Instructions: Answer as required. Use the papers provided as answer sheets.

Place your Code Number on the upper right hand

corner of your answer sheets. The exam is good for four hours. Make your work as neat as possible.

I. STRAIGHT PROBLEMS. Show your solutions in an organized manner. Encircle your final answers.

1. Grande has the following depreciation policies on machinery:

a. A full year’s depreciation is taken in the year of acquisition.
b. No depreciation in year of disposal.
c. Life is 5 years.
d. Straight line is used.
On June 30, 2008, the company sold for P2,300,000 a machine acquired in June 1, 2005 for P4,200,000. Then estimated salvage
value was P600,000. How much gain or loss should the company recognize?

2. A new business has the following transactions for the month: (1) the owner invested P36,000; (2) P26,000 of supplies were
purchased for cash and ½ remained unused at the end of the month; (3) P23,000 was received for payment for services rendered
by the business; (4) a salary of P10,000 was paid to an employee and (5) P30,000 was borrowed from the bank (6) equipment
worth P25,000 was bought paying cash of P5,000 and the balance was payable in 45 days (7) a customer paid in advance
P12,000 which remain unearned at the end of the month.
a. Compute for total assets as at end of month.
b. Ignoring depreciation, compute for owner’s equity as at end of the month.

3. You were given the following information about certain inventory sale shipments of LEI Company.

Invoice # FOB Term Shipped Recorded Sales Price Cost

7871 Destination 20-Oct 31-Oct 1000 900
7872 Shipping Point 31-Oct 2-Nov 2500 2000
7873 Shipping Point 25-Oct 31-Oct 1800 1200
7874 Destination 31-Oct 29-Oct 4200 3100
7875 Destination 31-Oct 2-Nov 9200 8000
7876 Shipping Point 2-Nov 23-Oct 6500 5100
7877 Shipping Point 5-Nov 6-Nov 7500 5800
7878 Destination 25-Oct 3-Nov 3900 2000
7879 Shipping Point 4-Nov 31-Oct 8600 8200
7880 Destination 5-Nov 2-Nov 5000 4000

A physical inventory was taken as of the close of business on October 31, the company’s balance sheet date. All customers are
within a three-day delivery of the company. The unadjusted balances of Sales and Inventories accounts are P2,500,000 and
P110,000 respectively. Compute for the adjusted balances of (a) Sales and (b) Inventories.

4. Mr. A sells home cooked meals. He purchased the following for the day: Pork = P50, Beef = P55, Fish = P30, Chicken = P95, and
Shrimps = P45. Out of these purchases he mad e 10 pork meals, 12 beef meals, 15 fish meals, 10 chicken meals and 12 shrimp
meals. He still had the following meals from yesterday’s operation: 5 pork meals, 2 beef meals, 3 fish meals, 5 chicken meals and 4
shrimp meals. Mr. A purchased the same number of items as purchased yesterday only that the price for all items today were lower
by P0.50. He made exactly the same number of meals of each type today compared to yesterday. Mr. A sells meals at the following
prices: Pork = P10, Beef = P24, Fish = P11, Chicken = P13, and Shrimps = P14. Each meal sold comes with one cup of rice
costing P2 each. Unsold meals as at the end of the day (Mr. A uses FIFO) were: Pork = 2, Beef = 1, Fish = 1, Chicken = 4, and
Shrimps = 5. Mr. A also pays P50 per day for stall rental. Calculate the following:
a. Total sales for the day
b. Net income for the day
c. Inventory as of the end of the day

5. Dreamtim Corporation keeps all its cash in checking account. An examination of the company’s accounting records and bank
statement for the month’s accounting records and bank statement for the month of June 30, 2008 revealed the following
information:
 The cash balance per book on June 30 is P8,500,000
 A deposit of P1,000,000 that was place in the bank’s night depository on June 30 does not appear on the bank statement
 The bank statement shows on June 30, the bank collected note for Dreamtim and credited to company’s account:
P950,000.
 Checks outstanding on June 30 amount to P300,000
 Dreamtim discovered that checks written in June for P200,000 in payment of an accounts payable had been recorded in
the company’s record as P20,000
 Included with the June bank statement was NSF check for P250,000 that Dreamtim had received from a customer on
June 26.
 The bank statement shows a P20,000 service charges for June.
` What amount of cash to be shown in the balance sheet on June 30, 2008?

6. The partial income statement of five different companies are as follows:

BSA Pre-Qualifying Examination 2009 – Afternoon Session 1
 1 2 3 4 5
Net sales A D 250,000 290,000 400,000
Merchandise inventory, 1/1/09 B 50,000 70,000 J 120,000
Net Purchases 80,000 E G 160,000 390,000
Goods available for sale 110,000 160,000 H K M
Merchandise inventory, 1/31/09 40,000 F 30,000 70,000 N
Cost of Goods Sold C 140,000 230,000 L 380,000
Gross Profit 50,000 40,000 I 160,000 O

7. The financial statements of Dyosa Company contained the following errors:

Ending inventory of 2008 was understated by P2,000. Ending inventory of 2009 was overstated by P1,800. Depreciation expense
of 2008 was understated by P400. Insurance of P1,500 was prepaid in 2008 for the years 2008, 2009, and 2010. The entire
amount was expensed in 2003. On December 31, 2009, a fully depreciated machinery was sold for P3,200 cash but the sale was
not recorded until 2010. No corrections had been made for any of these errors. Compute for the net effect (indicate whether under
or overstatement) of these errors on the 2008 income.

8. You were given the following purchase and sale schedule for Gladys Company.
Purchases Sales Unit cost
Beginning – 2008 2000 1.5
1-Jan-2008 5000 1.6
19-Feb-2008 3000
28-Apr-2008 2500 1.8
5-May-2008 3000
22-Jul-2008 5000 1.8
20-Sept-2008 1000
15-Nov-2008 3500 2
18-Dec-2008 500
15-Jan-2009 3000 2.1
18-Jan-2009 200
The company sells its product at P5.5.
a. Compute for cost of goods sold for 2008 using weighted average inventory costing.
b. Compute for gross profit of 2008 assuming FIFO.

9. You were given the following breakdown of Melody Company’s accounts receivable on December 31, 2008:
Sales to Amount Date shipped-2008 Term Date received-2008
A P100,000 1-Nov Shipping point 2/10, n/30 15-Dec
B P200,000 31-Aug Destination 2/10, n/60 15-Nov
C P250,000 21-Nov Shipping point 5,10, 2/15, n/30 20-Dec
D P300,000 1-Sept Destination 2/10, n/30 1-Oct
In computing bad debts, the company uses the following estimates: not yet due, 2%; 1-20 days past due, 5%, 21-40 days past due,
8%; 41-60 days past due, 10%; and over 60 days, 15%. The credit period starts after each sale and includes holidays. If the
unadjusted balance of the allowance account is a debit of P5000, calculate the bad debts expense to be reported for 2008.

10. On the worksheet, assume that the total of the debit column (before income) on the balance sheet is P5,524,875 and the total debit
column (after income) on the income statement is P1,258,250, what was the total of the debit column on the income
statement(before income) if the total of the credit column on the balance sheet (before income) is P4,921,651?

11. On August 31, 2001, M.Catherine Company acquired land and building at a single cost of P6,500,000. At the time of acquisition,
the land had a fair value of P1,000,000 and the building P4,000,000. The building has a salvage value of P880,000 and will be
depreciated for 12 years using the straight line method. On January 31, 2007, the company determined that the building had a
useful life of 9 years. What is the depreciation expense for the year ended 2007 and accumulated depreciation on April 1, 2008?

12. A business owned by DJ was short of cash and he decided to form a partnership with Kates who was able to contribute cash twice
the interest of DJ in the new partnership. The assets contributed by DJ appeared as follows in the balance sheet of his business:
Cash P450; Accounts receivable P9,450 with allowance for doubtful accounts of P300; Inventory P21,000; and store equipment
P7,500 with an accumulated depreciation of P75. DJ and Kates agreed that the allowance for doubtful accounts was inadequate
and should be P500. They also agreed that the fair value for the inventory is P23,000 and for the store equipment P6,000.
Compute for the cash contributed by Kates into the partnership.

BSA Pre-Qualifying Examination 2009 – Afternoon Session 2

13. Hazel Company had the following account balances on December 31, 2008:
Cash in bank – current account 5,000,000
Cash in bank – payroll account 1,000,000
Cash on hand 500,000
Cash in bank – restricted account for building
construction expected to be disbursed in 2009 3,000,000
Treasury bills, purchased December 15, 2008 and
due March 15, 2009 2,000,000
The cash on hand includes a P200, 000 check
payable to Hazel dated January 15, 2009. What should be reported as “cash and cash equivalents” on December 31, 2008?

14. Cecile Company had the following bank reconciliation on June 30, 2008:
Balance per bank statement, June 30 3,000,000
Add: Deposit in Transit 400,000

Total 3,400,000
Less: Outstanding Checks 900,000
Balance per book, June 30 2,500,000
The bank statement for the month of July showed the following:
Deposits (Including P200,000 note collected for Lazer) 9,000,000
Disbursements (Including P140,000 NSF check and P10,000
service charge) 7,000,000
All reconciling items on June 30 cleared through the bank in July. The outstanding checks totaled P600,000 and the deposit in
transit amounted to P1,000,000 on July 31.
a. What is the cash balance per book on July 31, 2008?
b. What is the amount of cash receipts per book in July 2008?
c. What is the amount of cash disbursements per book in July 2008?

15. The balance sheet of Sandy Novem Company shows accounts receivable at January 1, 2008 as follows:
Accounts receivable 450,000
Allowance for doubtful accounts 9,000
During 2008, transactions relating to the accounts receivable were as follows:
Sales on account, P4,800,000
Cash collections of accounts receivable totaled P3,920,000 after discounts of P80,000 were allowed for prompt payment
Bad accounts previously written off prior to 2008 amounting to P5,000 were recovered
The company decided to provide P26,000 for doubtful accounts by a journal entry at the end of the year
Accounts receivable of P700,000 have been pledged to a local bank on a loan of P400,000. Collections of P150,000 were
made on these receivables (not included in the collections previously given) and applied as partial payment for the loan
Compute for the estimated realizable value of accounts receivable at December 31, 2008.

16. The following information pertains to Tita Margie Company’s accounts receivable at December 31, 2008:

Days outstanding Estimated amount % uncollectible

0 – 60 1,200,000 1%
61 – 120 900,000 2%
Over 120 1,000,000 6%

During 2008, Tita Margie wrote off P70,000 in receivables and recovered P40,000 that had been written off in prior years. Tita
Margie’s January 1, 2008, allowance for uncollectible accounts was P100,000. Under the aging method, what amount of allowance
for uncollectible accounts should be reported at December 31, 2008?

17. On July 1, 2008, Jan Mark Corporation sold equipment to Mando Corporation for P1,000,000. Jan Mark accepted a 10% note
receivable for the entire sales price. This note is payable in two equal installments of P500,000 plus accrued interest on December
31, 2008 and December 31, 2009. On July 1, 2009, Jan Mark discounted the note at a bank at an interest rate of 12%. Compute
for Jan Mark’s proceeds from the discounted note.

18. Jerome company is preparing its 2007 year-end financial statements. Prior to any adjustments, inventory is valued at P7,600,000.
The following information has been found relating to its certain inventory transactions:
 Goods valued at P1,000,000 are on consignment with a customer. These goods are not included in the year-end inventory
figure.
 Goods costing P250,000 were received from a vendor on January 5, 2008. The related invoice was received and
recorded on January 12, 2008. The goods were shipped on December 31, 2007, terms, FOB shipping point.
 Goods costing P850,000 were shipped on December 31, 2007, and were delivered to the customer on January 2, 2008.
The terms of the invoice were FOB shipping point. The goods were included in ending inventory for 2007 even though the
sale was recorded in 2007.
 A P350,000 shipment of goods to a customer on December 31, 2007, terms FOB destination, was not included in the
year-end inventory. The goods cost P260,000 and were delivered to the customer on January 8, 2008. The sale was
properly recorded in 2008.
 An invoice for goods costing P350,000 was received and recorded as a purchase on December 31, 2007. The related
goods, shipped FOB destination, were received on January 2, 2008, and thus were not included in the physical inventory.
 Goods valued at P650,000 are on consignment from a vendor. These goods are not included in the year-end inventory
figure.
 A P1,050,000 shipment of goods to a customer on December 30, 2007, terms FOB destination, was recorded as a sale in
2007. The goods, costing P840,000 and delivered to the customer on January 6, 2008, were not included in 2007 ending
inventory.
Compute for the correct inventory on December 31, 2007.

19. The inventory on hand at December 31, 2008 for Dexter Company is valued at a cost of P950,000. The following items were
excluded in this inventory amount:
BSA Pre-Qualifying Examination 2009 – Afternoon Session 3
 Item 1: Purchased goods in transit, shipped FOB destination, invoice price P30,000 which includes freight charge of P1,500.
Item 2: Goods held on consignment by Dexter Company at a sales price of P28,000 including sales commission of 20% of the
sales price.
Item 3: Goods sold to Dioville Company, under terms FOB destination, invoiced for P18,500 which includes P1,000 freight
charge to deliver the goods. Goods are in transit. The company’s selling price is 40% above the cost.
Item 4: Purchased goods in transit, terms FOB destination, invoice price P50,000 which includes freight cost, P2,500.
Item 5: Goods out on consignment to Dreamtim Company, sales price P35,000, shipping cost of P2,000.
What is the adjusted cost of the inventory on December 31, 2008?

20. Marianne Company started its operations in 2006. The following data are abstracted from the company’s purchases and sales
records:

2006 2007 2008

Number of units purchased 160,000 155,000 135,000
Number of units sold 100,000 145,000 130,000
Unit cost 4.00 5.00 6.00
Sales revenue 800,000 1,200,000 1,300,000

The inventory value is calculated in terms of FIFO. How much is gross profit for the year 2008?

21. During January of the current year, Leisha Company which maintains perpetual inventory system, recorded the following
information pertaining to its inventory:

Units Unit cost Total cost Units on Hand

Balance on 1/1 10,000 100 1,000,000 10,000
Purchased on 1/7 6,000 300 1,800,000 16,000
Sold on 1/20 9,000 7,000
Purchased 1/25 4,000 500 2,000,000 11,000

a. Under the moving average method, what amount should Leisha report as inventory at January 31?
b. Under the FIFO method, what amount should Leisha report as inventory at January 31?

22. Reah Company’s accounting records indicated the following information for the year 2008:
Inventory, 1/1 1,000,000
Purchases 5,000,000
Sales 6,400,000
A physical inventory taken on December 31, 3008, resulted in an ending inventory of P1,150,000. Reah’s gross profit on sales has
remained constant at 25% in recent years. Reah suspects some inventory may have been taken by a new employee. At December
31, 2008, what is the estimated cost of missing inventory?

23. A major portion of Katrina Company’s inventory was stolen on the night of August 31, 2008. A physical count the next day revealed
that goods costing P600,000 were still on hand. Your examination of the company’s accounting records reveal the following:
Inventory, January 1 1,250,000
Transactions, January 1 through August 31
Purchases 4,850,000
Purchase Returns 100,000
Transportation in 300,000
Sales 7,250,000
Sales Returns 250,000

The company began operation early in 2007, and its income statement for the year appears below.
Net sales 9,750,00
Cost of Goods Sold 0
5,850,00
0

Gross Margin on Sales 3,900,00

Operating expenses 0
1,400,00
0
Compute for the estimated cost of the inventory that was
stolen.
Income before income tax 2,500,00
Income tax 0
24. On April 1, 2008, Ladrero Company purchased new machinery
800,000
for P3,600,000. The machinery has an estimated useful life of
Net income 1,700,00
five years and is expected to be disposed for P600,000.
0
Depreciation is computed by the sum-of-the-years’ digits
method. Compute for the accumulated depreciation on this machinery at December 1, 2011.

25. On January 1, 2007, Dioville Company purchased a large quantity of personal computers. The cost of these computers was
P6,000,000. On the date of purchase, the management estimated that the computers would last approximately four years and
would have residual value at that time of P600,000. The company used the double declining balance method. During January
2008, the management realized technological advancements had made the computers virtually obsolete and that they would have
to be replaced. Management proposed changing the remaining useful life of the computers to two years. What is the depreciation
to be recognized for the year 2008?

26. Mataba Company is a partnership whose owners are Mads, Flor, and Danna. The partners share profits and losses at 20%, 20%
60% respectively. Due to mental incapacity of Mads, the partnership had to be dissolved and liquidated. Their balance sheet
prepared as of January 1, 2005 shows the following:
Cash P 12,000 Liabilities P125,000
Non-cash assets 425,200 Mads, Capital 107,700
Flor, Capital 78,500
BSA Pre-Qualifying Examination 2009 – Afternoon Session 4
 Danna, Capital 126,000
All noncash assets were sold at a loss for P75,000. Liquidation expenses of P20,000 were also paid. Mads and Danna are
insolvent while Flor is financially sound. How much capital deficiency was absorbed by Flor?

27. On December 1, 2008, Caloy Company received a donation of 2,000 shares of its P50 par value common stock from a stockholder.
On that date, the stocks’s market value was P350 per share. The stock was originally issued for P250 per share. By what amount
would this donation cause total stockholders’ equity to decrease?

28. MCS Limited is a liquidating partnership. It is owned by Mari, Cris and Sab who share profits at 40%, 40% and 20%, respectively.
Mari is a limited partner. The liquidation of the partnership is to commence June 30, 2003 and their accounts as of this date appear
as follows:
Debits Credits
Cash P45,200
Non-cash assets 528,000
Accounts payable 218,500
Loan from Mari 54,625
Mari, Capita 22,400
Cris, Capital 185,000
Sab, Capital 92,675
The first period of liquidation realized P200,000 cash from the sale of non-cash assets with book value of P245,500. Cash
distribution to the partners as agreed will be based on the schedule of safe payments. Assuming no cash is withheld, how much
cash should be paid to Mari as of this point in time?

29. The stockholders’ equity of Visa Company on December 31, 2008 includes the following:
12% Preferred stock, 20,000 shares, P100 par value 2,000,000
14% Preferred stock, 10,000 shares, P300 par value 3,000,000
Common Stock, 50,000 shares, P100 par value 5,000,000
Retained Earnings 2,240,000
Additional Paid in Capital 1,500,000
The 12% stock is cumulative and fully participating. The 14% stock is noncumulative and fully participating. Dividends have not
been declared for 3 years. What is the book value per ordinary share?

30. Vacio Company’s capital structure at January 1, 2007 was as follows:

Shares issued and outstanding
Ordinary share capital 200,000
Nonconvertible preference share capital 50,000
On October 1, 2007, Vacio issued
a 10% stock dividend on its ordinary share, and paid a cash dividend of P200,000 on its preference share. Net income for the year
ended December 31, 2007 was P1,920,000. What should be the basic earnings per share?

31. The business of A and B appear as follows:

Keng Kong
Cash 22,000 8,000
Accounts Receivable 505,000 645,000
Inventories 180,000 520,000
Building 1,800,000
Land 2,100,000
Furniture 52,000
Other assets 41,000
Accounts payable 470,500 632,000
Loans payable 105,380
Notes payable 200,000
Keng and Kong agreed to form partnership by contributing their net assets to the new association subject however to the
following adjustments:
a. Accounts receivable is to be revalued, and should have an allowance which is equal to 5% of the outstanding book
balance. Building is revalued at 30% less its book value.
b. The land has a fair market value of P2,210,000
c. The furniture and other assets are to be written off because they are already considered worthless
1. Assuming the books of A will be used as the books of the partnership, compute for the total assets immediately after formation of
the partnership.
2. Based on the above and assuming the books of B will be used as partnership books, calculate the total capital immediately after
the formation of the partnership.

32. Garcia and Henson formed a partnership on January 2, 2008 and agreed to share profits 90%, 10%, respectively. Garcia
contributed capital of P25,000. Henson contributed no capital but has a specialized expertise and manages the firm full time. There
were no withdrawals during the year. The partnership agreement provides for the following:
 Capital accounts are to be credited annually with the interest at 5% of beginning capital.
 Henson is to be paid a salary of P1,000 a month.
 Henson is to receive a bonus of 20% of income calculated before deducting his salary and interest on both capital
accounts.
 Bonus, interest, and Henson’s salary are to be considered partnership expenses.
 The partnership 2008 income statement follows:
Revenues P96,450
Expenses (including salary, interest and bonus) P49,700
Net income P46.750
What is Henson’s 2008 bonus?

BSA Pre-Qualifying Examination 2009 – Afternoon Session 5

33. On July 1, 2008, Moñuz and Pardo from the partnership, agreeing to share profits and losses in the ratio of 4:6, respectively.
Moñuz contributed a parcel of land that cost him P25,000. Pardo contributed P50,000 cash. The land was sold for P50,000 on July
1, 2008 four hours after formation of the partnership. How much should be recorded in Moñuz capital account on the formation of
the partnership?

34. Lina, Mina and Nina were partners with capital balances on January 2, 2008 of P300,000, P200,000 and P100,000, respectively.
On July 1, 2008 Lina retires from the partnership. On the date of retirement the partnership net loss is P60,000 and that partners
agreed that certain asset is to be revalued at P80,000 from its original cost of P50,000. The partners agreed further to pay Lina
P225,000 in settlement of her interest. The remaining partners continue to operate under a new partnership, MN partnership. What
is the total capital of MN partnership?

35. Abe, Bert Carl are partners sharing profits on a 7:2:1 ratio. On January 1, 2008, Dave was admitted into the partnership with 15%
share in profits. The old partners continue to participate in profits in their original ratios.
For the year 2008, the partnership showed a profit of P15,000. However, it was discovered that the following items were
omitted in the firm’s book:
Unrecorded at year end 2007 2008
Accrued expenses P1,050
Accrued income P875
Prepaid expenses P1,400
Unearned income P1,225
What is the share of partner Bert in the 2008 net profit?

36. On January 1, 2008, A, B, C and D formed Bekha Trading Co., a partnership with capital contribution as follows: A, P50,000; B,
P25,000; C, P25,000; and D, P20,000. The partnership contract provided that each partner shall receive a 5% interest on
contributed capital, and that A and B shall receive salaries of P5,000 and P3,000, respectively. The contract also provide that C
shall receive a minimum of P2,500 per annum and D a minimum of P6,000 per annum, which is inclusive of amounts representing
interest and share of remaining profits. The balance of the profits shall be distributed to A, B, C, and D in a 3:3:2:2 ratio. What
amount must be earned by the partnership before any charge for interest and salaries, so that A may receive an aggregate of
P12,500 including interest, salary and share of the profits?

37. Gilbert, Joseph and Li are partners with capital balance of P350,000, P250,000 and P350,000 and sharing profits 30%, 20% and
50% respectively. Partners agree to dissolve the business and upon liquidation, all of the partnership assets are sold and sufficient
cash is realized to pay all the claims except one for P50,000. Li is personally insolvent, but the other two partners are able to meet
any indebtedness to the firm. On the remaining claim against the partnership, how much will Gilbert absorb?

38. Penn Company began operations on January 1, 2008 by issuing at P15 per share one-half of the 950,000 ordinary shares of P1
par value that had been authorized for sale. In addition, Penn has 500,000 authorized preference shares of P5 par value. During
2008, Penn had P1,025,000 of net income and declared P230,000 of dividend.
During 2009, Penn Company had the following transactions:
 Issued 100,000 ordinary shares for P17 per share.
 Issued 150,000 preference shares for P8 per share.
 Authorized the purchase of a custom-made machine to be delivered in January 2010. Penn restricted P300,000 of
retained earnings for the purchase of the machine.
 Issued additional 50,000 preference shares for P9 per share.
 Reported P1,215,000 of net income and declared on December 31, 2009 a dividend of P635,000 to shareholders of
record on January 15, 2010, to be paid on February 1, 2010.
What is the total shareholder’s equity on December 31, 2009?

39. Dyosa Inc. was authorized to issue 500,000 ordinary shares at P10 par starting January 1, 2008. During the year, 40,000 shares
were issued for P30 per share, 10,000 shares for P65 per share and 10,000 shares were issued in exchange for a parcel of land
with cost of P150,00 and a fair value of P180,000 and 3,000 shares were subscribed for P40 per share ( ½ was collected on July 1,
2008). On January 15, 2009, 1,000 shares were reacquired for P55 per share and were held in treasury. How much is paid-in-
capital on December 31, 2008?

40. You were given the following shareholder’s equity accounts for Paperclip Inc.:
Ordinary shares (15 par) P499,500 Unappropriated Retained Earnings P400,000
Ordinary share premium P200,000 Appropriated Retained Earnings P320,000
Preference shares (P40) P250,000 Treasury shares (ordinary) @ cost P25,000
Preference share premium P80,000 Treasury shares (ordinary) @ par P15,000
Subsequently, ½ of treasury shares were reissued at P20 per share and ½ of the issued preference shares were converted to
ordinary shares at the rate of two ordinary shares for one preference share. The converted shares were originally issued at P50
per share. Compute the total shareholder’s equity after the above transactions.

41. On January 1, 2008, a group of stockholders set up Uhmwell Inc. They contributed cash of P2,500,000 and borrowed P300,000.
During the year, revenues from sales totaled P154,000, while total costs and expenses were P148,000. Uhmwell declared a cash
dividend of P10,000 on December 15, payable to the stockholders on January 15, 2009. There were no additional activities
affecting stockholder’s equity. By December 31, 2008, liabilities increased to P440,000. How much is total assets of Uhmwell as of
December 31, 2008?

42. On May 1 of the current year, Sol Company’s board of directors declared a 10% stock dividend. The market price of Sol’s 30,000
outstanding shares of P20 par value was P90 per share on that date. The stock dividend was distributed on July 1, when the
market price was P100 per share. What amount should Sol credit to share premium for this stock dividend?

43. Cox Company was organized on January 1, 2007 at which date it issued 100,000 ordinary shares of P10 par value at P15 per
share. During the period January 1, 2007 through December 31, 2007, Cox reported net income of P450,000 and paid cash
dividend of P230,000. On January 10, 2008, Cox purchased 6,000 treasury shares at P12 per share. On December 31, 2008, Cox
sold 4,000 treasury shares at P8 per share and retired the remaining treasury shares. Cox uses the cost method of accounting for
treasury shares. What is the total shareholder’s equity at December 31, 2008?

BSA Pre-Qualifying Examination 2009 – Afternoon Session 6

II. MULTIPLE CHOICE. Write the letter of your choice on a separate paper. No solutions are required.

1. On January 1, 2005, Charisma Company bought a machine for P1,500,000. At that time, this machine had an estimated useful life
of six years, with no residual value. As a result of additional information, Charisma determined on January 1, 2008, that the
machine had an estimated useful life of eight years from the date it was acquired, with no residual value. Accordingly, the
appropriate accounting change was made in 2008. How much depreciation expense for this machine should Charisma record for
the year ended December 31, 2008, assuming Charisma uses the straight line method of depreciation?
a. 125,000 b. 150,000 c. 187,500 d. 250,000

2. Mataba Company was organized on January 1, 2008, with authorized capital of 100,000 shares of P200 par value common stock.
During 2008, Mataba had the following transactions affecting the stockholders’ equity:
January 10 Issued 25,000 shares at P220 a share
March 25 Issued 1,000 shares for legal services when the fair value was P240 a share
September 30 Issued 5,000 shares for a tract of land when the fair value was P260 a share
What amount should Mataba report for additional paid-in capital at December 31, 2008?
a. 840,000 b. 800,000 c. 540,000 d. 500,000

3. Vacio Company’s stockholders’ equity at December 31, 2008, consisted of the following:
8% cumulative preferred stock, P50 par; liquidating value P55 per
share; authorized, issued and outstanding 20,000 shares 1,000,000
Common stock, P25 par, 200,000 shares authorized; 100,000 shares
issued and outstanding 2,500,000
Retained earnings 400,000
Dividends on preferred stock have been paid through 2006 but have not been declared for 2007 and 2008. Compute for Vacio’s
book value per common share as of December 31, 2008.
a. 25 b. 27.20 c. 26.40 d. 29

4. Amitap Company had 10,000 shares of common stock issued and outstanding at January 1, 2008. During 2008, Amitap took the
following transactions:
March 15 Declared a 2-for-a stock split, when the fair value of the stock was P80 per share
December 15 Declared a P5 per share cash dividend
In Amitap’s statement of stockholder’s equity for 2008, what amount should Patima report as dividends?
a. 50,000 b. 100,000 c. 850,000 d. 950,000

5. In preparing its bank reconciliation at December 31, 2008, Uhmwell Company has made available the following data:
Balance per bank statement 3,800,000
Deposit in transit 520,000
Amount erroneously credited by bank to Umwell’s account 40,000
Bank service charge for December 5,000
Outstanding checks 675,000
The adjusted cash in bank balance on December 31, 2008 is
a. 3,685,000 b. 3,645,000 c. 3,600,000 d. 3,605,000

6. Rai Company provided the following data for the purpose of reconciling the cash balance per book with the balance per bank
statement on December 31, 2008:
2,000,00
Balance per bank statement 0
Balance per book 850,000
Outstanding checks (including certified check of P100,000) 500,000
Deposit in transit 200,000
December NSF checks (of which P50,000 had been redeposited and
cleared by December 27 150,000
Erroneous credit to Rai's account, representing proceeds of loan granted
to another company 300,000
Proceeds of note collected by bank fo Rai, net service charge of 20,000 750,000
The cash in bank to be shown in Rai’s December 31, 2008 statement of financial position is
a. 1,500,000 b. 1,400,000 c. 1,800,000 d. 1,450,000

7. Luna Company prepared an aging of its accounts receivable at December 31, 2008 and determined that the net realizable value of
the accounts receivable 2008 was P2,500,000. Additional information is available as follows:
Allowance for uncollectible accounts at January 1 - credit balance 280,000
Accounts written off as uncollectible 230,000
2,700,00
Accounts receivable at December 31 0
Uncollectible accounts recovery 50,000
For the year ended December 31, 2008, Luna’s uncollectible accounts expense would be
a. 230,000 b. 200,000 c. 150,000 d. 100,000

8. An analysis and aging of Kates Company’s accounts receivable at December 31, 2008 disclosed the following:
9,000,00
Accounts receivable 0
Allowance for doubtful accounts per book 500,000
Accounts deemed uncollectible 640,000
At December 31, 2008, the net realizable value of accounts receivable should be
a. 8,860,000 b. 8,500,000 c. 8,360,000 d. 7,860,000

BSA Pre-Qualifying Examination 2009 – Afternoon Session 7

9. All of Meow Company’s sales are on credit basis. The following information is available for the current year:
Allowance for doubtful accounts - January 1 180,000
9,500,00
Sales 0
Sales returns 800,000
Accounts written off as uncollectible 200,000
Meow provides for doubtful accounts expense at the rate of 3% of net sales. At December 31, the allowance for doubtful accounts
balance should be
a. 281,000 b. 265,000 c. 261,000 d. 241,000

10. Sexyriz Company’s inventory at December 31, 2008 was P7,500,000 based on physical count priced at cost and before any
necessary adjustment for the following:
 Merchandise costing P450,000, shipped FOB shipping point from a vendor on December 30,2008, was received and
recorded on January 5, 2009.
 Goods in the shipping area were excluded from inventory although shipment was not made until January 4, 2009. The
goods billed to the customer FOB shipping point on December 30, 2008, had a cost of P600,000.
What amount should Sexyriz report as inventory on December 31, 2008?
a. 7,500,000 b. 7,950,000 c. 8,100,000 d. 8,550,000

11. The following information applied to Dann Company for the current year:
4,000,00
Merchandise purchased for resale 0
Freight in 100,000
Freight out 50,000
Purchase returns 20,000
Interest on Inventory loan 200,000
Dann’s inventoriable cost was
a. 4,280,000 b. 4,030,000 c. 4,080,000 d. 4,130,000

12. n April 1, Ville Company had 6,000 units of merchandise on hand that cost P120 per unit. During the month, Ville had the following
entries with regard to the merchandise:
April 5 Purchased on account 15,000 units at P140 per unit
8 Returned 1,000 units from the April 5 purchase
29 Sold on account 16,000 units at P200 per unit
Ville Company uses a perpetual inventory system and a FIFO cost flow. What is the cost of goods sold for April?
a. 2,120,000 b. 2,200,000 c. 2,144,000 d. 2,080,000

13. On August 1, Borja Company purchased a new machine on a deferred payment basis. A down payment of P100,000 was made
and 4 monthly installments of P250,000 each are to be made beginning on September 1. The cash price equivalent price of the
machine was P950,000. Borja incurred and paid installation costs amounting to P30,000. The amount to be capitalized as the cost
of the machine is
a. 950,000 b. 980,000 c. 1,100,000 d. 1,130,000

14. On January 1, 2004, May Company acquired equipment for P1,000,000 with an estimated 10-year useful life. May estimated a
P100,000 residual value and used the straight line method of depreciation. During 2008, after its 2007 financial statements had
been issued, May determined that, due to obsolescence, this equipment’s remaining useful life was only four more years and its
residual value would be P40,000. In May’s December 31, 2008 statement of financial position, what was the carrying amount of the
equipment?
a. 515,000 b. 490,000 c. 415,000 d. 390,000

15. Gladz Company purchased a tooling machine in 1998 for P3,000,000. The machine was depreciated on the straight line method
over an estimated useful life of twenty years with no residual value. At the beginning of 2008, when the machine had been in use
for ten years, the company paid P600,000 to overhaul the machine. As a result of this improvement, the company estimated that
the useful life of the machine would be extended an additional five years, What should be the depreciation expense for the
machine in 2008?
a. 150,000 b. 140,000 c. 210,000 d. 340,000

16. On March 1, 2008, Santos and Pablo formed a partnership with each contributing the following assets.

Santos Pablo
Cash P30,000 P70,000
Machinery and equipment P25,000 P75,000
Building - P225,000
Furniture and fixtures P10,000 -
The building is subject to mortgage loan of P80,000, which is to be assumed by the partnership. The partnership agreement
provides that Santos and Pablo share profits and losses 30% and 70%, respectively. On March 1, 2008 the balance in Pablo’s
capital account should be:
a. P290,000 b. P305,000 c. P314,000 d. P370,000

17. A and B entered into a partnership as of March 1, 2008 by investing P125,000 and P75,000, respectively, they agreed that A, as
the managing partner, was to receive a salary; P30,000 per year and a bonus computed at 10% of the net profit after adjustment of
the salary; the balance of the profit was to be distributed in the ratio of their original capital balances. On December 31, 2008,
account balances were as follows:
Cash P70,000 Accounts Payable P60,000
Accounts Receivable P67,000 A, capital P125,000
Furniture and Fixtures P45,000 B, capital P75,000
Sales Return P5,000 A, drawing (P20,000)
Purchases P196,000 B, drawing (P30,000)
Operating expenses P60,000 Sales P233,000
BSA Pre-Qualifying Examination 2009 – Afternoon Session 8
 Inventories on December 31, 2008 were as follows: supplies, P2,500, merchandise, P73,000, prepaid insurance was P950 while
accrued expenses were P1,550. Depreciation rate was 20% per year.

The partner’s capital balances on December 31, 2008, after closing the net profit and drawing accounts were:
A B
a. P135,940 P47,960
b. P139,540 P49,860
c. P139,680 P48,680
d. P142,350 P47,670

18. Mr. Zoom and his very close friend Mr. Boom formed a partnership on January 1, 2008 with Zoom contributing P16,000 cash and
Boom contributing equipment with a book value of P6,400 and a fair value of P8,000. During 2008, Boom made additional
investments of P1,600 on April 1 and P1,600 on June 1, and on September 1: he withdrew P4,000. Zoom had no additional
investments or withdrawals during the year. The average capital balance at the end of 2008 for Mr. Boom is:
a. P9,600 b. P8,000 c. P8,800 d. P7,200

19. Cong and Dong have just formed a partnership. Cong contributed cash of P126,000 and computer equipment that cost P54,000.
The computer had been used in his sole proprietorship and had been depreciated to P24,000. The fair value of the equipment is
P36,000. Cong also contributed a note payable of P12,000 to be assumed by the partnership. Cong is to have 60% interest in the
partnership. Dong contributed only P90,000 cash. Cong should make an additional investment (withdrawal) of:
a. P96,000 b. P84,000 c. (P76,800) d. (P15,000)

20. Bee, Cee and Dee are partners in BCD Partnership and share profits and losses, 5:3:2, respectively. The partners have agreed to
liquidate the partnership. Prior to liquidation, the partnership balance sheet shows the following book values:
Cash 25,200
Non-cash assets 297,600
Notes payable to Dee 38,400
Other Liabilities 184,800
Bee, capital 72,000
Cee, capital (12,000)
Dee, capital 39,600
Liquidation expenses of P16,800 are paid. Non-cash assets with a book value of P240,000 are sold for P216,000. How much
cash should Dee receive?
a. P74,571 b. P46,458 c. P39,600 d. P37,600

21. Carlos and Deo are partners who share profits and losses in the ratio of 7:3, respectively. On October 5, 2008, their respective
capital accounts were as follows:
Carlos P35,000
Deo P30,000
On that day they agreed to admit Sotto as partner with a one-third interest in the capital and profits and losses, and upon his
investment of P25,000. The new partnership will begin with a total capital of P90,000. Immediately after Sotto’s admission, what
are the capital balances of Carlos, Deo and Sotto, respectively?
a. P30,000; P30,000; P30,000 b. P31,500; P28,500; P30,000
c. P31,667; P28,333; P30,000 d. P35,000; P30,000; P25,000

22. The accounts below appear in the December 31, 2008 trial balance of Leytean Company:
Authorized share capital 10,000,000
Unissued share capital 7,000,000
Subscribed share capital 6,000,000
Subscription receivable 5,400,000
Share premium 500,000
Retained Earnings unappropriated 300,000
Retained Earnings appropriated 600,000
Revaluation surplus 200,000
Treasury shares @ cost 100,000
In its December 31, 2008 statement of financial position, Leytean should report total shareholder’s equity at
a. 5,100,000 b. 5,500,000 c. 4,900,000 d. 4,800,000

23. On December 1, Circle Company received a donation of 2,000 shares with P50 par value from a shareholder. On that date, the
share market value was P350. The shares were originally issued for P250 per share. By what amount would this donation cause
the total shareholder’s equity to decrease?
a. 700,000 b. 500,000 c. 200,000 d. 0

24. The shareholder’s equity section of Mina Company revealed the following information on December 31,2008.
Preference Share Capital, P100 par 2,300,000
Preference Share Premium 805,000
Ordinary Share Capital, P10 par 5,250,000
Ordinary Share Premium 2,750,000
Subscribed Ordinary Share Capital 50,000
Retained Earnings 1,900,000
Notes payable 4,000,000
Subscription Receivable-ordinary share 400,000
How much is the legal capital?
a. 7,550,000 b. 7,600,000 c. 13,055,000 d. 11,150,000

25. Effective December 31,2008,the shareholders of Dorr Company approved a two-for-one split of the company’s share capital, and
an increase in authorized shares from 100,000 shares (par value P20) to 200,000 shares (par value P10). Dorr’s shareholders’
equity accounts immediately before issuance of the split shares were as follows:
Share capital, par value P20; 100,000 shares authorized;
50,000 shares outstanding 1,000,000
BSA Pre-Qualifying Examination 2009 – Afternoon Session 9
 Share premium 150,000
Retained earnings 1,350,000
What should be the balances in Dorr’s share premium and retained earnings accounts immediately after the share split is
effective?
Share premium Retained earnings
a. 0 500,000
b. 150,000 350,000
c. 150,000 1,350,000
d. 1,150,000 350,000

26. Of the 125,000 shares issued by Vey Company, 25,000 shares were held as treasury at January 1, 2008. During 2008,
transactions were as follows:
January 1 through October 31-13,000 treasury shares were distributed to officers as part of the share compensation plan.
November 1- A 3-for-1 share split took effect.
December1- Vey purchased 5,000 of its own shares to discourage an unfriendly takeover. These shares were not retired.
On December 31, 2008, how many shares were issued and outstanding?
Issued Outstanding
a. 375,000 334,000
b. 375,000 324,000
c. 334,000 334,000
d. 324,000 324,000

27. Tarat Company’s shareholder’s equity at December 31, 2008 consisted of the following:
Preference share capital – 12%, P50 par, 20,000 shares issued 1,000,000
Ordinary share capital, P25 par, 100,000 shares issued 2,500,000
Share premium 200,000
Retained earnings 400,000
Retained earnings appropriated 100,000
Revaluation surplus 300,000
Dividends on preference share have not been paid since 2006. The preference share has a liquidating value of P55 and a call
price of P58. What is the book value per preference share?
a. 61 b. 56 c. 55 d. 58

28. Negros Company was incorporated on January 1, 2008 with the following authorized capitalization:

Ordinary share capital, 200,000 shares, no par P100 stated value 20,000,000
Preference share capital, 200,000 shares, 10% fixed rate, P50 par value 10,000,000
During 2008, Negros issued 150,000 ordinary shares for a total of P18,000,000 and 50,000 preference shares at P60 per share.
In addition, on December 15, 2008, subscriptions for 20,000 preference shares were taken at a purchase price of P100. These
subscribe shares were paid for on January 15, 2009. Net income for 2008 was P5,000,000. What should Negros report as total
contributed capital on December 31, 2008?
a. 28.000,000 b. 21,000,000 c. 23,000,000 d. 26,000,000

29. The directors of Ontario Company whose P50 par value share capital is currently selling at P60 per share have decided to issue a
stock dividend. The selling price is not expected to be affected by the stock dividend. Ontario, which has an authorization for
1,000,000 shares, had issued 500,000 shares, of which 100,000 shares are now held as treasury. In order to capitalize P2,400,000
of the retained earnings balance, what percentage should be declared as a stock dividend by the directors?
a. 10% b. 8% c. 6% d. 4%

30. Beauty Company has the following information in its equity accounts:
Number of shares Amount
Preference share capital, P500 par value 2,200 1,100,000
Treasury preference shares @ cost 100 110,000
Ordinary share capital without par value (at issue price) 3,000 600,000
Retained earnings 2,500,000
Due to the substantial amount of retained earnings, the company’s Board of Directors resolved to pay a 100% stock dividend on
all shares outstanding, capitalizing amounts of retained earnings equal to the par value and the issue price of the preference and
ordinary shares outstanding, respectively, and thereafter to pay a cash dividend of 10% on preference share and a cash dividend
of P10 per ordinary share. What is the total shareholder’s equity of Beauty Company after effecting the above transactions?
a. 4,090,000 b. 3,810,000 c. 3.820,000 d. 3,955,000

BSA Pre-Qualifying Examination 2009 – Afternoon Session 10