DLSU 1st Quiz in REVPRAA Practical Accounting One Direction: Read and solve the following problems. Shade the appropriate letter of your answer on the answer sheet
provided. 1. The following financial assets are obtained from the accounting records of JAZZ Inc. as of ecember !1" #$1% &und set aside for ac'uisition of land ( to be disbursed on January !$" #$1) *!"$$$"$$$ +ond sin,ing fund ( related bonds payable will be due on ecember !1" #$1) #"$$$"$$$ -ash surrender value of insurance policy #$$"$$$ Saving Saving eposi epositt in + +an, +an, /compe /compensa nsatin ting g balanc balance e of *#$$"$ *#$$"$$$ $$ ( unrest unrestric ricted ted00 #"$$$" #"$$$"$$$ $$$ Saving eposit in +*I +an, /compensating balance of *1$$"$$$ ( restricted for Shortterm borrowing0 1"2$$"$$$ Saving eposit in 3etro+an, /compensating /compensating balance of *!$$"$$$ ( restricted for 4ongterm borrowing0 #"5$$"$$$ Time Time eposi epositt with with remain remaining ing term term of !$ days days on 1#6!16 1#6!16#$1 #$1% % and ac'uir ac'uired ed on Septem September ber 1"#$1 1"#$11 1 %"$$$" %"$$$"$$$ $$$ Time eposit with original term of ) years and remaining term of 5$ days on ece ecemb mber er !1"# !1"#$1 $11. 1. It was was ac'ui c'uire red d on ecem ecembe berr #1" #1"#$1 #$11 )"$$ )"$$$" $"$$ $$$ $ &irst -urrent Account in 7-*+ ( /verdraft0 /1"$$$"$$$0 Second -urrent Account in 7-*+ !"$$$"$$$ Investment in rdinary Shares !$$"$$$ Investment in *reference Shares %$$"$$$ Investment in Redeemable *reference Shares ( 8$ days term )$$"$$$ What is the total cash and cash equialents to !e "resented in the Dece#!er $1% &'1( State#ent o) *inancial Position+
a. *1%")$$"$$$
b. *15")$$"$$$
c. *12")$$"$$$
d. *1)")$$"$$$
#. The following items are obtained from the records of cash accountant of S3- who filed for leave of absence at the end of reporting period ecember !1" #$1%9 S3- +an, Statement +alance *1$"$$$"$$$ -urrent Account in + +an, 1#"$$$"$$$ *roceeds of loan obtained obtained by S3- from + ( credited by the latter to the former:s account !"$$$"$$$ eposit in transit %"$$$"$$$ +an, service charge #$$"$$$ utstanding chec, 1"$$$"$$$ ;ote receivable of S3-:s customer collected by + )$$"$$$ ;S& -hec, from S3-:s customer !$$"$$$ The following errors were committed by the accountants of the S3- and +" respectively9 a. A deposit of S3 *rime amounting to *1"$$$"$$$ was cr edited to S3- by +. b. A chec, issued by S3- in the amount of *!"$$$"$$$ was charged by + in the amount of *)"$$$"$$$. c. A cash cash collec collectio tion n deposi deposited ted to the + amount amounting ing to *)"$$$ *)"$$$"$$ "$$$ $ was record recorded ed by S3-: S3-:s s accoun accountan tantt at *5"$$$"$$$. d. A chec, amounting to *#"$$$"$$$ issued by S3- was recorded twice by its cash accountant. What is the ad,usted !alance "er !an- to !e "resented on Dece#!er $1% &'1( State#ent o) *inancial Position+
a. *1!"$$$"$$$$
b. *1)"$$$"$$$
c. *1#"$$$"$$$
d. *1%"$$$"$$$
!. The following items are obtained from the accounting records of 4S4 Inc. as of ecember !1" #$1%9 4S4 +an, Statement +alance *)"$$$"$$$ +an, service charge 1$$"$$$ Tuition fee receivable collected by R-+- in favor of 4S4 )$$"$$$ ;S& -hec, from 4S4:s students #$$"$$$ utstanding chec,s !$$"$$$ eposit in transit 1"!$$"$$$ R-+- charged to 4S4:s account the loans payable of 4S7 1"$$$"$$$ 4S4:s 4S4:s accountant recorded a chec, it issued in the amount of *)$$"$$$ at an erroneous amount of #"$$$"$$$ What is the unad,usted !alance o) the .urrent Account in R./. in DLSL0s DLSL0s accounting record on Dece#!er $1% &'1(+
a. *<"$$$"$$$
b. *5"<$$"$$$
c. *)"!$$"$$$
d. *2"!$$"$$$
%. The audited financial statements for the year ended ecember !1" #$1! showed the following balances of -ARS Inc9 =ross Accounts Receivable *!"$$$"$$$ 4ess9 Allowance for +ad debts )$$"$$$ ;et reali>able value of AR *#")$$"$$$ The following transactions occurred during year 2014:
a. The total sales during #$1% amounted to *)$"$$$"$$$. b. The amount received from cash customers totaled *1$"$$$"$$$. c. -ARS collected *#5")$$"$$$ from credit customers who all availed of )? cash discount. It is e@clusive of the collection of previously written off accounts receivables. d. The company issued a total credit memo of *#"$$$"$$$ to its customers. e. ne of -ARS: customer dishonored its promissory amounting to *!")$$"$$$. The accrued interest of the note is *)$$"$$$. f. -ARS wrote off accounts receivable proven to be worthless amounting to *1)$"$$$. g. The company recovered previously written off accounts receivable in #$1# amounting to *!$$"$$$. h. -ARS factored one its accounts receivable with net reali>able value of *1"%$$"$$$ for a proceeds of *#"$$$"$$$. The related allowed for bad debts of the factored receivable is *1$$"$$$. i. It is -ARS: policy to provide bad debts e@pense based on 1? of its net credit sales. What is the net realiza!le alue o) accounts receia!le to !e "resented ! .ARDS 2nc3 as o) Dece#!er $1% &'1(+
a. *1#"%!)"$$$
b. *5"
c. *1%")#)"$$$
d. *1$"5#)"$$$
). The following transactions affecting the accounts receivable of onder -ompany too, place during the year ended ecember !1"#$1%9 Sales /cash and credit0 *)"8$$"$$$ Page 1 of 8
-ash received from credit customers" all of whom too, advantage of the discount feature of the company:s credit terms %61$" n6!$ -ash received from cash customers Accounts receivable written off as worthless -redit memorandum issued to credit customers for sales returns and allowances -ash refunds given to cash customers for sales returns and allowances Recoveries on accounts receivable written off as uncollectible in prior periods /not included in cash amount stated above0
!"$#%"$$$ #"1$$"$$$ )$"$$$ #)$"$$$ #$"$$$ 5$"$$$
The following balances were taken from the January 1,2014 Statement of Financial osition:
Accounts Receivable *8)$"$$$ Allowance for bad debts 1$$"$$$ The entity provided for uncollectible account losses by crediting allowance for doubtful accounts in the amount of *<$"$$$ for the current year. What is the net realiza!le o) accounts receia!le on Dece#!er $1% &'1(+ a. 1"15$"$$$ b. 1"##2"$$$ c. 1"$5$"$$$ d. 1"1$$"$$$ 2. The following data are obtained from the accounts receivable accountant of T** Inc. for the year #$1%9 De!it
.redit
Accounts receivable" 1616#$1% *#"$$$"$$$ Accounts receivable" 1#6!16#$1% %"$$$"$$$ Allowance for bad debts" 1616#$1% 1$$"$$$ Total credit sales during #$1% *)"$$$"$$$ Sales discount 1$$"$$$ Sales return %$$"$$$ uring #$1%" the company recovered previously written off accounts receivable in #$1! amounting to *)$"$$$. 3oreover" it also wrote off *#$"$$$ accounts receivable proven to be worthless. It is the company:s policy to provide bad debts e@pense based on 1$? of its net credit sales. All sales are on account. What is the a#ount to !e "resented as allo4ance )or !ad de!ts in the co#"an0s State#ent o) *inancial Position as o) Dece#!er $1% &'1(+
a. *%$$"$$$
b. *)5$"$$$
c. *!5$"$$$
d. *!#$"$$$
<. uring #$1%" RBC Inc. wrote off *1$$"$$$ accounts receivable proven to be worthless and recovered previously written off accounts receivable amounting to *)$"$$$. It is the company:s policy to provide bad debts based on 1$? of ending balance of accounts receivables. The following data are obtained from the accounting records of RBC Inc9 De!it
Accounts receivable" 1616#$1% Accounts receivable" 1#6!16#$1% Allowance for bad debts" 1616#$1% Total credit sales during #$1% Sales discount Sales return
.redit
*)"$$$"$$$ !"$$$"$$$ * 1)$"$$$ #"$$$"$$$ 1)$"$$$ !)$"$$$
What is the !ad de!t e5"ense to !e "resented )or the ear ended Dece#!er $1% &'1(+
a. *1)$"$$$ b. *!$$"$$$ c. #)$"$$$ d. *#$$"$$$ 5. It is 3A Inc.:s policy to provide bad debt e@pense based on #$? of its net credit dales. uring #$1%" the company recovered accounts receivable previously written off in #$1! in the amount of *#$$"$$$. The net credit sales during #$1% is *!"$$$"$$$. The ecember !1" #$1! audited financial statements presented an allowance for bad debts of *1$$"$$$ credit and gross accounts receivable of *#"$$$"$$$. After the financial statements audit of year #$1%" the net reali>able value of accounts receivable is *1")$$"$$$. The gross accounts receivable remains the same from #$1! to #$1%. What is the total a#ount o) accounts receia!le 4ritten o)) during ear &'1(+
a. *%$$"$$$
b. *!$$"$$$
c. *)$$"$$$
d. *#$$"$$$
8. n ctober 1" #$1%" 3AIA Inc. received a #year"1$?" *!"$$$"$$$ note receivable with semiannual interest payable every 3arch !1 and September !$. The note was received in e@change for a building with fair value of *!")$$"$$$ and cost of *%"$$$"$$$ and accumulated depreciation of *1"#$$"$$$. What is the gain67loss8 on e5change to !e re"orted ! 9A2A+ a. *1"$$$"$$$ b. *#$$"$$$ c. *)$$"$$$ d. *<$$"$$$ 1$. Using the sa#e data in nu#!er % 4hat is the interest inco#e and interest "aa!le% res"ectiel to !e "resented ! 9A2A on Dece#!er $1% &'1;+
a. *!$$"$$$ and *1)$"$$$
b. *1)$"$$$ and *1)$"$$$
c. *!$$"$$$ and *<)"$$$
d. *1)$"$$$ and *<)"$$$
11. n January 1" #$1%" 4BT Inc. sold an e'uipment with cost of *#"$$$"$$$ and accumulated depreciation of *)$$"$$$. The consideration received is a noninterest bearing note with a principal of *!"$$$"$$$ payable at the end of the term of % years. The applicable interest rate for the similar type note is 1#?. What is the carring alue o) notes receia!le on Dece#!er $1% &'1<+
a. *#.1!)"!%1
b. *#"!81")5#
c. *1"8$2"))%
d. *#"2<5")<1
1#. n January 1" #$1%" -&A Inc. received a %year noninterest bearing note receivable with a principal of *%"$$$"$$$ which is payable annually every ecember !1. The applicable interest rate for similar type of note is 1$?. What is the interest e5"ense to !e recognized ! .*A on Dece#!er $1% &'1=+
a. *1$$"$$$
b. *8)"2#!
c. *8$"8$8
d. *111"111
1!. +*I Inc. provides financing to other companies by purchasing their accounts receivable on a nonrecourse basis. +*I Inc. charges its clients a commission of 1)? on all receivables factored. In addition" +*I withholds 1$? of receivables factored as protection against sales return and other adDustments. +*I Inc. credits the 1$? withheld to -lients Retainer Account and ma,es payments to clients at the end of each month so that the balance in the retainer is e'ual to 1$? of unpaid receivables at the end of the month. B@perience has led +*I Inc. to establish an allowance for bad debts accounts of %? of all unpaid receivables Page 2 of 8
purchased. n ecember !1" #$1%" +*I purchased receivables from 4S4 Inc. totaling )"$$$"$$$. 4S4 Inc. had previously established an allowance for bad debts for these receivables at *#$$"$$$. +y ecember !1" +*I Inc. had collected %"$$$"$$$ on these receivables. What is the gain67loss8 on )actoring to !e recognized ! DLSL 2nc3+ a. /*1"$)$"$$$0 b. /*))$"$$$0 c. /*1"#)$"$$$0 d. /*)$$"$$$0 1%. n July 1" #$1%" AIT Inc. received a 15$day *1"$$$"$$$ note receivable from its customer with 1$? interest. ue to financial difficulties" AIT Inc. discounted the said notes receivable to R-+- Inc. on August 1)" #$1% at a 1)? discount rate. What is the gain67loss8 on note receia!le discounting to !e recognized ! AW2> 2nc3+
a. /*8"$2#.)$0
b. *!$"!1#.)$
c. /*#1")2#.)$0
d. *1)"#1!.)$
1). n January 1" #$1%" *+-33 Inc. granted a loan to S3- Inc. with a principal of *#"$$$"$$$ payable at the end of % y ears. Interest of 1$? is payable annually every ecember !1. n ecember !1" #$1%" *+-33 accrued the appropriate interest. n this date" S3- e@perienced financial difficulties as a result of economic recession. *+-33 determined that the loans receivable granted to S3- is impaired. The lender estimated that the accrued will no longer be recovered. nly *1"$$$"$$$ principal will be recovered on ecember !1" #$18 and a corresponding )? interest every ecember !1. The prevailing mar,et rate on ecember !1" #$1% is 1#?. What is the i#"air#ent loss to !e recognized ! P/.O99 2nc3 on Dece#!er $1% &'1(+
a. *1"!58")%$
b. *1"%)#"!!%
c. *1"#8%")!)
d. *1"1)%"#!1
12. S7ITS Inc. incurred the following costs related to its inventories9 4ist price *1"$$$"$$$ Trade discount and rebates #$$"$$$ *urchase discount 1$$"$$$ &oreign e@change differences arising from ac'uisition 1$$"$$$ &inance cost on inventory loan #$$"$$$ Irrecoverable import duties !$$"$$$ -reditable value added ta@es #$$"$$$ &reight and handling costs %$$"$$$ Aftersales warranty cost #$$"$$$ Sales commission paid to sales agents 1$$"$$$ Salary of inventory accountant !$$"$$$ What is the total ca"italiza!le cost o) inentories o) SU2>S 2nc3+
a. *1"%$$"$$$
b. *1"2$$"$$$
c. *1"5$$"$$$
d. *1"8$$"$$$
1<. A**4B Inc. produces the following types of inventories with their corresponding relevant data9 Product?istorical .ost Esti#ated Selling Price
Esti#ated @ross Pro)it
Esti#ated .ost to .o#"lete
Esti#ated .ost to Sell
I* *1"$$$"$$$ IT7-E*#"$$$"$$$ I*A *%"$$$"$$$
*)$$"$$$ *1"$$$"$$$ *#"$$$"$$$
*#$$"$$$ *5$$"$$$ *5$$"$$$
*!$$"$$$ *%$$"$$$ *<$$"$$$
*#"$$$"$$$ *!"$$$"$$$ *)"$$$"$$$
What is the total loss on inentor 4ritedo4n to !e "resented as "art o) .ost o) Sales o) A""le+
a. *#$$"$$$
b. *)$$"$$$
c. *<$$"$$$
d. *%$$"$$$
15. BS*; provided the following data concerning its inventory9 January 1 ) 2 5 1$ #) !$ !1
Inventory *urchases Sales *urchase Sales return *urchase retirn Sales *urchase
Units
.ost
)"$$$ 1$"$$$ 5"$$$ )"$$$ !"$$$ 2"$$$ )"$$$ 1"$$$
*).$$ *2.$$ *5.$$ *2.$$ *1$.$$
2) ESP .o3 uses *2*O "er"etual inentor sste#% 4hat is the cost o) goods sold )or Banuar+
a. *2)"$$$
b. *%)"$$$
c. *)<"$$$
d. *2#"$$$
18. The following data pertain to year #$1! opertion of 3I; Inc. +eginning inventory * #$$"$$$ =ross purchases 1"#$$"$$$ &reight in 1$$"$$$ *urchase return #$$"$$$ *urchase discount and allowance 1$$"$$$ =ross sales 1"!2$"$$$ Sales return 1$$"$$$ Sales allowance and discount #$$"$$$ =ross profit rate based on cost %$? n ecember !1"#$1!" a fire ra>ed 3in:s factory. An inventory with selling price of *1%$"$$$ was saved. ?o4 #uch is the loss on inentor due to )ire+
a. *12$"$$$
b. *#$$"$$$
c. *!$$"$$$
d. *#%$"$$$
#$. The following data pertains to year #$1! operation of JI; Inc. +eginning inventory =ross purchases *urchase return *urchase allowance
.ost
Retail
%8)"$$$ #"$$$"$$$ 1$$"$$$ 1#$"$$$
8$$"$$$ !")$$"$$$ #$$"$$$
Page 3 of 8
*urchase discount &reight in ;et mar,up ;et mar,down Sales Sales return Sales allowance Sales discount Bmployee discount ;ormal shortage
!$"$$$ )$"$$$ !$$"$$$ 2$$"$$$ !"$$$"$$$ )$$"$$$ #$$"$$$ !$$"$$$ 1$$"$$$ 1$$"$$$
Assu#ing the use o) *2*O retail inentor #ethod% 4hat is the cost o) goods sold )or the ear &'1$+
a. *#"1#)"$$$b.
*1")<)"$$$c.
*1"#!)"$$$d.
*1"<#)"$$$
#1. n ;ovember 1)"#$1$" amascus -ompany entered into a c ommitment to purchase 1$$"$$$ barrels of aviation fuel for *)) per barrel on 3arch !1"#$11. The entity entered into this purchase commitment to protect itself against the volatility in the aviation fuel mar,et. +y ecember !1"#$1$" the purchase price of aviation fuel had fallen to *%$ per barrel. Eowever" by 3arch !1"#$11" when the entity too, delivery of the 1$$"$$$ barrels the price of aviation fuel had risen to *2$ per barrel. ?o4 #uch should !e recognized as gain on "urchase co##it#ent )or &'11+
a. 1")$$"$$$
b. #"$$$"$$$
c. )$$"$$$
d. >ero
##. n January 1" #$1%" SEB*BR Inc. purchased 1$$ cows which are !year old for *1)"$$$ each for the purpose of producting mil, for the local community. n July 1"#$1%" the cows gave birth to #$ calves. The active mar,et provided the fair value less cost to sell of the biological assets as follows9 ;ewborh calf on July 1 %"$$$ ;ewborn calf on ecember !1 )"$$$ F year old calf on ecember !1 <"$$$ ! years old cow on ecember !1 15"$$$ % years old cow on ecember !1 #%"$$$ Using the sa#e data in nu#!er &&% 4hat is the gain due to "rice change )or the ear ended Dece#!er $1% &'1(+
a. *!#$"$$$
b. *%%$"$$$
c. *#2$"$$$
d. *!5$"$$$
#!. Using the sa#e data in nu#!er &% 4hat is t he gain due to "hsical change )or the ear ended Dece#!er $1% &'1( + a. *22$"$$$ b. *<5$"$$$ c. *2%$"$$$ d. *<#$"$$$ #%. n July 1" #$1%" JG-B Inc. ac'uired )"$$$ ordinary shares of + Inc. at *1#6share and paid transaction costs totaling *)"$$$. RI-E purchased the investment with the intent of selling them in the near future to generate shortterm gains or profits. n September 1" #$1%" + declared and distributed #$? share dividends to ordinary shareholders. n ecember !1"#$1%" the following 'uoted prices of + ordinary shares are available in the *hilippine Stoc, B@change9 As,ing *rice ( *1$ H +id *rice ( *5. ?o4 #uch is the unrealized holding gain or loss to !e "resented in "ro)it or loss ! BOC.E 2nc3 )or the ear ended Dece#!er $1% &'1(+
a. *1#"$$$ loss
b. *1<"$$$ loss
c. *#$"$$$ loss
d. *#)"$$$ loss
#). n January 1"#$1!" I; Inc. ac'uired #$"$$$ preference shares of AG;B Inc. at *1)6share for currently undetermined use and paid bro,er fees and transfer ta@es totaling *)$"$$$. The fair mar,et values of Investment in AG;B are provided9 ecember !1"#$1! *!$$"$$$ ecember !1"#$1% *)$$"$$$ ?o4 #uch is the cu#ulatie unrealized holding gain or loss to !e "resented in the other co#"rehenie inco#e o) State#ent o) *inancial Position as o) Dece#!er $1%&'1(+
a. *1)$"$$$ gain /credit0 b. *#$$"$$$ gain /credit0 c. *)$"$$$ loss /debit0
d. *1$$"$$$ loss /debit0
#2. n January 1"#$$8" +ridge company purchased #)"$$$ shares of the 1$$"$$$ outstanding shares of river company for a total of *1"$$$"$$$. At the time of purchase" the boo, value of river company e'uity was *!"$$$"$$$. River company assets having a fair value greater than boo, value at the time of the ac'uisition were as follows9 /oo- alue
*air alue
Re#aining li)e
Inventory %$$"$$$ )$$"$$$ 4ess than1 year /all inventories were sold0 B'uipment #"$$$"$$$ #")$$"$$$ ) years =oodwill none %$$"$$$ indefinite River company:s net income in #$$8 was *<$$"$$$. ividends per share paid by River c ompany amounted to *! in #$$8. What is the carring a#ount o) /ridge co#"an0s inest#ent in Rier co#"an on Dece#!er $1%&''+
a. *1"$)$"$$$
b. *1"$$$"$$$
c. *1"$<)"$$$
d. *1"1$$"$$$
#<. n July 1"#$1!" RAI; ac'uired %$"$$$ ordinary shares out of 1$$"$$$ outstanding ordinary shares of S7; Inc. for *#$6share. n August 1"#$1!" S7; paid cash dividend of *)6share to its stoc,holders. n ctober 1"#$1!" RAI; also received property dividend in the form of car with cost of *)$$"$$$ and accumulated depreciation of *%5$"$$$ and corresponding fair value of *)$"$$$. n ecember !1"#$1!" S7; reported its financial performance for the whole year #$1!9 ;et *rofit *#"$$$"$$$ ;et ther -omprehensive Income ( ebit )$$"$$$ ?o4 #uch is the carring alue o) inest#ent on Dece#!er $1%&'1$+
a. *5)$"$$$ b. *8)$"$$$ c. *1"$)$"$$$ d. *1"1)$"$$$ #5. 1. n January 1"#$1!" A-B Inc. ac'uired 1$"$$$ ordinary shares out of 1$$"$$$ outstanding ordinary shares of AGA4A Inc. for *#$6share. uring the year" AGA4A Inc. provided the following transactions9 n July 1"#$1!" AGA4A Inc. declared and paid )? same share dividends to its stoc,holders. The fair value of each share as of this date is *#)6share. n ctober 1"#$1!" AGA4A Inc. declared and paid *#6share cash dividend to its stoc,holders. n ;ovember 1"#$1!" AGA4A Inc. declared and distributed cars as property dividend. A-B received a car with historical cost of *)$$"$$$ and accumulated depreciation of *%)$"$$$. The fair value of the car is *!$"$$$. Page 4 of 8
?o4 #uch is the total diidend inco#e to !e recognized ! A.E 2nc3 )or the ear ended Dece#!er $1%&'1$+
a. *)#")$$
b. *)$"$$$
c. *)1"$$$
d. *<$"$$$
#8. n January 1" #$1%" +RBR Inc. ac'uired bonds of + Inc. with the intention of obtaining profit for shortterm fluctuations in its fair value. The bonds are purchased for *!"1$$"$$$. +RBR Inc. incurred transaction c osts totaling *%8.#11. The bonds have face value of *!"$$$"$$$ payable at the end of its threeyear term. Interest of 1#? is payable annually every ecember !1. The applicable effective rate of the bonds is 1$?. n ecember !1" #$1%" the bonds of + are traded in the e@change mar,et at 11$. n January 1" #$1)" +RBR Inc. sold the bonds of + for 1$) less disposal cost of *#$"$$$. ?o4 #uch is the realized gain67loss8 on dis"osal o) /onds on Banuar 1% &'1;+
a. *!$"$$$
b. /*1<$"$$$0
c. *1$$"$$$
d. /*#$$"$$$0
!$. n January 1" #$1%" =A3+4BR Inc. ac'uired bond securities from +*I Inc. at 82. =A3+4BR Inc. incurred and paid *##"<$# transaction cost in ac'uiring the bonds. The obDective of the business model of =A3+4BR Inc. is to hold assets in order to collect contractual cash flows from principal and interest. The +*I +onds have face value of *)"$$$"$$$ payable at the end of its twoyear term. The interest of 5? is payable every June !$ and ecember !1. The interpolated effective interest rate of the bonds is 1$?. n ecember !1" #$1%" the bonds are traded in the e@change mar,et at 1$). ?o4 #uch is the interest inco#e to !e recognized ! @A9/LER 2nc3 )or the ear &'1;+
a. *%8$"%8<
b. *%$$"$$$
c. *%8$"<$!
d. *%8#"8<$
!1. n January 1" #$1%" B44 Inc. purchased the bonds of S3 Inc. for *2"$$$"$$$. B44 paid transaction costs totaling *#11"%)1. The obDective of the business model of B44 Inc. is to hold assets in order to collect contractual cash flows from principal and interest. The face value of the bonds is *2"$$$"$$$ which is payable in three e'ual installments every ecember !1. The interest of 1$? is also payable annually every ecember !1. The applicable effective interest rate of this serial bond is 5?. What is the carring alue o) t he !onds 2nest#ent in /onds on Dece#!er $1% &'1(+ a. *2"1$5"!2< b. *%"1$5"!2< c. *%"<$5"!2< d. *)"#$!"851 !#. The following fi@ed assets are obtained from the trial balance of BT- Inc. as of ecember !1" #$1%9 3achinery used for production *1"$$$"$$$ B'uipment leased to another under operating lease #"$$$"$$$ -ar held for longterm capital appreciation %"$$$"$$$ +uilding held for administrative purposes !"$$$"$$$ 4and classified as held for sale )"$$$"$$$ -ondominium unit held for sale in the ordinary course of business #"$$$"$$$ Real *roperty under construction to be used as Investment *roperty #"$$$"$$$ 4and held for longterm capital appreciation !"$$$"$$$ +uilding leased to another under operating lease %"$$$"$$$ 4and and building held for currently undetermined use 1"$$$"$$$ +uilding that is developed on behalf of third parties !"$$$"$$$ Real property that is leased out to another under a finance lease )"$$$"$$$ 4and and building occupied by employees paying rent at mar,et rate #"$$$"$$$ 4and held for future plant site 1"$$$"$$$ What is the total inest#ent "ro"ert to !e "resented on Dece#!er $1% &'1( State#ent o) *inancial Position+
a. *1$"$$$"$$$
b. *1#"$$$"$$$
c. *18"$$$"$$$
d. *1)"$$$"$$$
!!. n July 1" #$1%" AGA4A 4A; Inc. ac'uired a building to be leased out to different companies at a total cost of *##"$$$"$$$. It is AGA4A 4A;:s policy to use cost model in accounting for its investment property. The useful life of the building is 1$ years with residual value of *#"$$$"$$$. The fair values of the building are as follows9 ecember !1" #$1% *#)"$$$"$$$ ecember !1" #$1) *15"$$$"$$$ n January 1" #$12" AGA4A 4A; Inc. sold the property for *#$")$$"$$$ and incurred disposal cost of *)$$"$$$. What is the carring alue o) the !uilding on Dece#!er $1% &'1;+
a. *#$"$$$"$$$
b. *18"$$$"$$$
c. *15"$$$"$$$
d. *#1"$$$"$$$
!%. n January 1"#$1%" 3B; Inc. established a sin,ing fund of *!"$$$"$$$ under a trustee *;+ +an, for payment of +onds *ayable which will mature on January 1"#$12. n ecember !1"#$1%" the periodic trustee report shows that *1")$$"$$$ was invested in securities and *1"$$$"$$$ in money mar,et placement. n ecember !1"#$1)" the periodic report from the trustee shows that the securities were sold for *#"$$$"$$$ and interest received on money mar,et placement was *1)$"$$$. The trustee:s fees and administrative e@penses during #$1) are *2$"$$$ and *%$"$$$ respectively. n January 1"#$12" 3B; Inc. received a periodic report from the trustee that bonds payable of *!"$$$"$$$ and interest of *!$$"$$$ were paid. What is the cash to !e re#itted ! P/ to 9E 2nc3 on Banuar 1% &'1<+
a. *#)$"$$$
b. *!)$"$$$
d. *!$$"$$$
d. Zero
!). n January 1"#$1%" *4T Inc. insures the life of its president for *1$"$$$"$$$" the entity being the beneficiary of the ordinary life policy. The annual premium is *1)$"$$$. The policy is dated January 1"#$1% and carries the following cash surrender value9 End o) the "olic ear
#$1% #$1) #$12 #$1<
.ash surrender alue
2$"$$$ 5$"$$$ Page 5 of 8
#$15 8$"$$$ The entity follows the calendar year as its fiscal period. The president dies on June !$"#$15 and the policy is collected on July !1"#$15. What is the gain to !e recognized ! PLD> 2nc3 )ro# "roceeds o) insurance "olic+ a. *8"81$"$$$ b. *8"5%$"$$$ c. *8"5!)"$$$ d. *8"81)"$$$ !2. Angeles -ompany has the *hilippine peso as its functional currency. The entity e@pects to purchase an e'uipment with an estimated life of ) years from 7SA for )$"$$$ on April 1"#$11. Accordingly" the entity is e@posed to a foreign currency e@change ris,. If the dollar increase before the purchase ta,es place" the entity will have to pay more pesos to obtain the )$"$$$ that it will have to pay for the e'uipment. To offset the ris, of any increase in the dollar rate" the entity enters into a forward currency contract on September !$"#$1$ to purchase )$"$$$ in si@ months for a fi@ed amount of *#"%$$"$$$ or *%5 for 1. The entity designates the forward currency contract as the hedging instrument in a cash flow hedge of its e@posure to increases in the dollar e@change rate. The company:s policy is to adDust the cost of nonfinancial items ac'uired as a result of hedged forecast transactions. n ecember !1"#$1$" the e@change rate is *)$ to 1 and on April 1"#$11" the e@change rate is *)1 to 1. What is the a#ount to !e r ecognized as deriatie asset6lia!ilit on Dece#!er $1%&'1'+
a. #"%$$"$$$ liability
b. 1$$"$$$ liability
c. 1$$"$$$ asset d. >ero
!<. n January 1"#$1$" Cigan -ompany received a #year" *!!"$$$"$$$ loan" with interest payments occurring at the end of each year and the principal to be repaid on ecember !1"#$11. The interest rate for the first year is the prevailing mar,et rate of 5?" and the rate in #$11 will be e'ual to the mar,et interest rate on January 1"#$11. In conDunction with this loan" Cigan enters into an interest rate swap agreement to receive a swap payment /based on *!!"$$$"$$$0 if the January 1"#$11" interest rate is greater than 5? and will ma,e a swap payment if the rate is less than 5?. The interest swap payment will be made on ecember !1"#$11. n January 1"#$11" the interest rate is
a. !$5"%15 payable
b. !$)")%< payment
c. !!$"$$$ payable
d. !!$"$$$ receivable
!5. B@cel company issued rights to subscribe to its stoc,s" the ownership of % shares entitling the shareholders to subscribe for 1 share at *1$$. Jealina company owns )$"$$$ shares of B@cel company with total cost of *)"$$$"$$$. The share is 'uoted righton at *1#). The stoc, rights are accounted for separately and measured initially at fair value. What is the cost o) ne4 inest#ent o) all the stoc- rights are e5ercised ! Bealina co#"an+
a. *1")$$"$$$
b. *1"#)$"$$$
c. *1")2#")$$
d. *1"%)$"$$$
!8. On April 1, 2014, SURE Inc. acquired bonds securities of P! dated "anuar# 1, 2014. $%e bonds %a&e face &alue of P1,000,000 pa#able at t%e end of its four'#ear ter(. Interest of 10) is pa#able e&er# *ece(ber +1. $%e effecti&e interest rate of t%e bonds on "anuar# 1, 2014 is 1). The obDective of the business model of S7RB Inc. is to %old assets in order to collect contractual cas% flo-s fro( principal and interest. On "anuar# 1, 201, SURE Inc. sold t%e P! bonds for 110 less disposal cost of P10,000. /. a. P100,000
b. P12,
c. P5,441
d. P1++,410
a. P4,11
b. P0,2+1
c. P+1,2
d. 44,/2
40.
%1. Sterling company is preparing its #$1% yearend financial statements. *rior to any adDustments" inventory is valued at *<"2$$"$$$. The following information had been found relating to certain in!entory transactions: a3 =oods valued at *1"$$$"$$$ are on consignment with a customer. These goods are not included in the yearend inventory. !3 =oods costing *#)$"$$$ were received from a vendor on January )"#$1). The related invoice was received and recorded on January 1#"#$1). The goods were shipped on ecember !1"#$1%" terms &+ Shipping point. c3 =oods costing *5)$"$$$ were shipped on ecember !1"#$1%" and were delivered to the customer on January #"#$1). The term of the invoice were &+ shipping point. The goods were included in ending inventory for #$1% even though the sale was recorded in #$1%. d3 A *!)$"$$$ shipment of goods to a customer on ecember !1"#$1%" terms &+ destination" was not included in the yearend inventory. The goods cost *#2$"$$$ and were delivered to the customer on January 5"#$1). The sale was properly recorded in #$1). e3 An invoice for goods costing *!)$"$$$ was received and recorded as a purchase on ecember !1"#$1%. The related goods" shipped &+ destination" were received on January #"#$1)" and thus were not included in the physical inventory. )3 =oods valued at *2)$"$$$ are on consignment from a vendor. These goods are not included in the yearend inventory. g3 A *1"$)$"$$$ shipment of goods to a customer on ecember !$"#$1%" terms &+ destination" was recorded as a sale in #$1%. The goods costing *5%$"$$$ and delivered to the customer on January 2"#$1)" were not included in #$1% ending inventory. What is the correct inentor on Dece#!er $1%&'1(+
a. *8"8)$"$$$
b. *5"1$$"$$$
c. *8"1$$"$$$
d. *8"%)$"$$$
%#. n ctober 1" #$1%" 3ATT Inc. ac'uired 1$"$$$ ordinary shares of +*I Inc. at *1$6share and paid transaction costs totaling *#$"$$$. 3ATT purchased the for currently undetermined use. n ;ovember 1" #$1%" +*I Inc. declared and distributed #$? share dividends to ordinary shareholders. n ecember !1"#$1%" the following 'uoted prices of + ordinary shares are available in the *hilippine Stoc, B@change9 As,ing *rice ( *1) H +id *rice ( *#$. n January 1" #$1)" 3ATT sold %"$$$ ordinary shares of +*I for *156share less *#"$$$ disposal cost.
Page 6 of 8
Using the sa#e data in nu#!er % ho4 #uch is the realized gain or loss )ro# the dis"osal o) ordinar shares o) /P2 on Banuar 1% &'1;+ 7USE PAS $8 ?o4 #uch is the net de!it6credit to Retained Earnings as a result o) the dis"osal o) ordinar shares o) /P2 on Banuar 1% &'1;+ 7USE P*RS 8
%!. T;T Inc. ac'uired a merchandise on January 1"#$1! with list price of *)$$"$$$ with trade discounts of #$? and 1$? and credit term of )61$" n6!$. n January 11"#$1!" T;T paid the accounts payable. ?o4 #uch is the a#ount o) cash "aid ! >> to its su""liers on Banuar 11%&'1$+ a. *!2$"$$$ b. *!%#"$$$ c. *%)$"$$$ d. *%$$"$$$ %%. The following data are e@tracted from the records of AI= Inc. relating to an inventory item. Units Unit .ost >otal .ost Jan. 1 +eginning balance )"$$$ *#$$ *1"$$$"$$$ 1$ *urchase )"$$$ *#)$ *1"#)$"$$$ 1) Sale <"$$$ 12 Sale return 1"$$$ !$ *urchase 12"$$$ *1)$ *#"%$$"$$$ !1 *urchase return #"$$$ *1)$ * !$$"$$$ Under "er"etual sste##oing aerage #ethod% 4hat is the cost o) goods sold )or Banuar+ a. *1"2)$"$$$ b. *1"!)$"$$$ c. *!"$$$"$$$ d. *2)$"$$$
%). The cash accountant of SK Inc. prepared the following ban, reconciliation SK +alance /+an, Statement0 1#6!16#$1% *#"$$$"$$$ +*I -hec,ing Account 1#6!16#$1% *#"!$$"$$$ Add9 ;S& -hec, #$$"$$$ Add9 Interest on note receivable !$"$$$ eposit in transit 2$$"$$$ utstanding chec,s 1$$"$$$ 4ess9 ;ote receivable of SK:s customers 4ess9 +an, service charge %$"$$$ collected by +*I %1$"$$$ AdDusted +alancer per +an, *#"!8$"$$$ AdDusted +alance per boo, *#"!8$"$$$ What is the ad,usted !alance "er !an- to !e "resented on Dece#!er $1% &'1( State#ent o) *inancial Position+ a. *1")$$"$$$ b. *#")$$"$$$ c. *#"5$$"$$$ d. #"#$$"$$$ %2. uring #$$8" 4awan company bought the shares of +urwood company as follows9 June 1 #$"$$$ shares L *1$$ *#"$$$"$$$ ecember 1 !$"$$$ shares L *1#$ !"2$$"$$$ *)"2$$"$$$ The transactions for #$1$ are9 January 1$ Received cash dividend at *1$ per share January #$ Received #$? stoc, dividend ecember 1$ Sold !$"$$$ shares at *1#) per share 2) the *2*O a""roach is used% 4hat is the gain on sale o) the shares+ a. *1"1)$"$$$ b. *8)$"$$$ c. *1)$"$$$
d. *))$"$$$
%<. n Janury 1"#$1!" ART Inc. ac'uired #$"$$$ ordinary shares out of )$$"$$$ outstanding ordinary shares of TB-E Inc. for *#)6share. n July 1"#$1!" TB-E Inc. declared and distributed 1$? share dividend in the form of preference shares to its stoc,holders. As of July 1"#$1!" the preference shares of TB-E is traded at *)$6share while its outstanding shares is traded at *1)6share. What is the a#ount to !e de!ited to 2nest#ent in >E.?0s "re)erence shares as a result o) declaration o) stoc- diidends on Bul 1%&'1$+ a. *1$$"$$$ b. *1#)"$$$ c. *1)$"$$$ d. *#$$"$$$
%5. n January 1" #$1%" -E;+A; Inc. granted a loan to S3- Inc. with a principal of *)"$$$"$$$ payable at the end of ! years. Interest of 1#? is payable semiannually every June !$ and ecember !1. The accounting department of -E;+A; determined that the effective interest of this loan is 5?. What is the carring alue o) the Loans Receia!le on Dece#!er $1% &'1(+
a. *)"!2#"88$
b. *)"%%)"15!
c. *)"!)2"2)!
d. *)"%#!"#1!
%8. The following data pertains to year #$1! opertion of TI; Inc. +eginning inventory =ross purchases *urchase return *urchase allowance *urchase discount &reight in
.ost 15$"$$$ 1"##$"$$$ 1$$"$$$ 1$$"$$$ )$"$$$ )$"$$$
Retail #)$"$$$ 1"<<)"$$$ #$$"$$$
Page 7 of 8
3ar, up 3ar,up cancellation 3ar,down 3ar,down cancellation Sales Sales return Sales allowance Sales discount Bmployee discount ;ormal shortage
#$$"$$$ #)"$$$ 1%$"$$$ 1)"$$$ 1"%)$"$$$ )$"$$$ 1$"$$$ #$"$$$ %$"$$$ !)"$$$
Assu#ing the use o) Aerage retail inentor #ethod% 4hat is the cost o) goods sold on ear &'1$+ a. *82$"$$$ b. *8##"$$$ c. *85%"$$$ d. *8%%"$$$
)$. n ecember !1"#$1$" Bmpress company had a fire which completely destroyed the goods in process inventory. After the fire a physical inventory was ta,en. The raw materials were value at *2$$"$$$" the finished goods at *1"$$$"$$$ and supplies at *1$$"$$$. The inventories on January 1"#$1$ consisted of the following9 &inished goods 1"%$$"$$$ =oods in process 1"$$$"$$$ Raw materials !$$"$$$ Supplies %$$"$$$ ata for #$1$ were9 Sales !"$$$"$$$ *urchases 1"$$$"$$$ &reight in 1$$"$$$ irect labor 5$$"$$$ 3anufacturing overhead ( )$? of direct labor M Average gross profit rate !$? What is the esti#ated cost o) the goods in "rocess on Dece#!er $1%&'1' that 4ere co#"letel destroed ! )ire+ a. *#"$$$"$$$ b. *#"1$$"$$$ c. *1"!$$"$$$ d. *1"<$$"$$$
Page 8 of 8
