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1. In an audit of Selena Company on December 31, 2009, the
following information is gathered:
Balance per book 6,700,000
Customer’s check 200,000
Depositor’s note charged to account
Customer’s note collected by bank
Outstanding checks 800,000
Checkbook printing charge 2,000
Certified checks included in the outstanding checks
Deposit in transit 1,200,000
Interest earned on deposits net of 20% final tax
The adjusted cash in bank of Selena Company on December 31,
2009 is
a. 6,050,000 b. 6,700,000 c. 6,000,000
d. 5,300,000

Balance per book 6,700,000
Customer’s NSF check ( 200,000)
Depositor’s note charged to account ( 650,000)
Customer’s note collected by bank 120,000
Checkbook printing charge ( 2,000)
Interest earned on deposits 32,000
Balance per books 6,000,000

2. On January 1, 2009, Everlasting Company purchased serial
bonds with a face value of P4,000,000 and a stated interest rate of
10% to be held to maturity. The stated interest is payable annually
on December 31. The bonds are acquired to have an effective
yield at 12%. The bonds mature at annual installments of
P1,000,000 every January 1, beginning in January 1, 2010 and
every January 1 thereafter. What is the market price of the bond
investment on January 1, 2009? (Round off present value factors
to 2 decimal places)

a. 4,000,000 b. 3,776,000 c. 3,842,000
d. 3,876,000

PV of 1/1/10 cash flow (1.4M x .89) 1,246,000
PV of 1/1/11 cash flow (1.3M x .80) 1,040,000
PV of 1/1/12 cash flow (1.2M x .71) 852,000
PV of 1/1/13 cash flow (1.1M x .64) 704,000
Total 3,842,000

3. On December 31, 2009, the balance of accounts receivable of
Jalena Company was P6,000,000 and the January 1, 2009
balance of allowance for doubtful accounts was P800,000. The
following data were gathered:
Credit Sales Write offs
2006 9,000,000 400,000 30,000
2007 13,000,000 600,000 70,000
2008 15,000,000 700,000 120,000
2009 20,000,000 650,000 150,000
Doubtful accounts are provided for a percentage of credit sales.
The accountant calculates the percentage annually by using the
experience of the three years prior to the current year. Hpw much
should be reported as allowance for doubtful accounts on
December 31, 2009?
a. 1,100,000 b. 800,000 c. 1,300,000 d.

Total writeoff (400 + 600 + 700) 1,700,000
Less: Total recovery (30 + 70 + 120) 220,000
Net writeoff 1,480,000
Divided by total credit sales 37,000,000
Doubtful accounts expense rate 4%

Beg. ADA 800,000
Writeoff ( 650,000)
Recovery 150,000
DAE (20M x 4%) 800,000
ADA, end 1,100,000

4. Esplanade Company sells a variety of merchandise to its
customers. On December 31, 2009, the balance of Esplanade’s
ending inventory account was P3,000,000, and the allowance for
inventory writedown account before any adjustment was
P150,000. Relevant information about the proper valuation of
inventories and the breakdown of inventory cost and market data
at December 31, 2009, are as follows:

Cost Replacement Sales NRV Normal
Cost Price Profit
Bags 800,000 900,000 1,200,000 550,000
Shoes 1,200,000 1,200,000 1,300,000 1,100,000 150,000
Clothing 700,000 1,000,000 1,250,000 950,000 300,000
Lingerie 500,000 600,000 1,000,000 350,000 300,000
How much loss on inventory writedown is included in 2009 cost of
a. 50,000 b. 200,000 c. 400,000 d.

Lower of cost or NRV on item by item basis (550 + 1M + 700 +
350) 2,600,000
Less: Total cost 3,000,000
Required allowance for inventory writedown
Less: Beginning allowance
Loss on writedown

5. Flavia Manufacturing began operations 3 years ago. On October
1, 2009, a fire broke out in the warehouse destroying all
inventories. The information available is presented below.
January 1 October 1
Inventory 500,000
Accounts receivable 800,000
Accounts payable 400,000

000 Purchases (5.000 to a business broker who helped find a suitable business and negotiated to purchase. On January 1. Katherine also paid P500.000 + 5.000 + 500.000 was paid in cash and P3.2M x (1-25%) 4.000 c.950.000 – 800.000 6. 200. 425.650.000) 5.000 Payments to suppliers. Katherine Company purchased 20% of the outstanding ordinary share capital of David Company for P4.000.000 7.000 d.000 Estimated fire loss 900.000 GP % (27.000 What is the inventory loss suffered as a result of the fire? a.000 6.375/21.450.500. 2010. .500) 25% GAS (500.000 Estimated ending inventory 1. 1/1 to 10/1 6. Collection on accounts receivable.000.000 8. 825.450.000 Less: Estimated COS (6. 1/1 to 10/1 5.000 Goods out on consignment at October 1.000 Less: Cost of goods out on consignment 400.650.500.200 – 400 + 650) 5.200. 900.000 payable with 12% annual interest on December 31.000.000 b.000 Sales (6. of which P1. 2009.725.000 2.000 Gross profit on sales + 23% +25%) / 3 or (5.000.300.000 1.000 2006 2007 2008 Sales 6.200.000. at cost 400.

000.200. 2006. 2009:  12% note to finance construction of the hydro-electric power plant.000.000 c. Investments were made on the excess borrowings from this loan and income of P50.000.325. 4.000 and an estimated life of 4 years.000.000 d.000. David’s shareholder’s equity on January 1. 2001.000 that was unpaid as of December 31.000 b. dated January 1. Judith Company Corporation constructed a new hydro electric power plant at a cost of P25.000.385. were incurred evenly during the year. P40.  15%.000. P10.000. 4.000 7.000 Share in net income (6M x 20%) 1. What is the amount of interest that was capitalized as cost of new building? a.000) Carrying amount 12/31/09 4. The entity had the following loans among Judith’s liabilities outstanding on December 31.5M .000.000. the fair value of David’s identifiable assets and liabilities were equal to their carrying value except for an office building which has a fair value in excess of book value of P2.000) Amortization ( 100. P10.560.000 Cost 4.000 d.500.900. 2009.300.000.200.000. 2009. dated March 1. During 2009.500.000. 2009 was P13. During 2009. David reported net income of P6. 4.000 was realized from deposits and other investments during 2009.000 and paid dividends of P4.800. What amount should Katherine Company report as investment in associate on December 31. The expenditures for this facility. 2009? a.800.000 Average expenditures (25M / 2) 12. which was finished late in 2009.000 b. 2. At the time of the acquisition. 5-year mortgage note payable. 1. 2.000 Dividends ( 800. 4.000 c. 20-year bonds payable issued at face value on January 1. 1.  8%.

000 d. 384. Amanda discounted the note with East-West Bank on March 1. 400.000 Maturity value (6M x 10% x 8/12) 6.000 Proceeds 6. Amanda Company received from a customer an 8-month. 100. The principal and the interest are payable on September 1. To obtain cash quickly. What is the loss on note receivable discounting to be recognized by Amanda? a.000.4M x 12% x 6/12) 384.7M Divide by the total Principal (40M + 10M) 50M Capitalization rate 9.5M Total 4.500. 2009.000 Total borrowing cost eligible for capitalization 1.000 1.000 note bearing an annual interest rate of 10%. Interest on BP (8% x 40M) 3.100.2M Interest on MP (15% x 10M) 1. 2009. 84. The bank charged a discount rate of 12%. On January 1.000 General borrowings 235.000 8.000 c.000 Trade discount 20% .000 Less: Discount (6. 2009 with a 5% discount if paid with in 15 days.000 Less: Principal and interest receivable (6M x 10% x 2/12) 6.400.150. Marla Company acquired new equipment on account on March 1.016. The following information is available: List price 3. 2009.000 Loss on discounting ( 84.385.000 b.000) 9.4% Specific borrowings (10M x 12%) – 50. 6.

000 using the perpetual inventory system. Goods costing P150.000 b.000 d. Removal of old equipment 100.000 Cost of installation 50. 2009 was P4.000 on December 28. An investigation of the discrepancy revealed the following: a. c.000 were sold on credit to Fernando Company for P500.800 -140) 2.010. 2.000 Total cost 2. The goods were received on December 30. Goods costing P450.760. 2009.000 c.000 Transportation costs 30. 2009 FOB shipping point.425. as they had not arrived by December 31.000. A physical count conducted on that day found inventory on hand worth of P3. 2009. b. The sales invoice was raised and processed on December 31. were not included in the . 3. what should be the cost of equipment? a.000 were purchased on credit FOB destination from Kimi Company on December 29. 2009. 3.000 Purchase price net of discount (2.000 Cost of redecoration of office in connection with the purchase 250. The goods were shipped on December 28. The goods were still in transit on December 31.660. Goods costing P300.000 Insurance taken during delivery 20. 2. 2009. The inventory control account balance of Luca Company at December 31. Net realizable value for each inventory item held for sale exceeded cost.000 If the invoice was paid on March 31. 2009 but.900. 2009 FOB destination.000 10.400.000 were purchased on credit from Alistair Company on December 27. 2009. 2010.000. 2009 and included in the physical count.760. The purchase invoice was received on January 2.000 Direct cost (50 + 20 + 30) 100.000 Repairs incurred while in transit 10.

000 Unadjusted perpetual balance 4. The purchase invoice was received and processed on December 31. Balances of the property. 4.100.000 d.000) Adjusted perpetual balance 3. Goods worth P200. Damaged inventory items valued P350.000 Recorded goods sold FOB destination 300. 3.000 11. plant and equipment.000 Unadjusted periodic balance 3.000 Goods in transit purchased FOB shipping point 150.650. f.000 on credit FOB shipping point to Ruben Company for P1.650. 4.000) Adjusted periodic balance 3.650.000.000 Unrecorded goods sold FOB shipping point ( 750.000 Unearned merchandise that had been received 450.400.000 b.000 Goods held on consignment ( 200. What is Luca Company’s adjusted inventory amount? a.000) Damaged goods ( 350.000.000 Uncounted goods sold FOB destination 300. physical count. Luca Company sold goods costing P750. These items were still recorded as of December 31. Lene Company uses straight line depreciation for its property.000 c. 2009.600.000 were discovered during the physical count.000. plant and equipment and related accumulated depreciation accounts on .000 held on consignment from Jensen Company had been included in the physical count. 2009. On December 31. 2009 but were omitted from the physical count records pending their writeoff. e. The goods were dispatched from the warehouse on December 31.000. 2009 but the sales invoice had not been raised at that date. 3. d.

800.200. What is the depreciation expense for 2009? a.000 Special tax assessment 50.800.000 loss.000 c.000.000. On the date of purchase.200.000 and P6. machinery was sold for P3.000 b. January 1.800. 12.000. The donated land is fairly valued at P1.000 and P6.000 Accum.850.600. Lene did not purchase property.000 c.000 Repairs and reconditioning cost made to the building 250.000 Remodeling of office space including new partitions and walls 400.000 d. From sold equipment (5M – (3M + 400) (1. 2. 3.000.600. During the year.000. the shares had a market value of P140 per share and the land and building had a fair value of P2. 3. 1/1 5.000 d. 4.000 and P5.600. 1. Dinara also received land from a shareholder to facilitate to relocation of its main offices in the city.000 b.000 Accum. Depn. 2009 are P25.000. plant and equipment during 2009. 2. Depn.000) Depreciation expense (SQUEEZE) 2. 2009 are P20. Dinara paid P50. Dinara Company made the following property. plant and equipment expenditures: Land and building acquired from Samantha Company 7.000 for the donated land transfer.000 and on December 31.000 In exchange for the land and building acquired from Samantha.000 Accum. 3.200.000 . Depn.000 respectively.000 ordinary shares of its P100 par value ordinary shares.200.000 Reconstruction of sidewalk and fences 100.000 that resulted in a P400. However. 12/31 6. What is the total cost of the land acquisition? a.000. During 2009. Dinara issued 50.

000 170.000 980. The acquiree had total liabilities of P1. expense 130.000 cash.000 Goodwill 2. Inventory 800.3M-1.000.000 Assembled workforce 1. 2005 December 31.500.000 What is the goodwill arising from the acquisition? a. & admin.000 Accounts receivable – net 1.000.000 Accounts payable 950. 2.000 13.000. 2006 Trade accounts receivable 840. Dominika Company’s assessment of the fair value of the assets it obtained when it purchased the other entity is as follows: Cash 500.000 780.850.200.000 Inventory 1.000 Less: FV on net assets acquired (7.500.5M) 5.000 FV of donated land 1. 3.000 d.000 14.000.800.000 .000 Special assessment 50.000.000 Total cost 3. FV of land acquired by issuing of shares 2. 700.000. plant and equipment – net 3.000 b.800.000 Property.000 c. a calendar year merchandising corporation: December 31. The following were taken from the incomplete financial data of Sam Company.000 1.000 Acquisition cost 8.000 Accrued gen. Dominika Company purchased another entity for P8. In-process research and development 2.

000.630.500.000 d.000.000. net of discounts of 70.000 Selling and Admin.000 Purchases 1.000) Depreciation 30. 3.000) .060. net 1.000 c.000 Purchase discounts ( 70. Equipment with a book value of 200. 1. 3. 2.000 Net income 270. payments for purchases.000 PPE.000 130. If the company reported a net income of 270.000 1.000 was sold for 250.000 was 1.000 Gain on sale of equipment ( 50.000 Cost of sales: Beg.165.225. what is the amount of collections on trade receivables in 2006? a.000 Investment in Associate 550.485.165. expenses 960.000 Amortization of patent 125.000 b.470.000 720.000 Gross profit 1. 2.285. There no acquisitions of investment during the year 2006.420.425.000) Income from investment in associates ( 170.000 300.000 Sales 3. Inv.000 Cost of sales 2.000 Patent 425.000 The following additional information were made available: cash payments for selling and administrative expense was 900. There were no acquisitions of PPE and other transactions affecting net income during the period .530. Prepaid selling expense 150.650.000.000 Gross profit 1.

000 Cash paid – Selling & Admin 900. 2006 of Mall Company showed a cash balance of P91.000.530.000 1. Customer’s check totaling P4. An examination of the books disclosed the following: Cash sales of P12. Post-dated checks totaling P3.750.700 were “redeemed” on December .000 15.000) AB (130.000 from January 1 to 7 were pre-dated as of December 28. but withheld by the treasurer.000 840.060.400 are being held by the cashier as part of cash.600 in payment of liabilities were prepared before December 31.200.000 Accounts payable Accounts Receivable 1.000 3.000) COS 2. Checks of P5. 30.000 being reversed for the purchased of a mini-computer which will be delivered soon. 2006 and charged to the cash account.000 950. The cash account includes P20.000 980.000 AE 170. P2. 31. plant & equipment 1.000 70. 2006 were not recorded in the books. 2006 and recorded in the books.630.000 AB (130.000 sold . Ending inventory (1.000) Selling & Admin (accrual) 960. The balance sheet at December 31. Personal checks officers.000 PB 150.825.000 Property.000 3.000 depreciation 1.650.000 780.500 deposited with and returned by the bank “NSF” on December 27. The company’s experience shows that post-dated checks are eventually realized.000 200.420.

37 at the time the fire occurred.195.51 .750 16.88 Beginning inventory 210.42 on December 31.80 Purchases 658. 43.750 Cash sales for 2007 dated 2006 (12. 54. 2005 to the date of fire totaled P641. Accounts payable were P110. but returned to cashier on January 2.56.882. Mills Corporation.500) Undelivered check 5. Almost all the merchandising items are sold approximately 30% in excess of cost. 216.009. 2006? a. As at June 15.668.789.56 c.710. How much is the cash balance that should be shown in the December 31. 2006. 2005 to the date of fire amounted to P876.23 b. 69.550 Balance per book 91.750 b. At the time. 2006.000) Personal check ( 2.106. requests your assistance in determining the amount of loss and in filing in insurance claim in connection with a fire on June 15. 2006 that destroyed some of the company’s inventory and accounting records.785. 72. 2005 and P126.871.700) Correct cash balance 54. Your client.400) Cash set aside for computer (20.50. 275. total (at cost) amounted to P210. 2005.600 Post dated check ( 3.33. How much is the loss incurred by the company as a result of the fire? a. Payments to vendors from December 31.789.80. 2007.750 d. The last physical inventory was taken on December 31. All sales are on account and account receivable were P135. 31.150 c. You were able to obtain the following information from available records.945.18 at December 31. 430.937.055.000) NSF ( 4. 91.21 d. the total cost of inventory items not destroyed by the fire amounted to P144.

33 Inventory loss 72.83 b.56 Goods based on counting 144. 2006.871. 105.51 848.009.42 135.945.56 110. the company sold 2.000 x P25. What is the average unit cost of the total investment as of December 31.000/6.000 Cost of new investment on exercise of rights Cash paid (4.52 c.106. Marcel Company purchased 5.145. Marcel Company classified the securities as available for sale.331.000 shares of Boniface Co.055.331.710. 99. 98. TGAS 869.00 Upon acquisition P600.000 Share dividend .667 .667 Cost of new investment P121.000 6.882. The share had a market value ex-right of P115 and the right had a value of P5. 2006? a.31 Cost of sales (848.18 876.500. On December 20.57 / 130%) 652. 95.37 107.000) _____ Balance of original investment P575.23 Accounts payable Accounts receivable 641.000) 16.50 and exercised remaining rights.25 17.000 Cost of rights exercised (4.195.50 658.70 d.75 Estimated inventory 216. 1.57 126.000 rights at P7.562.937. par P100 at P120 on July 2006. Marcel Company received a cash dividend of 1 share dividend at P10 per share on the stock and was granted to purchase 1 share at 105 for every 4 shares held.000 5.000 Share rights (5/20 x P600.000 rights / 4 x P105) P105.000) ( 25.

Trooper had a machine patented.200 in legal fees to successfully defend the patent against an infringement suit by Alliance Company.000 Fees paid to Government patent office to process application 24. What is the carrying value of the patent in December 31.350 c. 2007? a. 2007. paid P35.000 Legal expense to obtain patent 120. Trooper Enterprises. Because the process is considered valuable to the fortune cookie industry.667 1.697 . development.667 7. Inc.000 Wages and employees work on the research. 178.000 Blueprints expenses to design the machine 32. 145.52 18. Trooper Enterprises. 175.000 Expense of drawing required by the patent office to be submitted with the patent application 17. 142.000 Total 696.000 Metal used in construction of the machine 80.500 b. The following expenses were incurred in developing and patenting the machine: Research and development laboratory expenses P250.000 P99.000 New 121. 60% of the time was spent in actual building of the machine 150. Inc. and building of the machine.000 6. 2006. On January 1. Cost Shares Unit cost Original P575.500 On January 2. developed a new machine that reduces the time required to insert the fortunes into their fortune cookies.500 d.

600.000 Collections 5. Pearl changed its method of determining its allowance for uncollectible accounts by applying certain percentage to the accounts receivable aging as follows: Days past invoice date Percent deemed to be uncollectible 0-30 1 31-90 5 91-180 20 Over 180 80 In addition.000 91-180 120. Pearl wrote off all accounts receivable that were over 1 year old. 2006.000 30. On December 31.000 none Recovery of accounts previously Written off 14.5) P161.000 90.800. 2006? a. 62.000 31-90 160.000 Over 180 50.000 P5.000.350 19. 22. On January 1. 2005.830.000 What is the provision for uncollectible accounts for the year ended December 31. 78.000 none Days past invoice date @ 12/31 0-30 600.000 d. Total cost of patent (120 + 17 + 24. The following additional information relates to the year ended December 31.000 Accounts written off 54.5 x 2/20) 16250 Carrying value P145.000 500.000 180. Pearl provided for uncollectible accounts based on 1% of annual credit sales.000 4. 2005.000 b. 76.000 Required allowance for bad debts – 2006 .500 Less: Amortization for 2 years (161. 2005 and 2006: 2006 2005 Credit sales P6. Pearl Company began operations on January 1.000 c.

000 50. based on the price paid by Cape Company? (a) P300.000 more than its carrying amount.000 (d) P30.All other identifiable tangible and intangible assets of Bit Co. owns a tract of land with a current fair value of P900.000 70. .Bit co. Cape Company purchased 25% of the outstanding ordinary shares of Bit Co.000 (b)P1. have current fair values that are equal to their carrying amounts.Bit Co.100.’s ordinary shares at December 31.000 160. 2010.000 x 80% = 40.000 120. stock: .000 x 1% = P 6.000 (c) P120.000 Items 20 to 21: On June 30. 20. 201o0 is P9 million.000 Accounts written off 54. Also in the current year.600.’s net assets on acquisition date was P7.000.080. What amount of investment revenue should Cape report on its income statement for the year ended December 31. has depreciable assets with a current fair value of P180.200.000 x 5% = 8. The book value of Bit Co.000 Bad debts P 62.000 x 20% = 24. Cape was willing to pay more than book value for Bit Co. For the following reasons.620. at a total cost of P2. 600. What is the total amount of goodwill of Bit Co.000 21.000 Recovery 14.000. These assets have a remaining useful life of 10 years. 2010 under the equity method? .000 Total P132. earned evenly during the current year ended December 31. Cape Company’s financial year-end is December 31.000 P 78.000 to its ordinary shareholders. Bit reported net income of P1. 2010.000 more than their book value.000. .000 Beginning balance (1% P5. Market value of Bit Co.000) 56. it declared and paid cash dividends of P315.

000 Less: Amortization (200. 2011 and pay interest of 8% annually every December 31 with a 10% effective yield.000.000 16.In January 2009.000 Less: Dividends (40. acquired 20% of the outstanding common stock of Davis Co.000. Farley Corp. the carrying value of Cape Company’s investment in ordinary shares of Bit Co.000 (c) P2.900.500 including transaction costs of P100.000 (d) P 808.000 x 20%) 8.000 for P1. for P800.250 (c) P78. The excess of cost over book value was attributed to an identifiable intangible asset which was undervalued on Davis’ balance sheet and which had a remaining useful life of ten years.000 24. The book value of the acquired shares was P600.000 Carrying value of Farley’s investment 808. On December 31. For the year ended December 31.000 Add: Share in net income (180.000 and paid cash dividends of P40. What is the proper carrying value of Farley’s investment in Davis at December 31. on December 31.070.750 22. . 2010 should be: (a) P2. 2009? (a) P772. Davis reported net income of P180. (a) P202.000 (d) P2.250.000 Original investment 800.000.221.750 (d) P123. Under the equity method. The bonds mature on December 31.000 on its common stock.500 (b) P200.000 / 10) 20. This investment gave Farley the ability to exercise significant influence over Davis.000 23. 2009.500.000 (b) P780.100.On January 1.000 x20%) 36. Pie Company purchased available-for-sale debt securities with face value of P2.500 (b) P2.000 (c) P800.000 Total 816. 2009. 2009.

2009.400.000 (c) P400.900.800 (d) P7.000. .000 January 1.600.000 (d) P 0 Average rent (7M/ 5) P1. lessor.600 (c) P8. 2006 1.800.On January 1.700.800.000 27.617. Sweet Company purchased 5-year bonds with face value of P8. leases its equipment under an operating lease.500 25.000 Rent receivable – 12/31/2006 P4.000 (b) P800. Abe Company.000 Rent income for 2005 and 2006 (1.000 for the purpose of leasing it.648.000. The bonds acquired to yield 8%.000.000 January 1. Abe Company should recognize rent receivable at: (a)P1. What is the purchase price of the bonds? (a)P7.000 (d) P179.400 (b) P8.000 On December 31.000.400. 2008 1.200 26. The lease term is 5 years and the lease payments are made in advance on January 1 of each year as shown in the following schedule: January 1. The tractor is estimated to have a useful life of 5 years with scrap of P100.000 January 1. Depreciation is on a straight line basis.000 January 1.382. 2006.450 (b) P199.000 Rent received for 2005 and 2006 (1M + 1M) 2. Might Company purchased a tractor on January 1.400.000 and stated interest of 10% per year payable semi-annually January 1 and July 1. 2005 1. 2009 1. 2007 1.000.500 (c) P300. 2009 at a cost of P1. What amount of unrealized gain on these bonds should be reported on the 2009 statement of changes in equity? (a)P169.351. On April 1.4M x 2) P2. the bonds are quoted at 105.

which was known to Mine.000 Interest for 2007 (10% x 763.000 commission associated with negotiating the lease. net of current portion? (a) P660. 2011. 2009 P750.636) (76. Might paid P120. Dec.000) Commission (120. Mix Company reported a capital lease obligation of P750.364) ( 13.000 (d) P85. 2008. 2009 P90. December 31.000) (75. and P10.000) Net rent revenue P 80.636 Payment on January 2.000 Interest for 2010 (10% x 750.000 were made on both January 2. Might Company should report net rent revenue for the year 2009 at: (a) P160.000.000 (c) P80. Mix’s incremental borrowing rate on the date of lease was 11% and the lessor’s implicit rate. the lease for one year.000 28.000 + 13.000/5) (300. net of current portion of P13.500 Total lease liability.000 Depreciation (1.000 transportation of the tractor to the lessee during 2009.000) Repairs ( 15. The lease fee is P50.000 (b) P235.636) P763. P15. was 10%. 2009. In its December 31.000 Payment on January 2.000 minor repairs.636 (d) P742.000.000/ 2 x 9/12) ( 45. 2009 and January 2.000) .000 monthly and the lessee paid P600. In the long-term liabilities section of its balance sheet at December 31.000 x 9) P450. what amount should Mix report as capital lease obligation.000 Rental from April 1 to December 31. Payments of P90.000) Transportation ( 10.000 – 100.636.636) Lease liability.000 (b) P735.000) ( 15.600. 2009 (50. Might entered into a lease contract for the lease of the tractor for a term of two years up to March 31. 2008 (750. 31. 2010. 2010 P90. 2009 balance sheet.000 (c) P763.

plant and equipment 5. No allowance had been made against this debt in the draft financial statements. Pertinent account balances are: 2009 2008 Prepaid interest expense 200. On March 15.000 was made. What total amount should be recognized in profit or loss for the year ended December 31.000 Property.000. 2010.000 50.750.000 Bad debt loss 340.000 (b) P3.600. a manufacturing plant was destroyed by fire resulting in a financial loss of P2.290. 2009. The financial statements are authorized for issue on March 31.000 Total lease liability. 2009.000 Loss due to fire 2.000 Contractual profit share payment 350.000 (c) P2.290.500. On February 1.000 (d) P690. a customer went into liquidation having owed the entity of P340.000 . 2010. 2010) P 15.600. 2010. December 31.000 29.000 Current portion (represented by principal payment on January 2.000 30. a dividend of P1.000.600. 2009 P750.000 was declared and a contractual profit share payment of P350. Heidi uses the direct method to prepare its cash flow statement.000 Total adjusting entries 3. both based on the profit for the year ended December 31.000 4. 2010 P735. Jen Company is completing the preparation of its draft financial statements for the year ended December 31. 2009 to reflect adjusting events after the end of reporting period? (a)P1.000 for the past 5 months.000 Long-term portion (remainder) 735. 2010.750. Lease liability. On December 30. December 31.

beg.000 Interest paid 1.000 in equipment during 2009.000 Accumulated depreciation 900. 2009.000 General and administrative expenses 6.000. beg. 2009.000 Heidi purchased P500.000. FOB shipping point.600. Unamortized bond discount 250.000 Allowance for uncollectible accounts 65. 500.000 Total 1.000 400.000 150. Additional information was given as follows: a. end.100.000 Income tax payable 1.000 (c) P1.200. 200.150. Included in the physical count were small equipments billed to a customer.000 Amortization of bond disc.000 A Interest expense 800. 50.000 Deferred income tax liability 200.000 Add: Prepaid interest.100.000 Less: Prepaid interest.000 1. based on physical count.000 7.000 Income tax expense 1. Heidi allocated one-third of its depreciation to selling and the remainder to administrative.000 500.000 Selling expenses 7.000 31.000 Interest payable.000 700. 50.000 of inventory on December 31. .300.000 55. What amount should Heidi report in its 2009 cash flow statement as cash paid for interest? (a) P1.000 3.000 Accrued interest payable 300.000 (d) P750. on December 31.200.000 8. 300.500.000 300. Excel reported P70.000 750.850.000 400.000 Interest payable.100.000 (b) P1.000 Interest expense 800. end.565.

000 Work in process job out for finishing 500 Goods out on consignment [(4. Goods out on consignment amounted to P4. 2009. 2009.000 claim against the common carrier. 2009.000 before the following information was considered: .000 was recorded by Reed.15) + 120] 4. 1. The invoice price was P50. 2009. On January 5. The invoice cost was P8. Work in process costing P500 was sent to an outside processor for finishing on December 30.225. shipped FOB shipping point 8. The shipment is ready for pick-up by the delivery contractor. The invoice cost was P60. d. Dec.500 (c) P82. 2009 was P1. Goods were in transit from a vendor. On December 28. 31 2009 P82. b.600/ 1.620 32.Goods were in transit from a vendor to Reed on December 31.120 Inventory as adjusted. .000 and goods were shipped FOB shipping point on December 31.620 (b) P85. shipping costs. Jan.500 C Inventory per count. P120 (markup is 15% on cost). 2010.000 Goods in transit.Goods shipped to Reed. FOB shipping point on December 20. .000. Reed filed a P50. Reed received the goods on January 6.Goods shipped FOB destination on December 21. 2010. The small equipments had a cost of P3. . The invoice cost of P45. Reed notified the vendor of the lost shipment. 2009 from a vendor to Reed were lost in transit.000 had been billed at P5. The balance in Reed Company’s accounts payable account at December 31.620 (d) P82.000.000 and the goods were shipped FOB shipping point on December 28. 2009. 2009 from a vendor were lost in transit. The correct amount of inventory on December 31.600 (sales price). 2009 P70. c. 2009 is: (a) P85.

Following data reselected information on Marbel Company for the year 2009: Cash balance.000) Adjusted accounts payable P1.255.000 Cash balances.000 Accounts receivable. December 31 880.000 Net income 110.On December 27.000 Total assets.000 The net income of Marbel for 2009 is: (a)P490.255. January 1 380. a vendor authorized Reed to return.000 Total liabilities.000 Accounts receivable.000 (b) P150.000 A ( 45. January 1 750.345.000 Total liabilities – December 31 390. The returned goods were shipped by Reed on December 27.000 D ( 35.000 (d) P70.100.000 (c) P1. December 31 360. January 1 130.000 (d) P1. for full credit.000 C Accounts payable per book P1.225.000 Stockholders’ equity – December 31 490.000 (c) P110. January 1 190..000 Total assets.250.000 Stockholders’ equity – January 1 380.000 Stockholders’ equity. 2010. What amount should Reed report as accounts payable in its December 31. December 31 390.000 (b) P1. 2009 statement of financial position? (a) P1.000 credit memo was received and recorded by Reed on January 6.000 on December 20.300. December 31 160.000 C 50. goods shipped and billed at P35. 2009.000 . 2009.000) B 60. A P35.000 C Total assets – December 31 880.000 Collections from customers 2.000 33. 2009.

The goods were included in the physical count.500. Kayumanggi recorded a 200. P100 (d) cash. the journal entry to record replenishment should include credit (s) to the following account (s): (a) petty cash. P75 (c) cash.000 Inventory losses 120. No inventory writedown has been recorded for the year.700. P100 D Expenses (100 – 5) P95 Cash short and over (100 – 95) 5 Cash (250 – 150) P100 35.000 Cost of goods sold 5. These goods were sold on FOB destination terms and were in transit on December 31.000 Inventory 2. On December 15. Kayumanggi Company’s unadjusted trial balance on December 31. the net increase in stockholders’ equity is already the net income for the year. 2012.800.500.000. P95.500.000 credit sale of goods costing 150.000 Sales returns 200. had a cost of 3. How much should be reported as cost of goods sold for 2012? a.000 and a net realizable value of 2.000 .000.Since there are no dividends declared and issuance of capital stock during the year.000. 34. 2012. 5. 2012 appears below. P5 (b) petty cash. Gross Sales 7. cash short and over. If a petty cash fund is established in the amount of P250.000 Inventory on hand. The company uses the perpetual method to record inventory transactions. determined by physical count. and contains P150 in cash and P95 in receipts for disbursements when it is replenished.

The movement in share capital arose from issuance of share capital for cash during the year.000 c. 5.000.000 c.000.000 d.000 Retained earnings 1. There was no dividend declared at the beginning and end of the current year.000 b. How much is the financing net cash inflows that should be reported in the 2012 Cash Flow statement? a.000 450.000 2.200. December 31 January 1 Fixed Assets 1.000 800. 3. The company has a policy to depreciate all their .000. 5. Inc.000 was disposed of for a gain of P50.000.000 37. net of dividend of 700.000 vendor financing arising on the acquisition of a property. Net change in retained earnings comprises profit for 2012 of 900.720.900.000 d.000.700. Also during the year. an equipment with original cost of P300.620.000 The company purchased new equipment during the year.000 1.400.200.000 800. Depreciation charged for the current year was P200. provided the following numbers for the preparation of the 2012 financial statements. b. Marikitka Corporation accounting records show the following numbers below at the end of each year: 2012 2011 Borrowings 3. 3. 3.000 36.000 Old debts of 500.000 Share capital 4.000.000 Accumulated depreciation 300. 4. 5. Mirageme Holdings.000 were repaid during 2012 and new borrowings include 300.

Allowance for doubtful accounts are estimated to be 2% of accounts receivable and is only taken up as an adjustment at year end. 2012? a. 2012 balance sheet. 2012 prior to any year-end adjustments.000 insurance expense in 2012 and 2013.000 respectively as of December 31.000. What is the amount of newly acquired fixed assets during the year? a. the Company management decided to write off customer accounts amounting to 200.000. 150. What is the balance in the Allowance for doubtful accounts on January 1.000. The corporate income tax rate is 35%.assets in 5 years.000 39. On July 1.000 c. Should the accrual basis be used for the preparation of the income statement. 700. how much should be reported as deferred tax liability related to the prepaid insurance? . 400. The insurance premium was a tax deductible expense in the Company’s 2012 cash basis tax return.000 and 500. Sales in for the year 2012 totaled 120. Makisig Corporation has an accounts receivable and allowance for doubtful accounts balances of 18. On the December 31.000 b. 2012. 2012.000 (10% of which are by way of cash sales).000 c. 450. the Company will report a P210.000 b.000 d. 540. Maginoo Corporation had very risky business operations that started on January 1. 525.000. 725. 500. In the same year.000 d. the Company decided to pay in advance premiums on annual insurance policy for fixed assets amounting to P420.000 38.

50. 51.850 d.000 Decrease in accounts payable 3. Wowowee Corporation 2nd year in business posted a net income of 70. 171.300 41.500.500 b. 100. and its estimated economic life is 10 years.000.000.000. Dynamo Research.000 Forex Loss 22. The total cost of registering the patent amounted to 54.000 c.000 .750 d. Inc. 2012.000 relating to an invention the patent of which was granted on June 1. Dynamo Research should report net patent at a. 2012 at a.a. 2012 balance sheet. The average patent life for the company is 15 years.400. 147. 169.500.000 The Company should report as cash provided by operations in its cash flow statement for the year ended December 31. The following data are extracted from the books of accounts: Depreciation 32.100. On March 2012. In its December 31.500 c. 36. 0 40.400. has developed another breakthrough product which entails it to incur research and development costs amounting to 126.000 Increase in prepaid expenses 1. 73.000 for the year ended December 31. 2012.000 Dividends paid 25.000 b. The patent right was granted to the company for 20 years.

The tax return shows a taxable income of P5. 6% due 4/1/2013.000 d.000.200. The legal counsel of the Company expects that the litigation shall be settled in 2013.000.000 43.400.300. recent developments suggest that the deferred tax liability will be reversed next year. The contingent liability represents the accrual for possible losses on a legal suit filed by Matodas Corp. with tax payable of P1. 49. P15. In the December 31. 64. Accounts payable.000 for damages. Carino Milling Corporation ("the Company") operates a huge rice mill operation. Deferred tax liability.000.000. 126.750. As at December 31. 32. Also.000 42. 900.450.800.000 has been reported. Bonds Payable.500. Accrued expenses. 18.000 and accelerated depreciation for income tax purposes was P1. Cebu Fantastic Company would like to know the amount of its pretax financial income for the current year by taking adjustments to taxable income as per company's income tax return. 119. .000.300. 100.500. 1.800.000.000 b. 14.000 d. 8% due 5/31/2013. following are the liabilities of the Company: Promissory notes.000 c.000.000 c.000. Contingent liability.000.850. against the Company for damages in the amount of 15.b.000. 2012. 2012 financial statements. The following are adjustments to the amount of taxable income: Straight-line depreciation on these assets is P800. the amount that should be reported by the Company under current liabilities shall be a. with the Company paying 15. 32. 1.000.

5.000 worth of goods and services.000 Other Assets 110. Estimated corporate tax payable of 400. Installment dates are due every March 1 and September 1 starting year 2013.800. What is the amount of current assets that company should show in the financial statements? a.000 was charged to prepaid taxes during the year.000.000 was received on interest on treasury bills that were not included in the income tax return.100.000 b.550.200.000 Accounts payable 140. Cebu Fantastic 's financial income subject to tax for the year should amount to: a. During the year. Accounts receivable.700.000 44. P800.250.000 d. the company granted special payment terms to a customer that requires the latter to pay equal semi annual installments of 150.000.000 During the year.500. The following accounts came from the adjusted trial balances of Davao Pacific Company at December 31. 2. 2012: Cash 750. Prepaid taxes 400.000 for a 600. 4. The corporate tax rate is 35%. 5.000 c. net 1.Goodwill impairment loss of P500. 5.000 .000 b. 2. There were no adjustments between financial and taxable income.000 may be deducted in the income statement but was not included as a deduction in the tax return.

1.000.300. The following accounts were extracted from the books of Camarines Goods Company for the year ended December 31.000. 2.000. Estimated corporate tax payable of was charged to prepaid taxes during the year.200. Likewise. 1. Operating Expenses 800.196. 90. What is the amount of retained earnings that the Company should report as of December 31.000. 2012: Legal and audit fees 1.235. Accumulated Depreciation 150. Logistics and the rest of the Operations departments share in the plant operations space. The corporate tax rate is 35%.000 d.000 46.800. The following accounts came from the adjusted trial balances of Iloilo Lines Company at December 31.000 Rent for plant operations 2. Cost of Goods Sold 2.000 Rent for office space 1.000. 3.00 45.000. 1.060. There were no adjustments between financial and taxable income. 1. 2012? a.137.100.700. . Premium on Capital Stock 350.000 The Company’s top Operations Managers and Finance department share equally in the use of office space.c.500 d.000.000 c. Interest Income from Deposits.000.950. Revenue from Sale of Goods 4.000.000 Loss on inventory shortages and pilferages 350.000 Interest on bank loan 2. 2012: Capital Stock 700.293.500 b. Retained earnings 650.

000 Cumulative unrealized gain on available for sale securities 600. 3.450.700.050. 2. 3.100.800.000. 4.000 Ending inventory 1.What is the amount of general and administrative expenses that should be reflected in the income statement of Camarines Goods? a.350.000 Cumulative translation adjustment (equity reduction) 2. at cost 700.000.000 b.650. Sales returns increased this year to 2% of sales or 300.600.000 c.650. Mabilis Corp.000 Beginning inventory 1.000 c. The Company’s cost of goods sold for the current year is a.800. provided the following information on December 31.000 b.000 d.000.000 Purchase discounts 150.000 The company gives out sales discounts to long term customers.000 Freight out 400.2012: Capital Stock 5. Sales discounts granted for the year amounted to 250. 3.000 Retained earnings (post closing or ending) 1.800.000 Treasury shares.500.000 Premium on Capital Stock 3.000 d.000 47.500.000 in value.000 48.000 . The following information is available from Bulacan Crispy Company's accounting records for the current year: Purchases 4. 4. 5. 4.

000 c. 7. and a 2.200.000 Credit balance c.000 c. Answer not given d. 22.000 are written off as uncollectible. 20. 24.000 Credit balance 50. Marilag Company starts the year with an allowance for doubtful accounts balance of 9. 18. 9. At the end of the year.000 Receivables 49. 20.300.000 in receivables are written off as uncollectible.600. 8.000 d. receivables of 20. the Allowance for Doubtful Accounts account is adjusted based on anestimated rate of 4% of ending receivables.000 is recognized. bad debt expense is recognized based on 3% of credit sales.000 d.000.000 b.000 account previously written off as uncollectible is actually collected.000. A company starts the current year with a 18.000 b.300. For monthly reporting purposes. for financial statement purposes. During the year.000 (credit). 15. 2012? a.How much is the contributed capital that should be reported on the financial statement as of December 31. 9. a. 26. bad debt expense of 26. 22.000 Credit balance b.000 credit balance in its Allowance for Doubtful Accounts account. The Accounts Receivable account at the end of the year was 600. Total credit sales for the year were 800. During the year.000 . What is the ending Allowance for Doubtful Accounts account balance at the end of the year? a.

the company estimates that 10% of its accounts receivable will be uncollectible. 14. 16. During the year. On December 31.000 sales returns and write offs of 50. A company reports Sales of 300. a company has the following balances in the books: Sales 400. Based on experience. 12.2M.8M with 100.000. 18. 24. How much bad debts expense should the company recognize at the end of the year? a. During the year. Accounts receivable of 200.000. The company estimates that 4% of sales for the year will be bad.000 b.000.000 d.000 credit balance (unadjusted) as of the end of the year. how much bad debt expense should the company recognize at the end of the year? a.000 52.51. . Given the above. 26. 20XX.000 Allowance for Doubtful Accounts account (unadjusted) with a 2.000 Accounts receivable 300. the company generated credit sales amounting to 2. and an Allowance for Doubtful Accounts account of 4.000 53.000 c.000 credit balance.000 c.000 d. 16. 20.000.000 b. Mabilis company has a beginning Accounts receivable balance of 700. the company collected a total of 2.

000. At the end of the year. 1. 1.000 and estimated the uncollectible accounts per receivables aging report of 100.000. The ending balance of Accounts receivable before allowance for doubtful accounts should be .000 worth of receivables already and estimated the uncollectible accounts per receivables aging report of 120. 55.000. 60.100.000 with a corresponding Allowance for doubtful accounts of 60. 120.3M and collected 3. the company extended credit to customers amounting to 5. the company extended credit to customers amounting to 5.9M of it. the company has written off already 200. During the year. During the year.000.000 54.000 c.000 c. the company has written off 100. 220.5M with its corresponding Allowance for doubtful accounts of 130.050.150. 180.9M of it. What amount should the company report for gross Accounts Receivable balance at year end? a.000 and uncollectible accounts of 100.000 d.000. 1.000 b.000 b. the company estimated future sales returns at 50. At the end of the year.3M while collecting 3.000 d. Makunat company has an Accounts receivable beginning balance of 1.At the end of the year. How much is the Allowance for doubtful accounts balance as of the end of year? a. Matipid company has an Accounts receivable beginning balance of 1.

6. 2. 7. 2.720. 7. Malupeet Corporation factored 8M of its Accounts Receivable to Madugas Corporation.000 d.000 d. It is estimated that the fair value of the recourse obligation is 624.000 b. 2. It is estimated that the fair value of the recourse obligation is 240. Mabait Corporation factored 8M of its Accounts Receivable to Madugas Corporation. Other information include: Factoring fee 2% Holdback Value 4% Calculate the loss of Mabait in this factoring transaction: a. Madugas accepted and took over the receivables subject to recourse for non-payment.000 b. Other information include: Factoring fee 2% Holdback Value 4% Interest Charge 11% How much cash should Mabait expect from the factoring transaction? a.000.000 57.000 c.900.000 . 560. Madugas accepted and took over the receivables subject to recourse for non-payment. The weighted average time to maturity of the receivables is computed at 73 days. 7. 2.000 56.520.344.696.000.800.600.a.000 c.700.

1.000 Merchandise returned by customer 25. 720. The company records showed the following balances and transactions at year end: Collections received 3.000 d.000 Bad debts written off 50.500. 880.000 Checkbook balance 2. Bayani Corp has the following information relating to cash at December 31.000 Discounts allowed by creditors 260.b.000 58. 2011: Bank statement balance 2.000 c.000 .000 Discounts given to customers 25.450.000 Merchandise returned to suppliers 70. 950.000 Sales on account 4. 900.000 b.200.000 Notes given to creditors 250.000 Cash 59.000 Purchases on account 3.000.600.000 Payments to creditors 3.000 Provision for doubtful accounts 90.500. 880.000 Deposits in transit 700.900.000 Payments on notes payable 50.000 Compute the Net Accounts Receivable at year end: a.000 d.000 c. 480.

000. 3. The petty cash fund account of Magiting Company showed the following: Coins and currency 5.800 .000 c.100. 11.400.000 d. 5.000 b. 10.500. 3. 3.200 Digging deeper into the records. 3. 9.000 60.000 Bayani's December 31.Outstanding checks 200.500 Paid vouchers: Transportation 200 Gasoline 150 Office supplies 250 Postage stamps 200 Due from employees 1. There is also a check drawn by company to the order of petty cash custodian amounting to 3. 2011 Balance Sheet should report cash as: a.000 b. What is the amount of the petty cash fund for balance sheet purposes? a.000 d.500.000 c.000. you realized that there is a Manager's check returned by bank marked "NSF" for 1.

600. Cash in Metrobank as per bank statement of 2. what amount should cash on hand and in bank .000 c.2011: Petty cash fund of 20.000 The HSBC checking account has 250. The correct cash balance that should be shown in the balance sheet is a.000 Deposit in a bank closed by BSP 500.000 check still outstanding per bank statement.000 Checking account in HSBC 3.400.000 in is the form of paid vouchers) 50. The petty cash fund has 5. 4. Unrecorded vouchers paid out of collections and IOUs signed by employees taken also from collections amounted to 40.950.350.000 worth of paid vouchers.61. with a check for 30.000 respectively. 4.000 Advances to officers and employees 200.000 d.000.500.000 62.000 b. 4. The current assets section of the balance sheet of Gregorio Corporation consists of: Bond sinking fund cash 1. Diego Bandido Company's accounting data showed the following information as of December 31.000 Currency and coins awaiting deposit 1. There was a Bond sinking fund amounting to 900.000 still outstanding as of balance sheet date. Given the above data.945.000 and undeposited receipts amounting to 1.000.000 and 10.000 Petty cash fund (of which 100. The undeposited collections includes a postdated customer check for 50.595.635.

000 Total cash on hand and in bank 3.770.670.000 . The vouchers paid should be recorded as expenses and the IOUs should be shown as advances to employees.000 . Malvar Knives Company had the following cash balances as of December 31. Cash in bank HSBC 2.000 ***The postdated customer check of 50.000 Cash in Metrobank (2.000 b. The outstanding check of 30.000 d.50.000 There was a compensating balance of 500.740.400.that should be reported on the December 31. 2005) 500.690. 63.000) 2.000 on the HSBC account maintained against a short term borrowing arrangement made at the end .350. 2011 balance sheet? a.000 is deducted from the cash in MetroBank because the cash balance given is per bank statement. 3.30.000 Undeposited receipts (1. 2011.690.000 c.400. 3.000) 1.320.000 Revolving fund 100.350.000 should not be included as cash and should be treated as accounts receivable. 3.000 Solution Petty cash fund 20. 4.000 Time deposit (due February 1.000 Petty cash fund 50. The bond sinking fund should be shown as noncurrent investment.

000) 1. Until the short term loan is settled the company cannot withdraw the compensating balance. Plaridel Publishing Company had the following trial balances at December 31. Petty cash fund was all disbursed out by the end of the year including a 10. 2005 coming from a half year term. 2011? a.2011: . 2.900. 2.550.000 d. What total amount should be reported as cash as of December 31.500. 64.540.000 c.000 Solution Cash in bank (2. The term of the time deposit is given as 6 months hence it is not included in the computation as well. 2. Time deposit is due on January 1. 2.000 b.of the year.040.400.000 cash advance is already taken up so this is just a nuisance data that should not be included in the computations. The 10.000 Revolving fund 100. The compensating balance should be shown as "cash held as compensating balance" as a current asset because the related loan is short-term.000 Total cash 2.050.000 .000 Petty cash fund 50.050.000 cash advances to employees coming of the revolving fund. Terms of three months or less is needed for this to be included as cash. it is not included in the cash balance.000 ***Since the compensating balance is not withdrawable.

000 Total cash and cash equivalents 4.250. Also.500. 3.000 Special Time Deposits 500.250. It should be part of cash if not legally restricted.750.250.000 Cash on hand 250.000 ***A compensating balance is the bank's minimum balance requirement that must be maintained in the company's bank account for servicing a checking or demand deposit account or in connection with a borrowing arrangement with the bank.000 Treasury bills 500. 3.000 of compensating balance against short-term borrowing arrangement which is not legally restricted as to withdrawal by the company.000 Solution Cash in Citi 3. the special deposits account pertains to cash legally restricted for machinery upgrades that is expected to be disbursed in 2012. Otherwise. it should be treated as other current or non-current asset depending on the loan or bank services it is related.Cash in Citi 3.000 Treasury Bills 500. There was no mention of any contrary statement for the Treasury bills so it should be assumed as maturing within 90 days. In the current assets section of Company's December 31.750.000 d.500.000 c.000 b. the total cash and cash equivalents should be a. 4. . 4.000 Cash in bank includes P500. 2011 balance sheet.000 Cash on hand 250.

6.000 Cash on hand (300. The cash on hand includes a P100. 2012.Checking 2.000 Treasury bills 3. 6.000 d.000 b.000.000-100.000 c. 8.300. If you are the Accountant of Bonifacio Holdings.2011: Cash in bank . 2011? a.000 ***The cash in bank set aside for payroll is included in cash because it is for the payment of current liability.000 The restricted cash in bank account is opened specifically for building construction expected to be disbursed in Q1 2012.Checking 2.000. The Treasury bills are purchased December 1.500. .500.000 Treasury bills 3. 6.Savings 700.000 Cash in bank .600.restricted 2.000 Cash in bank .000 Total cash and cash equivalents 6.65. 2011 and due on February 28.000 Cash in bank . The accountant of Bonifacio Holdings presented the following account balances as of December 31.700. 2012.000 Cash on hand 300. dated January 5.000.000 Solution Cash in bank .000) 200. what amount of "cash and cash equivalents" should be reported as of December 31.000 check payable to Bonifacio.600.600.Savings 700.

Cash on hand should be reduced by the postdated check. Treasury bills are classified as cash equivalent because the term is within the 90-day rule. but was mailed only on January 15. 960. 2004. The PDC amount should be considered still as accounts receivable. The Accounting Department produced the following data for Aguinaldo Company as of December 31.000 Collectibles balance 1.000 Petty cash fund balance 10.000 Cash in sinking fund 1. 2011: Checkbook balance 950. 980.000 b. On December 31.980.000 d.000. 2011.000 c. payable to supplier amounting to 20.000.960. 1.000 . The cash in bank restricted for building construction should be classified as a noncurrent investment hence not included in the computation. 66.000. how much should be reported as "cash and cash equivalents"? a. 2012. An investment qualifies as a cash equivalent only when it has a short maturity of three months or less from the date of acquisition.000 There was also a check drawn on Thor's account. 1. dated and recorded on December 31.

000 dated January 15. 5.500. 5.000.Solution Checkbook balance 950.000 + 50.000) 4.2012 in payment of accounts payable that was recorded and mailed on December 31.500.450.000 Petty Cash fund 10.000 Adjusted cash balance 980. What amount should be reported as "cash and cash equivalents" at the end of the year? a. had the following data related to its cash position: Checking Account Balance 4.000 b.000 Time deposit 4. There was a check amounting to P50.450. 2011.000 ***Undelivered cheques as of closing dates should be restored to the cash balance by debiting cash and crediting accounts payable. 67. 9.450. Inc.000 c.000 Add: Undelivered cheque balance 20.000 The time deposit is held for one year and is maturing on March 15. 9.000 Savings deposit 1.000.000 . 2011.000 Solution Checking Account (4. Mabini Wheelchairs.550.000 Petty cash fund 50. On December 31.000 Petty cash fund 50.000 d. The cash in sinking fund should be considered aa noncurrent investment because it is set aside for the payment of noncurrent liability.2012.500.

Finance 40. 2004 but delivered to payee on January 15. 68.Citibank 3.2011. in this case. Should the original term is 90 days or less.000 Total cash and cash equivalents 5. 1 year. 2012.000 Current account .000 dated January 31.000 and an employee check for P5. you should remember that the point of reckoning is the original maturity period which is. it should be treated as cash equivalents. 2011 balance sheet should report "cash and cash equivalents" at .Operations 20.000 is added back to checking account because it is a postdated check to a supplier delivered only on December 31. the trial balance of Diego Bantay Company reveals the following account balances: Petty cash fund . it is classified separately in the current assets as marketable securities. the Duetche Bank time deposit is set aside for plant expansion in February 2012.HSBC (overdraft) (250. And lastly.000.000 Note that the petty cash fund includes unreplenished December 2011 petty cash expense vouchers for P10.000) Money market placement .000 Current account .Duetche Bank 2. In this case.000.000 that was drawn against CitiBank current account dated and recorded December 29. On December 31.000 ***You have to catch the check of P50.000 Revolving fund .JP Morgan 2. 2005.000 Time deposit . although the time deposit is due within 90 days from balance sheet date.000. There's a check for P45.Savings deposit 1. The December 31.000. The time deposit is a noncash equivalent because the term is one year and because of that.500.

depreciation is treated as an adjustment to reported net earnings because depreciation a.000 Solution Petty cash fund (40. On the statement of cash flows in which the operating activities section is prepared under the indirect method.000. 5. If there is no contrary statements regarding money market placement. 3.000. time deposit and treasury bills in the problem given.10. d. however.000 + 45.5.000 c.000 Money market placement JP Morgan 2. 3. c. they are to be considered as short-term investment of three months or less.000 Revolving fund 20. Here is a tip.000 b.Citibank (3. Is an inflow of cash to a reserve account for replacement of assets.000 Total cash and cash equivalents 5.000 ***The bank overdraft in the HSBC is should be classified as current liability.000 d.a. b.090.045.060. it is a noncash expense item and as such does not affect .000 .000) 3. Reduces reported net earnings but does not involve an outflow of cash. Is a direct inflow of cash from investing activities.090. Note that money market placement is included.090.095. Reduces reported net earnings and involves an inflow of cash. Duetche Bank time deposit should be noncurrent asset because it is set aside for plant expansion on a future date. CASH FLOWS 69. ***Depreciation is deducted in the calculation of net earnings.000 .000 Current account .000) 25. 5.

cash. Therefore, it would be added back in to net earnings on the
statement of cash flows when using the indirect method.

70. The amortization of bond premium on long-term debt should be
presented in a statement of cash flows (using indirect approach for
operating activities) as a(n)

a. Addition to net income.
b. Deduction from net income.
c. Investing activity.
d. Financing activity.

***If bonds are sold at a discount or premium, the interest expense for
the period will differ from the change in cash resulting from payment
of interest expense. When the premium is amortized, the interest
expense included in income determination is not as large as the
interest paid or becoming payable in the period. Because the cash
outflow is larger than the deduction in arriving at net income, a
deduction from net income is necessary to determine cash provided
by operating activities (when using the indirect approach of
presenting cash flows from operating activities).

71. A loss on the sale of machinery in the ordinary course of business
should be presented in a statement of cash flows (using indirect
approach for operating activities) as a(n)

a. Outflow of cash.
b. Addition to net income.
c. Deduction from net income.
d. Inflow and outflow of cash.

***The loss decreases net income, but does not reduce cash.
Therefore, the loss must be added back to net income to determine
cash flows from operating activities.

72. Would the following be added back to net income when reporting
operating activities’ cash flows by the indirect method?

.......Excess of treasury stock acquisition cost over sales proceeds

(cost method) ................... Bond discount amortization
A. .............Yes ............................................................Yes
B. .............No ..............................................................No
C. .............No ..............................................................Yes
D. .............Yes .............................................................No

***Under the indirect method of reporting cash flows from operations,
income from continuing operations is adjusted for changes in
operating-related accounts and noncash expenses, revenues, losses,
and gains. Noncash items that were subtracted in determining net
income must be added back, including amortization of bond discount
since it is a charge against income but does not increase cash. The
excess of treasury stock acquisition cost would not be added back to
net income when determining operating activities' cash flows because
it represents a financing activity.

73. In a statement of cash flows in which the operating activities
section is prepared under the indirect method, a gain on the sale of
an investment in available-for-sale securities should be presented as

a. Inflow and outflow of cash.
b. Outflow of cash.
c. Addition to net income.
d. Deduction from net income.

***Any gain on the sale of an investment other than trading securities
should be included as part of the total proceeds reported in investing
activities. However, this gain has been included in net income. Under
the indirect method, net income is adjusted for items which affect
income but not cash. Therefore, the amount of the gain must be
deducted from net income to remove the book gain from the cash
flows from operating activities, thereby avoiding double counting the

74. In a statement of cash flows, interest payments to lenders and
other creditors should be classified as cash outflows for

a. Financing activities.
b. Lending activities.
c. Borrowing activities.
d. Operating activities.

***Interest payments to lenders and other creditors are expenses of
the company; hence, they are categorized as cash flows from
operating activities.

75. In a statement of cash flows, payments to acquire debt
instruments of other entities (other than cash equivalents) which will
be held until maturity should be classified as cash outflows for

a. Lending activities.
b. Investing activities.
c. Operating activities.
d. Financing activities.

***Investing activities include making and collecting loans and
acquiring and disposing of debt or equity instruments and property,
plant, and equipment. Cash flows from transactions in held-to-
maturity and available-for-sale securities are to be classified as cash
flows from investing activities. Conversely, amounts related to
securities held for trading are classified as operating activities.

76. Cheesecake Manufacturing Co. purchased a 3-month Treasury
bill. In preparing Cheesecake’s statement of cash flows, this
purchase would

a. Have no effect.
b. Be treated as an outflow from financing activities.
c. Be treated as an outflow from lending activities.
d. Be treated as an outflow from investing activities.

***On the statement of cash flows, the purchase of a 3-month
Treasury bill is an acquisition of a security; however, it is considered a
cash equivalent and thus would not be included in investing activities.
Take note that the exchange of cash for cash equivalents would result
in no net change in cash and cash equivalents.

Investing activities. as well as acquiring and disposing of debt or equity instruments of other entities..... plant..... Operating activities............ Financing activities........ ... . property.. In a statement of cash flows.. ... Yes C. Yes . b.......... proceeds from issuing equity instruments should be classified as cash inflows from a.. and equipment and other productive assets. Yes ............. 78..... Investing activity ..... Operating activities. In a statement of cash flows. Receipts from sale of property.... c. and equipment and other productive assets are categorized as cash flows from investing activities...... Lending activities.. Financing activities... c. b...... plant....... Investing activities include making and collecting loans....... d.. ...... No .. No D. No ... ***Involved here is PPE. which is a non-current asset...... Financing activity A. Selling activities..... and equipment and other productive assets should generally be classified as cash inflows from a.. The purchase for cash of treasury stock should be presented in a statement of cash flows as a(n) ....... 79. plant.. d..77....... receipts from sale of property...... No B.. The purchase of treasury stock would not be classified as an investing activity because treasury stock is a SHE item.. Yes ***Transactions which involve either an outlay of cash for treasury stock or an inflow of cash from the reissue of treasury stock shall be reported as a financing activity... Investing activities. .

..... c..... Interest payments on mortgage is an expense (hence operating).... 80... Interest payments on mortgage notes are included in cash outflows from operating activities because these payments are expenses and included in the determination of net income.... Yes .. Yes C... 81.. Investing activity A... No ... ..... II. No ... III. ....... Yes ... I and III. Proceeds from issuing equity instruments are specifically identified as cash inflows from financing activities. II and III.......... II... Yes ...... ***Payments to retire mortgage notes are considered cash outflows from financing activities.. In a statement of cash flows. Financing activities include obtaining resources from owners and providing them with a return on...... while dividend payments affect SHE............ Dividend payments. I only...... ... .... Interest payments on mortgage notes.... The retirement of long-term debt by the issuance of common stock should be presented in a statement of cash flows as a ... ***Mortgage Note is a long term liability. No D. I. d.............. No B. Financing activity ...***A SHE item. and a return of.......... Dividend payments are included in cash outflows from financing activities.... their investment. which of the following items is reported as a cash outflow from financing activities? I. a..... Payments to retire mortgage notes. b.... and III..

........ NO and NO B....................000) ***The answer is 260.... 110...................000 Add(Deduct) Rent received . YES and YES A..... 82....... Dividend payment is not included because it is a SHE item and therefore included under financing activities..000 Cash dividends paid ..........000) Taxes paid ..000 Rent received ...000 d. 10... The following information is available from Sand Corp.... not in the body of the statement........... P230..........................000......000 Taxes paid .......D......000 Cash paid to suppliers and employees ... ........... (110....000 Net cash flow provided by operations for 2008 was a...000 b....... P870.... 10...................... 30. P260.. P250.......000 Cash paid to suppliers and employees .... 510............000 Solution: Cash received from customers ..... YES and NO C.. 2009: Cash received from customers . P220...... P870. NO and YES ***Financing and investing activities which have no effect on cash flows shall be shown either in a separate schedule of noncash financing and investing activities or in narrative form in the footnotes..000 c.........’s accounting records for the year ended December 31............. (510..

75........100 Decrease in Prepaid Rent...........1... 4.............500 Net Income....... The increase in the allowance account is added to net income because it reflects an expense (bad debt expense) which was not a cash payment... P75..............................200 Mademoiselle’s 2009 net income is P75......................... 500 Prepaid rent expense ..700 b...................300 d.100 Accounts payable .000) Increase in Allowance for Uncollectible Accounts..............500 Allowance for U/A ..... 6...........200 ..... Net cash provided by operating activities in the statement of cash flows should be a................000 Add(Deduct) Changes in Working Capital Accounts: Increase in Accounts Receivable..... Finally.... the increase in AP is added because it also represents an expense (cost of goods sold) which was not yet paid....... P11......................... P14........ 9...............83..... December 31 Accounts receivable . 400 ....2... 11.000............ P74............. P75..500 Net Cash from Operating Activities is........700 The increase in AR is deducted from net income because it indicates that cash collected is less than sales revenue.... has provided the following 2009 current account balances for the preparation of the annual statement of cash flows: ACCOUNTS ..700 ..........100 Increase in Accounts Payable.....75. ........... P72........ January 1 ....... The decrease in prepaid rent is added because it too reflects an expense (rent expense) which was not a cash payment (it was an allocation of previously recorded prepaid rent).700 c.........500 ... Mademoiselle Co....(3......

.....000......000). Paid dividends of P600. and bank loan payment (P450.000 d......84.(125.175.....000 Purchase of machinery and equipment... included the following: Purchased real estate for P550.000......(550...000 toward a bank loan.......000) are financing activities. 2009.000 The bank borrowing (P550.... included the following: Paid P450..000. Romantic Corp. Issued 500 shares of common stock for P250.... Purchased real estate for P425.000 Purchase of real estate... Issued 500 shares of common stock for P250. 2009.... P50.000 b.500.000 cash which was borrowed from a bank..000 cash which was borrowed from a .... Matatag Corp... P175. Paid P450. issuance of stock (P250..000).....000) Sale of investment securities...... Purchased machinery and equipment for P125.000) Total cash used in investing activities..000 c. Romantic’s net cash used in investing activities for 2009 was a.....000 cash.....000 toward a bank loan....000.000 cash.... P375. 85.’s transactions for the year ended December 31. dividend payment (P600.. Purchased machinery and equipment for P125.000)...’s transactions for the year ended December 31... P675.. Sold available-for-sale investment securities for P500..

...000 86... The building cost P100...250.. Paid dividends of P300....... P31..................000 Net cash used in financing activities is................000 Accumulated Depreciation..... Sold available-for-sale investment securities for P325.000 decrease d...........(450..... P52.... In Hollyfield’s 2010 cash flow statement.... Hollyfield received a cash settlement from the insurance company and reported an extraordinary loss of P21.......000 Payments for bank loans................000 Dividends paid this year................000 at the time of the loss..100..000...75.................000) Issuance of 500 shares of common stock.......000 increase Building Cost......000 d............000 Extraordinary loss reported.000 decrease c..............000 c.. P1...000...............(300.......425..000 b.......... P75.........000 and had depreciated value of P48.... P500.....................000 .......000 Net book value.....000............ Matatag’s net cash used in financing activities for 2009 was a... the net change reported in the cash flows from investing activities section should be a a.... a tornado completely destroyed a building belonging to Hollyfield Corp....21.........000) Advances from Stockholder (used to buy real estate).........majority stockholder....52..48..... P21....000 increase b. In 2010. P750.... P10..350..

Net Cash provided from Operating Activities. During the year......000 on January 1.000.....000 ---------------------------------------------------------------------------- Net change in cash....................000 ========================================== 88... there was a sale of land that resulted in a gain of P25. During 2012.. Inc......000.. engaged in the following related party transactions: .......... and cash provided by financing activities of P250.........000 were received from the sale.. What was La0 Tze’s cash balance at the end of the year? Answer: P208......P27...P351......000 To calculate the cash balance at the end of the year..... and add the beginning cash balance..000 Net Cash used from investing activities........000) Net cash provided by financing activities........ La0 Tze Co.000 and proceeds of P40. and financing activities. Pampanga’s Good... had net cash provided by operating activities of P351... La0 Tze’s cash balance was P27........... 87...........000 ---------------------------------------------------------------------------- Ending Cash Balance................000.. investing...............000 Add: Beginning cash balance..000.Net cash flows from investing activities is 31......P208..... you should combine the effects of the changes in operating.(P420.P250...... net cash used by investing activities of P420...P181..

560.000 c.000.150.000. Petty cash fund > 70.850.225. The following unadjusted account balances have been reported on the financial statements by Marilag Biscuit Company on December while Accounts receivable balance is net of accounts with credit balances of 650.000. 12. The following unadjusted account balances have been reported on the financial statements by Tarlac Trucking Company on December 31.000. The total current assets for the Balance Sheet as of December 31. Petty cash expenses have not been replenished for 20.000. The Key management compensation transaction only b Both transactions c. Neither transaction 89. The Sales to Affiliated Companies transaction only d.000. Notes receivable > 3. Inventory > 2.000. 2012: Cash in bank 4. 12.000.950.000. 2012: Cash in bank > 4.000 d. 13. Notes receivable includes discounted note of 800.000 b. 14.000 90. 2012 should be a. Notes receivable 3.000. Cash in bank is net of a checking account’s bank overdraft amounting 250.Sales to affiliated companies >> 3. .000.510 Which of the two transactions would be disclosed as related party transactions in the Company’s 2012 financial statements? a.000. Deferred charges > 350. Accounts receivable > 5.730 Top management personnel compensation >> 2.

000 while Accounts receivable balance is net of accounts with credit balances of 650. Cash in bank is net of a checking account’s bank overdraft amounting 250. Accounts payable 2.000 b.000 Inventory. Deferred charges 350. 11. Accruals 1.400. Inventory 2.000 d. The total current liabilities to be reported as of December 31.000 c.200.500. What amount should the Company report as cost of goods sold on its year end Income Statement? a.Accounts receivable 5.000.500.000.000 91. 8.000 c.000. Notes receivable includes discounted notes of 800.000.500.000.000 b. 7. December 31 1.600.000.000. 2012 should be a.000.900.400. 8.000 . 9. 9.400.000. The following information is extracted from the accounting records of Great Year Company's in the computation of cost of goods sold: Inventory. 13.000.500.000 There was unexpected inventory obsolescence of recently purchased stocks due to technological advances that prompted the Company to writedown some of its inventories. January 1 5.000 Purchases Accounts payable is also net of accounts with debit balances of 500. 8.000 d.900. Notes payable 4.300.000.000 Loss on inventory writedown 1.

92.667 93. purchased on January 1. 633. Management has determined from recent appraisal reports that the expected remaining useful life of the facilities is only 10 years and the estimated residual value should be increased by 200. 2010. 2009. Building 12. In its audited financial statements for the year ended December 31. 536. 2012 the company decided to review the useful lives of the property.000 12 years Machinery 9.000. 2012. plant and equipment. the Company used the following original cost and useful lives for its property plant and equipment. The facilities. Marangal Furnitures Corporation was incorporated on January 1.000. for 7.333 c. plant and equipment and consequently hired independent valuation experts who can certify the remaining useful lives of the property. had been depreciated using the straight-line method with an estimated residual value of 500.500. 2011. On January 1.000.667 b. What is the depreciation expense that should be recognized for the year 2012? a. The results are as follows: Building 10 years Machinery 7 years Furniture 4 years The Company uses the straight line method of depreciation. the management of Milan Company determined that a revision in the estimate associated with the depreciation of plant facilities was necessary. 293.000.333 d. 586.000 10 years Furniture 3. .000 6 years On January 1.000 and an estimated useful life of 15 years.000.

000 c. 1.175.000 Unrealized gain on available for sale securities 350. 1. 1.200.475. 2.400.400.857 97.050.000 b.300.400. 1. Kuliglig Company provided the following income statement information relating to the current year: Net income 4. 2.528.000 b. Selected information from the accounting records of Mabini Company is as follows: Accounts receivable at January 1 1.000 Inventory at December 31 1.000 d.100.000 Inventory turnover 5 to 1 What was the gross margin for end of year? a.000 Accounts receivable at December 31 1.000 Surplus on revaluation 1.250.742.000 Account receivable turnover 6 to 1 Inventory at January 1 800. 5.000 98.200.500.000 The amount of recognized gains and losses for the current year should show net amount at a. 5.000 c.000 Debit balance foreign currency translation adjustment 75. 4.000 .000 b.200.571 d. 2.What is the amount of depreciation expense for 2012? a.

675.Kaperahan Corporation had the following account balances on December 31.000 99. the Company purchased plant equipment at a cost of 3. 2.100. What should be the Depreciation expense on this machine for the year 2012? a.000. 5. 350. 2013. 700. During the preparation of the Company’s 2012 financial statements. 5.000 c. Madel Corporation was established on January 1.000 Treasury bills 2.000 b.000 d.000 d. It is the Company policy that this equipment should be depreciated on the straight line method over a five-year period with no residual value.reserved 2.c. 2012: Cash in bank .500.000 for its expanding provincial operations. the error was discovered by the auditors.000 check payable to the Company.400.000 Cash in bank .payroll account 2. the newly hired accountant made an error not to recognize depreciation in the Company’s financial statements.current account 4. The cash in bank reserved is established for the purchase of custom-made equipment that is expected to be consummated in 2012. dated January 2. Treasury bills were purchased on November 30.000.000 The cash on hand includes a 100. In the year 2011.400.000 Cash in bank . 2013. What amount should be reported as "cash and cash equivalents" on December 31. On January 1. 2009.000. 2011.000 100.000 Cash on hand .525.500. 1. 2012 and are due on March 1. 2012? .

000 b.900.800.a.000 .900. 10.800.000 d.000 c. 10. 8. 8.