PRACTICAL ACCOUNTING 1 INSTRUCTION: 1. Detach one (1) answer share from the bottom of your Examinee ID/ Answer Sheet Set. 2. Write the subject title “PRACTICAL ACCOUNTING 1” on the box p rovided. 3. Shade Set Box “A” on your answer sheet if your test booklet is Set A; Set Box “B” on your answer sheet if your test booklet is Set B. MULTIPLE CHOICE: 1. Andrei Financing Company leases equipment under a direct financing lease for a non cancelable period. On January 1, 2011, Andrei purchased an equipment for P5,500,000 and immediately leased it to another entity for 10 years. Lease payments of P800,000 are to be collected at the beginning be ginning of each year and Andrei expects to earn 9% interest. In addition Andrei incurred P100,000 of initial direct cost. Th e lease transfer the ownership of the asset to the lease at the end of the lease period. What is the financial revenue recognized in 2011?
a. 432,000 b. 495,000
c. 504,000 d. 423,000
2. During 2011, Christine Company sold assets that were originally purchased at P600,000 for P250,000. This resulted in a gain of P50,000. The balance in accumulated depreciation on January 1, 2011 was P1,200,000, and the balance on December 31, 2011 was 1,450,000 on December 31, 2011. There were no other disposal or acquisition of depreciable assets assets during 2011. What was Christine Company’s depreciation expense for 2011? a. 350,000 b. 650,000
c. 550,000 d. 500,000
3. Jeanette Company sells one and two-year two- year subscription for its movie pay-per-view business. Subscriptions are collected in advance and credited to an unearned subscription revenue account. An analysis of the recorded reco rded sales activity revealed the following:
Sales Less: Cancelation Net sales Subscription expiration: 2010 2011 2012 2013
2010 820,000 20,000 800,000
300,000 400,000 100,000
2011 950,000 30,000 920,000
250,000 350,000 320,000
On December 31, 2011, what is the balance for unearned subscription revenue? a. 770,000 b. 920,000
c. 670,000 d. 650,000
4. On July 1, 2011, Dreams Company had 500,000 of P10 par ordinary shares outstanding. The market price was P25 per shares. On the same date, Dreams declared a 1 for 2 reverse share split. The par value of the shares was increased from P10 to P20. Immediately before the 1 for 2 share split, the share premium was P3,000,000. What should be the balance in the share premium account immediately after the reverse share split? a. 2,000,000 b. 1,500,000
c. 3,000,000 d. 5,000,000
5. Celine Corporation sells equipment service contracts agreeing to repair con struction equipment for a two-year period. Celine’s past experience is that, of the total amount spent for repairs on service contracts, 60% is incurred evenl y during the first contract year and 40% evenly during the second contract year. Receipts from the service contract sales for the two years ended December 31, 2010 and December 31, 2011 are P12,000,000 and P15,000,000, respectively. Receipts from contracts are credited to unearned service contract revenue. All contract sales are made evenly during the year. What is the total service contract revenue for 20111? a. 10,500,000 b. 13.800.000
c. 13.500.000 d. 6,900,000
6. On January 1, 2009 Livingston Corporation signed a four-year operation lease for an office space. Livingston has the option to renew the lease for an additional five-year period on or before December 31, 2012. Livingston finished the constructions of general improvements to the leased property at a cost of P4,500,000 on January 1, 2010. The useful life of these improvements was estimated to be 5 years. Livingston use the straight-line method and took a full year’s depreciation on 2010. During 2011, Livingston Corporation exercised the renewal option to extend the lease term for an additional 5 years. What is the depreciation expense in 2011? a. 750,000 b. 900,000
c. d.
500,000 600,000
7. Marshes Company debits all insurance premium paid to prepaid insurance. The entity makes monthly charges to insurances expense with credits to prepaid insurance. Data for 2011 are: Prepaid insurance – December 31,2010 Charges to insurance expense Unexpired insurance premiums – December 31, 2011
400,000 1,600,000 600,000
What was the total amount of insurance premiums paid? a. 1,700,000 b. 1,600,000
c. 1,800,000 d. 2,000,000
8. Derby Company’s accounting records provided the following information for 201 1: January 1 1,700,000 5,000,000
Current assets Property, plant and equipment Current liabilities Noncurrent liabilities
December 31
5,500,000 700,000
1,000,000
Working capital of P500,000 remained unchanged from January 1 to December 31, 2011. Net income for 2011 was P900,000. No dividends were declared during 2011 and there were no other changes in equity. What is amount of noncurrent liabilities on December 31, 2011? a. 500,000 b. 300,000
c. 600,000 d. 900,000
9. The following information pertain to Reese Company’s pension plan: Actuarial estimate of projected benefit obligation at January 1, 2011 Assumed discount rate Service cost for 2011 Pension benefits paid during 2011 Past service cost recognized in 2011 due to an amendment to the plan
8,000,000 10% 1,200,000 1,500,000 2,000,000
If no change in actuarial estimates occurred during 2 011, what is the projected benefit obligation on December 31, 2011? a. 9,200,000 b. 10,000,000
c. d.
8,500,000 10,500,000
10. On December 31, 2009, Michelle Corporation issued P5,000,000, 10% bonds at 110. The bonds pay interest annually on December 31, and mature on December 31, 2019. Each P1,000 bond has a detachable share warrant that allows the bondholder to purchase 5 shares of Michelle’s P50 par value ordinary share for P60. Immediately after the sale o f the securities, the bonds were quoted at 95 ex – warrants and the warrants were quoted at P30 each. Michelle’s ordinary shares at that time were selling at P 75 per share. On January 1, 2011, all the share warrants were exercised when the price o f Michelle’s share was trading at P110. What is the share premium from issuance of the ordinary shares that will be recorded on same date?\
a. 1.000.000 b. 250,000
c. 650,000 d. 750,000
11. Rosenberg Company reported the following information on December 31, 2011: Sinking fund of P2,000,000 for bonds payable due on December 31, 2012. Debts Investments securities of P5,000,000. These securities are government bonds broken downs as follows: P2,000,000 in treasury bills, P1,800,000 in treasury bonds and P1,200,000 in treasury notes. Cash of P900,000 in the form of coin, currency, savings, accounts, and checking accounts. Checks and money orders of P500,000. Money market placements in the form of banker’s acceptances, commercial paper and negotiable certificate of deposits with a total value of P1,500,000.
What total amount should be reported as cash and cash equivalents on December 31, 2011? a. 6,900,000 b. 9,900,000
c. 4,900,000 d. 5,400,000
12. Helena Company has granted share options to its employees on January 1, 2010 with a total fair value of P4,000,000 computed under the Monte-Carlo model. The only condition to employees is that they have to remain in the employ of Helena until December 31, 2012. On January 1, 2010, Helena estimated that 10% of the employees would leave the company before December 31, 2012. On January 1, 2011, because of the low turnover rate in 2010, the estimate of emplo yees leaving before the vesting date was reduced to 7%. However, on December 31,2012, 5% of the total employees from January 1, 2010 entitled to share options forfeited their rights to the share based compensation. What is the compensation expense in 2012? a. b. c. d.
1,200,000 1,280,000 1,350,000 1,320,000
13. On January 2, 2011, Beckett Company established a noncontributory defined benefit plan covering all employees and contributed P2,500,000 to the plan. At December 31, 2011, Beckett determined that the 2011 service and interest costs on the plan were P3,000,000 and P600,000, respectively. The expected and the actual rate of return on plan assets for 2011 was 10%. There are no other components of Beckett’s pension expense. What amount should Beckett report on December 31, 2011 as prepaid or accrued pension cost? a. 850,000 prepaid b. 1,100,000 accrued c. 850,000 accrued d. 1,100,000 prepaid
14. Manuela Company uses leases as a primary method of selling its products. Late in 2010, Manuela completed construction of a transport hovercraft at a cost of P5,200,000 for use between several islands south of the archipelago. On January 1, 2011, the ferry was leased to the Carriers Company on a contract specifying that the ownership of the ferry will transfer to Carriers at the end of the lease period. Other terms of the agreement are as follows: Fair market value of the ferry at lease date Present value of lease payments Lease payments at the end of each year Estimated residual value Rate implicit in the lease Incremental borrowing rate Lease period
5,950,000 5,890,000 1,000,000 500,000 11% 13% 10 years
What total income should be recognized by Manuela in 2011 for this sakes-type lease? a. 647,900 b. 1,337,900
c. 1,404,500 d. 1,397,900
15. An SME with a profit in 2011 of P6,000,000 provided the following information: Amortization of intangibles (including goodwill of P100,000) Depreciation on plant assets Long-term debt: Bond premium amortization Interest paid Loss from change in fair value of investment in associate
400,000 1,000,000 200,000 600,000 800,000
What is the net cash provided by operating activities for 2011? a. 8,400,000 b. 7,600,000
c. 7,900,000 d. 8,000,000
16. Giants Company had total assets of P18,000,000 and shareholders’ equity of P13,000,000 on January 1, 2011. On December 31, 2011, assets decreases by P4,000,000 and liabilities decreased by P1,500,000. Giants Company should report what amount of shareholders’ equity on December 31, 2011? a. 10,500,000 b. 15,500,000 c. 18,500,000 d. 7,500,000
17. Vince Company has a flock of 200 two-year old sheep on January 1, 2011. During 2011, 80 three-year old male sheep were purchased on July 1, 2011 for P18,000 each while 30 two-year and nine-month old sheep from the beginning flock were sold on October 1, 2011. The fair value less cost to sell for each sheep for 2011 is as follows: Two-year old sheep on January 1, 2011 Three-year old sheep on July 1, 2011 Two-year and nine-month old sheep on October 1, 2011 Two-year old sheep on December 31, 2011 Three-year old sheep on December 31, 2011 Three and a half year- old sheep on December 31, 2011
15,000 17,500 16,000 16,500 19,500 21,000
What is the gain or loss from initial recognition of biological asset on July 1, 2011? a. 280,000 loss b. 40,000 loss c. 40,000 gain d. 280,000 gain 18. Bernardino Company developed a new product to be sold to its customers. The following costs were incurred in developing patenting and manufacturing the product: Fees paid to engineers and experts for initial research and feasibility Professional fees to consultation to conduct market study Cost of lab equipment and facilities for research Development cost after technological feasibility Legal expenses to obtain the patent Expenses of drawings required by the patent office to be submitted with the patent application Licensing fees paid to be patent office Legal cost paid to defend patent against competitors Materials used during production Direct labor Overhead What total cost should be capitalized as intangible assets? a. 650,000 b. 720,000
c. 800,000 d. 500,000
19. --------------------------------------------------------------------------------.
200,000 300,000 800,000 500,000 50,000 20,000 150,000 300,000 2,000,000 1,000,000 300,000
20. Helmsley Company’s financial statements contained errors as follows: 2011 2010 Ending inventory 400,000 overstated 100,000 understated Depreciation expense 200,000 understated 300,000 overstated Rent income 250,000 overstated Unearned rent income 250,000 understated The proper correcting entries were made on December 31, 2010. By how much will 2011 profit before income taxes be overstated because of the errors? a. 600,000 b. 200,000
c. 450,000 d. 750,000
21. On December 31, 2011, Nora Company had outstanding 50,000 12% cumulative preference shares of P100 par value and 100,000 ordinary shares with a P10 par value. On December 31, 2010, there were two years of dividends in arrears on the preference shares. Cash dividends declared in 2011 totaled P2,500,000. What total amount of dividend is payable to ordinary shareholders? a. 1,900,000 b. 1,300,000
c. 700,000 d. 600,000
22. On January 1, 2011 Roger Company purchased 20% of the outstanding ordinary shares of Mercy Company for P5,000,000 of which P2,000,000 was paid in cash and P3,000,000 is payable with 10% interest on December 31, 2015. Roger also paid P200,000 to a business broker who helped find a suitable business and negotiable the purchase. At the time of the acquisition, the fair value of identifiable assets and liabilities were equal to their carrying amount except for an office building which has a fair value in excess of carrying amount of P2,000,000 and a remaining useful life of 4 years. Mercy’s shareholders’ equity on January 1, 2011 was P20,000,000. During 2011, Mercy reported net income of P2,000,000 and paid dividends of P700,000. What amount should be reported as investment in associate on December 31, 2011? a. 5,660,000 b. 5,360,000
c. 5,560,000 d. 5,060,000
23. On December 1, 2011, Grover Company gave Elmo Company a P1,000,000, 11% loan. Grover paid proceeds of P970,000 after the deduction of a P30,000 nonrefundable loan origination fee. Principal and interest are due in six ty monthly installment of P21,550, beginning January 1, 2012. The repayments yield an effective interest rate of 11% at a present value of P1,000,000 and 12.4% at a present value of P970,000. What amount of income from this load should Grover report in its 2011 statement of comprehensive income? a. 10,023 b. 8,892
c. 9,167 d. 10,333
24. On January 1, 2011, Willie company signed a 10 year equipment lease with annual payments of P1,500,000 beginning January 1, 2011. The equipment is properly classified as a finance lease. The ten lease payments have a present value of P10,500,000 on January 1, 2011 based on an implicit rate of 9% and a present value of P9,945,000 based on Willie’s incremental borrowing rate of 12%. What amount should W illie report as interest expenses for 2012? a. 810,000 b. 747,900
c. 894,500 d. 900,000
25. Stamos Company has incurred heavy losses since its inception. The board of directors voted to implement quasi-reorganization, through reduction of pa r value. Immediately prior to the restatement on December 31, 2011, Stamos Company’s shareholders equity was as follows: Ordinary shares, P100 par 500,000 shares Share premium Accumulated losses
50,000,000 10,000,000 (25,000,000)
The shareholders approved the quasi-reorganization on January 1, 2012 to be accomplished by a reduction in inventory of P2,500,000, a reduction in property, plant and equipment of P3,500,000, writeoff of goodwill with a carrying amount P1,000,000 and recognition of unrecorded liabilities of P2,000,000. In addition, shareholders contributed P3,000,000 to create share premium. What amount must the total par value of the Stamos’ ordinary shares be reduced to eliminate the deficit? a. 15,000,000 b. 21,000,000
c. 16,000,000 d. -0-
26. Lauren Company is a listed entity. Lauren’s financial statements for the year -ended. December 31, 2011 reported earnings per share of P120. On august 1, 2012 Lauren made a 2 for 1 bonus issue. What figure for the 2011 earnings per share will be shown as comparative information in the statement of comprehensive income for 201 0? a. 240 b. 60
c. 120 d. 40
27. On January 1, 2007, Mickey Company grants to employees a share based payment with cash and share alternatives. The provisions include the right to a cash payment equal to the value of 12,000 phantom shares or 20,000 ordinary shares with a par value of P30. The grant is conditional upon the completion of three years services. If the employees choose the share alternative, the shares must be held for two years after the vesting date. At grant date, the share price is P50. At the end of 2009, 2010 and 2011 the share prices are P60, P65 and P7, respectively. Mickey does not except to pay dividends in the next three years. After taking into account the effect of post-vesting transfer restriction,
Mickey Company estimates that the grant date far value of the share alternative is P42. On January 1, 2012, the employees selected the share alternative. What is the amount of share premium to be recorded from the issuance of shares? a. 540,000 b. 400,000
c. 300,000 d. 150,000
28. Nadine Company is in the business financing the acquisition of freight vehicles. As a lessor, Nadine expects a 9% return on its net investment with insignificant amount of direct cost. All lease are classified as direct financing leases. At the en d of the lease term, the vehicles ownership is not transferred to the lessee. However, Nadine requires the residual value at that time to be guaranteed. On January 1, 2011, a freight vehicle is leases to a lessee for 8 years with payments to be made on January 1 of each year beginning January 1, 2011. The cost of the vehicle is P3,566,500 and the residual value is P500,000. The PV of 1 at 9% for 8 periods is .50, the PV of an ordinary annuity of 1 at 9% for 8 periods is 5.53 and the PV of an annuity due of 1 at 9% for 8 periods is 6.03. what is the gross investments of Nadine in this lease? a. 3,900,000 b. 4,900,000
c. 5,297,830 d. 4,400,000
29. The shareholders’ equity of Wilma Company on Decembe r 31,2011 consists of the following: Preference share capital, 10% cumulative, P100 par, 25,000 shares Ordinary share capital, P10 par, 200,000 shares Subscribed ordinary share capital, P10 par, 50,000 shares Subscriptions receivable Ordinary treasury shares, 200,000 shares at cost Share premium Accumulated profits
2,500,000 2,000,000 500,000 900,000 500,000 3,000,000 2,000,000
Preferences shares shall be paid at par plus a liquidation premium of P250,000. The preference dividends are in arrears for 3 years on January 1, 2011. What is the book value per ordinary share of Wilma Company? a. 25.00 b. 26.00
c. 24.50 d. 27.000
30. Frodo University is a leading educational institution with student population of more than 100,000. Frodo University continuously maintains good qualit y education and a roster of qualified instructor. As a result, Frodo University continuously produces top graduates at several fields. On December 31, 2011, Frodo University has an outstanding accounts receivable balance P130,000,000 broken down into: 0-60 days outstanding, P50,000,000; 61-120 days outstanding. P40,000,000, 121-365 days outstanding, P30,000,000; over one year outstanding, P10,000,000. Estimated uncollectible accounts are 2%, 5%, 10% and
25% respectively. Frodo University wrote off P2,500,000 of its accounts receivable and recovered P500,000 from accounts previously written off in prior years. On December 31, 2010, Frodo University has an allowance for uncollectible accounts of P5,000,000. What should Frodo University report s doubtful accounts expense for 2011? a. 8,500,000 b. 5,500,000
c. 2,000,000 d. 3,000,000
31. Mayen Company reported total tax expense of P2,000,000 in its 2012 statement of comprehensive income. The following changes in Mayen’s tax assets and liabilities re available:
Deferred tax asset Income tax payable Deferred tax liability
December 31, 2012 150,000 300,000 250,000
December 31, 2011 350,000 600,000 500,000
The deferred tax liability was caused by accele rated depreciation and the deferred tax asset is for rentals received in advances. What is the current tax expense for 2012? a. 2,050,000 b. 1,750,000
c. 1,950,000 d. 2,450,000
32. Mikaela Company has granted 100 share appreciation rights to each of its 1,000 employees on January 1, 2010 that will vest on December 31, 2012 and payable on January 1, 2013. The management feels on December 31, 2010, 90% of the awards will vest. This expectation had however decreased to 85% on December 31, 2011. The fair value of each share appreciation right on December 31, 2010 is P30 and on December 31, 2011 is P45. What is the compensation expense for 2011 resulting from the share appreciation rights? a. 1,800,000 b. 1,650,000
c. 1,900,000 d. 1,275,000
33. The statement of financial position of Cooper Company on December 31, 2011 presented the following shareholders’ equity: Share capital, P50 pr, 250,000 shares authorized, 60,000 shares issued Share premium Retained earnings
3,000,000 3,500,000 2,000,000
During 2012, Cooper completed the following selected transactions: Mar. 29 July 15
Distributed a 20% stock dividend. The market value of Cooper’s ordinary share was P70. Purchased 5,000 own ordinary shares at P75 per share.
Oct. 14 Nov. 30
Dec. 31
Sold 2,000 shares of treasury ordinary shares for P100 per share. Declared a P5 per share dividend on the outstanding ordinary shares. The date of record is December 20, 2012 and the payment date is January 15, 2013. Closed the P900,000 net income to retained earnings.
What is the balance of the unappropriate retained earnings on December 31, 2012? a. 1,460,000 b. 1,730,000
c. 1,955,000 d. 1,930,000
34. The following information was taken from Hedonistic Corporation’s 2011 income statements: Income before income taxes Income tax expense: Current Deferred Net income
5,000,000 1,200,000 150,000
1,350,000 3,650,000
Hedonistic’ first year of operations was in 2011. The entity has a 30% tax rate. The deferred tax expense is the net total of deductible temporary differences of P200,000 and taxable temporary differences of P700,000. Also during the year, Hedonistic received dividends of P500,000 from its investments in domestic corporation. No oth er differences existed between accounting income and taxable income. What was the taxable income for 2011? a. 4,000,000 b. 4,500,000
c. 3,800,000 d. 4,200,000
35. Morgan Company’s shareholders equity on January 1, 2011 is as follows: Ordinary share capital, P10 par value, authorized, 1,000,000 shares; outstanding 750,000 shares originally issued at P14 per share Share premium Retained earnings
7,500,000 3,000,000 1,000,000
During 2011, Morgan acquired 20,000 treasury shares for P900,000 and subsequently retired the treasury shares on December 31,2011. No other share transaction occurred during 2011. Morgan uses the cost method to record treasury share transaction. What is the total amount of share premium on December 31, 2011? a. 2,920,000 b. 3,080,000
c. 2,300,000 d. 3,000,000
36. The following assets and liabilities appeared in the statement of financial position o f Marcus Company: Cash Accounts receivable Allowance for doubtful accounts Inventory Equipment Accumulated depreciation Patents and trademarks Held to maturity investments Long-term receivables Accounts payable Accrued expenses Long-term notes payable Deferred tax liability Bonds payable Discount on bond payable
400,000 2,000,000 300,000 900,000 5,000,000 1,500,000 500,000 900,000 3,000,000 1,500,000 100,000 1,000,000 200,000 2,000,000 100,000
In preparing financial statements in hyperinflationary economy, what amount should be reported as net monetary assets? a. 1,600,000 b. 1,500,000
c. 1,700,000 d. 400,000
37. An analysis of the ending inventory account of Lilac Company on December 31, 2011 disclosed the inclusion of the following items: Merchandise in transit purchased on terms: FOB shipping point FOB destination Merchandise out on consignment at sales price (including mark up of 30% on cost) Merchandise sent to a customer for approval (cost of goods, P55,000) Merchandise held on consignment
200,000 50,000 325,000 70,000 20,000
The inventory account at December 31, 2011 should be reduced by what amount? a. 182,500 b. 160,000
c. 215,000 d. 180,000
38. Sidney Company purchased the following securities during 2011: Classification Cost Market value – 12/31/2011 Security A Trading 900,000 1,000,000 Security B Trading 1,000,000 1,600,000 On July 31, 2012 the company sold all of the shares of Security B for a total of P1,100,000. On December 31, 2012, the shares of Security A had a market value of P600,000. No other activity occurred during 2012 in relation to the trading security portfolio. What is the gain or loss sale of Security B on July 31, 2012? a. 500,000 gain b. 500,000 loss
c. 100,000 gain d. 100,000 loss
39. Marvin Company has the following information for the current year in relation to its short-term employee benefits, specifically regarding compensated absences: Accumulating and vesting taken 1,000,000 Accumulating and vesting not taken 500,000 Accumulating and nonvesting not taken 600,000 Non accumulating taken 300,000 Non accumulating not taken 100,000 What is the compensation expense to be recognized for the year for compensated absences? a. 2,400,000 b. 2,500,000
c. 1,300,000 d. 1,800,000
40. On January 1, 2011, Penelope Company has an outstanding P20,000,000 note payable which is due on August 31,2012. On December 31, 2011, Penelope signed an agreement to borrow up to P 20,000,000 to refinance the note payable on a long-term basis with no payments due until 2014. The financing agreement stipulated that borrowing should not exceed 75% of the value of the collateral Penelope was providing. At the date of issuance of the December 31, 2011 financial statements, the value of the collateral was (P22,000,000 and is not expected to fall below this amount during 2012. What amount of the note payable shall be classified as a current liability on December 31, 2011? a. 5,500,000 b. 3,500,000
c. 20,000,000 d. 16,500,000
41. On January 1, 2011, Slice Company issued 5,000 of its 12%, P1,000 face value bonds for P5,350,0000, including accrued interest. The bonds are dated October 1, 2010, mature on October 1, 2015 and pay interest annually on October 1. The bonds were issued through an underwriter to whom Slice paid bond issue cost of P80,000. On January 1, 2011, what should Slice report as bonds payable in its statements of financial position? a. 5,000,000 b. 5,270,000
c. 5,080,000 d. 5,120,000
42. Information from Tracer Company’s cash flows from the 2011 accounting records is as follows: Proceed from issuance of ordinary shares Stock issue cost Proceeds from issuance of bonds Cash dividends on ordinary shares Cash dividends on redeemable preferences shares Purchase of treasury shares for cash Sale of shares to officers and employees for cash not included above payment for interest on borrowings
5,000,000 200,000 2,000,000 500,000 800,000 600,000 900,000 80,000
What is the net cash provided by financing activities for 2011? a. 6,000,000 b. 5,800,000
c. 6,800,000 d. 6,600,000
43. On January 1, 2011, Janjan Company received a note from a customer in exchange for merchandise sold. The note is for P5,000,000 with interest rate of 12% and due on June 30, 2011. On March 1, 2011, Janjan Company discounted the note at 15% with a bank to generate cash. What amount should be recognized as loss on discounting of note receivable by the bank? a. 200,000 b. 100,000
c. 265,000 d. 65,000
44. Information regarding Labrador Company in relation to the restatement of its financial statements according to current cost accounting is as follows:
Sales for the year of 300,000 units of inventory purchased at P80 each amounted to P32,000,000. The average current cost of Labrador’s inventory was determined to be P95, while the current cost at the end of the reporting period was p110. The ending inventory, all of which came from the year’s purchases was 25,000 units. Depreciable assets were purchased at the be ginning of the year at a total cost of P3,000,000. These assets do not have a residual value and are depreciated using the straight-line method over five years. If purchased at the end of the reporting period, the same assets would cost P3,500,000. Selling and administrative expenses excluding depreciation on assets totaled P1,200,000.
What total amount should be recognized as realized holding gain in 2011? a. 4,500,000 b. 4,550,000
c. 1,150,000 d. 570,000
45. Bristol Company acquired equipment on January 1, 2010 at accost of P3,500,000 and depreciated it at 20% per annum, with no residual value under the straight-line method. On December 31, 2011, it was assessed that the equipment can be sold at the end of its useful life for P400,000. What depreciation expense should be recognized for 2011? a. 560,000 b. 600,000
c. 620,000 d. 760,000
46. The following selected information for Gorgonian Company’s defined plan for the year ended December 31, 2011 is given below: Fair value of plan assets – January 1 Projected benefit obligation – January 1 Pension expense for 2011 Contribution Benefits paid Unrecognized prior service costs – January 1 Unrecognized net actuarial gains – January 1 Interest cost
5,500,000 7,500,000 1,700,000 1,300,000 1,900,000 700,000 200,000 300,000
What amount should be reported on December 31, 2011? a. 1,900,000 accrued benefit cost b. 1,100,000 accrued benefit cost c. 1,900,000 prepaid benefit cost d. 1,100,000 prepaid benefit cost 47. On January 1, 2011, Simeon Company purchased 30,000 P100 par value ordinary shares of Harper Company for P3,600,000 to be held as available-for-sale securities. On May 1, 2011, Simeon received a 20% stock dividend. On September 1, 2011, Simeon sold all the shares that were received on May 1, 2011 at P200 per share. What is the gain on sale of investment? a. 1,000,000 b. 480,000
c. 600,000 d. 1,200,000
48. On January 1, 2011, an SME acquired 40% of the ordinary shares of an associate for P5,000,000 plus transaction cost of P500,000. The associate recognized a net income of P6,000,000 for 2011 and paid cash dividends of P2,000,000 on December 31, 2011. On December 31,2011, the fair value of the investment is P7,000,000 and the cost to sell is estimated at P200,000. The investment has a published price quotation. Accordingly, the investor used the fair value model of accounting for investment in associate. What is the carrying amount of the investments in associate on December 31, 2011? a. 5,500,000 b. 6,800,000
c. 6,800,000 d. 7,000,000
49. The general ledger trial balance of Darwin Company included the following accounts on December 31, 2011: Inventory including inventory expected in the ordinary course if operation to sold beyond 12 months amounting to P700,000 Trade receivables Prepaid insurance Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Cash Deferred tax asset Bank overdraft
2,700,000 2,200,000 100,000 1,000,000 1,800,000 1,300,000 450,000 300,000
What amount should be shown as total current assets on December 31, 2011? a. 7,300,000 b. 7,000,000
c. 9,100,000 d. 6,600,000
50. The following information pertains to Mae Company’s sales for the current year: Cash sales Gross Returns and allowances
2,000,000 100,000
Credit sales Gross Discounts
3,000,000 150,000
On January 1, customers owed Mae P1,000,000. On December 31, customers owed Mae P750,000. Mae uses direct writeoff method for bad debts. No bad debts were recorded in the current year. Under the cash basis of accounting, what amount of sales revenue should Mae report for the current year? a. 5,000,000 b. 4,750,000
c. 4,250,000 d. 1,900,000
PRACTICAL ACCOUNTING 1 1.
A
11.
A
21.
C
31.
A
41. D
2.
B
12.
D
22.
B
32.
B
42. D
3.
A
13.
C
23.
A
33.
B
43. D
4.
C
14.
D
24.
B
34.
A
44. B
5.
A
15.
D
25.
B
35.
A
45. B
6.
D &A
16.
A
26.
D
36.
B
46. A
7.
C
17.
B
27.
A
37.
B
47 C
8.
C
18.
B
28.
B
38.
B
48. D
9.
D
19.
29.
A
39.
A
49. A
10.
A
20.
30.
B
40.
B
50. A
A
TAKE NOTE…, QUESTION NO. 19… MISSING UNG PAGIPILIIAN NA SAGOT.,
