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You were requested by the Board of Directors of the WW Industries to audit its books for the year ending December 31,
2014. The condensed comparative balance sheet items of the company for December 31, 2013 and 2014 are shown
P 50,000
P 100,000
Marketable Securities
Property and Equipment (net)
Accrued Expenses
Bank Loan
Common Stock
Subscribed Common Stock
(net of subscriptions receivable P125,000)
Retained Earnings
Income operating and other data are:
Cost of Goods Sold
Operating Expenses, including
Bad Debts
Amortization of Patents
Net Profit
2014: Cash, P200,000; stock P200,000







Your examination revealed the following additional information:

1. The company was organized in January 3, 2013 with an authorized common shares worth P6,000,000, par value
per share P100. Issued shares at the end of the year amounted to P1,500,000. The shares issued in 2014 were at
a premium amounting to P335,000 which was credited to retained earnings. Stock dividend was declared on
December 31, 2013 but recorded in January 10, 2014 and issued February 1, 2014. The company shares were
selling at P110.00
2. The cash balance in 2014 consists of the following:
Imprest petty cash fund showed the following as per count:
Currency and coins
P 2,700
Post dated check of an officer
PCF vouchered dated December 31, 2014
for miscellaneous expenses
Cash in bank balance per books
A bank debit memo for P10,200 representing returned customer check marked DAUD including as
service charge of P200 has not been recorded on December 31, 2014.
3. Marketable securities at cost declined by P50,000 in 2014. In 2014, a sale was made at a gain of P10,000 and
P60,000 was credited to sales.

4. One percent of total sales has to be setup for uncollectible accounts, the allowance of which is maintained by
the home office.
5. Accumulated depreciation balances for 2014 and 2013 were P175,000 and P350,000, respectively.
6. The bank loan carries a 20% interest per annum which was secured on July 1, 2013. The amount of P250,000 has
been paid in 2014 together with the accrued interest thereon. Interest on this loan was paid up to July 1, 2014. A
second loan worth P1,000,000 was secured on July 1, 2014 to buy additional equipment. The interest for on year
at 18% was deducted in advance and charged to operating expenses.
7. Patent amortization was charged to operations.
8. In January 2014, the company established a branch in Baguio which reported the following data on December
31, 2014:
Debit (Credit)
P 50,000
Furniture and Equipment (net)
Cost of goods sold
Operating expenses
(including depreciation)


9. The inventories exclude the:

Unsold goods with consignees at cost P50,000
Freight cost corresponding to the unsold consigned goods not recorded but included P2,000
Goods received from consignor P50,000
10. The payables include the accrued interest for 2014 on the bank loan, which amount was debited to operating
Based on the following information and any additional assumption which may be given in each number, you have to
answer the following questions:
1. The journal entry to correct he recording of stock premium will credit:
a. Subscribed common stock
b. Common stock
c. Retained Earnings
d. Additional paid-in capital (Share premium)
2. The 2013 10% stock dividends need the approval of the following except one:
a. Banko Sentral ng Pilipinas
b. Board of Directors
c. Stockholders
d. Securities and Exchange Commission
3. The 2013 stock dividends will be recorded using the per share:
a. Market value
b. Book value
c. Par value
d. Liquidating value
4. The journal to take up the issuance of the stock dividends will debit:
a. Additional paid-in capital (Share premium)
b. Retained earnings
c. Stock dividends payable
d. Common stock

5. The 2014 cash dividends will result to:

a. Retained earnings decrease
b. Share premium decrease
c. Common stock decrease
d. Retained earnings increase
6. The 2014 Subscribed Common Stock will be at:
a. P 300,000
b. P 225,000
c. P 250,000
d. P 350,000
7. The 2013 stock dividend will be based on the number of shares issued and outstanding:
a. 1,650
b. 1,600
c. 2,000
d. 1,815
8. The 2014 stock dividend will be based on the number of shares issued and outstanding:
a. 20,000
b. 16,500
c. 18,150
d. 15,000
9. If treasury shares were in the books, they will be:
a. Shown as current assets
b. Deducted from common stock
c. Deducted from paid in capital
d. Deducted from stockholders equity
10. Treasury stocks are recorded at:
a. Cost
b. Market value
c. Book value
d. Par value
11. The petty cash fund will be shown in the 2014 balance sheet at:
a. P 4,800
b. P 4,700
c. P 5,000
d. P 4,900
12. Replenishment of the petty cash fund will mean a debit to:
a. Miscellaneous expenses
b. Receivable Officer and Miscellaneous expenses
c. Petty cash fund
d. Receivable Officer
13. The customers returned check will be recorded debiting:
a. Account Receivable P10,000 and Miscellaneous Expenses P200
b. Account Receivable P10,000
c. Cash in Bank P10,200
d. Miscellaneous Expenses P200

14. Subscriptions receivable, common will be shown in the 2014 balance sheet as:
a. Deduction from subscribed common stock
b. Deduction from common stock
c. Deduction from paid in capital
d. Current asset
15. The cash shortage amounts to:
a. P 0
b. P 100
c. P 200
d. P 300
16. The marketable securities will be shown in the 2014 balance sheet at:
a. P110,000
b. P 150,000
c. P 90,000
d. P 100,000
17. Allowance for doubtful accounts will have a 2014 balance of:
a. P 85,000
b. P 75,000
c. P 74,400
d. P 84,400
18. The property and equipment original cost was:
a. P 2,075,000
b. P 3,075,000
c. P 4,825,000
d. P 3,350,000
19. Patent amortization for 2014 is:
a. P 60,000
b. P 30,000
c. P 50,000
d. P 40,000
20. Property and equipment acquired in 2014 amounted to:
a. P 4,825,000
b. P 2,400,000
c. P 2,200,000
d. P 3,675,000
21. The accrued interest on the bank loan on December 31, 2013 was:
a. P 250,000
b. P 450,000
c. P 2,200,000
d. P 325,000
22. The 2013 patent amortization was:
a. P 40,000
b. P 35,000
c. P 25,000
d. 50,000

23. The branch reported profit/loss in 2014 of:

a. P 110,000 profit
b. P 90,000 profit
c. P 80,000 profit
d. P110,000 profit
24. The home office will record the branch profit by debiting and crediting respectively:
a. Profit and Loss debit; Branch credit
b. Branch debit; Branch Profit and Loss credit
c. Branch debit; Retained Earnings credit
d. Branch debit; Profit and Loss credit
25. The 2014 combined net income of the WW Industries Company will be:
a. P 255,600
b. P 365,600
c. P 427,500
d. P 315,600
26. The 2013 Retained Earnings as adjusted was:
a. P 135,000
b. P 200,000
c. P 150,000
d. P300,000
27. The 2014 balance sheet will show combined cash account of:
a. P 100,000
b. P 103,000
c. P 93,000
d. P 89,700
28. The combined 2014 book value of property and equipment amounts to:
a. P 5,330,000
b. P 5,150,000
c. P 5,000,000
d. P 5,550,000
29. The corrected 2014 combined sales will be:
a. P 8,500,000
b. P 8,400,000
c. P 8,440,000
d. P 7,440,000
30. The 2014 combined net realizable value of Receivables amount to:
a. P 606,000
b. P 487,800
c. P 506,000
d. P 586,000
31. The inventories should be shown in the 2014 balance sheet as:
a. On Hand and on Consignment, separately
b. On Consignment only
c. In Transit and On Hand, separately
d. On Hand only

32. The Inventories on consignment will show a 2014 balance of:

a. P 52,000
b. P 50,000
c. P 48,000
d. P 62,000
33. Inventories received from consignor will be:
a. Not recorded but included in the inventories total
b. Either recorded or not recorded
c. Not recorded but included in the notes to the balance sheet
d. Recorded with a debit to inventories
34. The 2014 combined operating expenses will be:
a. P 2,770,000
b. P 2,635,000
c. P 2,660,000
d. P 2,812,500
35. The 2014 combined Accounts Payable will be:
a. P1,020,000
b. P 572,000
c. P 902,000
d. P 452,000
36. The reciprocal accounts will be eliminated at:
a. P 600,000
b. P 690,000
c. P500,000
d. P 590,000
37. The 2014 combined inventories will be:
a. P 612,000
b. P 852,000
c. P 602,000
d. P 862,000
38. The 2014 combined accrued expenses will be:
a. P 300,000
b. P 400,000
c. P 450,000
d. P 375,000
39. The accrued interest on December 31, 2014 will be:
a. P 250,000
b. P 225,000
c. P 450,000
d. P375,000
40. The 2014 stock dividend was issued at:
a. Market value
b. Par value
c. Book value
d. Liquidation value