Fi

nal
Pre-
boar
dinPr
act
ical
Account
ing1(
Rev
iewSchool
ofAccount
ancy
)
1.Thefol
lowingwer etakenfr
om thei
ncompl
etef
inanci
aldat
aofSam Company
,acal
endar
yearmerchandi
singcorpor
ati
on:
December31, 2008 December31, 2009
TradeAccount sReceiv able 840,000 780,000
I
nv ent ory 1,500,000 1,000,000
Account sPayable 950,000 980,000
Accr uedgener al&admi nist
rativ
eexpenses 130,000 170,000
Prepai dselli
ngexpense 150,000 130,000
Proper ty,pl
antandequi pment 1,650,000 1,420,000
Patent 425,000 300,000
I
nv est mentinassociate 550,000 720,000
Thef oll
owingadditionali nfor
mationweremadeav ail
able:cashpaymentsf orsell
i
ngand
admi nistrati
veexpenseswasP900, 000,paymentsforpur chases,netofcashdi scountsof
P70,000wasP1, 530,
000.Equi pmentwithabookvalueofP200, 000wassoldf orP250,000.
There wer e no acquisitions ofpr oper
ty,pl
antand equi pmentand othert r
ansactions
aff
ect ingneti ncomedur i
ngt heperiod.Therewerenoacqui sit
ionsofi
nvest mentdur i
ng
2009.I ft hecompanyr epor t
edaneti ncomebeforetaxofP270, 000,whatist heamountof
col
lect ionsont r
aderecei vablesin2009?
a.2, 425,000 c. 3,285,
000
b.2, 470,000 d.3, 485,
000

2.ThebalancesheetatDecember31,2008ofMal lCompanyshowedacashbal
anceof
P91,
750.Anexaminat
ionoft
hebooksdiscl
osedt
hefoll
owi
ng:
Cashsal esofP12,000from Januar y1-7,2009wer epr edatedasofDecember28- 31,2008
andchar gedtothecashaccount .Cust omer s’checkst otali
ngP4, 500depositedwi t
hand
returnedbyt hebank“ NSF”onDecember27, 2008wer enotr ecordedinthebooks.Checks
ofP5, 600inpay mentofli
abi l
i
tieswerepr eparedbef oreDecember31, 2008andr ecordedin
thebooks,butwi t
hheldbyt het r
easur
er.Post -
datedcheckst otal
ingP3,400ar ebeingheld
byt hecashieraspartofcash.Thecompany ’
sexper i
enceshowst hatpost-
datedchecksar e
event ual
lyreal
i
zed.Thecashaccounti ncludesP20, 000bei ngreservedforthepurchasedof
ami ni-
computerwhi chwillbedel i
ver
edsoon.Per sonalchecksofof fi
cers,P2,
700,wer e
redeemedonDecember31, 2008,butreturnedtocashi eronJanuar y2,2009.
How muchist
hecashbal
ancet
hatshoul
dbeshownintheDecember31,2008bal
ance
sheet
?
a.P91,
750 b.P69,150 c. P54,
750 d.P43,550
3.Yourcl
ients,Mil
l
sCor porati
on,request
syourassi
stanceindetermi
ningt
heamountofloss
andinfil
ingasinsuranceclaimi nconnecti
onwit
haf i
reonJune15,2006thatdest
royed
someoft hecompany ’
si nvent
oryandaccounti
ngr ecords. Youwereabl
etoobtai
nt he
fol
l
owingi nf
ormati
onfrom av ai
l
ablerecor
ds:
Thel astphy si
calinventorywast akenonDecember31, 2005.Att hetime,totali
nvent
ory(at
cost)amount edt oP210, 798.80. Account spayabl
ewer eP110, 106.42onDecember31,
2005t othedat eoft hef iretot
aledP641, 871.
56.Al lsal
esar eonaccountandaccount s
receivablewereP135, 009. 18atDecember31, 2005andP107, 145.25atthedat eofthefi
re.
Collecti
ons on r eceivablef r
om December31,2005 t othe dat e offire amounted to
P876, 195.50.Almostal lt
hemer chandiseitemsaresoldatappr oximatel
y30%i nexcessof
cost.AsofJune15,2006,t het otalcostoftheinventor
yitemsnotdest royedbythefire
amount edtoP144, 882.33.
Howmuchi
sthelossi
ncur
redbyt
hecompanyasar
esul
tofthefi
re?
a.72,
055.
23 c. 216,
937.56
b.130,
785.
88 d.275,668.21
4.Mar celCompanypurchased5, 000sharesofBonif
aceCo.parP100atP120i nJuly2006.
Mar celCompanycl
assif
iedt hesecur
it
iesasavail
abl
eforsale.MarcelCompanyrecei
veda
sharedivi
dendof1sharef orevery5ownedonAugust5, 2006.OnSeptember16,2006,the
companyr ecei
vedacashdi vi
dendofP10pershar eont hest
ockandwasgr ant
edt o
purchase1shareatP105f orev er
y4sharesheld.Thesharehadamar ketval
ueex-ri
ghtof
 P115andtheri
ghthadaval
ueofP5.OnDecember20,2006,
thecompanysold2,000ri
ghts
atP7.50andexerci
sedt
her emaini
ngri
ght
s. Whati
st heaverageuni
tcostoft hetotal
i
nvest
mentasofDecember31,2006?
a.95.83 b.98. 70 c. 99.52 d.105. 00
5.Palm Corporati
onwasor gani
zedonJanuar y2,2005.I twasaut hori
zedtoi ssue74,000
sharesofordinar
yshare.Onthedat eofor ganizat
ion,
itsol
d20,000sharesatP50pershar e
and gavet he remaini
ng shares in exchange forcer t
ainland-
beari
ng recoverabl
e ore
deposit
sestimatedbygeologistsat900,000t ons.Thepr oper
tyisdeemedt ohav eavalue
ofP2,700,
000wi thnoresi
dualvalue.
During2005, purchasesofminebuildi
ngsandequipmentt
otal
edP261,000.Duri
ngt
heyear
,
75,000t onswer emi ned;8,
000t onsoft hi
samountswer eunsoldonDecember31,the
balanceoft onnagebeingsoldforcashatP17pert on.Expensesincur
redandpai
ddur
ing
they ear
,exclusiv
eofdepleti
onanddepr eci
ati
on,
wereasfol
lows:
Mining P173,
500
Deli
very P 20,
000
Generalandadminist
rati
ve P 19,
500
Cashdivi
dendsofP2pershar ewer
edeclar
edonDecember31, payabl
eJanuary15,2006.It
i
sbel i
evedt hatbui
l
dingsandshedswillbeusef
ulonlyov erthelif
eoft hemine,hence,
depreci
ati
oni stoberecogni
zedi
ntermsofmineoutput
.Howmuchi st
henetincomef or
2005?
a.705, 57 b.723,63 c. 724,05 d.765, 57
0 0 0 0
6.Duri
ng2006, RoverspentP6,000,000init
snewsof twarepackage.Ofthi
samount,60%was
spentbef oret echnol
ogicalfeasibi
li
tywasest abli
shed fortheproduct,whi
ch isto be
market edtot hir
dpar t
ies. Thepackagewascompl etedatDecember31,2006. Rov er
expectsausef ulli
feof8y ear
swi thtotalrevenuesofP20, 000,
000. Duri
ng2004,Rov er
real
izesrevenuesofP4, 000,
000.Netr eal
izablevalueofthesoftwar
eonDecember31, 2007
i
s85%ofcost .Whatamountofsof t
wareexpenseshoul dbeincl
udedintheDecember31,
2007i ncomest atement?
a.300, 00 b.360,00 c. 480,
00 d.720, 00
0 0 0 0
7.OnJanuar y1,2006,Tr ooperEnt erprises,Inc.dev el
opedanew machi nethatr educest he
ti
mer equiredtoi nser tt hef or tunesi ntot heirf or
tunecooki es. Becauset hepr ocessi s
consideredv er
yv aluabl et ot hef or t
unecooki ei ndustry,Trooperhadt hemachi nepat ented.
Thefol l
owingexpenseswer ei ncur redi ndev elopingandpat enti
ngthemachine:
Resear chanddev elopmentl abor ator yexpenses
P250, 000
Met alusedinconst ruct i
onoft hemachi ne 80,
000
Bluepr i
ntsusedt odesi gnt hemachi ne
32,000
Legal expensest oobt ainpat ent
120,000
Wagespai dfort heempl oy eesont her esear ch,developmentand
thebuil
dingoft hemachi ne; 60%oft het imewasspenti nactual
buil
dingoft hemachi ne 150,000
Expenseofdr awi ngr equir edbyt hepat entof f
icetobesubmi tt
edwi t
h
thepatentappl icat i
on 17,
000
Feespai dt
ogov ernmentpat entof fi
cet opr ocessappl icati
on
24,500
OnJanuar y2,2007,Tr ooperEnt er pri
ses,I nc.pai dP35, 200i nlegalfeestosuccessf ull
y
def
endt hepat entagainstani nfringementsui tbyAl i
anceCompany .Whati st
hecar ryingv alue
oft
hepat enti nDecember31, 2007?
a.142, 50 b.145, 35 c. 175,50 d.178, 69
0 0 0 7
8.PineCompanyof f
ersacoffeemugasapr emium forever
ytenP2.50candybarwrappers
present
edbycust omerstoget
herwithP10.00.Thepur chasepri
ceofeachmugt ot he
companyi sP8.
00;inaddi
ti
on,i
tcost
sP5.00tomai leachmug.Ther esul
tsoft
hepremium
pl
anf ortheyear
s2005and2006ar easf oll
ows(assumeal lpur
chasesandsalesarefor
 cash)
:
2005 2006
Coff
eemugspur chased 480,000 400,000
Candybarssold 3,750,000 4,500,000
Wrappersredeemed 1,900,000 2,800,000
2005wrappersexpectedtoberedeemedin2006 1,300,000
2006wrappersexpectedtoberedeemedin2007 1,800,000
Whatistheamountofpr emium l
iabi
l
ityi
ntheDecember31,2006bal ancesheet?
a.540,000 c. 990,000
b.840,000 d.1, 380,000
9.DreamerCor p.has an empl oyee benefitplan forcompensat ed absences thatgi v
es
empl oy ees10pai dvacati
ondaysand10pai dsi
ckday s.Bot hv acati
onandsi ckday scanbe
carriedov eri
ndef ini
tel
y.Employeescanel ecttor ecei
v epay menti nli
euofv acati
onday s;
howev er,nopay mentisgivenforsickday snott aken.AtDecember31,2006,Dr eamer’s
unadj usted bal ance ofl i
abi
l
ityforcompensat ed absences was P210, 000. Dr eamer
estimat edt hatt herewere150v acati
onday sand75si ckday sav ail
abl
eatDecember31,
2006.Dr eamer ’
sempl oyeesearnanav erageofP1, 000perday .I nit
sDecember31,2006
balancesheet ,whatamountofl i
abil
it
yf orcompensat edabsencesi sDreamerr equir
edto
repor t
?
a.P360, 000 b.P225,000 c. P210,000 d.P150, 000
10.BaronAppl i
anceCompany ’saccount anthasbeenr eviewi
ngt hef i
rm’spastt elevisionsales.
Forthepasty ear s,Bar onhasbeenof f
eringaspeci alservicewar r
ant yonalltelevisionsold.
Withthepur chaseofat elev i
sion,therighttopur chasea3- y earser vicecontractf oranext r
a
P800.I nformat i
onconcer ningpastt elevisi
onandwar rantycont ractsalesisgiv enbel ow:
2006 2005
Televisionsal esi nuni ts 1,100 920
Salespr iceperuni t P10, 000 P8,000
Numberofser vicecont ractssol
d 700 600
Expensesr elatingt ot elevisi
onwar ranties P77, 040 P26, 800
Baron’saccount anthasest i
mat edfrom pastr ecordsthatt hepat ternofr epai r
shasbeen
nd
40%i nthey earofsal e,36%ont hefi
rsty earaftersaleand24%on2 y earofsal e.Sal esof
thecont r
act saremadeev enl yduri
ngt hey ear.Howmuchunear nedser vi
cecont ractwould
berecogni zediny ear2006?
a.P201, 600 b.P294, 400 c. P448, 000 d.P649, 600
It
ems11and12ar ebasedont hef ollowi ngi nformat i
on:
Mat terCor por ati
oni sint hebusi nessofl easingnewsophi st
icat
edcomput ersyst
ems.Asa
l
essorofcomput ers, Mat terpur chasedanewsy stem onDecember31, 2005.Thesy stem was
deli
veredt hesameday( bypr iorar rangement )t oDOTCompany ,al essee.Thecor porat
ion’
s
account antrev ealedt hef ollowi nginf ormat ionr el
atingtothel
easetransact i
on:
Costofsy st
em t oMat ter P550, 000
Esti
mat edusef ul l
i
feandl easet er m 8y ears
Expect edr esidual v alue( unguar ant eed) P40, 000
Mat ri
x’si mplicitrateofi nterest 12%
Dateoff ir
stleasepay ment December31, 2005
Additi
onal informat ionasf ol l
ows:
 Att heendoft hel ease, thesy stem wi llreverttoMat ter
.
 Doti sawar eofMat ter’
sr ateofi mplicitinterest.
 Thel easer ent alconsi st sofequal annual payment s.
 Mat rixaccount sf orleasesusi ngt hedi r
ectf i
nancingmethod.Doti ntendst orecordthe
leaseasaf inancel ease.Bot hthel esseeandt helessorr
eportonacal endaryearbasisand
electtodepr eciateal lasset sont hest r
ai ght-l
i
nebasi s.
11.Whatamountofdepr eci
ati
onexpenseshoul
dthelesseerecogni
zedrel
atedt
ot hel
eased
assetfort
hey earendedDecember31,2006?(Car
rypresentval
uecomputat
ionsupto3
decimalpl
aces.
)
a.52,547 c. 64,
061 7
b.66,730 d.119,27
12.Whatamountofi nter
estexpense shoul
dthe l
essee recogni
zed r
elat
ed t
othe l
ease
t
ransact
ionfort
hey
earendedDecember31,2006?
a.52,547 b.66,730 c. 64,
061 d.119,
27
 7
13.Thefol
lowinginf ormat i
onr elatest ot hedef i
nedbenefitpensi
onpl
anf
ortheCity
wi de
Companyforthey earendi ngDecember31, 2006:
Presentv alueofbenef itobli
gati
on,January1
P6,900, 000
Presentv alueofbenef itobli
gati
on,December31
7,793,500
Fairvalueofpl anasset s,January1 7,
552,
500
Fairvalueofpl anasset s,December31
8,347,500
Deferredgai nonpl anassetdur i
ng2003
42,500
Amor tizationofdef er redgain 48,
750
Empl oy ercont ri
buti
on 637,
500
Benef i
tspai dtoreti
r ees
585,000
Settl
ementr ate
10%
Howmuchwoul dbet henetpensi oncostfortheyear2006?
a.687, 25 b.729, 75 c. 784,
75 d.788,50
0 0 0 0
14.SwiftCompanyoper atesadef i
nedbenef itpensionpl anandchangesi tonJanuary1,2006
toadef inedbenefitcontri
buti
onpl an.Thedef inedbenef i
tplanstil
lrelat
estopastservi
ce
butnotf utureservi
ce.Thenetpensi onliabi
l
ityaftertheplanamendmenti sP35,000,
000
andt henetpensionliabil
it
ybef or
et heamendmentwasP50, 000,
000.Howshoul dtheSwif
t
Companyaccountf orthischange?
a.Swi ftCompanyr ecogni
zesagai nofP15,000,000.
b.Swi ftCompanydoesnotr ecognizeagain.
c. Swi ftCompanyr ecognizesagai nofP15, 000,000overtheremai ni
ngser
v i
celi
vesof
t
heempl oyees.
d.Swi ftCompanyr ecogni
zesagai nbutappliesthe10%cor r
idorapproachtoit
.
15.OnDecember31,2007,WoodsCompanychangedi tsdef i
nedbenef itpensionpl ant o
definedcontributionplan.Woodsagr eeswi t
ht heempl oyeest opayt hem P18, 000,
000i n
totalontheint r
oduct i
onofadef inedcont ri
butionpl an.Theempl oy eesforf
eitanypensi on
entitl
ementf ort hedef i
nedbenef i
tplan. Thepensi onl i
abil
it
yr ecognizedint hebal ance
sheetatDecember31,2007wasP20, 000,000.How woul dthiscur tai
lmentbeaccount ed
forinthebalancesheetatDecember31, 2008?
a.Aset tlementgai nofP2,000,000shoul dbeshown.
b.The pensi on li
abil
it
y should be cr edited t or eserves and a cash pay mentof
P18,
000, 000shouldbeshowni nexpensei ntheincomest atement .
c. Thecashpay mentshouldgot or eservesandt hepensi onliabil
i
tyshouldbeshown
asacr edittotheincomest atement .
d.Acr edittor eser
vesshouldbemadeofP2, 000,
000.
16.Adversefinanci
alandoperat
ingci
rcumst
anceswarr
antt
hatCinemaCompanyunder
goesa
quasi
-organizat
ionatDecember31,2006. Thefol
lowi
nginf
ormati
onmayber el
evanti
n
accounti
ngf ort
hequasi
-reor
gani
zati
on.
Invent or
ywi thanetr eali
zablev alueofP215, 000iscur rentl
yr ecordedi ntheaccount satits
costofP250, 000.Equi pmentwi thaf ai
rmar ketvalueofP700, 000ar ecurrent
lyrecordedat
P875, 000, netofaccumul ateddepr eciat
ion.Acr editoragreest oextendt hemat uri
tydateof
al oanf orf i
vey ears,althoughi nter
estasor i
ginallystated mustcont i
nuet o bepai d.
Individualshar eholderscont r
ibuteP800, 000t ocreat eadditi
onalpai d-incapit
altof aci
li
tate
ther eorganization.Nonewshar esofst ockar eissued, alt
houghcont rolofamaj ori
tyoft he
company ’sout standingst ockpassest ot hecompany ’scredi t
ors. Theparv alueoft he
ordinar y sharei sr educed f rom P25 t o P15. I mmedi ately beforet hose events,t he
sharehol ders’equitysectionappear sasf oll
ows:
Ordi
narysharecapi
tal(
P25parv
alue,
100,
000shs.
,aut
hor
ized&out
standi
ng)
2,
500,000
Sharepremium r
eserv
e
 1,
750,000
Retai
nedear
nings(
def
ici
t) (750,
000)
3,
500,
000
Af
terthequasi
-r
eor
gani
zat
ion,
theshar
epremi
um r
eser
v eshouldhav
eabal
anceof
a.1,790,
000 b.2,390,
000 c. 2,590,
000 d.3,350,
000
17.HoneyCompanyr eportedt hef ollowingamount sinthest ockholders’equit
ysect ionofi ts
balancesheetdat edDecember31, 2005:
Preferenceshar ecapi t
al (
P150parv alue,20,000shares)
3,000,000
Ordinaryshar ecapi t
al(P37.50parv alue,100,000shar es) 3,750,000
Shar epremi um reserve
6,000,000
Accumul atedpr ofit
s 4,500,000
Treasuryst ock,atcost( 5,
000or di
nar yshares)
250,000
OnJanuar y2,2006,Honeysol d20,000addi ti
onalshar esofor dinaryshar eforP90per
shar e.Lat ein2006, itwasl earnedt hatbecauseofmat hemat icalerr
or,anov erstatementof
depr eciati
onexpensebyP375, 000hadoccur redin2005.Honeyr epor t
edneti ncomeof
P825, 000f or2006.Honeydecl aredcashdi vi
dendsofP150, 000onpr ef
erenceshar eand
P450, 000ont heor dinarysharedur ing2006.Al lthetreasur yshareswer ere-issuedf orP35
pershar eonDecember31,2006. Whatshoul dbet heaccumul atedpr ofi
t sbal anceon
December31, 2006?
a.4, 275,000 b.4, 980,000 c. 5,025,000 d.5, 100, 000
It
ems18and19ar ebasedont hef
oll
owinginfor
mat ion:
Databel owcamef rom thecomparat
ivetr
ialbal
anceofMel lowCompany .Thebooksarekept
ontheaccr ualbasi s. Incl
udedintheoper ati
ngexpensesar edepr
eciat i
onofP35,
000and
amorti
zat ionofP15, 000.
2006 2005
Account srecei vable 2,200,000 2,450,000
I
nter estrecei vable 8,
000 17,000
2006 2005
I
nv ent ori
es 4,200,000 4,050,000
Prepai dinsur ance 50,000 20,000
Account spay abl e 3,640,000 3,450,000
Otheroper ati
ngexpensespay abl
e 250,000 150,000
Netsal es 12, 000,000
I
nter estrev enue 65,000
Costofgoodssol d 8,000,000
I
nsur anceexpense 500,000
Otheroper ati
ngexpenses 950,000

18.Cashpai
dforoperat
ingexpensesduri
ngthey
earamountedto–
a.1,
330,000 b.1, 380,
000 c. 1,
400,
000 d.800,
000
19.I
fthecompany ’
sneti
ncomewasP500,000undert
heaccrualbasis,whati
stheneti
ncome
f
ortheyear2006undert
hecashbasi
s?
a.869,00 b.895,
00 c. 919,00 d.960,00
0 0 0 0
20.NeonCompanyhas110, 000or dinar
ysharesoutstanding,10,
000,6%cumul ative,P100par
converti
blepr ef
erencesharethatareconvert
ibl
ei nt
o20, 000ordi
naryshar esandan8%4-
yearconv ert
iblebondswi t
haf acev al
ueofP1, 000,000,conver
tibl
einto30, 000ordi
nary
shares.Thebondswer eissuedonJanuar y1whent heprevai
li
nginterestr atewas10%.
Thel i
abil
i
tycomponentoft hebondsatt heti
meofi ssueisP936,600.Neti ncomef orthe
yearisP850, 000.Incomet axrateis32%.Howmuchi sthedil
utedearningspershar efor
theyear?
a.P5. 71 b.P5. 65 c. P6.
00 d.P7. 18
21.PearlCompanybegan oper at
ionson January1,2005. On December31,2005,Pear l
prov
idedforuncol
lect
ibl
eaccountsbasedon1%ofannualcredi
tsal
es.OnJanuary1,2006,
Pearlchanged i
ts method ofdetermini
ng i
ts al
l
owance foruncol
l
ect
ibl
e accounts by
 apply
ingcertai
npercentaget otheaccountsrecei
vableagi ngasf ol
lows:
Dayspastinvoicedate Percentdeemedt obeuncollecti
ble
0–30 1
31-90 5
91-180 20
Over180 80
Inadditi
on,Pearlwrot
eof fallaccountsrecei
vabl
et hatwer eov er1y earol
d.Thef oll
owing
addit
ionali
nformati
onrelatestothey ear
sendedDecember31, 2005and2006:
2006 2005
Credi
tsales P6, 000,000 P5,600,000
Coll
ecti
ons 5,830,000 4,
800,000
Accountswritt
enoff 54,000 None
Recoveryofaccountspreviousl
ywr i
tt
enof f 14,000 none

Dayspasti
nvoi
cedateatDecember31
0–30 600,
000 500,000
31–90 160,
000 180,000
91–180 120,
000 90,
000
Over180 50,000 30,
000
Whatisthepr
ovi
sionforuncoll
ect
ibl
eaccount
sfort
heyearendedDecember31,2006?
a.22,000 b.62,000 c. 76,000 d.78,000
22.TheKill
joyCompanysel l
sProductA.Dur
ingt
heyear,t
hecompanymov edtoanewlocat
ion,
theinventoryrecordsforProductAweremispl
aced. Thebookkeeperhasbeenableto
gathersomei nfor
mationfr
om thesal
esr
ecor
dsandgivesyout
hedat ashownbel
ow:
Julysales: 57, 200atP100
Julypurchases:
Dat e Quantit
y Uni tCost
Jul y5 10,
000 P65. 00
Jul y9 12,
500 62.50
Jul y12 15,
000 60.00
Jul y23 14,
000 62.00
OnJul y31, 16,
000unitswereonhandwi that ot
alvalueofP988,000.Ki l
lj
oyhasal
ways
used a per iodic FI
FO invent
orycosti
ng sy st
em. Gr oss prof
iton sal es forJul
ywas
P2,058,750.Whati sthetot
alcostandunitcost
,respecti
vely
, oft
hebeginningi nv
ent
ory?
a.1, 345, 400and62.00 c. 1,367,
100and63. 00
b.1, 353, 538and62.38 d.1, 450,
000and66. 82
23.Storm Companybeganbusi nessi
nMayof2005. Dur i
ngt hey ear,Storm purchasedt he
threet radi
ngsecur iti
esl i
stedbel
ow. I nitsDecember31,2005bal ancesheet ,Storm
appr opri
atel
yr eport
edaP50, 000debi tbalanceinit
s“ Fai
rVal ueAdj ustment– Tr ading
Secur i
ti
es”account . Ther ewasnochangedur i
ng2006i nt hecomposi ti
onofSt orm’s
portfoli
ooft r
adingsecur i
ti
es.Pert
inentdataareasfol
lows:
Securi
ty Cost December31, 2006
MarketValue
G P 400,000 P 350,000
O 500,
000 350,000
D 900,
000 800,000
P1,800,
000 P1,
500,000
Whatamountofunr eal
izedlossont hesesecuri
ti
esshouldbei ncludedinSt or
m’ sincome
statementf ortheyearendedDecember31, 2006?
a.P0 b.P300,000 c. P350,000 d.P400, 000
24.GrandCompanyhas40, 000shar esofunquot edequit
yinstr
umentofSandCor poration.
Theseshareswer eacquiredatP40pershar eonJanuary2,2006.OnDecember31,2006,
GrandCompanysol d30,000shar esofi t
sinv
estmenti
nSandCor porati
onforP50pershar e.
Theremainingsecuri
ti
eswer esol donDecember15,2007f orP60pershar e.Mar ketv alue
ofSand’sshar esisnotdet er
mi nableorcannotbemeasur edr el
iabl
y. Usingt hecost
recov
erymet hod,whatamountofr eali
zedgainorl
ossshouldGrandCompanyr ecognizei n
2007from sell
i
ngthoseshar es?
a.100, 00 b.400, 00 c. 500,
00 d.600, 00
0 0 0 0
25.ThankCompanypur chased40%ofGodCompany ’soutst
andi ngor dinarysharesonJanuar y
2,2006f orP8, 000,000.Thecar ry
ingamountofGod’ snetasset satthedat eofpur chase
totaledP18,500,000.Fai rv al
uesandcar ryi
ngv al
uesweret hesamef oralli
temsexceptf or
plantandinv entoryforwhi chfai
rvaluesexceededt hei
rcarryi
ngamount sbyP1,000,000and
P200, 000respect i
vely.Thepl anthasa20- yearli
fe.Theent ireinventor
ywassol dduring
2006.Goodwi l
l,ifany ,i
snott obeamor t
izedandnoi mpai rmentt esthasbeendonesi nce
thecompanybel ievest hatthegoodwi llhasy ettodeclinei tsv alue. During2006,God
Companyr epor t
edneti ncomeofP2, 400,000andpai daP400, 000cashdi vi
dends.What
amountshoul dThankr eporti
nitsincomest atementfr
om itsi nvest menti
nGodf ortheyear
endedDecember31, 2006?
a.836,00 b.844, 00 c. 860, 00 d.960,00
0 0 0 0
26.The December31,2006 and 2005 compar ativ
ef inanci
alst atementsofWorld Gall
ery
Company showed equi pment wit
h an or i
ginalcost P379, 000 and P344,
000 wi th
accumulat
ed depreci
ati
on ofP153,000 and P128,000,r espectiv
ely
. Duri
ng 2006,t he
companypurchasedequipmentcosti
ngP50,000,andsol dequi pmentwithacarr
yingvalue
ofP9,
000.Whatamountshoul dthecompanyr eportasdepreciati
onexpensef
or2006?
a.19,000 b.25,000 c. 31,000 d.34, 000
27.AnintangibleassetcostP300,000onJanuar y1,2005.OnJanuar y1,2006,theassetwas
eval
uatedt odet er
minewhet heritwasimpai r
ed. AsofJanuar y1,2006,theassetwas
expectedt ogeneratefut
urecashf l
owsofP25, 000pery ear(attheendoft heyear).The
appropriat
ediscountrateis5%.Whatt otalamounttobechar gedagainstincomein2006,
assumi ngthattheassetwasassumedt ohav eatotalusefulli
feof10y earsfr
om dateof
acquisi
tion?
a.19, 744 c. 112,
04 d.132, 33
b.92, 304 4 4
It
ems28and29ar ebasedont hefoll
owing:
OnJanuar y1,2006,Beli
efCompanyi ssuedi ts9%, 4-
yearconv ert
ibl
edebtinst
rumentwitha
faceamountofP4, 000,
000f orP4,
100,000.I nter
estispay abl
eev eryDecember31ofeachy ear
.
Thedebti nst
rumentisconv ert
ibl
einto80,000or dinaryshareswi thaparv al
ueofP50.When
thedebti nstr
ument swereissued,theprevail
ingmar ketrateofinterestf
orsimil
ardebtwit
hout
conv er
sionopt i
onis10%.OnDecember31, 2007,1/4oft heconv ert
ibl
edebtinst
rumentswere
reti
redforP1,000,000.Withouttheconversionopt i
on,thedebtinstrumentcanber et
ir
edat97%.

28.Ont
hedat
eofi
ssue,
whatamountofthepr
oceedsr
epr
esent
stheequi
tycomponent?
a.None b.226,800 c. 3,
873,
200 d.4,100,
000
29.Aft
erthereti
rement
,whati
sthecar
ryi
ngval
ueoft
hedebtinst
rument
sasofDecember31,
2007?
a.2,947,
929 b.3,
900,
520 c. 3,
930,
572 d.3,963,
629
30.Self
lessCompanydet er
minedt hat,duet otheobsolescence,equi
pmentwithanor i
ginal
costofP180,000andaccumul at
eddepr eciat
ionatJanuary1,2005ofP84,000hadsuff
ered
permanentimpair
ment,andasar esultshouldhaveaf ai
rvalueofonlyP60,
000asoft he
beginni
ngoft hey
ear.Addit
ionall
y,ther emaini
ngusefulli
feoftheequipmentwasreduced
fr
om eightyearst
othreeyears.InitsDecember31, 2005balancesheet,
howmuchshoul d
Self
lessrepor
tasaccumulat
eddepr eci
at ion?
a.20, 000 0 0 0
b.104, 00 c. 120,00 d.140,00
31.OnJanuar y2,2005,Hav enCor por
at i
onacquiredat rackoflandt hatistobesol dint he
ordi
naryconductofbusiness.Thepur chasepriceofthepropertyofP50,000,
000waspai d
i
ncashandat ot
alt
ransactioncostsofP500, 000relatedt
ot heacquisit
ionoftheproper t
y
wasal sopaidatalaterdate.Thel andwassubdi v
idedint
o2, 000lots(200squaremet ers
foreveryl
ot)foranaddit
ionalcostofP5, 500,
000.OnDecember31, 2005,t
hemar ketvalue
ofthelotwasP1,500persquar emet er
.
AsofDecember31, 2006, onl
y20,
000squar
emet ersarest
illunsoldandmarketval
ueofthe
l
othadincreasedtoP1, 600persquaremeter
.Ont hisdate,Hav enCorpor
ati
ondecidedto
tr
ansf
ertheremaini
ngl otsint
oinvest
mentproper
tythati
st obecar r
iedunderthef
airval
ue
 model
.Ther
ewasnoaddi
ti
onal
costi
ncur
redont
hechangeofi
ntent
ionont
hepr
oper
ty.
Whatamountofgai
nshoul
dHavenCor
porat
ionr
ecogni
zeasar esul
toft
het
ransf
er?
a.29,200,
000 b.29,
225,
000 c. 29,
475,
000 d.29,500,
000
I
tems32and33ar ebasedont hefol
lowinginformation:
OnJune15,2006,Val iantCompanysol ditsinvest
mentpropertyforP6,
250,
000,netof
disposalcostandot hertransacti
oncost sofP150, 000. Thispropert
ywasacquiredata
histor
icalcostofP5,120,
000i ncl
udingtotaltransacti
oncostsofP190,00andhasafairmarket
valueofP6,200,000asofDecember31, 2005.
32.Ifthecompanyusest hecostmodel ,whatamountofr eal
i
zedgai
nonsal eoft
heinvestment
pr
opertyshouldVali
antCompanyr ecognize?
a.50,000 b.790, 000 c. 1,
080,
000 d.1,130,000
33.I
fthecompanyusesthefairval
uemodel,whatamountofr eal
i
zedgai
nonsaleofthe
i
nvest
mentpr
oper
tyshoul
dVali
antCompanyrecognize?
a.50,
000 b.790,
000 c. 1,
080,
000 d.1,
130,
000
34.Thedr aftfi
nanci
alst
atementsofClar
ionCompany ,f
orthey earendedDecember31,2006
arecurrentl
yunderconsi
derat
ionbythedir
ectors.Thenetassetf ortheyeari
sshownas
P3,500,000.SinceDecember31,2006,thefoll
owingev ent
shav eoccurr
ed,buthavenot
beenref l
ect
edinanywayinthedraf
tfi
nanci
alstatement
st othatdate.
It
em 1– A subst anti
alquanti
tyofsl ow-movingi nv
entorywassol dforP320,
000. The
i
nventoryhadcostP600,000andhadbeenv al
uedf ortheaccount
satDecember31, 2006at
i
tsesti
mat ednetr
eali
zableval
ueofP400, 000
It
em 2–At r
adereceiv
ablepaidtheamountowi ngofP130, 000inful
l.AtDecember31,
2006,ther
ewer edoubtsastowhet heritwouldbepai d,andaspecif
icprov
isi
onfortheful
l
amounthadbeenmadei ntheaccounts.
Whatist
headjust
edamountofnetassetshoul
dCl
ari
onCompanyrepor
tini
tsDecember31,
2006bal
ancesheet?
a.3,
420,000 b.3,500,000 c. 3,
550,
000 d.3,630,
000
35.The following i
nfor
mation has been extr
acted f rom the account
ing r
ecor ds ofTr end
Company :
December31, 2006 December31, 2007
Borrowings P1, 000,000 P2, 000,000
Sharecapi t
al 2,000,000 2,500,000
Propertyreval
uati
onreser
ve 500,000 600,000
Retainedearni
ngs 750,000 950,000

Additi
onalinformati
on:
 Bor rowingsofP200, 000werer epaiddur i
ngt hey ear2007. New bor r
owingsi
nclude
P600,000v endorfi
nancingari
singont heacquisi
ti
onofapr oper
ty.
 Thei ncreaseinshar ecapit
alincludesP300, 000ar i
singfrom t
hecompany ’
sdi
vidend
rei
nvestmentscheme.
 Themov ementinr etai
nedear ni
ngscompr isespr of
itforthey earP900,000andof
divi
dendsP700, 000.
 Ther ewer enodividendspayabler eport
edint hebalancesheetateitherDecember31,
2006orDecember31, 2007.
Whati
stheamountoff
inanci
ngnetcashfl
owsTr
endCompanyshoul
drepor
t?
a.P200,000 b.P500,000 c. P400,
000 d.P700,
000
36.Thef oll
owingi nf
ormat i
onhasbeenext r
act
edf
rom t heaccount i
ngr
ecor
dsofSmoot h
Company :
December31, 2006 December31, 2007
Land,atindependentvaluat
ion P1, 000,000 P1, 500,000
Plant
,atcost 2,100,000 2,550,000
Accumul at
eddepr eci
ati
on (200,000) (280,000)
Avail
ablef orsalel isted i
nvest
ment
s,fai
r 300,000 500,000
value
 Goodwill 250,000 200,000
Addit
ionali
nformati
on:
 Ther earenodisposalsofl and.
 Ther ewerenodisposalsofpl antorinvest
ment .
 Thel andreval
uationreservei ncr
ementi snetofdeferredtaxofP64,000.
 Thei nvestmentreval
uationr eservefortheyearisnetofdeferr
edtaxofP32, 000.
Whatistheamountofi nvestingcashf l
owsshouldSmoot hCompanyr eport
?
a.P300, 000 b.P750, 000 c. P450,000 d.P850, 000
Items37and38ar ebasedont hef oll
owinginf or
mat ion:
ZebraCo.l easedequipmentfrom Cobr aCor p.onJanuar y1,2005f oran8- yearper i
odexpi ring
December31,2012.Equalpay ment sundert hel easeareP600, 000andar edueonDecember
31ofeachy ear.Thef i
rstpaymentwasmadeonDecember31,2005.Ther ateofi nterest
contempl atedbyZebr aandCobr ais11%.Thepr esentvalueoft heequipmenti sP3, 087,674.
ZebraCompanyi ncurr
edat ot
altransacti
oncost sofP64,969t onegot i
atethecont ractofl ease.
Ifthetransact i
oncostisdeducted,theeffect
iv eyiel
di s11.6%.
37.Ifthel easeisaccountedasasal estypel ease,whati stheinit
ialcar
ryi
ngv alueoft helease
r
entalreceivableonDecember31, 2005?
a.2, 773,339 b.2, 827,
318 c. 3,022,
705 d.3, 087,674
38.I
ftheleaseisaccount
edasadir
ectfinancingl
ease,whatist
heini
ti
alcar
ryingv
alueofthe
l
easerental
receiv
abl
eonDecember31, 2005?
a.2,773,339 b.2,
827,318 c. 3,
022,
705 d.3,087,
674
39.MarcusCompanyhasr eportedat otalf i
nanciall i
abil
it
yofP15, 000,000ini t
saccounting
r
ecordsasofDecember31, 2007whi chincl udet hefoll
owing:
 AP3, 000,000facevalueperpetualbondt hatpay s5%interesteachy ear
.
 AP2, 000,000redeemablepr efer
enceshar et hatwil
lber edeemedbyMar cusataf ut
ure
dat e
 AP1, 500,000redeemablepreferenceshar eredeemabl eattheopt i
onofthehol der
 A P75, 000wr i
tt
encal lopti
ont hatal lowst heholdert opur chaseaf ixednumberof
or dinarysharesfrom MarcusCompanyf oraf ixedamount .
Whati sthecor r
ectamountoff inanci
alliabili
tythatshouldber epor t
edbyMar cusCompany
i
nit
sDecember31, 2007balancesheet ?
a.P11, 500,
00 b.P11, 925,00 c. P13,
425,00 d.P14, 925,
00
0 0 0 0
40.Tit
anCompanyi ssuedaconv ert
iblebondonJanuar y1,2006,thatmatur
esi nfiv
ey ears.
Thebondcanbeconv er
tedint
oor dinar
ysharesatanyt i
me.Titanhascalcul
atedthatthe
l
iabi
lityandtheequitycomponent softhebondareP3, 000,
000forthel
iabil
it
ycomponent
andP1, 000,
000fortheequit
ycomponent ,gi
vi
ngatotalamountofthebondofP4, 000,
000.
Thei nter
estrat
eoft hebondis6%andl ocaltaxl
egi
slati
onall
owsat axdeductionforthe
i
nterestpaidi
ncash.

Whatisthedeferr
edtaxl
i
abi
li
tyar
isingont
hebondasatthey earendi
ngDecember31,
2006?(
Taxrat
ei s32%)
a.None b.P320,000 c. P960,
000 d.P1,200,
000
41.OnJanuar y1,2006,IcorCompanyhasspentP900, 000indev el
opi
nganewpr oduct.These
costsmeett hedefi
niti
onofani nt
angi bl
eassetunderPAS38andhav ebeenr ecogni
zedin
thebalancesheet.Localtaxlegi
slati
onallowsthesecostst obededuct
edfortaxpurposes
whent heyareincur
red.OnDecember31, 2007,t
hei nt
angibl
eisdeemedtobei mpairedby
P75,000.Whatamountoft axbaserelatedtothei
ntangibl
eassetasofDecember31, 2006?
a.Zer o b.P75, 000 c. P825,000 d.P900, 000
42.MutantCompany ’
scurrentl
iabi
li
ti
esincl
udef i
nesandpenalt
iesforenvi
ronmentaldamage.
Thefinesandpenalt
iesarestat
edatP5,000,000.Thefi
nesandpenalti
esarenotdeductibl
e
fort
axpurposes.Taxr at
eis32%.Whati sthetaxbaseofthefi
nesandpenalt
ies?
a.None b.P1, 600,
000 c. P5,
000,000 d.P6, 000,
000
43.OnJanuar y2,2007,BrandCompanyrecei
vedagrantofP60,
000,
000tocompensat
eitfor
costsiti
ncurr
edinplanti
ngtr
eesoveraperi
odoff
iveyear
s.BrandCompanywi
lli
ncursuch
costinthi
smanner:
 Year Costs
2007 P2,
000,000
2008 P4,
000,000
2009 P6,
000,000
2010 P8,
000,000
2011 P10,000,
000
Act
ualcostsincur
redinpl
ant
ingthetr
eesshowedP2,
000,000andP4,000,
000i
nyear
s2007
and2008r espect
ivel
y.However,i
n2009andupt oyear2011,thecompanyhasstopped
pl
anti
ngtrees.
Duet ot
henon-f
ulf
il
lmentofi
tsobli
gati
on,t
hegover
nmenti
sdemandi
ngani mmedi
ate
repay
mentoft
hegranti
ntheamountofP50,
000,
000whi
chi
sconsi
der
edr
easonabl
e.
Whatamountshoul
dber
ecogni
zedasanexpenser
elat
edtotherepay
mentofgr
ant
?
a.None c. P44,
000,
00 d.P50,000,
00
b.P2,000,000 0 0
I
tems44t o46arebasedont hefoll
owingi nf
ormation:
OnJanuar y2,2007, WinkCorporati
onr eceiv
edagr antofP20,000, 000tobuil
dandrunapower
planti
naneconomi call
ybackwar darea.Thesecondar ycondi
t i
onat t
achedtothegranti
sthat
theentit
yshoul ddirectl
ydistr
ibut
et henecessar yneededpowert otheareaataratethatis
muchl owerthant hepr evai
li
ngpowerr ateinotheradv anceareas.Thepowerpl antistobe
depreci
atedusingthest rai
ght
-l
inemet hodov eraperiodof10y ears.

Thepowerpl antwascompl etedattheendofyear2007atcostofP50,

000,000andstar
ted
produci
nganddistri
but
ingpowertothebackwar
dareaatrat
ewhichi
satparthatthepr
evai
l
ing
ratesi
notheradvanceareas.
OnJune30,2009,t henat i
onalgov er
nmentdemandedP15, 000,000from WinkCompanyt he
repaymentoft hegrantduet ot henon-f
ulfi
ll
mentoftheconditi
ons.Wi nkCompanypai dthe
nati
onalgovernmentonJul y1,2009.
44.Whati sthecarryingv al
ueoft hepowerpl antasofJul y1,2009i mmedi at
elyaft
erthe
repaymentwasmadeassumi ngatt hetimeofini
ti
alrecogniti
onthegrantrecei
vedwas
recogni
zedasadef er
redincome?
a.P25, 500,
00 b.P42,500,00 c. P45,000,00 d.P50,000,
00
0 0 0 0
45.Whatisthecar
ryi
ngv al
ueofthepowerpl antasofJul y1,2009immediat
elyaft
erthe
r
epaymentwasmadeassumi ngatt heti
meofi ni
ti
alrecognit
iont
hegr
antrecei
vedwas
r
ecogni
zedasareduct
ionoft
herel
atedasset?
a.P25,500,
00 b.P42,500,00 c. P45,000,
00 d.P50,000,
00
0 0 0 0

46.Whattot
alamountofi
ncomeshouldWi nkCompanyrecogni
zedin2009assumi
ngthegr
ant
wastr
eatedasdef
err
edincomeatini
ti
al r
ecogni
ti
on?
a.None b.P2,000,000 c. P3,
000,
000 d.P4,
000,
000
47.CamperCompanyacqui resasubsi di
arywithav i
ewt osell
ingit
.Thesubsi diarymeet st he
cri
teri
at obecl assi
fi
edashel dforsal e.Atthebalancesheetdate,thesubsi diar
yhasnot
beensol dandsi xmonthshav epassedsi nceit
sacquisi
ti
on.Att hebal ancesheetdat e,the
carry
ingv alueofthesubsidiar
yisP4, 500,
000;it
sestimatedsell
ingpriceisP6, 000,000and
esti
mat edcostt oselli
sP1,200,000.Howmuchshoul dthesubsidiar
ybev aluedatbal ance
sheetdate?
a.P3, 300,
000 b.P4, 500,000 c. P4,800,
000 d.P6, 000,
000
48.OnJanuary31, 2006,MayCompanyentersi
ntoacontractwithApri
lCompanytorecei
vet he
fai
rv al
ueof2,000ofMayCompany ’
sownout st
andingshar esasofFebruary1,2007i n
exchangeforapay mentofP220,
000incashoranequivalentofP110pershareonFebruary
1,2007.Deliv
eringafixedamountofcashandrecei
vi
ngaf i
xednumberofMayCompany ’
s
shareswil
lsettl
ethecontract
.Atthetimeofthecont r
act,t
heprevai
li
ngrateofint
erestis
10%.

Attheti
meofthecontr
act
,shar
esofMayCompanyaresell
i
ngatP100pershare,t
he
pr
esentval
ueoft
hef or
wardcont
racti
szer
o. OnDecember31,2006,shar
esofMay
 Companyar eselli
ngatP115andthef
orwar
dcontracthasafai
rval
ueofP13,
800. On
February28,2007,shar
esofMayCompanyaresel
l
ingatP108andthefai
rval
ueofthe
for
war dcont
racti
sP4,000.

Whatamountshoul
dMayCompanyrecogni
zeasl
i
abi
l
ityonJanuary31,
2006?
a.None 0 3 0
b.200,00 c. 218,
33 d.220, 00
It
ems49and50ar ebasedont hefol
lowi
nginfor
mation:
OnFebruary1,2006,JaguarCompanyenter
si nt
oacont ractwithLy nxCompanythatgivesLynx
Companyt her
ighttoreceiveandJaguarCompanyt heobl igat
iontopayt hef
airval
ueof2, 000
ofJaguar’
sownor di
narysharesasofJanuary31,2007i nexchangef orP204,
000incash( P102
pershare)onJanuar y31,2007,ifLynxCompanyexer cisest her i
ght
. Thecontractwillbe
sett
ledbydeli
veri
ngaf i
xednumberofshar esandr eceiv
ingaf i
xedamountofcash.I fLynx
Companydoesnotexer cisei
tsri
ght,
nopaymentwi l
lbemade.

Belowi spert
inentr
elevanti
nfor
mati
on:
February1, December31,
2006 Januar
y31,
2007
2006
Mar ketval
ueofshar es P100/share P104/
share P104/
share
Fairvalueofopti
ons P10,000 P6,
000 P4,
000

49.Whatamountofshar
ehol
der
s’equi
tywil
lincr
easeasaresul
tofthecont
ractonFebr
uary1,
2006?
a.None b.4,000 c. 6,
000 d.10,000
50.Whatamountofsharehol
der
s’equit
ywi l
lincr
easei
nDecember31,2006ot
herthanthe
i
ncr
easei
nFebruar
yrelat
edtothecont
ract
?
a.None b.4,000 c. 6,
000 d.10,
000