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Ceu Exam Integ Exam PDF
Ceu Exam Integ Exam PDF
CEU-MANILA
EXAM (DEADLINE APRIL 23 – 12:00 LUNCH)
Co_Joseph_Yap@Yahoo.Com
Instruction: Select the correct answer for each of the following questions.
Use the following information for the next five (5) questions:
You were assigned to audit the financial statements of Fishermall Company as of and for
the period ended December 31, 20x8. This is the first time Fishermall Company’s
financial statements are being audited since it started operations in 20x6. The
following summarizes your audit findings:
b. No dividends were declared in 20x6. Dividends declared in December 20x7 and 20x8
were paid on January of the following years. The 20x8 dividends were at P500,000.
d. A three-year fire insurance amounting to P90,000 was paid and recognized as expense
on June 30, 20x6. The insurance however covers the period July 1, 20x6 to June 30, 20x9.
e. An equipment with a cost of P240,000 was fully expensed in September 30,20x6. Based
on your discussions with the management, the cost should have been capitalized and
depreciated using straight-line method over its eight-year useful life.
Requirements:
Use the following information for the next five (5) questions:
Brian, Inc. is a manufacturer of high-tech industrial parts that was started in 20x5 by
two talented engineers with little business training. As part of an internal audit, the
following facts were discovered. The audit occurred during 20x7 before any adjusting
entries or closing entries were prepared.
a. a five-year casualty insurance policy was purchased at the beginning of 20x5 for
P35,000. The full amount was debited to insurance expense at the time.
b. On December 31, 20x6 merchandise inventory was overstated by P25,000 due to a mistake
in the physical inventory count using the periodic inventory system.
c. At the end of 20x6, the company failed to accrue P15,500 of sales commissions earned
by employees during 20x6. The expense was recorded when the commission were paid in
early 20x7.
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d. Bad debts expense is determined each year as 1% of credit sales. Actual collection
experience of recent years indicates that 0.75% is a better indication of uncollectible
accounts. Management effects the change in 20x7. Credit sales for 20x7 are P4,000,000;
in 20x6 they were P3,700,000.
e. Additional industrial robots were acquired at the beginning of 20x5 and added to the
company’s assembly process. The P100,000 cost of the equipment was inadvertently
recorded as repair expense. Robots have 10-year useful lives and no material salvage
value. This class of equipment is depreciated by the straight-line method.
10. After correcting all the errors described in items a to e, retained earnings should
A. Decreased by P40,500
B. Increased by P60,500
C. Increased by P50,500
D. Increase by P80,500
Use the following information for the next five (5) questions:
The following balances have been excerpted from Kenji’s Statement of Financial Position
for the year 20x6:
January 1 December 31
Accounts receivable P200,000 P300,000
Allowance for bad debts 20,000 30,000
Merchandise inventory 380,000 330,000
Accounts payable 150,000 100,000
Accounts receivable written off 50,000
Cash received from customers 1,498,000
Cash paid to trade creditors 1,200,000
Sales discounts 20,000
Purchase returns 10,000
Rental receivables 70,000 80,000
Rental payable 60,000 35,000
Cash received from tenants 120,000
Additional information:
• Collections from customers included customer’s deposit of P80,000 of which P20,000
selling price of goods were already shipped and received by the customer. The
shipment of goods was not recorded by the company although the cost of merchandise
was properly excluded in the count.
• Collections from customers also included P30,000 payment from customer of accounts
receivable in which a check dated January 15, 20x7 was received.
• Collections also included recovery of accounts previously written off amounting to
P8,000.
• Included in the payment to trade creditors was a check drawn and recorded by the
company to the supplier in December 20x6 amounting to P20,000 which was delivered
to the payee on January 10, 20x7.
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• Also the company did not record payment to supplier amounting to P30,000.
Questions: Determine the accrual balance of the following as of December 31, 20x6:
11. Net sales
A. P1,400,000 B. P1,550,000 C. P1,470,000 D. P1,570,000
Use the following information for the next five (5) questions:
The following information was obtained in connection with the audit of Atlanta Co.’s cash
account as of December 31, 20x7:
• Cash balance per general ledger on December 31 was P37,500. The company recorded
actual company collections amounting to P152,500 from its customers during
December. Also in December, the company recorded bank service charges of P2,500,
including November bank service charges of P1,500. The December bank statement
showed total deposits credited by the bank of P145,000 and total checks paid
amounting to P133,750 and bank service charges of P3,250.
• The outstanding checks on November 30 and December 31 were P16,250 and P12,500
respectively while deposit in transit on November 30 was P12,500.
• The cash receipts books of December is under-footed by P2,500.
• The bank erroneously charged the company’s account for a P3,750 check for another
company. This bank error was corrected on January 20x8.
19. How much is the unrecorded bank service charges as of December 31, 20x7?
A. P1,250 B. P3,250 C. P2,350 D. P2,250
Use the following information for the next three (3) questions:
ALUCARD Company commenced operations on January 1, 2018. During the following year, the
company acquired a tract of land, demolished the building on the land and built a new
factory. Equipment was acquired for the factory and, in October 2019, the plant was ready
to commence operation. A gala opening was held on October 24, 2019, with the City Mayor
opening the factory. The first items were ready for sale on October 30, 2019.
During the year 2019, the following cash inflows and outflows occurred:
January 1 P4,000,000
March 31 8,000,000
July 1 12,200,000
September 30 8,800,000
December 31 7,000,000
Total P40,000,000
Bunny Company has a department that performs machining operations on parts that are sold
to contractors. A group of machines had an aggregate carrying amount of P7,380,000 on
December 31, 2021. This group of machinery has been determined to constitute a cash
generating unit for purposes of applying IAS 36 Impairment of Assets.
Presented below are data about future expected cash inflows and outflows based on the
diminishing productivity expected of the machinery as it ages and the increasing costs
that will be incurred to generate output from the machines:
The fair value of the machinery in this cash generating unit, net of estimated disposal
costs, is determined to amount to P5,070,000. The company discounts the future cash flows
of this cash generating unit by using a 5% discount rate.
21. In ALUCARD Company, what is the cost of land, building and equipment?
A. P3,450,000; P8,697,000; P2,547,000
B. P3,459,000; P9,702,000; P2,709,000
C. P3,453,000; P9,897,000; P2,877,000
D. P3,693,000; P10,077,000; P4,077,000
22. What is the amount of interest that should be capitalized of Adam Company in 2018?
A. P2,184,000 B. P2,466,070 C. P2,277,650 D. P5,013,670
24. How much impairment loss should be Bunny Company recognized at December 31, 2021?
A. 0 B. P2,310,000 C. P1,861,146 D. P2,020,714
Use the following information for the next two (2) questions:
25. How much should be credited to revaluation surplus on December 31, 2019?
A. P187,000 B. P28,000 C. P38,500 D. P19,600
Use the following information for the next four (4) questions:
In 2016, Clint Mining Co. purchased property with natural resources for P6,200,000. The
property was relatively close to a large city and had an expected residual value of
P1,500,000. However, P600,000 will have to be spent to restore the land for use. The
following information relates to the use of the property:
a. In 2016, Clint Mining Co. spent P400,000 in development costs and P300,000 in
buildings on the property. Clint does not anticipate that the buildings will have
any utility after the natural resources are depleted.
b. In 2017 and 2019, P300,000 and P800,000, respectively, were spent for additional
developments on the mine.
c. The estimated tons at the beginning of the period and tons extracted for the years
2016 – 2020 are as follows:
Year Estimated total tons at the beginning of the Tons extracted
period
2016 2,500,000 -
2017 2,500,000 750,000
2018 1,900,000 900,000
2019 1,300,000 850,000
2020 900,000 900,000
JOPAY FOODS CORPORATION (JFC) has provided information on intangible assets as follows:
A patent was purchased from KENJI FRIED CHICKEN (KFC) Company for P3,000,000 on
January 2, 2018. On the same date, the patent was estimated to have a useful life
of 10 years. The patent had a carrying value of P2,500,000 when KFC sold it to JFC.
On January 31, 2019, a franchise was purchased from Kuya B Inc., for P720,000. The
contract which runs for 20 years provides that 5% of revenue from the franchise
must be paid to Kuya B. revenue from the franchise for 2019 is P3,750,000.
The following research and development costs were incurred by JFC in 2019:
Materials and equipment P213,000
Personnel 283,500
Indirect costs 153,000
On January 1, 2019, because of recent events, JFC estimates that the remaining
useful life of the patent purchased on January 2, 2018, is only 5 years from
January 1, 2019.
27. Compute the accumulated depletion 2019 in Clining Mining Co Book.(Round depletion
rates to two decimal places)
A. P5,054,654 B. P5,761,000 C. P5,762,000 D. P5,140,391
28. Compute the accumulated depreciation expense 2018 in Clining Mining Co Book.
A. P416,308 B. P265,000 C. P189,000 D. P156,000
29. How much should be charged against JFC’s income for the year 2019?
A. P1,410,000 B. P1,413,000 C. P1,470,000 D. P1,222,500
30. In Starlight Company, What is the total amount to be classified and expensed as
research and development for 2019?
A. P4,584,000 B. P5,008,000 C. P4,804,000 D. P4,884,000
Use the following information for the next thirteen (13) questions:
You were assigned to review FAR Corp.’s accounts. The following post – closing trial
balance has been presented to you by the accountant of FAR Corporation in line with your
review of its financial statements as of and for the period ended December 31, 20x7:
Petty cash fund (note 1) P50,000
Cash in bank (note 2) 1,810,000
Accounts receivables and other receivable 620,400
Allowance for doubtful account (note 3) P80,000
Inventories 580,000
Prepayments 50,000
Building 11,799,000
Accumulated depreciation 700,000
Equipment 3,000,000
Accumulated depreciation 400,000
Accounts payable(note 4) 920,000
12% note payable –bank (note 5) 2,500,000
Premiums liability (note 6) 420,000
Warranties liability(note 7) 323,000
Salaries payable (note 8) 566,400
12% bonds payable(note 9) 3,000,000
Ordinary shares 2,000,000
Accumulated profits (note 10) 7,000,000
Total P17,909,400 P17,909,400
Notes:
Note 1: The petty cash fund includes unreplenishment December 20x7 petty cash expense
vouchers of P10,000 and employee IOU of P5,000.
Note 2: Reconciliation of FAR Corp.’s bank account on November 30 is:
Balance per bank statement P2,100,000 Balance per book P2,372,000
Note 3: FAR Corp.’s Company follows the procedure of debiting bad debt expense for 2% of
all new sales.
Allowance for doubtful account
Sales (Adjusted balance) (Adjusted balance)
20x5 P13,000,000 P40,000
20x6 12,800,000 60,000
20x7 13,500,000 80,000
Note 5: The 12% note payable to the bank was originated on March 1, 20x0 and is due on
March 1, 20x8. Interest on the note is payable every March 1 and Interest is yet to be
accrued at the end of the year. On February 23, 20x8 the company refinanced the
liability by issuing another long-term debt security to the same bank due on March 1,
20x16. The proceeds of the loan to be made, as per agreement shall not exceed 80% of the
fair market value of the property to be attached to the loan as a collateral. As of the
balance sheet date, the said property has a fair value of P2,000,000 and is not expected
to materially change until the refinancing transaction is completed.
Note 6: In 20x6, the company started a marketing program where a specially designed
plate shall be given to customers upon presenting 6 product labels plus P10 cash. The
company incurs handling and distribution cost at P20 upon redemption of the premiums
items. The following information are deemed relevant in relation to the program:
20x6 20x7
Sales P7,200,000 P8,400,000
Total cost of premiums purchased (P50 per plate) 780,000 1,160,000
Number of plates distributed 10,000 21,000
Estimated number of plates expected to be distributed in the 7,000 5,000
subsequent period
The balance of the premiums liability account, reflects the accrual at the of the
previous year (20x6), no entry had been made during the current year affecting the said
account.
Note 7: Warranties payable balance refers to the company’s accrual of warranty expenses
in the previous year. No other entry was made for the current year affecting the same
account. Warranties on items sold is for a one year period. Furthermore according to the
company’s past experience, three-fourths of the items sold covered by the warranty
program will be needing repairs. The following information are deemed relevant for the
said warranty program:
20x6 20x7
Items sold covered by the program 5,400 6,200
Actual warranty costs incurred P325,000 P715,000
Warranty cost (cost of repairing each unit returned) increased by 20% during the current
year.
Note 8: Salaries payable reflects the probable unused sick leaves and vacation leaves in
20x6 and prior to 20x6 carried over the current year. No entry had been made during the
current year affecting the salaries payable account. Employees are allowed to carry-over
unused leaves over 2 years from year of grant, thereafter. It shall expire. Salary rates
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increased for the current year by 10%. An analysis of the cumulative unused sick leaves
and vacation leaves are as follows:
Prior to 2016 leaves carried over to 20x7 520 days
2016 leaves carried over to 20x7 1,250 days
Prior to 20x7 leaves used in 20x7* 1,150 days
Leaves earned in 20x7 carried over 20x8 1,300 days
*from prior to 20x7 leaves used in 20x7, 450 were earned by employees prior to 20x6.
Note 9: The bonds payable were issued on January 1, 20x6 to yield a 10% effective yield
rate. The bonds shall mature on December 31, 20x9. The entry made by the client was to
debit cash for the cash proceeds, credit bonds payable at face value with the difference
being charged to interest expense. The only other entries related to bonds made by the
client from date of issuance were the semi-annual interest payments every June 30 and
December 31, in 20x6 and 20x7.
Note 10: On January 1, 20x7, FAR Company reported P1,750,000 of appropriated retained
earnings for the construction of a new office building which was completed in 20x7 at a
total cost of Pl,500,000. In 20x7, the entity appropriated Pl,200,000 of retained
earnings for the construction of a new plant. Also, P2,000,000 of cash was restricted for
the retirement of bonds payable due in 20x8.
Required: Based on the above and the result of your review, answer the following (Round
off present value factors to four decimal places).
31. What is the adjusted balance of the petty cash fund account?
A. P50,000 B. P45,000 C. P40,000 D. P35,000
37. How much from the 12% notes payable shall be presented as current?
A. P2,500,000 B. P1,600,000 C. P900,000 D. P800,000
38. What is the adjusted balance of interest payable from the 12% notes payable?
A. P250,000 B. P50,000 C. P200,000 D. P300,000
39. What is the adjusted balance of premiums liability on December 31, 20x7?
A. P540,000 B. P300,000 C. P440,000 D. P420,000
40. What is the adjusted balance of warranties liability on December 31, 20x7?
A. P352,000 B. P612,500 C. P564,900 D. P500,800
41. What is the correct balance of the salaries payable in the form of liability for
compensated absences?
A. P675,840 B. P651,200 C. P658,240 D. P592,000
42. What is the correct carrying value of the bonds payable as of December 31, 20x7?
A. P3,193,896 B. P3,152,271 C. P3,129,834 D. P3,106,232
43. In the December 31, 20x7 statement of financial position, what amount should be
reported as appropriated retained earnings?
A. P1,200,000 B. P2,950,000 C. P1,450,000 D. P3,200,000
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• The company also had negotiated a restructuring of its 9% P6,000,000 note payable
to PNB due on January 1, 2017. There is no accrued interest on the note. The bank
has reduced the principal obligation from P6,000,000 to P5,000,000 and extend the
maturity to three years or on December 31, 2019. However, the new interest rate is
13% payable annually every December 31.
Use the following information for the next four (4) questions:
Jan. 16 Declared a cash dividends of P0.40 per share, payable February 15 to shareholders
of record February 5.
Feb. 25 20,000 shares of authorized and unissued ordinary shares were issued in exchange
of an equipment having a fair market value of P500,000. The company incurred share issue
costs at P20,000.
Mar. 1 A 30% stock dividend was declared and issued. Market value of shares on this date
was at P30.
Apr. 1 A two-for-one split was carried out. Market value shares on this date was at P18
per shares.
July 1 A 15% stock dividend was declared and issued. Market value is currently at P20 per
share.
Aug. 1 A cash dividend of P.20 per share was declared payable September 1 to shareholders
of record on August 21.
Use the following information for the next two (2) questions:
On January 1, 20x4, Ivan Company granted the president compensatory share options to buy
5,000 shares of P100 par value. The options call for a price of P120 per share and are
exercisable for four years following the grant date. The president exercised the options
on December 31, 20x4. The market price of the share was P150 on January 1, 20x4 and P180
on December 31, 20x4. The fair value of a similar share option with the same terms was
P60 on the grant date.
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50. By what net amount should shareholders' equity increase as a result of the grant and
exercise of the options?
A. P500,000 B. P750,000 C. P600,000 D. P900,000
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