PRACTICAL ACCOUNTING 1

1. The company's accounting records show that changes costs by 50% when tendering for support contracts. The
in ledger account balances occurred during 2012 as revenue Zen should recognize in its financial year ended
follows: 31 December 2011 is
Increase Decrease a. P620,000 c. P710,000
Cash P800,000 b. P800,000 d. Nil
Accounts receivable (net) P40,000
Inventories 300,000 5. The Tiger Corporation included the following in its
Equipment (net) 360,000 unadjusted trial balance as of December 31, 2011:
Building (net) 600,000 Inventory, 12/31/10 P 19,450,000
Loans payable 1,000,000 Purchases 127,850,000
Accounts payable 300,000
Share capital, P10 par 600,000 Additional information:
Share premium 200,000  The inventory at December 31, 2011 was counted
Retained earnings ? at a cost of P8.5 million. This includes P500,000 of
slow moving inventory that is expected to be sold
Assuming that there were no transactions affecting for a net amount of P300,000.
retained earnings other than the P250,000 cash  Sales include P8 million for goods sold in December
dividends, compute the net income for 2012. 2011 for cash to Beer Finance Company. The cost
a. P770,000 c. P2,170,000 of these goods was P6 million. Beer Finance
b. P520,000 d. P 270,000 Company has the option to require Tiger to
repurchase these goods within one month of year-
2. Plum Corporation has the following transactions. end at their original selling price plus a facilitating
a. Plum sells P50,000 of goods to a customer, FOB fee of P250,000.
shipping point on December 31, 2011.
The cost of sales for the year ended December 31,
b. Plum sells three pieces of equipment on a contract
2011 is
over a three year period. The sales price of each
a. P138,800,000 c. P132,800,000
piece of equipment is P100,000. Delivery of each
b. P133,000,000 d. P139,000,000
piece of equipment on February 10 of each year. In
2011, the customer paid a P200,000 down
Use the following information for the next two questions.
payment, and paid P50,000 per year in 2012 and
2013. Collectibility is reasonably assured. Maximilian uses the perpetual inventory system.
c. On June 1, 2011 Plum signs a contract for P200,000 Maximilian's inventory transactions for the month of
for goods to be sold on account. Payment is to be
August were as follows:
made in two installments of P100,000 each on
December 1, 2012 and 2013. The goods are Total cost
delivered on October 10, 2011. Collection is No. Unit cost
reasonably assured, and the goods may not be 01 Aug. Beg. inventory 20 P4.00 P80.00
returned. 07 Aug. Purchases 10 4.20 42.00
d. Plum sells goods to a customer on July 1, 2011, for 10 Aug. Purchases 20 4.30 86.00
P500,000. If the customer does not sell the goods 12 Aug. Sales 15 ? ?
to retail customers by December 31, 2012, the 16 Aug. Purchases 20 4.60 92
goods can be returned to Plum. The customer sells 20 Aug. Sales 40 ? ?
the goods to retail customers on October 1, 2012. 28 Aug. Sales returns 3 ? ?
The total revenue to be recognized in 2011 is
a. P550,000 c. P350,000 6. Using the information, assume that the Maximilian uses
b. P450,000 d. P150,000 the FIFO cost flow method and that the sales returns
relate to the 20 August sales. The sales return should
3. Pious sells goods supplied by Devout. The goods are be costed back into inventory at what unit cost?
classed as A grade (perfect quality) or B grade, having a. P4.00 c. P4.07
slight faults. Pious sells the A grade goods acting as an b. P4.30 d. P4.60
agent for Devout at a fixed price calculated to yield a
gross profit margin of 50%. Pious receives a 7. Assuming that Maximilian uses the weighted average
commission of 12.5% of the sales it achieves for these cost flow method, the 12 August sales should be
goods. The arrangement for B grade goods is that they costed at what unit cost?
are sold by Devout to Pious and Pious sells them at a a. P4.16 c. P4.07
gross profit margin of 25%. The following information b. P4.30 d. P4.60
has been obtained from Pious' financial records:
A grade B grade 8. On January 1, 2011, Horse Corp. signed a three-year
Inventory held on noncancelable purchase contract, which allows Horse
premises, 1/1/11 P 2,400,000 P1,000,000 to purchase up to 500,000 units of a computer part
Goods from Devout annually from Dark Supply Co. at P10 per unit and
year to 12/31/11 18,000,000 8,800,000 guarantees a minimum annual purchase of 100,000
Inventory held on units. During 2011, the part unexpectedly became
premises, 12/31/11 2,000,000 1,250,000 obsolete. Horse had 250,000 units of this inventory at
December 31, 2011, and believes these parts can be
How much should be reported as sales revenue in sold as scrap for P2 per unit. What amount of probable
Pious’ income statement for the year ended December loss from the purchase commitment should Horse
31, 2011? report in its 2011 profit or loss?
a. P48,200,000 c. P36,800,000 a. P2,400,000 c. P1,600,000
b. P26,950,000 d. P11,400,000 b. P2,000,000 d. P 800,000
4. On 1 July 2011, Zen Company handed over to a client a
new computer system. The contract price for the supply
9. On August 15, 2012, a typhoon damaged a warehouse
of the system and after-sales support for 12 months was
of Parlophone Merchandise Company. The entire
P800,000. Zen estimates the cost of the after-sales
inventory and many accounting records stored in the
support at P120,000 and it normally marks up such
warehouse were completely destroyed. Although the

Page 1 of 10
 inventory was not insured, a portion could be Architect's fees 31,700
sold for scrap. Through the use of the Legal fees - title investigation 4,100
remaining records, the following data are Construction costs 950,000
assembled: Imputed interest based on stock
Inventory, January 1 P 375,000 financing 14,000
Purchases, January 1-August 15 1,385,000 Landfill for building site 19,300
Cash sales, January 1-August 15 225,000 Clearing of trees from building site 9,600
Collection of accounts, Jan. 1-Aug. 15 2,115,000 Temporary buildings used for
Accounts Receivable, January 1 175,000 construction activities 29,000
Accounts Receivable, August 15 265,000 Land survey 4,000
Salvage value of inventory 5,000 Excavation for basement 13,200
Gross profit percentage on sales Additional information:
 Salvage materials from demolition sold for
Compute the inventory loss as a result of the P1,800
typhoon.  Timber sold for P3,300
a. P107,600 c.
P102,600 Determine the cost of the land.
b. P104,200 d. a. P366,600 c.
P255,600 P353,600
b. P347,300 d.
10. A public limited company, Gatas Pure, P372,900
produces milk on its farms. It produces 30% of
the country’s milk that it consumed. Gatas 12. San Antonio Company is engaged in the
owns several farms and has a stock of 210,000 operation of public highways and skyways in
cows and 105,000 heifers. the Philippines. On November 2, 2010, a
catastrophe devastated the some of the
Additional information: company's operated highways and skyways.
The company suffered P5.6 billion loss due to
 At December 31, 2011, the herds are:
catastrophe. On January 1, 2011, the
a) 210,000 cows (3 years old), all Philippine government decided to compensate
purchased on or before December 31, the company for the incurred loss. The
2010 government loaned P5 billion at 5% per annum
b) 75,000 heifers, average age 1.5 years, with maturity period of 5 years. The current
purchased on July 1, 2011 market rate for similar type of loan after
c) 30,000 heifers, average age 2 years, considering credit risks attached was 10%.
purchased on December 31, 2010 The conditions stipulated on the loan
 No animals were born or sold in the year. agreement provide that the proceeds will be
used for reconstruction of the skyways and
 The unit fair values less estimated costs to highways.
sell were
On January 1, 2011, how much should the
1 - year old animal at Dec. 31, 2011 P32 company recognize as government grant
2 - year old animal at Dec. 31, 2011 (round off to nearest million)?
1.5 - year old animal at Dec. 31, 2011 a. Nil c. P4,052
3 - year old animal at Dec. 31, 2011 million
1 - year old animal at Dec. 31, 2011 b. P302 million d. P 948
and July 1, 2011 million
2 - year old animal at January 1, 2011
The increase in fair value of biological assets in 13. The Decca Company purchased a machine for
2011 due to physical change is P360,000 on 1 January 2012 and received a
a. P1,500,000 c. government grant of P50,000 towards the
P1,260,000 capital cost. Company policy is to treat the
b. P1,470,000 d. grant as a reduction in the cost of the asset.
P1,740,000 The machine was to be depreciated on a
straight-line basis over 8 years and was
11. On February 1, 2010, Baby Corporation estimated to have a residual value of P5,000 at
purchased a parcel of land as a factory site for the end of this period.
P320,000. An old building on the property was Under PAS20 Government grants and
demolished and construction begun on a new government assistance, what should be the
warehouse that was completed April 15, 2011. carrying amount of the machine at 31
Costs incurred on the construction project are December 2012?
listed below. a. P315,625 c.
Demolition of old building P 21,000 P266,875

Page 2 of 10
 b. P271,250 d.
P271,875
14. On January 1, 2011, LAL Corp. began
construction of homes for those families that
were hit by the tsunami disaster and were
homeless. The construction is expected to
take 3.5 years. It is being financed by issuance
of bonds for P7 million at 12% per annum. The
bonds were issued at the beginning of the
construction. The bonds carry a 1.5% issuance
cost. The project is also financed by issuance
of P3 million share capital with a 14% cost of
capital. The borrowing costs to be capitalized
in 2011 is (Use straight line amortization
method)
a. P870,000 c.
P1,290,000
b. P840,000 d.
P1,260,000
15. Aries Company started construction on a
building on January 1 of this year and
completed construction on December 31 of the
same year. Aries had only two interest notes
outstanding during the year, and both of these
notes were outstanding for all 12 months of the
year. The following information is available:
Average accumulated expenditures P250,0001,875,000 tons. At the beginning of 2011,
Ending balance in construction in
progress before capitalization of
interest
6 percent note incurred specifically for
the project
9 percent long-term note
What amount of interest should Aries capitalize
for the current year?
a. P27,900 c. P18,000
b. P22,500 d.
P15,000
16. Pantabangan Company takes a full year’s
depreciation in the year of an assets
acquisition, and no depreciation in the year of
disposition. Data relating to one depreciable
asset acquired in 2010, with residual value of
P900,000 and estimated useful life of 8 years,
at December 31, 2011 are:
Cost P9,900,000
Accumulated depreciation 3,750,000
Using the same depreciation method in 2010
and 2011, how much depreciation should
Pantabangan record in 2012 for this asset?
a. P1,125,000 c.
P1,650,000
b. P1,250,000 d.
P1,500,000
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17. A machine has a cost of P60,000, has an
annual depreciation of P12,000, and has
accumulated depreciation of P30,000 on
December 31, 2010. On April 1, 2011, when
the machine has a fair value of P24,000, it is
exchanged for a similar machine with a fair
value of P72,000 and the proper amount of
cash is paid. The loss to be recognized on
exchange is
a. P6,000 c. P21,000
b. P3,000 d. P 0
18. On January 15, 2009, Alaturka Company paid
P5,400,000 for property containing natural
resource of 2,000,000 tons of ore. The entity is
legally required to restore the site after mining
operations. The estimated cost of restoring the
land after the resource is extracted is P450,000
and the land will have a value of P650,000
after it is restored for suitable use. Tunnels,
bunk houses and other fixed installations are
constructed at a cost of P8,000,000 and such
expenditures are charged to mine
improvements.
Operations began on January 1, 2010 and
resources removed totaled 600,000 tons.
During 2011, a discovery was made indicating
that available resource after 2011 will total
additional bunk houses were constructed in the
amount of P770,000. In 2011, only 400,000
360,000tons were mined because of a strike.
150,000Alaturka Company should report depletion for
500,0002011 at
a. P1,560,000 c.
P640,000
b. P1,040,000 d.
P776,000
19. Dingalan Corporation’s investment properties
included the following items:
 Land held as potential plant site,
P5,000,000.
 A vacant building to be leased out under an
operating lease, P20,000,000.
 Property held for sale in the ordinary
course of its business, P30,000,000.
 Property held for administrative purposes,
P10,000,000.
 A hotel owned and managed, P50,000,000.
 A building being leased out to a subsidiary,
P8,000,000.
 A building, which cannot be sold or leased
out separately, used in the production of
goods and around 2% of the area being
leased out to canteen operators,
P2,000,000.
How much will be reported as investment
properties in Dingalan Corporation’s separate
financial statements?
 a. P20,000,000 c.
P25,000,000
b. P28,000,000 d.
P33,000,000
20. During 2011, Broca Co, had the following
transactions:
 On January 2, Broca purchased the net
assets of Amp Co. for P360,000. The fair
value of Amp's identifiable net assets was
P172,000, Broca believes that, due to the
popularity of Amp’s consumer products,
the life of the resulting goodwill is
unlimited.
 On February 1, Broca purchased a
franchise to operate a ferry service from
the state government for P60,000 and an
annual fee of 1% of ferry revenues. The
franchise expires after five years. Broca
received P20,000 of ferry revenues in
2011.
 On April 5, Broca was granted a patent that
had been applied for by Amp. During
2011, Broca incurred legal costs of P51,000
to register the patent and an additional
P85,000 to successfully prosecute a patent
infringement suit against a competitor.
Broca estimates the patent's economic life
to be ten years.
Broca has determined that it is appropriate to
amortize these intangibles on the straight-line
basis over the maximum period permitted by
generally accepted accounting principles,
taking a full year's amortization in the year of
acquisition.
Calculate the total expense to be recognized in
2011 income statement resulting from the
foregoing intangible assets.
a. P102,300 c. P25,600
b. P111,700 d.
P35,200
21. The following is information related to the
development of a particular software package
in the first year of product life:
Development costs prior to reaching
technological feasibility P 4,000a. P267,322
Development costs after reaching
technological feasibility
Costs of duplicating salable product
Estimated revenues over 3 year total
24. On January 1, 2009, Klatten Corporation
300,000
product life
Revenue in the first year of product life 150,000Corporation. New Corporation has a number of
*This represents the entire inventory
expected to be sold over the 3-year period.
What is the total expense related to this
software package to be recognized in its first-
year?
a. P16,000 c. P11,500
b. P12,000 d. P P2,400,000. The goodwill was allocated to
7,000
Page 4 of 10
22. Sacramento has just acquired the net assets of
Kings for P100,000. In acquiring Kings, the
owners of Sacramento felt that Kings had
unrecorded goodwill. They decided to
capitalize the estimated annual superior
earnings of Kings at 20% to determine the
amount of goodwill. The computation resulted
in an estimated goodwill of P10,000. A rate of
10% on net assets before recognition of
goodwill was used to determine normal annual
earnings of Kings, because it is the rate that is
earned on net assets in the industry in which
Kings operates. All other assets of Kings were
properly recorded. The estimated annual
earnings of Kings is
a. P10,000 c. P 2,000
b. P 9,000 d.
P11,000
23. On January 1, 2008, the Twine Corporation
purchased machinery for P650,000 which it
installed in a rented factory. It is depreciating
the machinery over 12 years by the straight-
line method to a residual value of P50,000.
Late in 2012, because of increasing
competition in the industry, the company
believes that its asset may be impaired and will
have a remaining useful life of 5 years, over
which it estimates the asset will produce total
cash inflows of P1,000,000 and will incur total
cash outflows of P825,000. The cash flows are
independent of the company's other activities
and will occur evenly each year. The company
is not able to determine the fair value based on
a current selling price of the machinery. The
company's discount rate is 10%. The
impairment loss to be recognized in 2012 profit
or loss is
c.
P246,490
b. P317,322 d. P
0
9,000*
acquired all the assets and liabilities of New
operating divisions, including one whose major
industry is the manufacture of toy train,
particularly those having historical significance.
The toy trains division is regarded as a cash-
generating unit. In paying P20 million for the
net assets of New Corporation, Klatten
calculated that it had acquired goodwill of
each of the divisions, and the assets and
 liabilities acquired are measured at fair value
at acquisition date.
At December 31, 2011, the carrying amounts
of the assets of the toy train division were:
Factory P2,500,000
Inventory 1,500,000
Brand – “Choochoo” 500,000
Goodwill 500,000
Total P5,000,000
There is a declining interest in toy trains
because of the aggressive marketing of
computer-based toys, so the management of
Klatten measured the value in use of the toy
train division at December 31, 2011,
determining it to be P4,230,000.
The journal entry to record the impairment loss
includes a credit to
a. Goodwill of P770,000.
b. Brand-“Choochoo” of P270,000.
c. Accumulated depreciation-Factory
P150,000.
d. Inventory of P81,000.
25. The following pertains to Megatron, Inc. on
December 31 of the current year: Checking
account balance P925,000; an overdraft in
special checking account at same bank as
normal checking account of P17,000;
certificate of deposit P400,000; cash held in a
bond sinking fund P200,000; postdated check
from customer P11,000; certified check from
customer P9,800; NSF check received from
customer P15,000; cash advance to subsidiary
of P300,000; postage stamps on hand P620;
utility deposit paid to electric company P8,000;
currency and coins in a petty cash fund (the
company has not replenished the fund to the
imprest amount of P5,000) P800. The correct
amount that should be reported as cash is
a. P908,800 c.
P1,318,600
b. P918,600 d.
P1,322,800
26. On January 1, 2007, Hanoi Company sold a
machine with a carrying amount of P300,000
and accepted in exchange a promissory note
with a face value of P500,000, a due date of
December 31, 2016, and a stated rate of 4%,
with interest receivable at the end of each
year. The fair value of the machine is not
readily determinable and the note is not readily
marketable. Under the circumstances, the
note is considered to have an appropriate
imputed rate of interest of 8%.
The amortized cost of the note receivable as of
December 31, 2011 is
Page 5 of 10
a. P500,000 c.
P407,547
b. P365,802 d.
P420,154
27. On November 30, 2012, accounts receivable in
the amount of P900,000 were assigned to
Kaban Finance Co. by Kalan as security for a
loan of P750,000. Kaban charged a 3%
commission on the accounts; the interest rate
on the note is 12%. During the December
2012, Kalan collected P350,000 on assigned
accounts after deducting P560 of discounts.
Kalan wrote off a P530 assigned account. On
December 31, 2012, Kalan remitted to Kaban
the amount collected plus one month's interest
on the note.
How much is Kalan’s equity in the assigned
accounts receivable as of December 31, 2012?
a. P149,470 c.
P141,410
b. P141,970 d.
P148,910
28. On December 28, 2011, Cross Company
commits itself to purchase a financial asset to
be classified as held to maturity for
P1,000,000, its fair value on commitment
(trade) date. This security has a fair value of
P1,002,000 and P1,005,000 on December 31,
2011 (Cross' financial year-end), and January 5,
2012 (settlement date), respectively. If Cross
applies the settlement date accounting method
to account for regular-way purchases of its
securities, the financial asset should be
recognized on January 5, 2012 at
a. P1,000,000 c.
P1,005,000
b. P1,002,000 d. P
0
29. On January 1, 2011, YOU TOO Corporation
purchased P1,000,000 10% bonds designated
as held-to-maturity. The bonds were purchased
to yield 12%. Interest is payable annually
every December 31. The bonds mature on
December 31, 2015. On December 31, 2011
the bonds were selling at 99. On December
31, 2012, YOU TOO sold P500,000 face value
bonds at 101. The bonds were selling at 103
on December 31, 2013.
How much is the realized gain on sale of the
investment in bonds in 2012?
a. P41,060 c. P35,387
b. P29,010 d.
P10,000
30. Edwards Company began business in February
of 2011. During the year, Edwards purchased
the three trading securities listed below. On its
December 31, 2011, balance sheet, Edwards
appropriately reported a P4,000 credit balance
 in its Market Adjustment--Trading Securities on the basis of 50 shares for each P1,000 bond at
account. There was no change during 2012 in the option of the holder. The interest rate for an
the composition of Edward's portfolio of trading equivalent bond without the conversion rights
securities. Pertinent data are as follows: would have been 10%.
Fair Value 33. The issuance of convertible bonds on January
Security Cost 12/31/12 1, 2011 increased the entity’s equity by
A P120,000 P126,000 a. P175,518 c.
B 90,000 80,000 P380,418
C 160,000 157,000 b. P 73,068 d. P
P370,000 P363,000 0
What amount of loss on these securities should
be included in Edward's income statement for 34. The carrying amount of the bonds payable as
the year ended December 31, 2012? of December 31, 2011 is
a. P11,000 c. P3,000 a. P3,000,000 c.
b. P 7,000 d. P0 P3,039,625
b. P2,701,540 d.
31. On July 1, 2008, Cleopatra Corporation P2,926,930
acquired 25% of the shares of Marcus, Inc. for
P1,000,000. At that date, the equity of Marcus 35. On July 1, 2011, Hawkeye Aviation leased two
was P4,000,000, with all the identifiable assets helicopters from Honnicutt Aircraft for an initial
and liabilities being measured at amounts period of 12 months with a provision for a
equal to fair value. The table below shows the continuation on a month-to-month basis. The
profits and losses made by Marcus during 2008 lease is properly classified as an operating
to 2012: lease. Lease payments are to be made as
follows:
Year Profit (Loss)
2008 P 200,000 First two months P15,000 per month
2009 (2,000,000) Second three months 12,000 per month
2010 (2,500,000) Third three months 10,000 per month
2011 160,000 Last four months 8,000 per month
2012 300,000 After the first year, the rent continues at
P6,000 per month. Hawkeye Aviation should
What is the carrying amount of the investment
report rent expense for year ended December
in Marcus, Inc. as of December 31, 2012?
31, 2011 of
a. P40,000 c. P75,000
a. P64,000 c. P72,000
b. P15,000 d. P
b. P76,000 d.
0
P36,000
32. In 2006, Chain, Inc. purchased a P1 million life
36. On January 1, 2011, Quezon Company entered
insurance policy on its president, of which
into a lease agreement with Batangas
Chain is the beneficiary. Information regarding
Company for a machine which was carried on
the policy for the year ended December 31,
its accounting records at P3,000,000. Total
2011 follows:
payments under the lease aggregate
Cash surrender value, 1/1/11 P87,000P5,000,000 of which P3,380,000 represents the
Cash surrender value, 12/31/11 108,000fair value and cost of the machine to Batangas.
Annual advance premium paid 1/1/11 40,000Payments of P500,000 are due on January 1
each year starting January 1, 2011. The
During 2011, dividends of P6,000 were applied interest rate of 10% which was stipulated in
to increase the cash surrender value of the the lease is considered fair and adequate
policy. What amount should Chain report as compensation to Quezon for the use of its
life insurance expense for 2011? funds. Batangas expects the machine to have
a. P40,000 c. P19,000 a 10-year life, no residual value and be
b. P21,000 d. depreciated on a straight line basis. The lease
P13,000 is appropriately classified as a sales type lease
by Quezon. What should be the total income
Use the following information for the next two before tax that is derived by Quezon from this
questions: (Round-off present value factors to four lease for the year ended December 31, 2011?
decimal places) a. P668,000 c.
P338,000
On January 1, 2011, Jumbo Corporation issued a P3 b. P288,000 d.
million 6% convertible bonds at par. The bonds are P718,000
redeemable at a premium of 10% on December 31,
2014 or it may be converted into ordinary shares

Page 6 of 10
37. Presented below is pension information related determined that no valuation allowance was
to Enrique, Inc. for the year 2011: needed. What amount of deferred tax asset
should West report in its December 31, 2011
Service cost P96,000
statement of financial position?
Interest on projected benefit obligation 72,000 a. P5,400 c. P10,800
Interest on vested benefits 32,000 b. P7,200 d.
Amortization of prior service cost due to P14,400
increase in benefits 16,000
Expected return on plan assets 41. The December 31, 2011 balance sheet of
24,000
Actual return on plan assets 30,000 Camille Corp. showed shareholders’ equity of
P448,700. Transactions during 2011 which
Contributions to the plan 100,000 affected the shareholders’ equity were: (1) an
Benefits paid 120,000 adjustment to Retained Earnings for an
The amount of pension expense to be reported overstatement of depreciation in 2010
for 2011 is P10,000; (2) gain on the sale of treasury
a. P144,000 b. shares, P9,000; (3) declared dividends of
P192,000 P60,000 of which P40,000 were paid during the
b. P160,000 c. year; and (4) net income after tax of P75,500.
P216,000 The share capital balance of P300,000 remain
unchanged during the year.
38. On January 2, 2011, Arjam Co. established a The retained earnings balance on January 1,
noncontributory defined benefit plan covering 2011 was
all employees and contributed P450,000 to the a. P134,200 c.
plan. At December 31, 2011, Arjam P123,200
determined that the 2011 service and interest b. P132,300 d.
costs on the plan were P620,000. The P114,200
expected and the actual rate of return on plan
assets for 2011 was 10%. There are no other 42. At December 31, 2010, Rama Corp. had 20,000
components of Arjam's pension expense. What shares of P1 par value treasury shares that had
amount should Arjam report in its December been acquired in 2010 at P12 per share. In
31, 2011 statement of financial position as May 2011, Rama issued 15,000 of these
accrued pension expense? treasury shares at P10 per share. At December
a. P575,000 c. 31, 2011, what amount should Rama show in
P125,000 notes to financial statements as a restriction of
b. P170,000 d. P retained earnings as a result of its treasury
80,000 shares transactions?
a. P 5,000 c. P
39. Dunn Co.’s 2011 income statement reported 90,000
P90,000 income before provision for income b. P60,000 d.
taxes. To compute the provision for current P240,000
income tax, the following 2011 data are
provided: 43. Mekeni Corp. has the following classes of
Rent received in advance P16,000shares outstanding at December 31, 2011:
Income from exempt municipal bonds 20,000 Ordinary share capital, P100 par P360,000
Depreciation deducted for income tax 6% Preference share capital, P100 par,
purposes in excess of depreciation cumulative and fully participating 120,000
reported for financial statement purposes 10,000
Enacted corporate income tax rate Dividends on preference shares are in arrears
for 2009 and 2010.
What amount of current income tax liability
should be reported in Dunn’s December 31, If P57,600 are to be distributed as dividends,
2011, balance sheet? the total dividends to be given on preference
a. P18,000 c. P25,800 shareholders would be
b. P22,800 d. a. P32,400 c. P26,400
P28,800 b. P30,000 d.
P25,200
40. West Corporation leased a building and
received the P36,000 annual rental payment on 44. The shareholders’ equity account balances for
June 15, 2011. The beginning of the lease was the Unforgiven, Inc. on December 31, 2011
July 1, 2011. Rental income is taxable when follows:
received. West’s tax rates are 30% for 2011 12% Preference share capital, P100
and 40% thereafter. West had no other par, 20,000 shares P2,000,000
permanent or temporary differences. West

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 Ordinary share capital, P25 par,  Building costing P600,000 and having a
145,000 shares 3,625,000 carrying amount of P350,000 was sold for
Subscribed share capital, net of P350,000.
P500,000 subscriptions receivable 1,000,000 Equipment costing P110,000 was acquired
Share premium 500,000 through issuance of long-term debt.
Retained earnings 695,000 A long-term investment was sold for
Treasury shares, 5,000 shares, at cost 400,000 P135,000. There were no other
Preference shares have a liquidation value of transactions affecting long-term
P110; shares are cumulative, with dividends in investments.
arrears for 3 years including the current year  10,000 ordinary shares were issued for P22
and fully payable in the event of liquidation. a share.
The book value of an ordinary share is In Marylet’s 2011 statement of cash flows, net
a. P22.50 c. P27.78 cash provided by operating activities was
b. P25.00 d. P29.00 a. P1,160.000 c. P
920,000
b. P1,040,000 d. P
45. Ket Company’s capital structure was as follows: 705,000
2010
Outstanding shares:
Ordinary 1,000,000 1,000,000
Convertible preference 100,000 100,000
10% convertible bonds
payable P30,000,000 P30,000,000

During 2011, Ket paid dividends of P15 per

share on its preference shares. The preference
shares are convertible into 150,000 ordinary
shares and the 10% bonds are convertible into
300,000 ordinary shares. Profit for 2011 was
P10,000,000. The income tax rate is 35%. The
diluted earnings per share for 2011 should be
a. P8.50 c. P8.24
b. P8.04 d. P7.50

46. The differences in Marylet Inc.'s statement of

financial position accounts at December 31,
2011 and 2010, are presented below.
Increase
(Decrease)
Assets
Cash and cash equivalents P 120,000
Available-for-sale securities 300,000
Accounts receivable, net
Inventory 80,000
Long-term investments (100,000)
Plant assets 700,000
Accumulated depreciation --
P1,100,000
Liabilities and Stockholders' Equity
Accounts payable and accrued
liabilities P (5,000)
Dividends payable 160,000
Short-term bank debt 325,000
Long-term debt 110,000
Share capital, P10 par 100,000
Share premium 120,000
Retained earnings 290,000
P1,100,000
The following additional information relates to
2011:
 Net income was P790,000.
 Cash dividends of P500,000 were declared.

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47. The equity of The Kaiaho Company is traded on 49. The Philippians Company's profit before tax for
a recognized stock exchange. Kaiaho regularly the six months to 30 September 2011 was P5
reports the financial results of five different million. However, the business is seasonal and
business units to its chief operating decision profit before tax for the six months to 31 March
maker. The relevant revenues for the year 2012 is almost certain to be P9 million. Profit
ended 31 December 2011 for these five before tax equals taxable profit for this company.
operations, as a percentage of total external and Philippians operates in a country where income
internal revenue, were as follows: tax on companies is at a rate of 30% if annual
Business profits are below P11 million and a rate of 35%
operation % internal % external % total where annual profits exceed P11 million. These
1 3 35 38 tax rates apply to the entire profit for the year.
2 10 14 24 Under PAS34 Interim financial reporting, what
3 15 5 20 should be the income tax expense in Philippians'
4 0 9 9 interim financial statements for the half year to
5 0 9 9 30 September 2011?
28 72 100 a. P1.75 million c. P1.50
million
In accordance with PFRS8 Operating b. P2.10 million d. P2.45
segments, the reportable segments of Kaiaho million
are
a. 1 and 2 only c. 1,2,3 and 4 50. The following information pertains to Furama
only Company for 2011:
b. 1,2 and 3 only d. 1,2,3,4 a. The company had net monetary items of
and 5 P1,600,000 on January 1.
b. Sales of P6,000,000 and purchases of
48. The Ephesians Company accounts for non- P2,400,000 were made evenly throughout
current assets using the cost model. On 30 the year
October 2011 Ephesians classified a non- c. Operating expenses of P1,800,000 and
current asset as held for sale in accordance with income tax expense of P1,200,000 were
PFRS5 Non-current assets held for sale and incurred evenly throughout the year
discontinued operations. At that date the d. Cash dividends of P400,000 were declared
asset's carrying amount was P15,000,000, its on November 30 and paid on December
fair value was estimated at P11,000,000 and 31. Selected values of the CPI-U during
the costs to sell at P1,500,000. On 20 November 2011 appear below:
2011 the asset was sold for net proceeds of
Jan. 1 110.0
P9,200,000.
Average for year 121.0
In accordance with PFRS5, what amount should Nov. 30 131.0
be included as a loss on disposal in Ephesians 's Dec. 31 133.1
statement of comprehensive income for the
The purchasing power loss for 2011 expressed
year ended 31 December 2011?
in constant year-end pesos is
a. Nil c.
a. P 53,588 c.
P5,800,000
P396,000
b. P4,300,000 d. P
b. P360,000 d.
300,000
P389,588

 - end of examination - 

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