10/1/2020 Submissions - Integrated Review 1 - SBCA-JBN

Integrated Review 1

Standalone assignment

Quiz 1.01 Financial Statements to Interim Reporting

Submissions
Here are your latest answers:

Question 1
Marriott Corp. reports operating expenses in the income statement by function. The adjusted trial balance at December 31, 200A included the following expense and loss
accounts:

Accounting and legal fees 120,000Loss on sale of long-term investments 30,000

Advertising 150,000Officers’ salaries 225,000
Freight-out 80,000Rent for office space 220,000
Interest 70,000Sales salaries and commissions 140,000

One half of the rented premises is occupied by the sales department. Marriott’s total selling expenses for 200A is

Response: 480,000

Feedback:

Advertising 150,000
Freight-out 80,000
Rent for office space (220,000 x 1/2) 110,000
Sales salaries and commissions 140,000
Selling expenses for 200A 480,000

Correct answer: 480,000

Score: 1 out of 1 Yes

Question 2
Willem Company reported the following liabilities on December 31, 200A

Accounts payable 2,000,000

Short-term borrowings 1,500,000
Bonds payable due December 31, 200C 3,000,000
Premium on bonds payable 500,000
Mortgage payable, current portion P500,000 3,500,000
Bank loan, due June 30, 200B 1,000,000

The P1,000,000 bank loan was refinanced with a 5-year loan on December 31,200A. The financial statements were issued March 1, 200B.

What total amount should be reported as current liabilities on December 31, 200A?

Response: 7,500,000

Feedback:

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Correct answer: 4,000,000

Score: 0 out of 1 No

Question 3
America Company provided the following data for the current year:

Sales P 25,000,000
Cost of goods sold 16,000,000
Interest revenue 70,000
Selling and administrative expenses 4,700,000
Impairment loss on goodwill 820,000
Income tax for the year 905,000
Gain on sale of investments 110,000
Loss due to storm surge 390,000
Loss on the disposition of the wholesale division 615,000
Loss on operation of the wholesale division 200,000
Income tax benefit from discontinued wholesale division 285,000
Dividends declared on ordinary shares 250,000

What is the loss from discontinued operations?

Response: 530,000

Feedback:

Loss on the disposition P 615,000

Loss on operation 200,000
Income tax benefit (285,000)
Loss on discontinued operation P 530,000

Correct answer: 530,000

Score: 1 out of 1 Yes

Question 4
Melody Company provided the following information for the current year:

Increase in goods in process invtry P 500,000

Increase in raw materials inventory 150,000
Decrease in finished goods inventory 350,000
Raw materials purchased 4,300,000
Direct Labor payroll 2,000,000
Factory overhead 3,000,000
Freight out 450,000

What is the cost of goods sold for the current year?

Response: 9,000,000

Feedback:

Raw materials purchased P 4,300,000

Direct Labor payroll 2,000,000
Factory overhead 3,000,000

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Increase in raw materials invtry (150,000)
Manufacturing Cost 9,150,000
Increase in goods in process invtry (500,000)
Decrease in finished goods inventory 350,000
Cost of goods sold P 9,000,000

Correct answer: 9,000,000

Score: 1 out of 1 Yes

Question 5
On March 15, 200A, Rex Company paid property taxes of P180,000 on the factory building for the calendar year 200A. On April 1, 200A, the entity made P300,000 in
unanticipated ordinary repairs to plant equipment.

What total amount of these expenses should be included in the quarterly income statement ending June 30, 200A?

Response: 345,000

Feedback:

Unanticipated ordinary repairs to plant equipment 300,000

Property taxes (180,000/4) 45,000
Total expenses 345,000

Correct answer: 345,000

Score: 1 out of 1 Yes

Question 6
Taylor Company, a publicly owned entity, assesses performance and makes operating decisions using the following information for the reportable segments:

Total segment revenue 7,700,000

Total segment profit 500,000

The total segment profit included intersegment profit of P50,000. In addition, the entity has P10,000 of common costs for the reportable segments that are not allocated in
reports reviewed by the chief operating decision maker.

What amount should be reported as segment profit?

Response: 500,000

Feedback:

Correct answer: 510,000

Score: 0 out of 1 No

Question 7
America Company provided the following data for the current year:

Sales P 25,000,000
Cost of goods sold 16,000,000
Interest revenue 70,000
Selling and administrative expenses 4,700,000
Impairment loss on goodwill 820,000
Income tax for the year 905,000
Gain on sale of investments 110,000
Loss due to storm surge 390,000

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Loss on the disposition of the wholesale division 615,000
Loss on operation of the wholesale division 200,000
Income tax benefit from discontinued wholesale division 285,000
Dividends declared on ordinary shares 250,000

What is the income from continuing operations?

Response: 2,365,000

Feedback:

Sales P 25,000,000
Cost of goods sold (16,000,000)
Interest revenue 70,000
Selling and administrative expenses (4,700,000)
Impairment loss on goodwill (820,000)
Income tax for the year (905,000)
Gain on sale of investments 110,000
Loss due to storm surge (390,000)
Income from continuing operations P 2,365,000

Correct answer: 2,365,000

Score: 1 out of 1 Yes

Question 8
Bangladesh Company provided the following information for the current year:

Sales P 50,000,000
Cost of goods sold 30,000,000
Distribution costs 5,000,000
General and administrative expenses 4,000,000
Interest expense 2,000,000
Gain on early extinguishment of long-term debt 500,000
Correction of inventory error, net of income tax - credit 1,000,000
Investment income - equity method 3,000,000
Gain on expropriation 2,000,000
Income tax expense 5,000,000
Dividends declared 2,500,000

What is the income from continuing operations?

Response: 9,500,000

Feedback:

Sales 50,000,000
Cost of goods sold (30,000,000)
Gross income 20,000,000
Gain on expropriation 2,000,000
Investment income 3,000,000
Total income 25,000,000
Expenses:
Distribution costs 5,000,000
General and administrative 4,000,000
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Finance cost* 1,500,000 10,500,000

Income before tax 14,500,000
Income tax expense (5,000,000)
Net income 9,500,000

Interest expense 2,000,000

Gain on early extinguishment (500,000)
Finance cost* 1,500,000

Correct answer: 9,500,000

Score: 1 out of 1 Yes

Question 9
Following are the changes in all the account balances of Sozekemi Corporation during the current year except for retained earnings:

Increase/(Decrease)
Cash P 948,000
Accounts receivable, net 540,000
Inventory 1,524,000
Investments (564,000)
Accounts payable (612,000)
Bonds payable 980,000
Ordinary shares 1,500,000
Share premium 160,000

The company declared and paid dividends of P230,000 in the current year. Using the net assets approach, Sozekemi’s net income for the year is

Response: 650,000

Feedback:

Increase in cash 948,000

Increase in accounts receivable, net 540,000
Increase in inventory 1,524,000
Decrease in investments (564,000)
Decrease in accounts payable 612,000
Increase in bonds payable (980,000)
Increase in net assets 2,080,000
Increase in ordinary shares (1,500,000)
Increase in share premium (160,000)
Dividends declared and paid 230,000
Net income for the year 650,000

Correct answer: 650,000

Score: 1 out of 1 Yes

Question 10
On January 1, 200A, Brazilia Company purchased for P4,800,000 machine with a useful life of ten years and a residual value of P200,000.

The machine was depreciated by the double declining balance and the carrying amount of the machine was P3,072,000 on December 31, 200B.

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The entity changed to the straight line method on January 1, 200C. The residual value did not change.

What is the depreciation expense on this machine for 200C?

Response: 359,000

Feedback:

Depreciation for 200C (2,872,000/8 years remaining) 359,000

Carrying amoung-January 1, 200C 3,072,000

Residual value (200,000)
Depreciable amount 2,872,000

Straight line rate (100% /10) 10%

Double declising rate (10% x 2) 20%

Acquisition cost-January 1, 200A 4,800,000

Accumulated depreciation-January 1, 200C
200A (20% x 4,800,000) 960,000
200B (20% x 3,840,000) 768,000 (1,728,000)
Carrying amount January 1, 200C 3,072,000

Correct answer: 359,000

Score: 1 out of 1 Yes

Question 11
Harper Company incurred an inventory loss from market decline of P840,000 on June 30, 200A. What amount of the inventory loss should be recognized in the quarterly
income statement for the three months ended June 30, 200A?

Response: 840,000

Feedback: Inventories shall be measured at the lower of cost and net realizable value even for interim purposes.

Accordingly, if the net realizable value is lower than cost, a loss on inventory writedown shall be recognized regardless of whether the writedown is temporary or
nontemporary.

Correct answer: 840,000

Score: 1 out of 1 Yes

Question 12
On January 1, 200A, Flair Company purchased a machine for P2,640,000 and depreciated it by the straight line using an estimated life of 8 years with no residual value. On
January 1, 200D, the entity determined that the machine had a useful life of 6 years from the date of acquisition with a residual value of P240,000.

What is the accumulated depreciation on December 31, 200D?

Response: 1,460,000

Feedback:

Acquisition cost P 2,640,000

Divide: Estimated life ÷ 8
Annual depreciation 330,000
Years elapsed x 3
Accumulated Depn (200C) 990,000
Annual depreciation (200D)
[(P2.64-P0.99-P0.24)÷3] 470,000
Accumulated depreciation P 1,460,000

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Correct answer: 1,460,000

Score: 1 out of 1 Yes

Question 13
On December 31, 200A, Condor Company committed to a plan to sell a manufacturing facility in its present condition and classifies the facility as held for sale at this date.
After a firm purchase commitment is obtained, the buyer’s inspection of the property identifies environmental damage not previously known to exist. Condor Company is
required by the buyer to make good the damage, which will extend the period required to complete the sale beyond one year. However, the entity has initiated actions to
make good the damage, and satisfactory rectification of the damage is highly probable. On December 31, 200A, the carrying value of the facility is P4,000,000 and its fair
market value is P3,600,000.

In its December 31, 200A statement of financial position, Candor Company should properly report this manufacturing facility as:

Response: Should be reported separately as non-current asset held for sale and valued at P3,600,000.

Feedback:

Correct answer: Should be reported separately as non-current asset held for sale and valued at P3,600,000.

Score: 1 out of 1 Yes

Question 14
Clara Company purchased equipment for P5,000,000 on January 1, 200A with a useful life of 10 years and no residual value. On December 31, 200B, the entity classified
the asset as held for sale. The fair value of the equipment on December 31, 200B is P3,300,000 and the cost of disposal is P100,000. On December 31, 200C, the fair value
of the equipment is P3,800,000 and the cost of disposal is P200,000. On December 31, 200C, the entity believed that the criteria for classification as held for sale can no
longer be met. Accordingly, the entity decided not to sell the asset but to continue to use it.

What amount should be recognized as impairment loss as a result of the asset classification as held for sale in 200B?

Response: 800,000

Feedback:

Acquisition cost P 5,000,000

Depreciation (P5.0 ÷ 10 x 2) (1,000,000)
Carrying amount on December 200B P 4,000,000

Carrying amount on December 200B P 4,000,000

Recoverable amount on December 200B (3,200,000)
Impairment loss P 800,000

Correct answer: 800,000

Score: 1 out of 1 Yes

Question 15
Arlene Company accounts for noncurrent assets using the cost model. On October 30, 200A, the entity classified a noncurrent asset as held for sale.

At that date, the carryining amount was P1,500,000, the fair value was estimated at P1,100,000 and the cost of disposal at P150,000. On November 20, 200A, the asset was
sold for net proceeds of P800,000.

What amount should be included as loss on disposal in the statement of comprehensive income for the year ended December 31, 200A?

Response: 150,000

Feedback:

Carrying amount 1,500,000

Fair value less cost of disposal (1,100,000 - 150,000) 950,000
Impairment loss 550,000

Sale price 800,000

Carrying amount on November 20, 200A, date of sale (950,000)
Loss on disposal (150,000)

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Correct answer: 150,000

Score: 1 out of 1 Yes

Question 16
Xavier Company has three segments, A, B and C. Segment C, the closing division, is deemed inconsistent with the long-term direction of the entity. Management has
decided to dispose of Segment C.

On November 15, 200A, the board of directors of Xavier Company voted to approve the disposal and an announcement was made.

On that date the carrying amount of Segment C's net assets was P90,000,000 and the fair value less cost of disposal was P70,000,000.

Segment C's revenue and expenses for 200A, respectively, were P50,000,000 and P45,000,000, including an interest of P5,000,000 attributable to Segment C.

There was no further impairment of assets between November 15 and December 31, 200A. The income tax rate is 30%.

What amount of loss from discontinued operation should be reported for 200A?

Response: 10,500,000

Feedback:

Revenue 50,000,000
Expenses (45,000,000)
Impairment loss (20,000,000)
Loss from discontinued operation (15,000,000)

Loss after tax (15,000,000 x 70%) 10,500,000

Carrying amount 90,000,000

Fair value less cost of disposal (70,000,000)
Impairment loss 20,000,000

Correct answer: 10,500,000

Score: 1 out of 1 Yes

Question 17
Folk Campany changed from the average cost method to the FIFO method to aceount for the inventory. Ending inventory for each method was a follows:

200A 200B
Average cost 500,000 900,000
FIFO cost 700,000 1,400,000

The income statement information caleulated by the average cost method was as follows:
200A 200B
Sales 10,000,000 13,000,000
Cost of goods sold 7,000,000 9,000,000
Operating expense 1,500,000 2,000,000
Tax expense - 30% 450,000 600,000

What amount of net income should be reported in 200B after the change to the FIFO inventory method?

Response: 1,750,000

Feedback:

Correct answer: 1,890,000

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Score: 0 out of 1 No

Question 18
Acute Company was organized on January 1, 200A. In preparing the financial statements for the year ended December 31 200C, the entity used the following original cost
and useful life for property, plant and equipment.

Original cost Useful life

Building 15,000,000 15 years
Machinery 10,500,000 10 years
Furniture 3,500,000 7 years

On January 1, 200D, the entity decided to review the useful life of the property, plant and equipment. On such date, the remaining useful life is 10 years for the building. 7
years for the machinery and 5 years for the furniture. The entity used the straight line method of depreciation with no residual value.

What is the total depreciation for 200D?

Response: 2,650,000

Feedback:

Carrying amount of Building (15.0M x 12/15) 12,000,000

Remaining useful life ÷ 10 1,200,000
Carrying amount of Machinery (10.5M x 7/10) 7,350,000
Remaining useful life ÷ 7 1,050,000
Carrying amount of Furniture (3.5M x 4/7) 2,000,000
Remaining useful life ÷ 5 400,000
Depreciation for 200D 2,650,000

Correct answer: 2,650,000

Score: 1 out of 1 Yes

Question 19
Aria Company and its divisions provided the following information for the current year:

Sales to unaffiliated customers 20,000,000

Intersegment sales of products similar to those sold to unaffiliated customers 6,000,000
Interest earned on loans to other operating segments 400,000

Aria Company and all of its divisions are engaged solely in manufacturing operations.

What is the minimum amount of segment revenue in order that a division can be considered a reportable segment?

Response: 2,600,000

Feedback:

Sales to unaffiliated customers 20,000,000

Intersegment sales 6,000,000
Combined revenue 26,000,000

Test of reportable segment (10% of 26,000,000) 2,600,000

Under PFRS 8, paragraph 13, segment revenue includes sales to extermal customers and intersegment sales of operating segments engaged solely in manufacturing.

Correct answer: 2,600,000

Score: 1 out of 1 Yes

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Question 20
During 200A, Marian Company was sued by a competitor for P5,000,000 for infringement of a patent.

Based on the advice of the legal counsel, the entity accrued the sum of P3,000,000 as a provision on December 31, 200A.

Subsequently, on April 15, 200B, the Supreme Court decided in favor of the party alleging infringement of the patent and ordered the defendant to pay the aggrieved party a
sum of P3,500,000.

The financial statements were prepared by management on February 15, 200B and approved by the board of directors on March 31, 200B.

What armount should be adjusted on December 31, 200A in relation to this event?

Response: 500,000

Feedback:

Correct answer: 0

Score: 0 out of 1 No

Question 21
Eagle Company operates in several different industries. Total sales for Eagle Company totaled P14,000,000, and total common costs amounted to P6,500,000 for the current
year.

For internal reporting purposes, Eagle Company allocated common costs based on the ratio of a segment's sales to total sales.

Segment A contributed 25% to the total sales and incurred specific costs of P1,100,000.

What is the profit of Segment A?

Response: 775,000

Feedback:

Sales- Segment A (25% x14,000,000) 3,500,000

Specific costs (1,100,000)
Allocated common costs (25% x 6,500,000) (1,625,000)
Segment profit 775,000

Correct answer: 775,000

Score: 1 out of 1 Yes

Question 22
Harper Company incurred an inventory loss from market decline of P840,000 on June 30, 200A. What amount of the inventory loss should be recognized in the quarterly
income statement for the three months ended June 30, 200A?

Response: 840,000

Feedback: Inventories shall be measured at the lower of cost and net realizable value even for interim purposes.

Accordingly, if the net realizable value is lower than cost, a loss on inventory writedown shall be recognized regardless of whether the writedown is temporary or
nontemporary.

Correct answer: 840,000

Score: 1 out of 1 Yes

Question 23
Folk Campany changed from the average cost method to the FIFO method to aceount for the inventory. Ending inventory for each method was a follows:

200A 200B
Average cost 500,000 900,000
FIFO cost 700,000 1,400,000

The income statement information caleulated by the average cost method was as follows:
200A 200B
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Sales 10,000,000 13,000,000

Cost of goods sold 7,000,000 9,000,000
Operating expense 1,500,000 2,000,000
Tax expense - 30% 450,000 600,000

What amount of net income should be reported in 200A after the change to the FIFO inventory method?

Response: 1,190,000

Feedback:

Sales 10,000,000
Cost of goods sold (7,000,000)
Operating expense (1,500,000)
Tax expense -30% (450,000)
Reported net income under average cost 1,050,000
Net of tax increase due to change to FIFO method [(700,000 - 300,000) x 70%]
140,000
Net income under FIFO cost 1,190,000

The change from average cost to FIFO cost resulted to an understatement to the ending balance. Thus, cost of goods should be reduced increasing the net income.

Correct answer: 1,190,000

Score: 1 out of 1 Yes

Question 24
During 200A, Marian Company was sued by a competitor for P5,000,000 for infringement of a patent.

Based on the advice of the legal counsel, the entity accrued the sum of P3,000,000 as a provision on December 31, 200A.

Subsequently, on March 15, 200B, the Supreme Court decided in favor of the party alleging infringement of the patent and ordered the defendant to pay the aggrieved party
a sum of P3,500,000.

The financial statements were prepared by management on February 15, 200B and approved by the board of directors on March 31, 200B.

What amount should be recognized as accrued liability on December 31, 200A?

Response: 3,500,000

Feedback:

Correct answer: 3,000,000

Score: 0 out of 1 No

Question 25
Vim Company has estimated that total depreciation expense for the year ended December 31, 200A will amount to P500,000, and that 200A year-end bonuses to employees
will total P1,200,000.

In the interim income statement for the six month ended June 30, 200A, what total amount of these expense should be reported?

Response: 850,000

Feedback:

Allocation of depreciation (P500,000÷2) P 250,000

Allocation of year end bonuses (P1,200,000÷2) 600,000
Reportable expenses for the semester P 850,000

Correct answer: 850,000

Score: 1 out of 1 Yes

Question 26
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Kay Company provided the following information for the current year:

Increase in goods in process invtry P 500,000

Increase in raw materials inventory 150,000
Decrease in finished goods inventory 350,000
Raw materials purchased 4,300,000
Direct Labor payroll 2,000,000
Factory overhead 3,000,000
Freight out 450,000

What is the manufacturing cost for the current year?

Response: 9,150,000

Feedback:

Raw materials purchased P 4,300,000

Direct Labor payroll 2,000,000
Factory overhead 3,000,000
Increase in raw materials invtry (150,000)
Manufacturing Cost P 9,150,000

Correct answer: 9,150,000

Score: 1 out of 1 Yes

Question 27
Blues Corporation's trial balance included the following account balances at December 31, 200A:

Accounts Payable P45,000

Bonds Payable, due 200B 75,000
Discount on Bonds Payable, due 200B 9,000
Dividends Payable January 31, 200B 24,000
Notes Payable, due January 31, 200E 60,000

What amount should be included in the current liability section of Blues' December 31, 200A, balance sheet?

Response: [none]

Correct answer: 135,000

Score: 0 out of 1 No

Question 28
Mite Company provided the following data for the year ended December 31, 200A:

Finished goods inventory, January 1 1,000,000

Finished goods inventory, December 31 1,200,000
Cost of goods manufactured 5,000,000
Loss on sale of plant equipment 100,000

What is the cost of goods sold for the current year?

Response: 3,800,000

Feedback:

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Correct answer: 4,800,000

Score: 0 out of 1 No

Question 29
Clay Company has three lines of business, each of which was detemined to be reportable segment.

The entity sales aggregated P7,500,000 in the current year, of which Segment No. 1 contributed 40%.

Traceable costs were P1,750,000 for Segment No. 1 out of a total of P5,000,000 for the entity as a whole.

For external reporting, the entity allocated common costs of P1,500,000 based on the ratio of a segment's income before common costs to the total income before common
costs.

In the financial statements for the current year, what amount should be reported as profit for Segment No. 1?

Response: 500,000

Feedback:

Segment 1 Total
Sales (40% x 7,500,000) 3,000,000 7,500,000
Traceable costs (1,750,000) (5,000,000)
Segment profit before common cost 1,250,000 2,500,000
Common cost
(1,250,000/2,500,000 x 1,500,000) (750,000) (1,500,000)
Segment profit 500,000 1,000,000

Correct answer: 500,000

Score: 1 out of 1 Yes

Question 30
The end of reporting period of Gallant Company is December 31, 200A and the financial statements for 200A are authorized for issue on March 15, 200B.
•On December 31, 200A, Gallant Company had a receivable of P400,000 from a customer that is due 60 days after end of reporting period. On January 15, 200B, a receiver
was appointed for the said customer. The receiver informed Gallant that the P400,000 would be paid in full by June 30, 200B.
•Gallant Company had investment in listed shares held for trading. On December 31, 200A, these investments were recorded at the market value of P5,000,000. During the
period up to February 15, 200B, there was a steady decline in the market value of all the shares in the portfolio, and on February 15, 200B, the market value had fallen to
P2,000,000.
•Gallant Company had reported a contingent liability on December 31, 200A related to a court case in which Gallant Company was the defendant. The case was not heard
until the first week of February 200B. On February 11, 200B, the judge handed down a decision against Gallant Company. The judge determined that Gallant Company was
liable to pay damages and costs totaling P3,000,000.
•On December 31, 200A, Gallant Company had a receivable from a large customer in the amount of P3,500,000. On March 31, 200B, Gallant Company was advised in
writing by the liquidator of the said customer that the customer was insolvent and that only 10% of the receivable will be paid on April 30, 200B.

What total amount should be reported as “adjusting events” on December 31, 200A?

Response: 9,550,000

Feedback:

Correct answer: 3,000,000

Score: 0 out of 1 No

Question 31
Clara Company purchased equipment for P5,000,000 on January 1, 200A with a useful life of 10 years and no residual value. On December 31, 200B, the entity classified
the asset as held for sale. The fair value of the equipment on December 31, 200B is P3,300,000 and the cost of disposal is P100,000. On December 31, 200C, the fair value
of the equipment is P3,800,000 and the cost of disposal is P200,000. On December 31, 200C, the entity believed that the criteria for classification as held for sale can no
longer be met. Accordingly, the entity decided not to sell the asset but to continue to use it.

What is the measurement of the equipment that ceases to be held for sale on December 31, 200B?

Response: 3,500,000

Feedback:

Correct answer: 3,200,000

Score: 0 out of 1 No

Question 32
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On January 1, 200F, Canyon Company decided to decrease the estimated useful life of an existing patent from 10 years to 8 years.

The patent was purchased on January 1, 200A for P3,000,000, The estimated residual value is zero.

The entity decided on January 1, 200F to change the depreciation method from an accelerated method to the straight line method.

On January 1, 200F, the cost of an equipment is P8,000,000 and the accumulated depreciation is P3,400,000.

The remaining useful life of the equipment on January 1, 200F is 10 years and the residual value is P200,000.

What is the total charge against income for 200F as a result of the accounting changes?

Response: 940,000

Feedback:

Patent- January 1, 200A 3,000,000

Accumulated amortization (3,000,000/10 x 5) (1,500,000)
Carrying amount- January 1, 200F 1,500,000

Amortization of patent for 200F (1,500,000/3) 500,000

Depreciation for 200F (4,600,000- 200,000/10) 440,000
Total charge against income for 200F 940,000

Revised estimated life of patent 8

Years expired (5)
Remaining revised life of patent 3

Correct answer: 940,000

Score: 1 out of 1 Yes

Question 33
The financial statements of Cresent Corporation for 200A and 200B contained the following errors:

200A 200B
Ending Inventory 14,000 overstated 20,000 understated
Rent Expense 4,800 understated 6,600 overstated

Assuming that none of the errors were detected or corrected, by what amount will 200A operating income be overstated or understated?

Response: 18,800 understated

Feedback:

Correct answer: 18,800 overstated

Score: 0 out of 1 No

Question 34
After the issuance of the 200A financial statements, Narra Company discovered a computational error of P150,000 in the calculation of the December 31, 200A inventory.

The error resulted in a P150,000 overstatement in the cost of goods sold for the year ended December 31, 200A.

In October 200B, the entity paid the amount of P500,000 in settlement of litigation instituted against it during 200B.

In the 200B financial statements, what is the adjustment to retained earnings on January 1, 200B?

Response: 150,000 credit

Feedback:

Correct answer: 105,000 debit

Score: 0 out of 1 No

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Question 35
Elaine Company prepared a draft FS that showed a profit before tax for the year ended December 31, 200A at P9,000,000. The board of directors authorized the FS for issue
on March 20, 200B. A fire occurred at one of Elaine's sites on January 15, 200B with resulting damage amounting to P7,000,000, only P4,000,000 of which is covered by
insurance. The repairs will take place and be paid for April 200B. The P4,000,000 claim from the insurance entity will however be received on February 14, 200B.

What amount should be reported as profit before income tax in the FS?

Response: 6,000,000

Feedback:

Correct answer: 9,000,000

Score: 0 out of 1 No

Question 36
Remy Company had the following events discovered during 200C:

• Depreciation for 200B was found to be understated by P300,000.

• A litigation settlement resulted in a loss of P250,000.
• The inventory on December 31, 200A was overstated by P400,000.
• The entity disposed of the recreational division at a loss of P500,000.
• The income tax rate is 30%.

What is the net effect of these events on the income from continuing operations for 200C?

Response: 175,000

Feedback:

Litigation settlement (250,000 x 70%) 175,000

Error on depreciation affects only the year when the error is committed.

Error on inventory balance will impact 200A and 200B, but not 200C.

Disposal loss of the recreational division belongs to discontinued operations.

Correct answer: 175,000

Score: 1 out of 1 Yes

Question 37
The December 31, 200A, balance sheet of Madden Inc., reported total assets of P1,050,000 and total liabilities of P680,000. The following information relates to the year
200B:

• Madden Inc. issued an additional 5,000 shares of common stock at P25 per share on July 1, 200B.
• Madden Inc. paid dividends totaling P80,000.
• Net income for 200B was P110,000.
• No other changes occurred in shareholders' equity during 200B.

The shareholders' equity section of the December 31, 200B, balance sheet would report a balance of

Response: 685,000

Feedback:

Correct answer: 525,000

Score: 0 out of 1 No

Question 38
Clara Company purchased equipment for P5,000,000 on January 1, 200A with a useful life of 10 years and no residual value. On December 31, 200B, the entity classified
the asset as held for sale. The fair value of the equipment on December 31, 200B is P3,300,000 and the cost of disposal is P100,000. On December 31, 200C, the fair value
of the equipment is P3,800,000 and the cost of disposal is P200,000. On December 31, 200C, the entity believed that the criteria for classification as held for sale can no
longer be met. Accordingly, the entity decided not to sell the asset but to continue to use it.

What is the gain or loss on reclassification on December 31, 200C?

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Response: 300,000 Gain

Feedback:

Acquisition cost P 5,000,000

Depreciation (P5.0 ÷ 10 x 3) (1,500,000)
Carrying amount had the asset not been classified as held for sale P 3,500,000

FV on December 200C P 3,800,000

Cost of disposal on 200C (200,000)
Recoverable amount P 3,600,000

Measurement based on lower between “could be” carrying amount and recoverable amount
P 3,500,000
Carrying amount of asset held for sale (3,200,000)
Gain on reclassification P 300,000

Correct answer: 300,000 Gain

Score: 1 out of 1 Yes

Question 39
Manchester Company provided the following information on Decembe 31, 200A:

Employee income taxes withheld 900,000

Cash balance at First State Bank 2,500,000
Cash overdraft at Harbor Bank 1,300,000
Accounts receivable with credit balance 750,000
Estimated expenses of meeting warranties 500,000
Estimated damages as a result of unsatisfactory performance on a contract
1,500,000
Accounts payable 3,000,000
Deferred serial bonds, issued at par and bearing interest at 12%, payable in semiannual installments of P500,000 due April 1 and October 1 of
each year, the last bond to be paid on October 1, 200G. Interest is also paid semiannually.

5,000,000

What amount should be reported as total current liabilities on December 31, 200A?

Response: 8,100,000

Feedback:

Employee income taxes withheld 900,000

Cash overdraft 1,300,000
Accounts receivable with credit balance 750,000
Estimated warranty liability 500,000
Estimated damages payable 1,500,000
Accounts payable 3,000,000
Accrued interest on bonds payable from October 1 to December 31, 200A (5,000,000 x 12% x 3/12) 150,000
Total current liabilities 8,100,000

The bonds will be paid over 5 years because the semiannual payment is P500,000. Since the last bond will be paid on October 1, 200G, the first bond will be paid on April
1,200C.

Accordingly, there is no currently maturing bond in 2019.

Correct answer: 8,100,000

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Score: 1 out of 1 Yes

Question 40
Zeno Company maintains a markup of 60% based on cost. The entity's distribution and administrative expenses average 25% of sales. Sales amounted to 9,600,000 for the
current year. Corporate income tax is 30%.

What is the net income for the current year?

Response: 1,200,000

Feedback:

Correct answer: 840,000

Score: 0 out of 1 No

Question 41
Parker Company reported operating expenses as distribution and general or administrative.

The adjusted trial balance at the end of the current year included the following expense accounts:

Accounting and legal fees P 1,450,000

Advertising 1,500,000
Freight out 750,000
Freight in 1,750,000
Interest 600,000
Loss on sale of delivery equipment 300,000
Officers' salaries 2,250,000
Property taxes and insurance 400,000
Rent for office space 1,800,000
Sales salaries and commissions 1,400,000
Doubtful accounts (credit granted by finance manager) 1,600,000
Insurance 850,000

About 40% of rental premises is occupied by the sales department.

What total amount should be included in administrative expenses for the current year?

Response: 9,980,000

Feedback:

Correct answer: 8,230,000

Score: 0 out of 1 No

Question 42
Pearl Company reported income before tax of P5,000,000 for the current year. the auditor questioned the following amounts that had been included in income before tax:

Equity in earnings of Cinn Company - 40% interest P 1,600,000

Dividend received from Cinn Company 320,000
Adjustment of profit of prior year for arithmetical error in depreciation
(1,400,000)
Unrealized gain on equity instrument at FVOCI 1,000,000

What amount should be reported as income before tax?

Response: 4,680,000

Feedback:

Correct answer: 5,080,000

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Score: 0 out of 1 No

Question 43
The following are the selected accounts of Cadorna Company as of December 31, 200A:

Acc depreciation - Building P 750,000

Acc depreciation - Furniture 625,000
Accounts receivable 375,000
Accrued interest on notes receivable 15,000
Allowance for doubtful accounts 75,000
Building 7,500,000
Cash in bank 1,000,000
Cash on hand 250,000
Deferred tax asset 145,000
Franchise 688,000
Furniture 2,500,000
Goods in process 590,000
Inventory 480,000
Investment in bonds 1,450,000
Investment in equity 950,000
Land 1,850,000
Notes receivable 500,000
Patent 455,000
Petty cash fund 50,000
Plant expansion fund 3,000,000
Prepaid insurance 110,000
Unused office supplies 35,000
Unused store supplies 65,000
Depreciation - Building 187,500
Depreciation - Furniture 500,000

What is the total current assets?

Response: 2,880,000

Feedback:

Correct answer: 2,805,000

Score: 0 out of 1 No

Question 44
The following are the selected accounts of Leynes Company as of December 31, 200A:

Acc depreciation - Building P 750,000

Acc depreciation - Furniture 625,000
Accounts receivable 375,000
Accrued interest on notes receivable 15,000
Allowance for doubtful accounts 75,000
Building 7,500,000
Cash in bank 1,000,000
Cash on hand 250,000
Deferred tax asset 145,000
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Franchise 688,000
Furniture 2,500,000
Goods in process 590,000
Inventory 480,000
Investment in bonds 1,450,000
Investment in equity 950,000
Land 1,850,000
Notes receivable 500,000
Patent 455,000
Petty cash fund 50,000
Plant expansion fund 3,000,000
Prepaid insurance 110,000
Unused office supplies 35,000
Unused store supplies 65,000
Depreciation - Building 187,500
Depreciation - Furniture 500,000

What is the total noncurrent assets?

Response: 17,163,000

Feedback:

Land P 1,850,000
Building 7,500,000
Furniture 2,500,000
Acc depreciation - Building (750,000)
Acc depreciation - Furniture (625,000)
Investment in equity 950,000
Plant expansion fund 3,000,000
Investment in bonds 1,450,000
Patent 455,000
Franchise 688,000
Deferred tax asset 145,000
Noncurrent assets P 17,163,000

Correct answer: 17,163,000

Score: 1 out of 1 Yes

Question 45
The following are several accounts of the Heathrow Corporation at the end of 200A:

Ordinary shares, P10 par P 47,100,000

Bonds payable (due 200C) 126,500,000
Premium on preference shares 39,600,000
Unappropriated accumulated profits 209,000,000
Appropriated accumulated profits 104,000,000
Premium on bonds payable 12,300,000
Unearned rent 4,800,000
Preference shares, P100 par 65,400,000

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Premium on ordinary shares 53,900,000
Unfunded accrued pension cost 18,400,000
Treasury shares (cost) 7,600,000
Donated capital for land from city of Wien 8,200,000

Heathrow’s statement of financial position at December 31, 200A should report total shareholders’ equity of

Response: 519,600,000

Feedback:

Ordinary shares P 47,100,000

Premium on preference shares 39,600,000
Unappropriated accumulated profits 209,000,000
Appropriated accumulated profits 104,000,000
Preference shares 65,400,000
Premium on ordinary shares 53,900,000
Treasury shares (cost) (7,600,000)
Donated capital for land from city of Wien 8,200,000
Shareholders' Equity P 519,600,000

Correct answer: 519,600,000

Score: 1 out of 1 Yes

Question 46
Natasha Company reported net income of P700,000 for 200B. The entity declared and paid dividends of P150,000 in 200B and P300,000 in 200A.

In the financial statements for the year ended December 31, 200A, the entity reported retained earnings of P1,100,000 on January 1, 200A. The net income for 200A was
P600,000.

In 200B, after the 200A financial statements were approved for issue, the entity discovered an error in the December 31, 200A financial statements.

The effect of the error was a P650,000 overstatement of net income for the year ended December 31, 200A due to underdepreciation.

What amount should be reported as retained earnings on December 31, 200B?

Response: 1,300,000

Feedback:

Retained earnings, January 1, 200A 1,100,000

Net Income - 200A 600,000
Dividends - 200A (300,000)
Overstatement due to underdepreciation (650,000)
Retained earnings, December 31, 200A 750,000
Net Income - 200B 700,000
Dividends - 200B (150,000)
Retained earnings, December 31, 200B 1,300,000

Correct answer: 1,300,000

Score: 1 out of 1 Yes

Question 47
After the issuance of the 200A financial statements, Narra Company discovered a computational error of P150,000 in the calculation of the December 31, 200A inventory.
The error resulted in a P150,000 overstatement in the cost of goods sold for the year ended December 31, 200A.

In October 200B, the entity paid the amount of P500,000 in settlement of litigation instituted against it during 200A. No provision was recorded in 200A when the award
was deemed probable at the settlement amount.

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In the 200B financial statements, what is the pretax adjustment to retained earnings on January 1, 200B?

Response: 150,000 credit

Feedback:

Correct answer: 350,000 debit

Score: 0 out of 1 No

Question 48
The following changes in Patriot Corporation's account balances occurred during 200A:

Increase
Assets P267,000
Liabilities 81,000
Share Capital 198,000

Patriot paid dividends of P39,000 during the year. There were no changes in Retained Earnings for 200A except dividends and net income. What was Patriot's net income for
200A?

Response: 39,000

Feedback:

Correct answer: 27,000

Score: 0 out of 1 No

Question 49
Pink Company is completing the preparation of the draft financial statements for the year ended December 31, 200A. The financial statements are authorized for issue on
March 31, 200B. On January 31, 200B, a dividend of P2,000,000 was declared and a contractual profit share payment of P200,000 was made, both based on the profit for
the year ended December 31, 200A. On February 15, 200B, a customer went into liquidation having owed the entity P900,000 for the past 5 months. No allowance had
been made against this debt in the draft financial statements. On March 1, 200B, a manufacturing plant was destroyed by fire resulting in a financial loss of 2,500,000.

What total amount should be recognized in profit or loss for the year ended December 31, 200A to reflect adjusting events after the end of reporting period?

Response: 1,100,000

Feedback:

Contractual profit share payment P 200,000

Customer that went into liquidation 900,000
Adjusting amount P 1,100,000

Correct answer: 1,100,000

Score: 1 out of 1 Yes

Question 50
During the year ended December 31, 200B, Samar Company revealed the following events:

• A counting error relating to inventory on December 31, 200A was discovered. This required a reduction in the carrying amount of inventory on that date of P280,000.

• The provision for uncollectible accounts receivable on December 31, 200A was P300,000, During 200B, an amount of P50,000 was written off the December 31, 200A
accounts receivable.

What adjustment is required to restate retained earnings on January 1, 200B?

Response: 280,000

Feedback:

Overstatement of December 31, 200B ending inventory 280,000

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No need to adjust the account written off to the beginning retained earnings as it is covered by a provision for bad debts.

Correct answer: 280,000

Score: 1 out of 1 Yes

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