PRACTICAL ACCOUNTING II 1.

Kroger Corporation acquired a 60% interest in Food Lion Corporation on January 1, 2008, when Food Lions book values and fair values were equal. In July 1, 2008, Kroger sold a building with a book value of P300,000 to Food Lion for P375,000. The building has a remaining life of 15 years, no salvage value, and depreciation using the straight-line method. Food Lion reports net income of P160,000 for 2008. The 2008 consolidated net income amounted to: a. P87,500 b. P23,500 c. P21,000 d. P18,000 2. AA, Inc. and BB, Inc. agree to combine. AA acquires the net assets of BB in exchange for 3,125 shares of AA capital stock (P1,000 par). AA shares on this day have a market value of P1,300 per share. The condensed balance sheet of BB prior to combination show: Current assets P1,525,000 Plant and equipment 2,300,000 Goodwill 250,000 Total Assets P4,075,000 Liabilities Capital stock Additional paid in capital Retained Earnings Total liabilities and stockholders equity P 950,000 2,000,000 650,000 475,000 P 4,075,000

An appraisal was made by an independent appraiser indicated that the fair value of BB assets are P1,125,000 for current assets and P2,500,000 for plant and equipment. How should the difference between the fair value of BBs net assets and the fair value of share issued by AA is taken up in AAs books. Shows as (1) goodwill, and/or (2) premium on stocks: a. (1) P1,137,500; (2) P937,500 c. (1) P1,387,500; (2) P -0b. (1) P1,137,500; (2) P -0d. (1) P1,387,500; (2) P937,500 3. Connie Corporation had a realized foreign exchange loss of P15,000 for the year ended December 31, 2008 and must also determine whether the following items will require year-end adjustment: Connie had an P8,000 loss resulting from the translation of the accounts of its wholly-owned foreign subsidiary for the year ended December 31, 2008. Connie had an account payable to an unrelated foreign supplier payable in the suppliers local currency. The Philippines peso equivalent of the payable was P64,000 on the October 31, 2008 invoice date, and it was P60,000 on December 31, 2008. The invoice is payable on January 30, 2007. In Connies 2008 consolidated income statement, what amount should be included as foreign exchange loss? a. P11,000q b. P15,000 c. P19,000 d. P23,000 4. On September 1, 2008, Brady Corporation entered into a foreign exchange contract for speculative purposes by purchasing 50,000 foreign currencies for delivery in 60 days. The rates to exchange follow: 9 / 1 / 2008 9 / 30 / 2008 Spot-rate P21.00 P21.50 30 day forward rate 20.98 20.00 60 day forward rate 20.99 22.10 In its September 30, 2008 income statement, what amount should Brady report as foreign exchange transaction gain (loss) a. P(49,000) b. P55,500 c. P27,500 d. P(49,500) 5. Cebu Enterprises is a Philippine exporter of souvenir items manufactured in the capital city of Cagayan. The following overhead cost data have been accumulated: Activity Center Cost Driver Amount of Activity Center Cost Materials Handling Grams handled 100,000 grams P50,000 Painting Unites painted 50,000 units 200,000 Assembly Labor hours 4,000 hours 120,000

Job 1234 contains 3,000 units. It weighs 10,000 grams and uses 300 hours of labor. Compute the total overhead costs that should be assigned to Job 1234. a. P31,955 b. P27,750 c. P26,000

d. P32,000

6. Some units of output failed to pass final inspection at the end of the manufacturing process. The production and inspection supervisors determined that the incremental revenue from reworking the units exceeded the cost of rework. The rework of the defective units was authorized, and the following costs were incurred in reworking the units: Materials requisitioned from stores: Direct materials .P 5,000 Miscellaneous supplies 300 Direct labor.. 14,000 The manufacturing overhead budget includes an allowance for rework. The predetermined manufacturing overhead rate is 150% of direct labor cost. The accounts(s) to be charged and the appropriate charges for the rework costs would be: a. Work-in-process inventory control for P19,000. b. Work-in-process inventory control for P5,000 and factory overhead control for P35,300. c. Factory overhead control for P19,300. d. Factory overhead control for P40,300. 7. On 1 July 2008, Norlisk Ltd. acquire 90% of the capital of Rudny Ltd. for P290,160. The equity of Rudny Ltd. at this date consisted of: Share capital P 200,000 Retained earnings 80,000 The carrying amounts and fair values of the assets and liabilities recorded by Rudny Ltd. at 1 July 2008 were as follows: Carrying Fair Amount Value Fittings P 20,000 P 20,000 Land 90,000 100,000 Inventory 10,000 12,000 Machinery (net) 200,000 220,000 Liabilities 40,000 40,000 The machinery and fitting have a further ten-year life, benefits to have received evenly over this period. Differences between carrying amounts and fair values are recognized on consolidation. The tax rate is 30%. All inventory on hand at 1 July 2008 is sold by 30 June 2009. The amount of goodwill (gain on acquisition / discount on acquisition) on 1 July 2008 consolidated statements: a. P9,360 b. P18,000 c. P20,000 d. P(12,240) 8. A chemical company manufactures joint products Pep and Vi, and by product, Zest. Cost are assigned to the joint products by the market value method, which considers further processing costs in subsequent operations. For allocating costs to the by-product, the market value of reversal cost method is used. The total manufacturing costs for 10,000 units were P172,000 during the quarter. Production and costs data follow: Pep 5,000 P50 10 Vim 4,000 P40 5 Zest 1,000 P5 2 1

Unit produced Sales price per unit Further process cost per unit Selling and administrative exp. per unit Operating profit per unit

The gross profit for Pep amounted to: a. P 0 b. P70,000

c. P80,000

d. P100,000

9. Alba, Bana, and Cada form a partnership and agree to maintain average investments of P100,000, P50,000, and P50,000 respectively. Interest on an excess or on a deficiency in capital contribution is to be computed at 6%. After the interest allowances, Alba, Bana, and Cada are to share any balance in the ratio of 5:3:2. Average amounts invested during the first six months were as follows: Alba, P120,000;Bana, P55,000; Cada P40,000. A loss from operations of P2,500 was incurred for the first six months. How is this loss be distributed among the partners? Alba Bana Cada a. P 500 P720 P1,280 b. P 875 P735 P 890 c. P1,250 P750 P 500 d. P1,475 P885 P 590 10. Katherine Inc, of Cebu Ltd has decided to institute a pilot activity-based costing project in its five-person purchasing departmental costs are P473,500. Because of finding the best supplier takes the majority of effort in the department, most of the costs are allocated to this area. Activity Find best suppliers Issue purchase orders Review receiving reports Allocation Measure Number of telephone calls Number of purchase orders Number of receiving reports Number of People 3 1 1 Total Costs P300,000 P100,000 P73,500

During the year, the purchasing department made 150,000 telephone calls, issued 10,000 purchase orders, and reviewed 7,000 receiving reports. Many purchase orders are received in a single shipment. One product manufactured by Cebu Ltd. required the following purchasing department activities: 125 telephone calls, 60 purchase orders, and 15 receipts. What would be the purchasing department costs per unit would be if 200 units of the product are manufactured during the year? a. P2.00 b. P5.04 c. P10.00 d. P10.50 11. In October 2008, United Corporation obtained a loan amounting to US $120,000 for the purchase of machinery and equipment. By the end of the year, one-half of the loans were still unpaid and a tenpercent decrease has take place. If the foreign loan payable account is correctly reported in the balance sheet at P1,848,000, the rate of exchange at the time the loan was obtained must have been: a. $1.00 = P27.00 c. $1.00 = P29.00 b. $1.00 = P28.00 d. $1.00 = P30.00 12. On January 3, 2008, PP Services, Inc. signed an agreement authorizing CC Company to operate as a franchisee over a 20-year period for an initial franchise fee of P50,000 received when the agreement was signed. CC commenced operations on July 1, 2008, at which date all of the initial services required of PP had been performed. The agreement also provides that CC must pay annually to PP a continuing franchise fee equal to 5% of the revenue from the franchise. CCs franchise revenue for 2008 was P400,000. For the year ended December 31, 2008, how much should PP record as revenue from franchise fees in respect of the CCs franchise? a. P70,000 b. P50,000 c. P45,000 d. P22,500 13. On March 1, 2008, PP and QQ decides to combine their businesses and form a partnership. their balance sheets on March 1, before adjustments, showed the following: PP P 9,000 18,500 30,000 QQ P 3, 750 13,500 19,500

Cash Accounts receivable Inventories

Furniture and fixtures (net) Office equipment (net) Prepaid expenses Total Accounts payable Capital Total

30,000 11,500 6,375 P105,375 P 45,750 59,625 P105,375

9,000 2,750 3,000 P 51,500 P18,000 33,500 P 51,500

They agreed to have the following items recorded in their books: 1. Provide a 2% allowance for doubtful accounts. 2. PPs furniture and fixtures should be P31,000, while QQs office equipment is under-depreciated by P250. 3. Rent expense incurred previously by PP was not yet recorded amounting to P1,000, while salary expense incurred by QQ was not also recorded amounting to P800. 4. The fair market value of inventory amounted to: For PP P29,500 For QQ.. 21,000 Compute the net (debit) credit adjustment for PP and QQ: PP QQ a. P2,870 P2,820 c. b. (2,870) (2,820) d.

PP P(870) 870

QQ P180 (180)

14. The following informations are extracted from the books and records of Rona Company and its branch. The balances are at December 31, 2008 of the companys operations. Home Branch Office Sales P260,000 Shipments to branch P78,000 Shipments from home office 104,000 Purchases 39,000 Expenses 78,000 Inventory, January 1, 2008 26,000 Allowance for overvaluation of branch 31,200 inventory However, no shipments in transit between the home office and the branch were made. Both shipments accounts are properly recorded. The ending inventory includes merchandise acquired from the home office in the amount of P26,000 and P7,800 acquired from outsiders for a total of P33,800. Compute the (1) realized inventory profit of home office from sales made by the branch, and (2) the amount of branch merchandise beginning inventory that was acquired from the home office? a. (1) P24,700; (2) P15,600 c. (1) P22,533; (2) P15,600 b. (1) P31,200; (2) P20,800 d. (1) P24,700; (2) P20,800 15. On January 1, 2003, Brownie Delight, Inc. entered into a franchise agreement with a company allowing the company to do business under Brownie Delights name. Brownie Delight had performed substantially all required services by January 1, 2003, and the franchisee paid the initial franchise fee of P70,000 in full on that date. The franchise agreement specifies that the franchisee must pay a continuing franchise fee of P6,000 annually, of which 20% must be spent on advertising by Brownie Delight. What entry should Brownie Delight make on January 1, 2003 to record the receipt of the initial franchise fee and the continuing franchise fee for 2003? a. Cash. 76,000 Franchise Fee Revenue.... 70,000 Revenue from Continuing Franchise Fee 6,000 b. Cash Unearned Franchise Fees. 76,000 76,000

c.

Cash Franchise Fee Revenue.. Revenue from Continuing Franchise Fee. Unearned Franchise Fee

76,000 70,000 4,800 1,200 1,200 76,000 70,000 6,000 1,200

d. Prepaid Advertising Cash Franchise Fee Revenue.. Revenue from Continuing Franchise Fee. Unearned Franchise Fee

16. CC and DD are partners who share profits and losses in the ratio of 7:3, respectively. On October 21, 2008, their respective capital accounts were as follows: CC P35,000 DD 30,000 P65,000 On that date, they agreed to admit EE as anew partner with a 1/3 interest in the capital and profits and losses, and losses, and upon investment of P25,000. The new partnership will begin a total of P90,000. Immediately after EEs admission, what are the capital balances of CC,DD, and DD, and EE respectively? a. P30,000; P30,000; P30,000 c. P31,667; P28,333; P30,000 b. P31,500; P28,500; P30,000 d. P35,000; P30,000; P25,000 Items 17 and 18 are based on the following information: On September 1, Ramus Company purchased machine parts from Jacky Chan Company for 6,000,000 Hong Kong dollars to be paid on January 1, 2009. The exchange rate on September 1 is HK $7.7 = P1. On the same date, Ramus enters into a forward contract and agrees to purchase HK $6,000,000on January 1, 2009, at the rate of HK $7.7 = P1. On December 31, 2008 and on January 1, 2009, the exchange rate is HK $8.0 = P1. 17. What is the fair value of the forward contract on December 31, 2008? a. P0 b. P29,221 c. P750,000 d. P779,221 18. What is the initial value of forward contract on December at the date of a. P0 b. P29,221 c. P750,000 d. P779,221 19. Jamie Corporations home office and branch pre-closing trial balances on December 31, 2008, contained the following accounts and amounts: Home Office Books P95,000 90,000 75,000 Branch Books P73,400

Branch Home Office Shipments to branch Shipments from home office

Additional information: 1. On December 31, 2008, Jamies home office sent a P5,000 check to its branch to replenish working capital. 2. The home office credits the shipments to branch account at cost without a loading (profit) factor. 3. The branch had transmitted P1,600 in cash to the home office which was not received until January 3, 2008. Compute the correct balance of the branch account on Jamies home office books: a. P88,400 b. P95,000 c. P78,400 d. P93,400 20. The Brooke Corporation has two branches, Branch P and Branch Q. The home office shipped P80,000 in merchandise to Branch P and prepaid the freight changes of P500. A short time thereafter, Brach P was instructed to ship this merchandise to Branch Q at a prepaid freight cost of P700. Freight charges for this merchandise normally cost P800 when shipped from the home office directly to Branch Q.

Compute the excess freight on transfers of merchandise: a. P700 b. P800 c. P78,400

d. P93,400

21. On October 1, 2008, Carsavers Company sold article A costing P27,000, for P40,000. Article B, used article, was accepted as a down payment, with the balance payable in monthly installments of P2,000 starting November 1, 2008, P12,000 was allowed on the article trade-in. the company estimated the reconditioning cost of this article at P800 and a selling price of P11,000 after such reconditioning costs. the company normally makes a 20% gross profit on the sale of used articles. The company employs the perpetual inventory method. The amount of realized gross profit in 2008 was: a. P3,000 b. P3,150 c. P3,500

d. P4,000

22. On June 30,2008, the balance sheet for the partnership of C, M, and P, together with their respective profit and loss ratios were as follows: Assets, at cost C, C, M, P, loan capital (20%) capital (20%) capital (60%) P 180,000 P 9,000 42,000 39,000 90,000 P 180,000

C has decided to retire from the partnership. By mutual agreement, the assets are to be adjusted to their fair value of P216,000 at June 30, 2008. It was agreed that the partnership would pay C P61,200 for C s partnership interest, including Cs loan which is to be repaid in full. No goodwill is to be recorded. After Cs retirement, what is the balance of Ms capital account? a. P36,450 b. P39,000 c. P45,450 d. P46,200 23. Pistahan Corporation is a manufacturing company engaged in the production of a single special product known as Marvel. Production costs are accumulated with the use of a job order costing system. The following information is available as of June 1, 2008: Work in process Direct materials inventory

P10,710 48,600

In analysis the job order cost sheets, the records disclosed that the composition of the work-in-process inventory on June 1, 2008 were as follows: Direct materials used P 3,960 Direct labor (900 hours) 4,500 Factory overhead applied 2,250 P10,710 The following manufacturing activity occurred during the month of June 2008:] Purchased direct materials costing, P60,000. Direct labor worked 9,900 hours at P5 per hour was applied to production. Factory overhead of P2.50 per direct labor hour was applied to production. At the end of June 2008: The following information was gathered in connection with the inventories: Inventory of work-in-process: Direct materials used P12,960 Direct labor (1,500 hours) 7,500 Factory overhead applied 3,750 P24,210 Inventory of direct materials P51,000 Compute the cost of goods manufactured: a. P142,560 b. P118,350 c. P131,850

d. P108,600

24. The trustee for Ardolio, Inc. prepares a statement of affairs which shows that unsecured creditors whose claims total P60,000 may expect to receive approximately P36,000 if assets are sold for the benefit of creditors. Michael is an employee who is owed P150. Meldcan holds a note for P1,000 on which interest of P50 is accrued; nothing has been pledged on the note. Compboy holds a note of P6,000 on which interest of P300 is accrued; securities with a book value of P6,500 and a present market value of P5,000 are pledged on the note. Ropres holds a note for P2,500 on which interest of P150 is accrued; properly with a book value of P2,000 and a present market value of P3,000 is pledged on the note. How much may each of the following creditors hope to receive? Michael Meldcan Compboy Ropres a. P 0 P 0 P 0 P 0 b. 90 0 6,300 2,390 c. 150 1,050 5,780 0 d. 150 630 5,780 2,650 25. McKee and Nelson enter into a contract to speculate on the stock market, each using approximately P5,000 of personal cash. The earnings are to be divided equally and settlement is to be made at the end of the year after all securities have been sold. A summary of the monthly brokerage statements for the year follows: McKee Nelson Total of all purchase confirmations P45,000 P18,000 Total of all sales confirmations 48,700 16,800 Interest charge on margin accounts 80 50 Dividends credited to accounts 40 100 Final settlement will require payment as follows: a. McKee pays Nelson P2,405 b. McKee and Nelson receive P1,255 each

c. McKee receives from Nelson P1,150 d. None

26. Hartwell Company distributes the service department overhead costs to producing departments and the following information for the month of January is presented as follows: Maintenance P18,700 20% 40% 40% Utilities P9,000 10% 30% 60%

Overhead costs incurred Service provided to: Maintenance department Utilities department Producing department A Producing department B

The company distributes service department costs based on the reciprocal method, what would be the formula to determine the total maintenance costs? a. M = P18,700 + .10U c. M = P18,700 + .30U + .40A +.40B b. M = P9,000 + .20U d. M = P27,700 + .40A + .40B 27. YDR Builders Construction has engaged into a contract for various vertical projects, currently tow jobs has an existing status as of December 31, 2008: Building 1 Building 2 Contract price P420,000 P300,000 Costs incurred during 2008 240,000 280,000 Estimated costs to complete 120,000 70,000 Billed to customers during 2008 250,000 290,000 Received from customers 245,000 285,000 General and administrative expenses 20,000 10,000 Interest income 5,000 8,000 The contractor further estimated that any costs incurred are expected to be recoverable.

The amount of net income (loss) for YDR Builders Construction in its income statement for 2008 would amount to: Percentage of completion Cost Recovery Method of Method Construction Accounting a. P -0P -0b. (17,000) (57,000) c. (40,000) (80,000) d. (27,000) (67,000) 28. The assets and equities and Queenie, Rose, and Sarah partnership at the end of its fiscal year on October 31, 2008 are as follows: Assets Equities Cash P 15,000 Liabilities P 50,000 Receivables net 20,000 Loan from Sarah 10,000 Inventory 40,000 Queenie, cap 30% 45,000 Plant assets net 70,000 Rose, capital 50% 30,000 Loan to Rose 5,000 Sarah, capital 20% 15,000 P150,000 P150,000 If the total amount of P7,500 is available paid, it should paid as follows: Queenie Rose a. P7,500 P 0b. -03,750 c. 2,250 3,750 d. 2,500 2,500 for distribution to partners after all non-partner liabilities are Sarah P -03,750 1,500 2,500

29. Chicane Builders, Inc. employs the cost to-cost method of determining the percentage of completion method for revenue recognition. The companys records show the following information on a recently completed project for a contract price of P5,000,000. 2006 2007 2008 Cost incurred to date P900,000 P2,550,000 P ? Gross profit (loss) 100,000 350,000 (50,000) Compute the (1) estimated costs to complete the project at December 31, 2007, and (2) the actual cost incurred during the year 2008. a. (1) P1,700,000; (2) P2,550,000 c. (1) P 850,000; (2) P2,050,000 b. (1) P1,700,000; (2) P2 050,000 d. (1) P1,700,000; (2) P2,200,000 30. VAT Corporation manufactures rattan furniture sets for export and uses job order costing system in accounting for its costs. you obtained from the corporations books and records the following information for the year ended December 31, 2008: The work-in-process inventory on January 1 was 25% less than the work-in-process inventory on December 31. The total manufacturing costs ended during 2008 was P900,000 based on actual direct materials and direct labor but with manufacturing overhead applied on actual direct labor pesos. The manufacturing overhead applied to process was 72% of the direct labor pesos, and it was equal to 25% of the total manufacturing costs. The cost of goods manufactured, also based on actual direct materials, actual direct labor and applied manufacturing overhead was P850,000. The cost of direct materials used and the work-in-process inventory on December 31, 2008: Direct Materials, Work-in-process Inventory, Used 12/31/2008 a. P1,075,000 P 200,000 b. 362,500 250,000 c. 312,500 250,000 d. 312,500 275,000

31. St. Lukes Hospital, a nonprofit hospital affiliated with St. Lukes University, received the following cash contribution from donors during the year ended December 31, 2007: Contribution restricted by donors for research..P 50,000 Contributions restricted by donors for capital acquisition.. 250,000 Neither of the contributions was spent during 2007; however, during 2008, the hospital spent the entire P50,000 contribution on research and the entire P250,000 contribution on a capital asset which was placed into service during the year. On the hospitals statement of operations for the year ended December 31, 2008, what total amount should be reported for net assets released from restriction? a. P 0 b. P50,000 c. P250,000 d. P300,000 32. Which of the following transactions would result in an increase in unrestricted net assets for the year ended December 31, 2007? I. A private, not-for-profit hospital earned interest on investments which were board designated. II. A voluntary health and welfare organization received unconditional promises to give (pledges) which will not be received until the beginning of 2008. The donors placed no restrictions on their donations. a. Both I and II b. I only c. II only d. Neither I nor II

33. Air, Inc. uses a standard cost system. Overhead cost information for Product CO for the month of October is as follows: Total actual overhead incurred ..P12, 600 Fixed overhead budgeted ..P 3,000 Total standard overhead rate per DLH ..P 4 Variable overhead rate per DLH .P 3 Standard hours allowed for actual production .P 3,500 What is the overall or net overhead variance? a. P1,200 favorable b. P1,200 unfavorable

c. P1,400 favorable d. P1,400 unfavorable

34. Jayella Restaurant Inc., sold a fast food restaurant franchise to Jayda. The sale agreement, signed on January 2 2008, called for a P30,000 down payment plus two P10,000 annual payments, representing the value of initial franchise services rendered by Jayella Restaurant. In addition, the agreement required the franchisee to pay 5% of its gross revenues to the franchisor this was deemed sufficient to cover the cost and provide a reasonable profit margin on continuing franchise services to be performed by Jayella Restaurant. The restaurant opened early in 2008, and its sales for the year amounted to P500,000. Assuming a 10% interest rate is appropriate, Jayella Restaurants total revenue (including interest) will be (the present value of and annuity of P1 at 10% for 2 periods is 1.7355). a. P30,000 b. P47,355 c. P72,355 d. P74,090 35. On December 30, 2008, Leigh Museum, a not-for-profit organization received a P7,000,000 donation of Day Corporation with donor-stipulated requirement as follows: Shares value at P5,000,000 are to be sold, with the proceeds used to erect a public viewing building. Shares valued at P2,000,000 are to be retained indefinitely, with the dividends used to support current operations. As a consequence of the receipt of the Day shares, how much should Leigh report as temporarily restricted net assets on its 2008 statement of financial position (balance)? a. P 0 b. P2,000,000 c. PP5,000,000 d. P7,000,000 36. Bergen Productions produced two different movies from the same original footage (joint products). The company also generated revenue from admissions paid by fans touring the movie production set. Bergen regards the net income from tours as a by-product of movie production. The firm accounts for this income as a reduction in the joint cost before that joint cost is allocated to movies. The following information pertains to the two movies: Products Total Receipts Separate Costs

Movie 1 Movie 2 Tours

P4,000,000 27,000,000 300,000

P2,400,000 18,600,000 140,000

The joint costs incurred to produce the two movies was P8,000,000. Joint cost is allocated based on net realizable value. How much profit was generated by each movie? Movie 1 Movie 2 a. P 320,000 P1,680,000 b. P1,600,000 P 400,000 c. 0 0 d. P 345,600 P1,814,400 37. Perry Corporation acquired 70% of the outstanding common stock of Sarah Corporation: Peery Sarah Sarah Book Book fair value Value Value Assets Cash P32,000 P20,000 P20,000 Receivable - net 80,000 30,000 30,000 Inventories 70,000 30,000 50,000 Land 100,000 50,000 60,000 Buildings - net 110,000 70,000 90,000 Equipment - net 80,000 40,000 30,000 Investment in Sarah 178,000 0 Total P650,000 P240,000 Liabilities and Equity Accounts payable Other Liabilities Capital stock, P10 par Retained earnings Total

P90,000 10,000 500,000 50,000 P650,000

P80,000 50,000 100,000 10,000 P240,000

P80,000 40,000

Compute the consolidated total assets on January 1, 2008: a. P712,000 b. P813,000 c. P818,000

d. P930,000

38. Using the same information in No. 37, compute the Minority Interest on January 1, 2008: a. P33,000 b. P45,000 c. P48,000 d. P72,000 39. Gloria Corporation started operations on January 1, 2007 selling home appliance and furniture sets both for cash and on installment basis. Data on the installment sales operations of the company gathered for the years ending December 31, 2007 and 2008 where as follows : 2007 2008 Installment sales P400,000 P500,000 Cost of installment sales 240,000 350,000 Cash collected on installment sales: 2007 Installment Contracts 210,000 150,000 2008 Installment Contracts 300,000 Additional information: On January 5, 2009, and installment sale in 2007 was defaulted and the merchandise with an appraised value of P5,000 was repossessed. Related installment receivable balance on January 5, 2009 was P8,000. The balance of Deferred Gross Profit on December 31, 2008 amounted to: a. P130,000 b. P76,000 c. P16,000

d. P60,000

40. Garden Company had a beginning inventory of 6,000 units, 60% complete, and ending inventory of 6,000 units, 80% complete. Transferred out 55,000 units. FIFO unit costs were P2.15 for materials, P1.25 for conversion costs. All materials are added at the start of the process. Beginning inventory costs P9,400. The cost of ending inventory is: a. P18,900 b. P20,400 c. P34,000 d. P26,320 41. Kutchen Manufacturing uses backflush costing to account for an electronic meter it makes. During August 2008, the firm produced 16,000 meters of which is sold 15,800. The standard cost for each meter is: Direct material P 20 Conversion costs 44 Total P 64 Assume that the company had no inventory on August 1. The following event took place in August: 1. Purchased P320,000 of direct materials. 2. Incurred P708,000 of conversion costs. 3. Applied P704,000 of conversion costs to Raw and In Process Inventory. 4. Finished 16,000 meters. 5. Sold 15,800 meters for P100 each. Compute the Finished Goods, ending and the amount of Cost of Goods Sold after the adjustment of overunder applied conversion cost: Finished Goods, ending Cost of Goods Sold as adjusted a. P0P1,015,200 b. P12,800 P1,011,200 c. P-0P1,024,000 d. P12,800 P1,015,200 42. A 55%-owned subsidiary makes the following entry to record a sale of merchandise to its parent: Accounts receivable..120,000 Sales revenue..120,000 All sales made by the subsidiary are at 125% of cost. One-third of this merchandise remains the parents inventory at year-end. A working paper entry to eliminate unrealized profits from consolidated inventory would include a credit to inventory in the amount of: a. P24,000 b. P12,000 c. P8,000 d. P10,000 43. Clark Textiles Company manufactures various wood products that, yield sawdust as a by-product. The only costs associated with the sawdust are selling costs of P6 per ton sold. The company accounts for sales of sawdust by deducting sawdusts net realizable value from the major products cost of goods sold. Sawdust sales in 2008 were 12,000 tons at P40 each. If Clark Textiles changes its method of accounting for sawdust sales to show the net realizable as other revenue (presented at the bottom of the income statement), how would its gross margin and net income be affected? Gross Profit Net Income a. None None b. P408,000 decrease P408,000 decrease c. P408,000 increase None d. P408,000 decrease None 44. Lisa Company makes fabric covered hat boxes. The company began August with 500 boxes in process that were 100% complete as to cardboard, 80% complete as to cloth and 60% complete as to conversion cost. During the month, 3,300 boxes were started. On August 31, 350 boxes were in process (100% complete as to cardboard, 70% complete as to cloth, and 55% complete as to conversion cost). Compute the equivalent units for cloth and conversion cost, under: Average FIFO Cloth Conversion Cost Cloth Conversion Cost a. 3,295 3,642.50 3,695 3,642.50 b. 3,695 3,642.50 3,695 3,642.50 c. 3,295 3,342.50 3,295 3,342.50 d. 3,695 3,642.50 3,295 3,342.50 45. Sullivan Corporations direct labor costs for the month of March were as follows:

Standard direct labor hours. 42,000 Actual direct labor hours 40,000 Direct labor rate variance favorable.P 8,400 Standard direct labor rate per hour.P 6.30 What was Sullivans total direct labor payroll for the month of March? a. P243,600 b. P252,000 c. P264,600 Items 46 and 47 are based on the following information: Son is a 75% - owned subsidiary of Papa Corporation acquired at book value (also fair value) on January 2, 2006. Comparative income statement for Papa and son for 2008 are as follows: Papa P500,000 300,000 P200,000 60,000 P140,000 37,500 P177,500 Son P200,000 120,000 P80,000 30,000 P50,000 P50,000

d. P260,400

Net sales Cost of sales Gross profit Operating expenses Operating income Dividend income Net income

Additional information: 1. Son made sales to Papa of P60,000 in 2007 and P100,000 in 2008. 2. Papas inventories at December 31, 2007 and December 31, 2008 included merchandise on which Son reported profit of P15,000 and P24,000 during 2007 and 2008, respectively. 3. Papa has not eliminated the effect of intercompany profits in accounting for its investment in Son. 46. The Consolidated cost of sales for 2008 amounted to: a. P420,000 b. P344,000 c. P329,000 47. The profit attributable to equity holders of Parent for 2008 amounted to: a. P170,750 b. P177,500 c. P188,750

d. P305,000

d. P190,000

48. Cobb Companys current receivables from affiliated companies at December 31, 2008 are: A P75,000 cash advance to Hill Corporation (Cobb owns 30% of the voting stock of Hill and accounts for the investments in equity method), A receivable of P260,000 from Vick Corporation for administrative and selling services (Vick is 100% owned by Cobb and is included in Cobbs consolidated financial statement), and A receivable of P200,000 from Ward Corporation for merchandise sales on credit (Ward is 90% owned, unconsolidated subsidiary of Cobb accounted for by the equity method). In the current assets section of its December 31, 2008 consolidated balance sheet, Cobb should report accounts receivable from investees in the amount of: a. P180,000 b. P225,000 c. P265,000 d. P305,000 49. MM is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus bonus of 10% of net income after salaries and bonus as a means of allocating profit among the partners. Salaries traceable to the other partners are estimated to be P100,000. What amount of income would be necessary so that MM would consider the choices to be equal? a. P165,000 b. P290,000 c. P265,000 d. P305,000 50. Clark Company had the following transactions with affiliated parties during 2008: Sales of P60,000 to Dean, with P20,000 gross profit. Dean had P15,000 of this inventory on hand at year-end. Clark owns a 15% interest in Dean and does not exert significant influence. Purchases of raw materials totaling P240,000 from Kent Corporation, a wholly owned subsidiary. Kents gross profit on the sale was P48,000. Clark had P60,000 of this inventory remaining on December 31, 2008.

Before eliminating entries, Clark had consolidated current assets of 320,000. What amount should Clark report in its December 31, 2008, consolidated balance sheet for current assets? a. P320,000 b. P317,000 c. P308,000 d. P303,000 51. Agency 007 received a request for replenishment of petty cash fund for the following expenses: Office supplies Transportation fares Repair of aircon JRS mail The entry for this transaction would be: a. No entry b. Memorandum entry to the RAOMO c. Office supplies expense. Traveling expense Repairs and maintenance.. Other maintenance and operating expenses. Cash National Treasury, MDS.. d. Office supplies expense. Traveling expense Repairs and maintenance.. Other maintenance and operating expenses. Petty cash Fund.... 500 100 200 160 960 500 100 200 160 960 P500 100 200 160

52. At December 31, 2008, Grey, Inc owned 90% of Win Corp., a consolidated subsidiary, and 20% of Carr Corp., an investee ov3er which Grey cannot exercise significant influence. On the same date, Grey had receivables of P300,000 from Winn and P200,000 from Carr. In its December 31, 2008 consolidated balance sheet, Grey should report accounts receivable from affiliates of: a. P500,000 b. P340,000 c. P230,000 d. P200,000 Items 53 and 54 are based on the following information: The income statement submitted by the Tarlac Branch to the Home Office for the month of December 31, 2008 follows: Sales P600,000 Cost of Sales : Inventory, December 1, 2008 P80,000 Shipments from home office 350,000 Purchases locally by branch 30,000 Total P460,000 Inventory, December 31, 2008 100,000 360,000 Gross margin P240,000 Operating expenses 180,000 Net income for the month P60,0000 The branch inventories consisted of: Merchandise from home office Local purchases Total 12/1/2008 P 70,000 10,000 P80,000 12/31/2008 P 84,000 16,000 P100,000

After affecting the necessary adjustments, the Home Office ascertained the true net income of the true net income of the Branch to be P156,000. 53. At what percentage of cost did the Home Office bill the Branch for merchandise shipped to it?

a. 100%

b. 120%

c. 140%

d. 150%

54. What is the balance of the Allowance for Overvaluation in the Branch Inventory at December 31, 2006? a. P10,000 b. P16,000 c. P24,000 d. P34,000 55. Agency MMM paid the bill for the construction of the building as follows: Accounts payable P5,950,000 Less: 10% retention (7,000,000 x 10%) 700,000 Withholding tax (7,000,000 x 10%) 700,000 Net amount P4,550,000 The entry to record this transaction would be: a. Accounts payable .. Due to National Govt. Agency. Cash National Treasury, MDS .. b. Accounts payable . Cash National Treasury, MDS.. c. Accounts payable. Other payables.. Withholding tax payable. Cash-Disbursing officer d. Accounts payable.. Other payables.. Withholding tax payable. Cash National Treasury, MDS

5,950,000 1,400,000 4,550,000 4,550,000 4,550,000 5,950,000 700,000 700,000 4,550,000 5,950,000 700,000 700,000 4,550,000

56. An entity is trying to determine which assets and which liabilities are monetary and nonmonetary. Which of the following assets or liabilities are nonmonetary? a. Trade receivables c. Accrued expenses b. Deferred tax liabilities d. Taxes payable 57. Agency DDDs obligation for (3) years amounted to P90,000. The entry to record this transaction would be: a. Rent expense . 90,000 Cash national Treasury, MDS. 90,000 b. Prepaid Rent.. Cash National Treasury, MDS c. Rent expense Cash National Treasury, MDS d. Memorandum entry in RAOMO 58. Property was purchased on December 31, 2004 for 20 million baht. The general price index in the country was 60.1 on that date. On December 31, 2007, the general price index had risen to 240.4. if the entity operates in a hyperinflationary economy, what would be the carrying amount in the financial statements of the property after restatement? a. 20 million baht c. 80 million baht b. 1,200.2 million baht d. 4.808 million baht 59. St. Pauls Hospital, a nonprofit hospital affiliated with St. Pauls University had the following cash receipts for the year ended December 31, 2008: Collection of health care receivables.... Contributions from donor establish a term endowment... Tuition from nursing school... Dividends received from investments in permanent endowment. 750,000 250,000 50,000 80,000 90,000 90,000 30,000 30,000

The dividends received are restricted by the donor for hospital building improvements. No improvements were made during 2008. On the hospitals statement of cash flows for the year ended December 31, 2004, what amount of these cash receipts would be included in the amount reported for net cash provided (used) by operating activities? a. P880,000 b. P800,000 c. P1,050,000 d. P750,000 60. On December 16, 2008, Gumamela Conrading sold flowers to a Venezuela firm. Payment of 1,000,000 Venezuela Bolivar is due on February 14, 2009. Concurrently, Gumamela Conrading paid P4,000 cash to acquire a 60-day put option for 1,000,000 Venezuela Bolivar. Conrading follows calendar basis of reporting. 12/16/2008 P.16 .16 P4,000 12/31/2008 P.15 .16 P13,300 2/14/2009 P.147 .16 P13,000

Spot rate (market price) Strike price (exercise price) Fair value of call option

The December 31, 2008 net foreign exchange gain or loss amounted to: a. P700 loss equity c. P700 loss current earnings b. P1,000 loss current earnings d. P700 gain current earnings