Name: ________________________________________

PREFINAL EXAMINATION -FINANCIAL ACCOUNTING & REPORTING PART 3

Multiple Choice. Identify the choice that best completes the statement or answers the question.(4pts each)

1. The following information pertains to each unit of merchandise purchased for resale by Vend Co.:
March 1, 2003
Purchase price P8
Selling price P12
Price level index 110

December 31, 2003

Replacement cost P10
Selling price P15
Price level index 121

Under current cost accounting, what is the amount of Vend’s holding gain on each unit of this merchandise?

2. Kerr Company purchased a machine for P115,000 on January 1, 2003, the company’s first day of operations.
At the end of the year, the current cost of the machine was P125,000. The machine has no salvage value, a
five-year life, and is depreciated by the straight-line method. For the year ended December 31, 2003, the
amount of the current cost depreciation expense which would appear in supplementary current cost
financial statements is ___________

3. Correy Corp. and its divisions (each is an operating segment) are engaged solely in manufacturing operations.
The following data (consistent with prior years’ data) pertain to the operations conducted for the eyar ended
December 31, 2010.

Industry Total Revenue Operating Profit Identifiable Assets

Operating Segment
A P 10,000,000 P 1,750,000 P 20,000,000
B 8,000,000 1,400,000 17,500,000
C 6,000,000 1,200,000 12,500,000
D 3,000,000 550,000 7,500,000
E 4,250,000 675,000 7,000,000
F 1,500,000 225,000 3,000,000
TOTAL P 32,750,000 P 5,800,000 P 67,500,000

In its segment information for 2010, how many reportable segment does Correy have?

4. Ozamis Corporation operates in hyperinflationary economy. Its statement of financial position on December 31,
2010, follows:
Cash P 3,500,000
Inventory 27,000,000
Property, plant and equipment 9,000,000
Current liabilities 7,000,000
Noncurrent liabilities 5,000,000
Share capital 4,000,000
Retained earnings 23,500,000

The general price index at December 31 had moved in this way: 2006 – 100; 2007 – 130; 2008 – 150; 2009 – 240;
2010 – 300.

The property, plant and equipment was purchased on December 31, 2008, and there is six months’ inventory held.
The noncurrent liabilities were a loan raised on March 31, 2010.
Based on the above and the result of the audit, answer the following:
The total assets on December 31, 2010 after adjusting for hyperinflation is _____________

1 Pilly Ltd purchased a vehicle on 1 July 2006 for P140 000. The vehicle is depreciated on a straight-line basis
over a 4-year period, with nil residual value. The following general price level indices are available:
1 July 2006   130
30 June 2007   140
Average for
  135
year
5. What is the amount of depreciation shown in the income statement (restated to a constant
purchasing power basis) for the year ended 30 June 2007?

6. On March 1, 2013 entities X and Y each acquired 25% of the ordinary shares that carry voting rights at a
general meeting of shareholders of entity C for P680,000. Transaction cost is 6% of the transaction price.
Entities X and Y immediately agreed to share control over entity C. For the year ended December 31,
2013 entity C recognized a profit of P750,000. On December 30,2013 entity C declared and paid a
dividend of P320,000 for the year 2013. On December 31, 2013 the fair value of each venturers’
investment in entity C is P840,000. Cost to sell is 4% of the fair value. However, there is no published
price quotation for entity C. Assuming Entity X uses the equity model to account for its investment in
entity C,

How much is the investment in Dec. 31, 2013?

7. On May 1, 2013 entities J and K each acquired 40% of the ordinary shares that carry voting rights at a
general meeting of shareholders of entity F for P918,000. Transaction cost amount to P5,000. Entities J
and K immediately agreed to share control over entity F. On December 31, 2013 entity F declared a
dividend of P30,000 for the year 2013. Entity F reported a loss of P270,000 for the year ended December
31, 2013. On December 31, 2013 the fair value of investment is P862,500 and costs to sell is P9,000.
There is a published price quotation for entity F. Assuming Entity K uses cost model to account for its
investment.

The amount of profit or loss to be reported by entity K is: __________

Use the following information for questions 8 through 10.

Wheeler Corp.'s balance sheet accounts as of December 31, 2004 and 2003 and information relating to 2004
activities are presented below.
December 31,
2004 2003
Assets
Cash $ 132,000 $ 60,000
Short-term investments 180,000 —
Accounts receivable (net) 306,000 306,000
Inventory 414,000 360,000
Long-term investments 120,000 180,000
Plant assets 1,020,000 600,000
Accumulated depreciation (270,000) (270,000)
Patent 54,000 60,000
Total assets $1,956,000 $1,296,000

Liabilities and Stockholders' Equity

Accounts payable and accrued liabilities $ 498,000 $ 432,000
Notes payable (nontrade) 174,000 —
Common stock, $10 par 480,000 420,000
Additional paid-in capital 240,000 150,000
Retained earnings 564,000 294,000
Total liabilities and stockholders' equity $1,956,000 $1,296,000
Information relating to 2004 activities:

 Net income for 2004 was $450,000.

 Cash dividends of $180,000 were declared and paid in 2004.
 Equipment costing $300,000 and having a carrying amount of $96,000 was sold in 2004 for $108,000.
 A long-term investment was sold in 2004 for $96,000. There were no other transactions affecting long-term
investments in 2004.
 6,000 shares of common stock were issued in 2004 for $25 a share.
 Short-term investments consist of treasury bills maturing on 6/30/05.

8. Net cash provided by Wheeler's 2004 operating activities was __________

9. Net cash used in Wheeler's 2004 investing activities was ________
10. Net cash provided by Wheeler's 2004 financing activities was _______