Level 1 AVERAGE

1. On January 1 of the current year a group of stockholders set up AB Corporation.

They contributed cash of P4, 250,000 and borrowed P950, 000 .
During the year revenues from sales totaled P1,400,000 while total costs and expenses
were P750,000 .AB Corporation were declared a cash dividend of P300,000 on
December 20,payable to the stockholders on January 30 of the following year. There
were no additional activities affecting stockholder’s equity.
By December 31 of the current year, liabilities decreased to P880,000.

Assets at the end of the year is

A. 4,670,000
B. 5,480,000
C. 5,780,000
D. 6,430,000

2. The accounts in the ledge of CD company contain the following balance at year end.

Accounts receivable, P30, 240 ; Cash P50,985 ; Equipment P172,760; Gas and Oil expense
P2,650 ; Insurable expenses ,P1,830, Notes Payable ,P64,575; Prepaid Insurance, P6,880;
Repair Expense, P3,360; Service Revenue, P37,130; CD Drawing, P2,450; CD Capital, (beg),
P156,290, Salaries Expense, p15,490, Salaries Payable, P2,850. Assuming no error
committed during the fiscal period, the balance of accounts payable is

A. 20,900
B. 23,800
C. 25,800
D. 31,500

3.The following information is available concerning the accounts of HD Company:

Accounts payable, January 1, 2013 P 25,000

Cash payments on account during 2013, net of discounts P 65,000

Purchase returns from purchase made in 2013 P 2,400

Accounts Payable, December 31, 2013 P 10,000

Assuming the company records purchase at gross amounts, the total purchaser for 2013
would be

A. 52,400 C. 82,400
B. 56,000 D. 86,000
4. Company X and Y exchanged non-monetary assets with no consideration involved and no
commercial value. The accounting on the exchanged should be based on

A. Carrying amount of the asset received

B. Carrying amount of the asset relinquished

C. Fair Value of the asset received

D. Fair Value of the asset relinquished

5. When an Entity breaches an undertaking under a long term loan agreement on or before
the end of reporting period with the effect that the liability becomes payable on demand, the
liability is classified as

A. Current under all the circumstances

B. Noncurrent under all circumstances

C. Current, if the lender has agreed after the reporting period and before the issuance of the
statements not to demand payment as a consequence of the breach.

D. Noncurrent, if the lender agreed after the end of the reporting period to provide a grace
period for at least twelve months after the reporting period.

6. During the current year, a storm damaged the roof of homeless shelters, a nonprofit
voluntary health welfare organization. One supporter of homeless shelters, a one-time
homeless man himself, now a trained professional roofer, repaired the roof at no charge. In
the statement of activities for the current year, the damage and repair of the roof should be
reported as

A. Note disclosure only

B. Increase in net assets and contributions

C. Increase in both expenses and contributions

D. Nothing to be reported at all

7. A cash flow of P200,000 may be received by Lydia Nickels, Inc. in one year, two years, or
three years, with probabilities of 20%, 50%, and 30%, respectively. The rate of interest on
default risk free investments is 5%. The present value factors are

PV of 1, at 5% for 1 year is .95238

PV of 1, at 5% for 2 years is .90703

PV of 1, at 5% for 3 years is .86384

What is the expected present value of Lydia’s Nickels cash flow (in nearest peso)
 A. 181,406
B. 180,628
C. 90,703
D. 89,925

8. Lin Co, a distributor of machinery, bought a machine from the manufacturer in November
year 1 for P10,000. On December 30, year 1, Lin sold this machine to zee hardware for
P15,000, under the following terms; 2% discount if paid within thirty days, 1% discount if paid
after thirty days but within 60 days, or payable in full within ninety days if not paid within the
discount periods. However, zee had the right to return this machine to Lin if zee was unable
to resell the machine before expiration of the ninety day payment period, in which case Zee’s
obligation to Lin would be cancelled. In Lin’s net sales for the year ended December 31, year
1, how much should be included for the sale of this machine to Zee?

A. 0

B. 14,700

C. 14,850

D. 15,000

9. Ward, a consultant, keeps her accounting records on cash basis. During year 2, Ward
collected P200,000 in fees from clients. At December 31, year 2, Ward had accounts
receivable of P60,000, and unearned fees of P5,000. On accrual basis, What was Ward’s
service revenue for year 2?

A. 175,000

B. 180,000

C. 215,000

D. 225,000

10. Bren Co.’s beginning inventory at January 1, year 1, was understated by 26,000, and its
ending inventory was overstated by 52,000. As a result, Bren’s cost of good s+old for year 1
was

A. Understated by 26,000.

B. Overstated by 26,000

C. Understated by 78,000

D. Overstated by 78,000