Rev

iew105-
--
--
--
--
--
Day1 b.Hedgeofaneti
nvest
menti
naf
orei
gnoper
ati
on d.Al
loft
hese

THEORYOFACCOUNTS
5.Char
acter
ist
ic(s)commont oalljoi
ntventur
esi
nclude
1.TheASCf
ramewor
k(Chooset
hei
ncor
rectone) a.Oneormor eventur
ersareboundbyacontractualar
rangement
.
b.Thecontractualarr
angementestabli
shesj
ointcontr
ol.
a.Set soutt heconcept st hatunder l
i
et heprepar ati
onand pr esentati
onof c.Theuseofpr oporti
onateconsoli
dati
on.
fi
nanci
alstatement sforext ernalusers. d.Bot
haandb.
b.I snotaSt atementofFi nanci alAccountingStandardsandhencedoesnot
defi
nestandardsf oranypar t
icul
armeasur ementordi sclosureissue.
6.Apar
tyt
oajoi
ntv
ent
ureandhasj
ointcont
rol
overt
hatj
ointvent
ure
c. Isconcernedwi thspecialpur poser eport
s,f
orexampl e,pr ospectusesand
computati
onspr eparedfort axationpurposes. a.Ventur
er b.I nvest
or c.Operat
or d.Manager
d.Appl i
estot hefi
nancialstat ement sofallcommer cial
,industri
alandbusi ness
repor
ti
ngent er
prises,whet herint hepubli
corpriv
at esect or
. 7.Amet hodofaccount i
ngwher ebyav enturer’
sshareofeachoft heasset s,
l
iabil
it
ies,incomeandexpensesofaj oi
ntl
ycont rol
l
edent i
tyi
scombi nedline
2.Accounti
ngis bylinewi t
hsi milarit
emsi ntheventurer
’sfinanci
alstat
ement sorrepor
tedas
I. Aserv iceact i
vityandi tsfuncti
oni stopr ovidequanti
tativeinfor
mat i
on, separateli
nei temsi ntheventur
er’
sf i
nanci
al stat
ements
pri
mar il
yf i
nanciali nnature,abouteconomi cent i
ti
es,thatisintendedt o a.Equi t
ymet hod c. Proport
ionate
beusef ul i
nmaki ngeconomi cdecisi
on. consolidati
onmet hod
II
. Thear tofr ecording,cl
assifyi
ng,andsummar i
zi
nginasi gnifi
cantmanner b.Costmet hod d.Combi nati
onmet hod
andint ermsofmoney ,transacti
onsandev entswhichar einpartatleast
ofafinanci alcharacterandinterpret
ingtheresult
sthereof .
8.Thisform ofj ointventure maint
ains own records and pr
epar
es and
II
I. The pr ocess ofi dent
if
y i
ng,measur i
ng and communi cati
ng economi c
inf
ormat iont oper mitinformedj udgmentanddeci si
onbyuser soft he pr
esent
sfinancial
statementsinaccordancewithGAAP.
inf
ormat ion. a.Jointl
ycont r
olledoperat
ions c.Joi ntl
ycontr
oll
edent
it
ies
a.I,IIandII
I b.Ionl y c.I Ionl
y d.I I
Ionly b.Jointlycontr
olledassets d.Al loftheabove

3.Fi
nancialaccounti
ng 9.Thisf
orm ofjoi
ntventureinv
olvestheuseofasset
sandot herresour
cesof
1.I stheexami nati
onoff inancialstatement sbyani ndependentCPAf ort he thevent
urer
sratherthantheestabli
shmentofaseparat
eentit
y
purpose ofexpr essi ng an opi ni
on as t othe f airness oft he f
inanci al a.Joint
lycontr
olledoperat
ions c.Joint
lycontrol
l
edentiti
es
stat
ement s. b.Joint
lycontr
olledassets d.Alloftheabove
2.Focusesont hepr epar ationandpr esentati
onofgener alpurposer eports
knownasf i
nancialst atement s. 10.Separat
efinancial statementsi
ncludefi
nancialstatements
3.Hasnopr eci
secov eragebuti susedgener al
lytor efert oser
vicestoclients
a.Inwhicht hei nv estmentsareaccountedforont hebasi
softhedirect
onmat tersofaccount ing,finance,businesspol i
cies,or gani
zati
onprocedures,
productcosts,distribut i
onandmanyot herphasesofbusi nessconductand equit
yinterest.
operati
ons. b.In which the i nv est
ments ar
e accounted f oron the basi
s oft he
4.I sthepr eparat
ionofannuali ncomet axr et
urnsanddet erminat
ionoft ax report
edr esultsandnetasset softheinvestees.
consequencesofcer tai nproposedbusi nessventure. c.Inwhichpr opor tionat
econsoli
dati
onisapplied.
d.Ofanent i
tyt hatdoesnothav easubsidiary,associ
ateorventur
er ’
s
4.Categor
iesofhedgesi
ncl
ude int
erestinaj ointlycontr
oll
edentit
y.
a.Fairval
uehedge c.Cashf
lowhedge
11.All
owedaccount i
ngt r
eatmentfori
nter
est
sinj
oint
lycontr
oll
edentit
y I
v
nconnect
er
ifyt
ionwitht
heaccount
heaudi
spayabl
toft
et r
hePAKYOCOMPANYf
ansact i
ons.Youf i
ndt
ort
hatt
heyearendedDecember31,2010y
hecompanydoesnotmakeuseofav
ouar ecal
l
oucherr
edupont
egi
st
o
erbut
i
nclude enter
sallmerchandisepurchasesi naPur chasesJournal,fr
om whichpost
ingaremadet oasubsi di
aryaccounts
a.Pr oport
ionat
econsoli
dati
on c.Eitheraorb pay
pay
abl
el
abl
edger
ebal
.Thesubsi
anceint
diar
yl
hecompany ’
edgerbal
sgener al
anceofP1,
l
edger
500,
.Ananaly
000asofDecember31,2010agr
sisoft
heaccountdiscl
osedt
hefol
l
eeswi
owing:
t
htheaccount s

b.Equi t
ymet hodofaccount
ing d.Noneoft heabov
e
Tradecredit
ors,creditbalances P1,
363,
000
12.Inv
estmentpropertyexcludes Tradecredit
or
Net
s,debitbalances 63,
000
P1,
300,
000
a.Landheldf orl
ong-term capi
talappr
eciati
on. Esti
matedwar r
antyonpr oductssold 100,000
b.Buil
dingleasedoutunderanoper at
inglease. Cust
Duet
omer
oof
’
f
i
sdeposi
cer
ts
sandshar eholdersf
oradvances 50,
000
9,
000

c.Propert
yhel df
orf utur
eusef oradministr
ati
vepur
poses. Goodsreceivedonconsi gnmentatsell
i
ngprice
d.Noneoft heabov e. (
offsett
ingdebi tmadetoPurchases) 41,
000
P1,
500,
000

13.Inv
estmentpropertyincludes Af
urt
heranal
ysi
soft
he“
TradeCr
edi
tor
s”debi
tbal
ancesi
ndi
cat
es:

a.Propert
ybei ngconst r
uctedordev el
opedonbehal fofthi
rdpar
ti
es. Dat
e I
tems Amount
b.Propert
yt hati s bei ng construct
ed ordev eloped foruse as an Mi
scel
l
aneousdebi
Noinfor
tbal
mati
ancespr
onav ai
l
i
ort
abl
o2007.
eduetoloss
i
nvest
mentpr operty. ofrecor
dsi naf i
re. P3,
000
c.Propert
yleasedt oanot herenti
tyunderafinancelease. 03/
03/
07Mani
l
aCo.–Merchandi
seret
urnedforcr
edi
t,
d.Propert
yt hatisbei ngr edevel
opedf orconti
nuinguseasi nvest
ment butthecompanyisnowoutofbusi
ness 8,
000
pr
opert
y. 06/
10/
09CebuCorp.–Merchandiseret
urnedbutCebu
says“neverreceived” 7,
000
07/
10/
10Jol
oDist
ribut
ors–All
owancegr antedon
defecti
vemer chandiseaf
tert
hei
nvoi
ce
waspai d 5,
000
14.Whichisnotapur poseoftheASCf r
amewor k?
a.To assi stt he ASC in devel
oping accounting standards thatr epresent 10/
10/
10Bul
acanCo–Ov
erpay
mentofi
nvoi
ce 12,
000

generall
yaccept edaccount
ingprinci
plesinthePhil
ippines. 12/
05/
10Adv
ancet
oZambalesCo.Thi
scompanyagrees
b.To assi stt he ASC initsrevi
ew and adopt i
on ofexi sti
ng Int
er nati
onal tosuppl
ycer
tai
narti
clesonacost–pl
usbasi
s 24,
000
Account ingStandards. 12/
05/
10Goodsr
etur
nedforcr
editandadjust
mentson
c. Toassi stauditorsinformi
nganopi nionast owhet herfinanci
alstatement s pri
ceaft
ertheinv
oiceswerepai
d;cr
edi
tmemos
conform wi thPhil
i
ppineGAAP. fr
om suppl
i
ernoty etr
ecei
ved 4,
000
63,
000
d.Toassi stt heBoar dofAccountancyi npromulgati
ngr ulesandr egulations
aff
ectingt hepracti
ceofaccount
ancyi nthePhili
ppi
nes. Yournextst epistocheckt heinvoi cesinboththepaidandtheunpaidinv
oicefil
esagai
nstledgeraccount
s.Inthi
s
connection,youdiscoveraninvoicef rom Atl
asCo.ofP45,000datedDecember12,2010mar ked“Dupl
icat
e”,whi
ch
wasent eredinthePur chaseJour nalinJanuary2011.Uponinquir
y,youdiscov
erthatthemer chandi
secov er
edby
15.TheASCf rameworkdeal swit
h(chooset
heincor
rectone) thi
sinvoicewasr eceiv
edandsol d, buttheori
ginal
invoi
ceapparent
lyhasnotbeenrecei
ved.
a.Object i
veoffi
nancialst
atements
Int
hebankr econci
li
ati
onwor ki
ngpapers,ther
eisanot ati
ont hatf i
vecheckstotali
ngP63,000wer epreparedand
b.Qual i
tati
vecharact
erist
ics ent
eredintheCashDisbursementsJour
nalofDecember ,butthesecheckswer enotissuedunt
ilJanuary10,2011.
c. Defi
niti
on,recogniti
on and measurementoft he basi
c el
ement
s off
inanci
al
st
atement s Theinvent
oryanaly
sissummar ydiscl
osesgoodi ntransitofP6, 000atDecember31,2010,nott akenupbyt he
companyunderauditduri
ngtheyear2010.Thesegoodsar eincludedinyouradjustedinv
ent
ory.
d.Gener all
yacceptedaccounti
ngpri
nci
ples
1.TheAccount
spay
abl
e–Tr
adebal
anceatDecember31,
2010shoul
dbe

AUDI
TINGPROBLEMS A.P1,
471,
C.P1,
000
214,
000
B.P1,
614,
D.P1,
000
477,
000
2.Thenetadj
ust
mentt
oPur
chasesshoul
dincl
udea 6.Int
erestpay abl
easofDecember31, 2010is
a. P155, 000 b.143,000 c.203,
000 d.215,
000
A.NetdebitofP51,
000 7.TheportionoftheNot espayabl
e–bankt obereport
edundercurr
entli
abi
li
ti
esasofDecember31,
2010is
B.Netcredi
tofP41,
000 a. P300, 000 b.500,000 c.800,
000 d.0
C.NetdebitofP10,
000 8.Totalcurrentli
abil
iti
esasofDecember31, 2010is
D.NetdebitofP73,
000 b. P3, 950,000 b.4,138,
000 c.3,
938,
000 d.3,
998,
000
9.BTotalnoncur r
entliabil
it
iesasofDecember31, 2010is
3.Theent
ryt
oadj
ustt
heAccount
spay
abl
eaccountf
ort
hoseaccount
swi
thdebi
tbal
ancesshoul
dincl
udeadebi
tto c. P1, 760,000 b.2,560,
000 c.3,
960,
000 d.1,
960,
000

A.P18,
000 B.P23,
000 FEELNAFEEL,INC.hasbeenproduci
ngqual
it
yreusabl
eadul
tdi
aper
sf ormoret
hantwodecades.Thecompany
’s
C.P35,
000 D.P39,
000 fi
scaly
earrunsfrom Apr
il1t
oMarch31.Thefol
l
owinginf
ormat
ionr
elatest
otheobl
i
gat
ionsofFeelNaFeelasof
March31,2010.
4.Theent
ryt
oadj
ustt
heAccount
spay
abl
eaccountf
ort
hoseaccount
swi
thdebi
tbal
ancesshoul
dincl
udeadebi
tto
BONDSPAYABLE
A.Miscell
aneouslossesifP23,000 FeelNaFeeli
ssuedP10,000,
000of10%bondsonJul y1,
2008.Theprevai
lingmarketr
ateofi
nter
estfort
hesebonds
B.AdvancestosuppliersofP24,000 was12% ont hedateissue.ThebondswillmatureonJuly1,2018.Interesti
spaidsemiannual
lyonJuly1and
C.Suppli
erstodebitbalancesofP18,000 Januar
y1.FeelNaFeelusestheef
fect
ivei
nter
estratemethodt
oamor t
izebondpr emi
um ordi
scount
D.PurchasesofP21, 000
NOTESPAYABLE
5.Audi
torconf
ir
mat
ionofaccount
spay
abl
ebal
ancesatt
heendoft
her
epor
ti
ngper
iodmaybenecessar
ybecause FeelNaFeelhassignedsev
erall
ong-t
erm not
eswithfi
nanci
ali
nst
it
uti
ons.Thematuri
ti
esoft
hesenot
esaregi
veni
n
theschedul
ebelow.Thetot
alunpai
dinter
estforal
loft
hesenot
esamountstoP600,000onMarch31,
2010
A.Therei
sli
kelytobeotherrel
iableexternalevidencetosupportt
hebalances
B.Corr
espondencewiththeauditclient
sattorneywi l
lrev
ealal
ll
egalacti
onbyv endorsf
ornon-
payment DueDate AmountDue
C.Thi
sisaduplicat
ionofcutof
ft est Apr
il1,
2010 P 400, 000
D.Account
spay abl
eattheendofr epor
tingperiodmaynotbepai dbeforetheauditi
scomplet
ed. Jul
y1,2010 600,000
Oct
ober1,2010 300,000
Pr
obl
em 2 Apr
il12011-March31,2012 300,000
Apr
il1,
2012–Mar ch31,2013 1,
200.000
Youwereabletoobtai
nthef
oll
owi
ngf
rom t
heaccount
antf
orMav
eri
csCor
p.Rel
atedt
othecompany
sli
abi
l
ityasof Apr
il1,
2013–Mar ch31,2014 1,
000,000
December31,2010. Apr
il1,
2014–Mar ch31,2015 800,000
Apr
il1,
2015–Mar ch31,2016 1,
000,000
Accountspayable P650,
000
Notespay abl
e–t rade 190,
000 P7,
000,
000
Notespay abl
e–bank 800,
000 ESTI
MATEDWARRANTI
ES
Wagesandsal ariespayabl
e 15,
000
I
nterestpayable ? FeelNaFeelhasaone- yearproductwarrantyonsomesel ect
edi temsi nitspr oductli
ne.Theesti
matedwarranty
Mortgagenotespay abl
e–10% 600,
000 l
iabi
li
tyonsal esmadedur ingthe2008-2009f i
scalyearandst i
lloutstandingasofMar ch31,2009amountedto
Mortgagenotespay abl
e–12% 1,
500,000 P180,
000.Thewar rantycostonsalesmadef rom Apri
l12009,t hroughMar ch31,2010,areesti
matedasP520,000.
BondsPay able 2,
000,
000 Theactualwarrantycostincurr
edduringthecur r
ent2009-2010fiscaltearareasf oll
ows:
Warr ant
ycl ai
mshonor edon2008- 2009sales P180, 000
Warr ant
ycl ai
mshonor edon2009- 2010sales 178,000
Thefol
lowingadditionalinfor mationper t
ainst ot hesel i
abi
lit
ies: Total warrant
yclaimshonored P358,000
a. Al ltr
adenot espay ablear eduewi thinsi xmont hsoft hebalancesheetdat e.
b. Banknot espay ableincludet wosepar atenot espay ableAl l
i
edBank. OTHERI
NFORMATI
ON
(1) AP300, 000, 8%not ei ssuedMar ch1, 2008,pay ableondemand.I nterestispayableev erysixmont hs.
(2) A1- year,P500, 000, 11½%not ei ssuedJanuar y2, 2010.OnDecember30, 2010Mav ericksnegot i
ated 1. TRADEPAYABLES
awr it
tenagr eementwi thAl li
edBankt orepl acet henot ewi t
h2- y ear,P500,
000,10% not etobe Account
spayabl
eforsuppl
i
es,goodsandser
vicespur
chasedonopenaccountamountt
oP740,
000
i
ss7uedJanuar y2, 2011.Thei nt erestwaspai donDecember31, 2010 asMarch31,
2010
c. The10%mor tgagenot ewasi ssuedOct ober1,2007.Wi t
hat erm of10y ears.Termsoft henot egi vethe
holderther i
ghtt odemandi mmedi atepay mentoft hecompanyf ail
st omakeamont hlyi nterestpay ment
2. PAYROLLRELATEDI TEMS
wit
hin10day soft hedat ethepay menti sdue.AsofDecember31, 2010, Mav eri
cksisthreemont hsbehind
Merchandi
se,
shippedFOBdest i
nat
ion,12.24.
10;
recei
ved01.02.11
i
npay ingitsrequi redint erestpay ment .
AccruedSalari
esandwages P300,000
d. The12%mor t
gagenot ewasi ssuedmay1,2001,wi t
hat er
m of20y ear s.Thecurrentpr i
ncipalamount
Withhol
dingtaxespayable 94,
000
dueisP1, 500,000.Pr i
ncipalandi nt erestpay abl
eannual lyonApr i
l30, Apay mentofP220, 000i sdueApr i
l
Otherpayrol
ldeduct
ions 10,
000
30,2011.Thepay menti ncludesinter estofP180, 000.
e. Thebondspay ablei s10- year,8%bi nds, i
ssuedJune30, 2001.Int
erestispay abl
esemi -
annual l
yev eryJune
3. MISCELLANEOUSACCRUALS
30andDecember31.
Ot
heraccr
ual
snotsepar
atel
ycl
assi
fi
edamountt
oP150,
000asofMar
ch31,
2010
Basedontheabov eandt her esul tofy ouraudi t,answert hef ollowing:
 4. DI VI
DENDS 2.Obl
i
gat
ionsmayar
isef
rom anyoft
hef
oll
owi
ng,
except
:
Onmar ch15,2010,FeelNaFeel’sboardofdi r
ectorsdecl
aredacashdi vi
dendofP0. 20per
commonshar eanda10%commonst ockdivi
dend.Bothdiv
idendsweretobedist
ribut
edonApr i
l12,2010,
tothecommonst ockhol
der
sofrecordatthecloseofbusi
nessonmar ch31,2010.Dataregar
dingFeelNa a.Cont
ract
s
Feelcommonst ockareasf
oll
ows:
PerVal
ue P 5. 00 per
shar
e b.Quasi
-cont
ract
s
Numberofsharesi
ssuedandout st
andi
ng 6,
000,000shares

Mar
ketVal
uesofCommonStock: c. Law
March15,2010 P22.
00pershare
March31,2010 21.
50pershare d.Negl
i
gence
Apr
il12,
2010 22.
50pershar
e

3.Iti
sthevol
unt
aryadmi
nist
rat
ionoft
hepr
oper
tyofanot
herwi
thouthi
s
10Howmuchwasrecei
vedbyFeelNaFeelfr
om t
hebondsi
ssuedonJul y1,
2008?
a. P8,852,
960 b.10, 000,
000 c.10,
500,000 d.10,
647,040 consent
.
11OnMar
ch31,2010,FeelNaFeel
’sst
atement
soffi
nanci
alposi
tionwouldrepor
ttot
alcur
rentl
iabil
it
ies
of
a.Negot
ior
umgest
io
a.P5,
286,
000 b.4,
386,
000 c.5,
336,
000 d.5,
642,
000
b.Sol
uti
oni
ndebi
ti
12.OnMar
ch31,
201,
Feel
NaFeel
’
sst
atementoff
inanci
alposi
ti
onwoul
drepor
ttot
alnoncur
rentl
i
abi
l
iti
es
of
c. Quasi
-del
i
ct
a.P14,
389.
350b.14,
352,
217 c.14,
370,
783 d.14,
252,
960

13I nAudit
ingaccountspay able,anaudi torproceduresmostlikel
ywi l
lf ocuspr i
mar i
lyonmanagement s d.Cont
ract
assert
ionof.
a.Exi
stence c.Compl eteness 4.I
tisawrongcommi
tt
edwi
thoutanypr
e-exi
sti
ngr
elat
ionsbet
weent
he
b. Pr esentati
onanddi sclosure d.Valuati
onandal l
ocation
14Anaudi t
orperfor
msat estt odet ermi newhet herallmerchandiseforwhi chtheclientwasbil
ledwas par
ti
es.
recei
ved.Thepopulati
onf ort hi
st estconsi stofall
a.Mer chandiserr eceived c.Canceledchecks a.Nat
ural
obl
i
gat
ion
b.Vendor ’sinvoices d.receivi
ngr eport
s
15.Thepr i
maryaudittestt odet erminei faccountspay abl
earev al
uedpr operlyis
b.Quasi
-del
i
ct
a.Confirmationofaccount spay able
b.Vouchingaccount spay abletosuppor ti
ngdocument ati
on
c. Ananal yti
cal procedur e c. Quasi
-cont
ract
d. Ver if
icati
ont hataccount spay ablewasr epor
tedasacur rentliabil
i
tyinthebalancesheet
.
d.Cul
pacont
ract
ual
BUSI
NESSLAW ANDTAXATI
ON
1.Thef
oll
owi
ngar
ether
equi
sit
esofanobl
i
gat
ion,
except
: 5.Unlessthelaworst
ipul
ati
onofthepart
iesr
equi
resanot
herstandar
dofcare,
everypersonobl
i
gedtogivesomethi
ngisal
soobli
gestotakecareofi
twit
h.
a.Passi
vesubj
ect
,debt
ororobl
i
gor
a.Ext
ra-
ordi
nar
ydi
l
igence
b.Act
ivesubj
ect
,cr
edi
tororobl
i
ge
b.Di
l
igenceofaf
atherofagoodf
ami
l
y
c. Ef
fi
cientcause
c. Di
l
igenceofagoodf
atherofaf
ami
l
y
d.Pr
esent
ati
on
 d.Gooddi
l
igenceofaf
atherofaf
ami
l
y
12.B Companyboughtouta compet i
tor
.C Corporat
ion,with a sti
pulat
ion t
hatC
6.Whi
choft
hef
oll
owi
ngcanbeconsi
der
edasaf
eat
ureofav
oidcont
ract
? Corporati
onshould nott hereaft
erengagei nanybusinessi nthePhi l
i
ppinesunless
a. Subjectt or
atifi
cation consentedtoandapprovedbyBCompany .
b. I
texist a. Thest i
pul
ati
onisdef ectivebutsubjectt
orati
fi
cat
ion.
c. Acti
onordef enceofnul l
it
yissubjecttoprescr
ipt
ion b. Thest i
pul
ati
onisv al
idbecauset heparti
esarefreetoenterint
oanyst i
pulat
ion,
d. Novat i
oncannotappl y ter
msandconditionssuchast hi
sone.
7.Denteredi ntoacont ractofmor tgagewi t
hX,T,t heclerkofL,t
ypedt
hedocument
. c. Thest i
pul
ati
onisunenf or
ceableast her
ewasnoshowi ngthatthesalewasdone
DuetoT’snegl i
gence,thedocumentmadewast hatofsaleinst
eadofmort
gage. inwri
ti
ng.
a. Ther emedyi sannul ment d. Thest i
pul
ati
onisv oi
dbecausei tiscont
rar
ytopublicpol
icy.
b. Part
iesmaygot ocour tf
orinter
pretat
ion
c. Part
iesmayenf orcet hei
rri
ghtbecauseitisenfor
ceable 13.Whichofthefoll
owingisnotvali
d?
D.
Reformat ionofinstrumentisproper a. Mutualpromisetomarryent er
edintoor al
l
y
b. Sal
eofi mmov abl
epropert
yor al
lyenteredinto.
8.Ther
epersonsboundbycont
ract
s,except
: c. Oneoft hepart
iesi
nacont ractisi
ncapabl eofgiv
ingconsent
a. Thi
rdpersons d. Mortgagorofanimmov ablecannotalienateitwit
houtthemortgagee’
sconsent
.
b. Assi
gns
c. Heir
s 14.DforcedCtoexecuteapr omi
ssorynot
e.
d. Part
ies a. Contr
acti
sr esci
ssbl
ebecausethecontr
acti
sfr
audl
ert
b. Thecontr
actisvoid
9. Li
ableforthelossofthesubj
ectmat
terbyf
ort
uit
ousev
ent
. c. Ccannotdemandpay mentfrom Dbecauset
hecont
racti
sunenf
orceabl
e
a. Credit
or d. Contr
actremainsvali
d
b. Debtor
c. Bothcreditoranddebt
or 15.Exampl e1–Ssol dt oBi npr i
vateinst
rumenthi sland.Later
,Bwant edtohavethe
d. Noneoft hem saler egi
stered,butr egistrationrequiresapublicinstr
ument :i
nhere,BmaycompelSt o
execut etheneededpubl ici nstrument.
10.Sofferstosel lhi
shouset oBf orP100,000.Baskshi mi fhewouldacceptP80,000. Exampl e2–Ssol dor allytoBhi sland.Aft
erBpai dSt hepr i
cehewant stor
egist
er
Whichofthef ol
lowingiscor
rect? thelandi nhisnamebutheneededapubl i
cinstrumentofsale.Inher
e,Bmaycompel
a. Becauseofambi gui
ty,bothoffersaret
erminatedbyoperati
onoflaw. St oexecutet heneededpubl icinstr
ument.
b. B’sresponsei sacount er-
offereff
ecti
velyterminat
ingtheP100,000offerand a. Bot hexampl esar ef alse
i
nstigatinganofferf
orP80, 000. b. Onl ythefirstist r
ue
c. B’sr esponsei sar ejecti
onoft heP100,000of fer
,andt her
eisnoof f erfor c. Onl ythesecondi st rue
P80,000becausei ti
st ooindefini
tetobeanof fer d. Bot heexampl esar et rue
d. B’sresponsei samer einquir
y,theP100,000offerbySissti
lli
nforce.
MANAGEMENTADVI
SORYSERVI
CES
11.Exampleno.1:G,guar dianofW,sol dW’shousev aluedP50,
000forP37,
500ora
l
esionby¼oft hevalue. 1.Thefoll
owingcharacteri
zemanagementadv i
soryservi
cesexcept
Exampleno.2:Ssol dhishousev aluedP50,000foronlyP10,
000becauseSdi
dnot A.involvedeci
sionforthefutur
e
knowthetruev alueofthehouse. B.broaderinscopeandv ar
iedi
nnature
a. Bothcontractsarerescissi
ble. C.util
izemorejuniorstaf
fthanseni
ormember softhefir
m
b. Onlyno.1isr esci
ssible D.relatetospecif
icprobl
emswher eexper
thelpisrequi
red
c. No.2isv oidablebecausethereisanerrorormistake.
d. Bothcontract sar
ev al
idandenforceabl
e.
2.Tot
alpr
oduct
ion cost
sforCar
era,I
nc.ar
ebudget
ed atP230,
000 f
or
 50,
000 unit
s ofbudget ed out
putand P280, 000 f or60,
000 units of 10% increaseinannualf i
xedcost sanda20% uni tcosti ncr
easei nthe
budgetedoutput
.Becauseoft heneedf oraddit
ionalfaci
l
iti
es,budgeted dir
ectlaborcomponentasar esultofhigherskil
leddirectlabor.Howev er
,
fi
xedcostsfor60,000unit
sare25%mor ethanbudget edfixedcostsfor thi
schangeper mitt
edther epl
acementofacost lyimpor tedcomponent
P50,000uni
ts.How muchi sCarer
a’sbudgetedv ar
iabl
ecostperuni tof withal ocalcomponent.Theef fectwast or educeuni tmat er
ialcostsby
output? 25%.Ther ehasbeennochangei nt heWalastiksell
ingprice.
A.P1. 60 C.P3.00 Theannual salesunit
srequir
edforMadel t
obr eakevenare:
B.P1. 67 D.P5.00 A. B. C. D.
2000 22,
000 22, 000 14,000 14,
000
3.Shor
t-t
erm credi
tor
sar
eusual
l
ymosti
nter
est
edi
nassessi
ng 2001 20,
840 22, 407 22,407 20,
840
a. solvency.
b. l
iquidit
y. 7.Derby Co.uses a st andard costing syst
em i n connection witht he
c. marketabil
it
y. manufactur
eofal ineofT- shir
ts.Eachuni toff ini
shedproductcont ains2
d. profi
tabil
i
ty. yar
dsofdi r
ectmat er
ial.Howev er
,a20per centdi r
ectmat erialspoilage
cal
culat
edoni nputquant iti
esoccur sduringt hemanuf acturingpr ocess.
4.Long-
ter
m creditor
sar
eusual
l
ymosti
nter
est
edi
nev
aluat
ing Thecostofthedirectmat eri
alsisP120pery ar d.
a. li
quidi
ty. Thestandarddi
rectmat er
ialcostperunitoffinishedproductis
b. marketabil
i
ty. A.P192 C.P288
c. prof
itabi
li
ty.
d. solv
ency. B.P240 D.P300
8.WastingResourceCo.hasannualcr editsalesofP4mi l
li
on.Itsav er
age
5.St
ockholdersaremosti
nter
est
edi
nev
aluat
ing col
lecti
onperiodi
s40day sandbaddebt sare5%ofsal es.Thecr edi
tand
a. l
iquidi
ty. col
lecti
onmanageri sconsi deri
ngi nstit
utingast rictercoll
ecti
onpol i
cy,
b. solv
ency . wherebybaddebtswoul dber educedt o2%oft otalsales,andtheav er
age
c. prof
itabi
li
ty. col
lecti
onperiodwouldf allto30day s.Howev er,saleswouldalsof al
lby
d. marketabil
it
y. anestimatedP500,000annual l
y.Var iablecostsar e60%ofsal esandt he
costofcarryi
ngreceivablesis12%.Assumi ngat axr ateof35%and360
6.MadelCompanymanuf act
uresasi ngl
eel ectronicproductcalledWal asti
k. daysay ear,t
heincrement alchangei nthepr ofi
tabili
tyofthecompanyi f
Walastiksellsf orP900peruni t
.I n2000,t hefoll
owingv ari
ablecost swere str
ict
erpoli
cywouldbei mpl ement edwoul dbe
i
ncurredt opr oduceeach    
 Wal
ast i
kdevice. a.Zer oasthepositi
veandnegat i
v eef f
ectsoffseteachot her.
Directl abor P180 b.Ar educti
oninnetincomebyP70, 000.
Directmat erials 240 c.Ar educti
oninnetincomebyP38, 350.
Fact oryov erhead 105 d.Ar educti
oninnetincomebyP35, 400.
Sel l
ingcost s 75 Uset
hef
oll
owi
ngi
nfor
mat
ionf
orquest
ions9-
10.
Tot al v
ariablecost s P600
Madelissubj ectt o40per centincomet axr ate,andannualfixedcost sar
e TerryCor por
ati
onhadneti
ncomeof$200,000andpaiddivi
dendst
ocommon
P6,
600, 000. Exceptf oran oper ati
ng l oss incurred i
nt he y earof stockholdersof$40,
000in2002.Thewei ght
edav er
agenumberofshares
i
ncorpor ati
on, t
hef i
rm hasbeenpr ofit
ableov erthelastfiv
ey ear s. outstandingin2002was50,
000shar
es.TerryCorpor
ati
on'
scommonstockis
I
n2001,asi gnificantchangei nMadel ’spr oductiontechnologycauseda sell
ingfor$60pershareontheNewYorkStockExchange.
 thef
ir
m do?
9.Ter
ryCorpor
ati
on'
spr
ice-
ear
ningsr
ati
ois A.Makenopolicychange.
a.3.8ti
mes. B.ChangetoonlyPoli
cyA.
b.15times. C.ChangetoPoli
cyB( meansal
sotaki
ngPoli
cyAfir
st)
.
c.18.8ti
mes. D.Allpol
i
ciesl
eadtothesametotalf
ir
m pr
ofi
t,t
husall
pol
i
ciesar
eequal
.
d.6times.
14.
TheNPVandIRRmet hodsgi ve
10.
Ter
ryCorpor
ati
on'
spay
outr
ati
ofor2002i
s A.thesamedecision(acceptorr ej
ect)f
oranysi ngl
einvestment
a.$4pershare. B.thesamechoicefrom amongmut ual
l
yexclusiveinvestments
b.25%. C.dif
fer
entr
ankingsofpr ojectswit
hunequal l
ives
c.20%. D.thesamerankingsofpr oject
swithdiff
erentrequi
redi nvest
ment
s
d.12.5%.
15.
Whati
sthepr
operpr
epar
ati
onsequenci
ngoft
hef
oll
owi
ngbudget
s?
11.
Phrankli
nPharmsI nc.purchasesmerchandi
sefr
om acompanythatgi
ves 1.Budget
edBalanceSheet
salestermsof2/ 15,net40.Phr ankl
inPharmshasgrosspurchasesof 2.Sal
esBudget
$800,000peryear.Whati sthemaximum amountofcostlyt
radecredi
t 3.Sel
li
ngandAdmi ni
strati
veBudget
Phrankli
ncouldget ,assumingtheyabidebythesuppl
ier
scredi
tterms? 4.Budget
edIncomeSt atement
(Assumea360- dayy ear
.) a.1,
2,3,4
a.$87, 111.
20 b.$32,666.
70 c.$54,
444.
50 d. b.2,
3,1,4
$52,266.
67 c.2,
3,4,1
d.2,
4,1,3
12.
CrestCo.hast heopport
uni t
yt oincr
easeannualsal esbyP1mi l
li
onby
sell
i
ngt onewr i
ski
ercustomer s.Ithasbeenest i
matedthatuncoll
ecti
ble
expenseswouldbe15%andcol l
ecti
oncosts5%.Themanuf acturi
ngand
sell
i
ngcost sare70%ofsal esandcor por
atetaxis35%.I fi
tpursuesthis
P1
opport
unity
,theaft
ertaxprofi
twill
a.IncreasebyP35,000. c.IncreasebyP65,000. 1.MankayanCompanyusesthefir
st-
in,f
irst
-outr
etai
lmet
hodofi
nvent
ory
b. Incr
easebyP97,500. d. val
uat
ion.Thef
oll
owi
ngi
nfor
mationisavai
labl
e:
Remainthesame.
Cost Ret
ail
13.
Af i
rm cur r
entlysell
s$500, 000annual l
ywi t
h3% baddebtl osses.Two Beginni
nginvent
ory P2,
500,000 4,
000,
000
alternative poli
ci
es ar e avai
lable.Poli
cy A woul dincrease sales by Purchases 13,
500,000 16,
000,
000
$500, 000,butbaddebtl ossesonaddi ti
onalsal eswouldbe8%.Pol i
cyB Netmar kups 3,
000,
000
woul dincr
easesalesbyanaddi ti
onal$120,000ov erPol
icyAandbaddebt
Netmar kdowns 1,
000,
000
lossesont headdi ti
onal$120, 000ofsal eswoul dbe15%.Theav erage
collect i
onper i
odwi l
lremainat60day s( 6t urnsperyear)nomat tert he Sal
es 15,
000,
000
deci sionmade.Thepr ofitmar ginwil
lbe20% ofsal esand no ot her
expenseswi lli
ncrease.Assumeanoppor t unit
ycostof20%.Whatshoul d Whatwoul
dbet
heest
imat
edcostoft
heendi
ngi
nvent
ory
?
 a.P7,
000,
000 c.P5,
110,
000 securi
ti
es.Themar ketv
alueofthesecuri
ti
eswasP13,
000,
000onDecember
b.P5,
250,
000 d.P4,
750,
000 31,2004 and P12,000,
000 on December31,2005.Ini t
s 2005 i
ncome
stat
ement,Hungduanshouldreportunreal
izedl
ossonthetransf
erofAFS
2.Dat
aregar
dingKi
anganCompany
’st
radi
ngsecur
it
iesf
oll
ow: securi
ti
esat
Cost a.2,
000,
000
Market
_ b.3,
000,
000
December31,
2004 10,
000,
000 c.1,
000,
000
8,
500,
000 d. 0
December31,
2005 10,
000,
000
9,
500,
000 5.Hi ngyonCompanyhadi nv est
ment si nmar ketabl
edebtsecuri
tiescost i
ng
P10,000,000 which were acquired on Januar y1,2004 and cl assifi
ed as
Dif
fer
encesbet ween costand mar
ketval
ueareconsider
ed t
emporary
. “avail
ableforsale”
.OnDecember31, 2005, t
hecompanydeci dedtohol dthe
Theincomest atementfor2005shoul
drepor
tunreal
izedgai
nont hese i
nvest mentst o maturi
tyand accor dingly reclassi
fi
ed them as “ heldto
secur
it
iesat mat urit
y”ont hatdate. Thei nvestment s’mar ketval
uewasP9, 000, 000at
a. 1,
500,000 December31,2004,andP7, 500,000onDecember31,2005.Whatamount
b. 1,
000,000 shoul dHingyonCompanyr epor tasunr eal
i
zedl ossonthesesecur i
ti
esi nit
s
c. 500, 000 2005st atementofstockholders’equi
ty?
d. 0
a.2,
500,
000
b.1,
000,
000
3.Dat
aregar
dingLamutCompany
’sav
ail
abl
eforsal
esecur
it
iesf
oll
ow:
c.1,
500,
000
Cost d. 0
Market
_
December31,
2004 10,
000,
000 6.OnDecember31,2004,May
ayaoCompanypurchasedt
radi
ngsecur
it
ies.
8,
500,
000 Per
ti
nentdat
aonDecember31,
2005ar
easfol
lows:
December31,
2005 10,
000,
000
Securi
ty Cost
11,
000,
000
Market_v
alue
Dif
fer
encesbet weencostandmar ketvaluear
econsideredtempor
ary. X 4,
000,
000
The2005st at
ementofstockhol
der
s’equit
yshoul
dreportunr
eali
zedgai
n 3,
500,000
onthesesecuri
ti
esat Y 6,
000,
000
a.2,500,
000 7,
500,000
b.1,000,
000 Z 8,
000,
000
c.1,500,
000 6,
000,000
d. 0
OnDecember31,2005,Mayayaorecl
assi
fi
editsi
nvest
mentinsecur i
tyZ
fr
om tradi
ngt
oavai
labl
eforsale.Whatamountofunreal
i
zedl ossonthe
4.Hungduan Company had acquir
ed invest
mentsin avai
labl
eforsal
e
tr
ansferoftr
adi
ng secur
it
ies shoul
d be shown i
nt he 2004 income
secur
it
iesf
orP15,000,
000 on January1,2004. On December31,2005,
stat
ement?
Hungduandeci
dedtorecl
assi
fyt heavai
lableforsal
esecuri
ti
esastr
adi
ng
  OnDecember1,2005,Viganrecei
vedfr
om ZCompanyadi vi
dend
a.2,
000,
000 i
nkindofoneshareofVCompanycommonst ockforev
ery5Z
b.1,
000,
000 Companycommonshar esheld.Viganholds200,
000ZCompany
c.3,
000,
000 shar
eswhichhav
eamar ketpr
iceofP50pershar
eonDecember1,
d. 0 2005.Themar
ketpr
iceofVCompanycommoni sP30pershar
e.

7.I
locosCompanyrecei
veddivi
dendsf
rom i
tscommonst
ocki
nvest
ment
s Whatamountshoul
dVi
ganr
epor
tasdi
vi
dendi
ncomei
nit
s2005i
ncome
dur
ingthey
ear2005asfol
lows: st
atement
?
 Astockdi
videndof20,
000shar
esfrom ACompanywhent
hemar
ket a.6,
200,
000
pr
iceofA’
sshareswasP30pershar
e. b.4,
200,
000
c.3,
000,
000
 Acashdivi
dendofP2,
000,
000f
rom BCompanyi
nwhi
chI
locosownsa d.5,
000,
000
20% i
nter
est.
 Acashdivi
dendofP1,
500,
000f
rom CCompanyi
nwhi
chI
locosownsa
9.CaoayanCompanyowns1, 000,000sharesofSuy oCompany ’
s5, 000,000
10% i
nter
est.
sharesofP50 par ,10% cumulati
ve,nonparti
cipating pref
erred st ockand
 10,
000sharesofcommonst ockofDCompanyi
nli
euofcashdi
vi
dend 500,000shares(2%)ofSuyo’scommonst ock.Dur ing2005Suy odecl ared
ofP20pershare.Themar ketpri
ceofDCompany’
sshar
eswasP180. andpaiddiv i
dendsofP40,000,
000 onpr eferredst ock. Nodi v
idendshad
I
locoshol
dsoriginal
ly100,000shar
esofDCompanycommonst ock. beendeclaredorpaiddur i
ng2004. I naddi t
ion,Caoay anr eceiveda15%
I
locosowns5%i nter
esti
nDCompany . commonst ockdivi
dendfr
om Suy owhenthequot edmar ketpriceofcommon
stockwasP100.Whatamountshoul dCaoay anr eportasdivi
dendi ncomei n
Whatamountofdi
vi
dendr
evenueshoul
dIl
ocosr
epor
tini
ts2005i
ncome i
ts2005incomest at
ement?
st
atement
?
a.15,
500,
000
a.3,
300,
000 b.20,
000,
000
b.5,
300,
000 c.10,
000,
000
c.3,
500,
000 d.8,000,
000
d.2,
500,
000
10.OnJanuary2,2005,Nar v
acanCompanyacqui r
ed100,000shar esofABC
8.Data per
tai
ning to di
vidends f
rom Vi
gan Company
’s common st
ock Companycommonst ockforat otalconsi
der at
ionofP6,000,000.OnOct ober
i
nvest
mentsfortheyear2005f ol
l
ow: 1,2005,Nar
vacanreceiv
edf r
om ABCapr ef err
edst ockdi
videndofoneshar e
forever
y10commonshar eshel d. Ont hisdat e,themar ketpri
ceofABC
 OnOctober1,2005,Vi
ganrecei
vedP2,
000,000l
i
qui
dat
ingdi
vi
dend commoni sP75pershar eandt heABCpr eferr
ed,P50pershar e.Narvacan
fr
om XCompany .Vi
ganownsa5%i nt
eresti
nXCompany. Companyshouldreporti
tsinvestmentinABCCompanypr eferredstockat
 Vigan owns a 10% int
erestin Y Company which decl
ared a a.500,
000
P30,000,
000cashdiv
idendonNov ember15,2005tostockholder
s b.750,
000
ofrecordonDecember15,2005payabl
eonJanuary15,2006. c.375,
000
d. 0
 P15,
000,
000.Thestockisquot
edr
ight
-onat125.Whati
sthet
heor
eti
cal
val
ueoft
hestockr
ight
s?
11.CandonCompanyowns100, 000 shar
esoft heout standi
ng common
stock ofBant ayCompanywhi ch has severalhundr ed t housand shares a.1,
000,
000
publi
clytr
aded.These100, 000shar eswerepur chasedi n2002f orP100per b.1,
250,
000
share.OnDecember1,2005,Bant ayCompanydi str
ibuted100, 000rightsto c.1,
500,
000
Candon.Candonwasent i
tl
edt obuyonenewshar eofBant aycommonst ock d. 0
forP100andf i
veoftheserights.OnDecember1,2005,eachshar eofst ock
hadamar ketval
ueofP135ex- ri
ghtandeachr ighthadmar ketval
ueofP15. 14.OnJanuar
y1,2004,LaoagCompanypurchased15%ofVintarCompany’s
OnDecember31,2005,Candonexer ci
sedallrights. Whatcostshoul dbe common stock f
orP20,000,000. The f
oll
owing dat
a concerni
ng Vi
ntar
recordedforeachnewsharet hatCandonacqui redbyexer cisingtheri
ghts? Companyareavai
l
able:

a.150 2004 _
b.100 2005_
c.135 Neti
ncome 6,
000,
000
d.15 7,
000,
000
Cashdivi
dendpai
d None
15,
000,
000
12.Tagudi
nCompanyi
nvest
edi
nst
ocksofKaunl
aranCompanyasf
oll
ows:
Initsincomest atementf ort hey earendedDecember31,2005,how much
2003 50,
000sharesatP80 4,000,000 shouldLaoagr eportasincomef rom thisinvestment ?
2004 100,
000sharesatP70 7,000,000 a.2,250,000
b.1,950,000
In2005,Tagudi nr eceived150, 000r i
ght
st opur chaseKanluranst ockat c. 700, 000
P80pershar eplusfiver i
ghts.Ati ssuedate,ri
ghtshadamar ketvalueof d. 600, 000
P5eachandst ockwassel l
ingatP95ex- ri
ght. Tagudinusedr ightst o
purchase22, 000addi tionalshar esofKanl uranst ockandal lowedt he
remainingr i
ghtstol apse.TheFI FOmat hodi susedi ndeterminingt he 15.I n Januar y2005 PaoayCompanyacqui red 25% oft he outstanding
stockrightsexerci
sed.Whati sthecostofthenewi nvestment? commonst ockofBanguiCompanyf orP25, 000,000.Thebookv alueoft he
acquiredshar eswasP21, 000,000.Theexcessofcostov erbookv al
uewas
a.1,760,000
attr
ibutablet oani denti
fiabl
ei ntangibleassetwhi chwasunder val
uedon
b.2,170,000
Bangui ’
sbal ancesheetandwhi chhadani ndef i
niteli
fe.Fort hey earended
c.2,310,000
December31,2005,Banguir epor t
edneti ncomeofP20, 000,000andpai d
d.2,100,000
cashdi vi
dendsofP6, 000,
000oni tscommonst ockandt hereaft
erissued10%
stockdi vi
dend.Whati st hepr opercar r
yingv al
ueofi nvest
menti nassoci ate
atDecember31, 2005?
13.NagbukelCompanyi ssuedr ightstosubscribetoitsstock,t
heowner ship
of4shar esent i
tl
ingthest ockholderstosubscribefor1shar eatP100.Si nait a.28,300, 000
Companyowns200, 000shar esofNagbukelCompanywi thtotalcostof b.28,500, 000
 c.20,
400,
000 1.Whichofthef ol
lowingobser vati
onsconcerni
ngi nt
erfundtransf
ersi
strue? 
d.28,
700,
000 A.
 Theyareexpect edtober epaid.
P2 B.
 Theyareclassifi
edasf undr evenuesorexpendit
ures.
C.
 Thereceivi
ngf undrecognizest heset
ransfer
sasr evenue.
D.
 Thesetransfersareclassif
iedunder"OtherFinanci
ngSour cesorUses."

2.Shue,apar t
nerintheFi
nancialBrokersPartnership,
hasa30per centshar
ein
part
nershippr of
it
sandlosses.Shue'scapit
al accounthadanetdecreaseof
100,000during2008.Duri
ng2008, Shuewi thdrew240,000aswi t
hdrawals
andcont r
ibutedequi
pmentv al
uedat$50, 000t othepartner
shi
p.Whatwas
thenetincomeoft heFi
nancialBrokersPartnershipfor2008? 
A. 
633,334
B. 
466,666
C. 
300,000
D. 
190,000

3.TheJPBpartner
shiprepor
tedneti
ncomeof160,000fort
heyearended
December31,2008.Accor
dingtothepar
tner
shipagr
eement
,part
nershi
p
prof
it
sandlossesaretobedist
ri
butedasfol
lows:

   
Howshoul
dpar
tner
shi
pneti
ncomef
or2008beal
l
ocat
edt
oJ,
P,andB?

   
 
A.
 Opt
ionA
B.
 Opt
ionB
C.
 Opt
ionC
D.
 Opt
ionD

4. 
Ref
ert
otheabov
einf
ormat
ion.Whati
seachpar
tner
'st
axbasi
sint
heJones
 andSmi
thpar
tner
shi
p? B.
 pl
ustheprofi
treali
zedthisyearf
rom upstream i
nter
companysalesof
i
nventor
ymadel astyear.
C.
 pl
usunreal
izedprofitondownstr
eam intercompanysal
esofinventor
y
madeduringthecurrentyear
.
D.
 minustheparent'
sshareofprofi
treali
zedt hi
syearf
rom upst
ream
i
nter
companysal esofinvent
orymadel astyear.
   
 
A.
 Opt
ionA 8.XingCor porati
onowns80per centoft hevot
ingcommonsharesofAdams
B.
 Opt
ionB Cor por
ation.Noncont r
oll
i
ngint erestwasassigned$24,
000ofincomei
nthe
C.
 Opt
ionC 2009consol idatedincomest atement .Whatamountofneti
ncomedid
D.
 Opt
ionD AdamsCor porationreportf
ort hey ear? 
A. $150,
000
5.WindsorCorporati
onowns75per centofElvenCor
porati
on'soutstanding
B. 
$96,000
commonst ock.Elven,
int
urn,owns15per centofWindsor'
soutstanding
C. $120,
000
commonst ock.Whatpercentofthedivi
dendspaidbyWi ndsori
sr eportedas
D. $30,
000
di
videndsdeclaredint
heconsoli
datedret
ainedearni
ngsstatement ? 
A. 
None 9.OnJanuar y1,2008,ZetaCompanyacqui r
ed85per centofThetaCompany '
s
B. 
100percent commonst ockfor$100,000cash.Thefai
rvalueofthenoncontroll
i
ng
C. 
85percent i
nterestwasdeterminedt obe15percentofthebookv alueofThetaatthat
D. 
75percent date.Whatporti
onoft heretai
nedearni
ngsreport
edi ntheconsoli
dated
balancesheetpreparedimmediatel
yaft
erthebusinesscombi nat
ionis
6. 
Par entCorporationowns90per centofSubsi
diary1Company 'sstockand75
assignedtothenoncontroll
i
nginter
est?
 
percentofSubsi diar
y2Company '
sstock.Dur
ing2008,Parentsoldinvent
ory
A. 
Ni l
purchasedin2007f or$48,
000toSubsi di
ary1for$60,
000.Subsidiary1then
B. 
15%
sol
dt heinventoryatitscostof$60,000toSubsidi
ary2.Pri
ortoDecember31,
C. 
100%
2008, Subsi
diary2sol d$45,
000ofi nvent
oryt
oanonaf fi
l
iatefor$67,000and
D. 
Cannotbedet ermined
hel
d$15, 000ini nventor
yatDecember31, 2008.
10. 
OnSept ember30,2008, Wil
fr
edCompanysol dinventoryt
oJackson
Basedont hei
nfor
mati
ongivenabov
e,whatamountshoul
dber
epor
tedi
nthe
Corporati
on,i
tsCanadiansubsidi
ary
.ThegoodscostWi l
fr
ed$30,000and
2008consoli
dated incomestat
ementascostofgoodssol
d? 
weresoldtoJacksonf or$40,
000,payabl
einCanadiandollar
s.Thegoodsar e
A. $36,
000
sti
l
l onhandattheendoft heyearonDecember31.TheCanadi andol
lar(C$)
B. $12,
000
i
sthef uncti
onal
currencyoftheCanadiansubsi
diary.Theexchangerates
C. $48,
000
fol
low:
D. $45,
000

7.Consol
i
datednetincomemayi ncl
udetheparent'sseparat
eoperat
ingi
ncome
pl
ustheparent'
sshareofthesubsi
diar
y'
sreportednetincome: 
A.
 pl
ustheunreali
zedprof
itonupst
ream i
ntercompanysal esofi
nvent
ory    
madeduri
ngt hecurr
entyear.
 Basedonthepr
ecedi
nginf
ormati
on,atwhatdoll
aramountistheendi
ng 13.Pr i
ncetonCompanyacquired75per centofthecommonst ockofShef f
ield
i
nvent
oryshowni
nthetr
ial bal
anceoftheconsol
idat
edworkpaper?
  Cor por
at i
ononDecember31, 2009.Ont hedateofacquisi
tion,Pri
ncetonheld
A. 
$45,
000 l
andwi t
habookv alueof$150,000andaf ai
rvalueof$300,000;Sheff
iel
dheld
B. 
$50,
000 l
andwi t
habookv alueof$100,000andf airval
ueof$500,000.Usingtheent i
ty
C. 
$40,
000 theory,atwhatamountwouldl andberepor t
edinaconsolidatedbalancesheet
D. 
$35,
000 preparedi mmedi
atelyaf
tert
hecombi nation? 
A. $650,000
11.Wakef i
eldCompanyusesaper petualinvent
orysystem.InAugust,i
tsold B. 
$500, 000
2,000unitsfr
om itsLIFO-baseinventory,whichhadoriginal
lycost$35perunit
. C. $550,000
Ther epl
acementcosti sexpectedtobe$45peruni t.Thecompanyi splanni
ng D. $375,000
toreduceitsinvent
oryandexpect stor eplaceonly1,
500oft heseunit
sby
December31, t
heendofi tsfi
scalyear.Thecompanyr eplaced1,500uni
tsin 14.IfPushCompanyowned51per
centoft
heout
standi
ngcommonst
ockof
Nov emberatanact ualcostof$50peruni t. ShoveCompany ,
whi
chr
epor
ti
ngmethodwoul
dbeappropr
iat
e? 
A. 
Costmet hod
  B. 
Consolidat
ion
Basedont heprecedingi
nformati
on,i
ntheentr
yinAugusttor
ecordt
hesal
eof C. 
Equitymethod
the2,000uni t
s:  D. 
Mer germethod
A. CostofGoodsSol dwil
lbedebit
edfor$70,
000. 15.Goodwill
undertheparentt
heory:
 
B. I
nventorywill
becr edi
tedfor$85,
000. A. 
exceedsgoodwil
lunderthepropri
etarytheory.
C. ExcessofRepl acementCostoverLI
FOCostofInv
entoryLi
qui
dati
onwi
ll
be B. 
exceedsgoodwil
lundertheenti
tytheory.
creditedfor$15,000. C. 
isl
essthangoodwillundert
heentitytheory.
D. ExcessofRepl acementCostoverLI
FOCostofInv
entoryLi
qui
dati
onwi
ll
be D. 
islesst
hangoodwillundert
hepropr i
etaryt
heory.
creditedfor$67,000.

12.OnDecember31, 2009,RuddCompanyacqui red80percentofthecommon

stockofWi lt
onCompany .Atthetime,Ruddhel dl
andwi t
habookv al
ueof
$100,000andaf airval
ueof$260, 000;
Wi l
tonheldlandwit
habookv alueof
$50,000andf ai
rvalueof$600,000.Usingtheparentcompanyt heory
,atwhat
amountwoul dl
andber epor
tedinaconsol idat
edbalancesheetprepared
i
mmedi atel
yaft
erthecombination? 
A. $550,000
B. 
$590,000
C. $700,000
D. $860,000