SOLUTION FOR PROBLEMS

MOCK SQE- BASIC ACCOUNTING

41 Unearned Revenue, beginning 30,000.00

Unearned Revenue, ending 11,000.00
Revenue earned during the period 19,000.00

Entry:
Unearned Revenue 19,000.00
Revenue 19,000.00
Answer: A

42 Advertising Expense, unadjusted 990,000.00

Adjustments:
(1) Accrued Advertising Expense 50,000.00
(2) Prepaid Advertising - not yet consumed (60,000.00)
Advertising Expense for the year ended 12/31/15 980,000.00
Answer: C

43 Salaries Expense none

Post-closing trial balance contains only REAL accounts. This is prepared after closing entries have been journalized and
Answer: D

Probability of non-
44 Days past due Amount collection
Not yet due 108,395.00 1%
1-30 days past due 16,340.00 10%
31-60 days past due 8,500.00 50%
61-90 days past due 3,600.00 90%
More than 90 days past due 2,400.00 100%
Total Accounts Receivable 139,235.00

Total Accounts Receivable 139,235.00

Less: Account written-of 2,400.00 Write-of
Required allowance for bad debts 10,207.95
Net Accounts Receivable 126,627.05
Req'd credit bal.
Answer: A (Note: Round of your answers to the nearest peso)

45 Face value of Note Receivable 13,000.00

Multiply by: Interest rate 10%
Annual interest 1,300.00
Multiply by: Time (in years) 0.375
Interest Income not recorded 487.50
Answer: C
46 Office Supplies Expense not recorded 15,000.00
Unexpired portion of Prepaid Insurance not taken up (7,875.00)
Depreciation Expense not taken up 12,500.00
Unearned portion of Rent Revenue 6,800.00
Interest Expense not accrued 3,000.00
Overstatement in 2015 net income 29,425.00
Answer: C

47 Total Gross Pay 54,500.00

Less Personal deductions
Withholding taxes 4,543.00
SSS- Employee's share 908.30
PHIC- Employee's share 550.00
Pag-ibig- Employee's share 550.00
Credit to Cash in Bank (debit memo) 47,948.70
Note: Employer's shares of SSS, PHIC and Pag-ibig contributions are expenses of the business and are NOT deducted fro
Answer: B

48 Invoice Price 113,600.00

Less: Purchase discount availed 1,136.00
Total Cash payment for the purchase on account 112,464.00
Add: Freight-in (FOB shipping point, freight PREPAID) 1,530.00
Credit to Cash 113,994.00

49 Total VATable Sales 594,124.25

Total VAT exempt Sales 191,535.05
Total Sales 785,659.30

Total Cash sales 785,659.30

Add: 12% VAT (VATable Sales only)- Output VAT 71,294.91
Total Cash received 856,954.21
Answer: A

50 Invoice price, inclusive of 12% VAT 112% 185,000.00

Less VAT (Output Tax) 12% 19,821.43
Sales 100% 165,178.57
Answer: B

51 Invoice price, inclusive of 12% VAT 112% 185,000.00

Less VAT (Input Tax) 12% 19,821.43
Sales 100% 165,178.57
Answer: B
52 No entry needed. When perpetual inventory system is used, Cost of Sales is debited and Merchandise Inventory is credi
No adjustments are necessary unless there are errors.
Answer: E

53 Net sales 5,637,200.00

Less: Cost of Sales (1) 1,241,360.00
Gross Profit 4,395,840.00
Less: General and Administrative Expenses 515,300.00
Selling Expenses, other than Delivery Expenses 493,040.00
Freight-out 17,950.00
Net Income before tax 3,369,550.00
Income taxes (30%) 1,010,865.00
Net Income 2,358,685.00
Answer: B

54 Item Ricial Christopher

Interest: 2% on Average Capital Balance 106,658.20 72,425.00
Salaries 300,000.00
Remaining Profit P1,879,601.80 (60%; 40%) 1,127,761.08 751,840.72
Total 1,234,419.28 1,124,265.72
Answer: A

55 Ricial, Capital, Jan. 1, 2016 6,649,829.28

Christopher, Capital, Jan. 1, 2016 4,645,515.72
Total Partnership Capital, Jan. 1, 2016 11,295,345.00
Divide by: Proportion of ownership of Ricial and Christopher 80%
Agreed Capital of new partnership 14,119,181.25
Nathaniel's interest in the new partnership 20%
Nathaniel's cash contribution 2,823,836.25
Answer: C

56 Bajang, Capital, unadjusted 33,000.00

Adjustments:
Provision for doubtful accounts (426.00)
Increase in value of Merchandise Inventory 3,000.00
Recognition of prepaid salary expense 600.00
Recognition of accrued rent expense (800.00)
Bajang, Capital, adjusted 35,374.00
Divide by: Bajang's interest in the partnership 2/3
Total agreed capital 53,061.00
Grace's interest in the partnership 1/3
Grace's cash contribution 17,687.00
Answer: C
 Proportionate
Balances before deduction in
Partners Patrick's capital (100%-
admission 20%)
57
Ellaine 252,000.00 80%
Jessica 126,000.00 80%
Mary Vee 42,000.00 80%
Answer: B

58 Items Amber (40%) Danica (30%)

Capital balances, before liquidation 48,000.00 216,000.00
Share in loss on realization 48,000.00 36,000.00
Capital balances, after liquidation- cash distribution - 180,000.00
Answer: A

59 Items Cash Non-cash assets

Balances before liquidation 2,000.00 61,000.00
Sale of non-cash assets and distribution of loss 23,200.00 (61,000.00)
Balances 25,200.00 -
Payment of liabilities (3,000.00)
Balances 22,200.00
Redistribution of losses- debit balances
Feve- to Katrina and Vanessa (4:6)
Jamel- to Katrina and Vanessa (4:6)
Final balances- Cash distribution to partners (22,200.00) -
Answer: D

60 Share Capital Ord. shares Pref. shares

Balances 3,000,000.00 2,550,000.00
Divide by: Par/stated value 50.00 15.00
No. of shares issued and outstanding 60,000 170,000
Answer: A

61 Par value, Ordinary share capital before split 10.00

Multiply by: one-for-five share split 5
Par value, Ordinary share capital after split 50.00
Answer: C

62 Entry:
Cash 190,000.00
Treasury Shares 120,000.00
Paid-in Capital from Treasury Shares 70,000.00
Answer: D

63 Issuance of share capital, Jan. 4, 2014 1,500,000.00

 Accumulated profits, 2014-2015 450,000.00
Dividend payout (230,000.00)
Acquisition of treasury shares, April 8, 2015 (72,000.00)
Reissuance of treasury shares, August 11, 2015 32,000.00
Total Shareholders' Equity 1,680,000.00
Note: Retirement of treasury shares does not affect total shareholders' equity
Answer: A

64 2015 Events/Transactions No. of shares outstanding

January 2: no. of shares outstanding 600,000
April 21: declaration of 10% share capital dividend 60,000
May 31: reacquisition 200,000 shares (200,000)
August 11: reissuance of 100,000 shares 100,000
Total shares outstanding prior to share split 560,000
Dec 30: declaration of two-for-one share split 2
Dec 31: no. of shares outstanding 1,120,000
Answer: A

65 No. of shares outstanding, Jan. 1, 2015 220,000.00

Reacquisition of shares, Aug. 11, 2015 (20,000.00)
Total shares outstanding 200,000.00
Declaraction of share capital dividend- 10% 10%
Total shares distributable 20,000.00
Multiply by: Fair value per share (small share capital div) 20.00
Debit to Retained Earnings, Oct. 29, 2015 400,000.00

66 Retained Earnings, Dec. 31, 2014 5,000,000.00

Profit for 2015 1,500,000.00
Declaration of cash dividend (750,000.00)
Declaration of SMALL SHARE CAPITAL DIVIDEND
Increase in Ordinary Share Capital (100,000.00)
Increase in Ordinary Share Premium (400,000.00)
Retained Earnings, Dec. 31, 2015 5,250,000.00
Answer: D

67 Total Shareholders' Equity 10,250,000.00

Less: Equity attributable to preference shareholders
Preference Share Capital, cumulative 2,500,000.00
Liquidation Premium 500,000.00
Dividends in arrears 250,000.00
Equity attributable to ordinary shareholders 7,000,000.00
Divide by: Ordinary shares outstanding 100,000
Book value per ordinary share 70.00
Answer: D
68 Net income 1,920,000.00
Net income attributable to preference shareholders 200,000.00
Net income attributable to ordinary shareholders 1,720,000.00
Divide by: Ordinary shares outstanding 220,000.00
EPS 7.82

69 No change. Appropriation of retained earnings does not affect total retained earnings.
Answer: D

70 Preference Ordinary
Dividends in arrears 160,000.00
Current dividends 80,000.00 220,000.00
Balance for participation
Preference: (P1M*12%-8%) or P540K * 1M/3.75M,
whichever is lower 40,000.00
Ordinary: balance 500,000.00
Total 280,000.00 720,000.00
es have been journalized and posted.

1,083.95
1,634.00
4,250.00
3,240.00
to be written of
10,207.95

Allow. For Bad Debts

2,400.00 4,550.00 beg. Bal
8,057.95 Bad debts Expense

10,207.95
ness and are NOT deducted from employee's salaries.
Merchandise Inventory is credited for every sale transactions.

(1) Cost of Sales: (2) Net Purchases

Beginning Inventory 825,675.00 Invoice Price
Add: Net Purchases (2) 1,100,885.00 Freight-in
Cost of Goods available for sale 1,926,560.00 Discounts
Less: Ending Inventory 685,200.00 Returns
Cost of Sales 1,241,360.00 Net Purchases

Total Remaining Profit

179,083.20 2,179,601.80
300,000.00 1,879,601.80
1,879,601.80 -
2,358,685.00
 Capital balances
after Patrick's
admission

201,600.00
100,800.00
33,600.00

Jerwin (30%)
36,000.00
36,000.00
-

1/ 7 4/21 2/ 7 8/21
Liabilities Feve (3/21) Katrina (4/21) Vanessa (6/21) Jamel (8/21)
3,000.00 1,000.00 25,000.00 25,000.00 9,000.00
(5,400.00) (7,200.00) (10,800.00) (14,400.00)
3,000.00 (4,400.00) 17,800.00 14,200.00 (5,400.00)
(3,000.00)
- (4,400.00) 17,800.00 14,200.00 (5,400.00)

4,400.00 (1,760.00) (2,640.00)

(2,160.00) (3,240.00) 5,400.00
- - 13,880.00 8,320.00 -
 Total
160,000.00
300,000.00

540,000.00
1,000,000.00
1,132,500.00
11,890.00
(11,325.00)
(32,180.00)
1,100,885.00
SOLUTION FOR PROBLEMS
MOCK SQE- FINANCIAL ACCOUNTING
Note: Round off your answers to the nearest number among the choices. Differences are due to rounding off.

31 Bills and Coins 840.00

Answer: A

32 Cash, ledger 4,500,000.00

Note collected by bank 94,000.00
NSF check (32,000.00)
Book error:

Customer check for P45K recorded as P54K (9,000.00)

Check drawn for P7,900 recorded as P9,700 1,800.00

Correct cash balance 4,554,800.00
Answer: B

33 Allowance for Bad Debts

Write-of 9,000.00 8,000.00 Beginning balance
6,500.00 Bad Debts Expense

Required credit balance 5,500.00

Answer: C

34 Inventory balance per physical count 400,000.00

Adjustments:
(1) Purchase 12/28/14 FOB shipping point 5,000.00
(2) Goods in shipping area, at cost P45,000*50% 22,500.00
Inventory, December 31, 2014 427,500.00
Answer: B

35 Lot No. of units Cost Total

10-Jan 50 100.00 5,000.00
8-Feb 75 110.00 8,250.00
Total 125 13,250.00
Answer: B

FVLCS*, 1/1/14
Animal Qty FVLCS*, 12/31/14
36 and 7/1/14
two year-old animals 1,050 4,500.00 4,000.00
one year-old animals 525 3,200.00 3,000.00
Increase in FV due to price change
*FVLCS = fair value less cost to sell
 Answer: B

37 List price 3,000,000.00

Trade discount 450,000.00
Invoice price 2,550,000.00
Purchase discount available 51,000.00
Net purchase price 2,499,000.00
Add: Nonrefundable taxes 40,000.00
Installation of special horn 30,000.00
Capitalized cost 2,569,000.00
Answer: C

38 Interest Expense 9,327.00

Depreciation Expense 38,863.00
Efect on net income 48,190.00 decrease
Answer: B

39 Revaluation Surplus, Dec. 31, 2013 200,000.00

Transferred to Retained Earnings Y2014 (28,571.42)
Y2015 (28,571.42)
Impairment loss, Dec. 31, 2015 (142,857.16)
Revaluation Surplus, Dec. 31, 2015 -
Correct answer not among the choices

40 Government grant 120,000,000.00

Proportion of cost expended to total costs 1/15
Government grant recognized as revenue 8,000,000.00
Answer: C

41 Interest Expense on specific loan 225,000.00

Less: Interest earned 60,000.00
Interest to be capitalized 165,000.00
Answer: A

42 Purchase price 14,000,000.00

Less price allocated to land 2,000,000.00
Depletable cost 12,000,000.00
Divide by: Estimated reserves in tons 1,500,000
Depletion expense/ton 8.00
Multiply by: Total tons extracted 170,000
Depletion Expense for 2014 1,360,000.00
Answer: B

43 Shares held 12,000

Cash dividends/share 5.00
 Dividend Income 60,000.00
Answer: C

44 Indirect costs 5,000.00

Answer: D
8% 10%
45 Answer: D Date Interest Expense Interest Payable
1/1/2014
6/30/2014 341,544.80 400,000.00
12/31/2014 339,206.59 400,000.00
6/30/2015 336,774.86 400,000.00
12/31/2015 334,245.85 400,000.00

46 Total liabilities, unadjusted 7,500,000.00

Adjustments:
(1) Purchase FOB shipping point 500,000.00
(2) Accrued interest on Notes Payable 200,000.00
(3) Gift Certificates expired (50,000.00)
Total liabilities, adjusted 8,150,000.00
Answer: C

47 Sales to Loyalty Cardholders 3,150,000.00

Divide by: peso sales needed to earn a pt. 50.00
Total 63,000.00
Estimated claims 85%
Freebies expense 53,550.00
Claims paid (35,400.00)
Liability for freebies outstanding 18,150.00
Answer: A

48 Upper Limit of the range 450,000.00

Lower Limit of the range 200,000.00
Average 325,000.00 not given
Answer: D

49 Principal 3,000,000.00
Present value factor 0.6512
Non-current liability 1,953,683.33
Answer not among the choices

50 Carrying value, Oct. 1, 2014 6,105,725.00

Partial amortization:
Interest Expense 122,115.00
Interest Payable (135,000.00)
Carrying value, Dec. 31, 2014 6,092,840.00
 Answer: B

51 Carrying amount of obligation, Jan.1, 2014 8,640,000.00

Present value of future cash flows:
Principal P7M*0.735 5,145,000.00
Interest P7M*10%*3.3121 2,318,470.00
Gain on extinguishment 1,176,530.00
Answer: C

52 Preference Share Capital 2,300,000.00

Ordinary Share Capital 5,250,000.00
Subscribed Ordinary Shares 50,000.00
Total Legal Capital 7,600,000.00
Answer: D

53 Share options vested 5,700,000.00

Less Cumulative Compensation Expense 3,760,000.00
Compensation Expense for 2016 1,940,000.00
Answer: B

54 Monthly rent stipulated 133,000.00

No. of months full rent 54
Total 7,182,000.00
6 months discounted rent 399,000.00
Total rent to be paid for the lease term 7,581,000.00
Divide by: Lease term 5 years
Annual Rent Expense 1,516,200.00
Multiply by: period: Jan 1- June 30 1/ 2
Rent Expense for the half year ended 758,100.00
Answer: B

55 Average rent for five years 1,400,000.00

Rent paid for 2015 (1,000,000.00)
Rent Receivable, Dec. 31, 2014 400,000.00
Rent Receivable, Dec. 31, 2015 800,000.00
Answer: B

56 Present value of Minimum lease payments

Annual Payment P100,000 x 6.328 632,820.00
BPO P100,000 x 0.322 32,200.00
Lease liability 665,020.00
Answer: C

57 Fair value 4,900,000.00

 Less guaranteed residual value 200,000.00
Depreciable cost 4,700,000.00
Divide by: lease term 10 years
Depreciation Expense for 2014 470,000.00
Answer: B

58 Present value of minimum lease payments

Total annual payment 420,000.00
Less executory costs 15,000.00
MLP 405,000.00
Multiply by: Present value of annuity due at
12% for 5 years 4.0373
Finance Lease Liability 1,635,106.50
Answer: A

59 Accounting income 4,000,000.00

Permanent diference:
Charitable cont. exceeding limit 1,000,000.00
Financial income subject to tax 5,000,000.00
Temporary diferences:
Tax dep'n in excess of book dep'n (400,000.00)
Compensated absences paid in excess of
compensated absences expense (100,000.00)
Rent received in excess of rent recognized as
income (200,000.00)
Taxable income 4,300,000.00
Multiply by: Tax rate 30%
Income tax expense-current 1,290,000.00
Income tax payments (500,000.00)
Income tax payable 790,000.00
Answer: B

60 Deferred tax liability: Deferred tax expense:

PPE 4,000,000.00 1,200,000.00

Deferred tax asset:

Accounts Receivable 1,000,000.00 (300,000.00)
Inventories 2,000,000.00 (600,000.00)
Total Deferred Tax Expense 300,000.00
Answer: D

61 Pre-tax accounting income 6,000,000.00

Future taxable amount (3,500,000.00)
Future deductible amount 1,500,000.00
Taxable income 4,000,000.00
 Tax rate 30%
Current tax expense 1,200,000.00
Answer: C

62 No. of vacation days 150

Average salary per day 1,000.00
Liability for compensated absences 150,000.00
Answer: D

63 Vacations earned for 2014 300,000.00

Change in accounting estimate: Increase in
liability 15,000.00
Vacation Pay Expense for 2014 315,000.00
Answer: B

64 Profit/Loss OCI DBO

Balances, Jan. 1, 2014 41,500,000.00
Current service cost 4,000,000.00 4,000,000.00
Past service cost 5,200,000.00 5,200,000.00
Interest cost- 10% (20,000.00) 4,150,000.00
Contributions made- Dec.31
Benefits paid- Dec. 31 (3,600,000.00)
Actuarial gain on plan assets (130,000.00)
Actuarial loss on remeasurement of DBO 50,000.00 50,000.00
Balances, Dec. 31, 2014 9,180,000.00 (80,000.00) 51,300,000.00

Defined Benefit Obligation 51,300,000.00

Plan Assets 44,550,000.00
Defined Benefit Plan, Dec. 31, 2014 6,750,000.00 liability
Answer: B

65 Retirement Benefit Expense- P&L 9,180,000.00

Retirement Benefit Cost in OCI (80,000.00)
Defined Benefit Cost for 2014 9,100,000.00
Answer: B
ng balance
bts Expense

Difference in Total
FVLCS
500.00 525,000.00
200.00 105,000.00
630,000.00
Revalued amount, Dec. 31, 2017 680,000.00
Carrying value, Dec. 31, 2017 540,000.00
Increase in value 140,000.00
Less: Recovery of previous Impairment l 100,000.00
Revaluation Surplus, Dec. 31, 2017 40,000.00
Premium Amort. Carrying value
8,538,620.00
(58,455.20) 8,480,164.80
(60,793.41) 8,419,371.39
(63,225.14) 8,356,146.25
(65,754.15) 8,290,392.10
Plan Assets
41,700,000.00

4,170,000.00
2,150,000.00
(3,600,000.00)
130,000.00

44,550,000.00