PDF PRTC Practial Accounting 1docxdocx Compress

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1
osted: b) Furniture and equipment

equipment is depreciated
depreciated at 20 percent
percent per year.
RTC 1 October 2015 First reboard (50) c) Insurance expired during the year,
year, P2,040.
RTC 1 May 2015 First & Final reboard (100) d) Interest accrued
accrued on notes payable, P2,688.
RTC 1 May 2012 reweek Drill (47) e) Sales salaries
salaries incurred
incurred but not paid, PI,920.
f) Advertising paid in advance, P560.
Accounting
1
. LakersProcess
Lakers Process
Com
Company
pany rrecei
eceivved
ed P12
P12,000
,000 fr
from
om a tenant
tenant on December
December 1 for ffour
our mo
months'
nths' rent
rent of an g) Inventory
h) Office supplies
on D on
on hand,31,
December
ecember P1,200, charged
charged to Office Expense
P64,000.
P64,000. Expense when purchased.
purchased.
office. This rent was for December, January, February,
February, and March. If Lakers debited Cash Disregarding income taxes, the adjusted profit is
Disregarding
and credited Unearned
Unearned Rental Income for P12,000 on Dec Decembe
emberr 1, the necessary
necessary A. P39,224 C. P41,912
adjustment December 31 would include B. P41,384 D. P44,072 PRTC 0512
A. A debit to Rental Income
Income of P3,000
B. A credit to Rental
Rental Income of P3,000 Statement of Financial Position
C. A debit to UnUnearn
earned
ed Ren
Rental
tal Income
Income of P9,0
P9,000
00 1. A chain of bicycle
bicycle shops holds bicycles
bicycles for short-term
short-term hire and
and for sale. The
The bicycles available
D. A credit to Unearned Rental Income of P9,000 PRTC 0515 for hire are used for two or three years and then sold by the shops as second-hand models.
All shops sell both new and second-hand
second-hand bicycles. The entity sold a new bicycles for
2
. Presente
Presentedd below is th
thee Dece
December
mber 31 trial
trial balaance
nce of C
Corin
orinthian
thianss Company.
Company. P500,000 (cost P400,000) and a second-hand
second-hand bicycles for P100,000 (carrying amount
Corinthians Company P50,000).
Trial Balance Which statement is correct?
December 31, 2012 A. The bicycles for hire are reported
reported in the statement of financial position as property, plant
Debit
De Credit and equipment.
Cash P 14,800 B. The entity shall reclassify
reclassify the bicycles for hire as non
non-current
-current assets
assets held for sale when
Accounts Receivable
Receivable 33,600 they cease to be rented and become held for sale.
Allow. For Doubtful Accounts
Accounts P2,160 C. The differ
difference
ence between
between the net disposal
disposal proceeds
proceeds and the carrying
carrying amount
amount of the
Inventory, January 1 62,400 second-hand bicycles is recognized as other income in profit or loss.
Furniture and Equipment 67,200 D. All of the above. PRTC 1015
Accumulated Depreciation,
Depreciation, Janu
January
ary 1 26,880
3
Prepaid Insurance 4,080 . A corpo
corporatio
ration's
n's accoun
accounting
ting records
records provi
providded
ed the fo
follow
llowing
ing informati
informatioon:
n:
Notes Payable 22,400 12/31/11
12 12/31/12
Owner, Capital 72,000 Current assets P240,000 P?
Sales 480,000 Noncurrent assets 1,600,000 1,500,000
Purchases 320,000 Current liabilities ? 130,000
Sales Salaries Expense 40,000 Noncurrent liabilities 580,000 ?
Advertising Expense
Expense 5,360 All assets and liabilities of the company are reported in the schedule above. Working capital
Administrative Salaries
Salaries Expense 52,000 of P92,000 remained unchanged from 2011 to 2012. Net income in 2012 was P88,000. No
Office Expense 4,000 . dividends were declared
declared during 2012 and there were no other changes in equity. Total
603,440 603,440 noncurrentt liabilities at December 31, 2012 would be
noncurren
Information necessary for the preparation of adjusting journal entries: A. P392,000 C. P568,000
a) Adjust the Allowance
Allowance for Doubtful Acco
Accounts
unts to 8 percent of the accounts rec
receivable.
eivable. B. P480,000 D. P616,000 CPAR 0512
May 2015, Final Preboard Page 1 of 56

Leased assets 775,000

2. Ottawa Electr
Electronics
onics Inc. reported th
thee following items on its Dece
December
mber 31, 2015, trial balance: Other loans 575,000
Accounts Payable
Payable P108,900 Patents 110,000
Advances to Employees
Employees 4,500 Plant and equipment 8,275,000
Unearned Rent Revenue 28,800 Prepayments 141,000
E
Csatsim
h aStuerdreLniadbeirlitVyaUlunedeorf O
Wfaficrrearnst'ieLsife Insurance 257,,850000 P
Prroovviissiioonn ffoorr reemstprluocytm
ureinngt benefits 247152,,000000
Bonds Payable 555,000 Provision for warranty 42,000
Discount on Bonds Payable 22,500 Raw materials 490,000
Trademarks 3,900 Retained earnings 1,481,000
The amount that should be recorded on Ottawa's statement of financial position as total Share capital 3,500,000
liabilities is Sundry creditors and accruals 715,000
A. P696,000 C. P703
P703,5
,500
00 Sundry debtors 320,000
B. P700,500 D. P741,000 PRTC 1015 Trade creditors 1,617,000
Trade debtors 1,744,000
Use the following information for the next two questions: PRTC 0515 Work in progress 151,000 .
The general ledger summarized trial balance of Heat Corporation, a manufacturing company, P17,121,000 P17,121,000
includes the following accounts at December 31, 2015: Additional information:
information:
Debit Credit a) Bank loans and other loans are all repayable beyond one year.
Accumulated depreciation
depreciation – build
buildings
ings P120,000 b) P300,000 of the debentures is repayable within one year. year.
depreciation – leas
leased
ed assets 310,000 c) Lease liabilitie
liabilitiess include P125,000
P125,000 repayable
repayable within one
one year.
depreciation – plan
plantt and equipment 3,726,000 d) Provision for employment
employment benefits includes
includes P192,000 payable within one
one year.
Allowance for doubtful
doubtful debts 80,000 e) The planne
plannedd restructuring
restructuring is intended to be completed
completed within one year,
Bank loans 2,215,000 f) Provision for warranty in includes
cludes P20,000 estimated to be incurred beyond one year.
Bank overdrafts 350,000
4
Buildings, at cost P1,030,000 . Total noncurrent assets is
Cash 175,000 A. P8,814,000 C. P8,8
P8,866
66,0
,000
00
Current tax payable 152,000 B. P8,839,000 D. P8,891,000
Debentures 675,000
5
Deferred tax 420,000 . Total current liabilities is
Deposits, at call 36,000 A. P3,693,000 C. P3,8
P3,885
85,0
,000
00
Finished goods 1,042,000 B. P3,883,000 D. P3,921,000
Goodwill 2,530,000
Investments in listed companies (AFS) 52,000 Use the following information for the next five questions. PRTC 0515
Investments revaluation reserve 25,000 The following is a post-closing
post-closing trial balance for June 30, 2015, East Company,
Company, an SME:
Land, at valuation 250,000 Account Title Debits Credits
Land revaluation reserve 81,000 Cash P830,000
Lease liabilities 350,000 Short-term investments 650,000

Accounts receivable
receivable 2,800,000 A. P3,590,000 C. P3,900,000
Prepaid expenses 320,000 B. P3,6
P3,630
30,0
,000
00 D. P3
P3,9
,950
50,0
,000
00
Land 750,000
7
Buildings 3,200,000 . The to
total
tal noncur
noncurrent
rent asset
assetss of East
East Compan
Companyy as of June 30, 22015
015 is
Accumulated dep.
dep. – buildings P1,600,000 A. P 900,000 C. P4,400,000
Equipment dep.
Accumulated dep. - equipment 2,650,000 1,200,000 B. P3,550,000 D. P4
P4,4
,450
50,0
,000
00
8
Accounts payable
payable 1,730,000 . The to
total
tal curren
currentt liabilitie
liabilitiess of Ea
East
st Compan
Companyy as of
of June 30, 2015
2015 is
Accrued expenses
expenses 450,000 A. P2,280,000 C. P2,780,000
Notes payable 1,000,000 B. P2,680,000 D. P2,880,000
Mortgage payable 2,500,000
9
Ordinary shares 1,000,000 . The tot
total
al noncurr
noncurrent
ent lia
liabiliti
bilitieess of Ea
East
st Company
Company as
as of June
June 30, 2015
2015 is
Retained earnings . 1,720,000 A. P 500,000 C. P2P2,9
,900
00,0
,000
00
Total P11,200,000 P11,200,000 B. P2,400,000 D. P5,680,000
10
Additional Information:
Information: . The to
total
tal shareh
shareholde
olders'
rs' equity
equity as of JJune
une 30,
30, 2015
2015 is
1. The short-term
short-term inves
investmen
tments
ts account inclu
includes
des P180,0
P180,000 00 in treas
treasury
ury bills purchased
purchased in May. A. P1,000,000 C. P2,270,000
The bills mature in July. B. P1,7
P1,720
20,0
,000
00 D. P2,720,000
2. The accounts
accounts rreceivable
eceivable account, consists of the following:
a. Amounts owed by customers P2,250,000 Statement of Comprehensive
Comprehensive Income
11
b. Allowance for uncollectible account s trade customers (150,000) What amoun
amountt of comprehensive
comprehensive income should
should Searles
Searles Corporation
Corporation repor
reportt on its statement of
c. Nontrade note receivable (due in three years) 650,000 profit or loss and other comprehensive income given the following net of tax figures that
d. interest receivable on note (due in four months) 50,000 represent changes during a period?
Total P2,800,000 Remeasurement loss on defined benefit oobbligation (P3,000)
3. The notes
notes payab
payable
le acco
accounts
unts co
consis
nsists
ts of two notes of P500,00
P500,0000 each. One note is due due on Unrealized gain on available-for-sale securities 15,000
September 30, 2015, and the other is due on November 30, 2016. Recla
Reclassssifi
ificat
cation
ion aadju
djustm
stmen
ent,
t, for sec
securi
uritties
ies gain inc
includ
ludeded in nnet
et income
income (2,
(2,500
500))
4. The mortgage payable is ppayable
ayable in ssemiannual
emiannual insta
installment
llment of P50,000 each plus in interest.
terest. The Share warrants outstanding 4,000
next payment is due on October 31, 2015. Interest has been properly accrued and is included Net income 77,000
in accrued expenses. A. P86,500 C. P89
P89 ,,550 0
5. Five hundred
hundred thous
thousand
and share
sharess of no par ordinar
ordinaryy shares are authorize
authorized,
d, of which
which 200,000 B. P89,000 D. P90,500 PRTC 0515
shares have been issued and are outstanding.
12
6. The land account includes
includes P500,000 repr
representing
esenting the cost of the land on whwhich
ich the company's . The following
following information for 2015 is provided
provided by Rockets
Rockets Company:
offic
officee building resid
resides.
es. The remainning ing P250,
P250,000
000 is the cost of land that the company is Sales P20,000,000
holding for investment purposes. The fair values of land cannot be determined reliably without Cost of goods sold 12,000,000
undue cost or effort on an ongoing basis. Selling expenses 1,200,000
General and administrative expenses 1,800,000
QUESTIONS: Interest expense 1,500,000
6
. The to
total
tal cu
curren
rrentt assets
assets of East C
Compa
ompany
ny as of Ju
June
ne 30,
30, 2015 is Gain oonn eeaarly eexxtinguishment ooff lo
long-term de
debt 500,000

Corr
Correc
ecti
tion
on of inve
invent
ntor
oryy eerr
rror
or,, net
net of in
inco
come
me ta
taxx - cr
cred
edit
it 800,
800,00
0000 Depreciation - office equipment 4,200
Investment income - equity method 600,000 Interest income 550
Gain on sale of investment 2,000,000 Utilities 6,400
Income tax expense 2,100,000 Telephone and postage 1,475
Dividends declared 2,500,000 Supplies inventory 2,180
WhatP4,500,000
A. was the 2015 income from continuing operations?
C. P6,6
P6,600
00,0
,000
00 M
Diivsicdeelnladnsepoauisd selling expenses 332,,070400
B. P4,900,000 D. P7,000,000 PRTC 0515 Dividends received 5,150
Interest expense 4,520
3. The gene
general
ral ledg
ledger
er trial balaance
nce of Kim
Kimberly
berly Lim
mited
ited inc
include
ludess the following
following accounts
accounts at Allowance for doubtful doubtful accounts 160
December 31, 2015: Officers' salaries 36,600
Sales revenue P975,000 Sales 451,000
Interest income 20,000 Sales returns and allowances 3,900
Share of profit of associates 15,000 Sales discounts 880
Other income 8,000 Gain on sale of assets 7,820
Decrease in inventories of finished goods 25,000 Inventory, January 1 89,700
Raw materials and consumables used 350,000 Inventory, December 31 20,550
Employee benefit expenses 150,000 Purchases 141,600
Loss on translation of foreign operations 30,000 Freight in 5,525
Depreciation of property and equipment 45,000 Accounts receivable,
receivable, December
December 31 261,000
Impairment of property 80,000 Gai n fro
from di sc
sc oonntin uuee d op er
er ati
atio nnss (be ffoor e i nncco me
me ta
taxxes) 40 ,,000 0
Finance costs 35,000 Loss on sale of equipment 72,600
Other expenses 45,000
Income tax expense 75,000 Adjusting information:
information:
How much should be reported as profit for the year ended December 31, 2015? a) Goods amoun
amounting ting to P18,600 in thethe possession
possession of consignees
consignees as of December
December 31,2015 was
A. P183,000 C. P263,000 not included in the ending inventory balance.
B. P2
P213
13,0
,000
00 D. P288,0
P288,000
00 PRTC
PRTC 1015
1015 b) After preparing an analysis
analysis of aged accounts
accounts receivable,
receivable, a decision was made to increase
increase the
allowance for doubtful accounts to 2% of the ending accounts receivablereceivable balance.
Use the following information for the next five questions. PRTC 0515 c) Purchase re returns
turns and allowances
allowances werewere unrecord
unrecorded.
ed. They are computed
computed as 6% of of purchases
Selected pre-adjustment account balances and adjusting information of Lakers Inc. for the year (not including freight in).
ended December 31, 2015, are as f ollows: d) Sales ccommi
ommissions
s sions for the las
lastt day of 2015 had not not been accrue
accrued.
d. Total sales
sales for that
that day
Retained earnings, January 1, 2015 P440,670 amounted to P3,050. Average sales commissionscommissions is 3% of sales.
Sales salaries and commissions 25,000 e) No accr
accrual
ual had bee beenn made for a P570 freight
freight bill received
received on Janua
Januaryry 3, 2016, for goods
goods
Advertising expense
expense 16,090 received on December 29, 2015.
Legal services 2,225 f) An adv
advert
ertisi
isinngg campai
campaiggnn was inittiated
iated on Novem
Novemberber 1, 2015
2015.. P1,
P1,818
818 was
was reco
recorde
rdedd as
Insurance and licenses 7,680 "prepaid advertising"
advertising" and should be amortized over a six-month perio period.
d. No amortization was
Travel expense - sales representatives 4,560 recorded.
Depreciation - sales/delivery equipment 6,100 g) Freight charge
chargess of P3,500 paid during
during 2015 on sold merchandise
merchandise were
were netted against
against sales.

h) P560 interest
interest earned at the en
endd of 201
20155 was not accrued.
accrued. Corr
Correc
ecti
tion
on of in
inve
vent
ntor
oryy eerr
rror
or,, nnet
et of in
inco
come
me ta
taxx - cred
credit
it 80
800,
0,00
0000
i) A forklift
i ft with a useful
useful life of 10 years wa wass purc
purcha
hased
sed on Mar
March
ch 1, 2015 for P7,800
P7,800.. Investment income - equity method 600,000
Depreciation had not been recognized
recognized,, Gain on sale of investment 2,000,000
j) Supplies on hand amounted to P1,225 at December 31, 2015. A "real" account is debited Income tax expense 2,100,000
upon receipt of supplies. Dividends declared 2,500,000
k) Inco
Income
me tax rate oonn all ittems
ems is 30%
30%.. WhatP4,500,000
A. was the 2012 income from continuing operations?
C. P6,600,000
QUESTIONS: B. P4,900,000 D. P7,000,000 CPAR 0512
Compute for the following for the year ended December 31, 2015:
19
. Below are selected account balance of the Petronius Company
Company with additional
additional information
information
13
. Net sales as of December 31, 2012:
A. P447,500 C. P451,000 Retained earnings, January 1 P 55440,000
B. P4
P449
49,7
,720
20 D. P454
P454,5
,500
00 Sales (net) 8,375,000
Dividends received 15,000
14
. Cost
Cost of good
goodss sol
sold Dividends paid 140,000
A. P189,749 C. P208
P208,4
,449
49 Loss on sale of marketable securities 40,000
B. P208,399 D. P210,149 Loss from write-down of obsolete inventory 115,000
Merchandise inventory, January 1 1,040,000
15
. Sell
Selling
i ng exp
expen
ense
sess Purchase (net) 4,720,400
A. P55,838 C. P58,688 Salaries 1,540,000
B. P58P58 ,5
,596 D. P5
P599,3
,3338 Contribution to employees' pension fund 280,000
Delivery expenses 205,000
16
. Gen
Genera
erall and adm
admini
inistr
strati
ative
ve ex
expen
pense
sess Miscellaneous expense 125,000
A. P64,595 C. P66
P66,1
,1440 Doubtful accounts expense 12,000
B. P6
P 64,915 D. P6
P68,095 Depreciation expense - fixed assets 86,000
Income tax expense 120,000
17
. Inc
Income
ome from
from ccont
ontinu
inuing
ing ope
operat
ration
ionss Inventory at December 31, 2012 was valued at P760,000 (P875,000 less P115,000 write-
A. P50,707 C. P79,099 down of obsolete inventory).
B. P5
P511 ,0
,099 D. P95
P95,2
,2227 How much should be reported as profit for the year ended December 31, 2012?
A. P841,600 C. P9
P981
81,6
,600
00
Income Statement B. P8
P866
66,6
,600
00 D. P9
P986
86,6
,600
00 CPAR
CPAR 05
0512
12
18
. The following information for 2012 is provided by Matthew Company:
Sales P20,000,000 Cash Flow Statement
20
Cost of goods sold 12,000,000 . Ryan CoCompan
mpany's
y's income
income statement
statement for the year
year ended
ended December
December 31, 2015,
2015, reported
reported net
Selling expenses 1,200,000 income of P360,000. The f inancial statements also disclosed the following information:
General and administrative expenses 1,800,000 Amortization P 20,000
Interest expense 1,500,000 Depreciation 60,000
Gain on early extinguishment of long-term debt 500,000 Increase in accounts receivable 140,000

Increase in inventory 48,000 During the current year, the following events occurred:
Decrease in accounts payable 76,000 Accounts written off
off P 12,000
Increase in salaries payable 28,000 Sales on account 300,000
Dividends paid 120,000 Bad debt expense recognized 20,000
Purchase of equipment 150,000 At the end of the current year, the company showed a balance in gross accounts
accounts receivable
Net cashIprovided
ncrease iby
n looperating
ng-term nactivities
ote payabfor
le 2015 should be reported as 300,000 (before
What the would
amount allowance for doubtful
be shown as anaccounts)
operatingofcash
P168,000.
inflow in the statement of cash flows
A. P 84,000 C. P234,000 under the direct method?
B. P2
P204
04,0
,000
00 D. P324,0
P324,000
00 PRTC
PRTC 0515
0515 A. P210,000 C. P282,000
B. P220,000 D. P300,000 CPAR 0512
21
. The followin
followingg informatio
informationn is available from the financial statements
statements of
of Hornets Corporation for
24
the year ended December 31, 2015: . At balan
balance
ce sheet
sheet date, Dim Limited
Limited had the follow
following
ing net balance
balance from cash
cash flow
flows:
s:
Net income P396,000 • Operating activities, P53,440;
Depreciation expense 102,000 • Investing activities, P45,230;
Decrease in accounts receivable 126,000 • Financing activities, P(47,860).
Increase in inventories 90,000 If the company had an ending balance of cash amounting to P107,310, what was the
Increase in accounts payable 24,000 comparative ending balance of cash for the previous year?
Payment of dividends 54,000 A. P(39,220) C. P158,120
Purchase of available-for-sale securities 22,000 B. P56,500 D. P16
P163,3
3,380
80 CPA
CPAR
R 051
05122
Decrease in income taxes payable 16,000
What is Hornets Corporation's net cash flow f rom operating activities? Notes to Financial Statements
A. P440,000 C. P520,000 Operating Segments
25
B. P466
P466,0 ,000
00 D. P5
P542
42,0
,000
00 PRTC 0515 . The follo
following
wing segmen
segments
ts were identif
identified
ied for Oklahoma
Oklahoma Corpor
Corporation
ation::
Segment Operating Profit (Loss)
22
. Sales, P102,000
P102,000;; Cost of good
goodss sold, P40,00
P40,000;
0; Wages, P31,800;
P31,800; Purchas
Purchasee of land, P8,00
P8,000;
0; ##11 P1,000,000
Increase in accounts receivable, P3,600; Depreciation expense, P4,000; Gain on sale of ##22 200,000
equipment, PI,400; Issuance of bonds, P16,000 at face value; Increase in accounts payable, ##33 (500,000)
P5,200; Patent amortization expense, P2,600; Decrease in inventory, P2,000; Loss on sale of ##44 (100,000)
tand PI,000; Dec
Decreas
reasee in wage
wagess payable,
payable, P600
P600;; Declaaration
ration and payment
payment of dividend,
dividend, Which of the four segments is a reportable segment?
P6,800. A. 1 and 2 only C. 1, 2, and 3 only
Net cash flows from operating activities is B. 1 and 3 only D. all four PRTC 0512, 0515
A. P22,800 C. P36,800
26
B. P3P333 ,2
,200 D. P38,00
P38,0000 PRTC
PRTC 0515
0515 . Hyde Co
Corp.
rp. has three
three manufactu
manufacturing
ring divisio
divisions,
ns, each
each of which has been
been determine
determinedd to be a
reportable operating segment.
segment. In the year just ended, Clay division had sales of P3,000,000,
23
. Luke C
Compa
ompanyny beg
began
an the ccurre
urrent
nt yea
yearr with th
thee follo
following
wing:: which was 25% of Hyde's total sales, and had traceable operating
operating costs of PI,900,000. Hyde
Accounts receivable
receivable P100,000 incurred operating costs of P500,000 that were not directly traceable to any of the divisions.
doubtful accounts (8,000) In addition, Hyde incurred interest expense of P300,000. The calculation of the measure of
Net account receivable 92,000 segment profit or loss reviewed by Hyde's chief operating decision maker does not include an

allocation of interest expense incurred by Hyde. However, it does include traceable costs. It Employee related costs P10,000,000
also includes nontraceable operating costs allocated based on the ratio of divisional sales to Losses on disposal of branch net assets 15,000,000
aggregate sales. In reporting segment information, what amount should be shown as Clay's The paint shop's revenues and operating expenses for 2012, respectivel y, were
profit for the year? P40,000,000 and P60,000,000.
P60,000,000. In addition, it is expected that the operatin
operatingg losses of the
A. P875,000 C. P 975
975,0
,000
00 paint shop during January
January 2013 will be P2,000,000. Assuming a 35% tax rate, how much will
B. P900,000 D. P1,100,000 CPAR 0512 be reported

A. as loss from discontinued
P13,000,000 discontinued operations
C. inP2
Arvin's
P29,
9,25
250,2012
0000 income statement?
0,00
Discontinued operations & assets held for sale
Discontinued B. P19
P19,50
,500,0
0,000
00 D. P30
P30,55
,550,0
0,000
00 CPA
CPAR
R 051
05122
27
. Byron Inc. decided oonn August 1, 2012, to dispo
dispose
se of a segment ooff its bus
business'.
iness'. The segment
was sold on November 30, 2012. Byron's income for 2012 included income of P250,000 from Interim Financial Reporting
30
operating the discontinued segment from January 1 to the sale date. Byron incurred a loss on . An entity prepares quarterly financial reports
reports in accordance
accordance with PAS 34. At the end of the
the November 30 sale of P220,000. Ignoring income taxes, what amount should be reported first quarter, an entity's investment in equity instrument carried at cost is deemed to be
in the 2012 income statement as the net income or loss under "Discontinued Operations"? impaired by P100,000. The fair value of the equity instrument subsequently recovered
recovered at the
A. P220,000 loss C. P30
P30,00
,0000 inc
income
ome end of the second quarter so that by the half-year date there had not been a significant
B. P150,000 loss D. P250,000 income CPAR 0512 decline in fair value below cost. The entity would not recognize an impairment loss in its
annual financial statements if it tested for impairment only at its annual reporting date. How
28
. On Janua
January
ry 1, 2012, Generator
Generator CoCorp.
rp. met th
thee criteria for discontinuance
discontinuance of
of a business
business much should the entity recognize as reversal of impairment loss in its second quarter income
compon
componenent.
t. F
For
or the period
period Janua
January
ry 1 thr
throu
ough
gh OcOctob
tober
er 15, 2012,
2012, the compon
component
ent had statement?
revenues of P500,000 and expenses of P800,000. The assets of the component were sold on A. P0 C. P50
P50 ,,000 0
October 15, 2012, at a loss for which no tax benefit is available. In its income statement for B. P25,000 D. P100,000 CPAR 0512
the year ended December
December 31, 2012,2012, how should Generator
Generator report
report the compone
component's
nt's
31
operations from January 1 to October 15, 2012? . Cyrene Company,
Company, a calendar-yea
calendar-yearr corporation,
corporation, has the follo
following
wing income before income
income tax
A. P300,000 should be reported as aann extraordina
extraordinary
ry loss. provision and estimated effective annual income tax rates for the first three quarters of the
B. P500,000 shoshould
uld be repo
reported
rted as re
revenues
venues from operations of a discontin
discontinued
ued component.
component. current year:
C. P300
P300,000
,000 should
should be reported
reported as part of the loss on operatio
operations
ns and disposal
disposal of a Income before Estimated effective annual
component. Quarter income tax provision tax rate at end of quarter
D. P500,000 and and.P800,000
.P800,000 should be included with reven revenues
ues and exp
expenses,
enses, resp
respectively,
ectively, First P60,000 40%
as part of continuing operations. CPAR 0512 Second 70,000 40%
Third 40,000 45%
29
. Arvin Inc. is a small pu
publicly
blicly listed company w whose
hose activities
activities consist
consist of an en
engineering
gineering branch
branch Cyrene's income tax provision in its interim income statement for the t hird quarter should be
(also acting as the head office) and a paint shop branch producing specialized industrial A. P18,000 C. P25,500
coatings
coatings.. During
ng the year ended
ended Dece
December
mber 31, 2012,
2012, the pain
paintt shop branch
branch became
became B. P2
P244,5
,5000 D. P76
P76,50
,5000 PRTC
PRTC 051
05155
unprofitable and the directors made the decision to close down the branch. The employees
have been told of the closure and those employees who cannot be transferred to the Revenue & Expense Recognition
engineering branch have been given redundancy/retrenchment
redundancy/retrenchment notices. In addition, the 45. Assume Sweet Corp.,
Corp., an equipment distributor, sells a pie
piece
ce of machinery with a list price of
directors have written to all of the paint shop's customers informing them that no further P800,000 to Arch Inc. Arch Inc. will pay P850,000 in one year. Sweet Corp. normally sells this
orders will be accepted and th thee bran
branch
ch w
will
ill forma
formally
lly close
close oonn January
January 31, 22013.
013. The type of equipment for 90% of list price. How much should be recorded as revenue?
estimated direct costs of the closure, which have not yet been provided for, are:
A. P720,000 C. P8
P800
00,0
,000
00

B. P765,000 D. P850,000 PRTC 1015 In

Invven ttoor y h eell d o n pr em
em ises, 1 //11 P 2 ,,440 00,0
,0000 P1,0
P1,0000 ,,000 0
Goods from Espiyu year to 12/31 18,000,000 8,800,000
32
. On 1 July 2011
2011,, The Pyretu
Pyretuss Compa
Company,
ny, a manuf
manufactu
acturer
rer of office fu
furnitu
rniture,
re, supplied
supplied goo
goods
ds to Inventory held on premises, 12/31 2,000,000 1,250,000
The Natiso Company for P120,000 on condition that this amount was paid in full on 1 July How much should be reported as sales revenue in John's income statement?
2012. Natiso had earlier rejected an alternative offer from Pyretus whereby they could have A. P11,400,000 C. P3
P36,
6,80
800, 0,00
0000
bought the same

Under PAS18 goods byhow
Revenue, paying
muchcash of P108,000
relating to this on 1 July 2011.
transaction should Pyretus recognize in B. P26,950,000 D. P48,200,000 PRTC 0515
profit or loss in respect of revenue and interest income for the year ended 30 June 2012? 47. On January
January 2, 2015, Kamprad
Kamprad Company
Company assigned
assigned its paten
patentt to Alive
Alive for royalties
royalties of 10% of
CPAR 0512 A. B. C. D. patent related sales. On the same date, Kamprad received a P400,000 advance to be applied
Revenue P108,000 P108,000 P120,000 P120,000 against royalties for 2015
2015 sales. Royalties are payable
payable every six months.
months. Alive reported the
Interest income Nil P 12,000 Nil P12,000 following sales:
Six months ended Amounts
46. On July 1, 2015, Sad
Sadanga
anga Company finfinished
ished consu
consultation
ltation services aand
nd accepted in eexchange
xchange June 30, 2015 P1,500,000
a promissory note with a face value of P300,000, a due date of June 30, 2018, and a stated December 31, 2015 2,000,000
rate of 5%, with interest receivable at the end of each year. The fair value of the services is How much royalty revenue should Kamprad report in its 2015 income statement?
not readily determinable and the note is not readily marketable. Under the circumstances,
circumstances, the A. P200,000 C. P400,000
note is considered to have an appropriate
appropriate imputed rate of interest of 10%. The total income B. P3
P350
50,0
,000
00 D. P75
P750,0
0,000
00 PRTC
PRTC 101
10155
to be recognized in Sadanga's 2015 profit or loss is
35
A. P262,694 C. P288,963 . Play Co.'s professional
professional fees expense
expense account
account had a balance
balance of P92,000 at December
December 31,
B. P2P275
75,8
,829
29 D. P307,5
P307,500
00 PRTC
PRTC 1015
1015 2015, before considering year-end adjustments
adjustments relating to the following:
• Consultants were hired hired for a special project
project at a total fee not
not to exceed
exceed P65,000. Play
33
. On Novemb
Novemberer 1, 201
2011,
1, an ope
operator
rator enters into a service
service con
contract
tract with a customer for a per
period
iod has recorded P55,000 of this fee based on billings for work performed in 2015.
of 12 months. Under the contract specifications, the customer is offered for the first 2 months • The attorney
attorney's
's letter requested
requested by the auditors, dated
dated January
January 28, 2016,
2016, indicated that
that
60 free minutes per month of communication, and for the remaining 10 months of the contract legal fees of P6,000 were billed on January 15, 2016 for work performed in November
the customer will pay a fixed fee of P30 per month for 60 minutes of communication per 2015 and that unbilled f ees for December 2015 were P9,000.
month. The operator considers the recoverability of t he amounts due under the contract from What amount should Play report for professional fees expense for the year ended December
the customer to be probable. 31, 2015?
How much is the total income of the Operator from communication servservice
ice for the year 2012? A. P52,000 C. P1P107
07,0
,000
00
A. P0 C. P250 B. P92,000 D. P117,000 PRTC 0515
B. P5P50 D. PP3300 CPAR 0512
36
. Loading Corp.
Corp. pays commissions to its ssales
ales staff aatt the rate of 3% of net sales.
sales. Sales staff
34
. John se
sells
lls goo
goods
ds supplied
supplied by Es
Espiyu
piyu.. The go
goods
ods are cclass
lassed
ed as A grade
grade (per
(perfect
fect quality)
quality) or are not paid salaries but are given monthly advances
advances of P30,000. Advances are charged charged to
B grade, having slight faults. John sells the A grade goods acting as an agent for Espiyu at a commission expense,
expense, and reconciliations against commissions are prepared
prepared quarterly. Net
fixed price calculated to yield a gross profit margin of 50%. John receives a commission of sales for the year ended March
March 31, 2015 were P30 million. The unadjusted balance balance in the
12.5% of the sales it achieves for these goods.
goods. The arrangement
arrangement for B grade goods is that commissions expense
expense account on March 31, 2015 was P800,000.P800,000. March advances
advances were
they are sold by Espiyu to John and John sells them at a gross profit margin of 25%. The paid on April 3, 2015. In its income statement for the year en ended
ded March 31, 2015, whawhatt
following information has been obtained from John's financial records: amount should Loading Corp. report as commission expense?
A. P800,000 C. P9P900 00,0
,000
00
A grade B grade

B. P830,000 D. P930,000 PRTC 0515

Cash & Cash Equivalent
37 38
. Prude
Prude Corpo
Corporatio
rationn has an incen
incentive
tive com
commiss
mission
ion plan for its salesm
salesmen,
en, entitling
entitling them to an . Consider the following:
following: Cash in Bank - che
checking
cking account
account of P13,500, Cash
Cash on hand of
of P500,
additional sales commission
commission when actual quarterly sales exceed budgeted estimate
estimates.
s. An Post-dated checks received totaling P3,500, and Certificates of deposit totaling P124,000.
analysis of the account "incentive commission expense" for the year ended December 31, How much should be reported as cash in the statement of financial position?
2012, follows:
Amount For Quarter End
Ended
ed Date Paid A.
B. P13,500
P144,0
P1 ,0000 C. P13
D. P137,500
P138,0
8,000
00 PRTC
PRTC 051
05155
P42,000 December 31, 2011 January 23, 2012
39
36,000 March 31, 2012 April 2244, 2012 . The following pertains
pertains to Miraflor,
Miraflor, Inc. on December
December 31 of the current year:
year: Checking account
39,000 June 30, 2012 July 19, 2012 bala
balance
nce P925,000;
P925,000; an overdraft
overdraft in spespecial
cial checkinngg acco
account
unt at same bank as normal
normal
43,0
43,000
00 Sept
Septemembe
berr 30,
30, 2012
2012 Oc
Octo
tobe
berr 22,
22, 2012
2012 checking account of P17,000; certificate of deposit P400,000; cash held in a bond sinking
The incentive commission for the quarter ended December 31, 2012, was P45,000. This fund P200,000; postdated check from customer PI 1,000; certified check from customer
amount was recorded
recorded and paid in January 2013
2013.. What amount should Prude
Prude report as P9,800;
P9,800; NSF cheek received
received from customer
customer PI 5,000;
5,000; cash advance
advance to subs
subsidiar
idiaryy of
incentive commission expense for 2012? P300,000; postage stamps on hand P620; utility deposit paid to electric company P8,000;
A. P118,000 C. P163,000 currency and coins in a petty cash fund (the company has not replenished the fund to the
B. P160,000 D. P205,000 CPAR 0512 imprest amount of P5,000) P800. The correct amount that should be reported as cash is
A. P908,800 C. P1,318,600
48. Crush
Crush Compan
Companyy is an experie
experienced
nced ho home me applia
appliancence dealer. er. CrusCrushh Compa
Company ny also offe
offers
rs a B. P9
P918
18,6
,600
00 D. P1,322,800 PRTC 0515
number
numb er of serv
services
ices togeth
togetherer with the home appliancesappliances that it sells (installat (installation
ion and
40
maintenan
maint enance).
ce). Crush CompCompanyany sells dish dishwash
washersers on a stan standalo
dalone
ne basiss,, it also sells . The cas
cashh account
account of TargetTarget Corp. on Decemb
December er 31, 2015 ha hass a balance
balance of P127,600
P127,600 and it
installation and maintenance service for the dishwashers. consists of the following:
Pricing for dishwashers is as follows: Bills and coins on hand P52,780
Dishwasher only P1,600 Petty cash including petty cash vouchers of P650 1,000
Dishwasher with installation service 1,700 Ba
Balalanc
ncee iinn ssav
avin
ings
gs ac
acco
coun
untt wit
withh a ba
bank
nk clos
closed
ed by ththee B
BSP
SP 36
36,0
,000
00
Dishwasher with maintenance services 1,950 Customer's check dated January 15, 2016 8,000
D is hw
hwas he
her wi
wi th
th in
instal
tal lation aannd m
maai nte
ntenna nc
nce ssee rv
rvi ccee s 2 ,0
,00 0 Credit memo from suppliers for purchases returns 6,500
In cases where maintenance service servicess are provided, the maintenance service is separately Postage stamps 120
priced within the arrangement at P350. Dishwashers
Dishwashers are sold subject to a general right of Money order 800
retur
return.
n. If a customer
customer purcha
purchases
ses a dish dishwash
washer er with insta
installatio
llationn and/or
and/or main
maintenan
tenancece IOU of an employee 400
services, in the event Crush Company does not complete the service satisfactorily, the Checking account balance In Bank of P.I. 22,000
customer is only entitled to a refund of the portion of the fee that exceeds P1,600. P1,600. On The correct cash balance on December 31, 2015 of Target Corp. is
January
January 1, 2015,2015, Crush
Crush CompCompany any sells 100 dish dishwash
washers ers to CondoCondo Comp
Complex,
lex, Inc. a A. P75,130 C. P76,330
developer of high-rise condos. The dishwashers are installed and Condo Complex, Inc. B. P7
P755,9
,9330 D. P76
P76,58
,5800 PRTC
PRTC 051
05155
purchases the dishwashers with the installation and maintenance services. services. The total price
for the 100 dishwasher
dishwasherss is P190,000. How much revenue should Crush Company allocate 11. At Decemb
December er 31
31,, 2015
2015,, Mursi
Mursi Co. ha
hadd the follow
following
ing balanc
balances
es in the
the account
accountss it mainntains
tains
to the dishwashers? at First State Bank:
A. P150,000 C. P160,000 Checking account #101 P175,000
B. P1 P152
52,0
,000
00 D. P190,0
P190,000 00 PRTC
PRTC 1015
1015 Checking account #201 (10,000)

42
Money market account 25,000 . Carefree Company's newly hired assistant prepared the following bank reconciliation
reconciliation on
90-day certificate of deposit, due 2/28/16 50,000 March 31, 2012:
180-day certificate of deposit, due 3/15/16 80,000 Book balance P1,405,000
In its December 31, 2015 statement of financial position, what amount should Mursi report as Add: March 31 deposit
deposit P 750,000
cash and cash equivalents? Collection of note 2,500,000
A.
B. P190,000
P200,000 C.
D. P240
P2
P340,0
20,000
,0000
0 PRTC 1015 Inotetarlest on note
T 150,000 43,,480005,,000000
Less: Careless Company's deposit to our account1,100,000
41
. Char
Charm m Carpet
Carpet Cleaninngg prep
prepares
ares a ban
bankk recon
reconcilia
ciliation
tion at the end of every
every month. At the end Bank service charge 45,000 1,145.000
of July, the balance in the general ledger checking account, was P2,750 and the bank Adjusted book balance
balance 3,660,000
balance on the bank statement was P2,980. Outstanding checks checks totaled P680 and deposits
in transited were P400. The bank statement reve revealed
aled that a check written for P120 was Bank balance P5,630,000
incorrectly recorded
recorded by Charm as a P220 disbursement. The bank statement listed service Add: Error on check
check No. 175 45,000
charges and NSF check charges
charges totaling P150. The corrected cash balance is: Total 5,675,000
A. P2,270 C. P2,550 Less
Less:: Pr
Preauth
eauthoriz
orized
ed payments
payments for water
water bbills
ills 205,000
205,000
B. P2,470 D. P2,700
P2,700 PRTC 0515 NSF check 220,000
Outstanding check 1,650,000 2,075,000
12. The follow
following
ing data perta
pertaining
ining to the cash trans transacti
actions
ons and bank accountaccount of Mandiriggma
ma Adjusted bank balance
balance 3,660,000
Company for the month of May are available to you: Check No. 175 was made for the proper amount P249,000 in payment of account. However
Cash balance, per bank statement, 5/31 31,948 it was entered in the cash payments journal as P294,000. Carefree authorized the bank to
Bank service charge for May 109 automatically pay its water bill as submitted directly to the bank. The correct cash in bank
Deb it m eem
m o for
for the
the co st
st of
of p riri nte
ntedd ch ec
ecks de li vveere d by th
thee ba nk
nk 12 5 balance is
Outstanding checks, May 31 6,728 A. P2,880,000 C. P3,630,000
Deposit of May 30 not recorded by bank until June 1 4,880 B. P3,600,000 D. P3,660,000 CPAR 0512
Proceeds of a bank loan of May 30, net of interest of P300 5,700
Proce
Proceeds
eds fro
from
m a cus
custom
tomer'
er's pro
promis missor
soryy not
note,
e, in
inclu
cludin
dingg interes
interestt of P10
P1000 8,1
8,100
00 Receivables
43
Check No. 2772 issued to a supplier entered in the accounting records . Tanya, Inc had net net sales in 2015
2015 of P700,000. At December
December 31, 2015,
2015, before adjusting
adjusting
at entries, the balances in selected accounts were: accounts receivable P125,000 debit, and
P2,100 but deducted in the bank statement at an erroneous amount amount allowance
allowance for doub
doubtful
tful accounts
accounts PI,200
PI,200 debitt.. Tany
Tanyaa estimates
estimates that 2% of its accounts
accounts
of 1,200 receivable will prove to be uncollectable. What is the cash realizable value of the receivables
Stolen check lacking an authorized signature, deducted from reported on the statement of financial position at December 31, 2015?
Mandirigma's account by the bank in error 800 A. P109,800 C. P112,200
Customer's check returned
returned by the bank marked NSF; no entry B. P111,000 D. P1P122
22,5
,500
00 PRTC 0515
has been
been made
made iinn the accoun
accountin tingg reco
records
rds to re recor
cordd the
the retur
returned
ned check
check 760
44
What is the cash balance per books at May 31? . Your ana
analysis
lysis of
of the accounts receivable of Hollande
Hollande Company
Company in
indicates
dicates the
the following:
following:
A. P17,194 C. P30P30,0 ,0000 Accounts receivable,
receivable, January
January 1 P 300,000
B. P18,994 D. P42,806 PRTC 1015 Allowance for doubtful
doubtful accounts, January
January 1 40,000
Credit sales during the year 1,200,000

Cash collections during the year 1,100,000 of P8,000 were allowed for prompt payment.
Accounts receivable
receivable written off dur
during
ing the year 20,000  Customer's accounts
accounts of P2,000 were ascertained to be worthless and were written off.
In prior years, Hollande's bad debt expense
expense has averaged 2% of credit sales. On December  Bad accounts previously written off prior to 2015 amounting to P500 were recovered.
recovered.
31, what would be the amount of Hollande's accounts receivable, net of any allowance for  The company provided P2,300 for doubtful accounts by a journal entry at the end of the
doubtful accounts, assuming that Hollande uses the credit sales method to estimating bad year.
debtP336,000
A. expense? C. P360
P360,0
,000
00

Accounts receivable
receivable of P70,000 have
have been pledged
pledged to a local bank on
on a loan of P40,000.
Collections of P15,000 were made on these receivables (not included in the collections
B. P358,000 D. P400,000 PRTC 0515 previously given) and applied as partial payment to the loan.
The amortized cost of accounts receivable
receivable at December 31, 2015 is
14. Lemo
Lemonade
nade Cor
Corpora
poration
tion had a 1/1/15 balanc
balancee in the Allowa
Allowance
nce for Doubtful
Doubtful Accounts
Accounts of A. P 81,300 C. P106,300
P10,000. During 2015, it wrote off P7,200 of accounts and collected P2,100 on accounts B. P105,800 D. P106,800 PRTC 0515
previous
previously
ly written off. The balanc
balancee in Account
Accountss Rece
Receivab
ivable
le was P200,000
P200,000 at 1/1 and
P240,000 at 12/31. At 12/31/15, Lemonade estima estimates
tes that 5% of accounts receivable
receivable will 46
. The Hawt
Hawthorn
hornee Manufactur
Manufacturing
ing Company
Company sells its products,
products, offering
offering 30 days credit
credit to its
prove to be uncollectible
uncollectible.. What is Doubtful Accounts Expense for 2015? customers. Uncollectible amouamounts
nts are estimated by accruing monthly charge to bad debt
A. P2,000 C. P 9,200 expense equal to 2% of credit sales. At the end of the year, the allowance for uncollectible
B. P7,100 D. P12,00
P12,0000 PRTC
PRTC 1015
1015 accounts is adjusted based
based on aging of accounts receivable. The company started the
current year with the following balances in its accounts:
15. Exce
Excell Compan
Companyy is a leading edueducatio
cational
nal instit
institution
ution with student
student populaation
tion of more than Accounts receivable
receivable P305,000
50,000.
50,00 0. Exce
Excell continuo
continuously
usly maint
maintains
ains good quality educa
education
tion and a rost
roster
er of qualiified
fied Allowance for doubtful
doubtful accounts 25,500
professors.. As a result, Excel continuous
professors continuouslyly produces top graduates in several
several fields. As at During the year, sales on credit were P1,300,000, cash collections from customers were
December 31, Excel has an outstanding receivable balance of P23,250,000 broken down P1,250,000
P1,25 0,000,, and actual write-offs
write-offs of accounts
accounts were P25,000.
P25,000. An aging of acco accounts
unts
into: 0-60 days outstandin
outstanding,
g, P9,000,000; 61-120 days outstand
outstanding,
ing, P6,750,000; and over receivable at the end of the year indicates a required allowance of P30,000.
120 days outstanding, P7,500,000. Estimated percent uncollectible of these accounts is 1%, Based on the f oregoing, which statement is true?
2% and 6%, respectively. Excel wrote off P525,000 of its accounts receivable and recovered
recovered A. The doubtful accounts
accounts expense
expense for the year is P26,000.
P26,000.
P50,000 from accounts previously
previously written of in prior year
year.. As at January 1, Excel has an B. The balance of accounts
accounts receivable
receivable at the end of the year
year is P300,000.
P300,000.
allowance for uncollectible accounts of P650,000. Based on the aging analysis, Excel should C. The adjusting entry for doubtful
doubtful accounts at the end year inclu
includes
des a credit to allowance
report doubtful accounts expense for the year at for doubtful accounts of P30,000.
A. P475,000 C. P550,000 D. None of the above.
above. PRTC 0515
B. P5P500
00,0
,000
00 D. P675,0
P675,000
00 PRTC
PRTC 1015
1015
47
45
. On January 1, 2010, Tasty
Tasty Company sold a machine
machine with a carrying
carrying amount
amount of P300,000 and
and
. The bala
balance
nce she
sheet
et of Lake
Lake Produc
Products
ts Co, shows
shows the accoun
accountsts rece
receiva
ivable
ble bala
balance
nce at accepted in exchange a promissory note with a face value of P500,000, a due date of
December 31, 2014 as follows: December 31, 2019, and a stated rate of 4%, with interest receivable at the end of each year.
Accounts receivable
receivable - trade P45,000 The fair value of the machine is not readily determinable and the note is not readily
Less allowance for doubtful accounts 900 marketable. Under the circumstances,
circumstances, the note is considered to have an appropriate imputed
P44,100 rate of interest of 8%.
During 2015, transactions relating to the accounts were as follows: The interest income to be recognized in 2015 is
 Sales on account, P480,000. A. P20,000 C. P32,604

Cash received from collections of current receivables totaled P392,000, after discounts B. P29,264 D. P3
P333 ,6
,61 2
2 PRTC 0515

on December 31, 2015. The customer was scheduled

scheduled to receive the merchandise
merchandise on
48
. Move
Movess Corpo
Corporatio
rationn obtain
obtained
ed a P40,000 not
notee receivabl
v able from a custom
customer
er on June 30, 201
2015.
5. January 2, 2016.
The note, along with interest at 6%, is due on June 30, 2016.2016. On September 30, 2015, c. Merchandise
Merchandise costing P46,000 which was
was shipped by Hug f.o.b. shipping
shipping point to a
Moves discounted
discounted the note at Out bank. The bank's discount rate is 10%. What amount of customer
customer on Decemb
December
er 29, 2015. The customer
customer was scheduled
scheduled to receive the
cash did Moves receive from Out Bank? merchandisee on January 2, 2016.
merchandis
A. P36,000
B. P36,820 C.
D. P39,220
P40,600 PRTC 0515 d. 2015,
Merchandise
Merchandis e costing
and received byP83,000 shipped
shipped 4,by2016.
Hug on January a vendor
vendor f.o.b. destination
destination on December
December 30,
e. Merchandise
Merchandise costing P51,000 shipped
shipped by a vendor
vendor f.o.b. seller on December
December 31, 2015,
49
. Wonderful Inc. assigns P1,5
P1,500,000
00,000 of its ac
accounts
counts rece
receivables
ivables as collateral for a P1 million and received by Hug on January 5, 2016.
loan with a bank. The bank assesses a 3% finance fee and charges interest on the note at The adjusted cost of Hug Company's inventory at December 31, 2015 should be
6%. The journal entry to record this tran
transaction
saction would not include a A. P441,000 C. P5P530
30,0
,000
00
A. Debit to Cash for P9
P970,000
70,000 B. P479,000 D. P538,000 PRTC 0515
B. Debit to Finance Charge for P30
P30,000
,000
52
C. Credit to Notes Pay
Payable
able for P1,000,000. . The Yeti Cor
Corpora
poration'
tion's inventory
inventory at December
December 31, 2015, was P325,000
P325,000 based
based on a physical
physical
D. Credit to Accounts Receivable for P1,000,000.
P1,000,000. PRTC 0515 count priced at cost, and before any necessary adjustment for the following:
• Merchandis
Merchandisee costing P30,000, shipped
shipped F.o.b. shipping
shipping point
point from a vendor on December
50
. Score Inc. fa
factors
ctors P2,000,0
P2,000,000
00 of its ac
accounts
counts receivables
receivables with
without
out guarantee (recours
(recourse)
e) for a 30, 2015, was received on January 5, 2016.
finance charge of 5%. The finance company reta retains
ins an amount equal to 10% of the accounts • Merchand
Merchandise
ise costing
costing P22,0
P22,000,
00, shipped
shipped F.o.b.
F.o.b. destination
destination from a vendor
vendor on December
December
receivable for possible adjustments.
adjustments. What would be recorded as a gain (loss) on the transfer 28, 2015, was received on January 3, 2016.
of receivables
receivables?? • Mercha
Merchandi
ndissee cost
costing
ing P38,000
P38,000 was shipped
shipped to a custom
customer
er F.o.b.
F.o.b. des
destin
tinati
ation
o n on
A. Gain of P100,000 C. Loss of P200,000 December 28, arrived at the customer's location on January 6, 2016.
B. Los
Losss of
of P100
P100,00
,0000 D. Loss of P300,000 PRTC 0515 • Merchand
Merchandise
ise costing
costing P12,000
P12,000 was
was being held on consignment
gnment by Club Company
Company..
What amount should Yeti Corporation
Corporation report as inve
inventory
ntory in its December
December 31, 2015,
16. On April 1 of the curr
current
ent year, Misery Company factor
factored
ed receivables
receivables with a carryin
carryingg value of statement of financial position?
P85,000
P85,000 for P60,0
P60,00000 in cash from Scrooge Lende Lenders.
rs. The transfer
transfer was made without
without A. P325,000 C. P4
P405
05,0
,000
00
recourse. On April 1, Misery would B. P367,000 D. P427,000 PRTC 0515
A. Debit discount
discount on liability for P25,000
P25,000..
B. Credit
Credit deferr
deferred
ed inter
interest
est exp
expense
ense fo
forr P25,00
P25,000.
0. .
53
Mernadet
Mernadethh Corporation
Corporation rep
reporte
ortedd P70,000 of inventor
inventoryy on December
December 31, 2015, based
based on
C. Debit loss on sale of receiva
receivables
bles for P25,000
P25,000.. physical count. Additional information was given as follows:
D. Credit factored accounts receivable for P85,000.
P85,000. a. Included in the physical
physical count were goods
goods billed to a customer,
customer, FOB shipping point, on
December 31, 2015. The goods had a cost of P3,000 and have been billed at P5,000.
Inventories The shipment is ready for pick-up by the delivery contractor.
51
. In your rev
review
iew of Hug C
Company,
ompany, you find that a physical
physical inven
inventory
tory on Dec
December
ember 31, 2015,
2015, b. Goods were in transit from a vendor.
vendor. The invoice cost was P8,00
P8,0000 and goods were
showed merchandise
merchandise with a cost of P441,000 was on hand at that date. You also discover shipped FOB shipping point on December 31, 2015.
the following items were all excluded from the P441,000. c. Work in process
process costing
costing P500 was sent to an outs outside
ide processo
processorr for finis
finishing
hing on
a. Merchandis
Merchandisee of P61,000 which
which is he
held
ld by Hug on consignment.
consignment. The consignor
consignor is Kisse
Kissess December 30, 2015.
Company. d. Goods out on consignment
consignment amounted to P4,600 (sales (sales price); shipping
shipping costs, P120
b. Merchandis
Merchandisee costing P38,000 which
which was shipped by Hug f.o.b. destination to a cus
customer
tomer (markup is 15% on cost).

The correct amount of inventory on December 31, 2015 is B. A credit

credit to Purchas
Purchasee Discount
Discountss of P258.
P258.
A. P82,500 C. P85,500 C. A debit to Accounts
Accounts payab
payable
le of P15,875
P15,875..
B. P8
P822 ,6
,620 D. P85,620
P85,620 PRTC 0515,
0515, 1015 D. A debit to Purcha
Purchase
se Discount
Discountss Lost of P258.
P258. PRTC 0515
18. The Shop Company ssells

ells TVs. The perpetu
perpetual
al inventory was sta
stated
ted as P305,000 on the boo
books
ks Cost Flow Method
at December
used 31, 2015.a At
and apparently the close of
satisfactory the year,
cut-off a new approach
for preparation for compiling
of financial inventory
inventory
statements was was
not 20. InventoryMrecords
arch 1, for
201Epstein'
5, invenstoChemicals
Chemica
ry: ls reveale
revealedd the1foll
,00owing:
o0wing:
gallons P7.20 = P7,200
made. Some events that occurred are as follows. Purchases Sales
a) TVs shipped to a customer
customer January 2, 2012016,
6, costing P50,000 werewere included in inventor
inventoryy Mar. 10 600 gals @ P7.25 Mar. 5 400 gals
at December 31, 2015. The sale was record
recorded
ed in 2016. 16 800 gals @ 7.30 14 700 gals
b) TVs costing P100,000 received
received Decembe
Decemberr 30, 2015, were recorded as re received
ceived on 23 600 gals @ 7.35 20 500 gals
January 2, 2016. 26 700 gals
c) TVs received during
during 2015 cos
costing
ting P46,000 were recorded twictwicee in the inventory account.
account. Ending inventory assuming FIFO in a perpetual inventory system would be:
d) TVs shipped
shipped to a custome
customerr Decembe
Decemberr 28, 2015, f.o.b. shippinngg point, which cost A. P4,960 C. P5,080
P150,000
P150 ,000,, were not received
received by the custome
customerr until January,
January, 2016. The TVs wer weree B. P5,060 D. P5P5,1
,1440 PRTC 1015
included in the ending inventory.
e) TVs on hand that cost
cost P61,000 were ne
never
ver record
recorded
ed on the books
books.. Lower of cost or net realizable value
Compute the correct inventory at December 31, 2015. 21. Gillard Enterprises
Enterprises Inc. is a retailer of Italian furn
furniture
iture and has five majo
majorr product lines: sofas,
sofas,
A. P220,000 C. P2
P270
70,0
,000
00 dining tables, beds, closets, and lounge chairs. At December 31, 2015, quantity on hand, cost
B. P259,000 D. P320,000 PRTC 1015 per unit, and net realizable value (NRV) per unit of the product lines are as follows:
Product line Quantity Cost per unit NRV per unit
Gross & net method of recording purchases Sofas 100 P1,000 P1,020
54
. Cupcake C Co.
o. started 22015
015 with P94
P94,000
,000 of merch
merchandise
andise inventory
inventory on hhand.
and. During 2015, Dining tables 200 500 450
P400,000 in merchandise
merchandise was purchase
purchasedd on account with credit terms of 1/15, n/45. All Beds 300 1,500 1,600
discounts were taken. Purchases were all made f.o.b. shipping point. Cupcake
Cupcake paid freight Closets 400 750 770
charges of P7,500, Merchandise with an invoice amount of P5,000 was returned for credit. Lounge chairs 500 250 200
Cost of goods sold for the year was P380,000. Cupcake uses a perpetual
perpetual inventory system. In Gillard's December 31, 2015 statement of financial position, Inventory should be carried at
What is ending inventory assuming Cupcake uses the gross method to record purchases? A. P1,040,000 C. P1,080,000
A. P112,490 c. P116,500 B. P1,075,000 D. P1,115,000 PRTC 1015
B. P112,550 d. P120,300 PRTC 0515
Net provision
55
. On Dece
December
mber 3, Fran
Francis
cis Com
Company
pany pu
purcha
rchased
sed inve
inventor
ntoryy listed at P8,600
P8,600 from Lyn Corp
Corp.. 22. Chomper Co. Co. incurred P1,200,000 in manufacturing 10,000 widgets.
widgets. The inventories
inventories were
Terms of the purchase were 3/10, n/20. Francis Company also pur purchased
chased inventory from manufactured for the purpose of filling-up a binding contract to sell of 9,000 units of widgets.
Duck Company on December
December 10 for a list price of P7,500. Terms of the purchase were 3/10, The contract with the buyer stipulates unit price of 100. The Company actively sells widgets in
n/30. On December 16, Francis paid both suppliers for these purchases.
purchases. If Francis uses the the market at 200 per unit. The delivery date will be on January 10, 2016.
net method of recording purchases, the journal entry to record the payment on December 16 As of December 31,
31, 2015, how much should
should the company
company recognize
recognize as net provision?
provision?
will include A. Nil C. P200,000
A. A credit to Cash of P15,617.
P15,617. B. P1
P180
80,0
,000
00 D. P90
P900,0
0,000
00 PRTC
PRTC 101
10155

Work-in-process 115,000
Writedown Raw Materials 42,500
56
. The trial balance of Krea Company showed inventories of P164,000. The inventories include
include P277,500
some goods that have a production cost of P18,000. These goods have a manufacturing
manufacturing A review of the books and records disclosed that the gross profit margin historically
defect that will cost P6,000 to correct. The normal selling price for these goods
goods would be approximated 34% of sales.
sales. The sales for the first 6 months of 2015 were P428,00
P428,000.
0. Raw
P25,000,
at but of
a discount after
20%theonremedial workselling
the normal they will be sold
price. through
The agent willanreceive
agent as refurbished
ion ofgoods
a commission
commiss 10% materials purchases
purchase
manufacturing s were
overhe
overhead P96,000.
ad has Direct
historically beenlabor costs
applied at for
60%this
of period were P130,000, and
direct labor.
of the reduced selling price. In relation to the defective goods, the company will recognize a Compute the value of the work in process inventory lost on June 30, 2015.
loss on inventory write down of A. P 92,220 C. P1P135
35,0
,020
20
A. P 0 C. P4,000 B. P119,020 D. P271,980 PRTC 1015
B. P1,000 D. P6
P6,0
,000 0
0 PRTC 0515
24. A flood recently destroyed
destroyed many of the financial
financial records of
of Review Manufac
Manufacturing
turing Company.
Company.
Average cost
cost retail method Management has hired you to re-create as much financial information as possible for a month
25. Mary Lou Company uses the average cost reta
retailil method to estimate its inventory. December of July. You are able to find out that the company uses an average cost inventory valuation
31, 2015 are: system. You also learn that Review makes a physical count at the end of each month in order
Cost Retail to determine monthly ending inventory values. By examining various documents you are able
Inventory, January 1 P2,000,000 P3,000,000 to gather the following information:
Purchases 10,600,000 14,000,000 Ending inventory at July 31 50,000 units
Net markups 1,600,000 Total cost of units available for sale in July P118,800
Net markdowns 600,000 Cost of goods sold during July P99,000
Sales 12,000,000 Cost of beginning inventory, July 1 P0.35/ unit
Data relating to the inventory at Gross profit on sales for July P101,000
Estimated normal shoplifting losses 400,000 July purchases
Estimated normal shrinkage is 5% of sales Date Units Unit Cost
Mary Lou's cost of goods sold for the year ended December 31, 2015 is July 5 60,000 P0.40
A. P7,700,000 C. P8,680,000 11
11 50,000 0.41
B. P8,400,000 D. P9
P9,1
,100
00,0
,000
00 PRTC 1015 15
15 40,000 0.42
16
16 50,000 0.45
Loss The value of inventory at July 31 is
57
. On June 30, 2015, a flash flood damadamaged
ged the warehouse and factory of Raptor
Raptorss Corpor
Corporation,
ation, A. P19,800 C. P25
P25 ,,330 0
completely destroying
destroying the work in process inventory. There was no damage to either the raw B. P24,600 D. P28,000 PRTC 1015
materials or finished goods inventories.
inventories. A physical inventory taken
taken after the flood revealed
the following valuations: Purchase commitment
58
Finished Goods P112,000 . A physical
physical inven
inventory
tory taken
taken on Dec
Decembe
emberr 31, 2015 resulted
resulted in an ending inventory
inventory of
Work-in-process 0 P1,440,00 0. Circus Company suspects some inventory may have been taken by employees.
Raw Materials 52,000 To estimate the cost of missing inventory, the following were gathered:
The inventory on January 1, 2015, consisted of the following. Inventory, Dec. 31, 2014 P1,280,000
Finished Goods P120,000 Purchases during 2015 5,640,000

Cash sales during 2015 1,400,000 security. Heat Corporation shares

shares are publicly traded on the Stock Exch Exchange,
ange, and the
Shipment received on December 26, 2015, included in physical prevailin
prevailingg price
price on that exchange
exchange indicat
indicates
es that Miami's
Miami's inve
investmen
stmentt is worth
worth P20,
P20,000.
000.
inventory, but not recorded as purchases 40,000 However, Miami management believes that the stock market is generally overvalued, and
Deposits made with suppliers,
suppliers, entered as purchases. Goods were their analysis of the Heat investment suggests
suggests to them that it is worth P18,000. Miami should
not received in 2015 80,000 carry the Heat investment on its statement of financial position at:
Collectionsreceivable,
Accounts oneivable,
rec accounJanua
ts receryiv1,
January ab2015
le, 2015 71,000,000
,200,000 A.
B. P18,000.
P20,
P2 0,00
000.
0.
Accounts receivable,
receivable, Dec. 31
31,, 2015 1,200,000 C. either P18,000 or P20,000, as either are defensible valuations. PRTC 0515
Gross profit percentage on sales 40% D. P19,000, the midpoint
midpoint of Miami's range of reasonably
reasonably likely valuations of Heat.
Heat.
At December 31, 20152015 what is the estima
estimated
ted cost of missing in
inventory?
ventory?
A. P160,000 C. P240
P240,0
,000
00 Available-for-sale securitie
Available-for-sale securities
s
B. P200,000 D. P320,000 PRTC 0515 27. On January
January 1, 2014, Alaska
Alaska Corporation
Corporation purc
purchased
hased P1,000,000
P1,000,000 10% bonds
bonds for PI,051,510
PI,051,510
(including broker's commission
commission of P20,000). Interest is payable annually every December 31.
59
. On Nov
Novemb
ember
er 20
20,, 20
2015,
15, Celtic Corpo
Corpora
ratio
tionn en
enter
tered
ed int
intoo a non-ca
non-cance
ncella
llable
ble cont
contrac
ractt to The bonds mature on December 31, 2016.
purchase
purchase P10
P100,000
0,000 of inve
inventory
ntory on Janua
Januaryry 15, 2016. The valu
valuee of the inventor
inventoryy on The bonds are classified as available-for-sale. The prevailing market rate for the bonds is
December 31, 2015, Celtic's year
year end, was P90,000. What amount should be reported on 9% at December 31, 2014. On December 31, 2015, Alaska sold the bonds at 105. (Round
the statement of financial position at December 31 related to this purchase commitment? off present value factors to four decimal places)
A. P90,000 inventory
inventory How much is the gain on sale of bonds on December 31, 2015?
B. P100,000
P100,000 accounts
accounts payable
payable A. P 1,510 C. P3
P311 ,5
,51 0
C. P90,0
P90,000
00 purchase
purchase ccommit
ommitment
ment lia
liability
bility B. P18,490 D. P32,390 PRTC 1015
D. P10,0
P10,000
00 estimated
estimated liability
ty on purchase
purchase commitment
commitment PRTC 0515
Debt securities at amortized cost
61
Biological Assets . On Marc
Marchh 1, 2015, Pyne Furnitu
Furniture
re Co. acquired
acquired P700,00
P700,0000 of 10 percent
percent bonds to yield 8
26. XYZ Dairy Ltd is engaged in milk prod production
uction for supply to various ccustomers.
ustomers. The Compa
Company
ny percent. Interest is payable semiannually
semiannually on February
February 28 and August 31. The bonds mature
produced milk with a fair value of P550,000 (that is determined at the time of milking) in the in ten years. Pyne Furniture Co. is a calendar-year
calendar-year corporation. If the bonds are not held for
year ended 31 December 2015. trading, the interest income to be recognized in 2015 is
The Company also estimated the following costs: A. P52,925 C. P58
P58 ,,333 3
Commissions to brokers and dealers 20,000 B. P53,000 D. P58,933 PRTC 0515
Levi
Levies
es by re
regu
gula
lato
tory
ry agen
agenci
cies
es and
and comm
commod oditityy exch
exchan
ange
gess 55,0
55,000
00
62
Transfer taxes and duties 20,000 . On July 1, 2015
2015,, Morales
Morales Corp. acquire
acquiredd P4,000
P4,000,000
,000 face
face value of X Corporatio
Corporationn bonds with
with
Transpor
Transportt and
and other
other costs
costs necessa
necessary
ry to get assets
assets ttoo a mark
market.
et. 10,0
10,000
00 a nominal rate of interest of 4%. The bonds mature on July 1, 2020 and pay interest semi-
The milk should be valued at annually each July 1 and January 1, with the first interest payment due on January 1, 2016.
A. P445,000 C. P530,000 The bonds are held to maturity.
maturity. At the date of issuance the bon bonds
ds had a market rate of
B. P4P455
55,0
,000
00 D. P550,0
P550,000 00 PRTC
PRTC 1015
1015 inter
interest
est of 6%. The entity incurred
incurred transact
transaction
ion costs of 1% of the purchase
purchase price. On
December 31, 2015, the market value value of the bonds was P3,700,000. The amount to be
Investments in Debt & Equity Securities recognized in 2015 profit or loss related to the bond investment is
Trading securities A. Nil C. P109,764
60
. Miami Dealers hhasas an inves
investment
tment in Heat Co
Corporation
rporation that Miami
Miami accounts for as a tradin
tradingg B. P1P106
06,7
,797
97 D. P14
P142,4
2,498
98 PRTC
PRTC 051
05155

value,8% cumulative preference shares of Louisse in exchange for the P500,000 face value
63
. On Janua
January
ry 1, 2015, Alask
Alaskaa Corpor
Corporation
ation pur
purchas
chased
ed P1,000
P1,000,000
,000 10% bon
bonds
ds for P1,051
P1,051,510
,510 bond investment. The quoted market value of the preference share was P70 per share on
(including broker's commission of P20,000). Interest is payable annually every Decemb
Decemberer 31. July 1, 2012. What amount of loss should be included in the determination of Kara's profit or
The bonds mature on December 31, 2017. The prevailing market rate for the bonds is 9% at loss for 2012?
December 31, 2015. If the bonds are classified as available for sale, the amount to be A. P0 C. P100,000
recognized
A. Nil in the entity's 2015 OCI. C. P18
P18,0
,0220 B. P50,000 D. P15
P150,0
0,000
00 CPA
CPAR
R 051
05122
B. P13,900 D. P33,900 PRTC 0515 Investment in associate
67
. Hawk
Hawkss Corp
Corp.. acquired
red a 25% interes
interestt in Atlanta
Atlanta Co. on January
January 1,
1, 2015, for P5,000,
P5,000,000.
000. At
64
. On Janu
January
ary 1, 2015,
2015, Next Corp
Corporat
oration
ion purchase
purchasedd P1,000
P1,000,000
,000 10% bonbonds
ds for P927,
P927,880
880 that time, Atlanta had 1,000,000, P1 par, ordinary shares
shares issued and outstand
outstanding.
ing. On June
(includin
(includingg broker's
broker's comm
commissi
issioonn of P20,000).
P20,000). Next has the inten
intention
tion to hold the bonds 30, 2015, Atlanta declared and issued a 5% share dividend when the market value was P2
indefinitely. The bonds wewere
re purchas
purchased
ed to yield 12%. Interest is payable
payable annually every
every per share. On December 31, 2015, Atlanta declared cash cash dividends of P2.2 per share
December 31. The bonds mature on Decem December
ber 31, 2019. On December 31, 2015 the bonds
bonds payable on January
January 15, 2016. Atlanta's net income for 2015
2015 was P4,800,000.
P4,800,000. What should
were selling at 99. How much is the carrying amount the investment in bonds on December be the balance in Hawks' investment in Atlanta Co. at the end of 2015?
31, 2015? A. P5,622,500 C. P5
P5,8
,862
62,5
,500
00
A. P916,534 C. P961,626 B. P5,650,000 D. P6,200,000 PRTC 0512, 0515
B. P939,226 P990,000
D. P990,000 PRTC 0515
Trading securities & Investment in associate
FA@FVOCI Questions 8 & 9 are based on the following information. PRTC 0515
65
. For the year en ended
ded Dec
Decembe
emberr 31, 2014, WQA Com Company
pany rep
reported
orted op
openin
eningg retained
retained earnin
earnings
gs On July 1, 2015, TGV purchased 10,000 of BPO's 50,000 outstanding shares at a price of P6.00
of P1,850,000 and cumulative unrealized
unrealized gains recorde
recordedd as reserves of P25,000. These per share. BPO had earnings of P3,000 per month during 2013
2013 and paid dividends of P10,000 on
gains are from an investment with an original cost of P100,000 and a fair value of P125,000. March 1, 2015 and P12,500 on December
December 1, 2015. The market value of BPO's shares was P6.50
The company policy is to value all investments at fair value with unrealized gains and losses per share on December 31, 2015.
included in reserves. The company's accounaccounting
ting policy is that when an investment is sold,
68
the reserve amount is trans
transferr
ferred
ed to retained
retained earnings.
earnings. During
ng 2015, one-half
one-half of the . Assuming that TGV accounts for its investment in BPO as a held-for-trading
held-for-trading investment,
investment, what
investment was sold.
sold. The remaining inve
investment
stment increase
increasedd in value to P70,000. A second would be the total effect on TGV's profit or loss for the year ended December 31, 2015?
investment was bought for P150,000 and its fair value had increased to P165,000 by the end A. P2,500 C. P6,500
of 2015. What is the reserve balan
balancece at December 31, 2015? B. P4,500 D. P7P7,5
,5000
A. P27,500 C. P45,000
69
B. P3P355 ,0
,000 D. P60,000 PRTC 0515 . Assu
Assuming
ming tha
thatt TGV had significa
significant
nt influence
influence over
over BPO, what would
would be the balance
balance in TGV's
"Investment in BPO" account on its statement of financial position on December 31, 2015?
66
. On Januar
Januaryy 1, 2007
2007,, Kara Co
Company
mpany pur
purchased,
chased, at par, 500 of the P1,00
P1,0000 face va
value,
lue, 8% A. P61,100 C. P64,700
bonds of Louisse Corporation as a long-term investment. The bonds mature on January 1, B. P62,700 D. P65,000
2017, and pay interest semiannually on July 1 and January 1. Louisse incurred heavy losse
lossess
from operations for several years and defaulted on the July 1, 2011 and January 1, 2012 Derivatives & Hedging Activities
interest payments. Because of the permanent decline in markmarket
et value of Louisse's bond, 49. Avent Company sells
sells a financial asset with a carrying
carrying amount of P500,000
P500,000 for P600,000 and
Kara wrote down its investment
investment to P400,000 at December
December 31, 2011. Pursuant to Louisse's
Louisse's simultaneously
simultaneous ly enters into a total return swap with the buyer under which the buyer will return
plan of reorganization effected on July 1, 2012, Kara received 5,000 shares of P100 par any increases in value to Avent and Avent will pay the buyer interest plus compensation for

any decreases in the value of the investment. Avent expects the fair value of the financial
71
asset to decrease by P40,000. The journal entry to record the sale would include a credit to . As a res
result
ult of thi
thiss hedging
n g transa
transacti
ction
on,, at what amount
amount should
should Hector
Hector recogni
recognize
z e the
A. Financial ass
asset
et of P500,000 C. Gain on sale of P60,000
P60,000 equipment on
B. Financial liability of P600,000 D. Gain on sale of P100,000 PRTC 1015 February 15, 2012?
a. P350,000 c. P390,000
Ques
Questions
tions 18 &15,
On November 19 2011,
are
are ba
based
sed oonn Cop.,
Hector the follo
following
a wing infor
informatio
mation.
n. Philippine
calendar-year-end CPAR 0512
company, signed a legally- b. P360,00O d. P42
P42 00,0
,0000
72
binding contract to purchase equipment from Diego Corp., a foreign company. The negotiated price . Wizard Inc. borrows
borrows P10 million from Bank A at a fixedfixed rate of 7%, payable
payable quarterly in
is FC1,000,000. The scheduled deliverydelivery date is February 15, 2012. Terms require paymen
paymentt by arrears. The prime rate is 4.5% when the loan is taken out. Wizard's management believes
Hector Corp. upon delivery.
delivery. The terms also impose a 10% penalty on Diego Corp. if the equipment that interest rates will decline in the near future. Accordingly, it enters into a swap agreement
agreement
is not delivered by February 15, 2012. with Bank B. Under the agreement, Wizard is committed to pay to Bank B a sum equal to
To hedge its commitment to pay FC1,0Q0,000, Hector entered into a forward-exchange contract prime plus 2.5% on a notional principal of P10 million and Bank B is committed to pay to
on November 15, 2011 to receive FC1,000,000 on February 15, 2012 at an exchange rate of Wizard a sum equal to 7% on a notional principal of P10 million, with the amounts settled on
FC1.00 = P0.36. Additional exchange rate information: a net basis at the end of each quarter. If the prime rate drops to 4%, what are Wizard's cash
Forward Rates for flows for the next quarter?
Date Spot Rates February 15, 2012 A. P162,500 outflow to Bank Bank B
11/15/11 1FC = P0.35 1FC = P0.36 B. P162,500
P162,500 inflo
inflow
w fr
from
om Bank
Bank A
12/31/11 1FC = P0.36 1F'C= P0.38 C. P175
P175,000
,000 outflow
outflow to Bank A and P12,50
P12,5000 outflow to Bank
Bank B
02/15/12 1FC = P0.39 1FC = P0.39 D. P175
P175,000
,000 outflow
outflow to Bank A and P12,50
P12,5000 inflow from
from Bank B
B PRTC 0515
Quotes obtained from dealers indicate the following incremental changes in the fair Values of the
forward-exchange contract based on the changes in forward rates discounted on a net-present Investment Property
73
value basis: . Minty Corporation's
Corporation's investment properties included the followingfollowing items:
Date Gain/(Loss) • Land held as potential
potential plan
plantt sit
site,
e, P5,000,
P5,000,000.
000.
11/15/11 P0 • A vaca
vacant
nt building
building to be leased
leased outout under an opera
operating
ting lease,
lease, P20,000,
P20,000,000.
000.
12/31/11 P19,600 • Property
Property he
held
ld for sale in the ordina
ordinaryry course
course of its businness,
ess, P30,000,000
P30,000,000..
02/15/12 P10,400 • Property
Property hheld
eld for administra
administrative
tive purpos
purposes,es, P1
P10,000
0,000,000
,000..
Hector formally documented its objective and strategy for entering into this hedge. Hector also • A hothotel
el owned
owned and
and mana
managed
ged,, P50
P50,00
,000,0
0,000.
00.
decidded
ed to assess
assess hedge
hedge effective
effectiveness
ness based on an assessme
assessment
nt of the diffe
differenc
rencee betw
between
een • A buildding
ing bein
beingg leased
leased ou
outt to a subsi
subsidiary,
diary, P8,000,0
P8,000,000.00.
changes
changes in valu
valuee of the forward
forward-exc
-exchang
hangee contract
contract and the peso equivvalent
alent of the firm • A building,ng, whichc h cannot
cannot be sold or leasedleased out separate
separately,
ly, used
used in the productio
productionn of
commitment. Because both changes
changes araree based on chan
changes
ges in forward rates, Hector
Hector further
further goods and around 2% of the area being leased out to canteen operators, P2,000,000.
determined that the hedge is 100% effective. How much will be reported as investment properties in Minty Corporation's separate financial
statements?
70
. What are th thee amounts reported for the forward contract rreceivable
eceivable and
and the firm commitment A. P20,000,000 C. P28,000,000
liabillity
ity at Decem
December
ber 31, 2011 and Feb Februar
ruaryy 15, 2012 (pr(prior
ior to the settlement
settlement of the B. P2P25,
5,00
000,
0,00
0000 D. P33,000,000
P33,000,000 PRTC 0515
contract?)
A. B. C. D. 29. On 1 January 2015
2015 Kabila Corporation
Corporation acquired an investment
investment property
property (building) in a remote
remote
12/31/11 P10,000 P19,600 P19,600 P20,000 location for P100,000. After initial recognition, the entity measures the investment property
using the cost-depreciation-impairment model, because its fair value cannot be measured
02/15/12 P40,000 P30,000 P10,400 P30,000

reliably without undue cost or effort on an ongoing basis. sales proceeds of the old machinery which was replaced is P12,000.
At 31 December 2015,
2015, managemen
management:t: The new machinery shall be recorded at a cost of
• asse
assess
ssed
ed the
the buil
buildi
ding
ng's
's us
usef
eful
ul liife
fe aatt 50 year
yearss ffro
rom
m the
the ddat
atee of acqu
acquis
isititio
ionn A. P397,000 C. P411,712
• assessed that the entity will consume the building's
building's future economic benefits evenlyevenly over
over B. P405
P405,0
,000
00 D. P4 P419
19,7
,712
12 CPAR 0512
50 years from the date of acquisition
• offer
decliined
ned anunlikely
that is un
unsolic
solicited
ited
to beoffe
offer
r to purch
repeatedpurchase
aseforeseeable
in the the building
ldinfuture.
g for P130,000.
P130,000. This is a 'one-o
'one-off
ff 30. building
Lukashenko
Lukashenkbyoproviding
Company acquired
acquired
40,000 of itsland andthat
shares an old
owere
ld building.
tradingLukashenko
Lukashen ko acquired
on the Stock Exchangetheatland
land and
price of
The entity should measure the carrying amount of the building on 31 December 2015 at: P13 per share, and by paying off the existing mortgage of P30,000 and back taxes on the old
A. P 98,000 C. P127,400 building of P5,000. Lukashenko also paid P20,000 to demolish the old building on the land,
B. P100,000 D. P130,000 PRTC 1015 P30,000 to an architect to design a new building, and P220,000 to a contractor to build the
building. How much is the cost of the new building in accordance with PIC Q&A 2012-2?
Government Grants & Governmen
Government Governmentt Assistance A. P250,000 C. P300,000
74
. On 1 Januar
Januaryy 2015 Cent
Central
ral Comp
Company
any pur
purchas
chased
ed a plating mac
machine
hine with
with a 5-year use
useful
ful life B. P2P270
70,0
,000
00 D. P305,000 PRTC 1015
for P135,000. Central receiv
received
ed a grant of P13,500 towards the cap
capital
ital cost. Company policy
76
is to treat the grant as a reduction in the cost of the asset. What should be the depreciation
depreciation . Wharf Corp.
Corp. bou
bought
ght a new printing
printing machine.
machine. The cost
cost of the machine
machine was
was P80,000.
P80,000. The
expense in respect of this machine for the year ended 31 December 2015, assuming that installation costs were P5,000 and the employees received training on how to use the
depreciation is calculated on a straight-line basis? machine, at a cost of P2,000. Before using the machine
machine to print customers' orders,
orders, a test
A. P19,440 C. P24,300 was undertaken and the paper and ink cost P1,000.
B. P21,600 D. P27,000 PRTC 0515 What should be the cost of the machine in the company's statement of financial position?
A. P80,000 C. P86,000
28
28.. Nad
Nadine
ine Compa
Company ny rec
receiv
eived
ed a P1,800
P1,800,00
,0000 subsid
subsidyy from
from the gogover
vernme
nment
nt to purcha
purchase
se B. P85,000 D. P88,000 PRTC 0515
manufacturing equipment
equipment on January, 2, 2015. The equipment has a cost of P3,000,000,
P3,000,000, a
useful
useful life a six years
years,, and no salvage valu
value.
e. Nad
Nadineine deprec
depreciates
iates the equipm
equipment
ent on a Nonmonetary exchange
77
straight-line basis. . A machinen e has a cost
cost of P60
P60,00
,000,
0, has an annual
annual deprecia
depreciatio
tionn of P12,000
P12,000,, an
andd has
Which statement is correct? accumulated depreciation
depreciation of P30,000 on December
December 31, 2014. On April 1, 2015, when the
A. Expenses will be higher and net income lower if the grant is recorded as deferred machine has a fair value of P24,000, it is exchanged for a similar machine with a fair value of
income. P72,000 and the proper amount of cash is paid. The loss to be recognized on exchange is
B. Expe
Expenses
nses will be high
higher
er and net income lowelowerr if the grant is accounted
accounted for as an A. P 0 C. P6,000
adjustment to the asset. B. P3,000 D. P21
P21,00
,0000 PRTC
PRTC 051
05155
C. Depreciation expense
expense will be higher if the grant
grant is recorded as deferred
deferred income, but net
income will be the same under the two alternatives. 31. On March 31, 31, 2015, Nathaniel
Nathaniel Company traded in an old machine having a carrying
carrying amount
amount
D. Depr
Deprecia
eciation
tion expense
expense will be highe
higherr if the grant is recor
recorded
ded as an adjustm
adjustment
ent to the of P168,000, and paid a cash difference of P60,000 for a new machine having a total cash
asset, but net income will be the same under the two alternatives. PRTC 1015 price of P205,000. The cash flows from the new machine are expected to be significantly
different than the cash flows from the old machine. On March 31, 2015, what amount of loss
Property, Plant & Equipment should Nathaniel recognize on this exchange?
Initial measurement
measurement A. P 0 C. P37,000
75
. A piece ooff machinnery
ery hhas
as a marked
marked pr
price
ice of P550,0
P550,000.
00. It was purch
purchase
asedd unde
underr the term,
term, B. P2P233,0
,0000 D. P60
P60,00
,0000 PRTC
PRTC 101
10155
15%, 10%, and 5% discounts. The cost of freight and installation after deducting the P8,000

32. Campbell Corp. exch

exchanged
anged delivery truc
trucks
ks with Highway, Inc. Campb
Campbell's
ell's truck originally cost
cost estimated useful life of ten years and an estimated salvage value of P10,000. What should
P2,300,000, its accumulated depreciation was P2,000,000, and its fair value was P500,000. Peppermint record as depreciation expense for the first year under the straight-line method?
Highway's truck originally cost P2,350,000, its accumulated depreciation was PI,990,000, and A. P29,800 C. P31
P31 ,,000 0
its fair value was P570,000. Campbell also paid Highway P70,000 in cash as part of the B. P30,000 D. P31,800 PRTC 1015
transaction. The transaction
transaction lacks commercial subs
substance.
tance. What amount is the new book
80
valueP300,000
A. for the truck Campbell received? C. P500,000 . Bubblegum C
Company
ompany
no depreciation takes
takesofa disposition.
in the year full year's
year's depreciation
depreciation
Data in the
relating yeardepreciable
to one of an assets
assetsasset
acquisition,
acquisition,edand
acquir
acquired in
B. P370,000 D. P570,0
P570,000
00 PRTC
PRTC 1015
1015 2013, with residual value of P400,000 and estimated useful life of 8 years, at December 31,
2014 are:
Disposal Cost P5,400,000
78
. The carr
carrying
ying va
value
lue of compa
company's
ny's pr
proper
operty
ty and equip
equipment
ment was P200,0
P200,000
00 at 1 August 2014,
2014, Accumulated depreciation
depreciation 2,362,500
During the year ended 31 July 2015, the company sold equipment for P25,000 on which it Using the same depreciation method in 2013 and 2014, how much depreciation should
made a loss of P5,000. The depreciatio
depreciationn charge for the year wa
wass P20,000. What was the Bubblegum record in 2015 for t his asset?
carrying value of property and equipment at 31 July 2015? A. P625,000 C. P703,125
A. P150,000 C. P160
P160,0,000
00 B. P659
P659,3,375
75 D. P7P759
59,3
,375
75 PRTC 0515
B. P155,000 D. P180,000 PRTC 0515
81
. Lext
Lexter
er Manufact
Manufacturing
uring acqui
acquired
red a new milling
milling machi
machine
ne on April
April 1, 2006.
2006. The machine
machine has
has a
Depreciation special component
component that requires replacement before the end of the useful life. The asset was
79
. Jeric Com
Company
pany purc
purchased
hased a machine oonn December
December 2, 2013 at an invoice
invoice price of P4,500,000 originally recorded in two accounts, one representing the main unit and the other for the
with terms 2/10,
2/10, n/30
n/30.. On Decem
December
ber 10, 2013, Jeric paid the requir
required
ed amount for the special component. Depreciation is recorded by the straight-line method to the nearest
machine. On December 2, 2013, Jeric paid P80,000 for delivery of the machine and on month,, residdual
month ual values being disrega
disregarded
rded.. On April 1, 2012
2012,, the special component
component is
December
Dece mber 31, 2013, it paid P310,P310,000
000 for installa
installation
tion and testing of the machine.
machine. The scrapped and is replaced with a similar component. This component is expected to have a
machine was ready for for use on January 1, 2014. It was estimated that the machine would residual value of approximately 25% of cost at the end of the useful life of the main unit, and
have a useful life of 5 years, and a residual
residual value of P800,000. Engineering estima
estimates
tes because of its materiality, the residual value will be considered in calculating depreciation.
indicated that the useful life in productive units was 200,000. Units actually produce
producedd during Specific asset information is as follows:
the first two years were 30,000 in 2014 and 48,000 in 2015. Jeric Company decided decided to use Main milling machine
the productive output method of depreciation. Purchase price in 2006. P62,400
What is the depreciation of the machine for 2015? Residual value P4,400
A. P600,000 C. P9
P96060,0
,000
00 Estimated useful life 10 years
B. P 720,000 D. P1,560,000 PRTC 0515 First special component:
Purchase price P10,000
33. In January, Pep
Peppermint
permint Corpor
Corporation
ation entered into a contract to acquire
acquire a new machine
machine for its Residual value P250
factory. The machine, which had a cash price of P300,000, was paid for as follows: Estimated useful life 6 years
Down payment P30,000 Second special component:
Note payable in 10 equal monthly installments 240,000 Purchase price P15,250
1,000 ordinary shares of Pepp
Peppermint
ermint with an agre
agreed
ed value of P50 per share
share 50,000 What is the depreciation charge
charge to be recognized for the year 2012?
Total P320,000 A. P5,930 C. P8
P8,8,8000
Prior to the machine's use, installation costs
costs of P8,000 were incurred
incurred.. The machine has an B. P6,775 D. P9,100 CPAR 0512

The equipment consisted

consisted of two machines, machine A and machine B. Machine A had cost
Borrowing costs P3,000,000 and had a carrying amount of PI,800,000 at 30 June 2015, while machine B had
34. The Garga
Gargantuar
ntuar Comp
Company
any comme
commenced
nced the construct
construction
ion of a new packagin
packagingg plant on 1 cost P2,000,000 and was carried at PI,700,000.
PI,700,000. Both machines are measure
measuredd using the cost
Febr
February
uary 2015.
2015. The cost of PI,80
PI,800,000
0,000 was fun
funded
ded from exis
existing
ting borrowin
borrowings.
gs. The model, and depreciated on a straight-line basis over a ten-year period.
construction was completed
completed on 30 September 2015. Gargantuar's borrowings during 201 20155 On 31 December 2015, the directors of Johnston Ltd decided to change the basis of
•comprised:
Loan from Allie
Alliedd Ban
Bank:
k: P800,000
P800,000 at 6% pe perr ann
annum;
um; measuring
revalued to the equipment
P1,800,000 withfrom the cost useful
an expected modellife
to ofthe
sixrevaluation model. Machine
years, and machine A was
B was revalued
• Loan from
from BDO Bank: PI million at 6.6% per annum; and and to PI,550,000 with an expected useful life of five years.
• Loan from MeMetro
tro Ba
Bank:
nk: P3 million aatt 7% per aannum.
nnum. The amount to be recognized in profit or loss as a result of the revaluation of assets on
The amount of borrowing costs to be capitalized in relation to the packaging plant is December 31, 2015 is
A. Nil C. P91,125 A. (P150,000) C. P100,000
B. P81,000 D. P121,5
P121,500
00 PRTC
PRTC 1015
1015 B. (P 50,000) D. P15
P150,0 0,000
00 PRTC
PRTC 051
05155
Condemnation Questions 10 & 11 are based on the following information. CPAR 0512
82
. The natio
national
nal gove
governme
rnment
nt conde
condemned
mned Sag
Sagigili
igilid Co.'s par
parcel
cel of real estate.
estate. Sagigilid
gilid will An entity has a nuclear
nuclear power plant
plant and a related decommissioning
decommissioning liability.
liability. The nuclear
receive P750,000 for this property, which has a carrying amount of P575,000. Sagigilid power plant started
started operating on 1 January 2009. The plant has a useful
useful life of 40 years. Its initial
incurred the following costs as a result of the condemnatio
condemnation:n: cost was P120 million, this included an amount for decommissioning costs of P10 million, which
Appraisal fees to support
support a P750,000 vvalue
alue P2,500 represented estimated cash flows payable in 40 years discounted at a risk-adjusted rate of 5 per
Attorney fees for the closing
closing with the gov
government
ernment 3,500 cent. The entity's financial year ends on 31 December.
Attorney fees to review
review contract to acacquire
quire replace
replacement
ment property 3,000 The entity adopts the revaluation model on 31 December 2011. A market-based discounteddiscounted cash
Title insurance on replacement property 4,000 flow valuation of P115 million is obtained at 31 December
December 2011. It includes an allowance of
What amount of cost should Sagigilid use to determine the gain on the condemnation? P11.6 million for decommissioning
decommissioning costs, which represents no change to the original estimate, after
A. P581,000 C. P584,000 the unwinding of three years' discount.
B. P582,000 D. P588,000 CPAR 0512 On 31 December 2012, the decommissioning
decommissioning liability (before any-adjustment)
any-adjustment) is P12.2 million and
the discount rate has not changed. However, on that date, the entity estimates that, as a result of
Revaluation technological advances, the present value of the decommissioning liability has decreased by P5
36. Simpson Compa
Company ny applies rev
revaluation
aluation acc
accounting
ounting to plant as
assets
sets with a carrying
carrying value million.
of P800,000, a useful life of 4 years, and no salvage value. Depreciation is calculated The entity decides that a full valuation of the asset is needed at 31 December 2012, in order to
on the straight-line basis. At the end of year 1, independent appraisers determine that ensure that the carrying amount does not differ materially from fair value. The asset is now valued
the asset has a fair value of P750,000. at P107 million, which is net of an allowance of P7.2 million for the reduced decommissioning
The financial statements for year one will include the following information obligation that should be recognized as a separate liability.
A. Accumulated depreciation
depreciation P200,0
P200,000.
00. C. Plant assassets
ets P750
P750,000
,000.. The entity does not transfer realized surplus directly to retained earnings.
B. Depr
Deprec
ecia
iati
tion
on expe
expens
nsee P50
P50,0
,000
00.. D. ReReva
valu
luat
atio
ionn ssur
urpl
plus
u s P50,
P50,00
000.
0. PRTC
PRTC 1015
1015
84
. The ent
entity
ity should
should report
report revaluat
revaluation
ion surplus
surplus as ooff 31 December
December 2011
2011 at
83
. In the 30 Jun
Junee 2015 an
annual
nual report ooff Johnston Ltd, the equipment
equipment was rep
reported
orted as follo
follows:
ws: A. P1.65 million C. P13.25 million
Equipment (at cost) P5,000,000 B. P4 million D. P15.6 million
depreciation 1,500,000
85
P3,500,000 . The ent
entity
ity should
should report
report revaluat
revaluation
ion surplus
surplus as ooff 31 December
December 2012
2012 at

88
A. Nil C. P8.358 million . Diana Mining Company cconstructed
onstructed a building costing P2,800,000
P2,800,000 on the
the mine property.
property. Its
B. P0.108 million D. P11.622 million estimated residual value will not benefit the company and will be ignored for purposes of
computing depreciation.
depreciation. The building has
has an estimated life of 10 years. The total estimated
Wasting Assets recoverable
recoverab le units from the mine is 500,000 tons. The company's production
production of the first four
37. In January,
January, 2015, Yoder Corpor
Corporation
ation purch
purchase
asedd a miner
mineral
al mine for P3,400,000
P3,400,000 with years of operations was:
removable
estimated
estim ore estimated
ated value of P200 by geological
P200,000
,000 after the surveys
ore has atbeen
2,000,000
extr tons.
extracte
acted. Thecompany
d. The property
compan hasrred
y incu an
incurred F
Siersctoynedayrear 110000,,000000 ttoonnss
PI,000,000 of development costs preparing the mine for production. During 2015, 500,000 Third year Shut down, no output
ton
tonss were
were rem
remov
oved
ed and
and 400,00
400,0000 tons w
were
ere ssold
old.. What is the
the amount
amount of deple
depletio
tionn that Fourth year 100,000 tons
Yoder should expense for 2015? What is the depreciation for the fourth year?
A. P640,000 C. P 840
840,0,000
00 A. P210,000 C. P4
P490
90,0
,000
00
B. P800,000 D. P1,050,000 PRTC 1015 B. P336,000 D. P560,000 PRTC 0515
86
. On Janu
January
ary 2, 2011,
2011, Memp
Memphis
his Cor
Corpor
porati
ation
on purcha
purchased
sed lan
landd with valu
valuabl
able na
natur
tural
al ore Intangible Assets
deposits for P10 million. The estimated residual value
value of the land was P2 million. At the time Composition
89
of purchase, a geological survey estimated 2 million tons of removable ore were under the . Hous
Houston,
ton, Inc. has been
been considerin
consideringg the accounting
accounting treatment
treatment of its intangible
intangible assets
assets and has
ground. Early in 2011, roads were constructed on the land to aid in the extraction and asked for your opinion on how the matters below should be treated in its f inancial statements
transportation of the mined ore at a cos
costt of P750,000. In 2011, 50,000 tons were mine
mined.
d. In for the year ended March 31, 2012.
2012, Memphis fired its mining engineer and hired a new expert. A new survey made at the • Houston hhas as developed
developed and patented
patented a new
new drug which has been approved
approved for clinical
clinical
end of 2012 estimated 3 million tons of ore were available for mining. In 2012, 150,000 use. The costs of developing the drug were P12 million. Based on early assessments
assessments of
tons were mined. All the ore mined was sold. Compute the amount of depletion for 2012. its sales success, independent valuers have estimated its market value at P20 million.
A. P372,000 C. P426,000 • Houston's manufacturing facilities have recently received received a favorable
favorable inspection
inspection by the
B. P4
P406
06,5
,500
00 D. P433,500
P433,500 CPAR 0512,
0512, 1015 governmentt medical scientists. As a result of this, the company has been grante
governmen grantedd an
exclusive five-year license to manufacture and distribute a new vaccine. Although the
87
. On January 15, 2013, MouMountain
ntain Compan
Companyy paid P5,400,0
P5,400,000
00 for proper
property
ty containing nnatural
atural license had no direct cost to Houston, its directors feel its granting is a reflection of the
resource of 2,000,000 tons of ore. The entity is legally required to restore the site after mining company'
comp any's stan
standing
ding and have askeaskedd inde
independ
pendent
ent valu
valuers
ers to measure
measure the license.
license.
operation
operations.
s. The estimat
estimated
ed cost
cost of restorin
restoringg the land after the resource
resource is extr
extracte
actedd is Accordingly,, they have placed
Accordingly placed a value of P10 million on
on it.
P450,000 and the land will have a value of P650,000 after it is restored for suitable use. • In the current
current accounting
accounting period
period,, Houston
Houston has spent P3 million
million sending
sending its staff on
Tunnels, bunk houses and other fixed installations are constructed at a cost of P8,000,000 specialized training courses. While these courses have been expensive, they
and such expenditures are charged to mine improvements. have led to a marked improvement in production quality and the staff now needs less
Operations began on January 1, 2014 and resources removedremoved totaled 600,000 tons. During supervision.
supervisio n. This in turn has led to an increase in revenue and cost cost reductions. The
2015, a discovery was made indicating that available resource after 2015 will total 1,875,000 directors of Houston believe these benefits will continue for at least three years and wish
tons. At the beginning of 2015, additional bunk houses were constructed in the amount of to treat training costs as an asset.
P770,000. In 2015, only 400,000 tons were mine
minedd because of a strike. • In Decembe
Decemberr 2011, Houston
Houston paid P5 million for a television adv
advertising
ertising campaign
campaign for its
Mountain Company should report depletion for 2015 at products that
that will run for 6 months
months from JaJanuary
nuary 1 to June
June 30, 2012. The directors
A. P640,000 C. P1,0
P1,04040,0
,000
00 believe that increased sales as a result of the publicity will continue for two years from
B. P776,000 D. P1,560,000 PRTC 0515 the start of the advertisements.
Compute the total amount to be recognized as assets in Houston's Marc Marchh 31, 2012 statement

of financial position. (Ignore amortization) Sea

Seaso nnaal oorr ooth
thee r p eerri ooddi c de si
si ggnn cchh aanng eess ttoo eexxi sti
stin g pro dduu cts
cts 1 8855,0
,0000
A. P0 C. P24.5 million Laboratory rreesearch aaiimed at at ddiiscovery of nneew technology 225,000
B. P22.0 million D. P32.5 million CPAR 0512 In its income statement for the year ended December 31, 2015, Riley should report research
and development expense of
Patent A. P585,000 C. P770,000
90
. Minivalue
par Corp.ordinary
acqu
acquires
iresshares
a patent
shares andfro
from
m Maxi Co.
P75,000 in exc
cash. exchange
hange
When thefor 2,500was
patent shares of Mini
initially Corp.'s
issue
issued P5
d to Maxi B. P735,000 D. P920,000 PRTC 1015
Co., Mini Corp.'s shares were
were selling at P7.50 per share. When Mini Corp. acquired
acquired the 40. Hali Co. incurred
incurred research
research and development
development costs
costs in 2015
2015 as follows:
follows:
patent, its shares were selling for P9 a share.
share. Mini Corp. should record
record the patent at what Materials used in research and development projects P450,000
amount? Equipment acquired that will have alternate future uses in future
A. P75,000 C. P93,750 research and development projects 3,000,000
B. P87
P87 ,5,500 D. P9
P977,5
,5000 PRTC 0515 Depreciation for 2015 on above equipment 300,000
Personnel costs
costs of persons involved
involved in research
research and development
development projects 750,000
91
. Buck Enterpr
Enterprises
ises acquir
acquired
ed a patent fr
from
om Wolly R
Research
esearch Corporation
Corporation on 1/1/15 for P4 m million.
illion. Consultin
Cons ultingg fees paid to outside
outsiders
rs for researc
researchh and deve
developm
lopment
ent projeects
cts 300,
300,000
000
The patent will be used for five years, even though its legal life is 20 years. Bully Corporation Indirect costs
costs reasonably
reasonably allocable
allocable to research and development
development projects
projects 225,000
has made a commitment to purchase the patent from Buck for P200,000 at the end of five P5,025,000
years. Compute Buck's pate
patent
nt amortization for 2015, assuming the stra
straight-line
ight-line method is Assume economic
economic viability has not
not been achieved.
achieved.
used. The amount of resresearc
earchh and development
development costs charged to Hall's
's 2011 income
A. P380,000 C. P7P760
60,0
,000
00 statement should be
B. P400,000 D. P800,000 PRTC 0515 A. P1,500,000 C. P2,025,000
B. P1,900,000 D. P4,500,000 PRTC 1015
Goodwill
92
. Level has ju just
st acquired the net asse
assets
ts of Complete fo
forr P100,000. In acquiring Co
Complete,
mplete, the Comprehenisve
93
owners of Level felt that Complete had unrecorded goodwill. They decided to capitalize the . During 2015, Vic Co Co,, had the following
following transactions:
transactions:
estimated annual superior earnings of Complete at 20% to determine the amount of goodwill. • On JanuaJanuaryry 2, Vic purchased
purchased the net assets of Amp Co. for P360,000. The fair value value of
The computation resulted
resulted in an estimated goodwill of P10,000. A rate of 10% on net assets Amp's identifiable net assets was P172,000, Vic believes t hat, due to the popularity of
before recognition of goodwill was used to determine normal annual earnings of Complete, Amp's consumer
consumer products, the life of of the resulting goodwill
goodwill is unlimited.
because it is the rate that is earned on net assets in the industry in which Complete operates. • On Febr February
uary 1, Vic purch
purchased
ased a franchi
franchise
s e to operate
operate a ferry servic
servicee from the sta
state
te
All other assets of Complete were properly recorded. The estimated annual earnings of governmentt for P60,000 and an annual fee of 1% of ferry revenues. The franchise
governmen
Complete is expires after five years. Vic received P20,000 of ferry revenues in 2015.
A. P2,000 C. P10,000 • On April 5, Vic was was grante
grantedd a patent
patent that had been applied
applied for by Amp. During 2015, Vic
B. P9,000 P11,000
D. P11,000 PRTC 0515 incurred legal costs of P51,000 to register the patent and an additional P85,000 to
successfully
success fully prosecute a patent infringement suit against a competitor. Vic estimates the
Research & development costs patent's economic life to be ten years.
39. Riley Co
Co.. incurr
incurred
ed the follo
following
wing co costs
sts dur
during
ing 2015
2015:: Vic has determined that it is appropriate to amortize these intangibles on the straight-line
Signif
g nific
ican
antt m
mod
odif
ific
icat
atio
ionn ttoo tthe
he fo
form
rmul
ulaatio
tionn ooff a ch
chem
emic
ical
al prod
produc
uctt P160
P160,0
,000
00 basis over the maximum period permitted by generally accepted accounting principles, taking
Trouble-shooting
Trouble-sho oting in connec
connection tion with breakdo
breakdowns wns during com
commercial
mercial produ
production
ction 150,000 a full year's amortization in the year of acquisition.
Cost of exploration of new formulas 200,000 Calculate the total expense to be recognized in 2015 income statement resulting from the

foregoing intangible assets. The carrying amount of Brand - "Choochoo"

"Choochoo" after allocating impairment loss, if any, is
A. P25,600 C. P102
P102,3
,300
00 A. P0 C. P4P470
70,0
,000
00
B. P35,200 D. P111,700 PRTC 0515 B. P423,000 D. P500,000 PRTC 0515
95
Impairment of Long-Lived Assets . Twilight Corporation
Corporation has determined that
that its fine china
china division
division is a cash-generating
cash-generating unit. The
The
43. Harrel Company

P5,000,000. ac
acquired
It wasquired
expec atedpatent
expected on an
to have oil
a 110 extraction
0 year techniq
technique
life and ue on January
no residual value. 1, 2014uses
value. Harrel for carrying amounts
Factory of the assets at 31 December 2015 are as follows: P210,000
straight-line amortization for patents. On December 31, 2015, the recoverable amount of the Land 150,000
patent was estimated to be P4,300,000. At what amount should the patent be carried on the Equipment 120,000
December 31, 2015 balance sheet? Inventory 60,000
A. P4,000,000 C. P4,5
P4,50000,0
,000
00 Total P540,000
B. P4,300,000 D. P5,000,000 PRTC 1015 Twilight Corporation
Corporation calculated the value in use of the divisio
divisionn to be P510,000. Assuming
that the fair value less costs to sell of the land is P145,000, how much is the carrying amount
41. An entity has a database that it purc
purchased
hased five years aago.
go. At that date, the database had of equipment after allocating impairment loss?
30,000 customer addresses on it. Since the date of purchase, 2,000 addresses have been A. P110,909 C. P112,500
taken from the list and 4,000 addresses have been added
added to the list. It is anticipated that in B. P1P112
12,3
,308
08 D. P11
P113,3
3,333
33 PRTC
PRTC 051
05155
two years' time, a further 8,000 addresses will have been added to the list. In determining the
value-in-use of the customer lists, how many addresses should be taken into account at the
current date?
A. 30,000 C. 40,000
96
B. 32,000 D. 42,000
42,000 PRTC
PRTC 1015
1015 . On Janu
January
ary 2, 2014,
2014, Meadow
Meadow Inc. purchas
purchased
ed a patent
patent with a cost P940,000
P940,000 a useful
useful life of 4
years. At December 31, 2014, and December 31, 2015, the company company determines that
94
. Hamm
Hammer er Corp
Corporati
oratioonn acqu
acquired
ired all the ass
assets
ets and liab
liabilitie
ilitiess of New Corporatio
Corporation.n. New impairment indicators are present. The following information is available for impairment
Corporation has a number of operating divisions, including one whose major industry is the testing at each year end:
manufacture of toy train, particularly those having historical significance. The toy trains 12/31/2014 12/31/2015
division is regarded as a cash-generating
cash-generating unit. In paying P20 million for the net assets of Fair value less costs to sell P715,000 P420,000
New Corporation,
Corporation, Hammer calculated that it had acquireacquiredd goodwill of P2,400,000. The Value-in-use P750,000 P445,000
goodwill was allocated to each of the divisions, and the assets and liabilities acquired are No changes were made in t he asset's estimated useful life.
measured at fair value at acquisition date. The company's 2015 income statement will report
At the end of the period, the carrying
carrying amou
amounts
nts of the assets of the totoyy train division were:
were: A. Loss on impairment
impairment of P70,000.
Factory P2,500,000 B. Amortizat
Amortization
ion Expens
Expensee of P235,0
P235,000.
00.
Inventory 1,500,000 C. Amortization E Expense
xpense of
of P250,000 and Loss on Impairment
Impairment of P55
P55,000.
,000.
Brand - "Choochoo" 500,000 D. Amortization Expense
Expense of P235,000
P235,000 and a Loss of Impairment
Impairment of P25,000.
P25,000. PRTC 0515
Goodwill 500,000
Total P5,000,000 42. Four years ago
ago on January 2, Randall
Randall Co. purchased
purchased a long-lived
long-lived asset. The purchase
purchase price
There is a declining interest in toy trains because of the aggressive marketing of computer- of the asset was P2,500,000,
P2,500,000, with no salvage value. The estimated useful life of the asset
based toys, so the management of Hammer measured the value in use of the toy train was 10 years. Randall used the straight-line method to calcula
calculate
te depreciation expense
expense.. An
division at P4,230,000. impairment loss on the asset of P300,000 was recognized on December 31 of the current

year. The estimated useful life of the asset at December 31 of the current year did not
change.
change. What amouamount,
nt, should
should Rand
Randall
all report
report as deprecia
depreciation
tion expens
expensee in its income Current Liabilities, Provisions & Contingencies
Contingencies
statement for the next year? Accounts payable
payable
99
A. P200,000 C. P250,000 . Life, Inc. is preparin
preparingg its financial
al statements
statements for the year ended
ended December
December 31, 2015.
2015.
B. P220,000 D. P300,000 PRTC 1015 Accounts payable amounted
amounted to P200,000 before any necessary year-end adjustme
adjustment
nt related
97
. On April 1, 201
2015,
5, Brandoni Com
Company
pany has a piece of mach
machinery
inery with a cost
cost of P1,000,000
P1,000,000 and •to theAtfollowing:
Dece
December
mber 31,
31, 2015, Lifefe has a P50,00
P50,0000 debit balanc
balancee in its accounts
accounts payab
payable
le to
accumulated depreciation
depreciation of P750,000. On April 1, Brandoni decided to sell the machine Twist,
Twist, a supp
supplier
lier,, resu
resulting
lting from a P50,
P50,000
000 advance
advance payment
payment for good
goodss to be
within 1 year. Assume that the asset qu qualified
alified as noncurren
noncurrentt asset held for sale. As of April manufactured to Life's specifications.
specifications.
1, 2015, the machine had an estimated selling price of P100,000 and a remaining useful life • Chec Checks ks in the amount
amount of P25,000
P25,000 were writte
writtenn to vendo
vendorsrs and recorde
recordedd on December
December
of 2 years. It is estimated that selling costs associated with the disposal of the machine will 29, 2015. The checks were dated January 5, 2016.
be P10,000.
P10,000. On Decem December
ber 31, 2015, the estimate
estimatedd selling price of the machine
machine had What amount should Life report as accounts payable in its December 31, 2015 statement of
increased to P150,000,
P150,000, with estimated selling costs increasing
increasing to P16,000. The gain on financial position?
reversal of impairment loss on December 31, 2015 is A. P125,000 C. P250,000
A. P0 C. P50,000 B. P200P200,0 ,000
00 D. P2P27575,0
,000
00 PRTC 0515
B. P4P444 ,0
,000 D. P160,0
P160,000
00 PRTC
PRTC 0515
0515
100
. DATACO
DATACORP RP a cocompu
mputer
ter store
store in Virra Mall, Greenh
Greenhill
illss sp
speci
eciali
a lizzes
es in the sale of IBM
44. On June 2, 2014, Lind Lindtt Inc. Purcha
Purchased
sed a tra
trademark
demark with a cost P9,440,000. The tradema
trademark
rk compatibles
compatibl es and software
software pack
packages
ages and had the follo
following
wing transactio
transactionsns with one of its
is classified as an indefinite-life intangible asset. At December 31, 2014 and December 31, suppliers:
2015, the following information is available for impairment testing: Purchase of IBM compatibles P328,000
12/31/2014 12/31/2015 Purchases of commercial software packages. 90,000
Fair value less costs to sell P9,115,000 P9,050,000 Returns and allowances 8,000
Value-in-use P9,350,000 P9,550,000 Purchases discounts taken 2,700
The 2015 income statement will report Purchases were made throughout
throughout the year on terms 3/10, n/60. All returns and allowances
A. Impairment Loss of P90,000. took place within 5 days of purchase and prior to any payment of account. Discount lost is
B. Reco
Recovery
very of Impairm
Impairment
ent of P90,0
P90,000.
00. A. P6,900 C. P9,600
C. Reco
Recovery
very of
of Impairrment
ment of P200
P200,000.
,000. B. P7,140 D. P9,840 CPAR 0512
D. No Impairment Loss or RecoverRecoveryy of Impairment. PRTC 1015
Deferred revenues
101
Other Investments . Parity Compa
Company ny sells subscriptio
subscriptions ns to a specialized
specialized directory thatthat is published
published semian
semiannuallynually
98
. Dur
During
ing 2012,
2012, Isch
Ischyri
yrine
n e Co. pays an insuran
insurance
ce prem
premium
ium of P31,8
P31,80000 on a P900,
P900,000
000 life and shipped to subscribers
subscribers on April 15 and October 15. Subscriptions received received after the
insurance policy covering
covering the president. The cash surrender valu
valuee of the policy will increase March 31 and September 30 cutoff dates are held for the next publication. Cash from
from P165,000 to P175,200 during
during 2012. Dividends rec
received
eived from the insur
insurance
ance company subscribers is received evenly during the year and is credited to deferred revenues from
during 2012 total P6,300.
P6,300. The president died half-w
half-way
ay through 2012. The policy indicates subscriptions.
subscription s. Data relating to 2015 2015 are as follows:
follows:
that the cash surrender value is P170,100 at that date and 50% of the premium is refunded. Defe
ferrr ed
ed rree ve
ven uuees ffrr oom
m su
su bs
bscr iptio nnss, bbaa lanc e 12/3
/311/1
/144 P1 ,,550 00,0
,0000
The gain on life insurance settlement is Cash receipts from subscribers 7,200,000
A. P714,000 C. P729,900 In its December
December 31, 2015 stat statemen
ementt of finan financial
cial position,
position, Parittyy shou
should
ld repo
report rt defer
deferred
red
B. P723,600 D. P736,200 CPAR 0512 revenues from subscriptions of

A. P1,800,000 C. P3,600,000 Approach 2 - 20% probability of total decontamination cost of P100,000 at the end of
B. P3,300,000 D. P5,400,000 PRTC 0515 30 years.
Approach 3 - 70% probability of total decontamination cost
cost of PI,500,000 at the end of
Liability for premiums 30 years.
102
. In an effort to increas
increasee sales, Blue Raz
Razor
or Blade Comp
Company
any inaug
inaugurat
urated
ed a sale
saless promotion
on Assuming that the appropriate
appropriate interest rate is 8%, the total expense to be reco
recognized
gnized in 2015
campaign
sold, on Junebeing
the coupons 30, 2012, whereby
redeema
redeemable Blue
ble for placed a coupon
a premium. in each costs
Each premium package
BlueofP.50,
razorand
blades
five profitNil
A. or loss is C. P8,511
coupons must be presented by a customer to receive a premium. Blue estimated that only 60 B. P3,546 D. P1
P122 ,0
,05 77 PRTC 1015
percent of the coupons issued will be redeemed. For the six months ended December 31,
2012, the following information is available: Questions 25 & 26 are based on the following information. CPAR 0512
Packages of razor blades sold 400,000 Opus sells sports goods and clothing through a chain of retail outlets. It offers customers a full
Premiums purchased 30,000 refund facility for any goods returned within 28 days of their purchase provided they are unused
Coupons redeemed 100,000 and in their original packaging. In addition, all goods carry a warranty agains
againstt manufacturing
What is the estimated liability for premium claims outstanding at December 31, 2012? defects for 12 months from their date of purchase. For most goods the manufacturer underwrites
A. P10,000 C. P18,000 this warranty such that Opus is credited with the cost of the goods that are returned as faulty.
B. P14,000 D. P24,000 CPAR 0512 Goods purchased from one manufacturer, Header, are sold to Opus at a negotiated discount which
103 is designed to compensate Opus for manufacturing faults of these goods.

. The Genero
Generous
us Corpor
Corporation's
ation's pres
president
ident has a profit-sha
profit-sharing
ring agreem
agreement
ent with the company. Th
Thee Opus makes a uniform mark up on cost of 25% on all goods it sells, except for those supplied from
agreement states that the president is to receive a bonus consisting of a basic amount Header on which it makes a mark up on cost of 40%. Sales of goods manufactured by Header
equivalent to 10% of the company's net income before deduction
deduction of bonus but after deduction consistently account for 20% of all Opus's sales. Sales in the last 28 days of the trading year to
of income tax. In addition, the basic bonus shall be increased by the company's tax savings December 31, 2012 were PI,750,000. Past trends reliably indicate that 10% of all goods are
on bonus because the total amount of bonus is deductible in computing the company's returned under the 28-day return facility. These are not faulty goods. Of these 70% are later sold at
taxable income. The company registered a net income of P5,000,000 before deduction of the the normal selling price and the remaining 30% are sold as 'sale' items at half the normal retail
president's bonus and income tax. The company is subject to corporate income tax of 30%. price. In addition to the
the above expected
expected returns,
returns, an estimated
estimated P160,000 (at selling
selling price)
price) of the
The total bonus due to the president is goods sold during the year will have manufacturing defects and have yet to be returned by
A. P263,158 C. P360,825 customers.. Goods returned as faulty have no resale value.
customers
B. P339
P339,8
,806
06 D. P5P522
22,3
,388
88 CPAR 0512 Compute the provision that the company is required to make as of December 31, 2012 for
104
Provisions . Good
Goodss subject
subject to the 28 day rretur
eturnn policy
icy
35. On Janua
Januaryry 1, 2015, Burns Com
Company
pany has pur
purchas
chased
ed land that will serv
servee as a tempo
temporary
rary A. P38,000 C. P122,150
repository for nuclear waste. The site will function for 30 years, at which time Burns will be P52,850
B. P52,850 D. P137,000
required to completely decontaminate the land. The purchase price for the land is P500,000.
105
Burns knows that the land will have to be decontaminated but isn't sure which of several . Goods that are likely to be faulty
faulty
possible approaches
approaches will be sufficient to reach the level of decontamination
decontamination necessary by law. A. P32,000 C. P125,260
The costs of each approach, and the estimated probability that the approach will be the one B. P57,600 D. P1
P134
34,4
,400
00
used, follow:
Approach 1 - 10% probability of total decontamination cost of P5,000 at the end of 30 Lawsuits
106
years. . On Nov
Novemb
ember
er 7, 201
20155 loc
local
al resid
resident
entss sue
suedd Brim
mley
ley Corpor
Corporati
ation
on for excess
excess ch
chemi
emical
c al

emission
emissionss that caused
caused some of them to seek medical
medical attention
attention.. The total lawsuit
lawsuit is pay it off in three equal annual payments of P30,000 each, starting on December 31, 2013.
P8,000,000. Brimley Corporation's lawyers believe that the lawsuit will be successful and that The interest rate was 11 percent. The balance in the liability account of VCR Company on
the amount
amount to be paid to the residents
dents will be P4,000,00
P4,000,000.0. On its Decemb
Decemberer 31, 2015 January 1, 2015 is:
financial statements Brimley should: A. P27,027 C. P73
P73 ,,332 1
A. Do nothing as the lawsuit has not ye
yett ended. B. P51,875 D. P90,000 PRTC 0515
B. Accrue disclose
C. Simply a provision
the loss
loss of P4,000,000
detailsP4,000 ,000the
regarding and note disclose.
lawsuit in a note. PRTC 0515 111
. On December 31 31,, 2014, Merciful Bank entered entered into a debt restructuring
restructuring agreement
agreement with
D. Accrue a pro
provision
vision loss of P8,00
P8,000,000
0,000 with no financ
financial
ial statement disclos
disclosure
ure necessary.
necessary. Floreza Corp., which was experiencing financial difficulties. A note for P1,000,000 and one
year's accrued interest
interest was due on this date from Floreza. The note receivable from Floreza
107
. In 2015, Cobus Limited was ssuedued for P1,000,0
P1,000,000.
00. Lawyers hhave
ave advised that the obligating was restructured as follows:
event has occurred, but that the probability of making a payout is 25%, which is deemed not • redu
reduced
ced the principa
principall obliigati
gationon to P700,000
P700,000..
certain. It is expected to take at least 3 years before the lawsuit is finalized. Cobus uses an • forgave
forgave tthe
he P120,00
P120,0000 of accru
accrueded in
intere
terest
st for 2014
2014..
8% discount rate. What amount would be recorded as a liability in 20157 • exte
extended
nded the matur
maturity
ity date
date to December
December 31, 22017.
017.
A. P0 C. P 250,000 • redreduc
uced
ed tthe
he innteres
terestt ra
rate
te ttoo 8%
8%..
B. P 19198,8,45
4500 D. P 314,92
314,9288 PRTC
PRTC 0515
0515 Interest is payable annually on December December 31, beginning 2015. In accordance with the
agreement, Floreza made payment to Merciful Bank on December 31, 2015.
108
. In 2016, before the entity's 22015
015 financial statem
statements
ents were approved
approved for issue, a clas
classs action How much interest expense should Floreza report for the year ended December 31, 2015?
lawsuit
lawsuit was filed against the entity. The lawsuit
lawsuit seeks compensat
compensationion for a communittyy A. P 0 C. P64,258
experiencingg health problems allegedly caus
experiencin causeded by pollution from the entity's plant. Legal B. P56
P56,0
,0000 D. P7 P755 ,9
,93 1
1 PRTC 0515
counsel advised management that there is a 30 per cent chance that the action will be
successf
successful.
ul. If success
successful,
ful, the court
court is likely to awaawardrd the communit
communityy compensa
compensation
tion of Compound Financial Instruments
112
between P1,000,000
P1,000,000 and P2,000,000. In its financial statements for th thee year ended 31 . On Janua
Januaryry 1, 2015, DCE Company
Company dated
dated and issued P1,000,0
P1,000,000,
00, 5%, 5-year
5-year convertible
convertible
December 2015, the entity should recognize
recognize a liability for t he lawsuit of bonds for P1,045,000. Bonds are convertible
convertible at the investor's option into 200,000 ordinar
ordinaryy
A. Nil C. P1,5
P1,500 00,0
,000
00 shares. Interest is payable quarterly. Bonds without the conversion feature would have been
B. P1,000,000 D. P2,000,000 PRTC 0515 issued to yield 6%. What is the value of the conversio
conversionn feature?
A. P42,892 C. P87,080
109
. On Januar
Januaryy 3, 2012, Sun Corp. oowned
wned a machine
machine that hhad
ad cost P3
P300,000.
00,000. The accumulated B. P56
P56,9
,9117 P87,892
D. P87,892 PRTC 0515
depreciation was P180,000, estimated salvage value was P18,000, and fair market value was
113
P480,000. On January 4, 2012, this machine was irreparably damaged by Light Corp. and . On Januar
Januaryy 1, 2015, SWQ
SWQ Company issued P500,000
P500,000 convertible
convertible bonds. In part, the journal
journal
became worthless. In October 2012, a court awarded damages of P480,000 against Light in entry to record the bond issue included a credit to the conversion feature of P21,450 and a
favor of Sun. At December 31, 2012, the final outcome of this case was awaiting appeal and debit to discount on bonds for P19,560.
P19,560. What was the amount of cash received
received for the
was, therefore, uncertain. However, in the opinion of Sun's attorney, Light's appeal will be convertible bond issue?
denied. At December 31, 2012, what amount should Sun accrue for this gain contingency? A. P458,990 C. P5 P501
01,8
,890
90
A. P0 C. P390
P390,0
,000
00 B. P480,440 D. P521,450 PRTC 0515
B. P300,000 D. P480,000 CPAR 0512
Accounting for Leases
Leases
114
Long-Term Debt . Adam Limit
Limited
ed and Davie
Daviess Limited enter
enter into a finan
finance
ce lease agreeme
agreement
nt with the followinngg
110
. VCR Compan
Companyy owed a P73,311 debt ddue
ue on Jan
January
uary 1, 201
2013.
3. An agreement
agreement was reac
reached
hed to terms:

117
• lease term is 3 years . NHO CompCompany
any has machin
machinery
ery with an original cost of P100,000 and accu accumulat
mulated
ed
• estimated economic life of of the leased asset is 6 years depreciation of P30,000.
P30,000. At the beginning of the year, NHO ssold old the machinery to RTQ
• 3 x annual rental payments of P23,000; each payment is one year in arrears arrears Company for P80,000 and immediately
immediately leased the machinery bacbackk from RTQ. The lease
• residual value at the end of the lea lease
se term is not guaranteed by the lessee qualifies as a financing lease. Which of the following would be included in the journal entry to
• interest rate implicit in the le
lease
ase is 7% record the sale of the machinery?
On inception
A. P60,359 date, the present value of the minimum lease payments is:
C. P64,584 A.
B. Debit
Debit to
to machinery
machine ry forofP80,000
loss on sale machinery for
for P20,000
B. P64,170 D. P69,000 CPAR 0512 C. Credit to accumulated depreciation for P30,000
P30,000
D. Credit to deferred
deferred gain on sale and leaseback of machinery
machinery for P10,000
P10,000 PRTC 0515
115
. On Janua
January
ry 1, Jessa Comp
Companyany sign
signed
ed a 1-year
1-year rental with qua
quarterl
rterly paymen
payments
ts of P100,000
due at the end of each quarter. In addition, the renter must pay contingent rent of 5% of a!! Accounting for Income
Income Taxes
118
sales in excess of P10,000,000.
P10,000,000. The contingent rent is paid in one paympayment
ent on December . The Timb
Timberwo
erwolves
lves Co
Compan
mpanyy purchase
purchasedd a building
building in January
January 2012 forfor P150,000.
P150,000. The
31. On March 31, Jessa Company received the first rental payment. At that time, sales for the accounting depreciation charge is 5% straight-line. For tax purposes, depreciation of 2%
renter had reached P3,000,000.
P3,000,000. The same renter has used the building for the past 5 years,
years, straight-line is deducted annually. The remaining cost will be deducted in future periods,
and in each of those years the renter reached the contingent
contingent rent threshold of P10,000,00
P10,000,0000 either as depreciation or through a deduction on disposal. The tax rate is 25%.
in sales. Accordingly
Accordingly,, the accountant for Jessa Company recognized total rent revenue of What should be the deferred tax balance
balance at 31 December 2015?
2015?
P125,000 for the first quarter P100,000 collected in cash and another P25,000 in estimated A. P3,375 deferred
deferred tax asset C. P4,500
P4,500 deferre
deferredd taxtax asset
asset
contingent rent. Sales for the quarter ended June 30 were were P2,800,000, and the accountant
accountant B. P3,3
P3,3775 de ffeer re
red ta
taxx l iabi li ty
ty D. P4,5
P4,5000 d eefe
ferrr ed
ed ta
taxx l iab il ittyy PR TC
TC 05 1155
for Jessa Company followed
followed the same procedure regardinngg the contingent rent. Sales in the
119
third quarter
quarter were P3,500
P3,500,000
,000.. How
However
ever,, in the third quarter
quarter the accountan
accountantt for Jessa . Tower CoCorp.
rp. began operations on January
January 1, 2014.
2014. For financial
financial reporting,
reporting, Tower recognizes
Company learned that contingent rentals should not be estimated, but instead should be revenue from all sales under the accrual method. However, in its income tax returns, Tower
recognized only after the threshold has been reached.
reached. The accounting was done correctly
correctly in repo
reports
rts qualifying
qualifying sales under the instainstallmen
llmentt metho
method. d. Tower's
Tower's gross profit on thes thesee
the third quarter, and the appropriate entry was made to correct the mistakes made in the first installment sales under each method was as follows:
and second quarters. Sales by the renter in the fourth quarter were P4,000,000. Year Accrual method Installment method
The total rent income for the year is 2014 P1,600,000 P 600,000
A. P265,000 C. P 565,000 2015 2,600,000 1,400,000
B. P400,000 D. P1,365,000 PRTC 0515 The inc
income
ome tax rat
ratee is 30% for
for 2014
2014 aand
nd fu
futur
turee ye
years
ars.. There
There aare
re no othe
otherr tempor
temporary
ary
or permanent differences.
differences. In its December 31, 2015 balan balancece sheet, what amount should
116
. Lovely Co
Company
mpany leas
leased
ed equipme
equipmentnt to Mie In
Inc.
c. on January
January 1, 2014. The lease is for an eight- Tower report as liability for deferred income taxes?
year period. The first of eight equal annual payments of P900,000 was made on January 1, A. P360,000 C. P6P660
60,0,000
00
2014. Lovely had purchased
purchased the equipment on December 29, 2013, for P4,800,000.
P4,800,000. The B. P600,000 D. P840,000 PRTC 0515
lease is appropriately accounted
accounted for as a sales-type lease by Lovely. Assume that the
present value at January 1, 2014, of all rent payments over the lease term discounted at a 10 Accounting for Employee
Employee Benefits
120
percent interest rate was P5,280,000.
P5,280,000. What amount of interest income should Lovely record
record . The following informa
information
tion pertain Mavericks
cks Corporation's
Corporation's which star
started
ted operations on 3131
in 2015 as a result of the lease? December 2011.
2011. Summarized information
information abou
aboutt its employees
employees at 31 December
December 20152015
A. P391,800 C. P480
P480,0
,000
00 includes:
B. P438,000 D. P490,000 PRTC 0515 Number of Salary level for the 12- Percentage wage
Employee employees in month period ending increase effective

category category 30/06/2016 from 01/07/2016 three years. The entity estimates that the fair valu
valuee of each option is P21. On the basis of a
A 9 P100,000 5% weighted average probability, the entity estimates that 60 employees will leave during the
B 200 P50,000 7% three-year period and therefore forfeit their rights to the share options.
C 300 P25,000 9% Suppose that 15 employees leave during
during year 1. Also suppose that by the end of year 1, the
Annual salary increases are expected to continue at the same rates for the foreseeable entity's share price has dropped, and the entity reprices its share options, and that the
future.
future. In Decemb
December er 2015, with a view to reducing ng its work
workforc
force,
e, the entit
entityy made an repriced
employees share options
options
will leave vestyears
during at the2 end of During
and 3. year 3.year
The2, aentity estimates
further that a leave,
10 employees furtherand
35
irrevocable offer to its employees of a voluntary redundancy package.
package. In accordance with the
offer the entity will compensate any employee who accepts voluntary redundancy on or the entity estimates thatthat a further 10 employees will leave
leave during year 3. During year 3, a
before 30 June 2016. The compensation offere offeredd is equal to the employee's annualized total of 8 employees leave.
salary for the 12-month period ending 30 June 2016. The entity estimates that, at the date of repricing, the fair vaiue of each of the original share
At 31 December 2015
2015 the entity's volu
voluntary
ntary redund
redundancy
ancy record
recordss include: options granted (i.e., before taking into account the repricing) is P10 and that the fair value of
Employee Number of employees who accepted Number of employees expected to each repriced share option is P13.
category voluntary redundancy by accept voluntary redundancy in The amount to be recognized as expense in year 3 is
31/12/2015 2016 A. P136,800 C. P150,750
A 0 1 B. P1P14545,0
,050
50 D. P40
P400,8
0,800
00 PRTC
PRTC 051
05155
B 2 8
C 5 25 Shareholders’ Equity
Shareholders’
123
Calculate the entity's liability for termination benefits at 31 December 2015. . Tekk
Tekkaa Corporation
Corporation was incorpor
incorporated
ated on June 1, 2015 with an authoriz
authorized
ed 200,000,
200,000, no-par,
no-par,
A. P225,000 C. P1,350,000 ordinnary
ary shar
shares,
es, state
statedd value
value P10 and 10,0
10,000,
00, 9% par valuvaluee P30, pref
preferen
erence
ce sha
shares.
res.
B. P243,250 D. P1,457,500 PRTC 0515 Transactions affecting company's
company's equity as of July 31, 2015 were as follows:
June 1 50,000
50,000 ord
ordinar
inaryy shares
shares were
were isssued
sued at P10.
P10.
121
. The following ininformation
formation rela
relates
tes to the define
definedd benefit pension plan
plan for the Nicola
Nicola Company
Company June 5 AsseAssets
ts with a total appraised
appraised valuuee of P600,00
P600,0000 were acquired
red in exchange
exchange for
for the year ending December 31, 2015. 50,000 ordinary shares.
Defined benefit obligation, January 1 P4,600,000 June 15 Subs
Subscrip
criptions
tions were received
received for 100,000 ordinary
ordinary shares
shares at P15 and for 5,000
Defined benefit obligation, Dec. 31 4,729,000 preference shares at P35.
Fair value of plan assets, January 1 5,035,000 June 2525 Payments in full for the ordinary and preference
preference shar
shares
es subscribed
subscribed June 15 were
Fair value of plan assets, Dec. 31 5,565,000 received and the corresponding shares were issued.
Expected return on plan assets 450,000 The total shareholders' equity as of July 31, 2015 is
Employer contributions 425,000 A. P2,300,000 C. P2,775,000
Benefits paid to retirees 390,000 B. P2,750,000 D. P2,875,000 PRTC 0515
Settlement rate 10%
124
Service cost for the year would be . Julia Co
Corp.'s
rp.'s equity
equity as of Decembe
Decemberr 31, 2014 is P534,000
P534,000.. The Julia's
ia's shares
shares have
have a par
A. P59,000 C. P129,000 value of P10 per share. The following transactions occurred
occurred in 2015: February 15: Dividends
Dividends
B. P94,000 D. P390,000 PRTC 0515 of P10,000 are paid;
paid; March 14: 10 ,000
,000 shares are sold for P14 per share;
share; June 6: 2,000
shares are repurchased
repurchased for P16 per share; October 8: 2,000 shares previou
previously
sly repurchased
repurchased
Share-Based Payment are resold for
for P18 per share.
share. Profit for 2015 is P103,000. On December
December 31, 2015, Julia
Julia
122
. At the beginning of year 1, D
Dickenson
ickenson C
Corporation
orporation ggrants
rants 100 sshare
hare options to each of its 200 should report equity of
A. P664,000 C. P7P771
71,0
,000
00
employees. Each grant is conditional upon the employee remaining in service over the next

B. P767,000 D. P781,000 PRTC 0515 of conversion are for every P1,000 nominal value of shares:
December 31, 2015 120 ordinary shares
125
. At December 31, 2014, Ra
Rama
ma Corp. ha
hadd 20,000 sh
shares
ares of P1 par value treasury sshares
hares that December 31, 2016 150 ordinary shares
had been acquired in 2014 at P12 per share. In May 2015, Rama issued 15,000 of these December 31, 2017 140 ordinary shares
treasury shares at P10 per share.
share. At December 31, 2015, what amount should Rama show show Assuming that the income
income tax rate is 35%,
35%, the diluted earnings per
per share in 2015
2015 is
in notestransactions
shares to financial ?statements as a restriction of retained earnings as a result of its treasury
transactions? A. P1.81
B. P1.82 C.. P
D P11..888353 PRTC 0515
A. P 5,000 C. P 90,000
129
B. P6P600 ,0
,000 D. P240,000 PRTC 0515 . Calvin Co
Company's
mpany's capital structure
structure was as follows:
follows:
2 014
20 2015
126
. Ricky
Ricky Corp.'s outstan
outstanding
ding sha
share
re capit
capital
al at Decemb
December er 15, 2012,
2012, consis
consisted
ted of the following:
following: Outstanding securities:
• 30,000 5% cumulative preference shares, par par value P10 per share, fully participating as Ordinary 1,000,000 1,000,000
to dividends. No dividends wer
weree in arrears. Co nnvve rti
rtib le pre ffeer en
enc e 1 0000,0
,0000 1 0000 ,,000 0
• 200,000 ordinary shares, par value PI per share. 10
10%% coconv
nvererti
tibl
blee bo
bond
ndss pa
paya
yabl
blee P30,
P30,00
000,0,00
0000 P3
P30,
0,00
000, 0,00 0000
On December 15, 15, 2012, Ricky ddeclared
eclared divide
dividends
nds of P100,000
P100,000.. What was the aamount
mount of Durinngg 2015, Calvin
Calvin paid dividdends ends of P15 per share on its preference
preference shares.
shares. The
dividends payable to Ricky's ordinary shareholders? preference shares are convertible into 150,000 ordinary shares and the 10% bonds are
A. P10,000 C. P40,000 convertible into 300,000
300,000 ordinary shares.
shares. Profit for 2015 was P10,000,000.
P10,000,000. The income tax
B. P34,000 D. P47,500 CPAR 0512 rate is 35%. The diluted earnings per
per share for 2015 should be
A. P7.50 C. P8.24
127
The December 31, 2015, the balance sheet of TXY reflected the following: B. P8.04 D. P8.
P8.50
50 PRTC
PRTC 051
05155
Total assets (market value P298,000) P252,000
Total liabilities Corporate restructuring
130
Preference shares, P.10 cumulative, P70,000 . Bago's direc
directors
tors decided
decided on 3 November
November 2012 to res restructure
tructure the company's
company's operations.
operations. As
non-participating, P2.20 liquidation preference 50,000 at Bago's balance sheet date of 31 December 2012 the following transactions and events had
per share, 20,000 shar
shares
es outstanding occurred:
Ordinary shares, no par, 30,000 shares outstanding 120,000 • Factory Z was shut dow downn on 30 November
November 2012.
2012. An offer of P4M hadhad been received for
Retained
Retained earnings
earnings (no dividends
dividends were declared
declared or paid
paid in 201
20144 - 2015)
2015) 12,000
12,000 Factory Z; however there was no binding sales agreement.
P252,000 • The 100 employees had been retrenched,
retrenched, had left and
and their accumulated entitlements
Assume the company sold all of the assets at December 31, 2015, at market value for cash; had been paid, however an amount of P76,000, representing a portion of the 3 months'
paid off the liabilities and distributed all of the remaining cash
cash to the shareholders
shareholders.. The wages for the retrenched employees, had still not been paid.
amount of cash per share that each common shareholder would receive would be: • Costs ooff P23,000 were expected
expected to be incurred
incurred in transferring the 20 employees
employees to their
A. P4.47 C. P6.07 new work in Factory X. The transfer will occur on 15 January 2013.
B. P6.00 D. P8.33 PRTC 0515 • Four of the five head-office
head-office staff had been retrenched,
retrenched, had left and their accumulated
entitlements, including the 3 months' wages, had been paid. However one employee,
employee, D.
Earnings per Share Terminator, remained on to complete administrative tasks relating to the closure of
128
. Entity A has made a profit attrib
attributabl
utable to ordinary
nary shareho
shareholder
lderss of P20,0
P20,000,00
00,0000 for the year Factory Z and the transfer of staff to Factory X. D. Terminator was expected to stay until
ended December
December 31, 2015. Ten million ordinary shar shares
es were outstandin
outstandingg during 2015. 31 January 2013. D. Terminator's salary for January would be P4,000 and his
Since January 2015 there has been P8,000,000
P8,000,000 of 5% convertible bonds in issue. The terms retrenchment package would be P13,000, all of which would be paid on the day he left.

He estimated that he would spend 60% of his time administering the closure of Factory Reconstruction of Accounts
Reconstruction
132
Z, 30% of his time administering the transfer of staff to Factory X and the remaining 10% . At January 1, a sole proprietorship's
proprietorship's assets
assets totaled P210,000,
P210,000, and its liabilities amounted
amounted to
on general administration. P120,000.
P120 ,000. During ng the yea
year,
r, owner investment
investmentss amounted to P72,000,
P72,000, and owner
Calculate the amount of the restructuring provision to be recognized in Bago's financial withdrawals totaled P75,000. At year-end, assets totaled P270,000, and liabilities amounted
statements as at 31 December 2012. to P171,000. The amount of net income for the year was
A. P89,000
B. P9
P91
1 ,4
,400 C.
D. P93,000
P116,0
P116,000
00 CPAR
CPAR 05
0512
12 A.
B. P
P60,000 C. P12,000
D. P 9,000
P12,000 PRTC 0515
133
Accounting Changes
Changes & Prior Per
Period
iod Errors . A company
company repor
reported
ted P210,000
P210,000 in sale
sales.
s. Its open
opening
ing accounts
accounts receivable
receivable balanc
balancee was
131
. TUQ Comp
Company
any disc
discover
overed
ed error
errorss in its ending
ng inventory
inventory for the year ende
endedd Decemb
December er 31, P45,000
P45,0 00 and its endinngg acco
accounts
unts receivable
receivable balance was P50,000.
P50,000. The company
company also
2014. The error was discovered in early 2015, after the books were closed. Some inventory reported P20,000 in unearned revenues at the end of the year. What was the amount of cash
in the amount of P12,000 was counted twice and inventory valued at P5,000 was excluded collected from customers for the year?
from the inventory count because
because it was in transit (with terms FOB shipping point)
point).. The tax A. P205,000 C. P215,000
rate is 30%. Which of the following would be included in the correcting journal entry to be B. P210
P210,0
,000
00 P225,000
D. P225,000 PRTC 0515
done in 2015?
A. Credit inventor
inventoryy for P12,000 C. Debit deferred income
income tax P1,500 13. Certain information
information relative
relative to the operation of Stripes Company follows:
B. Debit cost
cost of goods sold P1
P12,000
2,000 D. Debit retained
retained earnings P4,900 PRTC Accounts receivable,
receivable, January
January 1 P 800,000
0515 Account receivable
receivable collected 2,600,000
Cash sales 500,000
4. A receipt of
of P12,600 ca
cash
sh from a customer as a pay
payment
ment on ac
account
count was incorrectly credited Inventory, January 1 1,200,000
to service revenue.
revenue. What is the effect of this error
error on the finan
financial
cial state
statement
mentss of the Inventory, December 31 1,100,000
company? Purchases 2,000,000
A. Assets are overstated
overstated by P12,600
P12,600 and equity is overstated
overstated by P12,600.
P12,600. Gross profit on sales 900,000
B. Assets are overstated bbyy P25,200 aand
nd equity is overstated by P25,200. What is the accounts receivable
receivable balance at December 31?
C. Assets are understated by P12,600 and equity is understated by by P12,600. A. P 700,000 C. P1
P1,3
,300
00,0
,000
00
D. Assets are understated by P12,600 and liabilities are understated by P12,600. PRTC B. P1,200,000 D. P1,700,000 PRTC 1015
1015
.
134
Damascus C Company
ompany had the following
following information relating relating to its accounts
accounts receivable:
receivable:
5. On January 1, year 1, N Newport
ewport Cor
Corp.
p. purchase
purchasedd a machine for P1,000,000. TheThe machine Accounts receivable,
receivable, 12/31/2011
12/31/2011 P1,300,000
was depreciated using the straight-line method over a 10-year period with no residual value. Credit sales for 2012 5,400,000
Beca
Because
use of a bookkee
bookkeeping
ping error, no deprecia
depreciation
tion was recogniz
recognized
ed in New
Newport'
port's year 1 Col le cti
ction s fro
from c uussto
tom
me rs
rs fo
forr 20 1122, ex cl
cl uuddi nngg re co
cove ry
ry 4 ,,775 00,0
,0000
financial statements, resulting in a P100,000 overstatement of the book value of the machine Accounts written
written off 9/30/2012 125,000
on December 31, year 1. The oversight was discovered during the preparation of Newport's Estimated uncollectible
uncollectible receivables
receivables per aging of receivables receivables at at 12/31/2012 165,000
year 2 financial stateme
statements.
nts. What amou
amount
nt should Ne
Newport
wport report for
for deprecia
depreciation
tion expense Colleection
ction of accoaccounts
unts written off in prior prior year (customer(customer credit 25,000 was not
on the machine in the year 2 financial statements? reestablished)
A. P 90,000 C. P110,000 On December 31, 2012, the amortized cost of accounts receivable is
B. P1P100
00,0,000
00 D. P200,000 PRTC 1015 A. P1,635,000 C. P1,800,000
B. P1
P1,6
,660
60,0
,000
00 D. P1, P1,82
825,0
5,000
00 CPA
CPAR R 051
05122

Cash P5,000,000
135
. The following data were taken from the books of Marina
Marina Co. for th
thee yyear
ear 2012: Accounts receivable,
receivable, net 3,500,000
From cash records: Inventory 2,000,000
Cash purchases P 30,000 Investments (500,000)
Payments to trade creditors for credit purchases 302,600 Accounts payable
payable (3,000,000)
From balance sheets

Accounts payable
payable B
Sohnardes cpaapyiatablle 46,,000000,,000000
Jan. 1, 2012 37,500 Share premium 1,000,000
Dec. 31, 2012 43,300 What should be the 2015 net income, assuming there were no entries in the retained
Merchandise inventory, Jan. 1, 2012 12,800 earnings account except for the net income and a dividend declaration of P2,000,000 which
From other records: was paid in the current year?
Purchase returns and allowances 7,500 A. P2,000,000 C. P7,000,000
Cost of goods for the year 335,000 B. P4
P4,0
,000
00,0
,00000 D. P9,
P9,00
000,0
0,000
00 PRTC
PRTC 051
05155
The merchandise inventory
inventory at the end of the year is
A. P12,800 C. P1P166,2
,2000 10. Presente
Presentedd below are changes
changes in all the account
account balances
balances of Mangold
Mangold Company
Company for 2015,
B. P13,800 D. P23,700 CPAR 0512, 1015 except for retained earnings:
Increase
8. Mharis
Mharis Co. bega
begann opera
operations
tions on JaJanuar
nuaryy 1, 2015, with P1,
P1,500,0
500,00000 from the iss
issuanc
uancee of (Decrease)
share capital and borrowed funds of P300,000. Net income for 2015 was P100,000 and Cash P 790,000
Mharis paid a P50,000 cash dividend
dividend on December 15. No additional activities affec affected
ted Accounts receivable
receivable (net) 240,000
owners' equity in 2015. At December 31, 2015, Mharis' liabilities had increased to P550,000. Inventory 1,270,000
In Mharis' December 31, 2015, statement of financial position, total assets should be reported Investments ( 470,000)
at Accounts payable
payable ( 380,000)
A. P1,550,000 C. P2
P2,1
,100
00,0
,000
00 Bonds payable 820,000
B. P1,850,000 D. P2,400,000 PRTC 1015 Share capital 1,250,000
Share premium 130,000
9. Using
Using the data for Lla
Llanah
nah Cor
Corpora
poration,
tion, com
compute
pute the lia
liabilit
bilities
ies at year-end
year-end What amount should net income for 2015 be, assuming that there were no entries in the
Total assets, end P80,000 retained earnings account except for net income and a dividend declaration of P190,000
Share capital, end 15,000 which was paid in the current year?
Retained earnings, beg. 22,000 A. P 10,000 C. P1,080,000
Net income 15,000 B. P 200,000 D. P1,
P1,14
140,0
0,000
00 PRTC
PRTC 101
10155
Dividends declared 7,000
A. P35,000 C. P50
P50,0 ,0000 50. On December
December 31, 2015, the following
following accounts
accounts appear
appear in the trial balance
balance of Grizzlieess
B. P43,000 D. P65,000 PRTC 1015 Company:
Inventories on January 1:
136
. Chan
Changes
ges in accoun
accountt balance
balancess of Kirc
Kirchner
hner Comp
Company
any for 2015, excep
exceptt for retained
retained earnings
earnings,, Raw materials P 350,000
are: Goods in process 400,000
Increase (Decrease) Finished goods 319,000

Purchases of raw materials 4,200,000 bank and made interest payments of P5,000. Perk had no other loans payable. Interest of
Purchases returns and allowances 120,000 P1,000 was payable at December 31, 2012. There was no interest payable at December 31,
Freight in 80,000 2011. Equipment of P20,000 was donated by shareholders
shareholders during the year.
Direct labor 1,420,000 From these data, the profit for 2012 is
Indirect labor 900,000 A. P10,000 C. P20,000
R
Reeaallttyy ttaaxx--fasactleosryroboumildainngd office 115200,,000000 B. P15,000 D. P65,000 CPAR 0512
139
Depreciation-factory building 90,000 . The company
company's's accounting
accounting records show
show that changes
changes in ledger account
account balances
balances occurred
occurred
Depreciation-salesroom and office 50,000 during 2012 as follows:
follows:
Light and power 1,000,000 IInncrease Decrease
• Of the light
light and po power,
wer, 60 60% % was co consum
nsumed
ed in the fac
factory
tory,, 25% in the off
office
ice and 115%5% in Cash P800,000
the salesroom. Accounts receivable
receivable (net) P40,000
• Inv
Inven
entor
tories
ies on Decem December ber 31: Inventories 300,000
Raw materials P380,000 Equipment (net) 360,000
Goods process 500,000 Building (net) 600,000
Finished goods 250,000 Loans payable 1,000,000
The cost of materials used is Accounts payable
payable 300,000
A. P4,050,000 C. P4,170,000 Share capital, P10 par 600,000
B. P4
P4,1
,130
30,0
,000
00 D. P4,250
P4,250,00
,0000 PRTC
PRTC 1015
1015 Share premium 200,000
Retained earnings ?
137
. The following bbalances
alances w
were
ere reporte
reportedd by Mall Co.
Co. at December
December 31, 2012 and 2011: Assuming that there were no transactions affecting retained earnings other than the
1 2/31/12 12/31/11 P250,000 cash dividends, compute the net income for 2012.
Inventory P260,000 P290,000 A. P 270,000 C. P770,000
Accounts payable
payable 75,000 50,000 B. P520,000 D. P2,170,000 CPAR 0512
Mall paid suppliers P490,000 during the year ended December 31, 2012. What amount
should Mall report for cost of goods sold in 2012? PFRS for SMEs
140
A. P285,000 C. P495,000 . On 1 Ja Janua
nuary
ry 2012 Pho Phoen
enixix Corpo
Corporat
ration
ion,, an SME,
SME, acqacquir
uired
ed an investme
investmentnt pro
proper
perty
ty
B. P435
P435,0 ,000
00 D. P545,000
P545,000 CPAR 0512 (building) in a remote location for P100,000. After initial recognition, the entity measures
the investment property using the cost-depreciation-im
cost-depreciation-impairment
pairment model, because its fair value
138
. An analysis of Perk, Inc
Inc.,., disclosed changes in account bala
balances
nces for 22012
012 and the following cannot be measured reliably without undue cost or effort on an ongoing basis.
supplementary data.
supplementary At 31 December 2012, 2012, management:
management:
Cash P21,000 increase • assesse
assessedd the building's
building's useful
useful life at 50 years
years from thethe date of
of acquisition
Accounts receivable
receivable 25,000 increas
increasee • presumed th thee residual value
value of the building
building to be nil (given that the
the fair value cannot
cannot be
Inventory 10,000 decrease determined reliably)
Equipment 70,000 increase • assesse
assessedd that the entity
entity will consume
consume the building's
building's future
future economic benefits evenly
evenly over
Accounts payable
payable 5,000 decreas
decreasee 50 years from the date of acquisition
Perk sold 5,000 shares of its P5 par shares for P8 per share and received cash in full. • declined an unsolicited offer offer to purchase
purchase the building
building for P130,000. This
This is a 'one-off'
'one-off'
Dividends of P15,000 were paid in cash during the year. Perk borrowed P50,000 from the offer that is unlikely to be repeated in the foreseeable future.

The entity should measure the carrying amount of the building on 31 December 2012 at: 46. On December
December 30,
30, 2010, Future,
Future, Incorpor
Incorporated
ated paid P2,000,000
P2,000,000 for land.
land. At December
December
A. P 98,000 C. P127,400 31,2011, the current value of the land was P2,200,000. In January 2012, the land was sold
B. P100,000 D. P130,000 CPAR 0512 for P2,250,000. Ignoring income taxes, by what amount should shareholders' equity be
increased for 2011 and 2012 as a result of the above facts in current value financial
Cash basis vs. accrual basis of accounting statements?
141
. Class
Clas s Corp.tomaint
statements maintains
ains its method
the accrual acco
accountin
unting
ofgaccounting.
record
recordss on Class
the cash
cas h basis
had but inresta
P60,000 restates
tes its financ
cash-basis financial
ial
pretax C
20P1A1R 0512 P A. 0 P B. 0 P20C
0,.000 D.
P200,000
income for 2012. The following information pertains to Class's operations
operations for the years ended 2012 P50,000 P250,000 P 0 P 50,000
December 31, 2012 and 2011:
2 012
20 2011 143
. On Janu
January
ary 1, 2015,
2015, Jayson
Jayson Company
Company acq
acquire
uiredd inven
inventory
tory for P20,000
P20,000.. The invento
inventory
ry
Accounts receivable
receivable P40,000 P20,000 consisted of 10,000 identical
identical units. The current cost of the inventory was P30
P30,000
,000 on July 1,
Accounts payable
payable 15,000 30,000 2.015; on that date Jayson Company sold three-fourths
three-fourths of the inventory for P28,000. On
Under the accrual method, what amount of income before taxes should Class report in its December 31, 2015, the current cost of the inventory on hand was P8,500. The general price
2012 income statement? index on various dates is as follows:
A. P25,000 C. P65,000 Jan. 1, 2015 110.0
B. P55
P55 ,0
,000 D. P9
P955,0
,0000 CPAR 0512 July 1, 2015 121.0
Dec. 31, 2015 133.1
Financial Statement Analysis Assuming that cost of goods sold is Jayson
Jayson Company's only expense and that no purchasing
purchasing
17. Lollippop
op Corpo
Corporatio
rationn had accou
accounts
nts receiv
receivable
able of P100
P100,000
,000 at 1/1. The only transac
transactions
tions power gain or loss exist, the net income for the 2015 under current cost/constant peso basis
affecting accounts receivable
receivable were sales of P600,000 and cash collections of P550,000. The would be
accounts receivable turnover is A. P14,100 C. P17,050
A. 4.0 C. 4.8 B. P1
P155,1
,1000 D. P23,650 PRTC 0515
B. 44..4 D. 6.0 PRTC 1015
Financial Statement Analysis
7. On Decem
December
ber 31, Joan CorCorpora
poration'
tion's curren
currentt liabilities
liabilities total P50,000
P50,000 and long-term
long-term liabiliities
ties 144
. Sharm
Sharm Co. has total
total debt of P252,0
P252,000
00 and stockh
stockholder
olders’
s’ equity
ty of P420,000
P420,000.. Sharm
Sharm is
total P150,000. Working capital at Dec December
ember 31 is equal to P80,000
P80,000.. If Joan Corporation's seeking capital to fund an expansion. Sharm is planning to issue an additional P180,000 in
debt-to-equity ratio is .32 to 1, total long-term assets must equal ordinary shares,
shares, and is negotiating with a bank to borrow additional funds. The bank requires
A. P625,000 C. P745,000 a maximum debt ratio of .75. What is the maximum additional amount Sharem will be able to
B. P6P695
95,0
,000
00 D. P795,0
P795,000 00 PRTC
PRTC 1015
1015 borrow after the ordinary shares are issued?
A. P1,428,000 C. P1,680,000
Current Cost Accounting B. P1P1,5
,548
48,0
,000
00 D. P1,
P1,80
800,0
0,000
00 PRTC
PRTC 051
05155
142
. Acts Inc., paid P1,20
P1,200,000
0,000 in December 2011 for its invento
inventory.
ry. In Decem
December
ber 2012
2012,, one half
half
of the inventory was sold for P1,000,000 when the replacemen
replacementt cost of the original inventory Cost Accounting
was PI,400,000. Ignoring income taxes
taxes,, what amount should be shown in the current cost 145
. The following quarterly cost
cost data have
have been accumulated
accumulated for Grace
Grace Mfg. Inc.
Inc.
accounting income statement for 2012? Raw materials
materials - beginning inventory (Jan. 1, 2012) 10,000 units @P6.00
@P6.00
A. P200,000 C. P400,000 Purchases 8,500 units @P7.00
B. P300,000 D. P5
P500
00,0
,000
00 CPAR 0512 11,000 units @P7.50
Transferred 21,500 units of raw materials to work in process:


Work in process
process - bbeginning
eginning inv
inventory
entory (Jan
(Jan.. 1, 2012) 5,600 units @P13.50
@P13.50
Direct labor P250,000
Manufacturing over head P325,000
Work in process - endin
endingg inven
inventory
tory (Mar.
(Mar. 31, 2012)
2012) 4,200 uunits
nits @P13
@P13.75
.75
If Grace uses the FIFO method for valuing raw materials inventories, compute for the cost of
goods
A. manufactured for the quarter ended Mar.C.31P734,850
P699,150 2012
B. P717,000 D. P746,850 CPAR 0512

1
.Answer is (B).
Adjusting entry
Unearned rental income (P12,000 x 1/4) 3,000
Rental income 3,000
2
.Answer is (B).
Sales 480,000
Less cost of goods sold:
Inventory, beginning 62,400
Purchases 320,000
Inventory, ending (64,000) 318,400
Gross profit 161,600
Sales salaries expense (P40.000 + P1,920) (41,920)
Advertising expense
expense (P5,360 - P560) (4,800)
Administrativ
Administrative
Office expenseesalaries expense (P4,000 - P1,200) (52,000)
(2,800)
Doubful accounts expense [(P33,600 x .08) - P2.160] (528)
Depreciation (P67.200 x .2) (13,440)
Insurance expense (2,040)
Interest expense (2,688)
Profit 41,384
3
.Answer is (A).
Current assets, 12/31/12 (P130,000+P92,00
0000) 222,000
Noncurrent assets, 12/31/12 1,500,000
Total assets, 12/31/12 1,722,000
Less equity, 12/31/12
T
Leostasl taostasleltisa,b1il2iti/e3s1,/1112/31/11 [(P240,000-P9(P2,204000,)0+0P05+8P01,.060M0)] 1,782480,,000000
Equity, 12/31/11 1,112,000
Net income-2012 88,000 1,200,000
Total liabilities, 12/31/12 522,000
Less current liabilities, 12/31/12 130,000
Noncurrent liabilities, 12/31/12 392,000
4
.Answer is (C)
Investments in listed companies (available for sale) 52,000
Land, at valuation 250,000
Buildings, at cost 1,030,000
depreciation - buildings (120,000)
Plant and equipment 8,275,000
depreciation - plaht and equipment (3,726,000)
Leased assets 775,000
depreciation - leased asset
assetss (310,000)
Goodwill 2,530.000
Patents. 110,000
Noncurrent assets 8,866,000
5
.Answer is (C)
Trade creditors 1,617,000
Sundry creditors and accruals 715,000
Bank overdrafts 350,000

Debentures 300,000
Lease liabilities 125,000
Provision for employment be nefits 192,000
Provision for restructuring 412,000
Provision for warranty (P42.000 - P20.000) 22,000
Current tax payable 152,000
Current liabilities 3,385,000
6
.Answer is (D).
Ca
Cash
sh and cash
cash equiva
equivalen
lents
ts (P8
(P830,
30,000
000 + P180,0
P180,000)
00) 1,0
1,010,
10,000
000
Shor
Shortt term
term in
inve
vest
stme
mentnt (P
(P65
650,
0,00
0000 - P1
P180
80,0
,000
00)) 47
470,
0,00
0000
. Accoun
Accountsts receiv
receivabl
ablee (P2,25
(P2,250,0
0,000
00 - P150,0
P150,000)
00) 2,1
2,100,
00,000
000
Interest receivable 50,000
Prepaid expenses. 320,000
Current assets 3,950,000
7
.Answer is (D).
Land
and (P
(P75
750,
0,00
0000 - P250,
250,00
000)
0) 500,
500,00
0000
Buildings 3,200,000
depreciation - buildings (1,600,000)
Equipment 2,650,000
depreciation - equipment (1,200,000)
Investment property 250,000
Property, plant and equipment 3,800,000
Notes receivable 650,000
Noncurrent assets 4,450,000
8
.Answer is (C).
Accounts payable
payable 1,730,000
Accrued expenses
expenses 450,000
Notes payable - current 500,000
Mortga
Mortgagege payabl
payablee - cur
curren
rentt (P5
(P50.0
0.000
00 x 2) 100,000
100,000
Current liabilities 2,780,000
9
.Answer is (C).
Notes payable - noncurrent 500,000
Mortga
Mortgagege payabl
payablee - noncur
noncurren
rentt (P2,50
(P2,500,0
0,000
00 - P100,0
P100,000)
00) 2,4
2,400,
00,000
000
Noncurrent liabilities 2,900,000
10
.Answer is (D).
Share capital 1,000,000
Retained earnings 1,720,000
Equity 2,720,000
11
.Answer is (A).
Net income 77,000
Other comprehensive income:
Remeasurement loss on defined benefit obligation (3,000)
Unrealized gain on available-for-sale securities 15,000
Reclassification adjustment (2,500) 9,500
Comprehensive income 86,500
12
.Answer is (A)
Sales P20,000,000
Cost of goods sold (12,000,000)
Selling expenses (1,200,000)
General and administrative expenses (1,800,000)
Interest expense (1,500,000)
G
Inaviensotmneenatrilnyceoxmtineg-ueisqhum
ityenmt eotfhloodng-term debt 650000,,000000
Gain on sale of investment 2,000,000
Income tax expense (2,100,000)
Income from continuing operations 4,500,000
13
.Answer is (B).
Sal
ales
es (P
(P4451,0
51,0000 + P3,
3,50
500)
0) 454,
454,50
5000
Sales returns and allowances (3,900)
Sales discounts (880)
Net sales 449,720
14
.Answer is (A).
Inventory, January 1 89,700
Purchases 141,600
Pu
Purc
rcha
hase
se re
retu
turn
rnss an
andd allo
allowa
wanc
nces
es (P
(P14
141,
1,60
6000 x .0
.06)
6) (8,4
(8,496
96))
Freight in (P5,525 + P570) 6,095
Total goods- available for sale 228,899
Inve
Invent
ntor
ory,
y, De
Dece
cemb
mberer 31 (P
(P20
20,5
,550
50 + P18,
P18,60
600)
0) (39,
(39,15
150)
0)
Cost of goods sold 189,749
15
.Answer is (D).
Sate
Satess sa
sala
lari
ries
es and
and comm
commisissi
sion
onss [P25
[P25,0
,000
00 + (P
(P3,
3,05
0500 x .0
.03)
3)]] 25
25,0
,092
92
Advertising expense
expense [P16,090 + (P1,818 x 2/6)] 16,696
Travel expense - sales representatives 4,560
Dep
epre
reci
ciat
atio
ionn - de
delilive
very
ry eq
equi
uipm
pmen
entt [P6,
[P6,10
1000 + (P
(P7,
7,80
8000 x 10
10/1
/120
20)]
)] 6,
6,75
7500
Miscellaneous selling expenses 2,740
Freight out 3,500
Total selling expenses 59,338
16
.Answer is (A).
Legal services 2,225
Inespurreacnicaetioannd- olifcfeicneseeqs uipment

D 47,,260800
Utilities 6,400
Telephone and postage 1,475
Supplies expense (P2,180 - P1,225) 955
Doubt
oubtfu full accccouounnts expe expens nsee (P
(P2261,0
61,000
00 x .02)
02) - P160
160] 5,
5,060600
Officers' salaries 36,600
Total general and administrative expenses 64,595
17
.Answer is (B).
Net sales (see no. 1) 449,720
Cost of goods sold (see no. 2) (189,749)
Selling expenses (see no. 3) (59,338)
General and administrative expenses (see no. 4) (64,595)
Other income
Interest income (P550 + P560) 1,110
Dividends received 5,150
Gain on sale of assets 7,820 14,080
Other expenses
Interest expense (4,520)
Loss on sale of equipment (72,600) (77,120)
Income from continuing operations before income tax 72,998
Income tax expense (30%) (21,899)
Income from continuing operations 51,099
Income from discontinued operations (P40,000 x .7) 28,000
Net income 79,099
18
.Answer is (A)
Sales 20,000,000
Cost of goods sold (12,000,000)
Selling expenses (1,200,000)
General and administrative expenses (1,800,000)
IGnateinreosnt eexaprelynesxetinguishment of long-term debt (1,550000,0,00000)

Investment income - equity method 600,000
Gain on sale of investment 2,000,000
Income tax expense (2,100,000)
Income from continuing operations 4,500,000
Items excluded in the computation:
Correction of inventory error - credit to retained earnings beginning
Dividends declared - debit to retained earnings
19
.Answer is (C).
Sales (net) 8,375,000
Cost of goods sold (see computation below) (4,885,400)
LDoivsisdeonndssarleecoefivmeadrketable securities (4105,0,00000)

Loss from -write-down of obsolete inventory (115,000)
Salaries (1,540,000)
Contribution to employees' pension fund (280,000)
Delivery expenses (205,000)
Miscellaneous expense (125,000)
Doubtful accounts expense (12,000)
Depreciation expense - fixed assets (86,000)
Income tax expense (120,000)
Profit 981,600
Computation of cost of goods sold:
M
Puerrcchhaasnedi(sneeti)nventory, January 1 41,,702400,,400000
Merchandise inventory, December 31 (875,000)
4,885,400
20
.Answer is (B)
Net income 360,000
Amortization 20,000
Depreciation 60,000
Increase in accounts receivable (140,000)

Increase in inventory (48,000)
Decrease in accounts payable (76,000)
Increase in salaries payable' 28,000
Cash provided by operating activities 204,000
21
.Answer is (D).
Net income 396,000
Depreciation expense 102,000
Decrease in accounts receivable 126,000
Increase in inventories (90,000)
Increase in accounts payable 24,000
Decrease in income taxes payable (16,000)
Cash provided by operating activities 542,000
22
.Answer is (B).
Col
olle
lect
ctio
ions
ns from
from sale
saless (P
(P10
102,
2,00
0000 - P3
P3,6
,600
00)) 98
98,4
,400
00
Paym
Paymen
Pa ymen
Paym ents
ts fo
ents
ts for
forr wage
for purc
purcha
wa hase
gess sess (P
(P40
40,0
,000
00 -(P
P2,0
P2,000
(P31
31,80000- +P5,2
,800 P5P6
,200
00)
00)))
P600 (32,
(3
(32,80
(32,800)
2,400)
400)
0)
Net cash flows from operating activities 33,200
23
.Answer is (B)
receivable, beg. 100,000
Sales on account 300,000
Accounts written
written off (12,000)
receivable, end. (168,000)
Collections 220,000
24
.Answer is (B).
Cash balance, ending 107,310
Les
Le
Casssh net
ne
batlain
inc
nccrea
re
e,abse
egininncash
as
ingh (P
(P53
53..440
440 + P45.
45.23
2300 - P47,8
47,860
60)) 550,
0,81
6,810
5000
25
.Answer is (C).
Pr
Prof
ofitit or lo
loss
ss th
thre
resh
shol
oldd (P1,
(P1,20
200,
0,00
0000 x . 1) 12
120,
0,00
0000
26
.Answer is (C).
Sales of Clay division 3,000,000
Traceable operating costs (1,900,000)
Allocated indirect operating
operating costs (P500,000
(P500,000 x .2) (125,000)
Clay division profit 975,000
27
.Answer is (C).
Income from operations of discontinued segment 250,000
Loss from sale of segment (220,000)
Income from discontinued operations 30,000
28
.Answer is (C).
29
.Answer is (C).
Paint shop revenue 40,000,000
Paint shop expenses (60,000,000)
Loss from operations (20,000,000)

Employee related costs (10,000,000)
Losses on disposal of branch net assets (15,000,000)
Total loss before tax benefit (45,000,000)
Tax benefit 15,750,000
Loss from discontinued operations (29,250,000)
30
.Answer is (A).
31
.Answer is (B).
Cumulativee income
Cumulativ income tax expen
expense,
se, end of 3rd quarter
quarter (P170,000
(P170,000 x .45) 76,500
76,500
Less cumulativ
cumulativee income
income tax
tax eexpens
xpense,
e, en
endd of 2nd qu
quarter
arter (P130,000
(P130,000 x .40)
.40) 52,000
52,000
Income tax provision - 3rd quarter 24,500
32
.Answer is (B). PAS18 para 11 covers deferred income. In this problem the revenue is is the value at the time
time of supply ,
July 2011. Therefore the interest is the amount of the
the payment in full in July 2012 les
lesss the offered cash payment pric
pricee
at July 2011.
33
.Answer is (C). Income for 2012 (P30 x 10 mos. x 10/12) = 250
34
.Answer is (A)
Cos
ostt of goods
oods so
soldld - B grad
gradee (P
(P11 M + P8.8M
8.8M - P1.
1.25
25 M) 8,
8,55
550,
0,00
0000
Divide by the cost ratio (1 - 0.25) ÷ 0.75
Sales revenue 11,400,000
Note: The entity, will recognize commission income of P4.6M on sales of A grade goods.
35
.Answer is (C)
Unadjusted professional fees expense 92,000
Unrec
nrecor
orde
dedd legal
egal fee
fees for Nov.
ov. and
and Dec.
ec. 2015
2015 (P
(P6,
6,0000+P
00+P9,
9,00
000)
0) 15,
15,000
000
Adjusted professional
professional fees expense 107,000
36
.Answer is (C).
Comm
ommis isssion
ion exp
xpen
ensse - year
year end
ended 3/3
3/31/15
1/15 (P
(P30
30,,000,
000,00
0000 x 3%
3%)) 900,
900,00
0000
37
.Answer is (C). Commission expense-2012
expense-2012 (P36,000+P39,000+P43,000+P45,000)
(P36,000+P39,000+P43,000+P45,000) = 163,000
38
.Answer is (B).
Cash in bank 13,500
Cash on hand 500
Total cash 14,000
Notes: PDCs - receivables: Certificates of deposit - cash equivalents
39
.Answer is (B)
Total cash (P925,000 – P17,000 + P9.800 + P800) 918,600
40
.Answer is (B).
Bills and coins on hand 52,780
Petty cash (P1,000 - P650) 350
Money order 800
Checking account balance in Bank of P.I. 22,000
Total cash 75,930
41
.Answer is (D).
Balance per bank 2,980
Outstanding checks (680)
Deposits in transit 400
Total cash 2,700
42
.Answer is (C).
Unadjusted bank balance 5,630,000
March 31 deposit (In transit) 750,000
Erurotsntaenoduisngbacnhkecckresdit (Careless Co. deposit)

O ((11,,615000,,000000))
Adjusted bank balance 3,630,000
43
.Answer is (D)
Net realizable value (P125,000 x .98) 122,500
44
.Answer is (A)
Accounts receivable;
receivable; January 1 300,000
Credit sales during the year 1,200,000
Cash collections during the year (1,100,000)
Accounts receivable
receivable written off during
during the year (20,000)
receivable, December 31 380,000
doubtful accounts, January
January 1 40,000
Accounts receivable
receivable written off during
during the year (20,000)
Dou
oubt
btfu
full ac
acco
coun
unts
ts expe
expens
nsee (P
(P1.
1.2M
2M x .02)
.02) 24
24,0
,000
00
doubtful accounts, December
December 31 44,000
Accounts receivable
receivable - net, December
December 31 336,000
45
.Answer is (C) receivable,

Accounts receivable, 12/31/14 45,000
Sales on account 480,000
Collections on AR (P392,000 + P8,000) (400,000)
AR write-off (2,000)
Recovery of accounts previously written off --
Collections on AR pledged (15,000)
receivable, 12/31/15 108,000
Les
esss al
allo
low
wanc
ance for DA, 12/
12/31/
31/15 (P
(P90
9000 – P2,0
P2,000
00 + P500
500 + P2,
2,30
300)
0) 1,
1,70
7000
Amortized cost
cost of AR, 12/31/15
12/31/15 106,300
46
.Answer is (D)
receivable, ending (P305,000 +P1,300,000
+P1,300,000 : PI,250,000 - P2
P25,000)
5,000) 330,000
Do
Doub
ubtf
tful
ul ac
acco
coun
unts
ts expe
expens
nsee (P
(P30
30,0
,000
00 + P25,
P25,00
0000 - P25,
P25,50
500)
0) 29
29,5
,500
00
Required allowance 30,000
Re
Reco
cord
rded
ed al
allo
lowa
wanc
ncee [P25
[P25,5
,500
00 + (P
(P1,
1,30
300,
0,00
0000 x .0
.02)
2) - P2
P25,
5,00
000]
0] 26
26,5
,500
00
Increase (decrease) in allowance for doubtful accounts 3,500
47
.Answer is (D)
PVF at 8%,
Cash flows 5 periods AC, 12/31/14
Principal 500,000 0.6806 340,300
Interest 20,000 3.9927 79,854
420,154

Interest income - 2015 (P420,154 x .08) 33,612
48
.Answer is (C)
Principal 40,000
Interest to maturity (P40,000 x .06) 2,400
Maturity value 42,400
Discount (P42,400 x .1 x 9/12) (3,180)
Proceeds 39,220
49
.Answer is (D)
Journal entries:
Accounts receivable
receivable - Assigned 1,500,000
Accounts receivable
receivable 1,500,000
Cash (P1,000,000 x .97) 970,000
Finance charge (P1M x .03) 30,000
Notes payable 1,000,000
50
.Answer is (B)
Consideration received and receivable (P2M x .95) 1,900,000
CA of receivables 2,000,000
Gain (loss) on factoring (100,000)
51
.Answer is (C)
Unadjusted Inventory,12/31/15 441,000
(b) Goods sold in transit - FOB destination 38,000
(e) Goods purchased - FOB shipping.point 51,000
Adjusted Inventory,12/31/15
Inventory,12/31/15 530,000
52
.Answer is (C)
Unadjusted inventory 325,000
Add (deduct) adjustments
adjustments
Goods purchased FOB shipping point 30,000
Goods sold FOB destination 38,000
Goods out on consignment 12,000
Adjusted inventory
inventory 405,000
53
.Answer is (B)
Unadjusted inventory 70,000
b) Goods in transit purchased FOB shipping point 8,000
c) Work in process sent to outside processor 500
d) Go
Goodinventory
Adjusted s out ory
invento n consignment [(P4.600/1.15) + P120] 4,120
82,620
54
.Answer is (B)
Inventory, beginning 94,000
Purchases 400,000
Purchase returns (5,000)
Purchase discounts [(P400.000 - P5.000) x .01] (3,950)
Freight in 7,500
Cost of goods sold (380,000)
Inventory, ending 112,550

55
.Answer is (D)
Journal entry,
Accounts 12/16
payable
payable [(P8,600 + P7,500) x .97] 15,617
Purchase discount lost (P8.600 x .03) 258
Cash (P8,600 + (P7,500 x .97)] 15,875
56
.Answer is (D)
Cost 18,000
Net realizable value
Estimated selling price (P25.000 x .8) 20,000
Cost to correct defect (6,000)
Commission (P20,000 x .1) (2,000) 12,000
Loss on write down 6,000
57
.Answer is (C).
Raw materials, 1/1 42,500
Purchases 96,000
Raw materials available for use 138,500
Less raw materials, 6/30 52,000
Raw materials used 86,500
Direct labor 130,000
Factory overhead (P130,000 x .6) 78,000
Total manufacturing cost 294,500
Work in process, 1/1 115,000
Total cost placed in process 409,500
Less work-in-process, 6/30 (squeeze) 135,020
Cost of goods manufactured 274,480
Finished goods, 1/1 120,000
Total goods available for sale 394,480
Less finished goods, 6/30 112,000
Cost of goods sold (P428.000 x .66) 282,480
58
.Answer is (A)
Invrcha
Pu enhase
Purc toses
ry:s12/31/14 (P
(P5,
5,64
640,
0,00
0000 + P40,
P40,00
0000 – P8
P80,
0,00
000)
0) 15,
,2600,
5,60800,00
,0000
000
Cost of sales (see computation below) (5,280,000)
Estimated Inventory, 12/31/15 1,600,000
Inventory based on physical count (1,440,000)
Estimated cost of missing inventory 160,000
Computation of cost of sales:

receivable, 12/31/15 1,200,000
Collections 7,200,000
receivable, 1/1/15 (1,000,000)
Sales on account 7,400,000
Cash sales 1,400,000
T
x oCtaOl Ssarlaetsio (1 - .4) 8,8000,0.0600
5,280,000
59
.Answer is (D)

60
.Answer is (B)
61
.Answer is (A)
PVF at 4%
Cash flows 20 periods Purchase price
Principal 700,000 0.4564 319,480
Interest 35,000 13.5903 475,661
795,141
Partial amortization schedule:
Date NI (5%) EI (4%) Disc. Amort. A.C.
3/1/15 795,141
8/31/15 35,000 31,806 3,194 791,947
2/28/16 35,000 31,678 3,322 788,625
Interest
3/1/income
15 – 8/31/15 31,806
9/1/15 – 12/31/15 (P31,678 x 4/6) 21,119
T
Tootal 52,925
62
.Answer is (B)
PVF at 3%,
Cash flows 10 periods Purchase price
Principal 4 000,000 0.7441 2,976,400
Interest 80,000 8.5302 682,416
3,658,816
Initial carrying amount (P2,658,816 x 1.01) 3,695,404
Interest income - 2015 (P3,695,404 x .0289) 106,797
63
.Answer is (C)
PVF at 9%, Fair value,
Cash flows 2 periods 12/3115
Principal 1,000,000 .08417 841,700
Interest 100,000 1.7591 175,910
1,017,610
PVF at 8% Amortized cost

Cash flows 2 periods 12/31/15
Principal 1,000,000 0.8573 857,300
Interest 100,000 1.7833 178,330
1,035,630
Fair value adjustment gain (loss) – OCI (18,020)
64
.Answer is (D).
Carr
Carryi
ying
ng amou
amountnt (Fai
(Fairr valu
value)
e),, 12/3
12/31/
1/15
15 (P1M
(P1M x .9
.99)
9) 99
990,
0,00
0000
- Since thethe bond investment is not held for collection (the entity has the intention to hold the bonds indefinitely), it
- shall
In be measured
accordance with at
PASfair39,
value
theinbond
accordance withisPFRS
investment AFS. 9.
65
.Answer is (B).
Unrealized gain (Reserve), 12/31/14 25,000
Rese
Reserv
rvee tr
tran
ansf
sfer
erre
redd to reta
retainined
ed earn
earnin
ings
gs (P
(P25
25,0
,000
00 x 1/
1/2)
2) (12,
(12,50
500)
0)
Incr
Increa
ease
se in FV of re
rema
main
inin
ingg inve
invest
stme
ment
nt [P70
[P70,0
,000
00 - (P
(P12
125.
5.00
000/
0/2)
2)]] 7,
7,50
5000
Incr
Increa
ease
se in FV of ne
new
w inve
invest
stme
ment
nt (P
(P16
165,
5,00
0000 - P1
P150
50,0
,000
00)) 15
15,0
,000
00
Unrealized gain (Reserve), 12/31/15 35,000
66
.Answer is (B).
Fair value of PS received (5,000 x P70) 350,000
Carrying amount of investment 400,000
Loss on settlement (exchange) (50,000)
67
.Answer is (A).
Acquisition cost
cost 5,000,000
Ca
Cash
sh div
divide
idends
nds receiv
receivabl
ablee (1,000
(1,000,00
,0000 x .25 x 1.0
1.055 x P2.2)
P2.2) (577,5
(577,500)
00)
Share
Share of profit
profit of associ
associate
ate (P4,80
(P4,800,0
0,000
00 x .25
.25)) 1,2
1,200,
00,000
000
Carrying amount, 12/31/15 5,622,500

68
.Answer is (D).
Dividend income (P12,500 x .2) 2,500

PDF PRTC Practial Accounting 1docxdocx Compress

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

PDF PRTC Practial Accounting 1docxdocx Compress

Uploaded by

Copyright:

Available Formats

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

osted: b) Furniture and equipment

May 2015, Final Preboard Page 1 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

Leased assets 775,000

May 2015, Final Preboard Page 2 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

May 2015, Final Preboard Page 3 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

May 2015, Final Preboard Page 4 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

May 2015, Final Preboard Page 5 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

May 2015, Final Preboard Page 6 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

B. P900,000 D. P1,100,000 CPAR 0512 be reported

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

B. P765,000 D. P850,000 PRTC 1015 In

bought the same

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

B. P830,000 D. P930,000 PRTC 0515

May 2015, Final Preboard Page 9 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

May 2015, Final Preboard Page 10 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

on December 31, 2015. The customer was scheduled

May 2015, Final Preboard Page 12 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

The correct amount of inventory on December 31, 2015 is B. A credit

18. The Shop Company ssells

May 2015, Final Preboard Page 13 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

May 2015, Final Preboard Page 14 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

Cash sales during 2015 1,400,000 security. Heat Corporation shares

May 2015, Final Preboard Page 15 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

May 2015, Final Preboard Page 16 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

May 2015, Final Preboard Page 18 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

32. Campbell Corp. exch

May 2015, Final Preboard Page 19 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

The equipment consisted

May 2015, Final Preboard Page 20 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

May 2015, Final Preboard Page 21 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

of financial position. (Ignore amortization) Sea

May 2015, Final Preboard Page 22 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

foregoing intangible assets. The carrying amount of Brand - "Choochoo"

43. Harrel Company

May 2015, Final Preboard Page 23 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

May 2015, Final Preboard Page 24 of 56

PROFESSIONAL REVIEW & TRAINING CENTER PRACTICAL ACCOUNTING 1

103 is designed to compensate Opus for manufacturing faults of these goods.

May 2015, Final Preboard Page 25 of 56