b. Internal as well as e-ternal year4end reports c. 0stimate of inventory destroyed by fire or other casualty d. *ough test of the validity of an inventory cost determined under either periodic or perpetual system.
Review 105-----------Day 9 THEORY OF ACCOUNTS
1. The credit credit balance balance that arises arises when a net loss in a purchase purchase commitment commitment is recognized recognized should be a. Presented as a current liability b. Subtracted from ending inventory c. Presented as an appropriation of retained earnings d. Presented in the income statement 2. When using a perpetual inventory system I. o purchases account is used. ll. ! cost of goods sold account is used. lll. Two entries are re"uired to record a sale. a. I and II only
b. II only
c. II and III only
d. I# II and III
$. Which one of the following inventory costing method lends itself most to manipulation of reported net income among periods. a. %I&' %I&' perpet perpetual ual b. &I&' &I&' perpet perpetual ual c. %I&' periodic d. &I&' periodic (. )uring periods of arising prices# when the &I&' inventory cost flow method is used# a perpetual inventory system would a. ot be permitted b. *esult in a higher ending inventory than a periodic system inventory system c. *esult in the same ending inventory as a periodic system d. *esult in a lower ending inventory than a periodic inventory system +. ,enerally# which inventory costing method appro-imates most closely the current cost for each of the following /ost of goods sold 0nding inventory a. %I&' &I&' b. %I&' %I&' c. &I&' &I&' d. &I&' %I&' . To produce an inventory inventory valuation valuation which which appro-imates appro-imates the lower of average average cost or maret using the conservative retail inventory method# the computation of the ratio of cost to retail should a. Include marups but not mardowns c. Include marups and mardowns b. Ignor Ignore e both both mar marups ups and mardo mardowns wns d. Include Include mardo mardowns wns but not not maru marups ps 3. The gross margin method of estimating ending inventory may be used for all of the following e-cept a. Internal as well as e-ternal interim reports
5. The gross profit method of inventory valuation is invalid when a. ! portion of the inventory is destroyed. b. There is substantial increase in inventory during the year. c. There is no beginning inventory because it is the first year of operation. d. The gross profit percentage percentage appli applicable cable to goods in the ending inventory is diffe different rent from the percentage applicable to goods sold during the period. 6. ! financial instrument is any contract that gives rise to a. ! financial asset only b. ! financial liability only c. ! financial asset of one entity and a f inancial liability of another entity only d. ! financial asset of one entity and a financial liability or e"uity instrument of another entity 17. ! financial asset is any asset that is 8choose the incorrect one9 a. /ash b. !n e"uity e"uity instrument instrument of another another entity. entity. c. /ontractual /ontractual right right to receive cash or another another financial financial asset asset from another entity. entity. d. /ontra /ontractual ctual roght roght to e-change financial financial assets assets or financial liabili liabilities ties with another another entity under conditions that potentially unfavorable to the entity. 11. &inancial assets include a. !ccounts payable b. Inventories
c. otes receivable d. Prepaid e-penses
12. ! financial liability is any liability that is a contractual obligation I. To deliver cash or another financial asset to another entity. II. To e-change financial assets or financial liabilities with another entity under conditions that potentially unfavorable to the entity. a. I only b. II II only c. :oth I and II d. either I nor II 1$. 0"uity security a. 0ncompasses any instrument representing ownership shares and the right to ac"uire ownership shares. b. Is a security that represents a creditor relationship with the enterprise. c. Is the residual interest in the enterprise. d. Includes redeemable preferred stoc# stoc# treasury stoc and convertible bonds. 1(. ;!vailable for sale securities< are a. )ebt securities ac"uired with positive intent and ability of holding them until maturity.
b. )ebt and e"uity securities ac"uired by an enterprise with the intent of selling them in the ;near term< or very soon. c. )ebt securities that are purchased and held indefinitely and will be available to be sold in response to li"uidity needs. d. &inancial assets with fi-ed or determinable payments that are not "uoted in an active maret. 1+. The following statements relate to investments in trading and available for sale securities. Which is the incorrect statement= I. *ealized and unrealized gains and losses on trading securities are recognized in income. II. *ealized and unrealized gains and losses on available for sale securities shall be e-cluded from earnings and reported as a separate component of stocholders> e"uity a. I only b. II only c. :oth I and II d. either I nor II
b. P+$#777
d. P1#16#777
2. @anapla /ompany computed a preta- financial income of P1+#777#777 for the year ended )ecember $1# 277+. In preparing the ta- return# the following differences are noted between financial income and ta-able income. ondeductible e-pense onta-able revenue 0stimated warranty cost that was recognized as e-pense in 277+ but deductible for ta- purposes when paid 0-cess ta- depreciation over financial depreciation
2#777#777 1#777#777 1#+77#777 +77#777
What is the current ta- e-pense for 277+ if the ta- rate is $2C= a. P+#127#777 c. P(#577#777 b. P+#((7#777 d. P+#77#777
P1
1. The Plaridel /orporation was organized on ?anuary $# 277+ with an authorized capital stoc of P+#777#777. !t )ecember $1# 277+ of the same year# the general ledger of said /ompany showed the following accounts and balances !ccounts receivable @erchandise inventory %and :uilding &urniture and fi-tures !ccounts payable otes payable A ban /ommon stoc !dditional paid capital Sales 0-penses paid 8e-cluding purchases9
Bour review of the ban statement for )ecember disclosed the f ollowing information :an balance# )ecember $1# 277+ :an service charge )eposits in transit Total checs not returned by the ban
P +2(#+77 #777 2#+77 125#777
Bour review also revealed that the cash received of P2#+77 on )ecember $1# 277+ was deposited on ?anuary 2# 277. The company>s mar up on sales is (7C. Dow much is the adEusted cash balance as of )ecember $1# 277+= a. P(+6#777 c. P$6#777
$. /adiz /ompany has the following financial statement elements for which the )ecember $1# 277+ boo value is different from the )ecember $1# 277+ ta- basis :oo value Ta- basis )ifference 0"uipment +#+77#777 (#777#777 1#+77#777 Prepaid officers> insurance policy +7#777 7 +7#777 Warranty liability +77#777 7 +77#777 /omputer software cost 2#2+7#777 7 2#2+7#777 The difference between the boo value and ta- basis of the e"uipment is due to accelerated depreciation for ta- purposes. The insurance premium on the officers> insurance policy is paid on )ecember $1 277+ and the amount is a nondeductible e-pense for ta- purposes. The warranty liability is the estimated warranty cost that was recognized as e-pense in 277+ but deductible for ta- purposes when actually paid. In ?anuary 277+# /adiz /ompany incurred P$#777#777 of computer software cost. /onsidering the technical feasibility of the proEect# this cost was capitalized and amortized over ( years for accounting purposes. Dowever# the total amount was e-pensed in 277+ for ta- purposes. The income ta- rate is $2C. !s a result of these differences# /adiz /ompany shall report a deferred ta- liability on )ecember $1# 277+ at a. P1#277#777 c. P1#7(7#777 b. P1#21#777 d. P (57#777 (. Sagay /ompany provides the following ta- effects of temporary differences at the end of 277+ )eferred ta*elated asset asset 8liability9 classification
!ccelerated depreciation 8+77#7779 !dditional cost in inventory for ta- purposes 277#777
oncurrent /urrent 8$77#7779
! valuation allowance was not considered necessary. Sagay anticipates that P1+7#777 of the deferred ta- liability will reverse in 277. In its )ecember $1# 277+ balance sheet# what amount should Sagay report as noncurrent deferred ta- liability= a. P$77#777 c. P1+7#777 b. P+77#777 d. P277#777 +. %a /arlota /ompany is determining the amount of its preta- financial income for 277+ by maing adEustment to ta-able income from the company>s 277+ ta- return. The ta- return indicates ta-able income of P1+#777#777 on which a ta- liability of P(#577#777 has been recognized. &ollowing is a list of items that may be re"uired to determine preta- financial income from the amount of ta-able income. !ccelerated depreciation for income ta- purposes was P2#777#777 and straight line financial depreciation is P1#+77#777.
5. What is the deferred ta- liability on )ecember $1# 277+= a. P+3#777 c. P32#777 b. P(57#777 d. P 7 6. What is the 277+ total income ta- e-pense= a. P2#2(#777 b. P2#327#777
c. P2#557#777 d. P2#35(#777
17. What is the revaluation surplus on )ecember $1# 277+= a. P1#727#777 c. P1#22(#777 b. P1#+77#777 d. P 62(#777 11. Pampanga /ompany>s )ecember $1# 277+ balance sheet reported the following current assets Cash Accounts receivable Inventory Prepaid expenses 0"uipment used and held for resale
Insurance premium of P177#777 on the life of an officer with %a /arlota /ompany as beneficiary was not included as a deduction in t he ta- return. Interest on treasury bills was not included in the ta- return. )uring the year# %a /arlota received P2#+77#777 on these investments. What was %a /arlota /ompany>s preta- financial income= a. P1+#+77#777 c. P15#777#777 b. P13#(77#777 d. P13#677#777 'n ?anuary 1# 2771# @anapla /ompany ac"uired a building for P+#777#777. The building is depreciated using straight line method based on a useful life of 17 years with no residual value. 'n ?anuary 1# 277+# the building is revalued at a replacement cost of P5#777#777 with no change in useful life. The 277+ preta- accounting income before depreciation is P6#777#777. The income ta- rate is $2C and there are no other temporary differences at the beginning of 277+. . What is the deferred t a- liability arising from the revaluation on ?anuary 1# 277+= a. P67#777 c. P$5(#777 b. P+3#777 d. P 7 3. What is the 277+ current ta- e-pense= a. P2#327#777 b. P2#557#777
!n analysis of the accounts receivable disclosed that accounts receivable comprised the following Trade accounts receivable !llowance for doubtful accounts Selling price of Pampanga /ompany>s unsold goods sent to FBG /ompany on consignment at 12+C of cost and e-cluded from Pampanga>s ending inventory
(#777#777 8 $77#7779 1#+77#777
+#277#777 !t )ecember $1# 277+# the total current assets should be a. P17#77#777 c. P17#377#777 b. P 6#577#777 d. P 6#677#777 12. The trial balance of !rayat /ompany reflected the following liability account balances on )ecember $1# 277+ !ccounts payable :onds payable# due 277 )iscount on bonds payable )eferred ta- liability )ividends payable Income ta- payable ote payable# due 1H1+H2773
Insurance In its )ecember $1# 277+ balance sheet# !rayat should report current liabilities at a. P1#777#777 c. P13#777#777 b. P1(#+77#777 d. P1#+77#777 1$. /andaba /ompany was incorporated on ?anuary 1# 277+# with proceeds from the issuance of P1+#777#777 in common stoc and borrowed funds of P+#777#777. )uring the first year of operations# revenue from sales and consulting amounted to P27#777#777# and operating costs and e-penses totaled P12#777#777. 'n )ecember 1+# /andaba declared a P2#777#777 cash dividend payable to stocholders on ?anuary 1+# 277. o additional activities affected owners> e"uity in 277+. /andaba>s liabilities increased to P3#777#777 by )ecember $1# 277+. 'n )ecember $1# 277+ balance sheet# total assets should be reported at a. P$7#777#777 c. P22#777#777 b. P21#777#777 d. P25#777#777
277#777
The office space is used e"ually by the sales and accounting departments. What amount should be classified as general and administrative e-penses= a. P5#277#777 c. P#277#777 b. P+#277#777 d. P+#777#777 MAS
1. ! weaness of the internal rate of return method for screening investment proEects is that it !. does not consider the time value of money :. implicitly assumes that the company is able to reinvest cash flows from the proEect at the company>s discount rate /. implicitly assumes that the company is able to reinvest cash flows from the proEect at 1(. !palit /ompany>s )ecember $1# 277+ unadEusted current assets and stocholders> e"uity are the internal rate of return as follows ). fails to consider the timing of cash flows /ash +#777#777 2. The method of budgeting which adds one month>s budget to the end of the plan when Trading securities 8including P2#777#777 of !palit /ompany>s common stoc9 the current month>s budget is dropped from the plan refers to 5#777#777 !. %ong4term budget /. Incremental budget Trade accounts receivable 17#777#777 :. 'perations budget ). /ontinuous budget Inventory 3#777#777 Total current assets $7#777#777 $. To avoid waste and ma-imize efficiency when transferring products among divisions in a competitive economy# a large diversified corporation should base transfer prices on /ommon stoc 1+#777#777 !. &ull cost /. variable costs !dditional paid in capital $#777#777 :. replacement cost ). maret price *etained earnings 8including appropriated for contingencies of P$#777#7779 3#777#777 Total e"uity 2+#777#777 (. @/ Industries manufactures a product with the following costs per unit at the e-pected production of $7#777 units The trading securities and inventory are reported at their costs which appro-imate )irect materials P ( )irect labor 12 maret values. In the 277+ statement of changes in e"uity# the total amount of e"uity at ariable manufacturing overhead &i-ed manufacturing overhead 5 )ecember $1# 277+ is The company has the capacity to produce (7#777 units. The product regularly sells for P(7. ! wholesaler has offered to pay P$2 a unit for 2#777 units. a. P2+#777#777 c. P27#777#777 If the firm is at capacity and the special order is accepted# the effect on operating income b. P2$#777#777 d. P22#777#777 would be !. a P27#777 increase /. a P(#777 increase 1+. The following items were among those that were reported on :ulacan /ompany>s income :. a P1#777 decrease ). P7 statement for the year ended )ecember $1# 277+ %egal and audit fees *ent for office space Interest on acceptances payable %oss on abandoned data processing e"uipment
2#777#777 #777#777 1#777#777 +77#777
+. Jsing the information presented below# calculate the total overhead spending variance. :udgeted fi-ed overhead P17#777 Standard variable overhead 82 )%D at P2 per )%D9 P( per unit !ctual fi-ed overhead P17#$77
!ctual variable overhead :udgeted volume 8+#777 units - 2 )%D9 !ctual direct labor hours 8)%D9 Jnits produced !. P+77 J /. P1#777 J :. P577 J ) . P 1# $7 7 J
P16#+77 17#777 )%D 6#+77 (#+77
. /ompared to other firms in the industry# a company that maintains a conservative woring capital policy will tend to have a a. ,reater percentage of short4term financing. b. ,reater ris of needing to sell current assets to repay debt. c. Digher ratio of current assets to fi-ed assets. d. Digher total asset turnover. 3. ! firm following an aggressive woring capital strategy would a. Dold substantial amount of fi-ed assets. b. @inimize the amount of short4term borrowing. c. &inance fluctuating assets with long4term financing. d. @inimize the amount of funds held in very li"uid assets. 5. &idelity /ompany uses a fle-ible budget system and prepared the following information for the year &idelity operated at 57 percent of capacity during the year# but applied factory overhead based on the 67 percent capacity level. !ssuming that actual factory overhead was e"ual to the budgeted amount of overhead# how much was the overhead volume variance for the year= Percent of /apacity 57 Percent 67 Percent )irect labor hours 2(#777 23#777 ariable factory overhead P+(#777 P7#3+7 &i-ed factory overhead P51#777 P51#777 Total factory overhead rate pre )%D P+.2+ P+.2+ !. P6#777 J :. P1+#3+7 J
/ . P 6# 77 7 & ). P1+#3+7 &
6. :0KD /o. is considering dropping a product. ariable costs are L.77 per unit. &i-ed overhead costs# e-clusive of depreciation# have been allocated at a rate of L$.+7 per unit and will continue whether or not production ceases. )epreciation on the e"uipment is P27#777 a year. If production is stopped# the e"uipment can be sold for P15#777# if production continues# however# it will be useless at the end of 1 year and will have no salvage value. The selling price is P17 a unit. Ignoring ta-es# the minimum units to be sold in the current year to brea even on a cash flow basis is !. (#+77 units /. 1#577 units :. +#777 units ). $#777 units 17. The following data relate to Domer /ompany which sells a single product Jnit selling price P 27 77
Purchase cost per unit 11.77 Sales commission# 17C of selling price 2.77 @onthly fi-ed costs P57#777 The firm>s salespersons would lie to change their compensation from a 17 percent commission to a + percent commission plus P27#777 per month in salary. They now receive only commission. The change in compensation plan should change the monthly breaeven point by !. 1#731 Increase :. 1#731 )ecrease
/. 1#+$5 Increase ). 1#+$5 )ecrease
Muestions 11 K 12 are based on the following information. Information about *ose /ompany is as follows 'utput 8units9 Selling price per unit Input "uantities @aterials 8pounds9 %abor 8hours9 Input prices @aterials 8per pound9 %abor 8per hour9
2771 57#777 P2+
2772 5(#777 P2+
(#777 $#277
(#777 $#2+7
P+.77 P3.77
P+.+7 P3.+7
11. What are the materials productivity# and labor productivity ratio for 2771= !. :. /. @aterials 27.77 177.77 2+.77 %abor 2+.77 6+.(+ 2(.77
12. :y how much did profits change as a result of changes in productivity materials# and labor# respectively= !. :. /. @aterials P81#1779 P1#177 P82+9 %abor P 852+9 P 52+ P 2+
). 27.77 2(.77
related to ). P2+ P2+
Muestions 1$ thru 1+ are based on the following information. !t the beginning of the year# ?oshua /orporation initiated a "uality improvement program. The program was successful in reducing scrap and rewor costs. To help assess the impact of the "uality improvement program# the following data was collected for the current and preceding year. Preceding Bear /urrent Bear
P 1#777#777 1#+77 (#777 1+#777 2+#777 17#777 23#+77
1$. !s a result of "uality improvements# profits have increased by !. P$2#+77 /. P3#+77 : . P 27 #+ 77 ). P+# 77 1(. If "uality costs had been reduced to 2.+ percent of sales in the current year# profits would have increased by !. P133#777 : . P +5 #7 77
/. P1#777 ) . P 2+ #7 77
1+. &or the current year# the respective percentages based on sales of the different "uality costs# respectively# are Prevention !ppraisal Internal &ailure 0-ternal failure !. 7.1+C 1.(7C 2.+7C 1.+7C :. 7.1+C 1.(7C (.77C 2.3+C /. 7.+C 1.77C 1.+7C (.2+C ). 7.+C 1.77C 2.+7C 1.+7C AP :!*:I0 /'@P!B was formed on ?uly 1# 2775. It was authorized to issue 77#777 shares of P17 par value common stoc and 277#777 shares of 5 percent P2+ par value# cumulative and nonparticipating preferred stoc. :!*:I0 /'@P!B has a ?uly 14 ?une $7 fiscal year. The ff information relates to the shareholders> e"uity accounts of :!*:I0 /'@P!B COMMON STOCK Prior to the 271742711 fiscal year# :!*:I0 /'@P!B had 227#777 shares of outstanding common stoc issued as follows 1. 167#777 shares were issued for cash on ?uly 1#2775# at P$1 per share. 2. 'n ?uly 2(#2775# 17#777 shares were e-changed for a plot of land which cost the seller P1(7#777 in 2772 and had an estimated maret value of P((7#777 on ?uly 2(#2775. $. 27#777 shares were issued on @arch 1#2717N the shares had been subscribed for P(2 per share on 'ctober $1# 2776. )uring the 271742711 fiscal year# the ff transactions regarding common stoc too place 2010 'ct. 1 Subscriptions were received for (#777 shares at P(per share. /ash of P15(#777 was received in full payment for (#777shares and stoc certificates were issued.
ov. $7 )ec. 1+
:!*:I0 purchased (#777 shares of its own stoc on the open maret at P$6 per share. :!*:I0 declared a +C stoc dividend for stocholders of record on ?anuary 1+#2711# to be issued on ?anuary $1#2711. :!*:I0 was having a li"uidity problem and could not afford a cash dividend at the time. :!*:I0>s common stoc was selling at P+2 per share on )ecember 1+#2717.
2011 ?une 27
:!*:I0 sold 1#777 shares of its own common stoc that it had purchased on ovember $7#2717# for P(2#777 PREFERRED STOCK :!*:I0 issued 177#777 shares of preferred stoc at P(( per share on ?uly 1#2776. CASH DIVIDENDS :!*:I0 has followed a schedule of declaring cash dividends in )ecember and ?une with payment being made to shareholders of record in the following month. The cash dividends which have been declared since inception of the company through ?une $7#2711# are shown below )eclaration )ate /ommon Stoc Preferred stoc 12H1+H76 P7.$7 per share P1.77 per share 7H1+H17 P7.$7 per share P1.77 per share 12H7+17 4444 P1.77 per share No cash dividends were declared during June 2011 due to the company’s liquidity problems. RETAINED EARNINS !s of ?une $7# 2717# :!*:I0>s retained earnings account had a balance of P1#$57#777. &or the fiscal year ending ?une $7# 2711# :!*:I0 reported net income of P57#777. In @arch 2717# :!*:I0 received a term loan from :adingding ational :an. The ban re"uires :!*:I0 to establish a sining fund and restrict retained earnings for an amount e"ual to the sining fund deposit. The annual sining fund payment of P177#777 is due on !pril $7 each yearN the first payment was made on schedule on !pril $7#2711. Based on the foregoing and the result of your audit answer the following! 1. Jnappropriated retained earnings at ?une $7#2711 is !. P355#777 :. P5!1"000 /. P213#777 ). P1#7$$#777 2. Total number of common shares issued and outstanding at ?une $7# 2711 is !. P2(5#777 :. P2+1#777 C# P2$2"000 ). P2$+#777 $. Treasury stoc at ?une $7#2711 is !. P11!"000 :. P$7#777 /. P$3#777 ). P1+#777 (. Total shareholder>s e"uity at ?une $7#2711 is !. P1$#113#777 /. P12#35$#777 %# P1$#+3#777 D# P1$"000"000 !t the beginning of year 1# 0ntity a grants share options to each of its 177 employees woring in the sales department. The share options will vest at the end of year $# provided that the employees will remain in the entity>s employ# and provided that the volume of sales of a particular product increases by at least an average of +C per year. If the volume of sales of the product increases by an average of between +C and 17C per year# each employee will
receive 177 share options. If the volume of sales increases by an average of between 11C and 1+C each year# each employee will receive 277 share options. If the volume of sales increases by an average of 1C or more# each employee will receive $77 share options. 'n grant date# 0ntity ! estimates that the share options have a fair value of P27 per option. 0ntity ! also estimates that the volume of sales of the product will increase by an average of bet 11C and 1+C per year# and therefore e-pects that# for each employee who remains in service until the end of year $# 277 share options will vest. The entity also estimates# on the basis of a weighted average probability# that 27C of employees will leave before the end of year $. :y the end of year 1# seven employees have left and the entity still e-pects that a total of 27 employees will leave by the end of year $. Dence# the entity e-pects that 57 employees will remain in service for the three4year period. Product sales have increased by 12C and the entity e-pects this rate of increase to continue over the ne-t 2 years. :y the end of year 2# a further + employees have left# bringing the total to 12 to date. The entity now e-pects only $ more employees will leave during year $# and therefore e-pects a total of 5+C employees will remain at the end of year $. Product sales have increased by 27C# resulting in an average of 1C over the 2 years to date. The entity now e-pects that sales will average 1 percent or more over the three4year period# and hence e-pects each sales employee to receive $77 share options at the end of year $. :y the end of year $# a further two employees have left. Dence# 1( employees left during the three4year period# and 5 employees remain. The entity>s sales have increased by an average of 1 C over the three years. :ased on the preceding info# answer the ff +. What is the compensation e-pense for year 1= !. P10&"&&! :. P+$#$$$ /. P17#777 ). P132#777 . What is the compensation e-pense for year 2= !. P25#3 :. P157#777 /. P2$$"$$$ ). P15#777 3. What is the compensation e-pense for year $= !. P11(#3 :. P1!&"000 /. P252#3 ). P155#777 5. What is the cumulative compensation e-pense for years 1# 2 and $= !. P$27#777 :# P51&"000 /. P$((#777 ). P132#777 6. !t the end of year 2# the entity should report share options outstanding of= %# P$25#777 :. P2#3 /. P25#3 ). P$'0"000 !n entity grants to an employee the right to choose either 1#777 phantom shares 8i.e.# right to a cash payment e"ual to the value of 1#777 shares9 or 1#277 shares with a par value of P17 per share. The grant is conditional upon the completion of the $ years> service. If the employee chooses the share alternative# the shares must be held for $ years after vesting date. !t grant date " the entity>s share price is P+7 per share. !t the end of years 1# 2 and $# the share price is P+2# P++# and P7 respectively. The entity does not e-pect to pay dividends in the ne-t $ years. !fter taing into account the effects of the post4vesting transfer restrictions# the entity estimates that the grant date fair value of the share alternative is P(5 per share. !t the end of the year $# the employee chooses Scenario 1 the cash alternative
Scenario 2 the e"uity alternative :ased on the preceding information# answer the ff 17. What is the total fair value of the e"uity component as a result of the share4 based payment transaction with settlement alternatives= !. P!"&00 :. P17#777 /. P2#(77 ). P7 11. What is the compensation e-pense in year 1= !. P13#$$$ /. P16#$$$ ). P2$#$$( %# P19"(&& 12. What is the compensation e-pense in year 2= !. P16#5 :. P13#$$$ ). P16#$$$ C# P21"(&! 1$. What is the compensation e-pense in year $= !. P2$#$$( /. P16#$$$ ). P16#5 %# P25"(&! 1(. If the employee has chosen the cash alternative# the amount to be paid at the end of year $ should be !. P++#777 :. P3#77 /. P+2#777 D# P&0"000 1+. If the employee has chosen the share alternative# the amount of share premium to be recognized is %# P55"&00 !. P3#77 /. P7#777 ). P3#277 %)T
1
2
$
(
! was forced by : to sign a contract. /# a creditor of ! wants to annul the contract. Is / allowed by law to do so= a o# because a third person cannot assail a void contract. b Bes# because the contract is voidable and / is damaged. c o# because a third person cannot assail a voidable contract. d Bes# a third person can annul a rescissible contract. To defraud his creditors# ! sold his real property to :. : now sees to register the sale. F# a creditor# sees to prevent the registration on the ground that it is a rescissible contract. )espite F>s obEection# may the land be registered in :>s name= a o# because the contract is rescissible and therefore without effect. b o# because the sale is voidable and after annulment is not binding. c Bes# because the contract although voidable is valid and binding. d Bes# because the contract although rescissible is valid# binding and enforceable before rescission. ! made a donation to :. later ! contracted several debts. What ! has left as assets are much less than his present liabilities. @ay the donation to : be rescinded= a o# because the debts were incurred after the donation has been made. b o# if ! gave guaranty or security for his debts. c Bes# because the donation is rescissible being in fraud of creditors. d Bes# because ! has become insolvent after the donation. To defraud hi creditor# ! sold his property to : 8who is in good faith9. %ater# : sold the property to /# who is in bad faith. @ay the creditor rescind the sale= a Bes# because the third person /# is in bad faith. b o# because the third person is in good faith.
+
3
5
6
c o# because the contract is voidable and not rescissible. d Bes# because the contract is rescissible. To defraud his creditor# ! sold his house to F. When however the creditor wanted to collect his credit# somebody lent ! enough money. Is the sale rescissible= a Bes# because it was entered into fraud of creditors. b o# because the creditor can collect the credit due to him. c o# because the debtor has become in good faith when he was lent enough money to pay his debts. d Bes# because the debtor was in bad faith when he sold his house to F. ! orally sold to : a house at 1 Oio St. @alate# @anila. In the written deed of sale# both forgot the true number of the house and instead wrote on the contract# ;o.15 Oio St. @alate# @anila< The remedy shall be a !nnulment of a voidable contract because of mutual mistae. b *eformation of instrument because of lac of meeting of minds. c *eformation of instrument because of mutual error. d )eclaration of nullity of the contract because if the uncertainty of the intention as to the obEect. ! loan for P577.77 was orally contracted. @ay the lender receive the sum lent= a o# because the contract is unenforceable. b o# because the contract must be in writing to be valid. c Bes# because the debtor ratifies the loan. d Bes# because the contract is enforceable. When his father died but before the delivery of the property to him# a son sold his share of the property inherited. Is the sale valid= a o# because future inheritance cannot be sold. b Bes# because future inheritance can be the obEect of the contract. c Bes# because what has been sold is present inheritance. d o# because the son was not the owner due to lac of delivery to him. ! !T4registered person is engaged in the sale of !T ta-able goods and at the same time is also engaged in non4!T business# in the same business establishment. )uring the "uarter made sales of goods in the amount of P$77#777 plus a value4added ta- of P$#777. The sales of the non4!T business amounted to P277#777 with a separate percentage ta- of P#777 for a total of P27#777. )uring the same "uarter# repairs on the building amounted to P+7#777 plus value4added taof P#777. Supplies purchased for common use amounted to P17#777 plus P1#277 value4added ta-.
The creditable input ta- is a.
P25#577
b. P(#($
c.
P3#277
d. P(#$27
?anuary 1+# she made a gift of P$#777#777 8real property9 to her husband. She is insured for P1#777#777 designating her estate as beneficiary. The premium was paid from her e-clusive property. The last will and testament of @rs. Oina Pos Sahangin reveals that her shares of stoc in Pure ?oe /orporation shall be contributed to the local government of Tagaytay /ity for the maintenance of public par# and the balance shall be given to her husband. @rs. Oina Pos Sahangin>s e-ecutor field and paid the follow ta- returns )onor>s ta- for gift to her husband 0state Ta-
The transfer ta- still due for the estate ta- of @rs. Oina Pos Sahangin. a. P11#17 b. P17#17 c. P$+#17
d. +7#17
*ates of 0state Ta-. A
'ver
:ut ot 'ver
The Ta- Shall be
Plus
'f the 0-cess 'ver
P 277#777
0-empt 7
+C
P 277#777
P 277#777
+77#777
+77#777
2#777#777
P 1+#777
5C
+77#777
2#777#777
+#777#777
1$+#777
11C
2#777#777
+#777#777
17#777#777
(+#777
1+C
+#777#777
17#777#777
!nd 'ver
1#21+#777
27C
17#777#777
11 ! race trac bettor won on the following bets 'n forecast# a bet of P1#777 and dividend of P177 per P274ticet 'n ordinary # a bet of P+77 and dividend of P1#777 per P+74ticet 'n double# a bet of P277 and dividend of P277 per P274ticet Total percentage ta- due from the winnings was • • •
17 @rs. Oina Pos Sahangin# a &ilipino# died ovember 1# 2775 survived by her husband. !t the date of death# she has P2#777#777 cash in ban and 177#777 shares holding of Pure ?oe /orporation with a sales value of P177 per share at the date of death. 'n
P 27(#777 $(#5(7
a.
P52 d. P1#+$7
b. P1#152
c. P1#257
12 !n invoice issued for the sale of !T ta-able goods shows the following Total invoice amount +7#(77 %ess Trade discount of +C
2#+27
et
(3#557
If !T ta-payer enEoys partial ta- e-emption of (7C including !T and the amount is !T inclusive# how much is the output t a-= a. P$#25
b. P$#((3
c. P$#2(7
d. P$#21
13 An alteration committed by a stranger to a negotiable instrument is: a. Policitacion b. Spoliation c. Option contract d. Material alteration 14 Which of the following does not discharge a negotiable instrument a. !ntentional cancellation of the instrument by the holder. b. Payment by the party primarily liable to holder or his authori"ed representati#e. c. Payment by ma$er of a promissory note before maturity date. d. %oluntary surrender of the instrument by the holder to the ma$er without collecting. 1& Which is not correct 'he acceptor by accepting a negotiable instrument a. Admits the capacity of the payee to endorse. b. Admits the genuineness of the drawer(s signature. c. Admits the genuineness of the endorser(s signature. d. Admits that he will pay it according to the tenor of his acceptance.
P2
The assets and e"uities of the Mueen# *eed# and Stac Partnership at the end of its fiscal year on 'ctober $1#2711 are as f ollows !ssets /ash P1+#777 *eceivables4net 27#777 Inventory (7#777 Plant assets4net 37#777 %oan to *eed +#777 Total assets P1+7#777 %iabilities and 0"uity %iabilities P+7#777 %oan from Stac 17#777 Mueen# capital4$7C (+#777 *eed# capital4+7C $7#777 Stac# capital427C 1+#777 Total liab. K e"uity P1+7#777 The patners decide to li"uidate the partnership. They estimate that the noncash assets# other than the loan to *eed# can be converted into P177#777 cash over the t wo4months period ending )ecember $1#2711. /ash is to be distributed to the appropriate parties as it becomes available during the li"uidation process. 1. The partner most vulnerable to partnership losses on li"uidation is a.Mueen c.*eed and Mueen e"ually b.Ree* d.Stac 2. Jsing the same information# and P+#777 is available for first distribution# it should be paid to Priority creditors Mueen *eed Stac a. P7#777 P+#777 P7 P7 b. 7#777 1#+77 2+77 1#777 c. +7#777 +#777 7 17#777 *# 50"000 12"000 0 $"000 The following data are provided by the Troubled /ompany !ssets at the boo value P1+7#777 !ssets at net realizable value 17+#777 %iabilities at boo value &ully secured mortgage 7#777 Jnsecured accounts and notes payable 37#777 Jnrecorded liabilities Interest on ban notes +77 0stimated cost of administering estates #777 The court has appointed a trustee to li"uidate the company 1.The Eournal entry made by the trustee to record the assets and liabilities should include an estate deficit of a.P$1#+77 c#P25"500 b. $1#777 d. 2+#777
2.Jsing the same information above# the statement of affairs prepared by the trustee at this time should include an estimated deficiency to unsecured creditors of a. P(+#777 c.P$1"500 b. $6#777 d. 2+#777 !nson and :aylon formed a Eoint venture. Their capital contributions# and profit and loss ratio are presented below /ontributions Profit and /ash @erchandise %oss ratio !nson P+#777 P5#777 +7C :aylon 4 #777 +7C ! summary of the Eoint venture activities is presented below Purchase of merchandise by :aylon P(#777 0-penses paid by :aylon @ayor>s permit (77 &reight on merchandise contributed by !nson $77 )elivery e-penses of merchandise sold 277 Sales 8all of the merchandise contributed and purchased by :aylon and one4half of those contributed by !nson94Selling price 1(#777 1. The balance of the Eoint venture account before profit or loss distribution is a# P'"900 b.P1(#777 c.P1(#777 d.none 2. Jsing the same information above# the profit8loss9 of the Eoint venture is a. P8(+79 b.P3+7 c. P+!50, d. P(+7 $. Jsing the same information above# how much would !nson receive in the final settlement assuming he too the unsold merchandise of cost= a. P1$#777 b. P12#2+ c.P("'!5 d.P5#+1+ ?ohnson 0nterprises uses the cost recovery method for all installment sales /omplete the following table 2717 2711 2712 Installment sales P57#777 P6+#777 P= /ost of installment sales = +#7+7 5#2+7 ,ross profit percentage $5C = $+C /ash collections 2717 sales 2+#77 (#(77 +#77 2711 sales 22#577 = 2712 sales $2#++7 *ealized gross profit on installment sales = = 1#7+7 (.The installment sales in 2712 #P105"000 c.P112#12.+7 d.P16+#777 a.P62#1$3.+7 +..Jsing the same information#the cost of installment sales in 2717 a.zero b.P$7#(77 c.P(3#16 *#P'9"&00
.. Jsing the same information above# the cost of installment sales in 2717 a.26C c.+6C d.cannot be determined #'1. 3.. Jsing the same information above# the collection in 2712 for 2711 sales a.P17#(77 b.P$$#2+7 /#P'$"!00 d.(5#77 5.. Jsing the same information above# the realized gross profit on installment sales in 2717 *# e a.P6#325 b.P3#7(6 c.P(#577 6.. Jsing the same information above# the realized gross profit on installment sales in 2711 a.P5#( b.P6#$(5 c.P15#712 *#P22"'00 T@ partnership begins its first year of operations with the following capital balances Tray /apital @ay /apital
P277#777 P177#777
!ccording to the partnership agreement. !ll profits will be distributed as follows a. Tan will be allowed a monthly salary of P27#777 with P17#777 assigned to @ay. b. The partners will be allowed with interest e"ual to 17 percent of the capital balance as of the first day of the year. c. Tan will be allowed a bonus of 17 percent of the net profit after bonus. d. The remainder will be divided o the basis of the beginning capital for the first year and e"ually for the second year. e. 0ach partner is allowed to withdraw up to P17#777n a year. !ssume that the net loss for the first year of operations is P1+#777 with net income of P++#777 in the subse"uent year. !ssume further hat each partner withdraws the ma-imum amount from the businesses each period. 17. What is the balance of Tan>s capital account at the end of the second year= a# P2&'"!50 b. P25(#3+7 c. P157#777 d. P15(#3+7
11. ?aime )izon# a partner in an accounting firm# decided to withdraw from the partnership. )izon>s share of the partnership profits and losses was 27C. Jpon withdrawing from the partnership# he was paid P3(#777 in final settlement f or his interest. The total of t he partners>
capital accounts before recognition of partnership goodwill prior to )izon>s withdrawal was P217#777. !fter his withdrawal# the remaining partners> capital accounts# e-cluding their share of goodwill# totalled P17#777. The implied goodwill of the firm was
!l tan and *ey %ee formed a Eoint venture on ?anuary 1# 2775 to operate two stores to be managed by each venture. They agreed to contribute cash as follows
a# P120"000 b. P1(7#777 c. P17#777 d. P2+7#777
Tan %ee
The accountant of Doly company under li"uidated provided the following data !ssets at boo value !ssets at net realizable value %iabilities at boo value &ully secured mortgage payable Jnsecured accounts and notes payable Jnrecorded %iabilities Interest on ban notes !dministrative 0-penses
/# P1'"250 d. P17#777
P$7#777 P27#777
Profits and losses are to be divided in the capital ratio. !ll the venture transactions are f or cash# and the cash receipts and disbursements of the venture during the four4month period# handled through the venturer>s ban accounts# are as follows
P177#777 3+#777 (7# 777 (+#777 2+7 (#777
Tan P35#627 2#23+
/ash receipts /ash disbursements
%ee P+#(2+ 37#6+>
The remaining assets are sold for P7#777. 1(. What is the Eoint venture profit 8loss9 after selling the remaining non4cash assets=
! trustee is appointed tp li"uidate the company. 12. The entry made by the trustee to record the assets and liabilities should include estate e"uity of a# P1'"250 b. P1(#777 c. P17#2+7 d. P17#+27
1$. Jsing the data above# what is the estimated deficiency to unsecured creditors= a. P$+#777 b. P$1#777
a. P11#$3+ # P21"$!5 c. P8$1#$3+9 d. $1#$3+ 1+. The P7#777 cash should be divided between the venturers as follows
