and a cash price of P3,750,000. The note is payable on December 31, 2007.

In its 2005
REVIEW 105 – DAY 16 income statement, Balungao should report the sale at
a. P3,750,000 c. P5,000,000
b. P4,000,000 d. P5,200,000
P1
1. Arvak Company owns 50% of Sarrat Company’s preferred stock and 30% of its common 6. The work-in-process inventory of Bakun Company were completely destroyed by fire on
stock. Sarrat’s stock outstanding at December 31, 2005 includes P20,000,000 of 10% June 1, 2005. You were able to establish physical inventory figures as follows:
cumulative preferred stock and P50,000,000 of common stock. Sarrat reported net income of
P10,000,000 for the year 2005. What amount should Arvak report as investment income for January 1, 2005 June 1, 2005
the year 2005? Raw materials P 60,000 P120,000
Work-in-process 200,000 -
a. P3,000,000 c. P2,400,000 Finished goods 280,000 240,000
b. P3,400,000 d. 4,400,000
Sales from January 1 to May 31, were P546,750. Purchases of raw materials were
2. Umingan Company has a 10% note receivable dated June 30, 2005, in the original amount P200,000 and freight on purchases, P30,000. Direct labor during the period was
of P9,000,000. Payments of P3,000,000 in principal plus accrued interest are due annually P160,000. It was agreed with insurance adjusters than an average gross profit rate of
on July 1, 2006, 2007 and 2008. In its June 30, 2007 balance sheet, what amount should 35% based on cost be used and that direct labor cost was 160% of factory overhead.
Umingan report as a current asset for interest on the note receivable?
a. P900,000 c. P300,000 The work in process inventory destroyed as computed by the adjuster
b. P600,000 d. P 0 a. P314,612 c. P185,000
b. P366,000 d. P265,000

3. On January 1, 2005, Armeo Company purchased as a long-term investment P5,000,000

face value of 8% bonds for P4,562,000. The bonds were purchased to yield 10% interest. 7. On January 1, 2005, Ynang Reyna Company received a grant of P50 million from the
The bonds pay interest annually December 31. Armeo uses the interest method of British government in order to defray safety and environmental costs within the area where
amortization. What amount (rounded to the nearest P100) should Armeo report on its the enterprise is located. The safety and environmental costs are expected to be incurred
December 31, 2005 balance sheet for this long-term investment? over four years, respectively, P4 million, P8 million, P12 million and P16 million.
a. P4,680,000 c. P4,662,000
b. P4,618,000 d. 4,562,000 How much income from the government grant should be recognized in 2005?
a. P50,000,000 c. P12,500,000
4. On January 1, 2001 Apitong Company purchased P8,000,000 ordinary life policy on its b. P 5,000,000 d. P 0
president. Additional data for the year 2005 are:
8. The liabilities section of the balance sheet of Pug Company on December 31, 2005
Cash surrender value, January 1 200,000 detailed the following:
Cash surrender value, December 31 240,000
Annual advance premium paid on January 1, 2005 400,000 Accounts payable 2,000,000
Dividend received on July 1, 2005 20,000 Notes payable-trade 2,500,000
Bank note payable -10% 800,000
Apitong Company is the beneficiary under the life insurance policy. Apitong should report Bank note payable – 12% 1,000,000
life insurance expense for 2005 at Accrued expenses 350,000
a. P400,000 c. P360,000 Accrued interest payable 500,000
b. P340,000 d. P380,000 Mortgage note payable – 6% 4,000,000
Bonds payable – 10% due June 30, 2006 5,000,000
5. Balungao Company accepted a P5,000,000, 2% interest bearing note from Rosales
Company on December 31, 2005, in exchange for a machine with a list price of P4,000,000
 The 10% bank note payable is issued on January 1, 2005, payable on demand and year-end adjustments to the allowance account were made. Anda's usual credit terms are
interest is payable every six months. The 12% bank note payable is a two-year note net 30 days.
issued on July 1, 2004.
The credit balance in the allowance for doubtful accounts was P260,000 at January 1, 2005.
The 6%, 10 year mortgage note was issued on October 1, 2002. Terms of the note give During 2005, credit sales totaled P18,000,000, interim provisions for doubtful accounts were
the holder to demand payment if the company fails to make monthly interest payment. On made at 2 percent of credit sales, P180,000 of bad debts were written off, and recoveries of
December 31, 2005, Pug is three months behind in paying its required interest. accounts previously written off amounted to P30,000. Anda installed a computer system in
November 2005 and an aging of accounts receivable was prepared for the first time as of
What is the total amount of current liabilities on December 31, 2005? December 31, 2005. A summary of the aging is as follows:
a. P10,150,000 c. P15,750,000
b. P15,150,000 d. P16,150,000 Balance in Estimated %
Classifications by Month of Sale Each Category Uncollectible
9. A new product introduced by Wilkenson Promotions carries a two-year warranty against November-December 2005 P2,280,000 2%
defects. The estimated warranty costs related to dollar sales are as follows: July-October 2005 1,200,000 15%
January-June 2005 800,000 25%
Year of sale .............................. 3 percent Prior to January 1, 2005 260,000 80%
Year after sale ........................... 5 percent
Based on the review of collectibility of the account balances in the "prior to January 1, 2005"
Sales and actual warranty expenditures for the years ended December 31, 2004 and aging category, additional receivables totaling P120,000 were written off as of December 31,
2005, are as follows: 2005. Effective with the year ended December 31, 2005, Anda adopted a new accounting
method for estimating the allowance for doubtful accounts at the amount indicated by the
Actual Warranty year-end aging analysis of accounts receivable.
Sales Expenditures
2004 P 8,000,000 P200,000 QUESTIONS:
2005 10,000,000 700,000
11. How much is the adjusted balance of the allowance for doubtful accounts as of December
What amount should Wilkenson report as its estimated liability as of December 31, 2005? 31, 2005?
a. P 40,000 c. P540,000 a. P537,600 b. P350,000 c. P633,600 d.
b. P240,000 d. P740,000 P753,600

10. On November 5, 2005, a Calauag Company truck was in an accident with an auto driven 12. How much is the doubtful accounts for the year 2005?
by Macalelon. Calauag received notice on January 15, 2006, of a lawsuit for P4,000,000 a. P427,600 b. P577,600 c. P547,600 d.
damages for personal injuries suffered by Macalelon. Calauag’s counsel believes it is P457,600
possible that Macalelon will be awarded an estimated amount in the range between
P2,000,000 and P3,000,000, and no amount is a better estimate of potential liability than any 13. The recorded allowance for doubtful accounts should be increased by
other amount. The accounting year ends on December 31, and the 2005 financial statements a. P283,600 b. P187,600 c. P67,600 d. P0
were issued on March 31, 2006. What amount of provision should Calauag accrue at
December 31, 2005?
a. P4,000,000 c. P2,500,000 14. On December 31, 2005, Atimonan Company issued 8,000 of its 8%, 10-year P1,000 face
b. P3,000,000 d. P 0 value bonds with detachable stock warrants at 120. Each bond carried a detachable warrant
for two shares of Atimonan’s P100 par value common stock at a specified option price of
Anda Corporation provided for uncollectible accounts receivable under the allowance method P150. Immediately after issuance, the market value of the bonds ex-warrants was
since the start of its operations to December 31, 2005. Provisions were made monthly at 2 P8,100,000 and the market value of the warrants was P900,000. In its December 31, 2005
percent of credit sales; bad debts written off were charged to the allowance account; balance sheet, what amount should Atimonan report as bonds payable?
recoveries of bad debts previously written off were credited to the allowance account; and no 1. P8,000,000 c. P8,100,000
2. P8,640,000 d. P9,600,000
 daily receipts are equal to $100,000, and short-term interest costs are 5%, calculate the benefit or loss
15. The Atok Corporation was organized on January 1, 2004. On December 31, 2005, the from adopting the lockbox system.
corporation lost most of its inventory in a warehouse fire just before the year-end count of a. $5,000 loss.
inventory was to take place. Data from the records disclosed the following: b. $10,000 loss.
c. $10,000 benefit.
2004 2005 d. $5,000 benefit.
Beginning inventory, January 1 P 0 P1,020,000
Purchases 4,300,000 3,460,000 5. Short-term interest rates are
Purchases returns and allowances 230,600 323,000 a. Usually lower than long-term rates.
Sales 3,940,000 4,180,000 b. Usually higher than long-term rates.
Sales returns and allowances 80,000 100,000
c. Lower than long-term rates during periods of high inflation only.
On January 1, 2005, the Corporation’s pricing policy was changed so that the gross profit d. Not significantly related to long-term rates.
rate would be three percentage points higher than the one earned in 2004.
6. According to the expectations theory, if the yield curve on the New York money market is
Salvaged undamaged merchandise was marked to sell at P120,000 while damaged upward sloping while that on the Tokyo money market is downward sloping, then inflation in
merchandise was marked to sell at P80,000 had an estimated realizable value of a. The United States is expected to decrease.
P18,000. b. The United States is expected to remain constant.
c. Japan is expected to decrease.
How much is the inventory loss due to fire? d. Japan is expected to remain constant.
a. P918,200 c. P856,200
b. P947,000 d. P824,600
7. According to the expectations theory of the term structure of interest rates, if inflation is
MAS expected to increase, the yield curve is
a. Humped, with an upward slope that peaks and then turns downward.
1. Demand for a product tends to be price inelastic if b. Downward sloping.
a. The product is considered a luxury item. c. Upward sloping.
b. Few good complements for the product are available. d. Flat.
c. The population in the market area is large.
d. People spend a large share of their income on the product. 8. Which of the following is true about a firm’s float?
a. A firm strives to minimize the float for both cash receipts and cash disbursements.
2. Which of the following has the highest price elasticity coefficient? b. A firm strives to maximize the float for both cash receipts and cash disbursements.
a. Milk.
c. A firm strives to maximize the float for cash receipts and minimize the float for cash
b. Macaroni and cheese.
c. Bread. disbursements.
d. Ski boats. d. A firm strives to maximize the float for cash disbursements and minimize the float for cash
receipts.
3. Which of the following is true about electronic funds transfer from a cash flow standpoint?
a. It is always beneficial from a cash flow standpoint. 9. A firm is evaluating whether to establish a concentration banking system. The bank will
b. It is never beneficial from a cash flow standpoint. charge $5,000 per year for maintenance and transfer fees. The firm estimates that the float
c. It is beneficial from a cash receipts standpoint but not from a cash disbursements standpoint. will be reduced by two days if the concentration banking is put into place. Assuming that
d. It is beneficial from a cash disbursements standpoint but not from a cash receipts standpoint. average daily receipts are $115,000 and short-term interest rates are 4%, what decision should
the firm make regarding the concentration banking system?
4. Management of Radker Corp. is considering a lockbox system. The bank will charge $10,000 a. Do not establish the concentration banking system because the net cost is $5,000.
annually for the service, which will save the firm approximately $5,000 in processing costs. The
b. Do not establish the concentration banking system because the net cost is $21,000.
lockbox system will reduce the float for cash receipts by three days. Assuming that the average
c. Establish the concentration banking system because the net benefit is $115,000.
d. Establish the concentration banking system because the net benefit is $4,200.
10. A firm is evaluating whether to establish a lockbox system. The bank will charge $30,000
per year for the lockbox and the firm will save approximately $8,000 in internal processing
costs. The firm estimates that the float will be reduced by three days if the lockbox system is
put into
place. Assuming that average daily cash receipts are $350,000 and short-term interest rates
are 4%, what decision should the firm make regarding the lockbox system?
a. Do not establish the lockbox system because the net cost is $30,000.
b. Do not establish the lockbox system because the net cost is $22,000.
c. Establish the lockbox system because the net benefit is $12,000.
d. Establish the lockbox system because the net benefit is $20,000.
11. The local video store’s business increased by 12% after the movie theater raised its prices
from $6.50 to $7.00. Thus, relative to movie theater admissions, videos are
a. Substitute goods.
b. Superior goods.
c. Complementary goods.
d. Public goods.
12. Which of the following best describes a value chain in the balanced scorecard
framework?
a. The cause-and-effect linkages.
b. The baseline level of performance.
c. The sequence of business processes in which usefulness is added to products or services.
d. The chain of financial and nonfinancial measures.
13. Which of the following is not a characteristic of the balanced scorecard?
a. Both financial and nonfinancial performance measures are included.
b. Cause-and-effect linkages between strategic objectives.
c. Customer performance measures are excluded.
d. Internal process performance measures are included.
14. In the balanced scorecard framework, a survey of employee satisfaction is a potential
measure in which of the four perspectives?
a. Financial.
b. Customer.
c. Internal business processes.
d. Learning and growth.
15. A strategy objective in the balanced scorecard framework is
a. A statement of what the strategy must achieve and what is critical to its success.
b. Key action programs required to achieve strategic objectives.
c. Diagrams of the cause-and-effect relationships between strategic objectives.
d. The level of performance or rate of improvement needed in the performance measure.
TOA
1. Which statement is incorrect concerning revaluation of property, plant and
equipment?
a. When an item of property, plant and equipment is revalued, the entire class
of property, plant and equipment to which that asset belongs should be
revalued.
b. The basis of revaluation is fair value which is usually the market value
determined by appraisal undertaken by professional qualified valuers, or
depreciated replacement cost, in the absence of evidence of market value.
c. Items of property, plant and equipment that experience significant and
volatile movements in fair value should be revalued annually.
d. Frequent revaluations are unnecessary for items of property, plant and
equipment with only insignificant movements in fair value and instead,
revaluation every five to ten years may be sufficient.
2. Which statement is incorrect concerning revaluation of property, plant and
equipment?
a. When an item of property, plant and equipment is revalued, any
accumulated depreciation at the date of revaluation is restated
proportionately with the change in the gross carrying amount of the asset so
that the carrying amount of the asset after revaluation should equal its
revalued amount, or eliminated against the gross carrying amount of the
asset and the net amount restated to the revalued amount of the asset.
b. Any revaluation increase should be credited to equity as revaluation
surplus.
c. The revaluation surplus included in equity may be transferred directly to
retained earnings when the surplus is realized.
d. Any revaluation decrease should be debited to revaluation loss, a contra
equity account.
3. Which statement is incorrect regarding actuarial gains and losses?
a. On an ongoing basis, actuarial gains and losses arise that comprise
experience adjustments and the effects of changes in actuarial assumptions.
 b. In the long-term, actuarial gains and losses may offset one another and, as a II. The present value of future cash flows expected to be derived from an
result, the enterprise is not required to recognize all such gains and losses asset.
immediately. a. I only b. II only c. Both I and II d.
c. If the accumulated unrecognized actuarial gains and losses exceed 10% of the Neither I nor II
greater of the defined benefit obligation or the fair value of plan assets, the net
gain or loss is required to be recognized immediately as income or expense. 9. Which statement is incorrect regarding fair value less costs to sell?
d. Actuarial gains and losses that do not breach the 'corridor' need not be a. If there is a binding sale agreement, use the price under that agreement
recognized - although the enterprise may choose to do so. less costs of disposal.
b. If there is an active market for that type of asset, use market price less
costs of disposal.
4. When the revaluation surplus is realized because of the use of the asset by c. If there is no active market, use the best estimate of the asset's selling
the enterprise or disposal of the asset, it may be transferred directly to price less costs of disposal.
a. Income c. Deferred income d. Costs of disposal are the direct added costs including existing costs and
b. Donated capital d. Retained earnings overhead.
5. An asset is impaired when 10. The following are external indicators of impairment, except
a. Its recoverable amount exceeds its carrying amount. a. Market value declines.
b. Its carrying amount exceeds its recoverable amount. b. Negative changes in technology, markets, economy, or laws.
c. Its fair value less costs to sell is less than its value in use. c. Increases in market interest rates.
d. Its net selling price is less than its value in use. d. Worse economic performance than expected.
6. Recoverable amount is 11. 2. The journal entries for a bank reconciliation
a. The amount at which an asset is recognized in the balance sheet after a. Are taken from the balance per bank only
deducting accumulated depreciation and accumulated impairment losses. b. May include a debit to office expense for bank service charges
b. The higher of an asset's fair value less costs to sell and its value in use. c. May include a credit to accounts receivable for an NSF check
c. The amount obtainable from the sale of an asset in a bargained transaction d. May include a debit to accounts payable for an NSF check
between knowledgeable, willing parties.
d. The discounted present value of estimated future cash flows. 12. When preparing a bank reconciliation, bank credits are
a. Added to the bank statement balance
7. Which statement is incorrect in determining recoverable amount? b. Deducted from the bank statement balance
a. If the carrying amount is less than fair value less costs to sell or value in c. Added to the balance per book
use, it is not necessary to calculate the other amount. d. Deducted from the balance per book
b. If fair value less costs to sell cannot be determined, then recoverable
amount is value in use. 13. Bank overdrafts, if material, should
c. For assets to be disposed of, recoverable amount is fair value less costs to a. Be reported as a deduction from the current asset section.
sell. b. Be reported as a deduction from cash.
d. None of the above. c. Be netted against cash and a net cash amount reported.
d. Be reported as a current liability.
8. Fair value less cost to sell is
14. Which of the following is not a basic characteristic of a system of cash control?
I. The amount obtainable from the sale of an asset in an arm’s length
a. Use of a voucher system
transaction between knowledgeable, willing parties less cost of disposal.
 b. Combined responsibility for handling and recording cash d. The company had outstanding invoices (uncollected invoices) to customers
c. Daily deposit of all cash received amounting to P96,000 on January 1, 2007 and P110,000 on December 31, 2007.
d. Internal audits at irregular intervals
e. Inventory taking at the end of each year revealed that inventory on hand on
15. Bank statements provide information about all of the following except December 31, 2006 amounted to P186,000 while inventory on December 31, 2007
a. Checks cleared during the period. was at P174,000.
b. NSF checks.
c. Bank charges for the period. f. Accrued utilities at the beginning and at the end of the year amounted to P5,000 and
d. Errors made by the company. P7,000 respectively while prepaid rentals at the beginning and at the end of the year
amounted to P10,000 and P14,000, respectively.
AP Based on the information available and as a result of your audit, determine the following:

You are auditing the financial statements of UKG INC. for the year ended December 31, 1. How much was paid for inventory purchases?
2007. The company maintains its books on a semi-accrual and semi-cash basis. Purchases
and sales are recognized on an accrual basis while other operating expenses are kept on a. 344,000 b. 348,000 c. 368,000 d. 372,000
cash basis. The company bookkeeper presented to you a draft of its income statements for
the year under audit: 2. How much was received from customers in 2007?

Sales P600,000 a. 490,000 b. 566,000 c. 586,000 d. 614,000

Cost of Sales 360,000 3. What is the carrying value of the bonds payable on December 31, 2007?

Gross Profit P240,000 a. 225,318 b. 226,267 c. 226,840 d. 227,180

Depreciation Expense (29,000) 4. What is the correct interest expense in 2007?

Other Expenses (166,000)
a. 21,862 b. 20,000 c. 19,087 d. 18,138
Interest Expense (20,000)
5. What is the correct net income in 2007?
Net Income P25,000
a. 26,862 b. 28,862 c. 29,718 d. 46,000
Your investigation revealed the following information:

a. On January 1, 2007, UKG issued P200,000, 10%, 10 year bonds when the market
rate of interest was 8%. Interest is payable on June 30 and December 31. You are performing, for the first time, the audit for the year ended December 31, 2007 of
GKNB CORP.financial statements. The company reported the following amounts of net
b. All purchases of inventory are on account and other expenses reflect those expenses income for the years ended December 31, 2005, 2006, and 2007:
paid in cash during the period.
2005 P381,000
c. The company had open invoice (unpaid invoices) from suppliers amounting to
P120,000 on December 31, 2007 and P116,000 on January 1, 2007. 2006 450,000

2007 385,500
During your examination, you discovered the following errors: a. 313,200 b. 388,800 c. 393,000 d. 418,800

a. You observed that there were errors in the physical count: December 31, 2006 9. What is the retroactive adjustment to the beginning retained earnings in 2007 to
inventories were understated by 42,000 and December 31, 2007 were overstated by correct the prior years’ errors?
69,000.
a. 21,000 cr. B. 21,000 dr. c. 69,000 dr. d. 69,000 cr.
b. On December 30, 2007 GKNB recorded on account, merchandise in transit which
cost 45,000. The merchandise was shipped FOB Destination and had not arrived by 10. What is the adjusting entry in 2007 to correct the error in item e above?
December 31. The merchandise was not included in the ending inventory.
a. Accumulated profits 39,000
c. Accrual sales at each year end were consistently omitted as follows:
Other expense 30,000
2005 12,000 Share premium 9,000
2006 15,000 b. Accumulated profits 30,000
2007 10,500
d. Accrual of salaries were consistently omitted as follows: Accumulated profits 30,000
c. Accumulated profits 9,000
December 31, 2005 30,000
Share premium 9,000
December 31, 2006 42,000 d. No adjustment is necessary

e. On march 5, 2006, a 10%stock dividend was declared and distributed. The par value
of the shares amounted to 30,000 and market value was 39,000. The stock dividend
was recorded as follows: You are auditing the financial statements of Morlog Co. the company’s accountant provided
you with the following comparative statements of income and accumulated profits for the
Other expense 30,000 years 2006 and 2007.
Ordinary shares 30,000
f. On July 1, 2006, GKNB paid a 3-year rent. The 3-year premium of 18,000 was paid 2007 2006
on that date, and the entire premium was recorded as insurance expense.
Sales P4,500,000 6,000,000
g. On January 1, 2007, GKNB retired bonds with a book value of 360,000 for 318,000.
The gain was deferred and amortized over 10 years as a reduction of interest Cost of goods sold ( 2,800,000) (2,400,000)
expense on other outstanding bonds.
Gross income 3,200,000 2,100,000

6. What is the correct net income in 2005? Operating expenses (1,500,000) (1,800,000)

Net profit 1,700,000 300,000

a. 399,000 b. 363,000 c. 351,000 d. 339,000
Accumulated profits, beg 1,150,000 1,000,000
7. What is the correct net income in 2006?
Net profit 1,700,000 300,000
a. 477,000 b. 498,000 c. 528,000 d. 534,000
Dividends paid (500,000) (150,000)
8. What is the correct net income in 2007?
 Accumulated profits, end 2,350,000 1,150,000 a. No adjustment is necessary

b. Interest expense 25,000

Audit notes: Retained earnings 25,000

c. Interest expense 25,000
a. The ending inventory for 2006 was understated by 100,000.
Construction in progress 25,000
b. The company decided to change its method of depreciation from the double-declining d. Retained earnings 25,000
balance method to the straight-line. The depreciable assets had a 10 year useful life
and is 50% depreciated as at the end of 2006. The salvage value of the said assets Construction in progress 25,000
was estimated to be 50,000. Expenses in the income statements included a 350,000
depreciation expense computed based on double-declining balance method.
P2
c. On August 31, 2006, the company started the construction of a building it plans to 1. EE company produces chemical H and I. The processing also yields by product X, another
use as a second factory. As of the current balance sheet, the construction is yet to be chemical. The joint costs of processing is reduced by the NRV of X. Joint costs for the month
finished. Total accumulated costs incurred on the construction and recorded in its of May were P2,900,000. Below are additional data:
construction-in-progress account, amounted to 1,250,000, which included a 25,000 Product Units Market Value
capitalized borrowing cost in 2006, since the company opted to apply the alternative H 1,000 P5,000,000
approach of accounting for finance cost in accordance with PAS 23. During the I 2,000 2,500,000
current year, the company decided to change the method of accounting for borrowing X 500 500,000
cost to follow the benchmark treatment. Actual borrowing cost in 2007 amounted to An additional P120,000 were spent to complete the processing of X. The company uses the
75,000 it charged to current operations. NRV method of allocating joint costs. How much is the amount of joint cost allocated to I?
a. P1,260,000 b. P840,000 c. P1,680,000 d. P1,600,000
Answer the following questions based on the above information:
2. MM company produces joint products A and B together with by product C. A is sold at split
11. What is the correct net income in 2006? off but B and C undergo additional processing. Production data pertaining to these products
for year ended December 31, 2008 are as follows:
a. 400,000 b. 300,000 c. 275,000 d. 200,000 A B C Total
Joint Costs P1,200,000
12. What is the correct net income in 2007?
Separable costs P435,000 P56,000 P 491,000
Production in pounds 100,000 150,000 40,000 290,000
a. 1,715,000 b. 1,685,000 c. 1,675,000 d. 1,610,000
Sales price per pound P5 P9 P2.5
13. What is the adjusted accumulated profits balance at the beginning of 2007? There are no beginning or ending inventories. No materials are spoiled in production. Joint
costs are allocated to joint products to achieve the same gross profit rate for each joint
a. 1,025,000 b. 1,075,000 c. 1,225,000 d. 1,275,000 product. Net revenue from by product is deducted from joint production costs of the main
product. How much is the share of B in the joint cost?
14. What is the adjusted accumulated profits at the end of 2007? a. P843,658 b. P747,520 c. P430,000 d. P726,000

a. 2,335,000 b. 2,385,000 c. 2,835,000 d. 2,885,000

15. What is the necessary adjusting entry as a result of the change described in item c?
3. RR company makes two products Y and Z. They are initially processed from the same remaining was Job no. 101 with direct labor cost of P12,000. How much is the cost Direct
materials and then after split off, further processed separately. Additional information is as Materials charged to Job 101?
follows: a. P53,000 b. P42,800 c. P52,800 d. P54,800
Y Z Total
Final sales value P40,500 P49,500 P90,000 7. ZZ Company produces wooden chairs. Three percent of normal input is expected to be
Sales value at split off 33,000 47,000 80,000 spoiled in the process. Inspection occurs at the end of the process and rejected units are
Cost beyond split off 9,000 11,000 20,000 disposed of as scrap with no cost recovery. In a recent period, the following data were
Joint cost prior to split off 15,000 obtained.
Using the Net Realizable Value approach, how much is the joint cost assigned to Y and Z? Units
a. P6,000 and P9,000 c. P6,188 and P8,813 Total Units Started 1,000,000
b. P6,750 and P8,250 d. P7,500 and P7,500 Defective units rejected 50,000
Cost
4. W company has overapplied overhead of P60,000 for the year. Before disposition of Materials P 75,000
overapplied overhead, selected year end balances from W’s accounting records were… Conversion 43,000
Sales P1,000,000 Total 118,000
Cost of Goods Sold 750,000 How much is the cost for the units transferred to Finished Goods during this 24 hour period,
Direct Materials Inventory 50,000 assuming no ending Work In Process?
Work in Process Inventory 180,000 a. P112,100 b. P114,460 c. P115,640 d. P118,000
Finished Goods Inventory 270,000
Under W’s accounting system, over or under applied overhead is allocated to appropriate 8. Vex, general manager of AB corporation, provided the following information for transactions
inventories and CGS based on year end balances. In its year end income statement, W that occurred during March. The corporation uses JIT costing system.
should report CGS of a. Raw materials purchased and requisitioned for product were P84,000
a. P712,500 b. P714,000 c. P730,000 d. P787,500 b. Direct Labor costs of P78,000 were incurred
c. Actual factory overhead costs amounted to P250,000
5. N Machine shop manufactures lifting equipment. One order from O company for 3000 d. Applied conversion costs totaled P340,000.This included P78,000 of direct labor
lifting equipment showed the following costs per unit; materials P3.5; labor P2; FOH applied e. All units were completed
How much is the balance in Finished Goods account in March 31?
at 150% of direct labor cost (125% in cases in which any defective unit costs are to be
a. P412,000 debit c. P424,000 debit
charged to a specific order or a 25% allowance for reworking defective units). Final inspection
b. P412,000 credit d. P424,000 credit
showed that 250 units were not properly produced. Correction of each defective unit requires
P.35 for materials, P.40 for labor and FOH at the appropriate rate. Assuming the defective
9. GH company produces a small standard component in a process operation. There is a
units are the result of an internal failure how much is the unit cost for each unit
quality control check at the end of processing. Items which fail this check are sold off as scrap
manufactured?
for P3 per unit, the expected rate of rejection is 15%. Normal loss is not given a cost except
a. P8.10 b. P8.61 c. P8.50 d. P8.00
that whatever scrap value it has is credited to the process account. The cost/value of the
abnormal loss, net of scrap, is written off to the profit/loss account. Data for October are as
6. GD uses a job order system. Per company records, the total charges to Work in Process in
follows:
June 2008 were as follows:
Units Cost
Direct Materials P210,000
Materials input 1,500 P14,500
Direct Labor 180,000
Conversion Cost 1,475
Factory Overhead 153,000
Output to finished goods 1,200
No jobs were in process at the beginning of the month. During the month, Work in Process in
How much is the cost for the units transferred to Finished Goods?
the amount of P478,000 were charged to Finished Goods. On June 30, 2008, the only job
a. P15,975 b. P15,300 c. P15,075 d. P14,400 Sales P1,200,000 P540,000
Inventory, January 1 350,000 157,500
10. UR company uses a FIFO process costing system. The company had 10,000 units that Purchases 500,000
were 40% percent incomplete as to conversion costs at the beginning of the month. The Shipments to branch 315,000
company started 30,000 units this period and had 9,000 units in ending Work In Process Shipments from Home Office 346,500
inventory that were 50% complete as to conversion costs. What are the equivalent units for Inventory, December 31 80,000 122,100
conversion costs? Expenses 113,000 89,000
a. 35,500 b. 31,500 c. 29,500 d. 25,500 In 2007, the Home office billed its branch at 120% of cost which was higher by 5% than the
previous year. All of the units in the beginning inventory of the branch were acquired from the
11. Baby corporation issues 35,000 shares of previously unissued P15 par value common home office in 2007. The combined net income of the Home office and the branch is
stock with a fair market value of P40 per share for net assets of Daddy corporation. Baby a. P732,793 b. P747,750 c. P743,750 d. P738,500
pays the following out of pocket costs related to the business combination.
Registering and issuing securities P 5,000 14. On January 1, 2008, DC corporation purchased interest in GM company. (95%
ownership, P1,400,000 cost of investment). On this date, the book values and fair values of
CPA and legal fees 40,000 GM were as follows:
Salaries of Baby’s employees assigned to the 13,000 Book Value Fair Value
implementation of the merger Cash P 400,000 P400,000
Cost of closing duplicate facilities 19,000 Accounts receivable 500,000 450,000
Cost of shareholder’s meeting to vote on the merger 25,000 Inventory 825,000 900,000
Printing fees of stock certificates 3,000 Property, Plant and Equipment(net) 1,050,000 950,000
Finder’s fee 24,000 Current Liabilities 315,000 300,000
How much is the amount charged to profit and loss for the period? Non – current Liabilities 720,000 800,000
a. P64,000 b. P57,000 c. P65,000 d. P60,000 Common Stock 500,000
Additional Paid in Capital 100,000
12. Home office EE shipped merchandise costing P94,200 to XX branch and paid for the Retained Earnings 1,140,000
freight charges of P15,000. XX branch was subsequently instructed to transfer the If DC’s total assets in its separate books is P10,000,000, how much is total consolidated
merchandise to YY branch wherein XX branch paid P12,000 freight. If the shipment was assets on date of acquisition?
made directly from EE to YY, the freight cost would have been P22,500. Which of the a. P12,700,000 b. P12,820,000 c. P11,300,000 d. P11,420,000
following is incorrect?
a. Upon transfer of merchandise by XX to YY, XX debits Home office account by 15. Q company owns 80% of the stock of R corporation and 50% of S corporation. During
P121,200 2008, Q sold inventories purchased in 2007 from outsiders at P500,000 to R for P600,000. R
b. Upon transfer of merchandise by EE to XX, EE debits Investment in Branch XX
then sold the inventories to S for P750,000. Prior to December 31, 2008, S sold P450,000 of
account by P109,200
c. Upon transfer of merchandise by XX to YY, EE debits Investment in Branch XX the inventories to a non affiliate for P510,000 and held the remaining units at December 31,
account by P116,700 2008. What amount should be reported in the Dec. 31, 2008 Consolidated balance sheet as
d. Upon receipt of merchandise by YY from XX, YY credits Home office account by inventory?
P116,700 a. P0 b. P200,000 c P300,000 d. P500,000

13. BG corporation maintains a branch in Pampanga. Selected account balances taken from BLT
the books of the Home office and its branch as of December 31, 2008 are as follows: 1. Tee Gok died on October 11, 2008, leaving the following properties:
A parcel of land inherited from his father who died in 2006 valued at P350,000
Home Office Pampanga branch at the time but valued in 2008 at P400,000;
Conjugal properties valued at 200,000
The following are the deductions claimed against the estate: 5. Miriam Santiago, a business woman, incurred the following losses in 2008:
Funeral expenses 45,000 1. Wagering losses at Casino Filipino P86,000
Judicial expenses 20,000 Note: Wagering winnings amounted to P14,000
Claims against the estate 45,000 2. Loss on sale of company car to Red Co. 54,000
Note: Miriam Santiago owns 60% of the stocks of Red Co.
How much is the share of the surviving spouse? 3. Loss on sale of office computers to Miriam Sto. Domingo, 40,000
a. P100,000 b. P45,000 c. P52,500 d. P50,000 cousin of Miriam Santiago

2. Julian made the following gifts in 2008 – The deductible loss of Miriam Santiago is:
 May 1 - Land valued at P500,000. Donee is first son and the gift is on account of a. P190,000 b. P104,000 c. P54,000 d. None
marriage held on April 10, 2008.
- Farm valued at P600,000. Donee is first son, farm has an unpaid mortgage 6. Jolas Realty Corp. in the course of the trade sells real property. During the month of
of P100,000 which Donee assumed. January 2008 had the following data per sales document (VAT included):
 Dec 1 - Shares of stock of F4 Corporation valued at P400,000. Donee is first son Cash sales P 560,000
and the gift is also on account of his marriage on April 10. Sale on installment payment basis (initial payments
- Land in Makati valued at P1,000,000. Donee is the City of Makati and land do not exceed 25% of the selling price,
will be used for a school site. collection for the period equal to P100,000) 336000
The donor’s tax due on May 1 donations is –
a. P43,400 b. P51,200 c. P52,000 d. None of the The real property sold for cash had a zonal value of P600,000 (excluding VAT) and
above the property sold under deferred payment basis had a fair market value of P200,000
(excluding VAT)
3. J. Santos, VAT-registered, made the following purchases during the month of
January, 2008:
Goods for sale, inclusive of VAT P 246,400 How much is the output VAT on the sale of real property?
Supplies, exclusive of VAT 20,000 a. P9600 b. P84000 c. P108,000 d. P72,000
Office airconditioners, total invoice amount 56,000 7. Taxpayer sold capital assets as follows:
Home appliances for residence, gross of VAT 17,920
Repair of store, contractor not VAT-registered, total invoice amount 33,600 Lot 11 Lot 22
Selling Price P6,000,000 P10,000,000
Repainting of store, total invoice amount evidenced by
Cost 2,500,000 1,000,000
ordinary receipt of contractor 4,480 Net Gain (loss) P3,500,000 P9,000,000

Mr. Santos applies for refund of VAT on office air conditioners. Creditable input taxes Terms of sale:
are: Down payment 1.15.2008 P 500,000 P 500,000
a. P34,800 b. P28,800 c. P35,280 d. P34,670 Paid on 6.15.2008 500,000 1,000,000
Paid on 9.15.2008 500,000 1,000,000
Installment due 1.15.2009 2,000,000 3,000,000
4. The following, except one, are administrative remedies of the taxpayer: Installment due 5.15.2009 2,500,000 3,000,000
a. Appealing, the decision of the Revenue district officer/Revenue district Mortgage assumed by the buyer 1
Director to the Commissioner of Internal Revenue;
b. Appealing the final decision of the Bureau of Internal Revenue Commissioner ,
to the Court of Tax Appeals; 5
c. Protesting the assessment within the reglamentary period; 0
d. Tax minimization schemes. 0
 , and a net capital loss of P92,000.
0 Taxpayer’s net income before personal exemptions is:
0 a. P196,000 b. P141,000 c. P140,000 d. P151,000
0
10. A VAT-registered person is engaged in the sale of VAT taxable goods and at the
The final tax payable under the installment method for 2008 lot 22 is: same time is also engaged in non-VAT business, in the same business
a. P135,000 b. P150,000 c. P600,000 d. None of the establishment. During the quarter made sales of goods in the amount of P300,000
above plus a value-added tax of P36,000. The sales of the non-VAT business amounted to
P200,000 with a separate percentage tax of P6,000 for a total of P206,000. During
8. Jose Pidal, widower, supporting a son, 33 years old, who is invalid, has the following the same quarter, repairs on the building amounted to P50,000 plus value-added tax
transactions in 2008: of P6,000. Supplies purchased for common use amounted to P10,000 plus P1,200
Sales P1,200,000 value-added tax.
Cost of sales 550,000
The creditable input tax is:
Deductions:
a. P28,800 b. P4,463 c. P7,200 d. P4,320
1. Operating expenses 367,000
2. Loss of Goods thru theft 50,000
11. Mrs. Kina Pos Sahangin, a Filipino, died November 1, 2008 survived by her husband.
3. Contributions: At the date of death, she has P2,000,000 cash in bank and 100,000 shares holding of
To Quezon Province government for priority Pure Joke Corporation with a sales value of P100 per share at the date of death. On
Activity in sports development 10,000 January 15, she made a gift of P3,000,000 (real property) to her husband. She is in -
To St. Mark Cathedral 35,000 sured for P1,000,000 designating her estate as beneficiary. The premium was paid
Other income from her exclusive property.
1. Rent of Apartment 30,000
The last will and testament of Mrs. Kina Pos Sahangin reveals that her shares of
2. Capital gain from sale of family painting held for 2 years 80,000 stock in Pure Joke Corporation shall be contributed to the local government of
Tagaytay City for the maintenance of public park, and the balance shall be given to
Jose Pidal will report a net income before personal exemptions of: her husband.
a. P226,700 b. P262,700 c. P266,700 d.
P302,700 Mrs. Kina Pos Sahangin’s executor field and paid the follow tax returns:

9. Jose Miguel Estrada, single, has the following transactions in 2008: Donor’s tax for gift to her husband P 204,000
Business gross income P200,000 Estate Tax 34,840
Business expense 60,000
The transfer tax still due for the estate tax of Mrs. Kina Pos Sahangin.
Loss from gambling 10,000 a. P116,160 b. P160,160 c. P356,160 d. P560,160
Other transactions:
a. Selling price, partnership interest 100,000 Rates of Estate Tax. –
b. Investment in partnership 2006 20,000
c. Gain on sale of capital asset held for 4 years 10,000
d. Loss on sale of capital asset held for 8 months 12,000 Over But Not Over The Tax Shall be Plus Of the Excess Over
e. Loss on account of failure to exercise 2-month option to buy Property
2,000 P 200,000 Exempt
f. Liquidating dividend from Aquino Co. 150,000 P 200,000 500,000 0 5% P 200,000
Cost of investment in Aquino Co. in 2006 60,000 500,000 2,000,000 P 15,000 8% 500,000
Note: in 2007, Jose Miguel Estrada had a net income of P65,000 2,000,000 5,000,000 135,000 11% 2,000,000
5,000,000 10,000,000 465,000 15% 5,000,000
10,000,000 And Over 1,215,000 20% 10,000,000

12. A race track bettor won on the following bets:

• On forecast, a bet of P1,000 and dividend of P100 per P20-ticket
• On ordinary , a bet of P500 and dividend of P1,000 per P50-ticket
• On double, a bet of P200 and dividend of P200 per P20-ticket
Total percentage tax due from the winnings was
a. P682 b. P1,182 c. P1,280
d. P1,530

13. An invoice issued for the sale of VAT taxable goods shows the following:
Total invoice amount 50,400
Less: Trade discount of 5% 2,520
Net 47,880

If VAT taxpayer enjoys partial tax exemption of 40% including VAT and the amount is VAT
inclusive, how much is the output tax?
a. P3,628 b. P3,447 c. P3,240 d. P3,216
14. Statement 1. A person , refuse to pay on the ground that he will not receive a
benefit from the tax.

Statement 2. A person may not refuse to pay a tax on the ground that it is confiscatory
of his property.
a. The first statement is true while the second statement is false;
b. The first statement is false while the second statement is true:
c. Both statements are true;
d. Both statements are false.

15. Taxes must be for public purpose means that:

a. Taxes must be raised from the public;
b. Taxes should be used for recognized public needs benefiting a community;
c. Power of taxation should government be exercised by the legislature;
d. Relationship of the government and the governed must be transparent and
democratic.