Professional Documents
Culture Documents
14. Baggao Company’s accounts payable balance at December 31, 2005 was
9. On January 2, 2005, Trent Company signed an 8-year noncancelable lease for a P8,000,000 before considering the following data:
new machine requiring P1,500,000 annual payments at the beginning of each year.
The machine has a useful life of 12 years with no residual value. Title passes to Goods shipped to Baggao FOB shipping point on December 15, 2005
Trent at the lease expiration date. Trent uses the straight-line depreciation for all of were lost in transit. The invoice cost of P500,000 was not recorded by
its plant assets. Aggregate lease payments have a present value on January 2, Baggao. On January 15, 2006, Baggao filed a P500,000 claim against
2005 of P5,400,000 based on an appropriate interest rate. For 2005, Trent should the common carrier.
record depreciation expense for the leased machine at
a. P1,500,000 c. P675,000 On December 30, 2005, a vendor authorized Baggao to return for full
b. P 450,000 d. P325,000 credit goods shipped and billed at P200,000 on December 15, 2005.
The returned goods were shipped by Baggao on December 31, 2005.
Sabarre Inc. leases equipment to its customers under noncancelable leases. On A P200,000 credit memo was received and recorded on January 5,
January 1, 2005, Sabarre leased equipment costing P4,000,000 to Rebasa Co., for 2006.
nine years. The rental cost was P440,000 payable in advance semiannually What should Baggao report as accounts payable on December 31, 2005?
(January 1 and July 1), plus P20,000 semiannually for executory costs. The a. P8,300,000 c. P7,800,000
equipment had an estimated life of 15 years and sold for P5,330,250 with an b. P8,500,000 d. P7,500,000
estimated unguaranteed residual value of P800,000. The implicit interest rate is 12
percent.
15. Manapla Company computed a pretax financial income of P15,000,000 for the
10. How much is the total interest income from lease that will be earned by Sabarre, year ended December 31, 2005. In preparing the tax return, the following
Inc.? differences are noted between financial income and taxable income.
a. P2,869,988 b. P3,675,616 c. P3,389,748 d. P0
Nondeductible expense
11. Using the same information in no. 20, Sabarre, Inc. should report profit on the 2,000,000
sale at Nontaxable revenue
a. P1,330,252 b. P1,050,012 c. P1,044,384 d. 1,000,000
P1,338,492
Estimated warranty cost that was recognized as expense in 2005 but
deductible for tax purposes when paid 1,500,000 4. A working capital technique that increases the payable float and therefore delays the
Excess tax depreciation over financial depreciation 500,000 outflow of cash is
What is the current tax expense for 2005 if the tax rate is 32%? a. Concentration banking.
a. P5,440,000 c. P4,800,000 b. A draft.
b. P5,600,000 d. P5,120,000 c. Electronic Data Interchange (EDI).
d. A lockbox system.
MAS 5. Newman Products has received proposals from several banks to establish a lockbox
system to speed up receipts. Newman receives an average of 700 checks per day averaging
1. An individual receives an income of $3,000 per month, and spends $2,500. An increase in $1,800 each, and its cost of short-term funds is 7% per year. Assuming that all proposals will
income of $500 per month occurs, and the individual spends $2,800. The individual’s produce
marginal propensity to save is equivalent processing results and using a 360-day year, which one of the following proposals
a. 0.2 is optimal for Newman?
b. 0.4 a. A $0.50 fee per check.
c. 0.6 b. A flat fee of $125,000 per year.
d. 0.8 c. A fee of 0.03% of the amount collected.
d. A compensating balance of $1,750,000.
2. In any competitive market, an equal increase in both demand and supply can be expected
to always 6. The return paid for the use of borrowed capital is referred to as
a. Increase both price and market-clearing quantity. a. Cash dividends.
b. Decrease both price and market-clearing quantity. b. Stock dividends.
c. Increase market-clearing quantity. c. Interest.
d. Increase price. d. Principal payment.
3. An organization has an opportunity to establish a zero balance account system using four 7. In valuing interest rate swaps, the zero-coupon method uses all of the following variables
different regional banks. The total amount of the maintenance and transfer fees is except
estimated to be $6,000 per annum. The organization believes that it will increase the float a. Discount rate.
on its operating disbursements by an average of four days, and its cost of shortterm funds is b. Timing of cash flows as specified by the contract.
4.5%. Assuming the organization estimates its average daily operating disbursements to be c. Estimated net settlement cash flows.
$40,000 what decision should the organization make regarding this opportunity? d. Underlying assets.
a. Do not establish the zero balance account system because it results in estimated
additional net costs of $6,000. 8. Which of the following risks relates to the possibility that a derivative might not be
b. Do not establish the zero balance account system because it results in estimated effective at hedging a particular asset?
additional net costs of $1,200. a. Credit risk.
c. Establish the zero balance account system because it results in estimated net savings of b. Legal risk.
$1,200. c. Market risk.
d. Establish the zero balance account system because it results in estimated net savings of d. Basis risk.
$7,200.
9. A firm has daily cash receipts of $100,000. A bank has offered to reduce the collection methodology, if the company wants to reduce these costs, the most likely place to incur
time on the firm’s deposits by two days for a monthly fee of $500. If money market rates are costs would be for
expected to average 6% during the year, the net annual benefit (loss) from having this a. Prevention.
service is b. Appraisal.
a. $ 3,000 c. Internal failure.
b. $12,000 d. External failure.
c. $0
d. $ 6,000 15. In the cost of quality, costs incurred in detecting individual units of product that do not
conform to specifications are
10. A minimum checking account balance that a firm must maintain with a commercial bank a. Prevention costs.
is a b. Appraisal costs.
a. Transaction balance. c. Internal failure costs.
b. Compensating balance. d. External failure costs.
c. Precautionary balance.
d. Speculative balance.
TOA
11. Which of the following will cause a shift in the supply curve of a product? 1. Receivables denominated in a foreign currency should be
a. Changes in the price of the product. a. Translated to local currency using the exchange rate at the time the
b. Changes in production taxes. receivables arise
c. Changes in consumer tastes. b. Shown at face value of the foreign currency
d. Changes in the number of buyers in the market. c. Translated to local currency using the exchange rate at balance sheet date
d. Translated to local currency using the exchange rate when the balance sheet
12. In the cost of quality, which of the following is an example of an “internal failure”? is issued
a. Cost of inspecting products on the production line by quality inspectors.
b. Labor cost of product designers whose task is to design components that will not break 2. Trade receivables are classified as current assets when they are reasonably
expected to be collected
under extreme temperature conditions.
a. Within one year
c. Cost of reworking defective parts detected by the quality assurance group.
b. Within the normal operating cycle
d. Cost of parts returned by customers. c. Within one year or within the normal operating cycle whichever is shorter
d. Within one year or within the normal operating cycle whichever is longer
13. In the cost of quality, which of the following is an example of a “prevention cost”?
a. Cost of inspecting products on the production line by quality inspectors.
b. Labor cost of product designers whose task is to design components that will not break 3. Which statement is incorrect concerning the reversal of an impairment loss?
under extreme temperature conditions. a. The increased carrying amount due to reversal should not be more than what
c. Cost of reworking defective parts detected by the quality assurance group. the depreciated historical cost would have been if the impairment had not been
d. Cost of parts returned by customers. recognized.
b. Reversal of an impairment loss is recognized as income in the income
14. Delta Manufacturing Co. has had a problem with its product quality. The company has statement.
had a large amount of costs related to product recalls. In considering cost of quality c. Adjust depreciation for future periods.
d. Reversal of an impairment loss for goodwill is recognized as income in the d. The straight line method in all circumstances
income statement.
4. The best definition of useful life of an intangible asset is
4. An entity shall choose either the cost model or revaluation model as its a. The legal life of the intangible.
accounting policy in measuring intangible asset. Which statement is correct? b. The period over which management believes the intangible asset will
I. The cost model means that an intangible asset shall be carried at cost less contribute to the revenue-producing process.
any accumulated amortization and any accumulated impairment loss. c. Twenty years.
II. The revaluation model means that an intangible asset shall be carried at d. The period over which the cost of the asset can be deducted for income tax
revalued amount less any subsequent accumulated amortization and any purposes.
subsequent accumulated impairment loss.
a. I only b. II only c. Both I and II d. 5. Which of the following factors should not be considered in estimating the
Neither I nor II useful life of intangible asset?
a. Legal, regulatory or contractual provision
1. Which is not within the definition of an intangible asset? b. Expected action by competitors or potential competitors
a. Held for use in the production or supply of goods or services, for rental to c. Residual value
others, or for administrative purposes. d. Typical product life cycle of the asset
b. Identifiable nonmonetary asset without physical substance.
c. A resource controlled by an enterprise as a result of past events. 6. It is the systematic allocation of the cost of an intangible asset less any
d. A resource from which future economic benefits are expected to flow to the residual value as an expense over the asset’s useful life?
enterprise. a. Depreciation c. Depletion
b. Realization d. Amortization
2. Which is incorrect concerning the recognition and measurement of an
intangible asset? 11. Characteristic(s) common to all joint ventures include
a. If an intangible asset is acquired separately, the cost comprises its a. Two or more venturers are bound by a contractual arrangement.
purchase price, including import duties and taxes and any directly attributable b. The contractual arrangement establishes joint control.
expenditure of preparing the asset for its intended use. c. The use of proportionate consolidation.
b. If an intangible asset is acquired in a business combination that is an d. Both a and b.
acquisition, the cost is based on its fair value at the date of acquisition.
c. If an intangible asset is acquired free of charge or by way of government 12. Investment property excludes
grant, the cost is equal to its fair value. a. Land held for long-term capital appreciation.
d. If payment for an intangible asset is deferred beyond normal credit terms, b. Building leased out under an operating lease.
its cost is equal to the total payments over the credit period. c. Property that is being redeveloped for continuing use as investment property.
d. Property that is being constructed or developed for use as an investment
3. The appropriate method of amortizing intangible asset is best described by property.
which of the following?
a. The straight line method, unless the pattern in which the asset’s economic 13. Which statement is correct regarding the application of the equity method of
accounting for investments in associates?
benefits are consumed by the enterprise can be determined reliably.
a. The equity investment is initially recorded at cost.
b. The double declining balance in all circumstances
b. The equity investment is increased by the investor's share of the net loss of
c. Management can make a subjective amount of periodic amortization the associate.
without regard to any particular method
c. Distributions received from the investee increase the carrying amount of the Post dated checks totaling P37,900, were included in the deposits in transit.
investment. This represents collection of accounts receivables from customers. The checks were
d. The investor's share of profit or loss of the investee and of changes in the actually deposited on January 5, 2011.
investee's equity is determined on the basis of total potential ownership interests. On December 28, 2010, the company issued checks to creditors totaling
P115,000. These checks were released on January 5, 2011.
14. Which is incorrect concerning depreciation of PPE? A check dated December 12,2010 in payment of accounts payable was
a. The depreciation method used should reflect the pattern in which the asset's recorded as P12,000. Upon examination of the checks returned by the bank, the
economic benefits are consumed by the enterprise. actual amount was P21,000.
b. The depreciation method should be reviewed at least annually and, if the A check for P4, 750 in payment of a minor repair of office equipment was not
pattern of consumption of benefits has changed, the depreciation method should recorded on the company books.
be changed currently and prospectively as a change in estimate. Transfer of fund of P59,300 to Secured Bank Current account of DBS
c. Depreciation should be charged to the income statement, unless it is included Securities was not recorded. This pertains to purchase of 5,000 shares of William
in the carrying amount of another asset. Lines to be held as trading securities. Based on quoted price as of December
d. Depreciation begins when the asset is available for use and continues until the 21,2010, the market value per share is P8.20.
asset is derecognized and became idle. Interest earned amounting to P5,720, was not recorded.
Deposits in transit and outstanding checks at December 31,2010, amounted
15. The residual value of an intangible asset should be presumed zero, unless to P89,200 and P132,000 respectively.
I. There is a commitment by a third party to purchase the asset at the end of The cash in bank balance per book on December 31,2010 is P681,200.
its useful life.
II. There is an active market for the asset and residual value can be The petty cash fund of P35,000 maintained on an imprest basis was counted on
determined by reference to that market and it is probable that such market January 2,2011. Unreplenished expenses include petty cash vouchers for various
will exist at the end of the asset’s useful life. expenses totalling P19,300 and employees' advances for P5,800 all dated
a. Both I and II b. Neither I nor II c. II only d. I only December 2010.
On December 22, 2010, the bank erroneously credited the account of San your physical count of stock certificates disclosed that stock dividend of the ff issues
Felipe Trading for P195,000 representing deposit for the account of another were not yet recorded.
company.
Issue No. of Shares
Seniority Bank 500
Multivit 200 Goods purchased in cash for P41,700 were returened to the supplier on
December 22,2010. These goods were still included in the inventory schedule and
the unadjusted trial balance of the company at December 31,2010 included the ff the refund was received and recorded on January 10,2011.
accounts: Goods consigned to san Felipe totaling P89,500 were included in the physical
count.
Included in the physical count were goods sold to a customer on FOB
Debit Credit shipping point on December 27,2010. These goods with a selling price P52,830 and
Accounts Receivable P1,452,700 a cost of P35,600 were already recorded as sales on account but were shipped only
Allowance for Doubtful Accounts P10,200 on January 5,2011.
Sales P4,820,000
Prepayments consists of:
Prepaid advertising P144,000
Your review of the accounts receivable schedule disclosed that various collections Prepaid rent 165,000
totaling P17,350 were not recorded in the books but already reflected in the Unused office and store supplies 129,000
subsidiary ledgers. You also noted the ff information: Total P438,000
the customer's deposit of P38,000 for goods to be delivered on January 2011 Prepaid advertising consists of payment to an advertising agency for the design of
was deducted from accounts receivable. newspaper ad which will run for period of one year from July 31,2010.
A cash advance to an officer of P75,000 was included as part of accounts
receivable. san Felipe renewed its 5-year lease contract on the opffice building which expired on
Goods sold on account and delivered on December 21,2010 amounting to October 31,2010. total advance rental for 3 months was made amounting to
P31,810 were not recorded. P165,000 was booked as prepaid rent.
Collection of P15,275 on October 31,2010 from Cathay Trading was credited
to the account of Supreme Merchantile. The company books purchased office supplies as inventory, the expense is normally
A promissory note was issued by a customer to San Felipe Trading for goods taken up after the physical count is made at year end. On July 9,2010, a total of
purchased worth P168,000. The promissory note carries an intererest of 12% per P38,450 worth of supplies was bought and included in the inventory, as of year end,
annum with a term of 60 days, value dated November 15,2010. This was reflected as unused supplies inventory per physical count amounted to P53,200. No entry to set
part of accounts receivable. No interest was accrued as of year-end. up the expense was recorded.
Bad debts are provided based on 2% of outstanding accounts receivable at
the end of the year. San Felipe's PPE consist of the ff:
A physical count of merchandise on hand was made on December 30 and 31, 2010, Furniture and Equipment P1,045,000
which reflected a balance of P3,873,000. Your review of inventory list disclosed the Delivery Equipment 1,637,000
ff: Leasehold Improvements 363,000
Total P3,045,000
Goods costing P148,000 shipped FOB shipping point on December 30,2010 Accumulated depreciation (936,500)
by a supplier to San Felipe was received on January 3,2011. the purchase was Net Book Value P2,108,500
recorded on December 30,2010.
Goods costing P195,000, shipped FOB destination by the supplier on the building under this lease was renovated at a cost of P363,000 which was booked
December 28,2010, were recorded and received on January 5,2011. as leasehold improvements on september 30,2010. These improvements will be
amortized over 5 years. No amortization was recorded as at December 31,2010.
July 1,2010 Feb 1, 2011 P500,000 13 1/8%
On May 31,2010, the company bought new computers toatling P325,000. In addition P539,193
to the cost, it paid additional charges which were taken up as Re[pairs Expense. Sept. 15,2010 March 16,2011 2,300,000 14 3/8%
These are delivery chareges- P12,500; installation cost- P11,300; and testing cost- 2,467,149
P6,520. The estimated useful life of these computers is 4 years. No depreciation was Dec. 5,2010 April 4,2011 1,800,000 15 1/2%
provided on the equipment as of December 31,2010. 1,893,000
4,600,000
San Felipe Trading opoened additional stores in nearby localities. To service more P4,899,342
deliveries, additional 3 units of delivery equipment were bought on installment basis
on December 29,2010. The installment price was P1,200,000 but the cash price was Interests are paid on scheduled maturity dates. No accrual was madev as of year
P1,000,000. The terms are P200,000 down paymebt and the balance payable in 4 end.
equal quaterly installments. A non interest bearing promissory note was issued for
the unpaid portion on December 30,2010. The downpayment of P200,000 was The company issued P1.2M face value of 12% bonds at par on july 1,2010 maturing
recorded as a debit to delivery equipment and a credit to cash. on July 1, 2015 and paying interest semi annually on January 1 and July 1.
Problem 49. EFG Corporation’s shipments to and from its Quezon City branch are
billed at 125% of cost. On December 31, 2008, QC branch reported the following
data at billed price: Inventory January 1, P56,250; shipments received from home
Problem 47. On April 1, 2008, the AA Company established an agency in Bulacan, office, P1,156,250; shipments returned P156,250; and Inventory December 31,
sending its merchandise samples costing P82,500 and a working fund of P65,000 to P306,250. What is the balance of the allowance for over- valuation of branch
be maintained on the imprest basis. During the month of April, the agency inventory on December 31 before adjustments?
a. P150,000 b. P211,250 c. P231,250 d. P242,500
Problem 50. UVW Corporation and its branch in Manila maintain their respective
books of accounts. At close of books on December 31, 2008, Manila branch account
in the home office books showed a balance of P142,500. The interoffice accounts
were in agreement at the beginning of the year. For purposes of reconciling the
interoffice accounts, the following were ascertained:
1. A
2. B
3. A
4. B
5. D