARRY P3,100,000 P3,100,000 SORRY C. P5,000,000 D. P4,836,000 TARRY P3,720,000 P3,720,000
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The companys reported inventory (before any corrections) was P2,000,000. What is the correct amount of the companys inventory on December 31? A. P2,550,000 C. P2,500,000 B. P1,950,000 D. P2,700,000 9. WILLPOWER Company sells one product, which it purchases from various suppliers. balance at December 31, 2012, included the following accounts: Sales (100,000 units at P150) Sales discount Purchases Purchase discount Freight in Freight out The inventory purchases during 2012 were as follows: Units 20,000 30,000 40,000 50,000 10,000 150,000 Unit cost P60 65 70 75 80 Total cost P 1,200,000 1,950,000 2,800,000 3,750,000 800,000 P 10,500,000 P15,000,000 1,000,000 9,300,000 400,000 100,000 200,000 The trial
Beginning inventory, January 1 Purchases, quarter ended March 31 Purchases, quarter ended June 30 Purchases, quarter ended Sept. 30 Purchases, quarter ended Dec. 31
WILLPOWERs accounting policy is to report inventory in its financial statements at the lower of cost or market, applied to total inventory. Cost is determined under the first-in, first-out method. WILLPOWER has determined that, at December 31, 2012, the replacement cost of its inventory was P70 per unit and the net realizable value was P72 per unit. The normal profit margin is P10 per unit. What should WILLPOWER report as cost of goods sold for the year 2012? A. P6,400,000 C. P6,700,000 B. P6,600,000 D. P7,100,000 10. OMG Company uses the average cost retail method to estimate its inventory. Data relating to the inventory at December 31, 2012 are: Cost P 2,000,000 10,600,000 Retail P3,000,000 14,000,000 1,600,000 600,000 12,000,000 400,000
Inventory, January 1 Purchases Net markups Net markdowns Sales Estimated normal shoplifting losses Estimated normal shrinkage is 5% of sales
OMGs cost of goods sold for the year ended December 31, 2012 is A. P9,100,000 C. P8,400,000 B. P8,680,000 D. P7,700,000
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Aluminum siding Mahogany siding Louvered glass door Glass windows Total
The correct balance of the raw materials inventory after any allowance for write down is A. P427,000 C. P480,000 B. P486,500 D. P477,000 12. LOVELIFE Company has a herd of 10 2-year old animals on January 1, 2012. One animal aged 2.5 years was purchased on July 1, 2012 for P108, and one animal was born on July 1, 2012. No animals were sold or disposed of during the year. The fair value less cost to sell per unit is as follows: 2-year old animal on January 1 2.5-year old animal on July 1 New born animal on July 1 2-year old animal on December 31 2.5-year old animal on December 31 New born animal on December 31 3-year old animal on December 31 0.5-year old animal on December 31 What is the fair value of the biological assets on December 31, 2012? A. P1,400 C. P1,440 B. P1,320 D. P1,360 13. CHALLENGE Company purchased marketable equity securities during 2012 to be held as trading. An analysis of the current investments on December 31, 2012 showed the following: Cost 1,000,000 1,500,000 2,000,000 2,500,000 Market 800,000 1,800,000 1,700,000 2,600,000 100 108 70 105 111 72 120 80
A Company ordinary shares B Company ordinary shares C Company preference shares D Company preference shares
What is the measurement of the financial assets held for trading on December 31, 2012? A. P6,900,000 C. P7,000,000 B. P6,800,000 D. P6,500,000 14. JOURNEY Company received dividends from its common stock investments during the year 2012 as follows: A stock dividend of 20,000 shares from A Company when the market price of As shares was P30 per share. A cash dividend of P2,000,000 from B Company in which JOURNEY owns a 20% interest. A cash dividend of P1,500,000 from C Company in which JOURNEY owns a 10% interest. 10,000 shares of common stock of D Company in lieu of cash dividend of P20 per share. The market price of D Companys shares was P180. JOURNEY holds originally 100,000 shares of D Company common stock. Revolution owns 5% interest in D Company.
What amount of dividend revenue should JOURNEY report in its 2012 income statement? A. P3,300,000 C. P5,300,000 B. P3,500,000 D. P2,500,000
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16. Under the cost model, what amount should TITANIUM Company report as depreciation of investment property for 2012? A. P1,800,000 C. P2,200,000 B. P2,000,000 D. P 0 17. Under the fair value model, what amount should TITANIUM Company recognize as gain from change in fair value in 2014? A. P5,000,000 C. P7,000,000 B. P3,000,000 D. P 0 Use the following information for numbers 18 to 20: Selected accounts included in the property, plant and equipment of RISKTAKER Company on December 31, 2012, had the following balances: Land Land improvements Buildings Machinery and equipment During 2013, the following transactions occurred: A track of land was acquired for P200,000 as a potential future building site. A plant facility consisting of land and building was acquired in exchange for 20,000 shares of RISKTAKER Company. On the acquisition date, RISKTAKERs share had a closing market price of P42 per share on a stock exchange. The plant facility was carried on the sellers books at P178,000 for land and P520,000 for the building at the exchange rate. Current appraised values for the land and building, respectively, are P200,000 and P800,000. The building has an expected life of forty years with a P20,000 residual value. Items of machinery and equipment were purchased at a total cost of P400,000. Additional costs were incurred as follows: freight and unloading, P13,000; installation, P26,000. The equipment had a useful life of ten years with no residual value. Expenditures totaling P120,000 were made for new parking lots, street and sidewalks at the companys various plant locations. These expenditures had an estimated useful life of fifteen years. Research and development costs were P110,000 for the year. A machine costing P16,000 on January 1, 2006 was scrapped in June 30, 2013. Straight line depreciation had been recorded on the basis of a 10 year life with no residual value. A machine was sold for P48,000 on July 1, 2013. Original cost of the machine was P74,000 on January 1, 2010 and it was depreciated on the straight line basis over an estimated useful life of eight years and residual value of P2,000. 400,000 130,000 2,000,000 800,000
18. What is the total cost of land on December 31, 2013? A. P768,000 C. P888,000 B. P778,000 D. P898,000
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HAVEMERCY computes depreciation on the straight line method. The composite life of the assets should be A. 19.8 years C. 13.3 years B. 18.0 years D. 16.0 years 22. FEARLESS Company acquired property in 2012 which contains mineral deposit. The acquisition cost of the property was P20,000,000. Geological estimates indicate that 5,000,000 tons of mineral may be extracted. It is further estimated that the property can be sold for P5,000,000 following mineral extraction. For P2,000,000, FEARLESS is legally required to restore the land to a condition appropriate for resale. After acquisition, the following costs were incurred: Exploration cost Development cost related to drilling of wells Development cost related to production equipment 13,000,000 10,000,000 15,000,000
The company extracted 600,000 tons of the mineral in 2012 and sold 450,000 tons. In the 2012 income statement, what amount of depletion is included in cost of sales? A. P4,800,000 C. P3,600,000 B. P5,400,000 D. P4,050,000 23. On January 1, 2012, the historical balances of the land and building of FORMIDABLE Company are: Cost 50,000,000 300,000,000 Accumulated depreciation 90,000,000
Land Building
The land and building were appraised on same date and the revaluation revealed the following: Sound value 80,000,000 350,000,000
Land Building
There were no additions or disposals during 2012. Depreciation is computed on the straight line. The estimated life of the building is 20 years. The depreciation of the building for the year ended December 31, 2012 should be A. P25,000,000 C. P10,000,000 B. P15,000,000 D. P17,500,000 24. During December 2012, FIERY Company determined that there had been a significant decrease in market value of its equipment. At December 31, 2012, FIERY compiled the following information concerning the equipment: Original cost Accumulated depreciation Expected undiscounted net future cash inflows from the continued use and eventual disposal Expected discounted net future cash inflows from the continued use and eventual disposal Fair value less cost to sell 20,000,000 12,000,000 7,000,000 5,000,000 6,500,000
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15
Apr. 1
July 1
Dec. 31
25. What is the cost of patent recorded in the statement of financial position? A. P492,500 C. P63,500 B. P429,000 D. P 0 26. What is the carrying amount of Intangible Assets to be recorded in the statement of financial position? A. P 712,604 C. P697,604 B. P2,477,604 D. P 0 27. FAILUREISNOTANOPTION Company acquired three patents in January 2013. The patents have different lives as indicated in the following schedule: Cost 2,000,000 3,000,000 6,000,000 Remaining useful life 10 5 Indefinite Remaining legal life 8 10 15
Patent C is believed to be uniquely useful as long as the company retains the right to use it. In June 2013, the company successfully defended its right to Patent B. Legal fees of P800,000 were incurred in this action. The companys policy is to amortize intangible assets by the straight -line method to the nearest half year. The company reports on a calendar-year basis. The amount of amortization that should be recognized for 2013 is: A. P1,330,000 C. P1,250,000 B. P2,050,000 D. P 950,000 28. TRUSTINYOURSELF Company provided the following information relevant to the research and development expenditures for the year 2013: Current period depreciation on the building housing R and D activities Cost of market research study Current period depreciation on a machine used in R and D activities Salary of R and D director Salary of Vice-President who spends of his time overseeing R and D activities 1,500,000 1,000,000 500,000 1,200,000 2,400,000
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An analysis of the accounts receivable disclosed that accounts receivable comprised the following: Trade accounts receivable Allowance for doubtful accounts Selling price of IDEAL Companys unsold goods sent to TRUTH Company on consignment at 125% of cost and excluded from IDEALs ending inventory 4,000,000 ( 300,000)
1,500,000 5,200,000
At December 31, 2013, the total current assets should be A. P10,600,000 C. P10,700,000 B. P 9,800,000 D. P 9,900,000 32. The trial balance of ALMOSTTHERE Company reflected the following liability account balances on December 31, 2013: Accounts payable Bonds payable, due 2014 Discount on bonds payable Deferred tax liability Dividends payable Income tax payable Note payable, due 1/15/2015 4,000,000 8,000,000 1,000,000 1,500,000 3,000,000 500,000 2,500,000
In its December 31, 2013 statement of financial position, ALMOSTTHERE should report current liabilities at A. P16,000,000 C. P17,000,000 B. P14,500,000 D. P16,500,000
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2012 2013
At December 31, 2013, the company would report estimated warranty liability of A. P1,500,000 C. P2,250,000 B. P 750,000 D. P 500,000 35. On December 31, 2013, VALIX Company purchased a machine from OBERITA Company in exchange for a noninterest bearing note requiring eight payments of P200,000. The first payment was made on December 31, 2013 and the others are due annually on December 31. At date of issuance, the prevailing rate of interest for this type of note was 11%. Round off PV factors to three decimal places. In the December 31, 2013 statement of financial position, what is the carrying amount of the note payable? A. P1,142,400 C. P1,046,200 B. P1,029,200 D. P 942,400 36. Due to extreme financial difficulties, MEMORIZEDTHESTANDARDS Company has negotiated a restructuring of its 10% P5,000,000 note payable due on December 31, 2012. The unpaid interest on the note on such date is P500,000. The creditor has agreed to reduce the face value to P4,000,000, forgive the unpaid interest, reduce the interest rate to 8% and extend the due date three years from December 31, 2012. Round off all PV factors to two decimal places. MEMORIZEDTHESTANDARDS Company should report gain on extinguishment of debt in its 2012 statement of comprehensive income at A. P2,000,000 C. P1,703,200 B. P1,203,200 D. P 540,000 37. GAMAYNALANG Co. has outstanding 7%, 10-year P100,000 face value bond. The bond was originally sold to yield 6% annual interest. GAMAYNALANG uses the effective interest rate method to amortize bond premium. On June 30, 2012, the carrying amount of the outstanding bond was P105,000. What amount of unamortized premium on bond should GAMAYNALANG report in its June 30, 2013 statement of financial position? A. P1,050 C. P4,300 B. P3,950 D. P4,500 38. On March 1, 2012, HAPITNATIME Company issued 10,000 of its P1,000 face value bonds at 95 plus accrued interest. HAPITNATIME Company paid bond issue cost of P1,000,000. The bonds were dated November 1, 2011, mature on November 1, 2021, and bear interest at 12% payable semiannually on November 1 and May 1. What amount did HAPITNATIME receive from the bond issuance? A. P8,500,000 C. P9,500,000 B. P8,900,000 D. P9,900,000 39. On December 31, 2012, FLATONE Company had outstanding 10% P1,000,000 face amount convertible bonds payable maturing on December 31, 2015. Interest is payable on June 30 and December 31. Each P1,000 bond is convertible into 50 shares of P10 par value. On December 31, 2012, the unamortized premium on bonds payable was P60,000.
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What is the unearned interest income on January 1, 2012? A. P2,576,000 C. P2,176,000 B. P1,776,000 D. P1,616.500 43. The following information pertains to DREAMER Corporations defined benefit pension plan for 2013: Service Cost Actual gain on plan assets Unexpected loss on plan assets related to a 2013 disposal of a subsidiary Prior service cost Annual interest expense on pension obligation P160,000 35,000 40,000 5,000 50,000
What amount should DREAMER report as pension expense in its 2013 income statement? A. P250,000 C. P215,000 B. P285,000 D. P180,000 44. SUPERIOR Company had the following balances relating to its defined benefit plan on December 31, 2013: Fair value of plan assets Projected benefit obligation Asset ceiling 37,000,000 33,000,000 2,500,000
What is the prepaid benefit cost to be reported in the December 31, 2013 statement of financial position?
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45. BONUS Company provided the following comparative information concerning its defined benefit plan in its memorandum records: January 1, 2013 December 31, 2013 Fair value of plan assets 10,000,000 11,500,000 Prepaid benefit obligation 12,500,000 13,035,000 The transactions for 2013 related to the defined benefit plan are: Current service cost Contribution to the plan Benefits paid to retirees Unexpected decrease in the benefit obligation 2,000,000 2,800,000 2,300,000 165,000
The remeasurements to be recorded in other comprehensive income in 2013 is A. P200,000 C. P1,000,000 B. P365,000 D. P1,165,000 46. The FUTURECPA Company is authorized to issue 200,000 of P10 par value ordinary shares and 60,000 of 6% cumulative and nonparticipating preference shares, par value P100 per share. The company engaged in the following share capital transactions through December 31, 2012: o o 50,000 ordinary shares were issued for P650,000 and 20,000 preference shares for machinery valued at P2,600,000. Subscriptions for 9,000 ordinary shares have been taken and 40% of the subscription price of P18 per share has been collected. The shares will be issued upon collection of the subscription price in full. 2,000 treasury ordinary shares have been purchased for P12 and accounted for under the cost method.
The post-closing retained earnings balance at December 31, 2012 is P420,000. What is FUTURECPA Companys total shareholders equity at December 31, 2012? A. P3,714,800 C. P3,710,800 B. P3,638,800 D. P3,110,800 47. The ROCKYROAD Company has incurred heavy losses since its inception. At the recommendation of its president and CEO, the board of directors voted to implement quasi-reorganization, through reduction of par value subject to stockholders approval. Immediately prior to t he restatement on December 31, 2012. ROCKYROAD Companys shareholders equity was as follows: Ordinary capital stock, P100 par 500,000 shares Additional paid in capital Retained earnings (deficit) 50,000,000 15,000,000 (10,000,000)
The shareholders approved the quasi-reorganization on December 31, 2012 to be accomplished by a reduction in inventory of P2,000,000, a reduction in property, plant and equipment of P6,000,000, and writeoff of goodwill at P5,000,000. To eliminate the deficit, ROCKROAD should reduce ordinary share capital stock by A. P23,000,000 C. P13,000,000 B. P10,000,000 D. P 8,000,000 48. PERFECTNA Company reported the following amounts in the shareholders equity s ection of its December 31, 2011 statement of financial position: Preference shares, 10%, P10 par (100,000 shares authorized, 20,000 shares issued) Ordinary shares, P5 par (50,000 shares authorized 10,000 shares issued) Share premium Retained earnings Total
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The share appreciation right is to be exercised on January 1, 2014. The quoted prices of CONQUERED Company shares are 100, 124, and 151 on January 1, 2011, December 31, 2011 and December 31, 2012, respectively. What amount should the company charge to compensation expense for the year ended December 31, 2012 as a result of the share appreciation right? A. P1,700,000 C. P1,200,000 B. P1,300,000 D. P 500,000 50. FINISHLINE Companys general ledger shows the following liability and equity accounts at the end of the reporting period. Accounts payable Accrued expenses Reserve for bond retirement Preference shares, 6% cumulative, P100 par; 6,000 shares authorized; 4,000 shares issued; 3,700 shares outstanding (P110 liquidation value) Ordinary shares, P10 par; 200,000 shares authorized; 80,000 shares issued and outstanding Share premium Retained earnings What is the book value per share of the preference shares on December 31, 2012? A. P116 C. P115 B. P110 D. P122 *End of Examination* Good Luck and God Bless! Happiness is not GRANTED, it is ACHIEVED. 530,000 41,600 320,000 400,000 800,000 154,600 262,520
MJL
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