Professional Documents
Culture Documents
In its 2005
income statement, Balungao should report the sale at
a. P3,750,000 c. P5,000,000
b. P4,000,000 d. P5,200,000
P1
1. Arvak Company owns 50% of Sarrat Company’s preferred stock and 30% of its common 6. The work-in-process inventory of Bakun Company were completely destroyed by fire on
stock. Sarrat’s stock outstanding at December 31, 2005 includes P20,000,000 of 10% June 1, 2005. You were able to establish physical inventory figures as follows:
cumulative preferred stock and P50,000,000 of common stock. Sarrat reported net income of
P10,000,000 for the year 2005. What amount should Arvak report as investment income for January 1, 2005 June 1, 2005
the year 2005? Raw materials P 60,000 P120,000
Work-in-process 200,000 -
a. P3,000,000 c. P2,400,000 Finished goods 280,000 240,000
b. P3,400,000 d. 4,400,000
Sales from January 1 to May 31, were P546,750. Purchases of raw materials were
2. Umingan Company has a 10% note receivable dated June 30, 2005, in the original amount P200,000 and freight on purchases, P30,000. Direct labor during the period was
of P9,000,000. Payments of P3,000,000 in principal plus accrued interest are due annually P160,000. It was agreed with insurance adjusters than an average gross profit rate of
on July 1, 2006, 2007 and 2008. In its June 30, 2007 balance sheet, what amount should 35% based on cost be used and that direct labor cost was 160% of factory overhead.
Umingan report as a current asset for interest on the note receivable?
a. P900,000 c. P300,000 The work in process inventory destroyed as computed by the adjuster
b. P600,000 d. P 0 a. P314,612 c. P185,000
b. P366,000 d. P265,000
10. On November 5, 2005, a Calauag Company truck was in an accident with an auto driven 12. How much is the doubtful accounts for the year 2005?
by Macalelon. Calauag received notice on January 15, 2006, of a lawsuit for P4,000,000 a. P427,600 b. P577,600 c. P547,600 d.
damages for personal injuries suffered by Macalelon. Calauag’s counsel believes it is P457,600
possible that Macalelon will be awarded an estimated amount in the range between
P2,000,000 and P3,000,000, and no amount is a better estimate of potential liability than any 13. The recorded allowance for doubtful accounts should be increased by
other amount. The accounting year ends on December 31, and the 2005 financial statements a. P283,600 b. P187,600 c. P67,600 d. P0
were issued on March 31, 2006. What amount of provision should Calauag accrue at
December 31, 2005?
a. P4,000,000 c. P2,500,000 14. On December 31, 2005, Atimonan Company issued 8,000 of its 8%, 10-year P1,000 face
b. P3,000,000 d. P 0 value bonds with detachable stock warrants at 120. Each bond carried a detachable warrant
for two shares of Atimonan’s P100 par value common stock at a specified option price of
Anda Corporation provided for uncollectible accounts receivable under the allowance method P150. Immediately after issuance, the market value of the bonds ex-warrants was
since the start of its operations to December 31, 2005. Provisions were made monthly at 2 P8,100,000 and the market value of the warrants was P900,000. In its December 31, 2005
percent of credit sales; bad debts written off were charged to the allowance account; balance sheet, what amount should Atimonan report as bonds payable?
recoveries of bad debts previously written off were credited to the allowance account; and no 1. P8,000,000 c. P8,100,000
2. P8,640,000 d. P9,600,000
4. Management of Radker Corp. is considering a lockbox system. The bank will charge $10,000
15. The Atok Corporation was organized on January 1, 2004. On December 31, 2005, the annually for the service, which will save the firm approximately $5,000 in processing costs. The
corporation lost most of its inventory in a warehouse fire just before the year-end count of lockbox system will reduce the float for cash receipts by three days. Assuming that the average
inventory was to take place. Data from the records disclosed the following: daily receipts are equal to $100,000, and short-term interest costs are 5%, calculate the benefit or
loss from adopting the lockbox system.
2004 2005 a. $5,000 loss.
Beginning inventory, January 1 P 0 P1,020,000 b. $10,000 loss.
Purchases 4,300,000 3,460,000
c. $10,000 benefit.
Purchases returns and allowances 230,600 323,000
d. $5,000 benefit.
Sales 3,940,000 4,180,000
Sales returns and allowances 80,000 100,000
5. Short-term interest rates are
On January 1, 2005, the Corporation’s pricing policy was changed so that the gross profit a. Usually lower than long-term rates.
rate would be three percentage points higher than the one earned in 2004. b. Usually higher than long-term rates.
c. Lower than long-term rates during periods of high inflation only.
Salvaged undamaged merchandise was marked to sell at P120,000 while damaged
d. Not significantly related to long-term rates.
merchandise was marked to sell at P80,000 had an estimated realizable value of
P18,000.
6. According to the expectations theory, if the yield curve on the New York money market is
How much is the inventory loss due to fire? upward sloping while that on the Tokyo money market is downward sloping, then inflation
a. P918,200 c. P856,200 in
b. P947,000 d. P824,600 a. The United States is expected to decrease.
b. The United States is expected to remain constant.
MAS
c. Japan is expected to decrease.
1. Demand for a product tends to be price inelastic if d. Japan is expected to remain constant.
a. The product is considered a luxury item.
b. Few good complements for the product are available. 7. According to the expectations theory of the term structure of interest rates, if inflation is
c. The population in the market area is large. expected to increase, the yield curve is
d. People spend a large share of their income on the product. a. Humped, with an upward slope that peaks and then turns downward.
b. Downward sloping.
2. Which of the following has the highest price elasticity coefficient?
c. Upward sloping.
a. Milk.
d. Flat.
b. Macaroni and cheese.
c. Bread.
d. Ski boats. 8. Which of the following is true about a firm’s float?
a. A firm strives to minimize the float for both cash receipts and cash disbursements.
3. Which of the following is true about electronic funds transfer from a cash flow standpoint? b. A firm strives to maximize the float for both cash receipts and cash disbursements.
a. It is always beneficial from a cash flow standpoint. c. A firm strives to maximize the float for cash receipts and minimize the float for cash
b. It is never beneficial from a cash flow standpoint. disbursements.
c. It is beneficial from a cash receipts standpoint but not from a cash disbursements standpoint. d. A firm strives to maximize the float for cash disbursements and minimize the float for
d. It is beneficial from a cash disbursements standpoint but not from a cash receipts standpoint. cash receipts.
9. A firm is evaluating whether to establish a concentration banking system. The bank will
charge $5,000 per year for maintenance and transfer fees. The firm estimates that the float
will be reduced by two days if the concentration banking is put into place. Assuming that 14. In the balanced scorecard framework, a survey of employee satisfaction is a potential
average daily receipts are $115,000 and short-term interest rates are 4%, what decision measure in which of the four perspectives?
should the firm make regarding the concentration banking system? a. Financial.
a. Do not establish the concentration banking system because the net cost is $5,000. b. Customer.
b. Do not establish the concentration banking system because the net cost is $21,000. c. Internal business processes.
c. Establish the concentration banking system because the net benefit is $115,000. d. Learning and growth.
d. Establish the concentration banking system because the net benefit is $4,200.
15. A strategy objective in the balanced scorecard framework is
10. A firm is evaluating whether to establish a lockbox system. The bank will charge $30,000 a. A statement of what the strategy must achieve and what is critical to its success.
per year for the lockbox and the firm will save approximately $8,000 in internal processing b. Key action programs required to achieve strategic objectives.
costs. The firm estimates that the float will be reduced by three days if the lockbox system is c. Diagrams of the cause-and-effect relationships between strategic objectives.
put into d. The level of performance or rate of improvement needed in the performance measure.
place. Assuming that average daily cash receipts are $350,000 and short-term interest rates
are 4%, what decision should the firm make regarding the lockbox system?
a. Do not establish the lockbox system because the net cost is $30,000.
TOA
b. Do not establish the lockbox system because the net cost is $22,000.
c. Establish the lockbox system because the net benefit is $12,000. 1. Which statement is incorrect concerning revaluation of property, plant and
d. Establish the lockbox system because the net benefit is $20,000. equipment?
a. When an item of property, plant and equipment is revalued, the entire class
11. The local video store’s business increased by 12% after the movie theater raised its of property, plant and equipment to which that asset belongs should be
prices from $6.50 to $7.00. Thus, relative to movie theater admissions, videos are revalued.
a. Substitute goods. b. The basis of revaluation is fair value which is usually the market value
b. Superior goods. determined by appraisal undertaken by professional qualified valuers, or
c. Complementary goods. depreciated replacement cost, in the absence of evidence of market value.
d. Public goods. c. Items of property, plant and equipment that experience significant and
volatile movements in fair value should be revalued annually.
12. Which of the following best describes a value chain in the balanced scorecard
d. Frequent revaluations are unnecessary for items of property, plant and
equipment with only insignificant movements in fair value and instead,
framework?
revaluation every five to ten years may be sufficient.
a. The cause-and-effect linkages.
b. The baseline level of performance.
2. Which statement is incorrect concerning revaluation of property, plant and
c. The sequence of business processes in which usefulness is added to products or services.
equipment?
d. The chain of financial and nonfinancial measures.
a. When an item of property, plant and equipment is revalued, any
accumulated depreciation at the date of revaluation is restated
13. Which of the following is not a characteristic of the balanced scorecard?
proportionately with the change in the gross carrying amount of the asset so
a. Both financial and nonfinancial performance measures are included.
that the carrying amount of the asset after revaluation should equal its
b. Cause-and-effect linkages between strategic objectives.
revalued amount, or eliminated against the gross carrying amount of the
c. Customer performance measures are excluded. asset and the net amount restated to the revalued amount of the asset.
d. Internal process performance measures are included. b. Any revaluation increase should be credited to equity as revaluation
surplus.
c. The revaluation surplus included in equity may be transferred directly to b. If fair value less costs to sell cannot be determined, then recoverable
retained earnings when the surplus is realized. amount is value in use.
d. Any revaluation decrease should be debited to revaluation loss, a contra c. For assets to be disposed of, recoverable amount is fair value less costs to
equity account. sell.
d. None of the above.
3. Which statement is incorrect regarding actuarial gains and losses?
a. On an ongoing basis, actuarial gains and losses arise that comprise 8. Fair value less cost to sell is
experience adjustments and the effects of changes in actuarial assumptions. I. The amount obtainable from the sale of an asset in an arm’s length
b. In the long-term, actuarial gains and losses may offset one another and, as a transaction between knowledgeable, willing parties less cost of disposal.
result, the enterprise is not required to recognize all such gains and losses II. The present value of future cash flows expected to be derived from an
immediately. asset.
c. If the accumulated unrecognized actuarial gains and losses exceed 10% of the a. I only b. II only c. Both I and II d.
greater of the defined benefit obligation or the fair value of plan assets, the net Neither I nor II
gain or loss is required to be recognized immediately as income or expense.
d. Actuarial gains and losses that do not breach the 'corridor' need not be
9. Which statement is incorrect regarding fair value less costs to sell?
recognized - although the enterprise may choose to do so.
a. If there is a binding sale agreement, use the price under that agreement
less costs of disposal.
b. If there is an active market for that type of asset, use market price less
4. When the revaluation surplus is realized because of the use of the asset by
costs of disposal.
the enterprise or disposal of the asset, it may be transferred directly to
c. If there is no active market, use the best estimate of the asset's selling
a. Income c. Deferred income
price less costs of disposal.
b. Donated capital d. Retained earnings
d. Costs of disposal are the direct added costs including existing costs and
overhead.
5. An asset is impaired when
a. Its recoverable amount exceeds its carrying amount.
10. The following are external indicators of impairment, except
b. Its carrying amount exceeds its recoverable amount.
a. Market value declines.
c. Its fair value less costs to sell is less than its value in use.
b. Negative changes in technology, markets, economy, or laws.
d. Its net selling price is less than its value in use.
c. Increases in market interest rates.
d. Worse economic performance than expected.
6. Recoverable amount is
a. The amount at which an asset is recognized in the balance sheet after
11. 2. The journal entries for a bank reconciliation
deducting accumulated depreciation and accumulated impairment losses. a. Are taken from the balance per bank only
b. The higher of an asset's fair value less costs to sell and its value in use. b. May include a debit to office expense for bank service charges
c. The amount obtainable from the sale of an asset in a bargained transaction c. May include a credit to accounts receivable for an NSF check
between knowledgeable, willing parties. d. May include a debit to accounts payable for an NSF check
d. The discounted present value of estimated future cash flows.
12. When preparing a bank reconciliation, bank credits are
7. Which statement is incorrect in determining recoverable amount? a. Added to the bank statement balance
a. If the carrying amount is less than fair value less costs to sell or value in b. Deducted from the bank statement balance
use, it is not necessary to calculate the other amount. c. Added to the balance per book
d. Deducted from the balance per book
a. On January 1, 2007, UKG issued P200,000, 10%, 10 year bonds when the market
13. Bank overdrafts, if material, should rate of interest was 8%. Interest is payable on June 30 and December 31.
a. Be reported as a deduction from the current asset section. b. All purchases of inventory are on account and other expenses reflect those expenses
b. Be reported as a deduction from cash. paid in cash during the period.
c. Be netted against cash and a net cash amount reported. c. The company had open invoice (unpaid invoices) from suppliers amounting to
d. Be reported as a current liability. P120,000 on December 31, 2007 and P116,000 on January 1, 2007.
d. The company had outstanding invoices (uncollected invoices) to customers
14. Which of the following is not a basic characteristic of a system of cash control? amounting to P96,000 on January 1, 2007 and P110,000 on December 31, 2007.
a. Use of a voucher system e. Inventory taking at the end of each year revealed that inventory on hand on
b. Combined responsibility for handling and recording cash December 31, 2006 amounted to P186,000 while inventory on December 31, 2007
c. Daily deposit of all cash received was at P174,000.
d. Internal audits at irregular intervals
f. Accrued utilities at the beginning and at the end of the year amounted to P5,000 and
P7,000 respectively while prepaid rentals at the beginning and at the end of the year
15. Bank statements provide information about all of the following except
amounted to P10,000 and P14,000, respectively.
a. Checks cleared during the period.
b. NSF checks. Based on the information available and as a result of your audit, determine the following:
c. Bank charges for the period.
d. Errors made by the company. 1. How much was paid for inventory purchases?
a. 344,000 b. 348,000 c. 368,000 d. 372,000
2. How much was received from customers in 2007?
AP a. 490,000 b. 566,000 c. 586,000 d. 614,000
You are auditing the financial statements of UKG INC. for the year ended December 31, 3. What is the carrying value of the bonds payable on December 31, 2007?
2007. The company maintains its books on a semi-accrual and semi-cash basis. Purchases a. 225,318 b. 226,267 c. 226,840 d. 227,180
and sales are recognized on an accrual basis while other operating expenses are kept on 4. What is the correct interest expense in 2007?
cash basis. The company bookkeeper presented to you a draft of its income statements for a. 21,862 b. 20,000 c. 19,087 d. 18,138
the year under audit: 5. What is the correct net income in 2007?
a. 26,862 b. 28,862 c. 29,718 d. 46,000
Sales P600,000
13. BG corporation maintains a branch in Pampanga. Selected account balances taken from BLT
the books of the Home office and its branch as of December 31, 2008 are as follows: 1. Tee Gok died on October 11, 2008, leaving the following properties:
A parcel of land inherited from his father who died in 2006 valued at P350,000
Home Office Pampanga branch at the time but valued in 2008 at P400,000;
Sales P1,200,000 P540,000 Conjugal properties valued at 200,000
Inventory, January 1 350,000 157,500 The following are the deductions claimed against the estate:
Purchases 500,000 Funeral expenses 45,000
Shipments to branch 315,000 Judicial expenses 20,000
Shipments from Home Office 346,500 Claims against the estate 45,000
Inventory, December 31 80,000 122,100
Expenses 113,000 89,000 How much is the share of the surviving spouse?
a. P100,000 b. P45,000 c. P52,500 d. P50,000
In 2007, the Home office billed its branch at 120% of cost which was higher by 5% than the
previous year. All of the units in the beginning inventory of the branch were acquired from the
2. Julian made the following gifts in 2008 –
home office in 2007. The combined net income of the Home office and the branch is
May 1 - Land valued at P500,000. Donee is first son and the gift is on account of
a. P732,793 b. P747,750 c. P743,750 d. P738,500 marriage held on April 10, 2008.
- Farm valued at P600,000. Donee is first son, farm has an unpaid mortgage
14. On January 1, 2008, DC corporation purchased interest in GM company. (95% of P100,000 which Donee assumed.
ownership, P1,400,000 cost of investment). On this date, the book values and fair values of Dec 1 - Shares of stock of F4 Corporation valued at P400,000. Donee is first son
GM were as follows: and the gift is also on account of his marriage on April 10.
- Land in Makati valued at P1,000,000. Donee is the City of Makati and land
Book Value Fair Value
will be used for a school site.
Cash P 400,000 P400,000 The donor’s tax due on May 1 donations is –
Accounts receivable 500,000 450,000 a. P43,400 b. P51,200 c. P52,000 d. None of the above
Inventory 825,000 900,000
Property, Plant and Equipment(net) 1,050,000 950,000 3. J. Santos, VAT-registered, made the following purchases during the month of
Current Liabilities 315,000 300,000 January, 2008:
Non – current Liabilities 720,000 800,000 Goods for sale, inclusive of VAT P 246,400
Common Stock 500,000 Supplies, exclusive of VAT 20,000
Additional Paid in Capital 100,000 Office airconditioners, total invoice amount 56,000
Retained Earnings 1,140,000 Home appliances for residence, gross of VAT 17,920
If DC’s total assets in its separate books is P10,000,000, how much is total consolidated Repair of store, contractor not VAT-registered, total invoice amount 33,600
assets on date of acquisition? Repainting of store, total invoice amount evidenced by
a. P12,700,000 b. P12,820,000 c. P11,300,000 d. P11,420,000 ordinary receipt of contractor 4,480
Mr. Santos applies for refund of VAT on office air conditioners. Creditable input taxes
are: Terms of sale:
a. P34,800 b. P28,800 c. P35,280 d. P34,670 Down payment 1.15.2008 P 500,000 P 500,000
Paid on 6.15.2008 500,000 1,000,000
4. The following, except one, are administrative remedies of the taxpayer: Paid on 9.15.2008 500,000 1,000,000
a. Appealing, the decision of the Revenue district officer/Revenue district Director to the Installment due 1.15.2009 2,000,000 3,000,000
Commissioner of Internal Revenue; Installment due 5.15.2009 2,500,000 3,000,000
b. Appealing the final decision of the Bureau of Internal Revenue Commissioner to the
Mortgage assumed by the buyer 1,500,000
Court of Tax Appeals;
c. Protesting the assessment within the reglamentary period;
d. Tax minimization schemes. The final tax payable under the installment method for 2008 lot 22 is:
a. P135,000 b. P150,000 c. P600,000 d. None of the
5. Miriam Santiago, a business woman, incurred the following losses in 2008: above
1. Wagering losses at Casino Filipino P86,000
Note: Wagering winnings amounted to P14,000 8. Jose Pidal, widower, supporting a son, 33 years old, who is invalid, has the following
2. Loss on sale of company car to Red Co. 54,000 transactions in 2008:
Note: Miriam Santiago owns 60% of the stocks of Red Co. Sales P1,200,000
3. Loss on sale of office computers to Miriam Sto. Domingo, 40,000 Cost of sales 550,000
cousin of Miriam Santiago Deductions:
1. Operating expenses 367,000
The deductible loss of Miriam Santiago is: 2. Loss of Goods thru theft 50,000
a. P190,000 b. P104,000 c. P54,000 d. None 3. Contributions:
To Quezon Province government for priority
6. Jolas Realty Corp. in the course of the trade sells real property. During the month of Activity in sports development 10,000
January 2008 had the following data per sales document (VAT included): To St. Mark Cathedral 35,000
Cash sales P 560,000 Other income
Sale on installment payment basis (initial payments 1. Rent of Apartment 30,000
do not exceed 25% of the selling price, 2. Capital gain from sale of family painting held for 2 years 80,000
collection for the period equal to P100,000) 336000
Jose Pidal will report a net income before personal exemptions of:
The real property sold for cash had a zonal value of P600,000 (excluding VAT) and a. P226,700 b. P262,700 c. P266,700 d.
the property sold under deferred payment basis had a fair market value of P200,000 P302,700
(excluding VAT)
9. Jose Miguel Estrada, single, has the following transactions in 2008:
How much is the output VAT on the sale of real property? Business gross income P200,000
a. P9600 b. P84000 c. P108,000 d. P72,000 Business expense 60,000
7. Taxpayer sold capital assets as follows: Loss from gambling 10,000
Other transactions:
Lot 11 Lot 22 a. Selling price, partnership interest 100,000
Selling Price P6,000,000 P10,000,000 b. Investment in partnership 2006 20,000
Cost 2,500,000 1,000,000 c. Gain on sale of capital asset held for 4 years 10,000
d. Loss on sale of capital asset held for 8 months 12,000
Net Gain (loss) P3,500,000 P9,000,000
e. Loss on account of failure to exercise 2-month option to buy Property
2,000 P 200,000 Exempt
f. Liquidating dividend from Aquino Co. 150,000
Cost of investment in Aquino Co. in 2006 60,000 P 200,000 500,000 0 5% P 200,000
Note: in 2007, Jose Miguel Estrada had a net income of P65,000 500,000 2,000,000 P 15,000 8% 500,000
and a net capital loss of P92,000. 2,000,000 5,000,000 135,000 11% 2,000,000
Taxpayer’s net income before personal exemptions is: 5,000,000 10,000,000 465,000 15% 5,000,000
a. P196,000 b. P141,000 c. P140,000 d. P151,000 10,000,000 And Over 1,215,000 20% 10,000,000
10. A VAT-registered person is engaged in the sale of VAT taxable goods and at the 12. A race track bettor won on the following bets:
same time is also engaged in non-VAT business, in the same business On forecast, a bet of P1,000 and dividend of P100 per P20-ticket
establishment. During the quarter made sales of goods in the amount of P300,000 On ordinary , a bet of P500 and dividend of P1,000 per P50-ticket
plus a value-added tax of P36,000. The sales of the non-VAT business amounted to On double, a bet of P200 and dividend of P200 per P20-ticket
P200,000 with a separate percentage tax of P6,000 for a total of P206,000. During Total percentage tax due from the winnings was
the same quarter, repairs on the building amounted to P50,000 plus value-added tax a. P682 b. P1,182 c. P1,280 d. P1,530
of P6,000. Supplies purchased for common use amounted to P10,000 plus P1,200
value-added tax.
13. An invoice issued for the sale of VAT taxable goods shows the following:
Total invoice amount 50,400
The creditable input tax is:
Less: Trade discount of 5% 2,520
a. P28,800 b. P4,463 c. P7,200 d. P4,320
Net 47,880
11. Mrs. Kina Pos Sahangin, a Filipino, died November 1, 2008 survived by her husband.
At the date of death, she has P2,000,000 cash in bank and 100,000 shares holding If VAT taxpayer enjoys partial tax exemption of 40% including VAT and the amount is
of Pure Joke Corporation with a sales value of P100 per share at the date of death. VAT inclusive, how much is the output tax?
On January 15, she made a gift of P3,000,000 (real property) to her husband. She is a. P3,628 b. P3,447 c. P3,240 d. P3,216
insured for P1,000,000 designating her estate as beneficiary. The premium was paid 14. Statement 1. A person , refuse to pay on the ground that he will not receive a
from her exclusive property. benefit from the tax.
The last will and testament of Mrs. Kina Pos Sahangin reveals that her shares of Statement 2. A person may not refuse to pay a tax on the ground that it is confiscatory
stock in Pure Joke Corporation shall be contributed to the local government of
of his property.
Tagaytay City for the maintenance of public park, and the balance shall be given to
her husband. a. The first statement is true while the second statement is false;
b. The first statement is false while the second statement is true:
Mrs. Kina Pos Sahangin’s executor field and paid the follow tax returns: c. Both statements are true;
d. Both statements are false.
Donor’s tax for gift to her husband P 204,000
Estate Tax 34,840 15. Taxes must be for public purpose means that:
a. Taxes must be raised from the public;
The transfer tax still due for the estate tax of Mrs. Kina Pos Sahangin. b. Taxes should be used for recognized public needs benefiting a community;
a. P116,160 b. P160,160 c. P356,160 d. P560,160 c. Power of taxation should government be exercised by the legislature;
d. Relationship of the government and the governed must be transparent and
Rates of Estate Tax. – democratic.
Over But Not Over The Tax Shall be Plus Of the Excess Over