University of the Philippines - Junior Philippine Institute of Accountants

Education and Research Committee 65.1

BA 99.1 Long Exam 3 (Samplex)
Academic Year 2023-2024

Part I. Theory (20 items)

1. Additions to plant assets are:

a) Revenue expenditures
b) Debited to the Maintenance and Repairs account
c) Debited to the Purchases account
d) Capital expenditures

2. Which of the following statements is false?

a) If an intangible asset has a finite life, it should be amortized.
b) The amortization period of an intangible asset can exceed 20 years.
c) Goodwill is recorded only when a business is purchased.
d) Development costs are always expensed when incurred.

3.. Which of the following statements is true?

a) Since intangible assets lack physical substance, they need be disclosed only in the
notes to the financial statements.
b) Goodwill should be reported as a contra account in the equity section.
c) Totals of major classes of assets can be shown in the statement of financial position,
with asset details disclosed in the notes to the financial statements.
d) Intangible assets are typically combined with plant assets and extractable natural
resources and shown in the property, plant, and equipment section.

4. Depreciation of fixed assets is an accounting process in conjunction with

a) Asset valuation for statement of financial position purposes
b) Asset valuation based on economic data
c) Accounting for costs to reflect the change in general price levels
d) Cost allocation for financial reporting purposes

5. In computing for depreciation, which of the following depreciation methods normally ignores
the residual value of a depreciable asset?
a) Straight line method
b) Units-of-production method
c) Declining-balance method
d) Sum-of-the-years-digits method

6. Depreciation is computed under which of the following depreciation methods in the same way
as depletion?
a) Units-of-production method
b) Straight line method
 c) Declining-balance method
d) Sum-of-the-years-digits method

7. The sale of a depreciable asset resulting in a gain indicates that the proceeds from the sale
were
a) Less than the depreciable asset’s current market value
b) Greater than the depreciable asset’s cost
c) Greater than the depreciable asset’s book value
d) Less than the depreciable asset’s book value

8. On initial recognition, PPE should be measured at

a) Cost
b) Net realizable value
c) Current market value
d) Purchase price only

9. The useful life of a patent is

a) Equal to its legal life
b) Equal to the number of period/s within which economic benefits are expected to flow to
the entity
c) A or B, whichever is shorter
d) A or B, whichever is longer

10. Which of the following methods of depreciation would result in the highest depreciation
expense during the latter years of a depreciable asset?
a) Units-of-production method
b) Declining-balance method
c) Straight line method
d) Sum-of-the-years-digits method

11. Dishonored notes receivable would involve

a) A debit to accounts receivable
b) A debit to bad debts expense
c) A debit to allowance for doubtful accounts
d) A debit to notes receivable

12. Which method of recording bad debt expense is consistent with accrual accounting?
a) Allowance method
b) Direct writeoff method
c) Percentage of Sales method
d) Percentage of Receivables method

13. Under the allowance method, the entry to recognize bad debt expense
a) Increases net income
 b) Decreases current assets
c) Has no effect on current assets
d) Has no effect on net income

14. AOMG Company provides for doubtful accounts based on 3% of credit sales. The following
data are available for 2021:

● Credit sales during 2021 P21,000,000

● Allowance for doubtful accounts 1/1/21 170,000
● Collection of accounts written off in prior years (reestablished) 80,000
● Customer accounts are written off as uncollectible during 2021 300,000

What is the balance in the allowance for doubtful accounts at December 31, 2021?
a) P630,000
b) P500,000
c) P420,000
d) P580,000

15. A company's average collection period is 54 days. Its accounts receivable turnover ratio
(using 365 days) is
a) 6.7 times
b) 6.8 times
c) 0.14 times
d) 0.15 times

16. KAYA MO YAN, Inc. had an accounts receivable turnover ratio of 8.3x last year. Its
accounts receivable turnover ratio for the current year is 8.6x. From last year to the current year,
Mae Grace's average collection period (using 365 days) has:
a) Increased
b) Decreased
c) Stayed the same
d) Cannot be determined from the information given

17. What is an example of TRADE receivables?

a) Claims in litigation
b) Loans to employees
c) Amounts due from customers
d) Receivables from affiliates

18. When an accounts receivable aging schedule is prepared, a series of computations is made
in order to determine the estimated uncollectible amount. The resulting figure from this schedule
a) When added to the total amounts written off during the year, is the desired credit
balance of the allowance for doubtful accounts to be reported at year-end
b) Is the amount of doubtful accounts expense for the year
 c) Is the desired credit balance of the allowance for doubtful accounts to be reported at
year-end
d) Is the amount that should be added to the beginning balance of allowance for doubtful
accounts to get the doubtful accounts expense for the year

19. The credit balance of Allowance for Uncollectible Accounts is P5,200. The estimated
uncollectible accounts expense using the percentage of sales method is P42,500. After the
adjusting entry has been recorded, the credit balance of Allowance for Uncollectible Accounts
should be
a) P47,700
b) P42,500
c) P37,300
d) P5,200

20. Net sales on account are P300,000. The beginning book value of accounts receivable is
P45,000. The ending book value of accounts receivable is P60,000. The accounts receivable
turnover ratio is ____.
a) 0.18 times
b) 5.71 times
c) 6.67 times
d) 42 times

Part II. Short Problems (20 items)

1. During the current year, Sadboy President Company had the following transactions pertaining
to its new office building:

Purchase price of land P 800,000

Legal fees for contract to purchase land P 50,000
Architect fee P 75,000
Demolition of old building on site P 53,000
Sale of scrap of old building P 20,000
Construction cost of new building P 3,400,000

In Sadboy President Company’s year-end statement of financial position, what amounts should
be reported as land and building?

2. On August 1, 2020, Fancy Corporation bought a trademark from Feel Special Company for
P4,500,000. The trademark was considered to have an indefinite life. Its carrying amount in Feel
Special’s accounting records was P1,500,000. In Fancy’s December 31, 2021 statement of
financial position, what amount should be reported as a trademark?

3. On July 1, 2020, Make A Wish Company, a corporation following a calendar-year, purchased

the rights to a mine. The total purchase price was P3,600,000 of which P300,000 was attributed
to the land. Estimated reserves were 1,750,000 tons. The expected extraction was 25,000 tons
per month. Make A Wish Company also purchased new equipment on July 2, 2020. The
equipment costs P5,400,000 and has a useful life of 6 years. However, after all the resources
have been removed, the equipment will be of no use and will be sold for P200,000. What
amount of depletion and depreciation should be reported in Make A Wish Company’s 2020
Income Statement?

4. More Than Friends Ltd. recently acquired two items of equipment. The transactions are
described as follows:
● Acquired a press at an invoice price of P 4,500,000 subject to a 8% cash discount which
was taken by the company. Costs of freight and insurance during shipment were
P30,000. Installation costs amounted to P150,000. In addition, the company paid
P75,000 to pay the salary of one worker who tested the press.
● Acquired a welding machine at an invoice price of P 1,000,000 subject to a 4% discount
which was not taken by the company. Additional welding supplies were acquired at a
cost of P100,000. At the end of the year, the accumulated depreciation related to this
equipment is 50,000.
What should be the increase in equipment as a result of these transactions?

5. KAI_SOLO Company purchased a patent on January 1, 2013 for P357,000. The patent was
being amortized over its remaining legal life of 15 years expiring on January 1, 2028. At the
beginning of 2017, KAI_SOLO Company determined that the economic benefits of the patent
would not last longer than nine years from its date of acquisition. What amount should be
reported as patent, net of accumulated amortization, in the balance sheet on December 31,
2017?

6. In 2020, Bad Boy Company paid P30,400,000 for a land with an estimated 2,670,000 tons of
ore. Bad boy plans to sell the land for P4,100,000 once all the tons of ore have been extracted.
During the year, 485,000 tons of ore were mined and sold. What is the book value of the asset
at the end of 2020?

For numbers 7 to 10:

Use the information below.
Cost of equipment P900,000
Estimated residual value P30,000
Estimated life 6 years
Acquisition date 1/1/2015 (unless otherwise stated)

7. Assume that the company uses the straight-line method of depreciation. If at the beginning of
2019, the company found out that the equipment is still useful for 3 years, what should be the
book value of the equipment at the end of 2019?
8. Assume that the company uses the double-declining balance method of depreciation. After
recording three full years of depreciation, the company decided to switch to straight-line
depreciation. What is the balance of accumulated depreciation at the end of 2018?

9. Assume that the equipment was purchased on August 1, 2015, and that the company uses
the straight-line method of depreciation. What should be reported as accumulated depreciation
at the end 2017?

10. Assume that the company uses the double-declining balance method of depreciation and
sells the equipment after two years of usage for P403,600. What amount of gain/loss should be
reported in the 2017 income statement? Indicate if gain or loss.

11. H1gher Motor Company’s unadjusted trial balance on December 31, 2021, included the
following accounts and amounts:

Dr. Cr.
Allowance for Bad Debts 10,000
Sales 2,800,000
Sales Returns and Allowances 180,000

H1gher Motor Company estimates its bad debts expense to be 6% of net sales. Assuming that
all sales are made on account, determine the following:
a. Bad Debts Expense for 2021
b. Allowance for Bad Debts on December 31, 2021

12. SamgyupTY presented the following information in relation to its receivables:

● Accounts Receivable from NewRomanticsPig Co. for the sale of P180,000 worth of
inventory
● IOU from the company president for P156,000
● Notes Receivable from customers for P535,000
● Interest Receivable on the notes receivable for P50,000
● Advance of P10,000 for the employee of the month

How much is SamgyupTY’s trade receivables?

13. GOT7 Company provided the following information relating to its current operations:
● Accounts Receivable, January 1 P 4,000,000
● Accounts Receivable Collected 8,400,000
● Cash sales 2,000,000
● Inventory, January 1 4,800,000
● Inventory, December 1 4,400,000
● Purchases for the year 8,000,000
● Gross margin on sales 4,200,000

What is the balance of Accounts Receivable of GOT7 Company on December 31?

14. Shotaro Company operates in an industry that has a high rate of bad debts. On December
31, 2021, before any year-end adjustments, the balance in Shotaro Company’s Accounts
Receivable account (gross) was P3,000,000 and the Allowance for Doubtful Accounts had a
credit balance of P50,000. The year-end balance reported in the balance sheet for the
Allowance for Doubtful Accounts will be based on the aging schedule shown below:

Days Outstanding Amount Probability of

Collection

1-30 days past due P 0.98

1,750,000

31-60 days past due 350,000 0.95

61-90 days past due 450,000 0.90

91-120 days past due 300,000 0.75

Over 120 days past 150,000 0.40

due

Receivables written off during the year amounted to P40,000.

a. The appropriate balance of the Allowance for Doubtful Accounts on December 31,
2021 is:
b. The amount to be reported as bad debts expense for 2021 is:

15. The following information was made available about Sample Electronics’ sales and
receivables:

Accounts Receivable, January 1, 2020 350,000

Allowance for Uncollectible Accounts, January 1, 2020 35,000
Sales, all on credit 2,195,000
Sales returns and allowances 5,000
Cash collected from customers’ current accounts, net of sales
2,110,000
discount of P5,000
Accounts receivable written off during the year 30,000
Recoveries of accounts written off in the previous years 7,000

An aging of accounts receivable on December 31, 2021 indicated the following:

Age % of Gross Probability of

Accounts Collection
Receivable at year-
end
Current 80% 90%
31-60 days 12% 85%
 61-90 days 7% 50%
Over 90 days 1% 1%

Determine the following as of December 31, 2021:

a. Gross Accounts Receivable
b. Bad Debts Expense for the year
c. Net Realizable Value of Accounts Receivable

For numbers 16 and 17:

CrushBackJuseyo Consulting had the following pieces of information:
Allowance for Doubtful Accounts on January 1, 20201 P30,050, credit
Accounts written off, 2021 P5,650
Accounts previously written off but recovered during the year P2,345

CrushBackJuseyo Consulting uses the Aging of Receivables Method and estimates that the
doubtful accounts receivable at the end of the year to be P45,755.

16. What is CrushBackJuseyo Consulting’s Bad Debts Expense for 2021?

17. What is CrushBackJuseyo Consulting’s Allowance for Doubtful Accounts on December

31, 2021 if it approximates P26,870 of its net credit sales to be uncollectible? Assume that for
this item, CrushBackJuseyo Consulting used the Percentage of Sales Method.

18. Mamamoo Company prepared an aging of accounts receivable on December 31, 2021 and
determined that the net realizable value of the accounts receivable was P 2,500,000.

Allowance for doubtful accounts on January 1 P 280,000

Accounts written off as uncollectible 230,000
Accounts receivable on December 31 2,700,000
Uncollectible accounts recovery 50,000

What amount should be recognized as doubtful accounts expense for the current year?

19. During 2020, Kang Productions wrote off uncollectible accounts amounting to P15,000 and
recovered accounts of P7,000 that were written off in 2020. The following details were made
available:
Dec. 31, 2021 Dec. 31, 2020
Accounts Receivable 1,000,000 750,000
Net Realizable Value 960,000 725,000

After year-end adjustment, the uncollectible accounts expense for 2021 should be ______.

20. Minguk Company provided for doubtful accounts expense monthly at 3% of credit sales. The
balance in the allowance for doubtful accounts was P 1,000,000 on January 1, 2021. During
2021, credit sales totaled P 20,000,000, interim provisions for doubtful accounts were made at
3% of credit sales, P 200,000 accounts were written off, and recoveries of accounts previously
written off amounted to P 50,000.

An aging of accounts receivable was made on December 31, 2021.

1-60 days 6,000,000 90% collectible
61-180 days 2,000,000 80% collectible
181-360 days 1,500,000 70% collectible
More than one year 400,000 50% collectible
Total 9,900,000

What amount should be reported as doubtful accounts expense for the current year?