BS Accountancy ISAP Chapter

Practical Accounting 1 Reviewer

1. The following data pertain to Angat Corporation on December 31, 2005:

Current account at Metrobank P2,000,000

Current account at BPI (100,000)
Payroll account 500,000
Foreign bank account – restricted (in equivalent pesos) 1,000,000
Postage stamps 1,000
Employee’s post dated check 4,000
IOU from controller’s sister 10,000
Credit memo from a vendor for a purchase return 20,000
Traveler’s check 50,000
Not-sufficient-funds check 15,000
Money order 30,000
Petty cash fund (P4,000 in currency and expense receipts for P6,000) 10,000
Treasury bills, due 3/31/06 (purchased 12/31/05) 200,000
Treasury bills, due 1/31/06 (purchased 1/1/05) 300,000
Based on the above information, compute for the cash and cash equivalent that would be reported on the December 31, 2005 balance sheet.
a. P2,784,000 c. P2,790,000
b. P3,084,000 d. P2,704,000
2. The following data pertain to Balagtas Corporation on December 31, 2005:
Checkbook balance P10,000,000
Bank statement balance 15,000,000
Check drawn on Balagtas’ account, payable to supplier, dated and recorded on Dec. 31, 2005, but not mailed
until Jan. 15, 2006 3,000,000
Cash in sinking fund 4,000,000
Money market, three months due January 31, 2006 5,000,000
On December 31, 2005, how much should be reported as “cash and cash equivalents”?
a. P13,000,000 c. P18,000,000
b. P12,000,000 d. P17,000,000

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3. On December 31, 2005, Baliuag Company had the following cash balances:

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Cash in bank P15,000,000
Petty cash fund (all funds were reimbursed on December 31, 2005) 50,000

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Time deposit eH w 5,000,000
Saving deposit 2,000,000
Cash in bank includes P500,000 of compensating balance against short term borrowing arrangement at December 31, 2005. The compensating balance is legally

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restricted as to withdrawal by Baliuag. A check of P300,000 dated January 15, 2006 in payment of accounts payable was recorded and mailed on December 31,
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2005. In the current assets section of the December 31, 2005 balance sheet, what amount should be reported as “cash and cash equivalents”?
1. P21,850,000 c. P21,800,000
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2. P16,850,000 d. P14,850,000
4. Bocaue Company had the following account balances on December 31, 2005.
Petty cash fund P50,000
Cash in bank – current account 10,000,000
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Cash in bank – payroll account 2,000,000

Cash on hand 500,000
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Cash in bank – restricted account for plant additions, expected to

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be disbursed in 2006 4,000,000

Treasury bills, due February 15, 2006 3,000,000
The petty cash fund includes unreplenished December 2005 petty cash expense vouchers of P20,000 and employee IOUs of P10,000. The cash on hand includes
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a P100,000 check payable to Bocaue dated January 15, 2006. What should be reported as “cash and cash equivalents” on December 31, 2005?
a. P12,420,000 c. P15,420,000
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b. P19,420,000 d. P15,450,000
5. Bulacan Corporation's checkbook balance on December 31, 2005, was P800,000. In addition, Bulacan held the following items in its safe on December 31:
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Check payable to Bulacan Corporation, dated January 2, 2006, not included in December 31 checkbook balance
P200,000
Check payable to Bulacan Corporation, deposited December 20, and included in December 31 checkbook balance,
but returned by bank on December 30, stamped "NSF." The check was redeposited January 2, 2006, and
cleared January 7
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40,000
Post-dated checks 15,000
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Check drawn on Bulacan Corporation's account, payable to a vendor, dated and recorded December 31, but not
mailed until January 15, 2006 100,000
The proper amount to be shown as cash on Bulacan's balance sheet at December 31, 2005, is
a. P760,000 c. P860,000
b. P800,000 d. P975,000
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6. You noted the following composition of Hagonoy Company’s “cash account” as of December 31, 2005:
Demand deposit account P2,000,000
Time deposit – 30 days 1,000,000
NSF check of customer 40,000
Money market placement (due June 30, 2006) 1,500,000
Savings deposit in a closed bank 100,000
IOU from employee 20,000
Pension fund 3,000,000
Petty cash fund 10,000
Customer check dated January 1, 2006 50,000
Customer check outstanding for 18 months 40,000
Total P7,760,000
Additional information follows:
1. Check of P200,000 in payment of accounts payable was recorded on December 31, 2005 but mailed to suppliers on January 5, 2006.
2. Check of P100,000 dated January 15, 2006 in payment of accounts payable was recorded and mailed on December 31, 2005.
3. The company uses the calendar year. The cash receipts journal was held open until January 15, 2006, during which time P400,000 was collected and
recorded on December 31, 2005.
The cash and cash equivalents to be shown on the December 31, 2005 balance sheet is
a. P3,310,000 c. P1,910,000
b. P2,910,000 d. P4,410,000
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 7. The following information pertains to Bustos Company as of December 31, 2005:
Cash balance per general ledger P15,000,000
Cash balance per bank statement 14,550,000
Checks outstanding (including certified check of P100,000) 1,000,000
Bank service charge shown in December bank statement 50,000
Error made by Bustos in recording a check that cleared the bank in
December (check was drawn in December for P500,000
but recorded at P700,000) 200,000
Deposit in transit 1,500,000
At the December 31, 2005 balance sheet cash in bank should be
a. P15,150,000 c. P14,250,000
b. P14,650,000 d. P14,550,000
8. The bookkeeper of Calumpit Company recently prepared the following bank reconciliation on December 31, 2005:
Balance per bank statement 20,000,000
Add: Deposit in transit 1,500,000
Checkbook and other bank charge 50,000
Error made by Calumpit in recording check No.
1005 (issued in December) 150,000
Customer check marked DAIF 500,000 2,200,000
Total 22,200,000
Deduct: Outstanding checks 1,900,000
Note collected by bank (includes P200,000 interest) 2,300,000 4,200,000
Balance per book 18,000,000
Calumpit has P1,000,000 cash on hand on December 31, 2005. The amount to be reported as cash on the balance sheet as of December 31, 2005 should be
a. P19,600,000 c. P20,600,000
b. P18,600,000 d. P19,750,000
9. The petty cash fund of Guiguinto Company on December 31, 2005 is composed of the following:
Coins and currencies P14,000
Petty cash vouchers:
Gasoline payments 3,000
Supplies 1,000
Cash advances to employees 2,000

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Employee’s check returned by bank marked NSF 5,000

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Check drawn by the company payable to the order of Kristine
Anson, petty cash custodian, representing her salary 20,000

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A sheet of paper with names of employees together with contribution
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for a birthday gift of a co-employee in the amount of 8,000
Total P53,000

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The petty cash ledger account has an imprest balance of P50,000. What is the correct amount of petty cash on December 31, 2005?
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a. P34,000 b. P39,000 c. P14,000 d. P42,000
10. The Plaridel Corporation was organized on January 3, 2005 with an authorized capital stock of P5,000,000. At December 31, 2005 of the same year, the general
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ledger of said Company showed the following accounts and balances:

Accounts receivable P 200,000
Merchandise inventory 250,000
Land 1,200,000
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Building 1,600,000
Furniture and fixtures 400,000
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Accounts payable 420,000

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Notes payable – bank 500,000

Common stock 1,500,000
Additional paid capital 100,000
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Sales 5,800,000
Expenses paid (excluding purchases) 725,000
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Your review of the bank statement for December disclosed the following information:
Bank balance, December 31, 2005 P 524,500
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Bank service charge 6,000

Deposits in transit 62,500
Total checks not returned by the bank 128,000
Your review also revealed that the cash received of P62,500 on December 31, 2005 was deposited on January 2, 2006. The company’s mark up on sales is 40%.
How much is the adjusted cash balance as of December 31, 2005?
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a. P459,000 c. P39,000
b. P536,000 d. P1,619,000
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11. Reconciliation of Malolos Corporation’s bank account at November 30, 2005 follows:
Balance per bank statement P3,150,000
Deposits in transit 450,000
Checks outstanding (45,000)
Correct cash balance P3,555,000
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Balance per books P3,558,000

Bank service charge (3,000)
Correct cash balance P3,555,000
December data are as follows:
Bank Books
Checks recorded P3,450,000 P3,540,000
Deposits recorded 2,430,000 2,700,000
Collection by bank (P600,000 plus interest) 630,000 -
NSF check returned with December bank statement 15,000 -
Balances 2,745,000 2,715,000
The checks outstanding on December 31, 2005 amount to
P45,000 b. P135,000 c. P90,000 d. P0
12. Mangatarem Company had the following information relating to its accounts receivable for the year 2005:
Accounts receivable – January 1 P12,000,000
Credit sales 20,000,000
Collection from customers, excluding the recovery of accounts written off 17,000,000
Accounts written off as worthless 300,000
Sales returns 1,000,000
Recovery of accounts written off 100,000
Estimated future sales returns on December 31 400,000
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Estimated uncollectible accounts on December 31, per aging 1,000,000

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 Mangatarem should report the December 31, 2005 accounts receivable, before allowance for sales returns and uncollectible accounts, at
c. P13,700,000 c. P13,800,000
d. P12,300,000 d. P13,130,000
13. Binmaley Company operates in an industry that has a high rate of bad debts. On December 31, 2005, before any year-end adjustments, the accounts receivable
balance was P20,000,000 and its allowance for doubtful accounts balance was P1,500,000. The year-end balance reported for the allowance for doubtful
accounts is based on the following schedule:
Time Outstanding Accounts Receivable Percent Uncollectible
Under 30 days P10,000,000 5%
31 - 180 days 5,000,000 10%
181 - 360 days 3,000,000 30%
More than one year 2,000,000 100%
The accounts which have been outstanding for more than one year and 100% uncollectible would be written off immediately. What should be the doubtful
accounts expense for the year ended December 31, 2005?
c. P1,900,000 c. P3,900,000
d. P2,400,000 d. P2,000,000
14. Calasiao Company determined that the net realizable value of its accounts receivable at December 31, 2005 based on an aging of the receivables, was
P15,000,000. Additional information is as follows:
Allowance for uncollectible accounts – 1/1/2005 P1,500,000
Uncollectible accounts written off during 2005 1,000,000
Uncollectible accounts recovered during 2005 200,000
Accounts receivable – December 31, 2005 17,000,000
For 2005, what should be Calasiao’s uncollectible accounts expense?
a. P2,000,000 c. P1,800,000
b. P1,500,000 d. P1,300,000
15. Bayambang Company sells to wholesalers on terms of 5/15, net 30. Bayambang has no cash sale but 50% of customers take advantage of the discount.
Bayambang uses the gross method of recording sales. An analysis of trade receivables at December 31, 2005 revealed the following:
Age Amount _ Collectible
0 - 15 days 15,000,000 100%
16 - 30 days 3,000,000 95%
Over 30 days 2,000,000 1,500,000
On the December 31, 2005 balance sheet, what amount should be reported as allowance for discounts?

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3. P750,000 c. P375,000

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4. P650,000 d. P500,000
16. The following accounts were abstracted from Villasis Company’s unadjusted trial balance at December 31, 2005:

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Accounts receivable P20,000,000
Allowance for doubtful accounts 300,000

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Net credit sales P70,000,000
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VilIasis estimates that 5% of the gross accounts receivable will become uncollectible. The doubtful accounts expense for the year ended December 31, 2005
should be
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4. P1,000,000 c. P1,300,000
5. P3,500,000 d. P 700,000
17. All of Urdaneta Company’s sales are on a credit basis. The following information is available for 2005:
Allowance for doubtful accounts, 1/1/2005 P1,000,000
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Sales 22,000,000
Sales returns 2,000,000
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Accounts written off as uncollectible 600,000

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Recovery of accounts written off 200,000

Urdaneta provides for doubtful accounts expense at the rate of 10% of net sales. At December 31, 2005, the allowance for doubtful accounts balance should be
c. P3,200,000 c. P2,800,000
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d. P2,600,000 d. P2,000,000
18. On January 1, 2005, the balance of accounts receivable of Manaoag Company was P5,000,000 and the allowance for doubtful accounts on same date was
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P800,000. The following data were gathered:

Credit sales Writeoffs Recoveries
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2002 P10,000,000 P250,000 P20,000

2003 14,000,000 400,000 30,000
2004 16,000,000 650,000 50,000
2005 25,000,000 1,100,000 145,000
Doubtful accounts are provided for as percentage of credit sales. The accountant calculates the percentage annually by using the experience of the three years
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prior to the current year. How much should be reported as 2005 doubtful accounts expense?
c. P750,000 c. P330,000
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d. P812,500 d. P875,000
19. The Natividad Publishing Company follows the procedure of debiting Bad Debts Expense for 2% of all new sales. Sales for 4 consecutive years and year-ended
allowance account balances were as follows:
Allowance for Bad Debts End-of-Year
Credit Balance
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Year Sales
2002 P2,100,000 P21,500
2003 1,975,000 35,500
2004 2,500,000 50,000
2005 2,350,000 66,000
Compute the amount of accounts written off for the year 2005.
c. P31,000 b. P25,500 c. P35,500 d. P5,500
20. Anda Corporation provided for uncollectible accounts receivable under the allowance method since the start of its operations to December 31, 2005. Provisions
were made monthly at 2 percent of credit sales; bad debts written off were charged to the allowance account; recoveries of bad debts previously written off
were credited to the allowance account; and no year-end adjustments to the allowance account were made. Anda's usual credit terms are net 30 days.
The credit balance in the allowance for doubtful accounts was P260,000 at January 1, 2005. During 2005, credit sales totaled P18,000,000, interim provisions for
doubtful accounts were made at 2 percent of credit sales, P180,000 of bad debts were written off, and recoveries of accounts previously written off amounted to
P30,000. Anda installed a computer system in November 2005 and an aging of accounts receivable was prepared for the first time as of December 31, 2005. A
summary of the aging is as follows:
Balance in Estimated % Uncollectible
Classifications by Month of Sale Each Category
November-December 2005 P2,280,000 2%
July-October 2005 1,200,000 15%
January-June 2005 800,000 25%
Prior to January 1, 2005 260,000 80%
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 Based on the review of collectibility of the account balances in the "prior to January 1, 2005" aging category, additional receivables totaling P120,000 were
written off as of December 31, 2005. Effective with the year ended December 31, 2005, Anda adopted a new accounting method for estimating the allowance
for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable.
QUESTIONS:
b. How much is the adjusted balance of the allowance for doubtful accounts as of December 31, 2005?
a. P537,600 b. P350,000 c. P633,600 d. P753,600
c. How much is the doubtful accounts for the year 2005?
a. P427,600 b. P577,600 c. P547,600 d. P457,600
d. The recorded allowance for doubtful accounts should be increased by
a. P283,600 b. P187,600 c. P67,600 d. P0
21. Purple Company showed the following balances on December 31, 2005:
Accounts receivable-unassigned P1,000,000
Accounts receivable-assigned 300,000
Allowance for doubtful accounts-January 1 30,000
Receivable from factor 40,000
Note payable-bank 240,000
During the year 2005 Purple Company found itself in financial distress and decided to resort to receivable financing.
On June 30, Purple Company factored P200,000 of its accounts receivable to a finance company. The finance company charged a factoring fee of 5% of the
accounts factored and withheld 20% of the amount factored.
On December 31, Purple Company assigned P300,000 of its accounts receivable to a bank under a nonnotification basis. The bank advanced 80% less a service
fee of 5% of the account assigned. Purple Company signed a promissory note for the loan.
On December 31, it is estimated that 5% of the outstanding accounts receivable may prove uncollectible.
REQUIRED:
a. Entry to record the factoring.
b. Entry to record the assignment.
c. Entry to adjust the allowance for doubtful accounts on December 31.
d. Indicate the classification, presentation and disclosure of the accounts involved in receivable financing.
22. Mangaldan Company obtained a one-year loan of P5,000,000 from a bank on April 1, 2005. The loan was discounted at 12%. The company signed a note and
pledged its accounts receivable of P5,000,000 as collateral for the loan. In relation to the loan, Mangaldan should report note payable on December 31, 2005 at
a. P4,850,000 c. P5,450,000
b. P4,400,000 d. P4,550,000
23. On December 1, 2005 Pozurrubio Company assigned on a nonnotification basis accounts receivable of P5,000,000 to a bank in consideration for a loan of 90% of

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the receivables less a 5% service fee on the accounts assigned. Pozurrubio signed a note for the bank loan. On December 31, 2005, Pozurrubio collected

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assigned accounts of P3,000,000 less discount of P200,000. Pozurrubio remitted the collections to the bank in partial payment for the loan. The bank applied
first the collection to the interest and the balance to the principal. The agreed interest is 1% per month on the loan balance. In its December 31, 2005 balance

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sheet, Pozurrubio should report note payable as a current liability at
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6. P1,745,000 c. P1,545,000
7. P1,700,000 d. P2,250,000

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24. Binalonan Company factored P5,000,000 of accounts receivable to ABC Company on July 1, 2005. Control was surrendered by Binalonan. ABC assessed a fee of
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5% and retains a holdback equal to 20% of the accounts receivable. In addition ABC charged 12% computed on a weighted average time to maturity of the
receivables of 30 days.
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a. Binalonan Company will receive and record cash of

e. P3,700,685 c. P3,750,000
f. P3,700,000 d. P4,700,685
b. Assuming all receivables are collected, Binalonan Company’s cost of factoring the receivables would be
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e. P250,000 c. P49,315
f. P299,315 d. P 0
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25. On September 30, 2005, Asingan Company discounted at the bank a customer’s P5,000,000 6-month 10% note receivable dated June 30, 2005. The bank
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discounted the note at 12%. The proceeds from this discounted note amounted to
a. P5,092,500 c. P4,842,000
b. P5,250,000 d. P5,170,000
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26. Urdaneta Company accepted from a customer P5,000,000, 120-day, 12% note dated August 31, 2005. On September 30, 2005, Urdaneta discounted the note at
the National Bank. However, the proceeds were not received until October 1, 2005. In the September 30, 2005 balance sheet, the amount receivable from the
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bank includes accrued interest revenue of

d. P200,000 c. P44,000
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e. P156,000 d. P 0
27. Umingan Company has a 10% note receivable dated June 30, 2005, in the original amount of P9,000,000. Payments of P3,000,000 in principal plus accrued
interest are due annually on July 1, 2006, 2007 and 2008. In its June 30, 2007 balance sheet, what amount should Umingan report as a current asset for interest
on the note receivable?
e. P900,000 c. P300,000
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f. P600,000 d. P 0
28. Balungao Company accepted a P5,000,000, 2% interest bearing note from Rosales Company on December 31, 2005, in exchange for a machine with a list price of
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P4,000,000 and a cash price of P3,750,000. The note is payable on December 31, 2007. In its 2005 income statement, Balungao should report the sale at
a. P3,750,000 c. P5,000,000
b. P4,000,000 d. P5,200,000
29. On January 2, 2005 Tayog Company sold equipment with a carrying amount of P6,500,000 in exchange for P8,000,000 noninterest bearing note due January 2,
2008. There was no established exchange price for the equipment. The prevailing interest rate for this note on January 2, 2005 was 10%. The present value of 1
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at 10% for three periods is 0.75.

a. In the 2005 income statement, what amount should be reported as interest income?
a. P800,000 c. P660,000
b. P600,000 d. P740,000
b. In the 2005 income statement, what amount should be reported as gain or loss on sale of equipment?
a. P1,500,000 gain b. P 100,000 gain c. P500,000 gain d. P500,000 loss
30. Cagayan Company included the following items under inventories:
Materials P 1,400,000
Advance for materials ordered 200,000
Goods in process 650,000
Unexpired insurance on inventories 60,000
Advertising catalogs and shipping boxes 150,000
Finished goods in factory 2,000,000
Finished goods in company-owned retails store, including 50% profit on cost 750,000
Finished goods in hands on consignees including 40% profit on sales 400,000
Finished goods in transit to customers, shipped FOB destination, at cost 250,000
Finished goods out on approval, at cost 100,000
Unsalable finished goods, at cost 50,000
Office supplies 40,000
Materials in transit shipped FOB shipping point, excluding freight of P30,000 330,000
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Goods held on consignment, at sales price, cost P150,000 200,000

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 How much is the correct amount of inventories?
a. P5,610,000 c. P5,375,000
b. P5,500,000 d. P5,450,000
31. The Abulug Manufacturing Company reviewed its year-end inventory and found the following items:
a. A packing case containing a product costing P100,000 was standing in the shipping room when the physical inventory was taken. It was not included in the
inventory because it was marked “Hold for shipping instructions.” The customer’s order was dated December 18, but the case was shipped and the
costumer billed on January 10, 2006.
b. Merchandise costing P600,000 was received on December 28, 2005, and the invoice was recorded. The invoice was in the hands of the purchasing agent; it
was marked “On consignment”.
c. Merchandise received on January 6, 2006, costing P700,000 was entered in purchase register on January 7. The invoice showed shipment was made FOB
shipping point on December 31, 2005. Because it was not on hand during the inventory count, it was not included.
d. A special machine costing P200,000, fabricated to order for a particular customer, was finished in the shipping room on December 30. The customer was
billed for P300,000 on that date and the machine was excluded from inventory although it was shipped January 4, 2006.
e. Merchandise costing P200,000 was received on January 6, 2006, and the related purchase invoice was recorded January 5. The invoice showed the
shipment was made on December 29,2005, FOB destination.
f. Merchandise costing P150,000 was sold on an installment basis on December 15. The customer took possession of the goods on that date. The
merchandise was included in inventory because Abulug still holds legal title. Historical experience suggests that full payment on installment sale is
received approximately 99% of the time.
g. Goods costing P500,000 were sold and delivered on December 20. The goods were included in the inventory because the sale was accompanied by a
purchase agreement requiring Abulug to buy back the inventory in February 2006.
How much of these items should be included in the inventory balance at December 31, 2005?
a. P1,300,000 c. P1,650,000
b. P 800,000 d. P1,050,000
32. The Alcala Company counted its ending inventory on December 31. None of the following items were included when the total amount of the company’s ending
inventory was computed:
g. P150,000 in goods located in Alcala’s warehouse that are on consignment from another company.
h. P200,000 in goods that were sold by Alcala and shipped on December 30 and were in transit on December 31; the goods were received by the customer on
January 2. Terms were FOB Destination.
i. P300,000 in goods were purchased by Alcala and shipped on December 30 and were in transit on December 31; the goods were received by Alcala on
January 2. Terms were FOB shipping point.
j. P400,000 in goods were sold by Alcala and shipped on December 30 and were in transit on December 31; the goods were received by the customer on
January 2. Terms were FOB shipping point.

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The company’s reported inventory (before any corrections) was P2,000,000. What is the correct amount of the company’s inventory on December 31?

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a. P2,550,000 c. P2,500,000
b. P1,950,000 d. P2,700,000

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33. Aparri Company included the following items in its inventory on December 31, 2005:
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Merchandise out on consignment, at sales price,
including 25% markup on cost P4,000,000

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Goods purchased in transit, FOB destination 2,000,000
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Goods held on consignment by Aparri Company 1,000,000
By what amount should the inventory at December 31, 2005 be reduced?
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g. P3,800,000 c. P1,800,000
h. P2,000,000 d. P1,000,000
34. Allapacan Company had the following consignment transactions during 2005:
Inventory shipped on consignment to Benguet Company, consignee P600,000
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Freight paid by Allapacan 50,000

Inventory received on consignment from Ifugao, consignor 800,000
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Freight paid by Ifugao 50,000

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No sales of consigned goods were made through December 31, 2005. In its December 31, 2005 balance sheet, Allapacan should include consigned inventory of
a. P600,000 c. P 650,000
b. P700,000 d. P1,500,000
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35. On June 1, 2005 Amulung Company sold merchandise with a list price of P5,000,000 to ABC. Amulung allowed trade discounts of 20% and 10%. Credit terms
were 5/10, n/30 and the sale was made FOB shipping point. Amulung prepaid P200,000 of delivery cost for ABC as an accommodation. On June 11, 2005,
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Amulung received from ABC full remittance of

c. P3,420,000 c. P3,600,000
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d. P3,620,000 d. P3,800,000
36. Baggao Company’s accounts payable balance at December 31, 2005 was P8,000,000 before considering the following data:
k. Goods shipped to Baggao FOB shipping point on December 15, 2005 were lost in transit. The invoice cost of P500,000 was not recorded by Baggao. On
January 15, 2006, Baggao filed a P500,000 claim against the common carrier.
l. On December 30, 2005, a vendor authorized Baggao to return for full credit goods shipped and billed at P200,000 on December 15, 2005. The returned
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goods were shipped by Baggao on December 31, 2005. A P200,000 credit memo was received and recorded on January 5, 2006.
What should Baggao report as accounts payable on December 31, 2005?
Th

e. P8,300,000 c. P7,800,000
f. P8,500,000 d. P7,500,000
37. Ballesteros Company began operations late in 2004. For the first quarter ended March 31, 2005, Ballesteros made available the following information:
Total merchandise purchased through March 15, recorded at net P4,900,000
Merchandise inventory at December 31, 2004, at selling price 1,500,000
sh

All merchandise was acquired on credit and no payments have been made on accounts payable since the inception of the company. All merchandise is marked
to sell at 50% above invoice cost before time discounts of 2/10, n/30. No sales were made in 2005.
How much cash is required to eliminate the current balance in accounts payable?
g. P6,000,000 c. P6,400,000
h. P5,900,000 d. P5,750,000
38. Calayan Company has determined its December 31, 2005 inventory on a FIFO basis at P9,500,000. Information pertaining to that inventory follows:
Estimated selling price P14,000,000
Estimated cost to complete and cost of disposal 5,000,000
Normal profit margin 2,000,000
Current replacement cost 8,000,000
Calayan records losses that result from applying the lower of cost or market rule. At December 31, 2005, Calayan should report inventory at
e. P9,500,000 c. P9,000,000
f. P8,000,000 d. P7,000,000
39. Claveria Company installs replacement siding, windows, and louvered glass doors for family homes. At December 31, 2005, the balance of raw materials
inventory account was P502,000, and the allowance for inventory writedown was P33,000. The inventory cost and market data at December 31, 2005, are as
follows:
Cost Replacement Cost Sales Price Net Realizable Normal
value Profit

Aluminum siding 89,000 86,000 91,500 87,000 5,000

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Mahogany siding 94,000 92,000 93,000 85,000 7,000

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 Louvered glass door 125,000 135,000 129,000 111,000 10,000
Glass windows 194,000 114,000 205,000 197,000 20,000
Total 502,000 427,000 518,500 480,000 32,000
The correct balance of the raw materials inventory after any allowance for write down is
8. P427,000 c. P480,000
9. P486,500 d. P477,000
40. Enrile Company had 180,000 units of Product A on hand at January 1, 2005 costing P20 each. Purchases of product A during the month of January were as
follows:
Units Unit cost
January 5 160,000 30
15 200,000 40
31 140,000 50
A physical count on January 31, 2005 shows 200,000 units of product A on hand. The inventory on January 31, should be
FIFO LIFO
e. P9,400,000 P4,200,000
f. P4,200,000 P9,400,000
g. P9,400,000 P5,800,000
h. P4,200,000 P7,000,000
41. Gonzaga Company uses the weighted average method to determine the cost of its inventory. Gonzaga recorded the following information pertaining to its
inventory:
Units Units cost Total cost
Balance 1/1 160,000 60 9,600,000
Sold on 1/15 140,000
Purchased on 1/31 80,000 90 7,200,000
What amount of inventory should Gonzaga report in its January 31, 2005 balance sheet?
Perpetual Periodic
5. P8,400,000 P7,000,000
6. P7,000,000 P8,400,000
7. P8,400,000 P7,500,000
8. P7,000,000 P7,500,000
42. Lasam Company sells one product, which it purchases from various suppliers. The trial balance at December 31, 2005, included the following accounts:

m
Sales (100,000 units at P150) P15,000,000

er as
Sales discount 1,000,000
Purchases 9,300,000

co
Purchase discount eH w 400,000
Freight in 100,000
Freight out 200,000

o.
The inventory purchases during 2005 were as follows:
rs e
Units Unit cost Total cost
Beginning inventory, January 1 20,000 P60 P 1,200,000
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Purchases, quarter ended March 31 30,000 65 1,950,000

Purchases, quarter ended June 30 40,000 70 2,800,000
Purchases, quarter ended Sept. 30 50,000 75 3,750,000
Purchases, quarter ended Dec. 31 10,000 80 800,000
o

150,000 P10,500,000
Lasam’s accounting policy is to report inventory in its financial statements at the lower of cost or market, applied to total inventory. Cost is determined under the
aC s

first-in, first-out method.

vi re

Lasam has determined that, at December 31, 2005, the replacement cost of its inventory was P70 per unit and the net realizable value was P72 per unit. The
normal profit margin is P10 per unit.
What should Lasam report as cost of goods sold for the year 2005?
y

21. P6,400,000 c. P6,700,000

22. P6,600,000 d. P7,100,000
ed d

43. The following quarterly cost data have been accumulated for Pamplona Mfg. Inc.
Raw materials – beginning inventory (Jan. 1, 2005) 10,000 units @P6.00
ar stu

Purchases 8,500 units @P7.00

11,000 units @P7.50
Transferred 21,500 units of raw materials to work in process:
Work in process – beginning inventory (Jan. 1, 2005) 5,600 units @P13.50
Direct labor P250,000
is

Manufacturing over head P325,000

Work in process – ending inventory (Mar. 31, 2005) 4,200 units @P13.75
Th

If Pamplona uses the FIFO method for valuing raw materials inventories, compute for the cost of goods manufactured for the quarter ended Mar. 31 2005
a. P699,150 c. P734,850
b. P717,000 d. P746,850
44. Total debits and total credits in selected accounts of Piat Company, after closing entries were posted on December 31, 2005 are given below.
Debits Credits
sh

Materials P 600,000 P 200,000

Goods in process 500,000 300,000
Material purchases 2,500,000 2,500,000
Purchase discounts 100,000 100,000
Transportation in 200,000 200,000
Direct labor 3,000,000 3,000,000
Manufacturing overhead 1,500,000 1,500,000
Finished goods 700,000 400,000
Cost of goods sold was
a. P7,100,000 c. P6,900,000
b. P7,000,000 d. P7,400,000
45. On August 30, 2005, Sta. Ana Company purchased a tract of land for P12,000,000. Sta. Ana incurred additional cost of P3,000,000 during the remainder of 2005
in preparing the land for sale. The tract was subdivided into residential lots as follows:
Lot class Number of lots Sales price per lot
A 100 240,000
B 100 160,000
C 200 100,000
Using the relative sales value method, what amount of cost should be allocated to Class C lots?
a. P6,000,000 c. P7,500,000
b. P5,000,000 d. P4,000,000
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 46. On November 17, 2005, Solana Airways entered in to a commitment to purchase 3,000 barrels of aviation fuel for P9,000,000 on March 23, 2006. Solana
entered into this purchase commitment to protect itself against the volatility in the aviation fuel market. By December 31, 2005, the purchase price of aviation
fuel had fallen to P2,200 per barrel. However, by March 23, 2006, when Solana took delivery of the 3,000 barrels, the price of aviation fuel had risen to P2,500
per barrel. How much should be recognized as loss on purchase commitment on December 31, 2005?
a. P1,500,000 c. P2,400,000
b. P 900,000 d. P 0
47. Benguet Company’s accounting records indicated the following for 2005:
Inventory, January 1 P6,000,000
Purchases 20,000,000
Sales 30,000,000
A physical inventory taken on December 31, 2005 resulted in an ending inventory of P4,500,000. The gross profit on sales remained constant at 30% in recent
years. Benguet suspects some inventory may have been taken by a new employee. At December 31, 2005 what is the estimated cost of missing inventory?
h. P5,000,000 c. P500,000
i. P4,500,000 d. P 0
48. The Atok Corporation was organized on January 1, 2004. On December 31, 2005, the corporation lost most of its inventory in a warehouse fire just before the
year-end count of inventory was to take place. Data from the records disclosed the following:
2004 2005
Beginning inventory, January 1 P 0 P1,020,000
Purchases 4,300,000 3,460,000
Purchases returns and allowances 230,600 323,000
Sales 3,940,000 4,180,000
Sales returns and allowances 80,000 100,000
On January 1, 2005, the Corporation’s pricing policy was changed so that the gross profit rate would be three percentage points higher than the one earned in
2004.
Salvaged undamaged merchandise was marked to sell at P120,000 while damaged merchandise was marked to sell at P80,000 had an estimated realizable value
of P18,000.
How much is the inventory loss due to fire?
i. P918,200 c. P856,200
j. P947,000 d. P824,600
49. The work-in-process inventory of Bakun Company were completely destroyed by fire on June 1, 2005. You were able to establish physical inventory figures as
follows:
January 1, 2005 June 1, 2005

m
Raw materials P 60,000 P120,000

er as
Work-in-process 200,000 -
Finished goods 280,000 240,000

co
Sales from January 1 to May 31, were P546,750. Purchases of raw materials were P200,000 and freight on purchases, P30,000. Direct labor during the period
eH w
was P160,000. It was agreed with insurance adjusters than an average gross profit rate of 35% based on cost be used and that direct labor cost was 160% of
factory overhead.

o.
The work in process inventory destroyed as computed by the adjuster
rs e
a. P314,612 c. P185,000
b. P366,000 d. P265,000
ou urc

50. Tublay uses the retail inventory method to approximate the lower of average cost or market. The following information is available for the current year:
Cost Retail
Beginning inventory P 1,300,000 P 2,600,000
Purchases 18,000,000 29,200,000
o

Freight in 400,000
Purchase returns 600,000 1,000,000
aC s

Purchase allowances 300,000

vi re

Departmental transfer in 400,000 600,000

Net markups 600,000
Net markdowns 2,000,000
y

Sales 24,400,000
Sales discounts 200,000
ed d

Employee discounts 600,000

What should be reported as the estimated cost of inventory at the end of the current year?
ar stu

10. P3,120,000 c. P3,000,000

11. P3,200,000 d. P3,840,000
51. Trinidad Company uses the average cost retail method to estimate its inventory. Data relating to the inventory at December 31, 2005 are:
Cost Retail
Inventory, January 1 P 2,000,000 P3,000,000
is

Purchases 10,600,000 14,000,000

Net markups 1,600,000
Th

Net markdowns 600,000

Sales 12,000,000
Estimated normal shoplifting losses 400,000
Estimated normal shrinkage is 5% of sales
Trinidad’s cost of goods sold for the year ended December 31, 2004 is
sh

i. P9,100,000 c. P8,400,000
j. P8,680,000 d. P7,700,000
52. Mankayan Company uses the first-in, first-out retail method of inventory valuation. The following information is available:
Cost Retail
Beginning inventory P 2,500,000 4,000,000
Purchases 13,500,000 16,000,000
Net markups 3,000,000
Net markdowns 1,000,000
Sales 15,000,000
What would be the estimated cost of the ending inventory?
m. P7,000,000 c. P5,110,000
n. P5,250,000 d. P4,750,000
53. The following data pertain to Antique Company’s investments in debt securities:
Market value
Cost 12/31/2005 12/31/2004
Trading 5,000,000 5,200,000 4,500,000
Available for sale 5,000,000 4,800,000 4,700,000
What amount should Antique report as unrealized gain in its 2005 income statement?
23. 700,000 25. 800,000
24. 200,000 26. 100,000
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 54. On October 1, 2005, Bangued Company acquired P20,000,000 face value 12% bonds of Didigan Company at 110 plus accrued interest. The bonds were dated
July 1, 2004 and will mature on June 30, 2009. Interest is payable June 30 and December 31. The commission to acquire the bonds was P500,000. The total
amount paid for the investment in bonds was
i. 23,100,000
j. 22,600,000
k. 22,500,000
l. 21,900,000
55. On July 1, 2005 Tagum Company purchased as a long-term investment in Langiden Company’s 10-year 12% bonds, with face value of P20,000,000, for
P18,500,000. Interest is payable semiannually on June 30 and December 31. The bonds mature on July 1, 2010. Tagum uses the straight line amortization
method. What is the amount of interest income that Tagum should report in its 2005 income statement?
g. 1,350,000
h. 1,200,000
i. 1,500,000
j. 1,050,000
56. On October 1, 2005 Bucay Company purchased 20,000 of the P1,000 face value 12% bonds of Manabo Company for P23,000,000 including accrued interest of
P600,000. The bonds which mature on January 1, 2012, pay interest semiannually on January 1 and July 1. Bucay used the straight line method of amortization
and appropriately recorded the bonds as a long-term investment. On the December 31, 2006 balance sheet the bonds should be reported at
47. 22,304,000
48. 21,920,000
49. 22,880,000
50. 22,400,000
57. On April 1, 2005, Caluya Company purchased P5,000,000 face value 9%. Treasury notes for P4,962,500 including accrued interest of P112,500. The notes
mature on July 1, 2006 and pay interest semiannually. Caluya intends to hold the notes to maturity. In its October 31, 2005 balance sheet, the carrying amount
of this investment should be
j. 4,850,000
k. 4,920,000
l. 4,930,000
m. 4,975,000
58. Luba Company purchased bonds at a discount of P5,000,000. Subsequently, Luba sold these bonds at a premium of P2,000,000. During the period that Luba
held this investment, amortization of the discount amounted to P1,500,000. What amount should Luba report as gain on the sale of the bonds?
k. 2,000,000
l. 5,500,000

m
m. 3,500,000

er as
n. 3,000,000
59. On January 1, 2005, Bucloc Company acquired for P6,500,000 the entire P8,000,000 issue 12% serial bonds. Bonds of P2,000,000 mature at annual intervals

co
beginning December 31, 2005. Interest is payable semiannually on June 30 and December 31. What is the interest income for 2005 using the bond outstanding
eH w
method of amortization?
o. 1,560,000

o.
p. 1,380,000
rs e
q. 780,000
r. 960,000
ou urc

60. On January 1, 2005, Lacub Company purchased P8,000,000 face value 12% bonds at 120. Bonds are due on January 1, 2015 but can be redeemed at earlier
dates at premium values as follows:
61. January 1, 2007 to December 31, 2010, at 110
62. January 1, 2011 to December 31, 2014, at 104
o

63. What is the interest income for 2005 using the accelerated method of amortization?
a. 1,360,000
aC s

b. 960,000
vi re

c. 560,000
d. 800,000
64. On July 1, 2005, Boloc Company purchased P2,000,000 of East Company’s 8% bonds due on July 1, 2015. Boloc expects to hold the bonds until maturity. The
y

bonds pay interest semiannully on January 1 and July. The bonds were purchased for P1,750,000 to yield 10%. In its 2005 income statement, Boloc should report
interest income at
ed d

65. a. 175,000
66. b. 160,000
ar stu

e. 92,500
f. 87,500
67. On July 1, 2005, Cagayan Company paid P9,585,000 for 10% bonds with a face amount of P8,000,000. Interest is paid on June 30 and December 31. The bonds
were purchased to yield 8%. Cagayan uses the effective interest method to recognize interest income from this investment. What should be reported as the
carrying amount of the bonds in the December 31, 2005, balance sheet?
is

c. 9,568,400
d. 9,601,600
Th

e. 9,551,800
f. 9,618,200
68. On July 1, 2005, Tuguegarao Company purchased as a long term investment P8,000,000 of Candon Company’s 8% bonds for P7,570,000, including accrued
interest of P320,000. The bonds were purchased to yield 10% interest. The bonds pay interest annually on December 31. Tuguegarao uses the interest method.
In its December 31, 2005 balance sheet, what amount should Tuguegarao report as investment in bonds?
sh

53. 7,292,500 55. 7,628,500

54. 7,207,500 56. 7,335,000
69. On January 1, 2004, Sibalon Company purchased as a long-term investment P5,000,000 face value of 8% bonds for P4,562,000. The bonds were purchased to
yield 10% interest. The bonds pay interest annually December 31. Sibalon uses the interest method of amortization. What amount (rounded to the nearest
P100) should Sibalon report on its December 31, 2005 balance sheet for this long-term investment?
30. 4,680,000 32. 4,618,000
31. 4,662,000 33. 4,562,000
70. On July 1, 2005, Solana Company purchased Amulong Company’s 10-year, 8% bonds with face amount of P8,000,000 for P6,720,000. The bonds mature on June
30, 2013 and pay interest semiannually on June 30 and December 31. Using the interest method, Solana recorded bond discount amortization of P28,800 for six
months ended December 31, 2005. From this long-term investment, Solana should report 2005 income of
k. 348,800 m. 320,000
l. 291,200 n. 384,000

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 71. On January 1, 2005 Aparri Company purchased 5-year bonds with face value of P8,000,000 and stated interest of 10% per year payable semiannually January 1,
and July 1. The bonds were acquired to yield 8%. Present value factors are:
72. Present value of an annuity of 1 for 10 periods at 5% 7.72
73. Present value of an annuity of 1 for 10 periods at 4% 8.11
74. What is the purchase price of the bonds?
g. 7,382,400
h. 8,617,600
i. 8,648,800
j. 7,351,200

m
er as
co
eH w
o.
rs e
ou urc
o
aC s
vi re
y
ed d
ar stu
is
Th
sh

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