Practical Accounting 1 accounts at 12/31 per aging 110,000

Comprehensive Exams What amount should be reported as net realizable value of

accounts receivable on December 31?
Financial Statements a. 1,200,000 c. 1,085,000
b. 1,125,000 d. 925,000
1. Charice Company provided the following information on
December 31, 2016: Doubtful Accounts

 Accounts payable amounted to P500,000 and accrued 5. On January 1, 2016, Jamin Company had a credit balance of
expenses totaled P300,000 on December 31, 2016. 260,000 in the allowance for uncollectible accounts. Based on
 On December 15, 2016, the entity declared a cash past experience, 2% of credit sales would be uncollectible.
dividend of P7 per share on 100,000 outstanding During the current year, the entity wrote off P325,000 of
shares, payable on January 15, 2017. uncollectible accounts. Credit sales for the year totaled
 On July 1, 2016, the entity issued P5,000,000,8% P9,000,000. What is the uncollectible accounts expense for the
bonds for P4,400,000 to yield 10%. The bonds mature year?
on June 30, 2021, and pay interest annually every June a. 325,000 c. 440,000
30. b. 180,000 d. 65,000
 The pretax financial income was P8,500,000 and
taxable income was P6,000,000. The difference is due Receivable Financing
to P1,000,000 permanent difference and P1,500,000 of
taxable temporary difference to reverse in 2017 6. Daisy Company sold accounts receivable without recourse
 The income tax rate is 30%. The entity made with face amount of P 6,000,000. The factor charged 15%
estimated income tax payments during the year of P commission on all accounts receivable factored and withheld
1,000,000. 10% of the accounts factored as protection against customer
What amount should be reported as total current liabilities returns and other adjustments. The entity had previously
on December 31, 2016? established an allowance for doubtful accounts of P200,000 for
a. 3,500,000 c. 2,300,000 these accounts. By year-end, the entity had collected the
b. 2,700,000 d. 2,500,000 factor’s holdback there being no customer returns and other
adjustments
Cash and Cash Equivalents What is the loss on factoring?
a. 700,000 c. 200,000
2. At year-end, Myra Company reported cash and cash b. 900,000 d. 0
equivalents which comprised the following:
Loan Receivable
Cash on hand 500,000
Demand deposit 4,000,000 7. Philippine Bank granted a loan to a borrower on January 1,
Certificate of deposit 2,000,000 2016. The interest on the loan is 8% payable annually starting
Postdated customer check 300,000 December 31, 2016. The loan matures in three years on
Petty cash fund 50,000 December 31, 2018.
Traveler’s check 200,000
Manager’s check 100,000 Principal amount 3,000,000
Money order 150,000 Origination fee charged
What total amount should be reported as “cash” at year- against the borrower 100,000
end? Direct origination costs
a. 7,000,000 c. 6,800,000 incurred 260,300
b. 4,800,000 d. 5,000,000 After considering the origination fee charged to the borrower
and the direct origination cost incurred, the effective rate on
Bank Reconciliation the loan is 6%.
What is the carrying amount of the loan receivable on
3. Mindanao Company provided the following data for the December 31, 2016?
month of December: a. 3,000,000 c. 3,109,918
b. 3,160,300 d. 3,210,682
Balance per Book 1,000,000
Bank service charges 3,000 Inventory
Outstanding checks 235,000
Deposit in transit 300,000 8. On December 28, 2016, Kerr Company purchased goods
Customer note collected costing P500,000 FOB destination. These goods were received
by bank 375,000 on December 31, 2016. The costs incurred in connection with
Interest on customer note 15,000 the sale and delivery of the goods were:
Customer check returned
NSF 62,000 Packaging for shipment 10,000
Depositor’s payment of note Shipping 15,000
payable charted to account 250,000 Special handling charges 25,000
What is the unadjusted cash in bank per bank statement? On December 31, 2016, what total cost should be included in
a. 1,310,000 c. 775,000 inventory?
b. 1,010,000 d. 945,000 a. 545,000 c. 520,000
b. 535,000 d. 500,000

Accounts Receivable Inventory Valuation

4. Jay Company provided the following data relating to 9. Celine Company provided the following data relating to an
accounts receivable for the current year: inventory item
Units Unit Cost Total
Accounts receivable, Jan. 1 650,000 Jan. 1 Beg. Bal. 5,000 200 1,000,000
Credit sales 2,700,000 10 Purchase 5,000 250 1,250,000
Sales returns 75,000 15 Sale 7,000
Accounts written off 40,000 16 Sale return 1,000
Collections from customers 2,150,000 30 Purchase 16,000 150 2,400,000
Estimated future sales returns 31 Purchase
at December 31 50,000 Return 2,000 150 300,000
Estimated uncollectible Under the perpetual system, what is the moving average unit
cost on January 31?
 a. 167 c. 181 a. 911,300 c. 953,300
b. 165 d. 225 b. 916,600 d. 960,600

Inventory Estimation
Investment Property
10. Hutch Company used the average cost retail inventory Fund and Other Investments
method to account for inventory. The following
information related to operations for the current year: 15. Ball Company purchased a P 1,000,000 ordinary life insurance
Cost Retail policy on its president. Ball Company is the beneficiary under
Beg. Inventory the life insurance policy. The policy year and the entity’s
and purchases 6,000,000 9,200,000 accounting year coincide. The entity provided the following
Net markups 400,000 data for the year ended December 31, 2016:
Net markdowns 600,000
Sales 7,800,000 Cash surrender value, January 1 43,500
What amount should be reported as cost of goods sold for the Cash surrender value, December 31 54,000
current year? Annual advance premium paid, Jan. 1 20,000
a. 4,800,000 c. 5,200,000 Dividends received July 1 3,000
b. 4,875,000 d. 5,250,000 What amount should be reported a life insurance expense?
a. 17,000 c. 6,500
Biological Assets b. 20,000 d. 9,500

11. Honey Company has a herd of 10 2-year old animals on Property, Plant and Equipment
January 1, 2016. One animal aged 2.5 years was purchased
on July 1, 2016 for P 108, and one animal was born on July 16. Bertz Company exchanged a delivery truck costing P1,000,000
1, 2016. No animals were sold or disposed of during the for a parcel of land. The truck had a carrying amount of
year. The fair value less cost of disposal per unit is as P650,000 and a fair value P500,000. The entity gave P600,000
follows: in cash in addition to the truck as part of this transaction. It is
expected that the cash flows from the assets will be
2-year old animal on January 1 100 significantly different. The previous owner of the land had
2.5-year old anima on July 1 108 listed the land for sale at P1,200,000. At what amount should
New born animal on July 1 70 Bertz record the land?
2-year old animal on December 31 105 a. 1,100,000 c. 1,150,000
2.5-year old animal on December 31 111 b. 1,250,000 d. 1,200,000
Newborn animal on December 31 72
3-year old animal on December 31 120
0.5-year old animal on December 80 Government Grant
What is the gain from change in fair value due to price
change? 17. At the beginning of current year, Sabangan Company received
a. 292 c. 237 a grant of P6,000,000 from the British government to
b. 222 d. 55 compensate for massive losses incurred because of a recent
tsunami. The grant was made for the purpose of giving
Financial Assets at Fair Value immediate financial support to the entity. It will take the entity
Investment in Equity Securities two years to reconstruct the assets destroyed by the tsunami.
What amount of grant income should be recognized in the
12. Day Company received dividends from share investments current year?
during the year ended December 31, 2015 as follows: a. 6,000,000 c. 1,500,000
 A stock dividend of 4,000 shares from Parr Company b. 3,000,000 d. 0
on July 31, 2016 when the market price of Parr’s share
was P20. Day owns less than 1% of Parr’s share Borrowing Cost
capital.
 A cash dividend of P150,000 from Lark Company in 18. Marian Company borrowed P20,000,000 at 10% partly for
which Day owns a 25% interest. A majority of Lark’s general purposes and partly to finance the construction of a
directors are also directors of Day. building on January 1, 2015. The loan shall be repaid
What amount of dividend revenue should be reported in commencing the month following completion of the building.
2016? Expenditures incurred evenly during the year for the
a. 230,000 c. 80,000 completed building totaled P12,000,000 on December 31,
b. 150,000 d. 0 2016. The entity earned interest of P200,000 for the year on
the unexpended portion of the loan. What amount of interest is
Investment in Associate capitalized on December 31, 2016?
a. 1,200,000 c. 600,000
13. At the beginning of current year, Kean Company b. 1,000,000 d. 400,000
purchased 30% interest in Pod Company for P2,500,000.
On this date Pod’s shareholders’ equity was P5,000,000. Depreciation
The carrying amounts of Pod’s identifiable net assets
approximated their fair values, except for land whose fair 19. Lester Company provided the following:
value exceeded the carrying amount by P2,000,000. The Total costResidual Value Est. Life
investee reported net income of P1,000,000 and paid no Machine A 5,500,000 500,000 20
dividends during the current year. What amount should be Machine B 2,000,000 200,000 15
reported as investment in associate at year-end? Machine C 400,000 5
a. 2,100,000 c. 2,800,000 The entity computed depreciation on the straight line method.
b. 2,200,000 d. 2,760,000 What is the composite life of the assets?
a. 13.3 c. 18.0
Financial Assets at Amortized Cost b. 16.0 d. 19.8

14. On July 1, 2016, York Company purchased as a long-term Depletion

investment P1,000,000 of Park ompany’s 8% bonds for
P946,000, including accrued interest of P40,000. The
bonds were purchased to yield 10% interest. The bonds
mature on January 1, 2022, and pay interest annually on
January 1. York Company used the effective interest
method of amortization. On December 31, 2016. What is
the carrying amount of the investment in bonds?
20. Farr Company quarries limestone, crushes it and sells it to be
used in road building. The entity paid P10,000,000 for a
certain quarry. The property can be sold for P3,000,000 after
production ceases.
Estimated total reserves 10,000,000
 Tons quarried through Jan. 1, 2016 4,000,000
Tons quarried in 2016 1,500,000 The balance in accounts receivable at December 31, 2016
before subtracting the allowance for doubtful accounts is:
An engineering study indicated that on January 1, 2016,
7,500,000 tons of limestone were available. What is the a. 960,000 c. 1,020,000
depletion for 2016? b. 1,010,000 d. 1,030,000
a. 1,050,000 c. 1,200,000
b. 2,800,000 d. 840,000 27. The following items were included in Opal Co.’s inventory
account at December 31, 2016:
Revaluation
Merchandise out on consignment, at sales price,
21. On January 1, 2011, Boston Company purchased a new including 40% markup on selling price P 40,000
building at a cost of P6,000,000. Depreciation was Goods purchased, in transit, shipped
computed on the straight line basis at 4% per year. On F.O.B. shipping point 36,000
January 1, 2016, the building was revalued at a fair value Goods held on consignment by Opal 27,000
of P8,000,0000. Before income tax, what is the revaluation By what amount should Opal’s inventory account at December
surplus on December 31, 2016? 31, 2016 be reduced?
a. 3,072,000 c. 3,040,000 a. 103,000 c. 51,000
b. 1,900,000 d. 1,920,000 b. 67,000 d. 43,000

Impairment 28. Ramos Company had the following bank reconciliation at

March 31:
22. On January 1, 2014, Reed Company purchased a machine Balance per bank statement, 3/31 P 93,000
for P8,000,000 and established an annual depreciation Add: Deposit in transit 20,600
charge of P1,000,000 over an eight-year life. During 2017, P 113, 600
after issuing the 2016 financial statements, the entity Less: Outstanding checks (25,200)
concluded that the machine suffered permanent impairment Balance per books, 3/31 P 88,400
and P2,000,000 is a reasonable estimate of the amount Data per bank statement for the month of April follow:
expected to e recovered through use of the machine for the Deposits P116,800
period January 1, 2017 through December 31, 2021. What Disbursements 99,400
is the impairment loss for 2016? All reconciliation items at March 31 cleared through the bank
a. 3,000,000 c. 2,000,000 in April. Outstanding checks at April 30 totaled P15,000.
b. 4,000,000 d. 0 What is the amount of cash disbursements per books in April?
a. 89,200 c. 109,600
Intangible Assets b. 99,400 d. 114,400

23. Tobin Company incurred P1,600,000 of research and 29. On January 1, 2016, Belief Company issued its 9%, 4-year
development costs to develop a product for which a patent convertible debt instrument with a face amount of P4,000,000
was granted at the beginning of the current year. Legal fees for P4,100,000. Interest is payable every December 31 of each
and other costs associated with registration of the patent year. The debt instrument is convertible into 80,000 ordinary
totaled P300,000. At year-end, the entity paid P450,000 for shares with a par value of P50. When the debt instruments
legal fees in a successful defense of the patent. What is the were issued, the prevailing market rate of interest for similar
total amount that should be capitalized for the patent at debt without conversion option is 10%. On December 31,
year-end? 2017, 1/4 of the convertible debt instruments were retired for
a. 750,000 c. 2,050,000 P1,000,000. Without the conversion option, the debt
b. 300,000 d. 2,350,000 instrument can be retired at 97%. On the date of issue, what
amount of the proceeds represents the equity component?
Research and Development a. None c. 326,800
b. 226,800 d. 126,800
24. Brill Company made the following expenditures during the
current year. 30. In the preceding problem after the retirement, what is the
carrying value of the debt instruments as of December 31,
Costs to develop computer software for 2017?
Internal use in Brill’s general a. 2,947,929 c. 3,930,572
Management information system P 1,000,000 b. 3,900,520 d. 3,963,629
Cost of market research activities 750,000
What is the research and development expense? 31. Neon Company has 110,000 ordinary shares outstanding,
a. 1,750,000 c. 750,000 10,000, 6% cumulative, P100 par convertible preference share
b. 1,000,000 d. 0 that are convertible into 20,000 ordinary shares and an 8% 4-
year convertible bonds with a face value of P1,000,000,
25. On September 1, Riva Co. assigns specific receivables convertible into 30,000 ordinary shares. The bonds were issued
totaling P750,000 to Pacific Bank as collateral on a on January 1 when the prevailing interest rate was 10%. The
P625,000, 12 percent note. Riva Co. will continue to liability component of the bonds at the time of issue is
collect the assigned accounts receivable. Pacific also P936,600. Net income for the year is P850,000. Income tax
assesses a 2 percent service charge on the total accounts rate is 32%. How much is the diluted earnings per share for the
receivable assigned. Riva Co. is to make monthly year?
payments to Pacific with cash collected on assigned a. P5.71 c. P6.00
accounts receivable. Collections of assigned accounts b. P5.65 d. P7.18
during September totaled P260,000 less cash discounts of
P3,500. What amount is owed to Pacific by Riva Co. for
September collections plus accrued interest on the note to
September 30?
a. P260,000 c. P264,000 Liabilities
b. P262,750 d. P266,250 Provisions
Contingencies
26. At the end of the first year of operations, December 31, Bonds Payable
2016, Foyayeng Company reported the following Note Payable and Debt Restructuring
information: Stockholders’ Equity
Book Value per Share
Accounts receivable, net 950,000 Earnings per Share
Customer accounts written off in 2016 10,000 Share-based Compensations
Bad debts expense for 2016 70,000