3RD PRE-BOARD ACTIVITY

ACCTG 206B
Instruction:
 Make a summary of answers and show your solutions; and
 Send to my messenger account the picture of the summary of answers
and solutions.
SUBMISSION:
PART 1(ITEM 1-25)- To be submitted on or before November 19,2021.
PART 2(ITEM 26-50)-To be submitted on or before December 3,2021.

PART 1: MULTIPLE CHOICE

Information on an entity’s accounts is shown below:
Current tax payable, beg. 150,000
Current tax payable, end. 400,000
Increase in deferred tax liability 60,000
Increase in deferred tax asset 20,000
Income tax paid 280,000
1) How much is the income tax expense for the period?
a. 530,000 b. 540,000 c. 570,000 d. 610,000
ABC Company sells to wholesalers on terms of 5/15, net 30. ABC has no cash sale
but 50% of customers take advantage of the discount. ABC uses the gross method of
recording sales. An analysis of trade receivables at December 31, 2015 revealed the
following:
Age Amount _ Collectible
0 - 15 days 15,000,000 100%
16 - 30 days 3,000,000 95%
Over 30 days 2,000,000 1,500,000
2) On the December 31, 2015 balance sheet, what amount should be reported as
allowance for discounts?
a. P750,000 c. P375,000
b. P650,000 d. P500,000
An analysis of ABC Corp.’s unadjusted prepaid expense account at December 31,
2013, revealed the following:
 An opening balance of P1,500 for ABC’s comprehensive insurance policy. ABC had
paid an annual premium of P3,000 on July 1, 2012.
 A P3,200 annual insurance premium payment made July 1, 2013.
 A P2,000 advance rental payment for a warehouse
ABC leased for one year beginning January 1, 2014.
3) In its December 31, 2013 balance sheet, what amount should ABC report as
prepaid expenses?
a. 5,200 c. 2,000
b. 3,600 d. 1,600
The balance in retained earnings at December 31, 2013 was P810,000 and at
December 31, 2014 was P654,000. Net income for 2014 was P563,000. A stock
dividend was declared and distributed which increased common stock P225,000 and
paid-in capital P125,000. A cash dividend was declared and paid.
4) The amount of the cash dividend was
a. P279,000. c. P494,000.
b. P369,000. d. P719,000.
ABC Company factored P750,000 of accounts receivable to S Company on
December 31,2013. Control was surrendered by ABC. S accepted the receivable
assessed a fee of 20% and retains a holdback equal to 4% of the accounts
receivable. In addition, S charged 12% interest computed on a weighted
average time to maturity of the receivables of 51 days.
5) The fair value of the recourse obligation is P15,000 Assuming all receivables
are collected, Blink’s cost of factoring the receivables would be:
a. 15,000
b. 15,575
c. 27,757
 d. 42,575

The following were the cash transactions of Entity A during the period:
Cash receipts from sale of goods 650,000
Cash paid for purchases of inventory 340,000
Cash receipts on loans taken from a bank 200,000
Cash paid for interest expense 20,000
Cash payment for the acquisition of property, plant and
equipment 180,000
6) How much is the net cash from (used in) operating activities?
a. 155,000
b. (155,000)
c. 290,000
d. (290,000)
7) How much is the net cash from (used in) investing activities?
a. 180,000
b. (180,000)
c. 20,000
d. 0
On April 1, 2018, Ivy began operating a service proprietorship with an initial cash
investment of P1,000. The proprietorship provided P3,200 of services in April and
received full payment in May. The proprietorship incurred expenses of P1,500 in April
which were paid in June. During May, Ivy drew P500 against her capital account.
8) What was the proprietorship's income for the two months ended May 31, 2018,
under the cash basis methods of accounting?
Cash basis
a. 1,200
b. 1,700
c. 2,700
d. 3,200
9) What was the proprietorship's income for the two months ended May 31, 2018,
under the Accrual basis methods of accounting?
a. 1,700
b. 1,200
c. 2,700
d. 3,200
ABC factored P800,000 of its Accounts Receivable to B on July 1, 2005.
Controlled was surrendered by ABC. B accepted the accounts receivable
subject to recourse for non-payment. B assessed a fee of 2% and retains a
holdback equal to 5% of accounts receivable. In addition, B charged 15%
interest computed on a weighted average time to maturity of the receivables of
41 days. The fair value of recourse obligation is P16,000.
10)The cash proceeds and the factoring cost to ABC are
Cash Proceeds Cost of Factoring
a. 714,520 85,480
b. 730,520 29,480
c. 754,520 16,000
d. 770,520 69,480
Dark Knight, Inc. purchased a batmobile under a deferred payment contract on
December 31, 2007. Under the terms of the contract, Dark Knight is required to pay
P100,000 downpayment and to make eight annual payments of P490,000 each
beginning December 31, 2008. The applicable interest rate is 8%.
11)What is the acquisition cost of the batmobile?
a. P3,920,000 b. P2,815,834 c. P2,915,834 d. P4,020,000

ABC Company factored P5,000,000 of accounts receivable to ABC Company on July 1,

2005. Control was surrendered by ABC. ABC assessed a fee of 5% and retains a
holdback equal to 20% of the accounts receivable. In addition, ABC charged 12%
computed on a weighted average time to maturity of the receivables of 30 days.
12)ABC Company will receive and record cash of
a. P3,700,685
b. P3,750,000
c. P3,700,000
d. P4,700,685
ABC Company uses the direct method to prepare its statement of cash flows. The
company had the following cash flows during 2002:
Cash receipts from the issuance of ordinary shares 400,000
Cash receipts from customers 200,000
Cash receipts from dividends on long-term investments 30,000
Cash receipts from repayment of loan made to
220,000
another entity
Cash payments for wages and other operating expenses 120,000
Cash payments for insurance 10,000
Cash payments for dividends 20,000
Cash payments for taxes 40,000
Cash payment to purchase land 80,000
13)The net cash provided by (used in) operating activities is
a. 60,000 b. 40,000 c. 30,000 d. (20,000)
14)The net cash provided by (used in) investing activities is
a. 220,000 b. 140,000 c. 60,000 d. (80,000)
15)The net cash provided by (used in) all activities is
a. 580,000 b. 410,000 c. 380,000 d. (60,000)
ABC Co. is committed to a plan to sell its headquarters building and has initiated
actions to locate a buyer. As of this date, the building has a carrying amount of
P5,000,000, a fair value of P6,000,000 and estimated costs to sell of P200,000.
16)ABC Co. has an intention to transfer ownership of a building to a buyer after it
vacates the building. How should ABC Co. classify the headquarters building?
a. Included under property, plant and equipment at P5,000,000.
b. Included under property, plant and equipment at P5,800,000.
c. Classified as held for sale at P5,000,000
d. Classified as held for sale at P5,800,000
17)ABC Co. will continue to use the building until the construction of a new
headquarters is completed. How should ABC Co. classify the headquarters
building?
a. Included under property, plant and equipment at P5,000,000.
b. Included under property, plant and equipment at P5,800,000.
c. Classified as held for sale at P5,000,000
d. Classified as held for sale at P5,800,000
ABC Co. is a commercial leasing and finance company. As of year-end, ABC holds
equipment that is available either for sale or lease. ABC is not yet decided whether to
sell or to lease the equipment. The equipment has a carrying amount of P1,000,000,
fair value of P1,200,000 and costs to sell of P50,000.
18)How should ABC Co. classify the equipment?
a. Inventory, P1,000,000
b. Held for sale, P1,150,000
c. Investment property, P1,250,000
d. Held for sale, P1,000,000
On January 1, 2021, ABC Co. acquired machinery by issuing a 3-year, P1,200,000
noninterest-bearing note payable due as follows:
Date Amount of installment
December 31, 2021 600,000
December 31, 2022 400,000
December 31, 2023 200,000
Total 1,200,000
The prevailing rate of interest for this type of note is 10%.
19)How much is the carrying amount of the note on December 31, 2021?
a. 1,026,296 c. 528,926
b. 867,312 d. 489,762
Entity A issues convertible bonds with face amount of P2,000,000 for P2,600,000.
Each P1,000 bond is convertible into 10 shares with par value of P60 per share. On
issuance date, the bonds are selling at 102 without the conversion option.
20)What is value allocated to the equity component on initial recognition?
a. 2,040,000
b. 540,000
c. 560,000
d. 460,000
The ledger of ABC Co. in 2011 includes the following:
Jan. 1, 2011 Dec. 31, 2011
Current assets 1,200,000 ?
Noncurrent assets 4,000,000 ?
Current liabilities 900,000 1,000,000
Noncurrent liabilities ? 3,000,000
Additional information:
- ABC’s working capital as of December 31, 2011 is twice as much as the working
capital as of January 1, 2011.
- Total equity as of January 1, 2011 is P1,700,000. Profit for the year is P2,400,000
while dividends declared amounted to P1,000,000. There were no other changes in
equity during the year.
21)How much is the total noncurrent liabilities as of January 1, 2011?
a. 2,600,000
b. 2,800,000
c. 3,200,000
d. 3,400,000
22)How much is the total current assets as of December 31, 2011?
a. 1,600,000
b. 800,000
c. 300,000
d. 2,200,000
23)How much is the total noncurrent assets as of December 31, 2011?
a. 4,500,000
b. 6,500,000
c. 5,800,000
d. 5,500,000
B Corporation's stockholders' equity at December 31, 2008 was as follows:
6% noncumulative preference shares, P100 par
1,000,000
(liquidation value P105 per share)
Ordinary shares, P100 par 3,000,000
Retained earnings 950,000
Preferred dividends have been paid up to December 31, 2008.
24)At December 31, 2008, B's book value per common share was
a.131.70
b.130.00
c.129.70
d.128.00
Point Company has an outstanding receivable of P1,000,000 as of December 31, 2006.
A test of collectability of the receivable showed that P600,000 is currently collectible
and not impaired; P300,000 has been outstanding more than the required period for
similar transaction and objective evidence showed that only P158,000 is considered
realizable; the remaining receivable balance has been outstanding for 2 years and
Point company estimates that none of which will be realized.
25)What amount should the account receivable is reported in the December 31, 2006
balance sheet?
a. P858,000 b. P700,000 c. P758,000 d. P900,000
PART TWO: MULTIPLE CHOICE
On February 1, 2006, Pacific Corporation factored receivables with a face amount of
P600,000 to Atlanta Corporation. Pacific Corporation advances P490,000 to Atlanta
and retains 5% of the receivables. Prior to the sale of the receivables, it was
determined that 2% of the receivables were deemed not collectible based on available
information at that time, thereby, the company made the necessary accounting of the
said development in their 2006 financial records.
26)What amount of loss from the transfer should Pacific recognize assuming the
factoring agreement is considered as a sale?
a. P80,000 b. P60,000 c. P68,000 d. zero
27)Based on the data above, what amount of loss from the transfer should Pacific
recognized assuming the factoring agreement is considered as borrowings?
a. P68,000 b. P80,000 c. 0 d. P60,000
Neal Corp. entered into a nine-year lease on a warehouse on December 31, 2011.
Lease payments of P52,000, which includes payment for non-lease component of
P2,000 (at stand-alone selling price), are due annually, beginning on December 31,
2011, and every December 31 thereafter. Neal does not know the interest rate implicit
in the lease; Neal's incremental borrowing rate is 9%.
28)What amount should Neal report as lease liability at December 31, 2011?
a. 280,000
b. 291,200
c. 450,000
d. 468,000
ABC Co. had the following information for 2021:
Accounts receivable turnover 10:1
Total assets turnover 2:1
Average receivables during the year P400,000
Total assets, January 1, 2021 800,000
29)How much is the total assets as of December 31, 2021?
a. 4,000,000
b. 3,800,000
c. 3,200,000
d. 2,800,000
The accountant of ABC Company is trying to determine which of its investments of
excess cash qualifies to be presented as part of its cash and cash equivalent line item
in its December 31, 2008 balance sheet
 3-month treasury bill, P150,000
 6-month treasury bill, maturing on February 28, 2009, P250,000
 1-year treasury bill, acquired on December 15, 2008, maturing on February 28,
2009, P275,000
 90-day money market placement, P200,000
 30-day certificate of time deposit, P240,000
 180-day certificate of time deposit, P180,000
 45-day commercial papers, P125,000
 8%, one-year term bonds issued by Jacob Company, dated February 1, 2008
acquired on October 1, 2008, P420,000
 9%, one-year term bonds issued by Alice Company, dated March 1, 2008
acquired on December 1, 2008, P350,000
 100,000 ordinary shares of Esme Company acquired on December 20, 2008,
P300,000
 5,000, 7%, P100 par cumulative preferred shares of Carlisle Company acquired
on December 26, 2008, P540,000
  5,000, 8%, P50 par value redeemable preferred shares of Charlie Company was
acquired on November 1, 2008. The redemption date will be on April 1, 2009.
30)The amount to be reported as cash and cash equivalents on the December 31,
2008 balance sheet is.
a. P1,410,000 b. P1,350,000 c. P1,340,000 d. 1,640,000

Insurance payments P150,000

Prepaid insurance, Jan. 1 65,000
Prepaid insurance, Dec. 31 85,000
Accrued insurance payable decreased by 35,000
31)How much is the insurance expense under accrual basis accounting?
a. 205,000
b. 65,000
c. 130,000
d. 95,000

On January 1, 2011, ABC Co. enters into a 4-year lease of office equipment. The rent
in 2011 is P10,000 and shall increase by 10% annually starting on January 1, 2012.
Rentals are payable at the end of each year. ABC Co. pays the lessor a lease bonus of
P5,000 on January 1, 2011. ABC Co. opts to use the practical expedient allowed under
PFRS 16 for leases of low value assets.
32)How much is the lease expense in 2011?
a. 10,000 b. 11,000 c. 11,603 d. 12,853

Data for the computation of total intangible assets follow:

 Organization costs 50,000
 Unamortized bond discount 155,000
 Patents 244,000
 Franchise to operate in Cebu 100,000
 Marketing costs of introducing new products 150,000
 Research and development costs expected to benefit future periods
420,000
33)What is the correct total cost of the intangible assets?
a. P744,000 c. P394,000
b. P439,000 d. P344,000

(Use the PFRS for SMEs) On 1 January 2021 an entity acquired a building for
P95,000, including P5,000 non-refundable purchase taxes. The purchase agreement
provided for payment to be made in full on 31 December 2021. Legal fees of P2,000
were incurred in acquiring the building and paid on 1 January 2021. The building is
held to earn lease rentals and for capital appreciation. An appropriate discount rate is
10 per cent per year.
34)The entity shall measure the initial cost of the building at:
a. P88,364
b. P97,000
c. P102,000
d. P107,000
At the start of the period, a business has total assets of P500,000 and total liabilities
of P300,000. During the period, the business earned total income of P1,000,000 and
incurred total expenses of P640,000. No additional investments or withdrawals were
made by the owner.
35)How much is the total equity at the end of the period?
a. 480,000
b. 520,000
c. 560,000
d. 640,000
ABC purchases a patent from p on January 2, 2004. For P64,000. The patent
has remaining legal life of 16 years at date of purchase. ABC feels the patent
will be useful for 10 years.
36)What should be the carrying value of the Patent in the books of ABC at the
end of December, 2005?
a. P51,200
b. P56,000
c. P57,600
d. P60,000

The stockholders' equity section of Peter Corporation's balance sheet at December 31,
2012, was as follows:
Ordinary shares (P10 par value, authorized 1,000,000
shares, issued and outstanding 900,000 shares) P 9,000,000
Share premium 2,700,000
Retained earnings 1,300,000
On January 2, 2013, Peter purchased and retired 100,000 shares of its stock for
P1,800,000.
37)Immediately after retirement of these 100,000 shares, the balances in the share
premium and retained earnings accounts should be
Share premium Retained earnings
a. P 900,000 P1,300,000
b. P1,400,000 P 800,000
c. P1,900,000 P1,300,000
d. P2,400,000 P 800,000
On January 1, 2011, Golf View Village Co. grants 1,000 share options to each of its
180 employees on condition that the employees remain in Golf View’s employ until the
end of 2013. The exercise price per share option is P20. The fair value per share option
is P80.
On December 31, 2011, Golf View modifies the share option grant by reducing the
exercise price to P60. This resulted to an increase in the fair value per option before
the modification of P100 to P120 after the modification.
38) What amount of compensation expense shall be recognized in 2011?
a. 4,800,000 b. 3,600,000 c. 1,800,000 d. 1,200,000
39)What amount of compensation expense shall be recognized in 2012?
a. 4,800,000 b. 6,600,000 c. 7,200,000 d. 9,600,000

ABC Company incurred the following costs during 2016:

Quality control during commercial production,
including routine- testing of products P 58,000
Laboratory research aimed at discovery of new knowledge 68,000
Testing for evaluation of new products 24,000
Modification of the formulation of a plastics product 6,000
Engineering follow through in an early phase of
Commercial production 15,000
Adaptation of an existing capability to a particular
requirement of customers’ needs as part of the
continuing commercial activity 13,000
Trouble shooting in connection with breakdowns
during commercial production 29,000
Searching for application of new research findings 19,000
40)What is the total amount to be reported as research and development
expense for 2006?
a. P92,000 c. P117,000
b. P98,000 d. P232,000

ABC Co. was organized on January 2, 2011, with 30,000 authorized shares of P10 par
ordinary shares. During 2011 the corporation had the following capital transactions:
 Jan. 5 Issued 20,000 shares at P15 per share.
July 14 Purchased 5,000 shares at P17 per share.
Dec. 27 Reissued the 5,000 shares held in treasury at P20 per share.
ABC used the cost method to record the purchase and reissuance of the treasury
shares.
41)In its December 31, 2011, balance sheet, what amount should ABC report as share
premium in excess of par?
a. 100,000
b. 125,000
c. 140,000
d. 115,000

Nest Co. issued 100,000 shares of common stock (i.e., ordinary shares). Of these,
5,000 were held as treasury stock at December 31, 2021. During 2022, transactions
involving Nest's common stock were as follows:
 May 3 - 1,000 shares of treasury stock were sold.
 August 6 - 10,000 shares of previously unissued stock were sold.
 November 18 - a 2-for-1 stock split took effect.
Laws in Nest's state of incorporation protect treasury stock from dilution.
42)At December 31, 2022, how many shares of Nest's common stock were issued and
outstanding?
Shares Issued Outstanding
a. 220,000 212,000
b. 220,000 216,000
c. 222,000 214,000
d. 222,000 218,000
ABC Corp.’s outstanding capital stock at December 15, 2011, consisted of the
following:
 30,000, 5% cumulative preference shares, par value P10 per share, fully
participating as to dividends. No dividends were in arrears.
 200,000 ordinary shares, par value P1 per share.
On December 15, 2011, Arp declared dividends of P100,000.
43)What was the amount of dividends payable to Arp’s ordinary stockholders?
a. 10,000
b. 34,000
c. 40,000
d. 47,500
On January 1, 2016, ABC Corporation granted options to purchase 9,000 of its
ordinary shares at P7 each. The market price was P10.50 per ordinary share on March
31, 2016, and averaged P9 per share during the quarter then ended. There was no
change in the 50,000 shares of outstanding common stock during the quarter ended
March 31, 2016. Profit for the quarter was P8,268.
44)The number of shares to be used in computing diluted earnings per share for the
quarter is
a. 59,000 b. 50,000 c. 53,000 d. 52,000
ABC Corporation has an authorized capital of 10,000 shares of P100 par, 8%
cumulative preferred stock and 20,000 shares of P100 par common stock. The equity
account balances at December 31, 2018 are as follows:
Cumulative preferred stock 500,000
Common stock 1,100,000
Additional paid in capital 200,000
Retained earnings 260,000
Treasury stock, common-1,000 shares at cost (150,000)
Total shareholders' equity 1,910,000
Dividends on preferred stock are in arrears for 2017 and 2018.
45)The book value of a share of common stock at December 31, 2018 should be
a. 125 b. 191 c. 133 d. 141
Georgia, Inc. has an authorized capital of 1,000, P100 par, 8% cumulative preference
shares and 100,000, P10 par, ordinary shares. The equity account balances at
December 31, 2011, are as follows:
Cumulative preference share 50,000
Ordinary share 90,000
Share premium 9,000
Retained earnings 13,000
Treasury shares, ordinary – 100 shares at cost (2,000)
Total 160,000
Dividends on preferred stock are in arrears for the year 2011.
46)The book value per ordinary share at December 31, 2011, should be
a. 11.78 b. 11.91 c. 12.22 d. 12.36

On January 1, 2011, ABC Co. grants 1,000 share options to each of its 180 employees
on condition that the employees remain in ABC’s employ until the end of 2013. The
exercise price per share option is P20. The fair value per share option is P80.
On December 31, 2011, ABC Co. modifies the share option grant by extending the
vesting period to the end of 2014.
47) What amount of compensation expense shall be recognized in 2011?
a. 4,800,000
b. 3,600,000
c. 1,800,000
d. 1,200,000
48)What amount of compensation expense shall be recognized in 2012?
a. 4,800,000
b. 6,600,000
c. 2,400,000
d. 1,600,000
HC uses the FIFO retail method of inventory valuation. For the period, the
following information are available:
COST RETAIL
Unsold Merchandise at the P24,000 P60,000
beginning
Purchases of goods 120,000 220,000
Net mark ups 20,000
Net mark downs 40,000
Sales of goods 180,000
49)If the lower or market rule is disregarded, what would be the estimated cost
of ending inventory?
a. 38,400
b. 40,000
c. 41,600
d. 48,000
The following are reported for the year ended December 31, 2019:
January 1 Inventory of goods 180,000
Purchases 680,000
Freight in 40,000
Sales 960,000
The gross margin recorded was ¼ of sales
50)What should be the inventory at December 31, 2019?
a. 240,000
b. 180,000
c. 225,000
d. 140,000

========================end of 3rd pre-board activity=====================