St.

Peter’s College
Acctg 16 Integrated Acctg Pract 1
TTh 5:30pm – 7:00pm
Final Exam

Name: ________________________

Multiple Choice.

1. On January 1, 2018, B Company bought a trademark from L Company for P3,000,000. The entity retained
an independent consultant who estimated the trademark’s life to be indefinite, The carrying amount of the
trademark was P1,500,000 on the books of L Company. On December 31, 2018, what is the carrying
amount of the trademark?
a. 3,000,000 b. 1,500,000 c. 2,850,000 d. 0
2. At the beginning of the current year, B Company had capitalized cost of P5,000,000 for new computer
software product with an economic life of 5 years. Sales for the current year amounted to P3,000,000.

The total sales of software over the economic life are expected to be P10,000,000. The pattern of future
sales cannot be measured reliably.

At year-end, the software had a fair value less cost of disposal of P4,500,000.

What is the carrying amount of the computer software at year-end?

a. 5,000,000 b. 3,500,000 c. 4,500,000 d. 4,000,000
3. N Company purchased T Company for P8,000,000 cash. T Company had total liabilities of P3,000,000. N
Company’s assessment of the fair value it obtained when it purchased T Company is as follows:
Cash 1,000,000
Inventory 500,000
In-process research and development 5,000,000
Assembled workforce 1,200,000
What is the goodwill arising from acquisition?
a. 4,500,000 b. 3,300,000 c. 1,500,000 d. 300,000
4. The petty cash fund of Bolinao Company on December 31, 2019 is composed of the following:

Coins and currencies 14,000

Petty cash vouchers:
Gasoline payments 3,000
Supplies 1,000
Cash advances to employees 2,000
Employee’s check returned by bank marked NSF 5,000
Check drawn by the company payable to the order of Kristine
Anson, petty cash custodian, representing her salary 20,000
A sheet of paper with names of employees together with contribution
for a birthday gift of a co-employee in the amount of 8,000
Total 53,000
The petty cash fund ledger account has an imprest balance of P50, 000. What is the correct amount of petty
cash on December 31, 2019?
a. 39,000 b. 34,000 c. 14,000 d. 42,000

5. At year-end, X Company reported cash and cash equivalents comprising cash on hand P500,000,
demand deposit P4,000,000, certificate of deposit P2,000,000, postdated customer’s check P300,000,
petty cash fund P50,000, traveler’s check P200,000, manager’s check P100,000 and money order
P150,000. What total amount of cash should be reported at year-end?
a. 6,000,000 b. 4,500,000 c. 6,800,000 d. 5,000,000
6. The bookkeeper of Alaminos Company recently prepared the following bank reconciliation on December
31, 2019:

Balance per bank statement 20,000,000

Add: Deposit in transit 1,500,000
Checkbook and other bank charge 50,000
Error made by Alaminos in recording check No.
1005 (issued in December) 150,000
Customer check marked DAIF 500,000 2,200,000
Total 22,200,000
Deduct: Outstanding checks 1,900,000
Note collected by bank (includes P200, 000 interest) 2,300,000 4,200,000
Balance per book 18,000,000

Alaminos has P1,000,000 cash on hand on December 31, 2005. The amount to be reported as cash on the
balance sheet as of December 31, 2019 should be
a. 19,600,000
b. 18,600,000
c. 20,600,000
d. 19,750,000
7. S Company, a clothing manufacturer, purchased a sewing machine for P2,000,000 on July 1, 2015. The
machine had a 10-year life, a P100,000 residual value, and was depreciated using the straight line
method. On January 1, 2018, a test for impairment indicated that the undiscounted cash flows from the
sewing machine are less than the carrying amount. The machine’s fair value on January 1, 2018 is
P600,000. What is the loss on impairment?
a. 1,300,000 b. 950,000 c. 925,000 d. 830,000
8.10. The following balances relating to property, plant and equipment of C Company appear on the books
on January 1, 2018.
Land 2,000,000
Building 15,000,000
Accumulated depreciation 3,750,000
Machinery 3,000,000
Accumulated Depreciation 1,500,000

Assets have been carried at cost since acquisition. All assets were acquired on January 1, 2008. The
straight line method is used. On January 1, 2018, the entity revalued the property, plant and equipment. On such
date, competent appraisers submitted the following.
Replacement Cost
Land 5,000,000
Building 25,000,000
Machinery 5,000,000

8. Ignoring income tax, what is the revaluation surplus on January1, 2018?

a. 15,000,000 b. 11,500,000 c. 30,000,000 d. 8,500,000
9. What is the depreciation for 2018?
a. 531, 250 b. 525,000 c. 875,000 d. 625,000
10. What is the revaluation surplus on December 31, 2018?
a. 11,150,000 b. 11,075,000 c. 11,050,000 d. 11,850,000
11. F company provided the following information relating to current operations:
Accounts receivable, January 1 4,000,000
Accounts receivable collected 8,400,000
Cash sales 2,000,000
Inventory, January 1 4,800,000
Inventory, December 31 4,400,000
Purchases 8,000,000
Gross margin on sales 4,200,000
 What is the balance of accounts receivable on December 31?
a. 8,200,000
b. 6,200,000
c. 2,000,000
d. 4,200,000
12. S Company reported the following balances after adjustments at year-end:
2018 2017
Accounts receivable 5,250,000 4,800,000
Net realizable value 5,100,000 4,725,000

During 2018, the entity wrote off accounts totaling P160,000 and collected P40,000 on accounts written
off in previous years. What amount should be recognized as doubtful accounts expense for the year
ended December 31, 2018?
a. 195,000
b. 150,000
c. 120,000
d. 150,000
13. N Company sold P5,800,000 in accounts receivable for cash of P5,000,000. The factor withheld 10% of
the cash proceeds to allow for possible customer returns and other adjustments. An allowance for bad
debts of P600,000 had previously been established by the entity in relation to these accounts. What is the
loss on factoring that should be recognized?
a. 200,000
b. 700,000
c. 500,000
d. 800,000
14. T Company accepted from a customer P1,000,000 face amount, 6-month, 8% note dated April 15, 2018.
On the same date, the entity discounted the note without recourse at union Bank at a 10% discount rate.
What amount of cash was received from the discounting?
a. 1,000,000 b. 1,040,000 c. 988,000 d. 1,080,000
15. On January 1, 2018, O company sold goods to F company. F signed a noninterest-bearing note requiring
payment of P600,000 annually for seven years. The first payment was made on January 1, 2018. The
prevailing rate of interest for this type of note at date of issuance was 10%. Information on present value
factors is as follows:
Present Value of
Present Value Ordinary Annuity
Period of 1 at 10% of 1 at 10%
6 .56 4.36
7 .51 4.87

What amount should be recorded as sales revenue in January 2018?

a. 3,216,000
b. 2,922,000
c. 2,616,000
d. 2,142,000
16. P Company sold machinery to R Company on January 1, 2018 for which cash selling price was
P7,582,000. R entered into an instalment sale contract with P at an interest rate of 10%. The contract
required payments of P2,000,000 a year over five years with the first payment due on December 31,
2018. What amount of interest income should be reported in 2018?
a. 1,000,000 b. 634,020 c. 758,200 d. 0
17. On December 31, 2018, F Company sold for 3,000,000 an old equipment having an original cost of
5,400,000 and carrying amount of 2,400,000. The terms of the sale were 600,000 down payment and
1,200,000 payable cash each year on December 31 of the next two years. The sale agreement made no
mention of interest. However, 9% would be a fair for this type of transaction. The present value of an
ordinary annuity of 1 at 9% for two years is 1.76.
What is the carrying amount of the note receivable on December 31, 2019?
a. 1,200,000 b. 1,102,080 c. 2,302,080 d. 1,009,920
 18. C Company started construction of a new office building on January 1, 2018, and moved into the
finished building on July 1, 2019. Of the building’s P25,000,000 total cost, P20,000,000 was incurred in
2018 evenly throughout the year. The incremental borrowing rate was 12% throughout 2018, and the
total amount of interest incurred was P1,020,000. What amount should be reported as capitalized interest
on December 31, 2018?
a. 1,020,000 b. 1,200,000 c. 1,500,000 d. 2,400,000
19. The third year of a construction project of J Company began with a P3,000,000 balance in construction
in progress. Included in that figure is P600,000 of interest capitalized in the first two years. Construction
expenditures during the third ear were P8,000,000 which were incurred evenly throughout the entire
year. The entity has had over P30,000,000 in interest-bearing debt outstanding in the third year at a
weighted average rate of 9%. What amount of interest for the third year is capitalized?
a. 360,000 b. 630,000 c. 936,000 d. 990,000
20-21. On July 1, 2018, L Company, a calendar year corporation, purchased the rights to a mine. The total
purchase price was P16,400,000, of which P2,000,000 was allocable to the land. Estimated reserves
were 1,800,000 tons. The entity expects to extract and sell 25,000 tons per month. The entity purchased
new equipment on July 1, 2018. The equipment cost P7,500,000 and had a useful life of 8 years.
However, after all the resource is removed, the equipment will be of no use and will be sold for
P300,000.

20. What amount should be recorded as depletion for 2018?

a. 1,200,000 b. 2,400,000 c. 1,366,500 d. 2,733,000
21. What amount should be recorded as depreciation of the mining equipment for 2018?
a. 450,000 b. 900,000 c. 600,000 d. 300,000
22. C Company had the following amounts all at retail:
Beginning inventory 180,000
Purchases 6,000,000
Purchase return 300,000
Net markup 900,000
Net markdown 140,000
Sales 3,600,000
Sales return 90,000
Employee discounts 80,000
Normal shortage 130,000
Abnormal shortage 200,000

What is the ending inventory at retail? ________________

a. 2,720,000 b. 2,800,000 c. 2,880,000 d. 2,920,000
23. S Company began operations in 2018. For the year ended December 31, 2018, the entity provided the
following information:
Total merchandise purchases for the year 7,000,000
Merchandise inventory on December 31 1,400,000
Collection from customers 4,000,000
All merchandise was marked to sell 40% above cost. All sales are on credit basis and all receivables
are collectible. What is the balance of accounts receivable on December 31, 2018? ______________
a. 1,000,000 b. 3,840,000 c. 5,000,000 d. 5,800,000
24. G Company used lower of cost or net realizable value method to value inventory. Data regarding the
items in work in process inventory presented below:
Markers Pens Highlighters
Historical Cost 240,000 188,000 300,000
Selling Price 360,000 250,000 360,000
Estimated Cost to complete 48,000 50,000 68,000
Replacement Cost 208,000 168,000 318,000
Normal profit margin as a percentage
percentage of selling price 25% 25% 10%
What is the measurement of the work in process inventory? __________________
a. 720,000 b. 728,000 c. 676,000 d. 694,000
25. The following information has been extracted from the records of J Company about one of its products.
J Company used the perpetual system.
Units Unit Cost Total Cost
Jan 1 Beginning balance 8,000 70.00 560,000
6 Purchase 3,000 70.50 211,500
Feb 5 Sale 10,000
Mar 5 Purchase 11,000 73.50 808,500
Mar 8 Purchase return 800 73,50 58,800
Apr 10 Sale 7,000
Apr 30 Sale Return 300

If the FIFO cost flow method is used, what is the cost of inventory on April 30? _________________
a. 330,750 c. 433,876
b. 315,000 d. 329,360
26. V Company used the average retail inventory method. On December 31, 2018, the following
information relating to the inventory was gathered:
Cost Retail
Inventory, Jan 1 190,000 450,000
Purchases 2,990,000 4,350,000
Purchase discounts 40,000
Freight in 150,000
Markups 300,000
Markdowns 400,000
Sales 4,400,000
Sales return 100,000
Sales discount 50,000
Sales allowance 30,000

What is the estimated cost of inventory on December 31, 2018? ______________ (P1, pg 372)
a. 400,000 b. 280,000 c. 245,000 d. 315,000
27-28. D Company provided the following information for the year ended December 31, 2018:
Cash 500,000
Trade and other receivable 1,500,000
Inventories 100,000
Dairy livestock – immature 50,000
Dairy livestock – mature 400,000
Property, plant and equipment, net 1,400,000
Trade and other payables 520,000
Note payable – Long term 1,500,000
Share Capital 1,000,000
Retained earnings – Jan 1 800,000
Fair value of milk produced 600,000
Gain from change in fair value 50,000
Inventories used 140,000
Staff costs 120,000
Depreciation expense 15,000
Other operating expenses 190,000
Income tax expense 55,000
27. What is the net income for 2018?
a. 650,000 b. 600,000 c. 130,000 d. 185,000
28. What is the fair value of biological assets on December 31, 2018?
a. 550,000 b. 450,000 c. 500,000 d. 400,0000
29. On January 1, 2019 L Company bought a machinery under a contact that required a down payment of
100,000, plus 24 monthly payments of 50,000 each, for total cash payments of 1,300,000. The cash price
pf the machinery has useful life of 10 years and residual value of 50,000. The entity used straight line
method of depreciation. What amount should be reported as depreciation for 2019?
a. 105,000 b. 110,000 c. 125,000 d. 130,000
30. U Company used the FIFO retail method of inventory valuation. The entity provided the following
information for the current year:
Cost Retail
Beginning inventory 600,000 1,500,000
Purchases 3,000,000 5,500,000
Net additional markups 500,000
Net Markdowns 1,000,000
Sales Revenue 4,500,000

What is the estimated cost of ending inventory?

a. 1,200,000 b. 1,200,000 c. 1,000,000 d. 960,000
31. I Company requires 40,000 kilos of soya beans each month in its operations. To eliminate the price risk
associated with the purchase of soya beans, On December 1, 2018, the entity entered into futures
contract as a cash flow hedge to buy 40,000 kilos of soya beans at P150 per kilo on March 1, 2019.

The market price on December 31, 2018 and March 1, 2019 is P160 per kilo. The appropriate discount
rate is 9% and the present value of 1 at 9% for one period is 0.917.

What amount should be recognized on December 31, 2018 as derivative asset or liability?
a. 400,000 asset b. 400,000 liability c. 366,800 asset d. 366,800 liability
32. On August 1, 2018, B Company purchased a new machine on a deferred payment basis. A down
payment of P100,000 was made and 4 monthly instalments of P250,000 each are to be made beginning
on September 1, 2018. The cash equivalent price of the machine was P950,000. The entity incurred and
paid installation costs amounting to P30,000. What is the amount to be capitalized as cost of the
machine?
a. 950,000 b. 1,130,000 c. 1,100,000 d. 980,000
33. J Company acquired a delivery truck and made payment of P2,680,000 analyzed as follows:

Price of truck 2,500,000

Charge for extra equipment 50,000
Value added tax – recoverable 300,000
Insurance for one year 120,000
Motor vehicle registration 10,000
Total 2,980,000
Trade in value of old truck (300,000)
Cash paid 2,680,000

The cost of the old truck was P1,500,000 with carrying amount of P200,000 and fair value of P50,000.
What is the cost of the new truck acquired in the exchange?
a. 2,250,000 b. 2,680,000 c. 2,300,000 d. 2,550,000
34. D Company has received a donation of land from rich local philanthropist. The land originally had a cost
of P1,000,000. On the date of donation, the land had a market value of P1,500,000 and an assessed value
of P1,200,000. What amount of income should be recognized from the donation?
a. 1,500,000 b. 1,200,000 c. 1,000,000 d. 0
35. I Company received a government grant of P15,000,000 to install and run a windmill in an economically
backward area. The entity had estimated that such a windmill would cost P25,000,000 to construct. The
secondary condition attached to the grant is that the entity shall hire labor in the area where windmill is
located. The construction was completed on January 1, 2018. The windmill is to be depreciated using
the straight line method over a period of 10 years. What amount of income from the government grant
should be recognized for 2018?
a. 1,500,000 b. 3,000,000 c. 2,500,000 d. 5,000,000
36. F Company acquired land and paid in full by issuing P600,000 of its 10 percent bonds payable and
40,000 ordinary shares with par value of 10 The share was selling at P19 and the bonds were trading at
102. What amount should be recorded as cost of land?
a. 988,000 b. 1,000,000 c. 1,372,000 d. 1,387,000
37. On July 1, 2018, B Company purchased P1,000,000 face value 8% bonds for P910,000 plus accrued
interest to yield 10%. The bonds mature on January 1, 2023, pay interest annually on January 1, and are
classified as trading securities. on December 31, 2018, the bonds had a market value of P945,000. On
February 13, 2019, the entity sold the bonds for P920,000. On December 31, 2018, what amount should
be reported for short-term investments in trading debt securities?
a. 910,000 c. 945,000
b. 920,000 d. 950,000
38. On January 1, 2018, L Company purchased equity securities to be held as “at fair value through other
comprehensive income”. On December 31, 2018, the cost and market value were:
Cost Market Value
Security X 2,000,000 2,400,000
Security Y 3,000,000 3,500,000
Security Z 5,000,000 4,900,000

On July 1, 2019, the entity sold Security X for P2,500,000. What amount of gain on sale of
financial asset s should be reported in 2019?
a. 500,000 c. 400,000
b. 100,000 d. 0
39. On July 1, 2018, M Company purchased 25% of W Company’s outstanding ordinary shares and no
goodwill resulted from the purchase. M appropriately carried this investment at equity and the balance in
M’s investment account was 1,900,000 at December 31, 2018. W Company reported net income of
1,200,000 for the year ended December 31, 2018. How much did M pay for the 25% interest in W?
a. 1,720,000 b. 2,020,000 c. 1,870,000 c. 2,170,000
40. J Company purchased bonds at a discount of P100,000. Subsequently, J sold these bonds at a premium
of P140,000. During the period that J held this long term investment, amortization of the discount
amounted to P20,000. What amount should be reported as gain on sale of bonds?
a. 120,000 b. 220,000 c. 240,000 d. 260,000
41. V Company made an investment of P5,000,000 at 10% per annum compounded annually for 6 years.
What is the amount of the investment on the date of maturity? Round off future value factor to two
decimal places.
a. 8,050,000 b. 9,750,000 c. 8,850,000 d. 5,500,000
42. The following information relates to a bond sinking fund that L Company placed in trust as required by
the underwriter:
Bond sinking fund, January 1, 2018 4,500,000
Additional investments in 2018 900,000
Dividends on investments 150,000
Interest revenue 300,000
Administration costs 50,000
Carrying amount of bonds payable 8,000,000
What is the carrying amount of the bond sinking fund on December 31, 2018?
a. 5,850,000 b. 5,800,000 c. 5,750,000 d. 5,400,000

43-44. On February 1, 2018, N Company purchased a parcel of land as a factory site for P1,000,000. An
old building on the property was demolished and construction began on a new building which was
completed on November 1, 2018. Other costs incurred were as follows:
Demolition of old building 100,000
Architect fee 175,000
Legal fee for title investigation and purchase contract 25,000
Construction cost 5,450,000
Salvaged materials resulting from demolition 50,000

43. What amount should be recorded as cost of land?

a. 1,125,000 b. 1,100,000 c. 1,050,000 d. 1,075,000
44. What amount should be recorded as cost of building?
a. 5,575,000 b. 5,650,000 c. 5,625,000 d. 5,450,000
45. On June 30, 2018, a fire in P Company’s plant caused a total loss to a production machine. The machine
was depreciated at P200,000 annually and had a carrying amount of P1,600,000 on January 1, 2018. On
the date of the fire, the fair value of the machine was P2,200,000 in October 2018. What amount should
be recognized as gain on disposition?
a. 500,000 b. 700,000 c. 400,000 d. 600,000
46. Loiuse Company includes one coupon in each box of laundry soap it sells. A towel is offered as a
premium to customers who sends in 10 coupons and remittance of P10.
2017 2018
Boxes of soap sold 2,000,000 2,500,000
Number of towels purchased at P50 each 65,000 90,000
Coupons redeemed 600,000 850,000
Experience indicates that only 40% of the coupons will be redeemed. What is the estimated premium
liability on December 31, 2018?
a. 1,400,000 b. 1,500,000 c. 3,200,000 d. 4,000,000
47. During 2017, Diane Company introduced a new product carrying a two-year warranty against defects.
The estimated warranty costs related to peso sales are 4% within 12 months following sale and 6% in the
second 12 months following sale. The entity reported sales of P5,000,000 for 2017 and P6,000,000 for
2018. The actual expenditures incurred and paid amounted to P150,000 for 2017 and P550,000 for 2018.
What amount should be reported as estimated warranty liability on December 31, 2018?
a. 360,000 b. 400,000 c. 240,000 d. 50,000
48. Princess company sells gift certificates redeemable only when merchandise is purchased. The
certificates have no expiration date. Upon redemption, the entity recognizes the unearned revenue as
realized. Data for 2018 are as follows:
Unearned revenue, January 1 1,500,000
Gift certificates sold 5,000,000
Gift certificates redeemed 4,000,000
Gift certificates expected not to be redeemed 300,000
Cost of goods sold 60%
On December 31, 2018, what amount should be reported as unearned revenue?
a. 2,500,000 b. 2,200,000 c. 1,000,000 d. 0
49. On January 15, 2018, an explosion occurred at Jesse Company plant causing extensive property damage
to area buildings. By March 1, 2019, no claims had been asserted against the entity but management and
counsel concluded that it is likely that claims will be asserted and that is probable that the entity will be
responsible for damages. Management believed that P1,250,000 would be reasonable estimate of the
liability. The entity’s P5,000,000 comprehensive public liability policy has a P250,000 deductible
clause. The financial statements for 2018 were issued on March 31, 2019. What should be reported on
December 31, 2018?
a. A footnote disclosure indicating the possible loss of P1,250,000.
b. An accrued liability of P250,000
c. An accrued liability of P1,250,000
d. A footnote disclosure indicating the possible loss of P250,000.
50. On March 1, 2018, Camille Company issued 5,000 of P1,000 face value bonds at 110 plus accrued
interest. The entity paid bond issue cost of P300,000. The bonds were dated November 1, 2017, mature
on November 1, 2027, and bear interest at 12% payable semi-annually on May 1 and November 1. What
net amount was received from the bond issuance on March 1, 2018?
a. 5,700,000 b. 5,200,000 c. 5,400,000 d. 5,500,000
51. On March 1, 2018, Justin Company borrowed P5,000,000 and signed a 2-year note bearing interest at
12% per annum compounded annually. Interest is payable in full at maturity on February 28, 2020.
What amount should be reported as accrued interest payable on December 31, 2019?
a. 1,200,000 b. 600,000 c. 1,000,000 d. 1,160,000
52. On January 1, 2018, Paula Company issued 9% bonds in the face amount of P5,000,000 which mature
on January 1, 2028. The bonds were issued for 4,695,000 to yield 10%. Interest is payable annually on
December 31. The entity used interest method of amortizing bond discount. What is the carrying amount
of the bonds payable on December 31, 2018?
a. 4,695,000 b. 4,704,750 c. 4,714,500 d. 5,000,000
 53. As an inducement to enter a lease, a lessor grants Dominic Company, a lessee, nine months of free rent
under five-year operating lease. The lease is effective on July 1, 2018 and provides for monthly rental of
P100,000 to begin April 1, 2019. In the income statement for the year ended June 30, 2019, what
amount should be reported as rent expense?
a. 1,020,000 b. 900,000 c. 300,000 d. 235,000
54. On December 31, 2018, Jasper Company sold an equipment with an estimated remaining useful life of
10 years. At the same time, the entity leased back the equipment for 2 years. The leaseback is an
operating lease.
Sale Price 7,500,000
Carrying amount 5,000,000
Fair value of equipment on date of sale 6,000,000
What amount of gain should be reported in the income statement for 2018?
a. 2,500,000 b. 1,500,000 c. 1,000,000 d. 1,750,000
55-57. Samuel Company is a dealer in equipment. On January 1, 2018, an equipment was leased to another
entity with the following provisions:
Annual rental payable at the end of each year 1,500,000
Lease term and useful life of machinery 5 years
Cost of equipment 4,000,000
Guaranteed residual value 500,000
Implicit interest rate 12%
PV of an ordinary annuity of 1 for 5 periods at 12% 3.60
PV of 1 for 5 periods at 12% 0.57
At the end of the lease term on December 31, 2022, the equipment will revert to the lessor. On such date, the
fair value of the asset is P350,000. The perpetual inventory system is used. The lessor incurred initial direct cost
of P200,000 in finalizing the lease agreement.
55. What is the gross investment in the lease?
a. 7,500,000 b. 8,000,000 c. 4,000,000 d. 4,500,000
56. What is the interest income to be recognized for 2018?
a. 682,200 b. 648,000 c. 900,000 d. 960,000
57. What amount should be reported as profit on sale for 2018?
a. 4,000,000 b. 1,685,000 c. 3,500,000 d. 1,485,000
58-59. Raymart Company is in the business of leasing new sophisticated equipment. The lessor expects a 12%
return on its net investment. All leases are classified as direct financing lease. At the end of the lease term, the
equipment will revert to the lessor. On January 1, 2018, an equipment is leased to a lessee with the following
information:
Cost of equipment to the lessor 5,000,000
Residual value – unguaranteed 600,000
Annual rental payable in advance 900,000
Initial direct cost incurred by the lessor 250,000
Useful life and lease term 8 years
Implicit interest rate 12%
First lease payment January 1, 2018
58. What is the gross investment in the lease?
a. 7,200,000 b. 7,800,000 c. 5,000,000 d. 5,250,000
59. What is the interest income for 2018?
a. 594,000 b. 522,000 c. 630,000 d. 450,000
60. On January 1, 2018, Alice Company entered into an 8-year finance lease for an equipment. The entity
accounted for the acquisition of the finance lease at P5,000,000 which included a P500,000 bargain
purchase option. At the end of the lease, the entity expects to exercise the bargain purchase option. The
expected fair value of the equipment is P400,000 at the end of the 10-year useful life. The straight line
depreciation is used. What amount of depreciation should be recognized for 2018?
a. 575,000 b. 450,000 c. 625,000 d. 460,000
61. Z Company reported the following shareholder’s equity at year end:
Share capital, par P25, authorized 150,000 shares, 55,000
shares issued of which 5,000 shares are in treasury 1,375,000
Retained earnings 2,000,000
Treasury shares, at cost 150,000
A 100% share dividend was declared and all of the treasury shares were issued as share dividend and the
balance from the unissued shares. The share has market value of P40.
What amount of retained earnings should be capitalized?
a. 1,250,000 b. 1,800,000 c. 1,275,000 d. 1,125,000
62. On December 31, 2019 and 2018, Glow Company had 100,000 ordinary shares and 10,000 cumulative
preference shares of 5%, P100 par value

No dividends were declared on either the preference or ordinary share in 2019 or 2018. Net income for
the current year was P900,000.

What amount should be reported as basic earnings per share?

a. 8.50 b. 9.50 c. 9.00 d. 5.00
63. At the beginning of current year, Rona Company issued 50,000 shares of P10 par value for P100 per
share.

Durng the year, the entity reacquired 2,000 shares at P150 per share and immediately canceled those
2,000 shares.

In connection with the retirement of shares, what amount should be debited to share premium?
a. 20,000 b. 100,000 c. 180,000 d. 280,000
64. Based on the data in item 63. In connection with the retirement of shares, what amount should be
debited to retained earnings?
a. 280,000 b. 180,000 c. 100,000 d. 0
65. Dunn Company had 200,000 ordinary shares of P20 par value and 20,000 shares of P100 par, 6%
cumulative, convertible preference share capital outstanding for the entire current year,

Each preference share is convertible into 5 ordinary shares.

The net income for the current yearwas P840,000

a. 2.40 b. 2.80 c. 3.60 d. 4.20

66. P Company provided the following adjusted account balances on December 31, 2019:
Wages payable 250,000
Cash 200,000
Mortgage payable 1,500,000
Dividends payable 150,000
Prepaid rent 100,000
Inventory 800,000
Sinking fund 500,000
Short-term investments 300,000
Investment in associate 2,000,000
Taxes payable 220,000
Accounts payable 240,000
Accounts receivable 350,000
What total amount should be reported as current assets on December 31, 2019? (P1, pg 3)
a. 2,250,000 b. 1,750,000 c. 3,750,000 d. 4,250,000
67. During 2019, B Company changed from the cost recovery method to the percentage of completion
method. The tax rate is 40%. Gross profit figures are as follows:
2017 2018 2019
Cost recovery method 950,000 1,250,000 1,400,000
Percentage of completion 1,600,000 1,900,000 2,100,000
How should this accounting change be reported in 2019? (P1, pg 95)
a. 1,200,000 increase in profit or loss c. 1,200,000 increase in retained earnings
b. 780,000 increase in profit or loss d. 780,000 increase in retained earnings
68. G Company sells toys so its sales are heavily concentrated in the last quarter of the year because of
holiday buying. The entity reported total sales for the past three years broken down to quarterly sales as
follows:
March 31 June 30 September 30 December 31 Total
2017 6,000 6,000 6,000 12,000 30,000
2018 8,000 8,000 8,000 16,000 40,000
2019 10,000 10,000 10,000 20,000 50,000
Using just the annual sales data, what is the sales forecast for fourth quarter of 2020?
a. 60,000 b. 15,000 c. 40,000 d. 10,000
69. H Company provided the following information for the current year:
Beginning inventory 400,000
Freight in 300,000
Purchase returns 900,000
Ending inventory 500,000
Selling expenses 1,250,000
Sales discount 250,000
The cost of goods sold is six times the selling expenses.
What is the amount of gross purchases? (P1, pg 53)
a. 6,500,000 b. 6,700,000 c. 8,000,000 d. 8,200,000
70. B Company had the following liabilities on December 31, 2019:
Accounts payable 550,000
Unsecured note payable, 8% due July 1, 2020 4,000,000
Accrued expenses 350,000
Contingent liability 450,000
Deferred liability 250,000
Senior bonds payable, 7% due March 31, 2014 5,000,000
What amount should be reported as total current liabilities? (P1, pg 15)
a. 10,350,000 b. 10,150,000 c. 9,900,000 d. 4,900,000

ADVANCE MERRY CHRISTMAS AND HAPPY NEW YEAR!