EXCEL PROFESSIONAL SERVICES, Inc.

Management Firm of Professional Review and Training Center (PRTC)

CPA REVIEW
Practical Accounting 1
Instructions: select the best answer for each of the following questions: mark only answer for each item
on the answer sheet provided. Strictly no erasures allowed erasures will render your examination
answer sheet invalid use pencil no. 2 only. Good luck.

1. Genesis Corporation entered into a contract with a customer to supply and install a machine on
1 January 2011 and to service the machine on 1 July 2011 and 1 January 2012, the cost of the
machine to the entity is P80, 000 it is possible for a customer to purchase both the machine and
the maintenance services separately

The customer is contractually obliged to pay the entity P200, 000 on January 1, 2012.

The prevailing rate for one year credit granted to trade customer in the industry is 5 per cent six
month period.

Experience has shown that the servicing of a machine of the model should to the customer is
expected to cost the entity P15, 000 to perform the first service and P25, 000 to perform the
second service. Assume actual cost equal expected costs. When the entity provides machine
services to customers in a separate transaction it earns a margin of 50 per cent on cost.

On 1 January 2011 the cash selling price of a machine of the model should sold to the customers
is P125, 964

The total revenue to be recognized by the entity for the year ended December 31, 2011 is
a. P125, 964
b. P140, 000
c. P162, 500
d. P200, 000
2. Exodus corporation has an incentive commission plan for its salesmen, entitling them to an
additional sales commission when actual quarterly sales exceed budgeted estimates. An analysis
of the account incentive commission expense for the year ended December 31, 2011, follows:

Amount for quarter ended date paid

P42, 000 December 31, 2010 January 23, 2011
36, 000 March 31, 2011 April 24, 2011
39, 000 June 30, 2011 July 19, 2011
43, 000 September 30, 2011 October 22, 2011
 The incentive commission for the quarter ended December 31, 2011 was P45, 000. This amount
was recorded and paid in January 2012. What amount should exodus report as incentive
commission expense for 2011?
a. P160, 000
b. P163, 000
c. P118, 000
d. P205, 000

Use the following for the next two questions:

Leviticus corporation began operations in 2011 in 2011 it incurred the following expenditures in
purchasing materials for producing its product:

 Purchase price of raw materials= P3, 000, 000

 Import duty and other non refundable purchase taxes= P800, 000
 Refundable purchase taxes =P100, 000
 Freight costs for bringing the goods from the supplier to the factory raw material
storeroom= P300, 000
 Costs of unloading the materials into the raw materials storeroom= P2, 000
 Packaging P200, 000

On 31 December 2011 the entity received P53, 000 volume rebate from a supplier for
purchasing more than P1, 500, 000 from the supplier during the year.

The entity incurred the following additional costs in the product run:

 Salary of the machine workers in the factory =P500, 000

 Salary of factory supervisor=P300, 000
 Depreciation of the factory building and equipment used for production process =P60, 000
 Consumables used in the production process =P20, 000
 Depreciation of vehicle used to transport the goods from the raw materials storeroom to
the machine floor. =P40, 000
 Factory electricity usage charges= P30, 000
 Factory rental= P100, 000
 Depreciation and maintenance of the entity vehicle used by the factory supervisor (50
percent for official use and 50 percent for personal use)= P20, 000. Private use of the vehicle
is an employee benefit

During 2011 the entity incurred the following administration expenses:

 Depreciation of the administration building= P50, 000

 Depreciation and maintenance of vehicle used by the administrative staff =P15, 000
 Salaries of the administration personnel= P305, 000
 Of the administration expenses 20 per cent are attributable to administering the factory. The
rest of the administration expenses are attributable in equal proportion to the sales and other
non production operation (e.g. financing, tax and corporate secretarial functions)

In 2011 the entity incurred the following selling expenses:

 Advertising costs = P30, 000

 Depreciation and maintenance of vehicles used y the sales staff= P10, 000
 Salary of the administration personnel = P600, 000
3. The total costs of purchase is
a. P3, 747, 000
b. P4, 047, 000
c. P4, 100, 000
d. P4, 249, 000
4. The total costs of conversion is
a. P1, 134, 000
b. P1, 144, 000
c. P1, 060, 000
d. P1, 070, 000
5. On February 1, 2010 numbers corporation purchased a parcel of land as a factory site of P320,
000 an old building on the property was demolished and construction begun on a new
warehouse that was completed April 15, 2011. Costs incurred on the construction project are
listed below.

Demolition of old building P21, 000

Architects fees 31, 700
Legal fees- title investigation 4, 100
Construction costs 950, 000
Imputed interest based on stock financing 14, 000
Landfill for building site 19, 300
Clearing of trees from building site 9, 600
Temporary buildings used for construction activities 29, 000
Land survey 4, 000
Excavation for basement 13, 200

Additional information:
 Salvage materials from demolition sold for P1, 800
 Timber sold for P3, 300

Determine the cost of the land:

a. P366, 600
b. P347, 300
 c. P353, 600
d. P372, 900
6. Deuteronomy corporation has a machine costing P480, 000 with an annual depreciation of P96,
000 and has accumulated depreciation of P240, 000 on December 31, 2010 on April 1, 2011,
when the machine has a fair value of P192, 000 it is exchanged for a similar machine with affair
value of P576, 000 and the proper amount of cash is paid. The loss to be recognized on
exchange is
a. P48, 000
b. P24, 000
c. P168, 000
d. 0
7. On July 1, 2010 Joshua corporation purchased factory equipment for P450, 000. Residual value
was estimated to be P12, 000 the equipment will be depreciated over ten years using the
double declining balance method. Counting the year of acquisition as one half year, Joshua
should record depreciation expense for 2011 on this equipment of
a. P90, 000
b. P81, 000
c. P78, 840
d. P72, 000
8. Judges company quarries limestone, crushes it and sells it to be used in road building. Judges
paid P20, 000 for a certain quarry on January 1, 2010.the property can be sold for P4, 000, 000
after production ceases. The original total estimated reserves totaled 5, 000, 000 tons. In 2011.
An engineering study performed in 2011 indicated that as of December 31, 2011, 4, 500, 000
tons were available. Judges company should record 2011 depletion at
a. P3, 600, 000
b. P6, 000, 000
c. P4, 800, 000
d. P4, 500, 000
9. On July 1, 2011 Ruth Co. sold a machine costing P500, 000 with accumulated depreciation of
P380, 000 on the date of sale. Ruth received as consideration for the sale a P300, 000
noninterest bearing note. Due July 1, 2014. There was no established exchange price for the
equipment and the note had no ready market. The prevailing rate of interest for a note of this
type at July 1, 2011 was 12% and 13% on December 31, 2011. In relation to this transaction, the
total income to be recognized in Ruth’s 2011 profit or loss is (round off present value factors to
four decimal places)
a. P180, 000
b. P119, 165
c. P101, 445
d. P106, 352
10. On August 1, Samuel Corporation assigned P20, 000 of its P56, 000 of accounts receivable the
finance company advanced 90% of the assigned accounts less a P2, 000 fees. Interest is 12% and
payable monthly on the beginning of period loan balance. A loan payment is remitted at the end
 of each month. Each payment includes principal and interest the amount of each loan payment
equals the cash collected on receivables during the month plus interest on the loan balance.

If P8, 000 was collected on accounts receivable during the August the entry for the first loan
payment would include a
a. Debit to interest expense of P180
b. Credit to cash of P8, 000
c. Credit to account receivable assigned of P8, 000
d. Debit to notes payable of P8, 100

Use the following information for the next two questions:

The following data pertains to Kings Co’s investment in marketable equity securities:

Fair Value

Cost 12/31/11 12/31/10

Trading P150, 000 P155, 000 P100, 000
Available for sale P150, 000 P130, 000 P120, 000

11. What amount should kings report as unrealized holding gain in its 2011 income statements?
a. P50, 000
b. P55, 000
c. P60, 000
d. P65, 000
12. What amount should kings report as net unrealized loss on marketable equity securities at
December 31, 2011, in accumulated other comprehensive income in shareholders equity?
a. P0
b. P10, 000
c. P15, 000
d. P20, 000
13. In January 2011, Chronicles Corporation acquired 20 percent of the outstanding ordinary shares
of Ezra Company for P1, 120, 000. This investment gave Chronicles the ability to exercise
significant influence over Ezra. The book value of the acquired share was P840, 000. The excess
of cost over book value was attributed to an identifiable intangible assets that was undervalued
on Ezra balance sheet and that had a remaining useful life of ten years. For the year ended
December 31, 2011, Ezra reported net income of P252, 000 and paid cash dividends of P56, 000
on its ordinary shares what is the proper carrying value of chronicles investment in Ezra at
December 31, 2011?
a. P1, 080, 800
b. P1, 092, 000
c. P1, 131, 200
d. P1, 181, 600
14. On February 1, 2011 Nehemiah Corporation purchased 5 year bonds with face value of P2, 000,
000 and stated interest of 12% per year payable annually every January 1. The bonds were
acquired to yield 10%. How much was the total amount paid to purchase the bonds? (round off
present value factors to four decimal places)
a. P2, 151, 592
b. P2, 149, 522
c. P2, 126, 751
d. P2, 169, 522
15. The Esther Company purchases P2, 000, 000 of bonds. The asset has been designated as one at
fair value through profit and loss.

One year later, 10% of the bonds are sold for P400, 000 total cumulative gains previously
recognized in Esther financial statements in respect of the assets are P100, 000

In accordance with PAS 39 financial instruments recognition and measurement what is the
amount of the begin on disposal to be recognized in profit or loss?
a. P190, 000
b. P90, 000
c. P200, 000
d. P100, 000
16. On January 1, 2010 Job Corporation enters into a forward contract to purchase on January 1,
2012. A specified number of barrels of oil at a fixed price. Entity A is speculating that the price of
oil will increase and plans to net settle the contract if the price increases. Job corporation does
not pay anything to enter into the forward contract on January 1, 2010. Job corporation does
not designate the forward contract as a hedging instrument. At the end of 2010 the fair value of
the forward contract has increased to P400, 000. At the end of 2011 the fair value of the
forward contract has declined to P350, 000. How much should be recognized in 2011 profit or
loss related to this forward contract?
a. P400, 000
b. P350, 000
c. P50, 000
d. P0
17. The Psalms Company has hedged the cash flow relating to its interest rate risk by purchasing an
interest rate cap. Interest rate when risen and the hedge has proved to be 90% effective based
on the amount hedged. Additional interest charges up to the end of the financial year amount to
P24, 000

In accordance with PAS 39, financial instruments recognition and measurement what amount
relating to the additional interest cost should be recognized in profit or loss?
a. Nil
b. P2, 400
c. P21, 600
 d. P24, 000
18. On January 1, 2011 Psalms corporation adopted a plan to accumulate funds for a new plant
building to be erected beginning July 1, 2016, at an estimated cost of P6, 000, 000. Psalms
intend to make five equal annual deposits in a fund that will earn interest at 8% compounded
annually. The first deposit is made on July 1, 2011. Present value and future amount factors are
as follows:

Present value of 1 at 8% for 5 periods 0.68

Present value of 1 at 8% for 6 periods 0.63
Future amount of ordinary annuity of 1 at
8% for 5 periods 5.87
Future amount of annuity in advance of 1
At 8% for 5 periods 6.34

Psalms should make five annual deposits (rounded) of

a. P1, 022, 150
b. P816, 000
c. P946,400
d. P756, 000
19. On July 1, 2005 Ecclesiastes Corporation issued for P960, 000 one thousand of its 9 percent P1,
000 callable bonds. The bonds are dated July 1, 2005. And mature on July 1 , 2015. Interest is
payable semiannually on January 1 and July 1. Ecclesiastes uses the straight line method of
amortizing bond discount. The bonds can be called by the issuer at 101 at any time after June
30, 2010. On July 1, 2011. Ecclesiastes called in all of the bonds and retired them. Ignoring
income taxes, how much loss should ecclesiasts report on this early extinguishment of debt for
the year ended December 31, 2011?
a. P50, 000
b. P34, 000
c. P26, 000
d. P10, 000
20. On July 1, 2011, Song of songs manufacturing Co. issued a five year note payable with a face
amount of P250, 000 and an interest rate of 10 percent. The terms of the note require song of
songs to make five annual payments of 50, 000 plus accrued interest, with the first payment due
June 30, 2012. With respect to the note. The current liabilities section of Song of songs
December 31, 2011, statements of financial position should include
a. P12, 500
b. P50, 000
c. P62, 500
d. P75, 000
21. On July 1, 2009 Isaiah Inc. leased a delivery truck from Marr corp. under a three year operating
lease. Total rent for the term of the lease will be P360, 000 payable as follows:
 12 months at P5, 000= P60, 000
12 month at P7, 500= P90, 000
12 months at P17, 500= P210, 000

All payments were made when due. In Mars June 30, 2011 balance sheet, the accrued rent
receivable should be reported as
a. P0
b. P90, 000
c. P120, 000
d. P210, 000
22. On January 2011 the Jeremiah company leased a van with a fair value of P37, 000 under a
finance lease. The lease term is 6 years and the present value of the minimum lease payments is
P35, 520. The useful life of the van to the business was estimated at 7 years with no final
residual value. The company operates a policy of straight line depreciation what is the
depreciation charge on the van in 2011?
a. P5, 074
b. P5, 286
c. P5, 920
d. P6, 167

Use the following information for the next two questions;

To encourage employees older than 60 years to extend their employment with the entity
lamentations corporation promises its 60 years old employees a lump sum benefit equal to 1 per
cent of final salary for each year of service they remain employed by the entity after their 6oth
birthday provided they remain in the employ of SME B until they are 65, at which time, in
accordance with local laws. Employees are required to retire. The benefit is payable to the
employees on retirement.

Employee A/s 6oth birthday is on 1 January 2011. Her salary for the year ended 31 December
2011 is P100, 000.

At 31 December 2011 the entity made the following actuarial assumptions:

 Employee A’s salary should increase by 5 percent (compound each year
 There is a 20 per cent probability that employee A’s employment with the entity will
terminate before 1 January 2016.
 The appropriate discount rate is 10 percent per year

Employee A’s salary for 2012 is P105, 000.

 At 31 December 2012. The entity revised its actuarial assumptions as follows:
 Employee A’s salary should increase by 15 percent (compound each year)
 There is a 10 percent probability that employee A’s employment with the entity will
terminate before reaching retirement date of 1 January 2016.
 The appropriate discount rate remains 10 percent per year

The entity does not found its obligation to pay Lump sum benefits it recognizes all actuarial gains and
losses immediately in other comprehensive income. (round off future and present value factors to four
decimal places)
23. Calculate the amount that the entity would recognize in profit or loss for the year ended 31
December 2012.
a. P1, 146
b. P1, 080
c. P1, 437
d. P1, 534
24. Calculate the amount that the entity would recognize in other comprehensive income for the
year ended 31 December 2012.
a. P1, 014
b. P1, 080
c. P350
d. Nil
25. The Ezekiel Corporations president has a profit sharing agreement with the company the
agreement states that the president is to receive a bonus consisting of a basic amount
equivalent to 10% of the company net income before deduction of nous but after deduction of
income tax. In additional the basic bonus shall be increased by the company tax savings on
bonus because the total amount of bonus is deductible in computing because the total amount
of bonus is deductible in computing the company taxable income. The company registered a net
income of P5, 000, 000 before deduction of the president bonus an income tax. The company is
subject to corporate income tax of 30% the total bonus due to the president is
a. P522, 388
b. P360, 825
c. P339, 806
d. P263, 158
26. On January 2, 2011 Daniel corporation granted share options to key employees for the purchase
of P60, 000 ordinary shares of the entity at P25 per share. The options are intended to
compensate employees for the next two years. The options are exercisable within a four year
period beginning January 1, 2013. By grantees still in the employ of the entity. The fair value of
the option determined by an option pricing model is P7 at the grant date. Daniel plans to
distribute up to P60, 000 treasury shares when options are exercised. The treasury share was
acquired by Daniel at a cost of P28 per share and was recorded under the cost method. Assume
 that no share options were terminated during the year. How much should Daniel charge to
compensation expense for the year ended December 31, 2011?
a. P420, 000
b. P210, 000
c. P180, 000
d. P90, 000
27. Hosea Corporation gives warranties at the time of sale to purchasers of its product. Under the
terms of the contract for sale the manufacturer undertakes to make good. By repair or
replacement, manufacturing defects that become apparent within one year from the date of
sale. On the basis of experience, it is probable (i.e. more likely than not) that there will be some
claims under the warranties.

Sales of P10 million were made evenly throughout 2011.

At 31 December 2011 the expenditures for warranty repairs and replacements for the product
sold in 2011 are expected to be made 50 per cent in 2011 and 50 percent in 2012. Assume for
simplicity that all the 2012 outflows of economic benefits related to the warranty repairs and
replacements take place on 30 June 2012.

Experience indicates that 95 percent of products sold require not warranty repairs. 3 percent of
products sold require minor repairs costing 10 percent of the sale price: and 2 percent of
products sold require major repairs or replacement costing 90 percent of sale price.

The entity has no reason to believe future warranty claims will be different from its experience.

At 31 December 2011 the appropriate discount factor for cash flows expected to occur on 30
June 2012. Is 0.95238. Furthermore, an appropriate risk adjustment factor to reflect the
uncertainties in the cash flow estimates is an increment of 6 percent to the probability weighted
expected cash flows.

At 31 December 2011 the entity recognizes a warranty provision measured at:

a. P210, 000
b. P222, 600
c. P113, 300
d. P106, 000
28. Joel Corporation is the defendant in a breach of patent lawsuit, it lawyers believe there is a 70
per cent chance that the entity will successfully defend the case. However, if the court rules in
favor of the claimant the lawyers believe that there is a 60 percent chance that the entity will be
required to pay damages of P2 million ( the amount sought by the claimant) and a 40 per cent
chance that the entity will be required to pay damages of P1 million (the amount that was
recently awarded by the same judge in a similar case.) other amounts of damages are unlikely.
 The court is expected to rule in late December of the following year. There is no indication that
the claimant will settle out of court.

A 7 percent risk adjustment factor to the cash flow is considered appropriate to reflect the
uncertainties in the cash flow estimates

How much the entity should recognizes as provision for damages at the end of the current year?
a. P1, 600, 000
b. P1, 500, 000
c. P1, 712, 000
d. Nil
29. On December 31, 2011, the warranty liability was estimated to be P500, 000. On January 16,
2012 results of a study done before December 31, 2011 were received. These study results
indicate that products would require much larger amount of warranty repairs than expected
total warranty repairs will be P875, 000 instead of the estimated P500, 000 the financial
statements were authorized for issue on February 1, 2012. What amount should be reported as
warranty liability in the December 31, 2011 statement of financial position?
a. P875, 000
b. P687, 500
c. P500, 000
d. P0
30. Amos Company has the following financial statement elements for which the December 31,
2011 carrying amount is different from the December 31, 2011 tax basis:

Carrying amount tax basis difference

Equipment 5, 500, 000 4, 000, 000 1, 500, 000
Prepaid officer’s insurance policy 50, 000 0 50, 000
Warranty liability 500, 000 0 500, 000
Computer software cost 2, 250, 000 0 2, 250, 000

The difference between the carrying amount and tax basis of the equipment is due to
accelerated depreciation for tax purposes. The insurance premium on the officers insurance
policy is paid on December 31, 2011 and the amount is a nondeductible expense for tax
purposes. The warranty liability is the estimated warranty cost that was recognized as expense
in 2011 but deductible for tax purposes when actually paid.

In January 2011, Amos Company incurred P3, 000, 000 of computer software cost. Considering
the technical feasibility of the project, this cost was capitalized and amortized over 4 years for
accounting purposes. However, the total amount was expensed in 2011 for tax purposes. The
income tax rate is 35%.
 As a result of these differences, Amos Company shall report a deferred tax liability on
December 31, 2011 at
a. P1, 312, 500
b. P1, 330, 000
c. P1, 137, 500
d. P525, 000
31. The Obadiah Corporation was incorporated on January 1, 2011 with the following authorized
capitalization:
 40, 000 ordinary shares no par value stated value P40 per share
 10, 000 5 percent cumulative preference shares, par value P10 per share

During 2011, Obadiah issued 24, 000 ordinary shares for a total of P1, 200, 000 and 6, 000
preference shares at P16 per share. In addition, on December 20, 2011, subscriptions for 2, 000
preference shares were taken at a purchase price of P17. These subscribed shares were paid for
on January 2, 2012. What should Obadiah report as total contributed capital on its December
31, 2011 statement of financial position?
a. P1, 040, 000
b. P1, 262, 000
c. P1, 296, 000
d. P1, 330, 000
32. On July 1, 2011 Jonah Corporation has 200, 000 shares of P10 par ordinary shares. Outstanding
and the market price of the stock is P12 per share. On the same date, Jonah declared a 1-for 2
reverse share split. The par of the share was increased from P10 to P20 and one new P20 par
share was issued for each two P10 par shares outstanding. Immediately before the 1-for-2
reverse share profit, Jonah share premium was P450, 000 what should be the balance in Jonah
share premium account immediately after the reverse share split is effected?
a. P0
b. 450, 000
c. P650, 000
d. P850, 000
33. Micah Co. owned 30, 000 ordinary shares of Nahum corporation purchased in 2008 for P540,
000. On September 20, 2011 Micah declared a property dividend of 1 share of Nahum for every
5 shares of Micah held by stockholders. On that date, there were 50, 000 ordinary shares of
Micah outstanding, and the market value of Nahum shares was P30 per share. The entry to
record the declaration of the property dividend would include a debit to retained earnings of
a. P540, 000
b. P180, 000
c. P300, 000
d. P0
34. The shareholders equity for the Habakuk foods. Inc. on December 31, 2011 follows:
12% preference share capital, P100
Par 20, 000 shares. P2, 000, 000
Ordinary share capital P25 par
200, 000 shares 5, 000, 000
Share premium 500, 000
Retained earnings 750, 000
Total shareholder equity P8, 250, 000

Preference shares have a liquidation value of P110 shares are cumulative with dividends in
arrears for 3 years including the current year and fully payable in the event of liquidation the
book value of an ordinary share is
a. P28.85
b. P25.35
c. P26.65
d. P22.90

Use the following information for the next two questions:

An employee of the controller’s office of Zephaniah Corporation was given the assignment of
determining the basic and diluted earnings per share value for the year ending December 31,
2011. The employee has compiled the information listed below.
a. The company is authorized to issue 8, 000, 000 P10 par value ordinary shares. As of
December 31, 2010, 3, 000, 000 shares had been issued and were outstanding
b. The per share market prices of ordinary shares on selected dates were as follows:

Price per share

July 1, 2010 P20.00
January 1, 2011 21.00
April1, 2011 25.00
July 1, 2011 11.00
August 1, 2011 10.50
November 1, 2011 9.00
December 31, 2011 10.00

Preference share have a liquidation value of P110: shares are cumulative with dividends in
arrears for 3 years including the current year and fully payable in the event of liquidation the
book value of an ordinary share is
a. P28.85
b. P25.35
c. P26.65
d. P22.90
Use the following information for the next two questions:

An employee of the controller office of Zephaniah Corporation was given the assignment of
determining the basic and diluted earnings per share values for the year ending December
31, 2011. The employee has compiled the information listed below.
a. The company is authorized to issue 8, 000, 000 P10 par value ordinary shares. As of
December 31, 2010, 3, 000, 000 shares had been issued and were outstanding
b. The per share market prices of the ordinary shares on selected date were as follows
Price per share
July 1, 2010 P20.00
January 1, 2011 21.00
April 1, 2011 25.00
July 1, 2011 11.00
August 1, 2011 10.50
November 1, 2011 9.00
December 31, 2011 10.00
c. A total of 700, 000 shares of an authorized 1, 200, 000 shares of convertible preferred
shares had been issued on July 1, 2010 the share was issued at its par value of P25 and it
has a cumulative dividend of P3 per share. The share is convertible into ordinary shares
at the rate of one share of convertible preference for one share of ordinary. The rate of
conversion is to be automatically adjusted for share split and share dividends. Dividends
are paid quarterly on September 30, December 31, March 31 and June 30.
d. Zephaniah Corporation is subject to a 40% income tax rate
e. The after tax profit for the year ended December 31, 2011 was P13, 550, 000

The following specific activities took place during 2011.

1. January 1- a 5% ordinary share dividend was issued. The dividend had been declared on
December 1, 2010 to all shareholders of record on December 29, 2010
2. April 1- a total of 200, 000 preference shares was converted into ordinary shares. The
company issued new ordinary shares and retired the preference shares.
3. July 1- A 2 for 1- ordinary shares split became effective on this date. The board of
directors had authorized the split on June 1.
4. August 1- a total of 300, 000 ordinary shares were issued to Acquire a factory building
5. November 1- a total of 24, 000 ordinary shares were purchased on the open market at
P9 per share. These shares were to be held as treasury shares and were still on the
treasury as of December 31, 2011.
6. Ordinary shares cash dividend- cash dividend to ordinary shareholders were declared
and paid as follows
April 15- P0.30 per share
October 15- P0.20 per share
7. Preference shares cash dividends- cash dividends to preference shareholders were
declared and paid as scheduled
 35. Determine the number of shares used to compute basic earnings per share for the year ended
December 31, 2011.
a. P6, 736, 000
b. P6, 367, 000
c. 6, 763, 000
d. 6, 637, 000
36. Determine the number of shares used to compute diluted earnings per share for the year ended
December 31, 2011.
a. P7, 891, 000
b. P7, 981, 000
c. P7, 836, 000
d. P7, 286, 000
37. Haggai corp. reports on a calendar year basis. Its 2010 and 2011 financial statements contained
the following errors.

2010 2011
Over (under) statement of ending inventory P (10, 000) P4, 000
Depreciation understatement 4, 000 6, 000
Failure to accrued salaries at year end 8, 000 12, 000

As a result of the above errors, 2011 income would be

a. Overstated by 4, 000
b. Overstated by 22, 000
c. Overstated by 24, 000
d. Overstated by 16, 000

Use the following information for the next two questions:

The account and balances shown below were gathered from Zechariah corporation’s trial balance on
December 31, 2011. All adjusting entries have been made.

Wages payable 25, 600

Cash 17, 700
Mortgage payable 151, 600
Dividends payable 14, 000
Prepaid rent 13, 600
Inventory 81, 800
Sinking fund assets 52, 400
Short term investment 15, 200
Premium on bonds payable 4, 600
Stock investment in subsidiary 102, 400
Taxes payable 22, 800
Accounts payable 24, 800
Accounts receivable 36, 600

38. The amount that should be reported as current assets on Zechariah corporation statement of
financial statement of financial position is
a. P151, 300
b. P217, 300
c. P164, 900
d. P267, 300
39. The amount that should be reported as current liabilities on Zechariah corporation statement of
financial position is
a. P91, 800
b. P238, 800
c. P87, 200
d. P73, 200
40. On December 31, 2011, Malachi corporation’s current liabilities total P50, 000 and long term
liabilities total P150, 000 working capital at December 31, 2011 is equal to P80, 000. If Malachi
corporation debt to equity ratio is .32 to 1 total long term assets must equal
a. P625, 000
b. P745, 000
c. P795, 000
d. P695, 000
41. The following information for 2011 is provided by Matthew Company:

Sales P20, 000, 000

Cost of goods sold 12, 000, 000
selling expenses P1, 200, 000
General and administrative expense 1, 800, 000
Interest expense 1, 500, 000
Gain on early extinguishment of long term debt 500, 000
Correction of inventory error, net of income tax-credit 800, 000
Investment income-equity method 600, 000
Gain on sale of investment 2, 000,000
Income tax expense 2, 100,000
Dividends declared 2, 500,000

What was the 011 income from continuing operations?

a. P4, 900, 000
b. P4, 500, 000
c. P6, 600, 000
d. P7, 000, 000
42. An analysis of Mark Inc., disclosed changes in account balances for 2011 and the following
supplementary data.

Cash P21, 000 increase

Accounts receivable 25, 000 increase
Inventory 10, 000 decrease
Equipment 70, 000 increase
Accounts payable 5, 000 decrease

Mark sold 5, 000 shares of its P5 par shares for P8 per share and received cash in full. Dividends
of P15, 000 were paid in cash during the year. Mark borrowed P50, 000 from the bank and made
interest payments of P5, 000. Mark had no there loans payable. Interest of P1, 000 was payable
at December 31, 2011. There was no interest payable at December 31, 2010. Equipment of P20,
000 was donated by shareholders during the year.

From these data, the profit for 2011 is

a. P15, 000
b. P10, 000
c. P20, 000
d. P65, 000
43. Luke company began the current year with the following:

Accounts receivable P100, 000

Allowance for doubtful accounts (8,000)
Net account receivable 92, 000

During the current year, the following events occurred

Accounts written off P12, 000

Sales on account 300, 000
Bad debt expense recognized 20, 000

At the end of the current year, the company showed a balance in gross accounts receivable
(before the allowance for doubtful accounts ) of P168, 000.

What amount would be shown as an operating cash inflow in the statement of cash flow under
the indirect method?
a. P210, 000
b. P220, 000
c. P300, 000
d. P282, 000
44. The following information is available from the financial statements of john Corporation for the
year ended December 31, 2011.

Net income P396, 000

Depreciation expense 102, 000
Decrease in accounts receivable 126, 000
Increase in inventories 90, 000
Increase in account payable 24, 000
Payment of dividends 54, 000
Purchase of available for sale securities 22, 000
Decrease in income taxes payable 16, 000

What is John Corporation net cash flow from operating activities?

a. P440, 000
b. P466, 000
c. P520, 000
d. P542, 000
45. Acts Inc. paid P1, 200, 000 in December 2010 for its inventory in December 2011, one half of the
inventory was sold for P1, 000, 000 when the replacement cost of the original inventory was P1,
400, 000. Ignoring income taxes, what amount should be shown in the current cost accounting
income statements for 2011?
a. P500, 000
b. P400, 000
c. P300, 000
d. P200, 000
46. Romans corporations as SME amends its pension plan on 1/1/11. The following information is
available:

1/1/11 before amendment 1/1/11 after amendment

Accumulated benefit obligation P950, 000 P1, 425, 000
Projected benefit obligation P1, 300, 000 P1, 900, 000

In accordance with section 28 of PFRS for SME the total amount of unrecognized prior service
cost to be amortized over future periods as a result of this amendment is

a. P950, 000
b. P600, 000
c. P475, 000
d. Nil
47. Presented below is the December 31 trial balance of Corinthians company:
 Corinthians Company
Trial Balance
December 31, 2011
Debit Credit
Cash P14, 800
Accounts receivable 33, 600
Allow for doubtful accounts 2, 160
Inventory, January 1 62, 400
Furniture and equipment 67, 200
Acc. Dep. January 1 26, 880
Prepaid insurance 4, 080
Notes payable 22, 400
Owner, capital 72, 000
Sales 480, 000
Purchases 320, 000
Sales salaries expense 40, 000
Advertising expense 5, 360
Administrative salaries expense 52, 000
Office expense 4, 000
P603, 440 P603, 440

Information necessary for the preparation of adjusting journal entries:

a. Adjust the allowance for doubtful accounts to 8 percent of the accounts receivable
b. Furniture and equipment is depreciated at 20 percent per year
c. Insurance expired during the year P2, 040
d. Interest accrued on notes payable P2, 688
e. Sales salaries incurred but not paid P1, 920
f. Advertising paid in advance P560
g. Office supplies on hand P1, 200 charges to office expense when purchased
h. Inventory on December 31, P64, 000

Disregarding income taxes, the adjusted profit is

a. P39, 224
b. P41, 384
c. P41, 912
d. P44, 072
48. The following segments were identified for Galatians corporation:
 Segment operating profit (loss)
1 P1, 000, 000
2 200, 000
3 (500, 000)
4 (100, 000)

Which of the four segments is a reportable segment?

a. 1 and 2 only
b. 1 and 3 only
c. 1, 2,3 and 4 only
d. All four
49. The Ephesians company accounts for noncurrent asset using the cost model. On 30 October
2011 Ephesians classified noncurrent assets as held for sale in accordance with PFRS noncurrent
assets held for sale and discontinued operations at that date the assets carrying amount was
P15, 000, 000 its fair value was estimated at P11, 000, 000 and the costs to sell at P1, 500, 000
on 20 November 2011 the assets was sold for net proceeds of P9, 200, 000 in accordance with
PFRS 5, what amount should be included as a loss on disposal in Ephesians statements of
comprehensive income for the year ended 31 December 2011?
a. Nil
b. P4, 300, 000
c. P5, 800, 000
d. P300, 000
50. The Philippians company profit before tax for the six months to 30 September 2011 was P5
million. However the business is seasonal and profit before tax for the six months to 31 March
2012. Is almost certain to be P9 million. Profit before tax equals taxable profit for this company.
Philippians operates in a country where income tax on companies is at a rate of 30% if annual
profits are below P11 million and a rate of 35% where annual profits exceed P11 million. These
tax rates apply to the entire profit for the year

Under PAS 34 interim financial reporting, what should be the income tax expense in Philippines
interim financial statements for the half year to 30 September 2011?
a. P1.75 million
b. P2.10 million
c. P1.50 million
d. P2.45 million