CEBU CPAR CENTER, INC.

PRACTICAL ACCOUNTING 1 OCTOBER 2007 BATCH

1st PRE-BOARD EXAMS JULY 20, 2007 (Fri) 6:00-9:00
INSTRUCTIONS: Select the correct answer for each of the following questions. Mark only one answer for
each item by writing a VERTICAL LINE corresponding to the letter of your choice on the answer sheet
provided. STRICTLY NO ERASURES ALLOWED. Use Pencil No. 1 or No. 2 only.
1. While preparing the 2006 trial balance, Rosalyn Company’s accountant committed the following errors:
omission of the prepaid rent account amounting to P4,000; understatement of the inventory account by
P72,000; overstatement of the sales account by P1,500; accounts receivables totaling to P123,000 was
included in the trial balance as P213,000; accounts payable totaling to P153,000 was included as P135,000;
discount on bonds payable was included as a credit rather than as a debit, P1,500; Revenue expenditures of
P35,000 was erroneously capitalized to furniture and fixtures.
The difference between the debit and credit amounts in Rosalyn Company’s trial balance is
a. P2,500 b. P26,000 c. P7,500 d. P27,500
2. The following items were taken from Rosalyn Company’s adjusted trial balance; except for its land and
building accounts
Accounts receivable P 200,000 Inventory 300,000
Accounts payable 120,000 Rosalyn, capital 420,000
Accrued Interest Expenses 35,000 Prepaid supplies 11,000
Accrued Interest Revenue 20,000 Rent revenue 11,500
Advances from customers 49,500 Salaries expense 75,000
Cost of sales 400,000 Sales 800,000
Furniture and fixtures 410,000 Sales returns and allowances 23,000
Interest expense 65,000 Unearned rent income 35,000
Interest revenue 90,000 Utilities expense 45,000
In Rosalyn Company’s post-closing trial balance, the credit total would amount to
a. P903,500 b. P938,000 c. P1,561,000 d. P953,000
3. Rosalyn Company reported the following changes during the current year
Increase Increase
(Decrease) (Decrease)
Cash P Accounts payable P 80,000
400,000
Accounts receivable 300,000 Bonds payable (100,000)
Allowance for bad debts 50,000 Discount on bonds payable (10,000)
Inventory (150,000) Common stock 120,000
Prepaid rent (50,000) Premium on common stock 60,000
Plant and equipment 1,000,000 Treasury stock at costs 30,000
Accumulated depreciation 100,000

There were no other entries in the Retained earnings account except for the dividend declaration of P50,000,
which was paid in the current year
Net income for the year
a. P1,200,000 b. P1,260,000 c. P1,280,000 d. P1,360,000
Use the following information for numbers 4 and 5
On April 12, 2006, upon the receipt of the March 2006 bank statement, the accountant of Rosalyn Company
prepared the following bank reconciliation dated March 31, 2006 and immediately recorded the appropriate
adjusting entry.
Balance per bank statement, March 31, 2006 P 980,000
Add: Deposit in transit P
34,500
Error in recording check No.125412 (P45,000 instead of 9,000
P54,000)
Service charges for March 1,500 45,000
Less: Outstanding checks P 15,000
Erroneous bank credit 2,000
Loan proceeds including interest for March 15,500 32,500
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Balance per books, March 31, 2006 P 992,500

The bank statement reported total receipts of P265,000 and total disbursements of P215,000 for April 2006.
All reconciling items as of March 31, 2006 cleared the bank on April 2006. However, the bank, in April 2006
erroneously debited Rosalyn Company P20,000 for a check that was supposed to be against the account of
Rosaline Company. Service charges for April 2006 was P1,200. Deposits in transit amounted to P42,000
while checks still outstanding amounted to P33,000 as of April 2006.
4. The total cash debits (receipts) to the cash in bank account is
a. P288,000 b. P273,000 c. P272,500 d. P257,000
5. The cash credits (disbursements) to the cash in bank account is
a. P213,300 b. P209,700 c. P220,300 d. P211,300

6. Rosalyn Company’s Cash in Bank items as of December 31, 2006 included the following items:
Cash in Bank – BDO checking account P 1,500,000
Cash in Bank – BPI checking account 1,200,000
Cash in Bank - MBTC checking account (per bank statement) 1,450,000
Total P 4,150,000

Additional information in relation to the above-mentioned components is as follows:

 The following items were noted in relation to the BDO checking account:
Check No.123543 written and dated on December 28, 2006 in the amount of P45,000 remains at hand as
of December 31, 2006
Check No. 123546 written on December 29, 2006 in the amount of P30,000 dated January 2, 2007 was
picked up at December 31, 2006
Check No. 123550 written and dated on December 30, 2006 in the amount of P25,000 was picked up at
December 31, 2006 but has remained outstanding until January 4, 2007
 The following information is in relation to Rosalyn Company’s BPI checking accounts:
BPI checking account #10001 P 1,450,000
BPI checking account #10002 (250,000)
Total P 1,200,000
The overdraft in BPI checking account #10002 was due to a check for P300,000 dated January 2, 2007
and was claimed by the payee on December 29, 2006.
A compensating balance was being maintained in BPI checking account #10001 for P100,000 in relation
to a long-term loan
 The following items were identified in relation to the MBTC checking account, deposit in transit at
December 31, 2006, P75,000; outstanding checks at December 31, 2006, P60,000; service charge for
December, P2,500; interest income for December, P1,000
The correct amount to be reported as Cash in Bank is
a. P4,440,000 b. P4,540,000 c. P4,240,000 d. P4,523,500

Use the following information for numbers 7 - 10

On January 1, 2005, Rosalyn Company sold goods to Miko Company costing P300,000 and receive in
exchange a P750,000 non-interest bearing note with a maturity date of January 1, 2009. The note has no
ready market but an effective interest of 11% is considered appropriate for a note of this type which will
approximate the inventory’s fair value at the time of sale.
On July 1, 2007, Rosalyn Company which was in need of immediate cash discounted the note issued by Miko
Company to Clark Finance at 14%

7. The total amount of income to be recognized in 2005 in relation to the above-mentioned transaction is
a. P494,048 b. P450,000 c. P248,393 d. P194,048
8. The carrying value of the note to be presented in the December 31, 2006 balance sheet is
a. P675,676 b. P750,000 c. P548,393 d. P608,717
9. The proceeds from the discounting of the note on July 1, 2007
a. P675,000 b. P690,263 c. P626,250 d. P592,500
10. The gain/loss arising from the discounting of the note on July 1, 2007 is
a. (P157,500) b. (P49,696) c. P98,452 d. (P123,750)
11. Rosalyn Company reported the following items as part of cash and cash equivalents
SEC registered commercial papers P 300,000
Central Bank Certificates of Indebtedness 350,000
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3-month Central Bank Treasury bills, maturing on January 31, 2006 450,000
3-year Treasury note, acquired three months from its maturity date of January 31, 600,000
2006
3-year Treasury note, acquired 2 years ago, maturing on January 31, 2006 800,000
The amount to be included from cash and cash equivalents is
a. P2,500,000 b. P1,700,000 c. P1,900,000 d. P1,100,000

Use the following information for numbers 12 - 14

On January 1, 2007, Rosalyn Company sold its goods costing P400,000 to Milton Company. Rosalyn
Company maintains a mark-up of 30% on cost. Milton Company made an initial payment of P20,000 and
issued a promissory note for the balance. The note provides for equal annual installments that will yield 12%.
The first installment would be made at the end of the current year and the last on December 31, 2011.
12. The amount of cash to be received by Rosalyn Company at December 31, 2007 is
a. P100,000 b. P138,889 c. P164,474 d. P121,655
13. The amount of cash to be received by Rosalyn Company as payment for interest at December 31, 2008 is
a. P50,533 b. P38,131 c. P52,601 d. P60,000
14. The carrying amount of the notes receivable at December 31, 2009 is
a. P200,000 b. P233,797 c. P291,951 d. P147,463

Use the following information for numbers 15 -16

The information that follows is available from the general ledger, cash in bank – BPI and the bank statement
of Rosalyn Company for the month of August 2006:
 Bank statement balance, August 31, P1,430,000
 Note collected by the bank in August including interest of P2,500, P62,500
 NSF checks in August, P25,000
 Outstanding checks at the beginning of August, P47,650, at the end of August, P68,450
 Bank service charges for July, P1,200; for August, P1,400
 Deposit in transit at the beginning of August P27,000; at the end of August P32,900
 Error committed by Rosalyn Company’s accountant in recording check No 12345 for P16,000 was
recorded as P1,600 and check No. 12348 for P1,250 was recorded as P12,500
 Error committed by Rosalyn Company’s accountant in recording deposits for its BPI checking account of
P12,000 was recorded under its BDO checking account, and deposits for its BDO checking account of
P16,000 was recorded as deposits to its BPI checking account
 Bank error in recording a disbursement by Roslyn Company for P28,000 was recorded against Rosalyn
Company’s account
15. The unadjusted balance per book, cash in bank – BPI is
a. P1,415,350 b. P1,385,500 c. P1,414,150 d. P1,393,500
16. The adjusted cash in bank – BPI balance is
a. P1,393,600 b. P1,422,450 c. P1,415,100 d. P1,397,600

Use the following information for numbers 17 - 19

Rosalyn Company was incorporated on January 1, 2006. All sales are on account under the terms 3/10, 1/20,
n/30. Rosalyn Company uses the aging of the receivables approach in providing bad debts. Provided below is
the aging schedule which Rosalyn Company’s accountant prepares at the end of the accounting period.
Days past due Probability of
collectibility
1 – 30 days 95%
31 – 60 days 80%
61 – 90 days 60%
91 – 120 days 30%
over 120 days 10%
During 2006, Rosalyn Company reported sales of P14,500,000. Initial bad debts expense has been provided
during the year at 2.5% of gross sales. Write-offs during the year amounted to P75,000. In July 2006,
Rosalyn Company received a P50,000 face value note from a customer as payment for goods sold in
February. The note carries an interest rate of 10% and will mature on June 30, 2008. Total cash collections
for 2006 amounted to P12,961,000; of which P3,686,000 were collected within 10 days from the date of sale,
P2,475,000 were collected beyond 10 days but within 20 days from the date of sale and the rest after 20 days,
including recoveries totaling to P40,000.
At the end of the year, a schedule of the receivable was provided
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Age of the Percentage

Receivables
1 – 30 days 35%
31 – 60 days 25%
61 – 90 days 20%
91 – 120 days 10%
121 – 150 days 7%
over 150 days 3%
17. The accounts receivable balance at December 31, 2006 is
a. P1,275,000 b. P1,315,000 c. P1,415,000 d. P1,554,000
18. The allowance for bad debts account balance prior to the preparation of the aging schedule is
a. P362,500 b. P402,500 c. P287,500 d. P327,500

19. The amount of bad debts expense to be reported in the 2006 income statement is
a. P362,500 b. P468,422 c. P256,578 d. P221,578

20. Only 2 adjustments appear in the adjustment column of worksheets for Rosalyn Company one to record P150
depreciation of office equipment and; the other to record the use of P120 office supplies. If the trial balance
column totals are P7,290, what are the totals of the adjusted trial b alance column?
a. P7,560 b. P7,440 c. P7,410 d. P7,290

21. Rosalyn Supplies, Inc. lost most of its inventory in a fire in December just before the year-end physical
inventory was taken. Corporate records disclosed the following: beginning inventory, P1,207,000;
purchases, P3,600,000; purchase returns, P225,000; sales, P5,250,000; sales returns, P120,000. Rosalyn
Company’s markup on cost has averaged 25% during the past few years. Merchandise with a selling price of
P100,000 remained undamaged after the fire, and the damaged merchandise has a salvage value of P56,200.
Rosalyn Company does not carry fire insurance on its inventory. It is estimated that the year-end inventory
would have been subject to a normal 5% write-down for obsolescence.
The estimated fire loss incurred by Rosalyn Supplies is
a. P302,900 b. P341,800 c. P324,710 d. P321,900

22. Rosalyn Company’s cash in bank balance as of May 31, 2006 included the following information:
Ending balance, May 31 P 38,280
Deposits made but not yet recorded by the bank 5,100
Checks written and mailed but not yet recorded by the bank 3,460
In comparing the cash records to the bank statement Rosalyn Company found the following:
Bank service charge for May P 100
Interest paid by bank to Rosalyn for May 1,500
In addition, Rosalyn Company discovered that it had erroneously recorded a check for P1,450 that should
have been recorded for P1,540.
The correct cash balance at May 31 is
a. P39,920 b. P39,830 c. P39,770 d. P39,590

Use the following information for numbers 23 - 24

Rosalyn Company had the following information in relation to its inventory accounts in 2006
Increase in Raw materials: P 14,000
Increase in Work in process: P 24,000
Decrease in Finished goods: P 33,500
Likewise the following costs & expenses were incurred in 2006
Raw materials purchased P 150,000
Direct labor cost 60,000
Indirect factory labor 30,000
Taxes and depreciation on factory building 10,000
Taxes and depreciation on sales room and office 7,500
Freight-out 3,000
Freight-in 4,000
Sales salaries 20,000
Office salaries 12,000
Utilities (60% applicable to factory, 20% to sales room, and 20% to office) 25,000

23. Total manufacturing cost is

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a. P255,000 b. P251,000 c. P283,000 d. P240,000

24. Rosalyn Company’s cost of goods sold for the year is

a. P249,500 b. P197,500 c. P264,500 d. P244,500

25. On July 1, 2006, Rosalyn Company sold goods to Mike Company for P2,100,000. Rosalyn Company
received as payment a non-interest bearing note requiring payments of P300,000 annually for seven years.
The first payment was made on July 1, 2006. The prevailing rate of interest for a note of this type at the time
of issuance was 8%. If Rosalyn Company’s accountant reported the transaction as sales of P2,100,000, the net income for
2006 would be overstated by
a. P413,136 b. P357,661 c. P468,611 d. P538,089

Use the following information for numbers 26 to 29

Rosalyn Corporation had 800 units of product MLR on hand on March 1, 2006 costing P20 each. Purchases
of product MLR during the month of March were as follows: March 10: 1,900 units @ P22; March 18:
2,300 units @ P25; March 28: 800 units @ P30.
Rosalyn Corporation sells its inventory at a mark up of 25% of cost. Sales for the month of March were as
follows: March 5, 600 units; March 12, 900 units; March 16, 700 units; March 22, 1,800 units; March 29
900 units.

26. The amount to be reported as inventory in Rosalyn Company’s March 31, 2006 balance sheet assuming that Moving-average
cost flow method is applied is
a. P24,066 b. P21,616 c. P21,825 d. P21,708
27. Assuming that Rosalyn Company is using the FIFO periodic cost flow method, the amount included as inventory in its
unadjusted trial balance as of March 31, 2006 is
a. P24,000 b. P18,200 c. P26,500 d. P16,000
28. The cost of sales to be reported in the income statement for the month of March 2006 under the FIFO perpetual cost flow
method is
a. P117,684 b. P112,800 c. P121,100 d. P123,300
29. Rosalyn Company as of December 31, 2006 provided the following balances:
Cash, net of a P5,000 overdraft P 50,000
Trading securities, (fair value at December 31, 2006, P19,000) 16,000
Receivables, net of allowance for bad debts P2,000 and customer credit balances of 30,000
P4,000
Inventory (P5,000 of which are held on consignment) 60,000
Prepayments, includes P2,000 of supplies already used up 10,000
Property, plant and equipment, net of accumulated depreciation 90,000
Accounts payable, (net of suppliers’ debit balance of P6,000) 45,000
Notes payable - bank, maturing annually at P50,000 450,000
Income tax payable 40,000
Stock dividends distributable 6,000
Net working capital is
a. P25,000 b. P27,000 c. P22,000 d. P19,000
30. Rosalyn Corporation had the following bank reconciliation at September 30, 2007
Balance per bank statement, 9/30/07 P 46,500
Add: Deposit in Transit 10,300
Less: Outstanding checks 12,600
Balance per books, 9/30/07 P 44,200
Data per bank statement for the month of October 2007 follows:

Deposits P 58,400
Disbursements 49,700
All reconciliation items at September 30, 2007, cleared through the bank in October. Outstanding checks at
October 31, 2007, totaled P7,500. The amount of cash disbursements per books in October is.
a. P44,600 b. P49,700 c. P54,800 d. P57,200
31. Rosalyn Publishing provides home delivery of day, evening and Sunday newspapers to subscriber who lives in the suburbs.
Customer may pay a yearly subscription fee in advance or pay monthly after delivery of their newspapers. The following data
are available for subscriptions receivable and unearned subscriptions at the beginning and end of July 2007:
July 1 July 31
Subscriptions receivable P 190,000 P 230,000
Unearned subscriptions 570,000 490,000
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The income statement shows subscriptions revenue for July of P1,120,000. The amount of cash received
from customers for subscriptions during July is.
a. P1,240,000 b. P1,160,000 c. P1,180,000 d. P1,000,000
32. Rosalyn Corp. acquires patent rights from other enterprises and pays advance royalties in some case, and in
others, royalties are paid within 90 days after year end. The following data are included in Rosalyn Corp
December 31 balance sheet:
2006 2007
Prepaid royalties P 55,000 P 45,000
Royalties payable 80,000 75,000
During 2007 Rosalyn remitted royalties of P300,000. In its income statement for the year ended December
31, 2007, Rosalyn Corp. should report royalty expense of
a. P330,000 b. P310,000 c. P305,000 d. P295,000
33. Rosalyn Company, a publicly owned corporation was incorporated in January 1, 2004 and reported the
following net income for the past 3 years: 2004: P1,600,000; 2005: P1,900,000; 2006: P2,400,000
The following items were discovered in 2006 while preparing Rosalyn Company’s 2006 financial
statements
Depreciation of P32,000 for 2006 on delivery trucks was not recorded
The physical inventory count on December 31, 2005, improperly excluded merchandise costing P190,000
that had been temporarily stored in a public warehouse
The physical inventory count on December 31, 2006, improperly included merchandise being held on
consignment in the amount of P89,000
An equipment was purchased on January 3, 2006, for P32,000 and was charged to Repairs and
Maintenance. The equipment has an estimated life of 8 years and no residual value. Rosalyn Company
uses the straight-line method for this type of equipment
Rosalyn Company failed to accrue sales commissions payable at the end of each of the last 2 years as
follows: December 31, 2005, P40,000; December 31, 2006, P25,000
Wages payable on December 31 have been consistently omitted from the records of that date and have
been entered as expenses when paid in the following year.
December 31, 2004: P December 31, 2005: 160,000 December 31, 2006: 180,000
140,000
Invoices for office supplies purchased have been charged to expense accounts when received. Inventories
of supplies on hand at the end of each year have been ignored, and no entry has been made for them
December 31, 2004: P December 31, 2005: 7,400 December 31, 2006: 14,200
13,000
The adjusted net income for 2006 is
a. P2,118,800 b. P2,116,200 c. P2,681,200 d. P1,989,200

34. Rosalyn Corporation began operations in 2004. The company has been using the first-in, first-out method in
costing its raw materials. However, during 2006, Rosalyn decided to change to average costing method.
Inventory balances under each method were as follows:
Dec 31, 2004 Dec 31, 2005 Dec 31, 2006
FIFO P490,000 P438,000 P 576,000
Average 465,000 374,000 482,000
In its 2006 financial statements, Rosalyn Company should report a cumulative effect of this accounting
change of
a. P25,000 b. P64,000 c. P89,000 d. P183,000

35. Rosalyn Company on December 31, 2006 reported an inventory balance of P2,575,000 which was based on a
physical count conducted as of December 29, 2006. An analysis of the purchase records of Rosalyn
Company revealed the following information:
 Goods costing P120,000 purchased fob shipping point were sent by the seller on December 30, 2006 and
was received by Rosalyn Company on January 5, 2007.
 Goods costing P150,000 purchased fob destination were sent by the seller on December 27, 2006 and was
received by Rosalyn Company on January 2, 2007.
 Goods costing P175,000 shipped to Rosalyn Company fob destination on December 28, 2007 and was
received on December 31, 2006.
 Goods costing P125,000 received on December 30, 2006 from Milady Company on consignment.
Rosalyn was to sell the goods at a mark-up of 25% of cost. 80% of the goods remained unsold at
December 31, 2006.
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 Goods costing P130,000 and P125,000 were sent out on consignment to Mac Company on December 28,
2006 and Myles Company on December 31, 2006 respectively. The goods remained unsold at December
31, 2006.
The correct amount of inventory to be reported as of December 31, 2006 by Rosalyn Company is
a. P3,000,000 b. P2,875,000 c. P3,125,000 d. P2,825,000

End of Examination
PRACTICAL ACCOUNTING 1

1 D 11 B 21 D 31 D
2 D 12 B 22 D 32 C
3 B 13 A 23 A 33 A
4 A 14 B 24 C 34 B
5 C 15 D 25 B 35 A
6 B 16 B 26 A
7 C 17 B 27 D
8 D 18 D 28 B
9 D 19 C 29 B
10 B 20 B 30 A