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15. Net realizable value is On December 31, 2005, Segment One suffered significant losses and its recoverable
a. Current replacement cost amount is P30,000,000. On December 31, 2005, the carrying amounts are as follows:
b. Estimated selling price
c. Estimated selling price less estimated cost to complete Segment One 28,000,000
d. Estimated selling price less estimated cost to complete and estimated cost to sell Segment Two 50,000,000
Segment Three 67,000,000
Goodwill 20,000,000
P1
In its 2005 income statement, Luzon Company should report impairment loss at
1. Sta. Rosa Company has been experiencing significant losses in prior years. On December a. 3,000,000
31, 2005, the assets and liabilities are: b. 5,000,000
c. 2,000,000
Cash 10,000,000 d. 1,000,000
Accounts receivable 20,000,000
Inventory 30,000,000
Property, plant and equipment 50,000,000 4. On January 1, 2003, Paete Company signed a 12-year lease for a building. Paete has an
Goodwill 5,000,000 option to renew the lease for an additional 8-year period on or before January 1, 2007. During
Liabilities 40,000,000 January 2005, Paete made substantial improvements to the building. The cost of the
improvements was P3,600,000, with an estimated useful life of 15 years. At December 31,
On December 31, 2005, the fair value of the net assets of Sta. Rosa is P62,000,000. 2005, Paete intended to exercise the renewal option. Paete has taken a full year’s
How much is the impairment loss applicable to goodwill? amortization on this improvement. In the December 31, 2005, balance sheet, the carrying
a. 13,000,000 amount of this leasehold improvement should be
b. 8,000,000 a. 3,240,000
c. 5,000,000 b. 3,360,000
d. 0 c. 3,400,000
d. 3,300,000
2. Benguet Company’s accounting records indicated the following for 2005:
Inventory, January 1 P6,000,000 5. On January 1, 2003, Puntavedra Company signed an eigth-year lease for office space.
Purchases 20,000,000 Puntavedra has the option to renew the lease for an additional six-year period on or before
Sales 30,000,000 January 1, 2009. During January 2005, Puntavedra incurred the following costs.
General improvements to the leased premises with useful 5,400,000 8. Biñan Company incurred the following costs during 2005:
life of 10 years
Office furniture and equipment with useful life of 8 years 2,400,000 Design of tools, jigs, molds and dies involving new technology 2,500,000
Moveable assembly line equipment with useful life of 5 years 1,800,000 Modification of the formulation of a process 3,200,000
Trouble shooting in connection of breakdowns during commercial
At December 31, 2005, Puntavedra’s intention as to the exercise of the renewal option is production 2,000,000
uncertain. A full depreciation of leasehold improvement is taken for year 2005. In Adaptation of an existing capability to a particular customer’s need as part
Puntavedra’s December 31, 2005 balance sheet, accumulated depreciation of leasehold of a continuing commercial activity 2,200,000
improvement should be
a. 1,200,000 In its 2005 income statement, Biñan should report research and development expense of
b. 1,300,000 a. 2,500,000
c. 540,000 b. 3,200,000
d. 900,000 c. 4,700,000
d. 5,700,000
6. Maayon Company begins construction of a new facility. Following are some of the costs
incurred in conjunction with the start up activities of the new facility: 9. Dumalag Company provided the following information relevant to the research and
development expenditures for the year 2005:
Production equipment 1,500,000
Travel costs of salaried employees 400,000 Current period depreciation on the building housing R and D activities 1,500,000
License fees 50,000 Cost of market research study 1,000,000
Training of local employees for production and maintenance operations 1,300,000 Current period depreciation on a machine used in R and D activities 500,000
Advertising costs 100,000 Salary of R and D director 1,200,000
Salary of Vice-President who spends ¼ of his time overseeing
What portion of the organizational costs will be expensed? R and D activities 2,400,000
a. 1,700,000 Pension costs for salary of R and D director 50,000
b. 1,850,000 Pension costs for salary of Vice-President 100,000
c. 3,350,000
d. 1,300,000 The R and D expense for the current period should be
a. 3,875,000
7. Siniloan Company incurred research and development costs in 2005 as follows: b. 4,875,000
c. 5,750,000
Equipment acquired for use in various R&D projects 6,000,000 d. 3,800,000
Depreciation on the above equipment 1,200,000
Materials used 3,000,000
Compensation costs of personnel 4,000,000 10. Biñan Company made the following expenditures relating to Product X:
Outside consulting fees 1,500,000
Indirect costs appropriately allocated 1,300,000 * Legal costs to file a patent on Product X. Production of the finished 500,000
product would not have been undertaken without the patent.
The 2005 total research and development expense should be
* Special equipment to be used solely for development of Product X. The 4,000,000
a. 11,000,000
b. 15,800,000 equipment has no other use and has an estimated useful life of four
c. 9,700,000 years.
d. 9,800,000 * Labor and material costs incurred in producing a prototype model 3,000,000
* Cost of testing the prototype 2,000,000
14. To increase sales, Quezon Company inaugurated a promotional campaign on June 30,
What is the total amount of costs that will be expensed when incurred? 2005. Quezon placed a coupon redeemable for a premium in each package of cereal sold at
a. 9,000,000 P200. Each premium costs P100. A premium is offered to customers who send in 5 coupons
b. 9,500,000 and a remittance of P30. The distribution cost per premium is P20. Quezon estimated that
c. 6,000,000 only 60% of the coupons issued will be redeemed. For the six months ended December 31,
d. 5,000,000 2005, the following is available:
3. If a firm had been extending trade credit on a 2/10, net/30 basis, what change would be 8. A company obtaining short-term financing with trade credit will pay a higher percentage
expected on the balance sheet of its customer if the firm went to a net cash 30 policy? financing cost, everything else being equal, when
a. Increased payables and increased bank loan. A. The discount percentage is lower.
b. Increased receivables. B. The items purchased have a higher price.
c. Decreased receivables. C. The items purchased have a lower price.
d. Decrease in cash. D. The supplier offers a longer discount period.
2. Loss on sale of company car to Red Co. 54,000 Statement 2. Finds Statutory basis on the Commissioner’s power to abate taxes.
Note: Miriam Santiago owns 60% of the stocks of Red Co. The first statement is true while the second statement is false;
3. Loss on sale of office computers to Miriam Sto. Domingo, 40,000 The first statement is false while the second statement is true;
Sale on installment payment basis (initial payments 15. May the tax collection of taxes be barred by prescription?
a. No, it can not be barred by prescription because taxes are for the support of
do not exceed 25% of the selling price, government;
b. Yes, collection of taxes can be barred by prescription. However, if tax law does not 4. What was the joint venture gain or loss?
provide for prescription, the right of government to collect taxes becomes A. 202,000
imprescriptible; B. 213,500
c. No. only the courts of law can allow action to prevent collection of taxes; C. 224,000
d. No, collection of taxes can not be barred by prescription. What can be barred by D. 236,500
prescription is assessment of taxes. 5. In the final settlement, what was the total amount due to Mac including his
investment?
A. 256,500
P2 B. 258,000
C. 263,750
The ABC partnership has assets with book value of P240,000 and a market value of D. 268,250
P195,000, outside liabilities of P70,000, loans payable to Partner Able of P20,000, and a
capital balances for Partner Able, Baker, and Chapman of P70,000, P30,000, and P50,000, The ff were found in your examination of the interplant accounts between the Home Office
respectively. The partners share profits and losses equally. and the Butuan Branch:
1. How would the first P100,000 of available assets be distributed? a. Transfer of fixed assets from Home Office amounting to P53,960 was not booked by
A. P70,000 to outside liabilities, P20,000 to Able, and the balance equally among the branch.
partners. b. P10,000covering marketing expense of another branch was charged by the Home
B. P70,000 to outside liabilities, and P30,000 to Able Office to Butuan.
C. P70,000 to outside liabilities, P25,000 to Able, and P5,000 to Chapman c. Butuan recorded a debit note oninventory transfers fromHome Office of P75,000
D. P40,000 o Able, P20,000 to Chapman, and balance equally among partners. twice.
d. Home Office recorded cash transfer of P65,700 from Butuan Branch as coming from
2. If all outside creditors and loans to partners had been paid. How would the balance of Davao Branch.
the assets be distributed assuming Chapman had already received assets with a e. Butuan reversed a previous debit memo from Cagayan de Oro Branch amounting to
value P30,000? P10,500. Home Office decided that this charge is appropriately Davao Branch’s cost.
A. Each of the partners would receive P25,000. f. Butuan recorded a debit memo from Home Office of P4,650 as P4,560.
B. Each of the partners would receive P40,000.
C. Able:P70,000, Baker: P15,000, Chapman:P20,000 6. The net adjustment in the home office books related to the Butuan Branch Current
D. Able:P55,000, Baker: P15,000, Chapman:P5,000 account is:
A. 75,700
Mac and Jolly, in a joint venture, contributed P150,000 each in order to purchase canned B. 65,700
goods which are sold by lots at a “closing-out” sale. They agreed to divide their profits equally C. 86,200
and each shall record his purchases, sales, and expenses in his own books. After D. 94,820
sellingalmost all of the canned goods, they wind up their venture. The ff data relate to the 7. The net adjustment in Butuan’s books related to the home office account is:
venture transactions: A. 33,335
B. 31,450
Joint venture credit balance of Mac was P120,000, and Jolly wasP105,000. C. 20,950
D. 10,450
Expenses pais fromthe joint venture cashwas P150,000 by Mac and P19500
8. Before the above discrepancies were given effect, the balance in the home office
Cost of unsold canned goods, which Mac and Jolly agreed to assume were, P4,500
books of its Butuan Branch Current account wasdebit balance f P165,920. The
and P7,000, respectively.
3. What was the total sales of the joint venture? unadjusted balance in the Butuan Branch books of its Home Office Current account
A. 559,500 must be:
B. 536,500 A. 92,336
C. 525,000 B. 98,230
D. 334,500 C. 104,500
D. 111,170 15. Trial balances for the home office and the branch of the Tony co. show the following
9. The adjusted balance of the reciprocal accounts is: accounts before adjustment, on December 31, 2011. The home office policy of billing
A. 84,807 the branch for the merchandise is 20% above cost.
B. 90,220 Home office Branch
C. 99,200 Unrealized intercompany inventory profit P10,800
D. 109,120 Shipments to branch 24,000
Purchase (outsiders) P7,500
The data pertain to instalment sales of Mickey’s store: Shipments from home office 28,800
Merchandise inventory, December 1, 2011 45,000
Down payment, 20%. What part of the branch inventory as of December 1,2100 represent purchase from
Instalment sales: P545,000 in Year 1; P785,000 in Year 2; and P968,000 in Year 3. outsiders and what part represents goods acquired from the home office:
Mark-up on cost, 35%. Outsiders Home office
Collections after down payment: 40% in the year of sale, 35% in the year after sale, a.P12,000 P33,000
and 25% in the third year. b. 16,500 28,500
10. The realized gross profit in year 1 is: c. 15,000 30,000
A. 109,357 d. 9.000 36,000
B. 73,474
C. 99,190
D. 114,825
11. The unrealized gross profit for instalment sales made during Year 2, as of the end of
Year 2 is:
A. 97,689
B. 131,880
C. 141,112
D. 114,063
12. The instalment account receivables at the end of year 3 is:
A. 652,722
B. 621,640
C. 602,991
D. 685,358
13. The unrealized gross profit at the end of year 3 is:
A. 211,047
B. 161,166
C. 198,574
D. 217,574
14. Shake’s Inc., franchisor, enters into a franchising agreement with Sha, franchisee, on
June 30,2011. The agreement calls for a total franchise fee of P1,000,000 of which
P100,000 is payable upon signing of the contract and the balance in four equal semi-
annual installments. It is agreed that the down payment is non-refundable
notwithstanding lack of substancial performance of services by the franchisor.
When Shake’s Inc. prepares its financial statements as of June 30,2011, the
unearned franchise fee to be reported is:
a.P0 b.P100,000 c.P900,000 d.P1,000,000