a y pr <7 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES (5 ‘COLLEGE OF ACCOUNTANCY Done ee ‘STA. MESA, MANILA ease A ACCO 3016-Financial Accounting and Repor:ing P-1 FINAL DEPARTMENTAL EXAMINATION. October 5, 2014 ‘est !—tMultipte Choice Theory (pt. each) 1+ Unteleased checks (checks drawn before balance sheet date but held fo" later dali should be treated as outstanding checks should be restored to the cash balance should be treated as outstanding checks if the dates shortiy ater the balance sheet date should be treated as outstanding checks if they are ultimately en-cashed ery to exeditore) Dey d, 2. Which of the following shall not be presented as part of an entity's cash valance? a. Undeposited customer's checks ‘b. Foreign currency deposits ~ ¢. , Bank deposits segregated for payment of salaries ws! ( “ Bank deposits segregated for acquisition of equipment Jo H+ s 3, Which of the following is not a basic characteristic of a system of cash control? use of a voucher system ‘combined responsibility for handling and recording cash daily deposits of all ash received internat audits at irregular intervals 4. Inreplenishing a petty cash fund, which one of the following entries is required? a._ debit Petty Cash, credit Cash {B)_ debit individual expense accounts, credit Cash "C! debit Petty Cash, credit individual expense accounts 4d. debit Cash, credit Petty Cash : . For fnencial repertiig purposes, trade accounts receivable generally are: & net realizable volue present value of future cash flows ©. amount billed to the customers. 4. Amounts billed to the eustomars adjusted for purchasing power gain, or losses, 6. When the allowance method of secognizing uncollectible accounts is used, the entry to record the write-off of a specific account. Aves 2% decreases both accounts receivable and the allowance for uncollectib'e accounts “b. decreases accounts receivable and increases allowance for uncollectinle accounts: _ © increases the allowance for uncotlectible accounts and decreases net ‘ncome d. decreases both accounts receivable and net income 7. Which of the following accounting principles primarily supports the use of allowance method of accounting for doubtful accounts a. continuity principle & matching principle b. cost principle full-disclosure principle 8. Inventories ave assets that are: a, held for sale in the ordinary course of business b. In the production process far sale In the ordinary course of business , In materials/supplies form to be consumed In the production process. ff all of the above®. Goods on conslnment shoul be Incuded in the inventory of fe Consignor but not of the con: e <@ mesons signee ¢. nelther the cons fe consignee but not of roeanulaie Ftheconsignor 4. both the consigner and vie conga All of the following items should be included in Art Com jo0ds in transite lM npanY's ending inv mony ; to Artat year end which were purchesea roe Destnacon mere tor sal sleeve characteristic of a perpetual inventory system is thatit ee es costly to operate than a periodic inventory system, conn 'y eliminates the need to make a physical count ofthe invent ‘or companies with large varieties of low-cost inventoryitems, Provides a continuous record of the balance in the Inventory oun 12. Which is an essential characteristic of 2. the property, plant and equipment are tangible assets b. the property, plant and equipms ot / squipment are used in production or ne meat ad ec Production or supply o! goods and services, for rental the property, plant and e @ all of the above,” Property, plant and equipment ‘quipment are expected to be used over a period of more than one year 13. What is the alternative treatment for borrowing costs? Borrowing costs shall be recognized as expense in the how borrowings are applied by Borrowing costs that are directly attributable to the acquisition, construction or production of a Qualifying assets shall be capitalized as cost of that asset . Borrowing costs shall be deferred and subsequently amortized d. Borrowing costs shall be capitalized regardless of how borrowings are wpplied period in which ‘hey are incurred reger lave of 14. Which of the following shall not be classified as property, plant and equiprient? ~ 2. equipment that is idle temporarily b._ building under construction (©) land acquired and put on the market for resale‘ fwvps}y) ' delivery truck acquired on installment, certificate of ownership being held by the finance company 15. A companypurchased land to be used as the site for the construction of: bullding, Timber was cut from the building site so that construction could begin. The proceeds from the sale ofthe timber should be deducted from the cost of the land ‘2X deducted from the cost of the building ~. netted against the costs to clear the land and expensed as incurred : 4. classified as other income 416. Using the cost model, how are property, plant and equipment measured on the statement of financial position? cond 5 Athistoricalcostless savage valve b. At original cost adjusted for general price level changes : ~ At sequisition cost less depreciated portion thereof and less accumulated impairment loss 9 ‘Atreplacement cost less accumulated depreciation and accumulated linpairment losses 127. The cost of purchasing patent rights for a product that of the purchaser's patented products should be a. Amortized over the legal life of the paca patent ‘to expense in the period of purchase i puieies factory ‘overhead and allocated to production of the purchaser's ese aneee ‘Amortized over the remaining estimated life ofthe original patent covering the prog market would have been impaired by competition from the newly pate nted p might otherwise have seriously competed with oneain that ignores. Sum-of-the year's, (PS Double deetining CO onl 19. Amachine with a five-yea January 12015, Tees estimated useful fe and an estimated 2015. The ie ated 15% sv age value w inetd aud ng ee! In ecuniiedcepreon or d0te ung ttesan sed a Original cost x 40% arcs, salvage valu diet Nena" lculating period depreciation expense isthe liner © Productive output method . Group or compositv method Sect fotimarstrye FT 20. Logal fees incurred by : ‘ cei ya el defending its patent Nights should be expensed when. the outcome of success! ‘unsuccessful __ Yes No Lo Yes Yes No Yes d. No “No 2.1, Which of the following items should no 3 Computer software a Db. Franchise right Patent right purchased from an inventor 8) Soodwil arising from the purchase of an existing business t be amortized over the periods 0 estimated benefit? . The capitalized software cost shall be amortized 2. Ona straight line basts over Its useful life b. Uniformly over twenty years _Ysing a rato of current revenue over total expected-revenue from the product Using theqi@ateRof the straight line rate or the ratio of current revenue over total expected revenue fromthe product + 23. Under which type of investment classification initial measurement basis? a. Investment in associate b. Financial assets at amortized cost Financial assets at falr value through profit or loss ‘2. Financial assets at fair value through other comprehensive income directly attroutable-cost of acqulshiog fat included the 24. Any instrument representing ownership shares and the right to acquire ownership shares fs a, Shareholders’ equity c Debt security b. Marketable security GD Equity security 25, Equity securities acquired for trading yhall be measured at a. Cost, being the purchase price plus transaction costs . Cost, being the purchase price * J. Fair value, with change In flr value taken to profit or loss Fale value, with change in fair value takan to othar comprahensive income 26. straw Corporation purchased bonds of Berry Company two months after interest payment date, at 0 premium, At purchase date, Straw Corp. pald to the seller of the bonds 2. Anamount less than the bonds’ face value plus accrued interest aiean qutg awe (5) Amamount exceodingthe bend’ face valueplusacoued Interest ranges se ‘the bonds’ face value page " d. The bonds’ face value plus accrued interest dehy bs ego de. * 127, Farm lots held by an entity engaged in agriculture are classified onthe entity's statement of financial sition as Property, plantand equipment «Agricultural assets ‘Agricultural produce d. Biological assets“Viv debx investments are measured at amortized cos, the amortization of bond premium f meraases the investment's amortizad cost - Weg do ) Decreases the Investmant’s amortized cost Does not affect the investment’s amortized cost ‘i Is not necessary, as the amount of interest recelved is equal to the effective interest. 29. Investment in debt securities acquired at a discount Indicates that 2. The amount of interest to be received by the Investor Is equal to th: effective interest rate (&) The amount of interast to be received by the investor is lower ther the effective interest rate The amount of interest tobe recelved by the investor Is higher the. the effective interest rate 4. The investment in bonds were acquired between interests payment date 40. Biological assets are measured on the statement of financlal position at 2. Fair value & Fair value less estimated cost to sell Purchase price plus transaction costs 4. Cost ess accumulated depreciation and accumulated impairment los es Prat Bebe ont yah and 480 Yest ll~ ‘Multiple Choice Problem {2 pts. each). ‘460,040 73/000 iB. yok, ce) W®, 51, Apple company’s cash account shows a balance of PASC fore reco-«iliation, The bank statement docs not include a deposit of P 23,000 made on the last day of the month. The bank statement shows» collection by the Bank of P9,040 and a customer's check fok3,200)was returned because It was NSF. A customer's check for P4,500 was recorded on the books at P 5400, and a check written for P790 was recorded asP970, The correct balance in the cash account was we va 455,120 b. P455,480 c. P457,280 d= P478,480 82., Red Company reported a cash balance of P1,980,000 on December 31, 2015 which consisted of the ~ following: a Petty cash, including 1OU from an employee of P1,250, P 10,000..¢77> Cash on hand, including a customer's f (20,500 lated January 5, 2016 625,000 64 -t? Cash in bank, General accoun bank overdraft in ano:her bank’s account 525,000 Cash in bank, Payroll account, Nét of 920,000 check dated Dec, 28, 215, but unreleased as of Dec. 31,2015 320,000 Savings deposit, restricted for plant expansion $00,000 “TAB What Is the correct amount of cash that should be reported by Red Compe y at December 31, 2035 a. P1,480,000 By 1,480,750 . P1,483,750 D_ P1,459,500 33) The following account balances are shown in the accounting records of Epal Company: heed é jan.1,2015 Dec.31,2015 194000 143,000 142.0 Cash “A 162,000 ? woo 3/000 TH,000 Accounts Receivable ‘ulee “ - 67,000 91,000 (4,00) (7/000) (s¢5 000 Merchandise Inventory 86,000 78,000 TOTO 7k, (107, 000 Accounts Payable (6S 3,000 48,000 Sales for 2015 amounted to P798,000 while Cost of Goods Sold was PSE3,000. Cash operating expenses amounted to P107,000. All sales and purchases were on acco unt. Assuming that there ‘were no other relevant sransactions, what is the cash balance at Decemlver 31, 2015? 3. P305,000 P249,000 — P149,000 d P108,000 2. ’ thy AR 34, You are given the following information relating to Centro Trading. (100) — “ Accounts Receivable, December 34, 2013 P70,000 ~y; qa 420 Collections on accounts receivable in 2014 430,000 iN Cost of Goods available for sale in 2014 460,000 94,0 Merchandise Inventory, December 31, 2014 100,000-! ~ gore Rate of gross profit op sales! 20% Assuming all sales were on int, what was the company's Accounts Revelvable balance on December 31, 2014? a. P50,000 © 90,000 < P100,000 d P120,000 44 amoi outstanding accounts raealvable we 0720: An asia analysis stows thet P7500 of the fotaolawes Fa estimated to be uncollectible, The incollectible accounts expense (9 P120.000 b, ; 75,000 . P45,000 ; (i Poo |) | 36 Starex Company recorded uncolle Ts peo | unealacte aoe ceeneaectbl aecouns expense df P24,000 durlg 2014, The allowance for | wote otf P3000 or ae eaane® of P17 500 on December 31,2012. Dg the year 2014, Starex ies ee YA00 of unllectiberecevabls and recovered P,050 fu olletble accounts wen of + What was the balance of Allowance for Uncollectible Accour ‘st December 31, 20147 Z 45,550 {> 719,050 .P15,050 4. 7,000. 1p, nf | oe p l 37. W. ee — Purchased an item of merchandise quoted and listed at °150,000 under the following e ‘counts of 15%, 10%,5%, 3/10,n/30. How much should W illa if wane dees : snopes ars 3. 100,842 ». P102,900 & 105,742.12 dP 106,832.25 38. Jane inc, had 10,200 units.on April 30,2015, based on physical count of gc ads on that date. The following. items have not yet been recorded as purchases and sales a of April 30 No. Transaction Terms ‘Number of units 1 Purchase 200 = 2 Purchase 200 doe 3 Sale FOB shipping point eon 4 Sale FOB destination 500 ‘tems 1-4 were shipped by the seller Apr! 30, 2015 and received by the buyer May 5, 2015. How many units should be considered as inventory at the end of April20)5? a P9,600 b, P20,200 BB P10,900 wi P10,950 39. On September 19,2015, portion of the inventory of Lhibre Food Products, stored in its warehouse llocatad slong Magsaysay Boulevard were lostin the flood. The following Information were made available to you from the company’s records: 450,000 Merchandise Inventory, January 2, 2015 450,000 S (eee, Purchases (January 1, 2015 to date of flood) 3,180,000 ay Sales (January 1, 2015 to date of flood) 4,200,000 0001 les Uanuary 1, ate of flood) (000 [Aphysical count of inventory was taken after the flood, and it was determined that there as inventory not damaged costing P 500,000. How much is the estimated'cost of inventory Idstin'the flood assuming the company’s gross profit rate remained constant at 4O% of cor (B P 00.000 b. P200,000 250,000, dPS80,000 ogo exarning the December 21,2035 fan statment of Moca Corpeny,Youdscover the 7” following errors . I ‘rThe December 31, 2035 Inventory was overstated by P10,0¢2 600,000 The January 1, 2015 Inventory was overstated by 4,000 rey ‘4P100,000 worth of merchandise was purchased and received ( ‘awards the end of 2015 an ned in inventory. Te purchase waskecorded in 2016, ‘ 4,000 ) a 00, oats profit reported in 2015 amounts to P600,009 before adjustment forthe gina items above. {What is the adjusted profit for the year 2018? 2. 486,000 & asé,600 c P686,000 d P714,000 ‘a recorded cost of P250,000 and accumulated depreciation of 140,000 was sold for sg" hn old cooler with Jer with markt price of P200,000 was purchased. Freight charge of F3,000 and 4,000. Anew coo! Fretatlation eost of P7,000 were pald. Whats the cost of the new cooler? (> 210,000 b, 299,000 204,000 d P200,000 ald awoley We) Cooler tat - "0,000 ty ~ 200,000 few - ("01000Zoa Company (a VAT-regie were temporarily invested ylelding P25,000 in interest revenue. Other than the construction funds borrowed, the only other debt outstanding during the year was a P2,500,000, 10-year, 9% notes payable dated January 1,2025. What is the amount of interest that should be capitalized by Bignay Company? a. P198,000 ») 218,000 & P243,000 4 250,000 j ' qised dene ‘46. On December 31, 2014, Dcorapp Company borrowed P 12,000,000 issuing @ 12%, 3-year note to finance. the construction of a new building, In 2025, the company made the following expenditures related to this bullding: January 1 P 3,600,002"? uy a 25,000,000), "6? June 1 6,000,000" °° December 1 :5,000,000 | ee Other debt outstanding and related information follow: eee 10-year, 12% bonds, dated December 31, 2012, interest payable annually _P 40,000,000 6-year, 10% note, dated December 32, 2013, interest payable annually 10,000,000 Interest earned in 2025 from temporary invéstment of the specificborrcwing 249,000 - ‘The borrowing costs to be capitalized in 2015 Is: a, 1,500,000 . P1,660,000 © 4,687,600 4 P1,658,380, 4¥. KhoThong Company purchased a machine on July 1,2013, for P600,000. The machine has an estimated ”” useful life of five years and a salvage value of PB0;000. The machine Is being vlepreciated from the date of 30/ acquisition by the 150% declining balance method. How much depreciation sould the company record for this machine for the year ended December 31, 2015? 7 30,00 a. P78,000 b. P90,000 fs.) 107,200, © P1goo00 ¥ $6 £79 ¥90 507 ‘On April 1, 2015, Bong Manufacturing Company bought. ‘equipment for P800,020. The estimated useful “© ite ofthe equipment is 12 years and salvage valve of €20,000. Depreciation is computed using the amvof- the years digits method. How much Is the depreciation of this equipment in 20362 ‘a. 90,000 b. 110,000 112,500 4 P120,000 6 40/000 y Hy Bpp 34. Hong Hang Company purch Q 1ased for P240) Of 10 years and an estimated resdval aliearny 00 pezO40 a mach ve with an estimated useful fe Using the stra of 12,000, ithtline ,000. Deprecation was recorded on a monthly basis using the se ethod. The machine was sald fr P110,6000nSeptenoes 30 DoLe ele @. P21,700 gain pbs . & b. P22,700 loss & Pa700gsin — ()pa,700H0ss 4,200 2. Luige Company determ ne ined that, due to obsol it and | accumulated solescence, equipment with ati original cost of P900,000 and | 70/7, — tel depreciation at December 31,2014 of P420,000 had suffered permanent impairment, and as equipment sya ane 2 S2"¥INE value of anly P360,000. In addition, the re:naining useful lfe of the Went M5 reduced from ight years to five years. 'at_was the impairment loss recognized on December 31, 20147 a PO 0. b. P100,000 © 120,000 & P180,000 $3. Usi i i 5% Using the same information given for Luige Company, What isthe revise’ depreciation expense to be recorded for the year ended December 31, 2015? 60,000 (8) P72,000 «96,000, d_P220,000 “S4. Masigasig Company acquired A building on January 2, 2005 at an original < sst of P4,000,000 (no residual 7 value). Depreciation on the bullding is computed on a straight line basis a 'd the annual depreciation on cost ls P160,000, On December 31, 2014, the bullding is appraised at a fal. market value of P3,240,000. The appraisal results are to be recognized in the accounts considering the :ame remaining lite for the building. What is the amount that should be credited to Revaluation Surpl 1s at December 31,2014? a. PA Q 840,000 & -P1,400,000 4 P3,000,000 45, Using the same information for Masigasig Company, The amount of Revalt ation Surplus to be amortized for the year 2035 is: Tyo, 000) a PAO b. P-42,000 (& Pssa00 d P84,000 56.’ On January 1, 2021, ChuChu Inc, purchased a machine for P528,000 and depreciated It by the straight- © ine method using an estimated useful life of eight years with no salvage value. During 2025; ChuChu determined that the machine had a useful life of six years from the date ot acquisition. An accounting change was made in 2015 to reflect these additional data. How much depreciation Is to be recorded for the year 2015? a. 66,000 &) 132,000 «. P.264,000 d P396,000 57: In 2013,Hattaw Mining company purchased for PS4,000,000 a tract of land containing mineral resources. The purchase contract contalned’a provision that Hattaw is required to restore the land sultable for factory use after It has extracted the mineral resource. Geological surve's have indicated that 2,400,000 tons of ore could be extracted. The property has an estimated sa'vage value of P6,000,000 after the ore has been extracted and the land is restored. The estimated cost of restoration is P7,200,000 which Is the present value at date of acquisition. Production started in 2024 and In that yesr, the company was able to cxtract 300,000 tons of ores. ‘Assume that Hattaw does not maintain inventories of extracted ores, how m uch Is the depletion expense for the year 2014? 5 ¢ 2. 6,000,000 @ 6,900,000. = ._—P7,000,000 é_P7,200,000 58. The following accounts were found in the general ledger of Silver Company 2s of December 31, 2015: Unamortized discount on bonds payable -—-P120,000Organization-costs _P100,000 Amount set up by the board of directors Trademarks 750,000 As Goodwill 300,000 Patents 200,000 Losses in early years of company 450,000 is: ‘The total intangible assets of Silver Company tobe reported in Its statement of financlat position a. P900,000 & 950,000 . P1,000,000 4 P1,300,000 4ye he prea spent P1,440,009 eroduet, the patent yoo In a cite nt Was os compat PaldPuso.eqp tases + 2ue to the competitive nature of How meet 28tained righ ret f005 na suc a ‘the beginning of 2013, the NY MUCN IS hea tea Patent wich meas Acco pone teh, On December 31,2044, 3 a p2ag, Patent obs ole. 440,000 ¥ 1 on b. p2aaao9 > 60. On January 3, 201 & | P261,000 (3) 248,000 solescence? ny ‘ire h ful Hte of yea totallzed costs of P6,00¢) 000 for acomputer software ‘Years, Sales tor the software priduct during 2035 were S Of the software over the ecoron life are ‘ext-ected to be P 10,000,000, but "e determined reliably, through p afit or los that were purchased ue! 000. At the end of 2015, the securities nad total market value of 116 the total market value of the. ‘equity sec srities is P 565,000. The holding. taln oF loss that would be reported by Paris forthe ‘year 2016 Is: z 3. 5,000 ». Pio,000 & P15,000 d P25,000 ‘$2, On July 1, 2038, Marvel Company purchased P10 rl ° 2y interest semiannually.on January 4 and July 1 were Company classified the det ‘the year ended December 31, @. 350,000 b n of East Companys 8% bonds, The bonds , which purchased for P9,200,000 to yield 19%. Marvel estment at argortized cost, Init statemertof comprehensive income for 2015, Marvel should report interest income of 400,000 c. p4a7.000 (4) 460,000 ‘63, On December 1, 2015, Whaastic Company purchased 1,000 shares of Tanglawrun Corp. P100 par > ordinary shares (5% interest in voting rights) at P17S per share. Whalastie also pald transaction cost of £3,500, The shares were designated as equity investments at fir value through other comprehensive 1) Ieome. On December 31, 2015, Tany iglaw ordinary shares were quoted at 200 per share, What is the carrying value of the equity Investment at December 1, 20152. ‘Da, P100,000 b. P175,000 fc.) P178,500 4 P200,000 U 4. Kopinia Company purchased as held for collection investment P1,000,000 tace value of kopiko Company's ‘8% bonds for P923,640 on January 2, 2025. The bonds were purchased to ‘ield 10% Interest. The bonds ay Interest annually on January 2. What's the carrying value of the debt iecuritles at December 31, 2015? a. 1,000,000 b.-P823,640 QO 936,008 4 P912,400 85. The following information pertains to XXX Company's biological assets at Dscember 31, 2015: Carrying value at January 1, 2015 20,000,000 y FV less cost to sell of biological assets purchased 4,000,000 Gain arising from change in fair value less cost to sell attributable to price change 800,000 Gain arising from change in fair value fess cost to sell attributable oo to physical change 1,500, 3 Decrease dueto sales 2,000,000 Decrease due to harvest 800,000 At what amount should the biological assets be presented on the statement of financial position at December 31, 2015? e 713,500,000 b. _P13,800,000 5,800,000 dP 6,300,000 ina J. You have feet in your shocs. You can steer yourse fin any direction jou choose. You have brains in yourhesd. You hove f Yeou’re on your own, and you know what you know. and you are the guy, 20 decide where to go. ‘geod luck! i . 8