Professional Documents
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Dysas Center For Cpa Review
Dysas Center For Cpa Review
1. Alpha Company provided the following information relating to the current year:
Net income 3,500,000
Unrealized gain on available for sale securities 250,000
Foreign currency translation adjustment – credit 50,000
Revaluation surplus 1,000,000
How much is the comprehensive income?
(a) P3,800,000 (b) P4,700,000 (c) P4,750,000 (d) P4,800,000 D
2. The following information pertains to Deal Corporation’s 2009 cost of goods sold:
Inventory, January 1 4,500,000
2009 purchases 6,200,000
2009 writeoff of obsolete inventory 1,700,000
Inventory, December 31 1,500,000
The inventory written off became obsolete due to an unexpected and unusual technological
advance by a competitor. In its 2009 income statement, what amount should Deal as cost of
goods sold?
(a) P9,000,000 (b) P9,200,000 (c) P7,500,000 (d) P6,200,000 C
3. The records of Big Corporation at December 31, 2009 showed the following balances:
Uncollectible accounts expense 2,000,000
Freight out 3,500,000
Cost of sales 40,000,000
Loss on sale of equipment 1,500,000
Loss from typhoon 3,000,000
Sales 90,000,000
Interest income 4,000,000
Administrative expenses 10,000,000
Finished goods inventory, January 1 60,000,000
Sales commissions 7,000,000
Finished goods inventory, December 31 55,000,000
Income tax rate 30%
Big shall report as income after income tax from continuing operations the amount of:
(a) P30,000,000 (b) P21,000,000 (c) P27,000,000 (d) P18,900,000 B
Sales P90,000,000
Cost of sales (40,000,000)
Gross income P50,000,000
Interest income 4,000,000
Total revenue P54,000,000
Operating expenses:
Uncollectible accounts expense P2,000,000
Freight out 3,500,000
Administrative expenses 10,000,000
Sales commissions 7,000,000
Loss on sale of equipment 1,500,000 (24,000,000)
Income before income tax P30,000,000
Income tax (30%) ( 9,000,000)
Income from continuing operations P21,000,000
4. Thor’s income statement for the year ended December 31, 2009 reported net income as
P7,410,000. The auditor raised questions about the following amounts that had been
included in net income:
Unrealized loss on decline in market value of
available for sale securities (P 540,000)
Gain on early retirement of bonds payable
(net tax effect) 2,200,000
Adjustments to profits of prior years for errors
in depreciation (net of tax effect) ( 750,000)
Loss from fire (net of tax effect) (1,400,000)
The loss from fire was an infrequent but not an unusual occurrence in Thor’s line of business.
Thor’s December 31, 2009 income statement should report net income of:
(a) P6,500,000 (b) P6,610,000 (c) P8,160,000 (d) P8,700,000 D
5. During 2009, Kerr Company determined that machinery previously depreciated over a
seven-year life had a total estimated useful life of only five years. An accounting change
was made in 2009 to reflect the change in estimate. If the change had been made in 2008,
accumulated depreciation would have been P800,000 at December 31, 2008, instead of
P600,000. As a result of this change, the 2009 depreciation expense was P50,000 greater.
The income tax rate was 30%. What should be reported in Kerr’s income statement for the
year ended December 31, 2009, as the cumulative effect on prior years of changing the
estimated useful life of the machinery?
(a) P 0 (b) P127,500 (c) P150,000 (d) P187,500 A
6. While preparing its 2009 financial statements, Dek Corporation discovered computational
errors in its 2008 and 2007 depreciation expense. These errors resulted in overstatement of
each year’s income by P100,000, net of income taxes. The following amounts were reported
in the previously issued financial statements:
2008 2007
Retained earnings, 1/1 P2,800,000 P2,000,000
Net income 600,000 800,000
Retained earnings, 12/31 P3,400,000 P2,800,000
Dek’s income statement for 2009 is correctly reported at P700,000. The statement of
retained earnings for the year ended December 31, 2009 should report an ending balance
at:
(a) P3,900,000 (b) P4,100,000 (c) P4,300,000 (d) P4,000,000 A
7. Zen, Inc. maintains a markup of 60% based on cost. The company’s selling and
administrative expenses average 30% of sales. For 2009, sales amounted to P960,000.
Zen’s cost of goods sold and operating income for 2009 are:
Cost of goods sold Operating income
(a) P570,000 P 96,000
(b) P576,000 P288,000
(c) P600,000 P 72,000
(d) P600,000 P288,000 C
Sales P960,000
Cost of sales (960,000/ 160%) (600,000)
Gross income P360,000
Selling and administrative (30% x 960,000) (288,000)
Operating income P 72,000
8. In Bar’s 2009 single-step income statement, the section title “Revenues” consisted of the
following:
Net sales revenue P1,870,000
Results from discontinued operations:
Loss from operations of segment
(net of P12,000 tax effect) (P24,000)
Gain on disposal of segment
(net of P72,000 tax effect) 144,000 120,000
Interest revenue 102,000
Gain on sale of equipment 47,000
Cumulative change in 2007 and 2008 income
due to change in depreciation method
(net of P7,500 tax effect) 15,000
Total revenues P2,154,000
In the revenues section of the 2009 income statement, Bar should have reported total
revenues of:
(a) P2,163,000 (b) P2,154,000 (c) P2,037,000 (d) P2,019,000 D
9. The following is a statement of retained earnings for the current year provided by Laser
Company:
Balance at beginning of year 85,000
Additions:
Change in estimate of amortization
expense for the year 2,500
Gain on sale of land 18,000
Interest revenue 4,500
Profit and loss for current year 13,000 38,000
Total 123,000
Deductions:
Increased depreciation due to change in
estimated life 5,000
Dividends declared and paid 11,000
Loss on sale of equipment 3,000
Loss from major casualty 7,000 26,000
Balance at end of year 97,000
What net income should have been reported in the income statement for the year?
(a) P23,000 (b) P13,000 (c) P12,000 (d) P25,500 A
10. On June 1, 2009, Star Company approved a plan to dispose of a business segment. It is
expected that the sale will occur on April 30, 2010. On December 31, 2009, the carrying
value of net assets of the segment was P4,000,000 and the net recoverable amount was
P3,600,000. During 2009, the company paid employees severance and relocation costs of
P200,000 as a direct result of the discontinued operation. The revenues and expenses of the
discontinuing segment during 2009 were:
Revenues Expenses
June 1 to December 31 4,400,000 5,800,000
If the tax rate is 30%, how much will be reported as loss from ordinary activities of the
discontinued segment during 2009?
(a) P980,000 (b) P1,120,000 (c) P1,400,000 (d) P2,000,000 C
Revenues 4,400,000
Expenses (5,800,000)
Termination cost ( 200,000)
Impairment loss ( 400,000)
Loss from ordinary activities (2,000,000)
Tax savings (2,000,000 x 30%) 600,000
Loss from ordinary activities, net of tax (1,400,000)
11. Far is disposing a segment of its business. At the measurement date, the net loss from the
disposal is estimated to be P675,000. Included in this P675,000 are severance pay of
P50,000 and employee relocation costs of P25,000, both of which are directly associated
with the decision to dispose of the segment, and estimated operating loss of the segment to
the disposal date of P100,000. A loss of P125,000 from operations from the beginning of the
year to the measurement date is not included in the P675,000 estimated loss. Ignoring
income taxes, how much should be reported on Far’s income statement as the total loss
under the heading “discontinued operations”?
(a) P225,000 (b) P625,000 (c) P650,000 (d) P800,000 D
Loss from operations of segment P125,000
Net loss from disposal of segment 675,000
Total loss P800,000
12. The accounts below were taken from the unadjusted trial balance of Kase Corporation as at
December 31, 2009:
Cash, net of bank overdraft of P150,000 600,000
Notes receivable (including discounted note of P100,000) 500,000
Trade accounts receivable, net of customers’ credit
balance of P50,000 700,000
Merchandise inventory 800,000
Trade accounts payable, net of creditors’ debit balances
of P100,000 800,000
What is the correct amount of current assets on December 31, 2009?
(a) P2,800,000 (b) P2,700,000 (c) P2,600,000 (d) P2,900,000 A
Cash P 550,000
Accounts receivable, net 1,650,000
Prepaid taxes 320,000
Accounts payable P 140,000
Ordinary share 500,000
Premium share 680,000
Accumulated profits 630,000
Foreign currency translation adjustment 430,000
Revenues 3,600,000
Expenses 2,600,000 _________
P5,550,000 P5,550,000
During 2009, estimated tax payments of P320,000 were charged to prepaid taxes. Trey
has not yet recorded income tax expense. There were no differences between financial and
income tax income. Trey’s tax rate is assumed to be 32%.
Included in accounts receivable is P500,000 due from a customer. Special terms granted
to this customer require payment in equal semiannual installments of P125,000 every April 1
and October 1.
13. In Trey’s December 31, 2009 statement of financial position, what amount should be
reported as total current assets?
(a) P1,950,000 (b) P2,200,000 (c) P2,270,000 (d) P2,520,000 A
Cash P 550,000
Accounts receivable (1,650,000–125,000–125,000) 1,400,000
Total current assets P1,950,000
14. In Trey’s December 31, 2009 statement of financial position, what amount should be
reported as total accumulated profits?
(a) P1,017,600 (b) P1,200,000 (c) P1,310,000 (d) P1,630,000 C
Revenues P3,600,000
Expenses (2,600,000)
Income before income tax P1,000,000
Income tax (32%) ( 320,000)
Net income P 680,000
Accumulated profits – January 1 630,000
Total accumulated profits P1,310,000
Items 15 to 17:
Multi Corporation provided the following balances on December 31, 2009:
Accounts payable 500,000
Accrued taxes 100,000
Ordinary shares 5,000,000
Dividends-ordinary share 1,000,000
Dividends-preference share 500,000
Mortgage payable (P500,000 due in 6 months) 4,000,000
Notes payable, due January 1, 2012 2,000,000
Premium share 500,000
Preference share 3,000,000
Premium on note payable 200,000
Profit summary-credit balance 4,000,000
Accumulated profits-1/1/2009 2,500,000
Unamortized issue cost on note payable 50,000
Unearned rent income 150,000
16. What is the accumulated profits account balance on December 31, 2009?
(a) P6,500,000 (b) P2,500,000 (c) P1,000,000 (d) P5,000,000 D
18. Heidi uses the direct method to prepare its cash flow statement. Pertinent account balances
are:
2005 2004
Prepaid interest expense 200,000 50,000
Property, plant and equipment 5,000,000 4,500,000
Unamortized bond discount 250,000 300,000
Selling expenses 7,200,000 8,600,000
General and administrative expenses 6,850,000 7,565,000
Interest expense 800,000 150,000
Income tax expense 1,000,000 3,000,000
Allowance for uncollectible accounts 65,000 55,000
Accumulated depreciation 900,000 750,000
Income tax payable 1,100,000 1,300,000
Deferred income tax liability 200,000 400,000
Accrued interest payable 300,000 500,000
Heidi purchased P500,000 in equipment during 2005. Heidi allocated one-third of its
depreciation to selling and the remainder to administrative. What amount should Heidi
report in its 2005 cash flow statement as cash paid for interest?
(a) P1,100,000 (b) P1,150,000 (c) P1,200,000 (d) P750,000 A
19. Jog, Inc. reported P60,000 net income for 2009. During the year, machinery costing P4,000
and land costing P6,000 were purchased. A machinery costing P4,000 and land costing
P6,000 were purchased. Machinery was sold for P300 which was its net book value.
Selected account information follows:
2009
January 1 December 31
Land P5,000 P11,000
Machinery 8,000 7,000
Accumulated depreciation 3,000 2,000
Net cash provided by operating activities was:
(a) P60,000 (b) P60,300 (c) P53,700 (d) P63,700 D
20. The 2009 net income of Chet Company was P3,000,000. Following are the changes in
balance sheet accounting during 2009:
Deferred income tax liability (noncurrent) 36,000 increase
Accumulated depreciation due to a major
repair on equipment 42,000 decrease
Noncurrent investment (at equity) 110,000 increase
Unearned interest income 28,000 decrease
The reported net cash provided by operating activities in the 2009 statement of cash flows
should be:
(a) P3,008,000 (b) P2,856,000 (c) P2,996,000 (d) P2,898,000 D
Items 21 to 23:
The worksheet below presents the comparative statement of financial position items of Kim
Company at December 31, 2010 and 2009:
2010 2009
Cash 4,037,500 3,500,000
Accounts receivable 5,640,000 5,840,000
Inventories 9,250,000 8,575,000
Property, plant and equipment 16,535,000 14,835,000
Accumulated depreciation (5,825,000) (5,200,000)
Investment in associate 1,525,000 1,375,000
Loan receivable 1,312,500 0
Accounts payable 5,075,000 4,775,000
Income taxes payable 150,000 250,000
Dividends payable 400,000 500,000
Liability under finance lease 2,000,000 0
Ordinary shares, P10 par 2,500,000 2,500,000
Share premium 7,500,000 7,500,000
Accumulated profits 14,850,000 13,400,000
Additional information:
(a) On December 31, 2009, Kim acquired 25% of Ming Co.’s ordinary shares for
P1,375,000. On that date, the book value of Ming’s only assets and liabilities, which
approximated their fair values, was P5,500,000. Ming reported profit of P600,000 for
the year ended December 31, 2010. No dividend was paid on Ming’s ordinary shares
during the year.
(b) During 2010, Kim loaned P1,500,000 to Lim Co., an unrelated company. Lim made
the first semi-annual principal repayment of P187,500, plus interest at 10%, on
December 31, 2010.
(c) On January 2, 2010, Kim sold equipment costing P300,000, with a carrying amount of
P175,000, for P200,000 cash.
(d) On December 31, 2010, Kim entered into a finance lease for an office building. The
present value of the annual rental payments is P2,000,000, which equals the fair
value of the building. Kim made the first rental payment of P300,000 when due on
January 2, 2011.
(e) Profit for 2010 was P1,850,000.
(f) Kim declared and paid cash dividends of P500,000 for 2010.
Based on the preceding information, determine the following:
24. Mega Company purchased from Ora Company a P2,000,000, 8% 5-year note that required
five equal annual year-end payments of P500,900. The note was discounted to yield a 9%
rate to Mega. At the date of purchase, Mega recorded the note at its present value of
P1,948,500. What should be the total revenue earned by Mega over the life of this note?
(a) P504,500 (b) P556,000 (c) P800,000 (d) P900,000 B
The direct origination cost incurred by the bank is a deferred charge to be amortized
over the term of the loan. The indirect origination cost incurred by the bank is an
outright expense. The nonrefundable origination fee charged by the bank against the
borrower is unearned income on the part of the bank and deferred financing charge on
the part of the borrower to be amortized over the term of the loan.
28. Assuming all receivables are collected, X Corporation’s cost of factoring the receivables
would be:
(a) P313,150 (b) P180,000 (c) P433,150 (d) P613,150 A
29. When examining the accounts of Brute Company, you ascertain that balances relating to
both receivables and payables are included in a single controlling account called receivables
control that has a debit balance of P4,850,000. An analysis of the make-up of this account
revealed the following:
Debit Credit
Accounts receivable – customers P7,800,000
Accounts receivable – officers 500,000
Debit balances – creditors 300,000
Postdated checks from customers 400,000
Subscriptions receivable 800,000
Accounts payable for merchandise P4,500,000
Credit balances in customers’ accounts 200,000
Cash received in advance from customers
for goods not yet shipped 100,000
Expected bad debts 150,000
After further analysis of the aged accounts receivable, you determined that the allowance
for doubtful accounts should be P200,000. What is the correct total of current net
receivables?
(a) P8,950,000 (b) P8,800,000 (c) P8,600,000 (d) P8,850,000 B
31. Excel reported P70,000 of inventory on December 31, 2009, based on physical count.
Additional information was given as follows:
a. Included in the physical count were machines billed to a customer, FOB shipping
point, on December 31, 2009. The machines had a cost of P3,000 a had been billed
at P5,000. The shipment is ready for pick-up by the delivery contractor.
b. Goods were in transit from a vendor. The invoice cost was P8,000 and goods were
shipped FOB shipping point on December 31, 2009.
c. Work in process costing P500 was sent to an outside processor for finishing on
December 30, 2009.
d. Goods out on consignment amounted to P4,600 (sales price); shipping costs, P120
(markup is 15% on cost).
The correct amount of inventory on December 31, 2009 is:
(a) P85,620 (b) P85,500 (c) P82,620 (d) P82,500 C
32. The book value of Good’s inventory at the end of 2009 is P95,000. Included in the amount
are the following items:
Merchandise in transit, purchased FOB shipping point P6,800
Goods held as consignee 5,000
Goods out on consignment, at cost plus 50% markup
on cot plus P100 delivery charge 6,100
The correct amount of inventory is:
(a) P83,100 (b) P87,900 (c) P86,200 (d) P88,000 D
33. Pine Company prepares monthly income statements. A physical inventory is taken only at
year-end; hence, month-end inventories must be estimated. All sales are made on account.
The rate of markup on cost is 50%. The following information relates to the month of
November:
Accounts receivable, November 1 P102,000
Accounts receivable, November 30 153,000
Collection of accounts receivable during November 255,000
Inventory, November 1 183,600
Purchases of inventory during November 163,200
The estimated cost of the November 30 inventory is:
(a) P122,400 (b) P142,800 (c) P193,800 (d) P224,400 B
34. A store uses the gross profit method to estimate inventory and cost of goods sold for interim
reporting purposes. Past experience indicates that the average gross profit rate is 25% of
sales. The following data relate to the month of October:
Inventory cost, October 1 P255,000
Purchases during the month at cost 683,400
Sales 856,800
Sales returns 30,600
Using the data above, what is the estimated ending inventory at October 31?
(a) P206,550 (b) P214,200 (c) P295,800 (d) P318,750 D
35. The balance in Reed Company’s accounts payable account at December 31, 2009 was
P1,225,000 before the following information was considered:
- Goods shipped FOB destination on December 21, 2009 from a vendor to Reed were lost
in transit. The invoice cost of P45,000 was not recorded by Reed. On December 28,
2009, Reed notified the vendor of the lost shipment.
- Goods were in transit from a vendor to Reed on December 31, 2009. The invoice cost
was P60,000 and the goods were shipped FOB shipping point on December 28, 2009.
Reed received the goods on January 6, 2010.
- Goods shipped to Reed, FOB shipping point on December 20, 2009 from a vendor were
lost in transit. The invoice price was P50,000. On January 5, 2010, Reed filed a P50,000
claim against the common carrier.
- On December 27, 2009, a vendor authorized Reed to return, for full credit, goods shipped
and billed at P35,000 on December 20, 2009. The returned goods were shipped by Reed
on December 27, 2009. A P35,000 credit memo was received and recorded by Reed on
January 6, 2010.
What amount should Reed report as accounts payable in its December 31, 2009 statement
of financial position?
(a) P1,300,000 (b) P1,345,000 (c) P1,235,000 (d) P1,250,000 A
36. Dione Company employs several consulting companies. Some of the companies require
payments in advance for performing services while others bill Dione after services are
rendered. Dione also leases office space to several law firms. Some law firms are required
to pay rent in advance for using their offices while others are allowed to their offices before
paying rent. Dione uses the conventional accrual basis of accounting. The amount of cash
paid to consulting companies during 2009 was P6,400,000 and the amount of rent revenue
earned from leasing office space was P7,800,000. Selected information obtained from the
company’s comparative balance sheet is shown below:
2009 2008
Prepaid consulting fees 200,000 500,000
Accrued consulting fees 700,000 200,000
Rent receivable 600,000 800,000
Unearned rent revenue 1,000,000 400,000
Under the direct method, the 2009 cash flow statement should report cash received from
leasing office space at:
(a) P8,600,000 (b) P7,800,000 (c) P8,200,000 (d) P7,000,000 A
37. The balance sheet at December 31 of Love Company showed a cash balance of P200,000.
An examination of the books disclosed the following:
a. Cash sales of P15,000 from January 1 to 7, were predated as of December 28 to 31, and
charged to the cash account.
b. Customer’s checks totaling P5,000 deposited with and returned by the bank, NSF, on
December 27, were not recorded in the books.
c. Checks of P6,500 in payment of liabilities were prepared before December 31, and
recorded in the books, but withheld by the treasurer.
d. Customer’s postdated checks totaling P4,300 are being held by the cashier as part of
cash. The company’s experience shows that postdated checks are eventually realized.
e. The cash account includes P30,000 being reserved for the purchase of a mini-computer
which will be delivered soon.
How much cash balance is to be shown on the December 31 balance sheet?
(a) P152,200 (b) P166,500 (c) P192,200 (d) P200,000 A
38. The balance sheet at December 31, 2009 of Lore Company showed a cash balance of
P105,600. An examination of the books disclosed the following:
a. The sales book was left open up to January 5, 2010 and cash sales totaling P15,000 were
considered as sales in December 2009.
b. Checks of P9,300 in payment of liabilities were prepared before December 31, 2009,
recorded in the books, but not mailed or delivered to payees.
c. Customer’s postdated checks totaling P7,800 deposited with but returned by bank, NSF,
on December 27, 2009. Return was not recorded in the books, P1,500.
d. The cash account includes P40,000 earmarked for the purchase of an office equipment
which will be delivered soon.
How much cash balance is to be shown on the December 31, 2009 balance sheet?
(a) P105,600 (b) P60,500 (c) P58,400 (d) P50,600 D
39. The balance sheet at December 31 of Live Company showed a cash balance of P91,750. An
examination of the books disclosed the following:
a. Cash sales of P12,000 from January 1 to 5, 2010 were predated as of December 28 to 31,
2009 and charged to the cash account.
b. Customer’s checks totaling P4,500 deposited with and returned by the bank, NSF, on
December 27, 2009 were not recorded in the books.
c. Checks of P5,600 in payment of liabilities were prepared before December 31, 2009 and
recorded in the books, but withheld by the treasurer.
d. Personal checks of officers, P2,700, were “redeemed” on December 31, 2009, but
returned to cashier on January 2, 2010.
e. The cash account includes P20,000 being reserved for the purchase of an office machine
which will be delivered soon.
How much cash balance is to be shown on the December 31 balance sheet?
(a) P91,750 (b) P69,150 (c) P54,750 (d) P90,350 C
40. On October 7, 2009, the cash book of Davao Company showed the following entries:
Receipts Checks
September 30 (overdraft) P 0 P5,000
October 1 Tuesday 1,200 1,600
2 Wednesday 3,000 2,400
3 Thursday 800 1,000
4 Friday 6,000 3,400
5 Saturday 4,000 2,500
Cash receipts are deposited at the beginning of every Monday, Wednesday and Friday and in
each case includes the receipts of the preceding two working days. The bank statement at
the close of October 5 showed:
Balance, September 30 – overdraft P6,500
Deposits 7,000
Checks (includes all checks issued prior to October 4
and also a check for P300 belonging to Cebu
Co., erroneously charged to Davao account 5,800
A check for P256 issued on October 5 had been canceled
by the company but the bookkeeper has not made
any entry for this.
Additional information: undeposited collections – October 31, P10,000; outstanding checks –
October 31, P5,644. The outstanding checks as at September 30, 2009 should be:
(a) P200 (b) P300 (c) P400 (d) P500 D