EASY

1. It is one of the basis for determining impairment loss. It is the present value of
discounted value of future cash flows expected to be derived from an asset.
What is it? Value in use

2. A Qualifying asset is an asset that necessarily takes a substantial period of time to get
ready for its intended use or sale.

3. Theoretically, receivables and payables are presented in the balance sheet at discounted
value. If receivables are short-termed they are presented at face value. What is the
principle that justifies the presentation at face value? Materiality

4. Non-current assets acquired with the intention of leasing or renting them out are called
investment properties.

5. On January 1, 2006, the balance sheet of Jazz Comp showed total assets of P7,000,000,
total liabilities of 3,000,000 and retained earnings of 400,000. During the year the
corporation issued 20,000 shares atP125 per share. Dividend were paid amounted to
P450,000. The balance sheet at the end of 2006 showed totals assets of P8,300,000 and total
liabilities of P4,000,000.

The result of operations during the year is (1,750,000). Enclosed in parenthesis if loss.

6. The following changes in account balances of Manhattan Corp. during 2006 were
Presented below:

Assuming there were no changes to retained earnings other than for dividend payment
of P500,000, the net income or (loss) for the year 2006 is (1,000,000).

7. The partnership of LD Company had a net income of P8,000.00 for the month ended
September 30, 2005. Sarsi purchased an interest in the LD Company of Liz and Dick by
paying Liz P32,000 for half of her 50% profit sharing interest on October 1, 2005. At this
time Liz capital balance was P24,000 and Dick capital balance was P56,000. Liz should
receive a debit to her capital account of 12,000.

8. The following information is available for Al Jarreau Corp. for the year 2006.

Cost of goods sold for the year is 5,300,000.

9. In January 2002, Lee Rit Company purchased a machine for P2,640,000 and depreciated it
by the straight lime method using and an estimated life of 8 years with no salvage. On
January 1, 2006, Lee Rit determined that the asset had a useful life of 10 years and a
salvage value of 40,000.
The accumulated depreciation at the end of the year 2007 is 1,746,666.
 10. During 2006, Patti Austin Corporation decided to change from LIFO to FIFO to conform
with the new Philippine Accounting Standards. Inventory balances under each method
were as follows:

Ignoring income tax, in its 2006 statement of changes in equity, retained earnings
beginning should be increased or decreased by 800,000 (enclosed in parenthesis if decreased).

AVERAGE
1. Larry Carlton Company had net income of 2,800,000 for the year ended December 31,
2006 after giving effect to the following events which occurred during the year.
The decision was made on May 1, 2006 to discontinue the meat packing segment. The
meal packing segments assets was sold on February 20, 2007. Operating gain from
January 1, 2006 to April 30, 2006 was 400,000. From May 1 to December 31, 2006, the gain
is 200,000, January 1 to February 15, 2007, operating loss of P100,000. Impairment loss
was recognized at December 31, 2006 at 200,000. The tax is 35%.

The income from continuing operation is 2,540,000.

2. Total debits and total credits in selected accounts of Chick Company, after closing entries
were posted on December 31, 2006 are given below:

What is the cost of ending inventory? 870,000.

3. In its first year of operations, Good Companys sales were as follows:

The cost of goods sold for the year was P900,000. If collection on installment during the
year amounted to P240,000, how much was the total gross profit realized at the end of the
year? 230,000.

4. Stan Getz Corporation and its division are engaged solely in manufacturing. The
following data presents the operating profits and losses of the segments:

A segment is reportable if the operating profit or loss of a segment is at least 680,000.

5. Tony Bennett Companys 1,200,000 net income for the quarter ended June 30, 2006,
included the following after-tax items:
 A 205,000 gain from change in accounting policy recognized in April. Loss due to
earthquake on January 20, P400,000 was allocated equally during the year. In addition
Tony Bennett paid P480,000 commissions to sales employees due to excellent
performance in the third quarter, was allocated equally during the year.
The corrected income for the quarter ended June 30, 2006 is 1,170,000.

6. On November 15, 2005, Hurly of Manila, ordered merchandise FOB shipping point from
Nippon Company of Japan for 500,000 yen. The merchandise was shipped and invoiced
to Hurly on December 10, 2005. Hobbies paid the invoice on January 10, 2006. The
exchange rates for yens on the respective dates are as follows:

In Hobbies December 31, 2005 income statement, the forex gain (loss) to be reported is 5,000.

7. On January 2, 2009, Haraya Company Purchased 10% of Ross Companys outstanding

common shares for P5,000,000. Haraya is the largest single shareholder in Ross reported
net income of P3,000,000 and paid dividends of P1,000,000. In its December 31, 2009
balance sheet, what amount shall Haray report as investments in Ross? 5,200,000.

8. A branch store in Cagayan was established by Marco on March 1. Shipments of

merchandise billed to this branch at 125% of cost, were as follows: March 5, P120,000;
March 10, P50,000; and March 20, P35,000.
On March 24, the branch returned defective merchandise worth P3,050 and on March 31,
it reported a net loss of P6,200 and merchandise inventory of P85,000. In the home office
books, the branch net income (loss) is 17,190.

9. Katherine Company was incorporated on January 1, 2009, with P4,000,000 form the
issuance of stock and borrowed funds of P1,000,000. During the first year of operations,
net income was P3,000,000. On December 15, Katherine paid a P2,000,000 cash dividend.
No additional activities affected owners equity in 2009. At December 31, 2009, balance
sheet, total assets should be reported at 7,000,000
10. Information on Rex Companys direct material-costs for May 2006 is as follows:

Actual quantity of direct materials purchase and used 30,000 kilos

Actual cost of direct materials P84,000.00
Unfavorable direct materials usage variance P 3,000.00
Standard quantity of direct materials allowed for May production. 29 kilos

For the month of May, what was Rexs direct materials price variance? 6,000 favorable.

DIFFICULT
1. On January 2, 2006, JC Company established a non-contributory defined benefit plan
covering all employees and contributed P1,000,000 to the plan. At December 31, 2006, JC
determined that the 2006 current service and interest cost on the plan amount to
P620,000. The expected and actual rate of return on plan assets for 2006 was 10%.
What should be reported on December 31, 2006 as prepaid pension cost? 480,000.

2. An analysis of the records of a proprietor disclosed the changes for the year 2006 and the
supplementary data listed below:
 During 2006, the proprietor borrowed P1,000,000 in notes from the bank and paid off
notes of 600,000 and interest of 120,000. Interest of 60,000 is accrued at the end of 2006. There
was no accrued interest on notes payable at the beginning of the year.

In 2006, the proprietor paid obligations of the business worth 400,000 and made withdrawals
of 250,000.
What is the net income or (loss) for the year 2006? (210,000).

3. True Value Company manufactured electric drills to the exact specifications of various
customers. During April 2005,Job 403 for the production of 1,100 units was completed at
the following costs per unit:

Direct materials P10

Direct labor 8
Applied factory overhead 12

Finished inspection of Job disclosed 50 defective units and 100 spoiled units. The
defective units were reworked at a total cost of P500, and the spoiled units were sold to
an employee for P1,500.
What would be the unit cost of the good units produced on Job? P32.

4. On April 1, 2009 Geraldine began operating a service proprietorship with an initial cash
investment of P500,000. The Proprietorship provided P1,000,000 of service in April and
received full payment in May. The proprietorship incurred expenses of P400,000 in April
which, were paid in June. During May, Geraldine drew P100,000 against the capital
account. What was the proprietorship income for the two months ended May 31, 2009
under the cash basis 1,000,000.

5. Green Company provided the following information with respect to its defined benefit
plan for the year 2006.

Projected benefit obligation

January 1 3,000,000
December 31 3,500,000
Contribution to the plan 600,000
Benefits paid to retirees 500,000
Settlement discount rate 10%

What is the current service cost for the year 2006? 700,000.