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St.

Vincents College Incorporated


National Federation of Junior Philippine Institute of Accountants
Qualifying Examination Review (Set 2)

Name:___________________________________ Date:_____________ Score:______________

Problem 1

The following schedule of liabilities were provided to you by the accountant of Sir Ong Incorporated in line with your
audit of various liabilities as of and for the period ended December 31, 2017:

Current Liabilities:
Accounts payable (note a) P 534,000
Premiums Payable (note b) 242,000 P 1,216,000

Noncurrent Liabilities:
10%, Bonds payable (note c) P 2,000,000
P 3,216,000

Furthermore, on January 1, 2017, Sir Ong Incorporated entered into a 10-year non-cancelable lease requiring year-end
payments of P 1M. Sir Ong incremental borrowing rate is 12%, while the lessors implicit rate, known to Sir Ong Inc. is
10%.
On the same date, Sir Ong Inc. paid an initial direct cost of P200,000 in negotiating and securing the leasing arrangement.
Ownership of the property remains with the lessor at expiration of the lease. There is no bargain purchase option. The
leased property has an estimated useful life of 12 years. This transaction was not disclosed in Sir Ong Inc. financial
statement. (Round off present value factors to 3 decimal places).

Audit Notes:
a. The purchase journal included the following transactions several days before and after December 31, 2017.

December Purchase Journal:


Purchase Invoice Date Receiving Report Number/ Date Amount Terms
December 26, 2017 1012/ Dec. 30, 2016 P 50,000 FOB Destination
December 28 1014/ Jan. 2, 2017 40,000 FOB Shipping Point
December 30 1015/ Jan. 2 35,000 FOB Destination
December 30 1017/ Jan. 4 25,000 FOB Shipping Point

January Purchase Journal


Purchase Invoice Date Receiving Report Number/ Date Amount Terms
December 29, 2017 1012/ Dec. 30, 2016 P 65,000 FOB Destination
December 30 1014/ Jan. 2, 2018 40,000 FOB Shipping Point
January 2, 2018 1015/ Jan. 2 30,000 FOB Shipping Point

b. The premiums payable balance was the accrued amount in December 31, 2016 for a promotional program the company
has started in 2016. For every 5 products labels the customer surrenders plus P50, the customer receives a specially
designed wall clock which the company purchases at a cost of P160/unit. Details about the said promotional program in
2016 and 2017 are as follows:
2016 2017
Sales in Units 50,000 60,000
Premiums purchased in units 3,000 6,000
Inventory of premiums at the end of each year 1,200 2,100

The company estimates that from the labels issued with products sold, 40% shall be presented for the said promotional
plan redemption.

c. The 10%, convertible bonds payable maturing on December 31, 2018, were issued on January 1, 2016 at P2,050,000.
The prevailing market interest of the bonds without the conversion option was at 12%. The bonds were convertible to
ordinary shares ( P1,000 bonds to 10, P50 par value ordinary shares). Interest are payable on the bonds annually every
December 31. On December 31, 2017 after payment of the annual interest which was recorded appropriately, half of the
bonds were converted to ordinary shares. The conversion is yet to be recorded by Sir Ong Inc. (Round off present value
factors to 5 decimal places).

Questions:

1. What is the correct accounts payable as of December 31, 2017?


a. P539,000 c. P604,000
b. P594,000 d. P564,000
2.What is the correct premium payable as of December 31, 2017?
a. P209,000 c. P143,000
b. P304,000 d. P171,000

3. What is the premium expense to be recognized in 2017 income statement?


a. P528,000 c. P451,000
b. P561,000 d. P429,000

4. What is the correct interest expense in 2017 on bonds payable?


a. P209,947 c. P206,942
b. P228,471 d. P231,888

5. What is the amount credited to share premium as a result of conversion of half of the bonds on December 31, 2017?
a. P555,179 c. P612,272
b. P539,236 d. P628,216

6. What is the carrying amount of the lease liability as of December 31, 2020?
a. P5,759,500 c. P4,335,450
b. P4,355,895 d. P4,868,995

7. What is the current portion of the lease liability as of December 31, 2019?
a. P513,100 c. P564,410
b. P566,455 d. P424,050

8. What is the carrying amount of the leased asset as of December 31, 2018?
a. P5,710,500 c. P3,807,000
b. P5,441,500 d. P5.076,000

Problem 2

AyawKawadAnUgPagAsa Inc. uses leases as a method of selling its products. In early 2017, AyawKawadAnUgPagAsa
Inc. constructs a passenger ferry for use between Dipolog and Dapitan. On April 1, 2017, the ferry was leased to
HapaPaTuonPa Inc. on a contract specifying that ferry will transfer to the lessee at the end of the lease period. The ferry is
expected to be economically useful for 25 years. Annual lease payments do not include executory costs. Other terms of
the agreement are as follows:
Original Cost of the Ferry P1,500,000
Lease Payment 225,000
Estimated residual value 78,000
Implicit rate 10%
Date of first lease payment April 1, 2017
Lease Period 20 years

9. What is the total financial revenue that will be earned by the lessor over the lease term?
a. P2,392,897 c. P2,392,987
b. P2,107,103 d. P2,107,130

10. What is the interest expense to be reported in 2017 income statement?


a. P141,158 c. P158,033
b. P210,710 d. P188,210

Problem 3

SaligLangJudNiGod Corp. is selling audio and video appliances. The companys fiscal year ends on March 31. The
following information relates to the obligation of the company as of March 31, 2017:

Notes payable
SaligLangJudNiGod Corp has signed several long term notes with financial institutions. The maturities of these notes are
given below. The total unpaid interest for all of these notes amounts to P340,000 on March 31,2017.

Due date Amount


April 31, 2017 P600,000
July 31, 2017 900,000
September 1, 2017 450,000
February 1, 2018 450,000
April 1, 2014- March 31, 2015 2,700,000
5,100,000
Estimated Warranty
SaligLangJudNiGod Corp. has one-year product warranty on some selected items. The estimated warranty liability on
sales made during the 2015-2016 fiscal year and still outstanding as of March 31, 2016, amounted to P252,000. The
warranty cost on sales made from April 1, 2016 to March 31, 2017, are estimated at P630,000. The actual warranty costs
incurred during 2016-2017 fiscal year are as follows:

Warranty claims honored on 2015-2016 sales P252,000


Warranty claims honored on 2016-2017 sales 285,000
537,000

Trade payables
Accounts payable for supplies, goods and services purchases on open account amount to P560,0000 as of March 31, 2017.

Dividends
On March 10, 2017, SaligLangJudNiGod Corp board of directors declared a cash dividend of P 0.30 per ordinary share
and 10% ordinary share dividend. Both dividends were to be distributed on April 5, 2017 to ordinary shareholders on
record at the close of business on March 31, 2017. As of March 31, 2017, lures has 5 Million, P2 par value, ordinary
shares issued and outstanding.

Bonds payable
SaligLangJudNiGod Corp. P5,000,000, 12% bonds, on October 1, 2011 at 96. The bonds will mature on October 1, 2021.
Interest is paid semi-annually on October 1 and April 1. SaligLangJudNiGod Corp. uses the straight line method to
amortize the bond discount.

Questions:
Based on the foregoing information, determine the adjusted balances as of march 31, 2017:

11. What is the estimated warranty liability?


a. P 93,000 c. P345,000
b. P285,000 d. P597,000

12.What is the unamortized bond discount and Bond interest payable?


a. P90,000 and 0 c. P100,000 and 0
b. P90,000 and 300,000 d. P100,000 and 300,000

13. What is the total current liabilities?


a. P4,805,000 c. P5,445,000
b. P5,105,000 d. P4,765,000

14. What is the total noncurrent liabilities?


a. P4,910,000 c. P7,910,000
b. P7,610,000 d. P10,355,000

Problem 4

MasterTheBasic Company provided the following information for 2017:


January 1 December 31
Fair value of Plan Assets P 2,600,000 3,000,000
Projected Benefit obligation 2,000,000 2,100,000
Asset Ceiling 200,000 300,000

Current service Cost P 100,000


Contribution to the plan 350,000
Benefits paid 150,000
Discount rate 10%

Questions:
Based on the above information, compute the following balances in 2017:

15. What is the employee benefit expense?


a. P40,000 c. P160,000
b. P80,000 d. P 60,000

16. What is the net remeasurement gain or loss?


a. (P170,000) c. P170,000
b. (P200,000) d. P200,000

17. What is the actual return on plan assets?


a. P200,000 c. P150,000
b. P 0 d. P350,000

18. What is the actuarial gain due to decrease in PBO?


a. P100,000 c. P150,000
b. P 50,000 d. P200,000

19. What is gain on change on effect of asset ceiling?


a. P160,000 c. P 0
b. P 60,000 d. P50,000

Problem 5

The following information relates to the defined benefit pension plan pf the FocusLangJud Company for the year ending
December 31, 2017:

Projected Benefit obligation, January P 9,000,000


Fair value of plan assets, January 1 8,000,000
Service Cost 1,000,000
Expected return on plan assets 900,000
Employers contributions 850,000
Benefits paid to retirees 800,000
Increase in PBO due to changes in actuarial assumptions 160,000
Discount Rate 10%

20. What is the amount to be recognized in 2017 P/L?


a. P1,000,000 c. P1,100,000
b. P1,900,000 d. P 200,000

21. What is the amount to be recognized in 2017 OCI?


a. P50,000 gain c. P110,000 loss
b. P50,000 loss d. P110,000 gain

22. What is the increase in prepaid/accrued benefit expense at December 31, 2017?
a. P410,000 c. P1,000,000
b. P140,000 d. P1,140,000

Problem 6

On December 31, 2017, the accounts of SaligLangSaKaugalingon Company have basis for accounting and tax purposes,
except:
Carrying Amount Tax base Difference
Computer Software P 4,000,000 P 0 P 4,000,000
Building 47,500,000 45,000,000 2,500,000

In January 2017, SaligLangSaKaugalingon incurred cost of P5,000,000 for the development of a computer software
product. Considering the technical feasibility of the product, this cost was capitalized and amortized over 5 years period
for accounting purposes using the straight-line method.

The building was acquired on January 1, 2017 for P50,000,000 and depreciated using the straight-line method at 5% for
accounting purposes and 10% for tax purposes.

In January 2018, SaligLangSaKaugalingon entered into an agreement with the employees to provide health care benefits.
The cost of such plan for 2018 is P2,000,000. This amount was accrued as expense in 2018 for accounting purposes.
However, health care benefits are deductible for tax purposes only when paid.

The reported pretax accounting income for the years 2017 and 2018 were P10,000,000 and P15,000,000 respectively. The
income tax rate is 30%.

23. What is the current tax expense in 2018?


a. P3,450,000 c. P4,500,000
b. P1,050,000 d. P4,650,000

24. What is the deferred tax liability as of Dec. 31, 2018?


a. P2,400,000 c. P1,650,000
b. P1,950,000 d. P1,140,000

25. What is the Net Deferred Tax expense in 2018?


a. P 150,000 c. P 900,000
b. P1,950,000 d. P1,000,000

Problem 7

DasigLang Company reported a net income for the current year 2017 at P5,000,000 before taxes. The income tax rate is
40%. Included in the determination of the said income were:

Permanent differences
Non-deductible expenses P 150,000
Non-taxable expenses 50,000

Temporary differences at the beginning of the year:


Cumulative temporary difference creating future deductible amount P 1,200,000
Cumulative temporary differences creating future taxable amount 800,000

Temporary differences at the end of the year:


Cumulative temporary difference creating future deductible amount P 1,600,000
Cumulative temporary differences creating future taxable amount 500,000

26. How much is the current tax expense?


a. P2,000,000 c. P2,320,000
b. P1,650,000 d. P2,040,000

27. What is the total tax expense?


a. P2,000,000 c. P2,320,000
b. P1,650,000 d. P2,040,000

28. What is the DTA and DTL in 2017 Balance Sheet?


a. P 640,000 and 200,000 c. P480,000 and 320,000
b. P160,000 and 120,000 d. P640,000 and 320,000

Problem 8
The equity section of the balance sheet of CPALagiTaPuhon Company on December 31,2017 shows the following items:

6% cumulative preference share capital, P100, par value


(liquidation value, P115 per share); authorized, 6,000 shares;
Issued 4,000 shares; in treasury, 600 shares P 400,000
Ordinary share capital, P100 par value authorized, 20,000 shares;
Issued and outstanding, 8,000 shares 800,000
Share Premium- Preference Share 150,000
Share Premium- Ordinary Share 165,000
Retained Earnings 458,600
Reserve for Bond retirement 320,000
Treasury shares-preference at cost (84,000)
Total 2,209,600

29. What is the book value per share of ordinary?


a. P121.00 c. P223.70
b. P224.78 d. P223.65

30. Assuming the preference share is participating, the book value per share of ordinary is?
a. P204.00 c. P233.70
b. P189.35 d. P187.56

Problem 9
The shareholders equity section of SakripisyoKaronKalipayUgma Corporations statement of financial position as of
December 31, 2017 is presented below:
Ordinary share Capital, P50 par value, 120,000 shares issued
of which 10,000 shares held in treasury P 6,000,000
8% Convertible cumulative and participating preference share
Capital 20,000 shares issued and outstanding,P100 par value 2,000,000
5% Convertible bonds payable 4,000,000
Share premium-preference 600,000
Share premium-ordinary 400,000
Retained earnings appropriated for treasury shares 450,000
Retained earnings unappropriated 1,240,000
Treasury shares-ordinary, at cost 450,000
Share options to purchase 20,000 shares at P15 were outstanding. Market price of share was p22 on December 31,2017
and averaged P20 during the year. The fair value of each share option is P3.

The preference shares are convertible into 50,000 ordinary shares. The 55 convertible bonds payable are convertible into
15 ordinary shares for 1,000 bond. The net income for the current year was P650,000. The income tax rate is 30%.only
current year dividend id undeclared.

31. What is the book value per ordinary share?


a. P67.32 c. P136.53
b. P68.27 d. P135.20

32. What is the book value per preference share?


a. P67.32 c. P136.53
b. P68.27 d. P135.20

33. What is the basic earnings per share?


a. P4.45 c. P6.10
b. P4.01 d. P6.13

34. What is the diluted earnings per share?


a. P3.56 c. P3.59
b. P3.58 d. P3.60

Problem 10
Rommel Regor, president of QEAndamNako Company, has a bonus arrangement with the company under which he
receives 10% of the net income (after deducting bonuses and taxes) each year. For the current year, the net income before
deducting either the provision for income taxes or the bonus is P4,650,000. The bonus is deductible for tax purposes, and
the tax rate is 30%.

35. What is the amount of Rommel Regors bonus?


a. P304,206 c. P304,260
b. P340,206 d. P340,260

Problem 11
On December 31, 2017, DapatRelaxNaSunday Company acquired a piece of equipment from ParaDiliMaMentalBlockby
issuing a P1,200,000 note, payable in full on December 31, 2021. DapatRelaxNaSunday Companys credit rating permits
it to borrow funds from several lines of credits at 10%. The equipment is expected to have a 5-year life and P150,000
salvage value.(Round off present value factor to 5 decimal places).

36. What is the equipments book value on December 31, 2019?


a. P551,767 c. P491,767
b. P630,000 d. P341,767

37. What is the carrying value of the note at December 31, 2019?
a. P1,090,903 c. P1,200,000
b. P 991,730 d. P 819,612

Problem 12

On January 1, 2017, BugsayPa Company issued 5,000 of its 5-year, P1,000 face value, 11% bonds dated January 1 at an
effective annual interest rate (yield) of 9%. Interest is payable each December 31. BugsayPa Company uses the effective
interest method of amortization. On December 31, 2018, the 3,000 bonds were extinguished early through acquisition in
the open market for P2,970,000 plus accrued interest.

38. What is the issue price of the bonds on January 1, 2017?


a. P5,388,835 c. P5,282,135
b. P4,630,655 d. P5,000,000

39. What is the carrying amount of the bonds on December 31, 2017?
a. P4,755,930 c. P5,323,830
b. P5,453,840 d. P5,000,000

40. What is the gain on early retirement of the bonds on December 31, 2018?
a. P116,442 c. P181,785
b. P266,811 d. P 0
Problem 13
On January 1, 2017, AyawAbusariAngLawas Company granted 100 share appreciation rights to each of the 300
employees on condition that the employees remain employed in the entity for the next three years.

No employees left the entity during the three-year vesting period. The employees exercised their appreciation rights as
follows:
December 31, 2019 50 employees
December 31, 2020 150 employees
December 31, 2021 100 employees

The fair value and intrinsic value of the share appreciation right are as follows:

Fair Value Intrinsic Value


December 31, 2017 10
December 31, 2018 12
December 31, 2019 15 10
December 31, 2020 18 15
December 31, 2021 20
The intrinsic value of the share appreciation rights on the date of exercise is the amount paid out to the employees.

41. What is the compensation expense on December 31,2020?


a. P140,000 c. P30,000
b. P185,000 d. P20,000

42. What is the compensation expense on December 31,2021?


a. P140,000 c. P30,000
b. P185,000 d. P20,000

43. What is the accrued salaries payable as of December 31,2018?


a. P240,000 c. P180,000
b. P375,000 d. P 0

44. What is the accrued salaries payable as of December 31,2019?


a. P240,000 c. P180,000
b. P375,000 d. P 0

Problem 14
On Year 1, AmpoLang Company granted to an employee the right to choose either 1,000 phantom shares (i.e., right to
cash payment equal to the value of 1,000 shares) or 1,200 shares with a par value of P10 per share. The grant is
conditional upon the completion of three year service. If the employee choses the share alternative, the share must be held
for three years after vesting date.

At grant date, the entitys share price is P50 per share. At the end of Year 1, 2 and 3, the share price is P52, P55, P60,
respectively. The entity does not expect o pay dividends in the next three years. After taking into account the effect of
post-vesting transfer restrictions, the entity estimated that the grant date fair value of the share alternative is p48 per share.

Based on the preceding information, answer the following questions:

45. What is the compensation expense in year 2?


a. P19,866 c. P21,866
b. P25,868 d. P19,333

46. What is the compensation expense in year 3?


a. P19,866 c. P21,866
b. P25,868 d. P19,333

47. If employee has chosen cash alternative, the amount to be paid at the end of year 3 should be?
a. P55,600 c. P67,600
b. P60,000 d. P55,000

48. If employee has chosen share alternative, the amount of share premium is?
a. P55,600 c. P67,600
b. P60,000 d. P55,000

Problem 15

Employees are each entitled to 10 working days of paid sick leave for each year. Unused sick leave may be carried
forward for one calendar year only.
Sick leave is taken out of any balance brought forward from the previous year and then out of the current years
entitlement on a FIFO basis.

During 2017, the sick leave records of key employees C, P, A are as follows:
C P A
Daily wage 1,000 1,500 2,000
Unused Sick Leave on January 1, 2017 8 4 2
Sick Leave earned in 2017 10 10 10
Sick Leave taken in 2017 6 6 8
Wage increase effective January 1, 2017 5% 10% 15%

49. What is the accrued sick leave as of December 31, 2017?


a. P32,900 c. P32,000
b. P35,000 d. P35,900

Problem 16
A partial list of accounts and the ending account balances taken from the post-closing trial balance of GodBlessToMe
Company on December 31, 2017 is shown below:
Accumulated profits P 410,000
Bonds Payable 220,000
Ordinary shares subscribed 50,000
Long term investment shares 210,000
Share premium on Ordinary shares 460,000
Premium on bonds payable 30,000
Ordinary shares 400,000
Preference share subscribed 45,000
Share premium on preference share 112,000
Preference shares 300,000
Gain on sale of treasury shares 4,000
Unrealized increase in the
value of securities at FV-OCI 3,000
Ordinary share option outstanding 15,000
Ordinary share warrants outstanding 5,000
Subscription Receivable-OS (Current) 10,000
Subscription Receivable-PS (Current) 5,000

50. What is the total shareholders equity as of December 31, 2017?


a. P1,789,000 c. P1,777,000
b. P1,786,000 d. P1,804,000

END OF THE EXAMINATION!

GOD BLESS!

There are things we regret words we wish had gone unsaid, starts that have bitter
endings, chances we threw away, roads we should have never taken signs we didnt see,
hearts we hurt needlessly and wounds we wish we could heal. But life gets much harder,
the past cant be rewritten but it can make you stronger. Be thankful for every break in
your heart, for every scar has marked you. Some pages were turned, some bridges were
burned, but then again, you have moments to cherished and important lessons to learn.

-EJ, CPAing