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PRACTICAL ACCOUNTING II AVERAGE QUESTIONS:

1. Each of the Coffee Beanery Companys 21 new franchisee contracted to pay


an initial franchise fee of P30,000. By December 31, 2008, each franchisee
had paid a non-refundable P10,000 fee and signed a note to pay P10,000
principal plus the market rate of interest on December 31, 2010. Experience
indicates that one fr4anchise will default on the additional payments.
Services for the initial fee will be performed in2009.
What amount of net unearned franchise fees would Coffee Beanery report at
December 31, 2008?
a.
b.
c.
d.

P400,000
P600,000
P610,000
P630,000

2. Pet Corporation purchased 100% of the common stock of Sol Company on


January 1, 2007 for P1,000,000. On that date, the stockholders equity of Sol
Company was P760,000. On the purchase date, inventory of Sol Company
which was sold during 2007 was understated by P40,000. Any remaining
excess of cost over book value is attributable to goodwill. The reported
income and dividends paid by Sol Company were as follows:
2007
2008
P160,000
P180,000
20,000
20,000

Net Income
Dividends paid

On December 31, 2007, what is the Income from Investment to be reported


under the two methods of accounting for investment?
a.
b.
c.
d.

Cost Method
P20,000
P110,000
P20,000
P50,000

Equity Method
P110,000
P110,000
P120,000
p160,000

3. Red Corporation will issue common shares with a par value P10 for the net
assets of Blue Company. Reds common stock has a current market value of
P40 per share. Blues balance sheet on the date of acquisition follow:
Current assets
P80,000
Property and Equipment
Liabilities

P320,000
880,000
400,000

Common Stock, P5 par

Additional paid in capital 320,000


Retained Earnings
400,000

Blues current assets are appraised at P400,000 and the property and
equipment was also appraised at P1,600,000. Its liabilities are fairly valued.
Accordingly, Red Corporation issued shares of its common stock with a total
market value equal to that of Blues net assets including goodwill.
To recognize goodwill of P200,000, how many shares we to be issued by Red?
a.
b.
c.
d.

45,000
40,000
50,000
55,000

4. On December 31, 2008, the pre-closing trial balance of Agency YY show the
following totals (In Millions):
Current Assets
Fixed Assets
Current Liabilities
Subsidy Income from NG
Expenses

P270
780
205
50
40

What is the Government Equity on December 31, 2008?


a.
b.
c.
d.

P845,000,000
P835,000,000
P855,000,000
P895,000,000

5. PX Co. had the following transactions with two subsidiaries, S1 and S2 during
2008:

Sales of P60,000 to S1, Inc., with P20,000 gross profit, S1 had P15,000 of this
inventory on hand at year end.
Purchases of raw materials totaling P240,000 from S2 Corp., a wholly-owned
subsidiary. S2s gross profit on the sale was P48,000. PX had P60,000 of this
inventory remaining on December 31, 2008.
Before eliminating entries, PX had combined current assets of P320,000.what
amount should PX report in its December 31, 2008, consolidated balance
sheet for current assets?
a.
b.
c.
d.

P320,000
P317,000
P308,000
P303,000

6. The following data pertains to the shipments of merchandise from Home


Office to Branch during 2008:
Home offices cost of merchandise
Inter-office billings
Sales by branch to outsiders
Merchandise inventory on December 31, 2008
50,000

P350,000
420,000
520,000

In the combined income statement of the Home Office and the Branch for the
year ended December 31, 2008, what amount of the above transactions
should be included as sales?
a.
b.
c.
d.

P570,000
P520,000
P470,000
P350,000

7. Primo Company acquired 75% in Sofa Company which is recorded on a cost


basis. For the fiscal year ended June 30, 2008, the following data were taken
from their respective books.
Net income of Primo Company was P250,000, while the net income of Sofa
Company was P90,000. There was intercompany interest on bonds of
P10,000. Sofa Company paid dividends of P18,000.
What is the consolidated net income attributable to parent on June 30, 2008?
a. P295,000
b. P304,000

c. P317,950
d. P326,500
8. Santa Fe Hospital, a private nonprofit hospital, had the following cash receipts
for the year ended December 31, 2008:
Patient service revenue
Gift shop revenue
Interest income restricted by donor for the
Acquisition of computer equipment

P300,000
25,000
50,000

As a result of these cash receipts, the hospitals statement of cash flows for
the year ended December 31, 2008 would report an increase in operating
activities of
a.
b.
c.
d.

P325,000
P375,000
P350,000
P400,000

9. On June 1, 2008, Figaro Corporation, franchisor, receives P200,000 from


Angel Sy representing down payment on the franchise agreement signed that
day. Angel Sy gave Figaro a 12% interest bearing promissory note for the
balance of P1,000,000 payable in four semi-annual installments. Franchise
services was substantially completed by Figaro on November 15 at a cost of
P900,000. On December 1, 2008, the first semi-annual installment became
due and was accordingly paid by Angel Sy. Figaro appropriately uses the
accrual method of recording franchise revenues.
In its December 31, 2008 financial statements, how much will Figaro report as
realized franchise income of the year?
a.
b.
c.
d.

P112,500
P300,000
P250,000
P187,500

10.The following data were taken from the Statement of Income and Expenses
and Comparative Balance Sheet of Department DD for the year ended
December 31, 2007 and 2008 (In Millions):
Net income over expenses
Depreciation Office Equipment
Increase in accounts payable
Increase in Withholding tax payable
Increase in Due from NGA
Increase in Supplies Inventory
What is the Net Cash Provided by Operating Activities on December 31,
2008?
a.
b.
c.
d.

P460,000,000
P480,000,000
P490,000,000
P465,000,000