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All Subj - Mock Board Exam BB - Doc - Printed
All Subj - Mock Board Exam BB - Doc - Printed
c. Borrowed capital
d. Invested and borrowed capital
2. Before 2005, Glen D. Company used the cash basis of accounting As of December 31,2005, Glen D changed to the accrual basis. Glen D cannot
determine the beginning supplies inventory. What is the effect of Glen Ds in ability to determine beginning supplies inventory on its 2005 accrual
basis net income and December 31, 2005, accrual basis owners equity?
2005 net income
12/31/05 owners equity
a. No effect
No effect
b. No effect
Overstated
c. Overstated
No effect
d. Overstated
Overstated
3. The premium on a three-year insurance policy expiring on December 31, 2004 was paid in total on January 1, 2002. The original payment was
initially debited to a prepaid asset account. The appropriate journal entry has been recorded on December 31, 2002. The balance in the prepaid asset
account on December 31, 2002 should be
a. Zero
b. The same as it would been if the original payment had been debited initially to an expense account
c. The same as the original payment
d.
Higher than if the original payment had been debited initially to an expense account
4. In a statement of cash flow which of the following items is reported as cash flow from financing activities?
I.
Payments to retire mortgage notes
II.
Interest payments on mortgage notes
III.
Dividends payments
a. I,II, and III
b. II and III
c. I only
d. I and III
5. A business combination is accounted for appropriately as a purchase. Which of the following should be deducted in determining the combined
corporations net income for the current period?
Direct cost
General expenses
Of acquisition
related to acquisition
a.
Yes
No
b.
Yes
Yes
c.
No
Yes
d.
No
No
6. On January 1,2005, XYZ Company signed a 5-year contract enabling it to use patented manufacturing process beginning in 2005. A royalty is
payable for each product produced, subject to a minimum annual Fee. Any royalties in excess of the minimum will be paid annually. On the contract
date, XYZ prepaid a sum equal to two years minimum annual fees. In 2005, only minimum fees were incurred. The royalty prepayment should be
reported on the December 31, 2005 financial statements as
a. Expenses only
c. Current asset and expenses
b. Current and noncurrent asset
d. Noncurrent asset
7. The effect of the change in accounting estimate should be
a. Accounted for in the period of change only
b. Accounted for in the period of change and future periods if the change affects both
c. Treated as an extraordinary item
d. Shown as a correction of retained earnings
8. Retrospective application means that any resulting adjustment from a change in accounting policy should be reported as
a. Correction of the opening balance of retained earnings
b. Separate item in the income statement as part of income from ordinary activities
c. Extraordinary item
d. Discounting operation
9. It means the preparation of financial statements for a period of less than one year,
a. Interim financial reporting
b. Segment reporting
c. Year-end reporting
d. Financial reporting
10. The cost incurred that clearly benefit the entire year are allocated over the interim periods benefited. The concept of interim financial reporting is
known as
a. Integral view
c. Consolidated entity view
b. Independent view
d. Cost and benefit view
11. A bank reconciliation is
a. A formal financial statement that list all of the bank account balance of an enterprise.
b. A merger of two banks that previously were competitors
c. A statement sent by the bank to depositor on a monthly basis.
d. A schedule that accounts for the differences between an enterprises cash balances as shown on its bank statement and the cash balance shown
in its general ledger.
12. If accounts receivable are pledge against borrowings, the amount of accounts receivable pledge should be
a.
b.
c.
d.
b. 9,000,000
c. 8,600,000
20. Aim Companys income statement for the year 2005 shows;
Income before income tax and extraordinary item
Gain on life insurance included in above income (nontaxable)
Extraordinary loss due to earthquake damage
d. 9,400,000
4,000,000
500,000
1,000,000
The income tax rate 35%. How much should be reported as the provision for income tax in the 2005 income statement?
a. 1,320,000
b. 1,155,000
c. 875,000
d. 990,000
21. Lia Company accepted from a customer a P 5,000,000, 90 day, 12% note dated August 31,2005. On September 30, 2005, Lia discounted the
note at 12%. However, the proceeds were not received until October 1, 2005. In the September 30, 2005 balance sheet, the amount receivable from
the bank includes interest revenue of.
a. 103,000
b. 150,000
c. 100,000
d. 47,000
22. On December 31, 2005, Chris Company had the following cash balances:
Cash in Bank
Petty cash fund (unrepelnished expenses, P50, 000 on 12/31/05)
3,000,000
20,000
100,000
80,000
20,000
3,700,000
c. 200,000
d. 380,000
24. Medy Companys inventory at December 31,2005 was P 4,000,000 based on physical count priced at cost and before any necessary adjustment
for the following:
Merchandising costing P 200,000 shipped FOB destination from a vendor on December 30, 2005 was received and recorded
on January 5, 2006.
Goods in the shipping area were excluded from inventory although shipment was not made until January 4, 2006. The goods
billed to the customer FOB shipping point on December 30,2005, had a cost of P300, 000.
What amount should Medy report as inventory on December 31,2005?
a. 4,600,000
b. 4,200,000
c. 4,300,000
d. 4,000,000
25. On January 1, 1987, the Victoria Company purchased for P85,000 a building that was expected to have a 25-year useful life with no residual
value at the end of its useful life. The straight-line method of depreciation was no change in residual value. What is the balance in the Accumulated
Depreciation account at December 31, 2003, assuming that the Victoria Company properly accounted for the change?
a. P 62,050
b. P 57,800
c. P 68,809
d. P72, 250
26. The following condensed income statement of Summer Corporation is presented for two years ended December 31, 2001 and 2003:
2004
2003
Net sales
P 10,000,000
P 9,000,000
Cost of sales.
6,000,000
6,000,000
Gross profit....
Operating expense..
P 4,000,000
2,500,000
Operating Income ..
Gain on sale of a segment .
P 1,500,000
900,000
P 3,000,000
2,000,000
P 1,000,000
-
2,400,000
1,000,000
720,000
300,000
P 1,680,000
P 700,000
============
===========
On January 1, 2004, summer entered into an agreement to sell for P 2,000,000 one of its separate operating divisions. The sale resulted in a gain on
disposition of P 900,000 on November 12, 2004, and qualifies as discounted segments. This divisions contribution to summer reported income taxes
for each was as follows:
2004
P (700,000)
loss
2003
P (400,000)
loss
Assume an income tax rate of 30%.
Income tax expense....
Net Income ..
In the preparation of a revised comparative income statement, summer should report under the caption Discounted Operation for 2004 and 2003,
respectively.
a.
b.
c.
d.
3/31
P 15,000
60,000
75,000
15,000
6/30
P95,000
240,000
75,000
255,000
P 95,000
75,000
15,000
9/30
P 95,000
75,000
15,000
12/31
government.
4,600,000
The company extracted 3,500,000 tons of the minerals in 2004. What is the depletion for 2004?
a. 5,775,000
b. 6,510,000
c. 4,900,000
d. 4,620,000
39. The following account balances relating to property, plant and equipment of Cycle Company appear on the books on December 31, 2004
Land
2,000,000
Building
15,000,000
Accumulated depreciation
3,750,000
Machinery
3,000,000
Accumulated depreciation
1,500,000
Assets have been carried at cost since their acquisition. All assets were acquired on January 1, 1994. The straight-line method is used. On January 1,
2004, the company wishes to show property, plant and equipment at revalued amount. On such date, competent appraisers submitted the following:
Replacement cost
Land
5,000,000
Building
25,000,000
Machinery
5,000,000
What is the revaluation surplus?
a. 15,000,000
b. 11,500,000
c. 30,000,000
d. 8,500,000
40. During December 2004, Bubba Company determined that there had been a significant decrease in market value of its equipment used in its
manufacturing process. At December 31, 2004, Bubba compiled the information below:
Original cost of equipment
Accumulated depreciation
500,000
300,000
Expected undiscounted net future cash inflows related to the continued used and eve
Eventual disposal
175,000
Fair value of equipment
125,000
What is the amount of impairment loss that should be reported on Bubbas income statement for the year ended December 31, 2004?
a. 325,000
b. 375,000
c. 75,000
d. 25,000S
41. Summa Company manufactures a special product. To promote the sale of the product, a premium is offered to customers who send in three
wrappers and remittance of P25. The distribution cost per premium is P5. Data for the premium are:
2004
2005
Sales
4,000,000
5,000,000
Premium purchases at P80 each
400,000
416,000
Number of premiums distributed
In next period
200
500
The premium expenses for 2005 should be
a.
464, 000
b. 348,000
c. 360,000
d. 0
42. Fores Company has an agreement to pay its sales manager a bonds of 5% of the companys earnings. The income for the year before bonus and
tax is 5,000,000. Income tax rate is 32% of income after bonus. The bonus is computed after deduction for both bonus and tax. What is the amount of
bonus for the year (round of to the nearest peso)?
a. 250,000
b. 164,410
c. 241,780
d. 172,630
43. For the year ended December 31, 2004, Marie Company showed a pretax financial income of P5, 000,000. To compute taxable income, the
following items are noted:
Depreciation deducted for tax purposes in excess of book depreciation
Proceeds received from life insurance on death of officer
Cash received in included in financial income of which P120, 000
Will be taxable in 2005
Income tax rate
200,000
500,000
200,000
32%
What amount should Marie Company report as total income tax expense for the year ended December 31, 2004?
a. 1,600,000
b. 1,337,600
c. 1,440,000
d. 1,542,000
44. Tobago Company has a define benefit plan for its employees. The memorandum records showed the following balances on January 1, 2004:
Fair value of plan assets
5,000,000
Unamortized past service cost
500,000
Unrecognized actuarial loss
1,000,000
Unamortized transition loss
150,000
Accrued benefit obligation
7,500,000
Assume the past service cost and the actuarial loss should be amortized over 5 years and the transition loss is amortized over 3 years. The transition
for 2004 involving the defined benefit plan include the following:
Current service cost
900,000
Interest cost
750,000
Expected and actual return
600,000
Contribution to the plan
1,400,000
Benefits paid to retirees
800,000
What is the 2004 total benefit expense?
a. 1,400,000
b. 1,200,000
c. 1,650,000
d. 1,250,000
45. On January 1, 2004, Doro Corporation granted an employee an option to purchase 3,000 shares of Doros P5 par value common stock at P20 per
share. The option became exercisable on December 31, 2005, after the employee compiered two years of service. The option was exercised on
January 10, 2006,
The market prices of stock were as follows:
January 1, 2004
December 31, 2004
January 10, 2006
For 2004, Doro should recognize compensations expense of
a. 45,000
b. 37,5000
c. 15,000
30
50
45
d. 0
October 1
October 31
12,000
21,000
32,000
14,000
10,000
9,000
10,000
6,000
c. 2,830,000
d. 2,784,000
47. The four categories of cost associated with product quality cost are:
a. External failure, internal failure, prevention, and carrying
b. External failure, internal failure, prevention, and appraisal
c. External failure, internal failure, training and appraisal
d. Warranty, product liability, training and appraisal
48.Which one of the following is least likely to be involved in establishing standard cost for evaluation purpose?
a. Top management
b. Line management
c. Budgetary accountants
d. Industrial engineers
49. Product x has sales of P200, 000, a variable cost ratio of 80% and a margin of safety of P80, 000. What is Product Xs fixed cost?
a. P24, 000
b P16, 000
c. P96, 000
d. P80, 000
b. P10.40 unit
54. Cool Coat Company estimates that 60,000 special zippers will be used in the manufacture of mens jacket during the next year. Tomorrow Zipper
Company has quoted a price of P60 per zipper. Cool Coat would refer to purchases 5,000 units per month, but Tomorrow is unable to guarantee this
delivery schedule. To ensure availability of these zippers, Cool Coat is considering the purchase of all 60,000 units at the beginning of the year.
Assuming Cool Coat can invest cash at 12%, the companys opportunity cost of purchasing the 60,000 units at the beginning of the year is
a. P 2,160
b. P 3,960
c. P 4,320
d. P 1,980
55. El Ninyo Company purchased a new machine on January 1 of this year for P90, 000 with an estimated useful life of 5 years and a salvage value
of P 10,000. The machine is expected to produce cash flow from operations, net of income taxes, of P36, 000 a year in each of the next 5 years. The
new machines salvage is P20, 000 in years 1 and 2 and
P15, 000 in years 3 and 4. What will be the bailout
(rounded) for this new machine?
a. 14 years
b. 22 years
c. 19 years
d. 34 years
PRACTICAL ACCOUNTING 2
56. Cagayan Company operates a branch in Iligan City. The following are gathered from the records at the end of the year:
H.O Books
Branch Books
Inventory, January 1
P 60,000
P 40,000
Purchases
750,000
150,000
Allowances for mark-up in branch inventory
98,750
Shipment to branch/ from home office
375,000
468,750
Sales
920,000
882,500
Investors at December 31, 2005
Home Office
70,000
Branch: From Home Office
20,000
From outsider
21,000
The cost of good sold of the branch (net of overvaluation)
a. P 371,000
b. P 431,000
c. P 513,250
d. P522, 250
Items 57 & 58, Butuan Company sells goods on installment basis. At the end of each year, it recognizes gross profit in the year of collections and
considers each collection to be composed of cost and gross profit elements.
January 1, 2005
December 31, 2005
Installment Contract receivables-2003
P 24,040
P0
Installment Contract receivables-2004
344,460
67,440
Installment Contract Receivables-2003
410,090
During 2005, upon default in payment by customers, the company repossessed the merchandise having an estimated resale value of P1, 900
(after reconditioning cost of P200). The sales had been in 2004 for P5, 400 and P3, 200 for P5, 400 and P3, 200 had been collected before the
default. The company recorded the default and repossession by a debit to merchandise-Repossessed and credit to installment contract receivable2002 for uncollected balance. The companys gross profit and ratios follow:
2005
2004
2003
Gross Profit
P222,740
P146,880
P133,000
Rate
37%
34%
35%
57.) The total realized gross profit in 2005:
a. 173,240.50
b. 174,688.50
58.) The gain (loss) on repossession:
a. P (381)
b. P (330)
c. 184,259.50
c. P0
d. 172,852.50
d. P (248)
59. LDCU Company began business on January 1, 2004 and uses the installment method of accounting revenues. The following information is
available for the years ended 2004 and 2005:
2002
2003
Sales
P 500,000
P1, 000,00
Gross profit realized on sales made in:
2004
75,000
45,000
2005
100,000
Gross Profit percentages
30%
40%
What amount of total Installment accounts receivables that should be reported in its December 31, 2005 Balance Sheet?
a. P 612,500
b. P 650,000
c. P 850,000
d. P 887,500
60. Bukidnon Company owns 80% of subsidiary Companys common stock during 2005; Bukidnon sold Subsidiary P 125,000 of inventory on the
same terms as sales made to third parties. Subsidiary sold all of the inventory purchase from Bukidnon. The following information pertains to the
Bukidnon and the Subsidiary sales for 2005.
Bukidnon
Subsidiary
Sales
P 500,000
P 350,000
Cost of sales
200,000
175,000
The cost of sales for 2005 Combined Income Statement:
a. 375,000
b. 340,000
c. 250,000
d. 215,000
61. On June 30,2005, Parent company issued shares of its P 5 par common stock in a pooling of interest type of combination. The stockholders
equity immediately before the combination were:
Parent Co.
Subsidiary Co.
Common Stock
P 3,250,000
P 1,000,000
APIC
2,200,000
800,000
Retained Earnings
3,050,000
2,700,000
Both companies operate as separate business maintaining accounting with years ending December 31, 2005. For 2005, the net income and dividends
paid from separate company operation were:
Net Income
Six months ended June 30, 2005
Six months ended December 31, 2005
Dividends Paid April 1, 2005
October 1, 2005
Parent Co.
P 500,000
Subsidiary Co.
P 150,000
550,000
650,000
250,000
-
175,000
In the June 30, 2005, the consolidated balance sheet total minority interest should be reported at:
a. P 475,000
b P 472,300
c. P 457,000
d. P 450,000
62. The following were among Ozamis Companys 2005 cost:
Normal spoilage
Standard manufacturing cost
Freight out
Excess of actual manufacturing cost over standard
Actual prime manufacturing costs
The actual factory overhead for 2003 is:
a. P90,000
b. P80,000
c. P110,000
P 10,000
200,000
20,000
40,000
160,000
d. 240,000
Items 63 and 64, Surigao company had these accounts at the times was acquired by Philippine Company:
Cash
P36,000
Inventories
P120,000
Accounts receivable
457,000
Plant Assets
696,400
Liabilities
350,800
Philippine Company paid P 1,400,000 for 100% of the stocks of Surigao. It was determined that fair values if inventories and plant assets were P
133,000 and P 900,000.
63. In the books of Philippine Company, this transaction resulted to:
a. Goodwill- P 441,000
b. Goodwill- P 224,800
c. Assets decreased P 224,800d. Assets increased P224, 800
64. The net assets (excluding goodwill, if any) recorded in the books of the acquiring Company was:
a. P1, 400,000
b. P 1,175,200
c. P 1,309,000
d. P 958,200
65. COC Company bought a fixed assets for US 10,000 dollar on November 31, 2005 when the exchange rate was P 46=US 1 dollar. At December
31, 2005. The companys year-end, the supplier of the fixed asset has not been paid and the exchange rate at the time was P50 = US 1 dollar. The
company ha snot taken out a forward exchange contract for this payment to hedge against adverse rate movements.
At the year end, the cost of the (1) fixed asset and (2) creditor that will be recorded;
a. (1) 50,000 (2) 50,000
b. (1) 46,000 (2) 50,000
c. (1) 46,000 (2) 46,000
d. (1) 50,000 (2) 46,000
END OF EXAMINATION
(ANSWER KEY)
11.D
12.C
13.D
14.D
15.C
31.A
32.A
33.A
34.A
35.B
36.B
37.B
38.C
39.B
40.C
41.B
42.B
43.C
44.D
45.C