ACCOUNTING 5

1. The following data were taken from the records ABC Company for the year ended December 31, 2008.

Sales on account2,880,000Notes received to settle accounts 320,000Provision for doubtful accounts 72,000Accounts Receivable determined to be worthless 16,000Merchandise returned by customer 12,000Collections received to settle accounts 1,960,000Discounts permitted to be taken by customer 36,000Collections received in settlement of notes 120,000What is the net realizable value of accounts receivable?A. 670,000B. 464,000C. 536,000D. 480,0002. On December 31, 2010, Akimomoo Company sold equipment and received a noninterest bearing note requiring payment of P250,000 annually for ten years. The first payment is due December 31, 2011, and the prevailing rate for this type of note at date of issuance is 12%.The present value factors are as follows:Present value of 1 at 12% for 10 periods0.322Present value of ordinary annuity of 1 at 12% for 10 years5.650In the December 31, 2010 statement of financial position, what is the carrying amount of the note receivable?A. 2,500,000B. 1,087,500C. 805,000D. 1,412,0003. On January 1, 2010 Global Company purchased 50,000 ordinary shares of Smart Company for P3,600,000. On December 1, 2010, Global Company sold the stock rights from Smart Company. Each right entitled the holder to acquire one share for P85.

The market price of Smart Companys share was P100 immediately before the rights were issued and P90 immediately after the rights were issued. Global Company sold the stock rights on December 31, 2010 for P15 per right.

What is the gain from the sale of the right?A. 500,000B. 250,000C. 100,000D. 750,0004. On December 31, 2010, Allysa Company had the following cash balances:Cash in bankP6,000,000Petty cash fund (all funds were reimbursed) 50,000Time depositthree months (due Jan. 15,2011) 2,500,000Savings deposit 1,000,000Cash in bank includes P400,000 of compensating balance against short term borrowing arrangement at December 31,2010. The compensating balance is legally restricted as to withdrawal by Allysa Company/A. P9,500,000B. P9,150,000C. P9,100,000D. P6,950,0005. Which is true concerning presentation of receivables in the statement of financial presentation?A. Trade receivables and nontrade receivable are shown separately.B. Nontrade receivables are presented as noncurrent assets.C. Trade accounts receivable and trade notes receivable shall be presented separately.D. Trade receivable and nontrade receivables which are currently collectible shall be presented as one line item called trade and other receivable.6. On December 31, 2010, Silence Company had the following balances in the bank accounts it maintains at second bank:Checking account #1013,500,000Checking account #201( 200,000)Time deposit account- 30days 500,00090-day Treasury bill, due February 28, 20111,000,000180-day treasury bill, due March 15, 20111,600,000In its December 31, 2010 statement of financial position, what amount should Silence Company report as cash and cash equivalents?A. 3,800,000B. 4,000,000C. 4,800,000D. 6,400,0007. Biological assets are measured at A. CostB. Lower of cost or net realizable value C. Net realizable value D. Fair value less cost to sell 8. At the beginning of the current year, Aguirre Company sold P17,400,000 in accounts receivable for cash of P15,000,000. The factor withheld 10% of the cash proceeds to allow for possible customer returns and other adjustments. An allowance for bad debts of P1,800,000 had previously been established by Aguirre Company in relation to these account. What was the loss on factoring recognized by Aguirre Company?A. 600,000B. 2,100,000C. 1,500,000D. 2,400,0009. On January 1, 2010, Ribbon Company sold equipment with a carrying amount of P2,400,000 in exchange for a P3,000,000 noninterest bearing note due January 1,2013. There was no established exchanged price for the equipment. The prevailing rate of rate of note for this type of January 1, 2010 was 10%. The present value of 1 at 10% for three periods is 0.75. in the income statement for 2010, what amount should be reported as interest income?A. 300,000B. 250,000C. 225,000D. 45,00010. When the investor uses the equity method to account for investment in ordinary shares, cash dividend received by the investor from the investee shall be recorded asA. Dividend income B. A deduction from the investors share of the investees profitsC. A deduction from the investment account D. A deduction from the shareholders equity account, dividends to shareholders11. BB Company purchased 100,000 shares of JD Company on January 15, 2010 representing 5% ownership interest. BB Company received a stock dividend of 20% on March 31, 2010 when the market price of the share is P40. JD Company paid a cash dividend of P5 per share on December 15, 2010.

In the income statement for the year ended December 31, 2010, what amount should BB Company report as dividend income?A. 300,000B. 800,000C. 1,400,000D. 600,00012. Account of the petty cash fund of Kim Company showed its composition as follows:Coin and CurrencyP26,400Paid vouchers:Transportation 4,800Gasoline 3,200Office Supplies 4,000Postage Stamps 2,400Due from Employees 9,600Managers check returned by bank marked as NSF 8,000Check drawn by company to the order of petty cash custodian 21,000

What is the amount of the petty cash fund for balance sheet purposes?A. 26,400B. 80,000C. 58,400D. 48,00013. XYZ Bank granted a loan to a borrower on January 1, 2010. The interest rate on the loan is 10% payable annually starting December 31, 2010. The loan matures in five years on December 31, 2014. The data to the loan are:Principal Amount P6,000,000Direct origination cost 92,000Origination fee received from the borrower 525,000The effective rate on the loan after considering the direct origination cost and origination fees received is 12%. What is the interest income for 2010?A. 600,000B. 837,000C. 794,070D. 668,07014. On April 1, Memorial Company established an imprest petty cash fund for P80,000 by writing a check drawn against its general checking account. On April 30, the fund contained the following:Currency and coinsP24,000Receipts for the office supplies 32,000Receipts for postage still unused 16,000Receipts for transportation 4,800On April 30, the entity wrote check to replenish the fund. What is the amount of replenishment under the imprest fund system?A. P80,000B. P52,800C. P56,000D. P24,00015. A gain or loss arising on the initial recognition of a biological asset and from a change in the fair value less cost to sell a biological asset shall be included in:A. Profit of loss for the perion B. Other comprehensive income C. A separate revaluation reserve D. An appropriate reserve16. On January 1, 2010 Young Company acquired 20% of the outstanding ordinary shares of Amper Company for P3,500,000. This investment gave Young Company the ability to exercise significant influence over Amper Company. The book value of the acquired shares was P3,000,000. The excess of cost over book value was attributed to an identifiable intangible asset which was undervalued on Amper statement of Financial Position and which had a remaining useful life of ten years.

For the year ended December 31, 2010, Amper Company reported net income of P4,000,000 and paid cash dividend of P300,000on its ordinary shares.

At December 31, 2010 what is the carrying amount of Young Companys investment in Amper Company?A. 3,390,000B. 3,570,000C. 3,500,000D. 3,450,00017. Sahara Bank loaned P4,500,000 to a borrower on January 1, 2008. The terms of the loan were payment in full on January 2013, plus interest payment at 12%. The interest payment was made as scheduled on January 1,2009. However, due to financial setbacks, the borrower was unable to make its 2010 interest payment.

Sahara Bank considered the loan impaired and projected the cash flows from the loan on December 31, 2010. The bank has accrued the interest at December 31, 2009 but did not continue to accrue the interest for the 2010 due to the impairment of the loan. The projected cash flows are:

Date of Cash FlowAmount projected on December 31, 2010December 31, 2011750,000December 31, 2012 1,000,000December 31, 2013 1,250,000December 31, 2014 1,500,000The present value of 1 at 12% is as follows:For one period 0.89For two periods0.80For three periods 0.71For pour periods0.64How much is the impairment loss?A. 1,185,000B. 1,725,000C. 3,315,000D. 1,225,00018. Tsuru Company purchased land and building for P10,500,000 cash, excluding an appraisers fee of P200,000. An appraisal indicated fair value as follows: Land P4,000,000 and Building 6,000,000. What is the initial measurement of the land?A. 4,280,000B. 4,200,000C. 4,120,000D. 4,000,00019. On June 1, 2010, Heroine Company assigned 800,000 of accounts receivable to Jaylo Company as a security for the loan of 670,000. Heroine Company charged a 2% commission on the amount of the loan; the interest rate on the note was 10%. During the first month, Heroine collected 220,000 on assigned accounts after deducting 760 of discounts. Heroine accepted returns worth 2,700,000 and wrote off assigned accounts totaling 5,960. How much cash did Heroine receive from Jaylo at the time of transfer?A. 603,000B. 654,000C. 656,000D. 670,00020. On June 1, 2010 Isabelle Company sold merchandise with the list price o P2,000,000 to a customer. Isabelle Company allowed the trade discounts of 20% and 10%. Credit terms were 5/10, n/30 and the sale was made FOB shipping point. Isabelle Company prepaid P100,000 of delivery cost for the customer as an accommodation.

On June 11, 2010, how much is received by Isabelle Company from the customer as full remittance?A. 1,368,000B. 1,468,000C. 1,440,000 D. 1,540,00021. On January 1, 2010, Girly Company acquired P2,000,000 of 12% face value bonds at P1,883,500 to be held financial assets at amortized cost with a 14% effective yield. Interest on bonds is payable annually on December 31 and the bonds mature on January 1, 2014. The effective interest rate method of amortization is used. What is the carrying amount of the investment on December 31, 2010?A. 1,907,190B. 1,883,500C. 2,000,000D. 1,859,810

22. An entity factored its accounts receivable without recourse with a bank. The entity received cash as a result of this transaction which is best described asA. Bank loan collateralized by the entitys accounts receivable.B. Bank loan to be repaid by the proceeds from the entitys accounts receivable.C. Sale of the entitys accounts receivable to the bank with the risk of uncollectible accounts retained by the entity.D. Sale of the entitys accounts receivable to the bank with the risk of uncollectible accounts transferred to the bank.23. On December 31, 2010, Infinity Company provide the following information relating to its inventory:COST RETAILInventory, Jan 1 855,000 2,025,000Purchases13,455,00019,575,000Purchase Discount 180,000Freight In 675,000Markups 1,350,000Markdowns 1,800,000Sales19,350,000Sales Discount 225,000

What is the estimated cost of the inventory on December 31, 2010 under average retail inventory method?a. 1,800,000b. 1,260,000c. 1,102,500d. 1,417,500

24. Katrina Company acquired an equity instrument for P8,000,000 on march 31, 2010 to be measured at fair value through other comprehensive income. The direct acquisition costs incurred amounted to P1,400,000.On December 31, 2010, the fair value of the instrument was P11,000,000 and the transaction costs that would be incurred on the sale of the investment were estimated at P1,200,000.What gain would be recognized in other comprehensive income for the year ended December 31, 2010?A. 400,000B. 1,800,000C. 1,600,000D. 0

25. On August 1, 2010, Eager Company purchased a new machine on a deferred payment basis. A down payment of P200,000 was made and 4 monthly instalments of P500,000 each are to be made beginning on September 1, 2010. The cash equivalent price of the machine was P1,900,000. Eager Company incurred and paid installation costs amounting to P60,000. What is the amount of be capitalized as cost of the machine?A. 1,900,000B. 1,960,000C. 2,200,000D. 2,260,000

26. The records of Royal Company showed the following:Cash in bank, March 31P 600,000Book credits for AprilP2,160,000Book debits for AprilP2,400,000Note collected by bank:MarchP 180,000AprilP 300,000Service Charge:MarchP 24,000AprilP 6,000NSF Check:MarchP 60,000AprilP 90,000What is the adjusted cash in bank on April 30 ?A. P1,044,000B. P 564,000C. P 696,000D. P 600,000

27. The following data were presented for Dove Company for the month of December 2010:Deposits in Transit, Nov. 30P160,000Cash receipts deposited during DecemberP800,000Deposits acknowledged by bank in DecemberP680,000December CM for note collectedP 80,000November CM for note collectedP 60,000How much is the deposit in transit for the month of December?A. P260,000B. P140,000C. P300,000D. P 60,000

28. The following information are taken from the records of Aces CompanyOutstanding Checks, Nov. 30P260,000Checks paid by bank during DecemberP520,000December NSF ChecksP 40,000Checks drawn by depositor during DecemberP720,000November Debit memosP 24,000What is the amount of outstanding check for the month of December?A. P396,000B. P412,000C. P244,000D. P476,000

29.Which is not an acceptable basis in measuring inventories in published financial statements?A. Historical costB. Net realizable valueC. Prime costD. Fair value less cost to sell

30. Under the cost model, subsequent to initial recognition as an asset, an item of property, plant and equipment shall be carried atA. CostB. Revalued amountC. Cost less accumulated depreciation and any accumulated impairment lossD. Revalued amount less accumulated depreciation and any accumulated impairment loss

31. The cost of an item of property, plant and equipment acquired in a nonmonetary exchange is measured at theA. Carrying amount of the asset given upB. Fair value of the asset given upC. Carrying amount of the asset received. Fair value of the asset received

32. Which principle/guideline justifies a company violating an accounting principle because the amounts are immateriala. Full disclosureb. Materialityc. Conservatismd. Periodicity

33. A company borrowed P800,000 on December 1, 2010 and will make its only payment for interest when the note is paid off on June 1, 2011. The total interest for the six months wil be P36,000. On the December 2010 income statement the accountant reported Interest Expense of P6,000. This action was the result of which accounting principle/guideline?a. Historical cost principleb. Matching principlec. Revenue recognition principled. Materiality

34. The creative chief executive of a corporation who is personally responsible for numerous inventions and innovations is not reported as an asset on the corporations balance sheet. The accounting principle/guideline that prevents the corporation for reporting this person as an asset is;a. Going concernb. Revenue recognition principlec. Historical cost principled. Conservatism

35. WXY Co. performed services for Client Ray in December 2010 and billed Ray P4,000 with terms of net 30 days. WXY follows the accrual basis of accounting. In January 2011, WXY received the P4,000 from Ray. In January 2011, WXY will debit Cash, since cash was received. What account should WXY credit in the January 2011 entry?a. Service Incomeb. Salesc. Accounts Receivabled. Accounts Payable

36. An item retailing for P10,000, subject to a trade discount of 25%, is paid for within the discount period on terms of 2/10, n/30. From the point of view of the buyer, the entry for payment would include a;a. A debit to Accounts payable of P7,500b. A debit to Purchase discount of P150c. A credit to Cash of P7,500d. A credit to purchase discount of P2,500

37. Bluetooth Company received a 60-day 8% note for P30,000. Interest is collected upon maturity, the entry to record the transaction on maturity date would include:a. Credit Notes receivable of P30,00b. Debit Interest Income of P400c. Credit Cash of P29,600d. Credit Cash of P30,400

38. Wages Payable were P3,500 at the end of September and P2,800 at the end of October. Wages Expense for October was P18,000. How much cash was paid for Wages during October?a. P18,700c. P17,300b. P24,100d. P11,700

39. Unearned Revenue was P6,000 at the February and P7,500 at the end of March. Service Revenue was P42,000 for the month of March. How much cash was received for service provided during Marcg?a. P55,500c. P28,500b. P40,500d.P43,500

40. Client Faye pays XYZ Co. P10,000 in December 2010 for XYZ to perform services for Faye in February 2011. XYZ uses the accrual basis of accounting. In December, XYZ will debit Cash for P10,000. What will be the other account involved in the December 2010 accounting entry prepared by XYZ (and what type of account is it?)A. Accounts Receivable (Asset)B. Prepaid Expense (Asset)C. Service Revenues (Revenue)d. Unearned Revenues (Liability)

41. QRS Co. incurs cleanup expense of P500 on December 30, 2010. The suppliers invoice states that the P500 is due by January 10, 2011 and QRS will pay the invoice on January 9. QRS follows the accrual basis of accounting and its accounting year ends on December 31. What is the effect of the cleanup service on the December balance sheet of ABC?a. Assets decreasedb. Liabilities increasedc. No effect on Owners Equityd. Assets increased

42. On December 1, a company borrowed 100,000 at 12% per year. The interest will be paid quarterly, with the first payment due on March 1. What should the company report on its income statement for December?a. Nothingb. Interest Expense of P3,000c. Interest Income of P1,000d. Interest Expense of P1,000

43. SMART Company had an initial capital of P1,000,000. During the year net sales amounted to P1,510,000 and cost of goods sold of 60% of net sales. Total operating expenses is 15% of net sales. The owner, Mr. Smart withdrew P300,000 for personal use. How much is the net income of the company?a. P679,500c.P604,000b. P377,500d.P304,000,44. After closing the nominal accounts of Amazing Trading, the income summary account showed a P90,000 credit balance. The partners Eds, Cherry and Jovy agreed to share profits and losses 2:5:3 respectively. Their respective share in net income or net loss would beA. Eds, P16,600; Cherry, P40,600; Jovy, P12,800B. Eds, (P16,600); Cherry, (P40,600); Jovy, (P12,800)C. Eds, P18,000; Cherry, P45,000; Jovy, P27,000D. Eds, (P18,000); Cherry, (P45,000); Jovy, (P27,000)

45. Carl and Faith established a partnership business engaged in selling of soap in Digos City. Their partnership attained a considerable success so that at the end of 2010 Carl receives P300,000 as his share in the profit. If the profit and loss ratio is 3:2 respectively, what is the total amount of profit that the partnership earned in 2010?sA. P500,000B. P640,000C. P750,000D. P760,000

46. Partners Yomi, Ryan and Charlie share profits and losses in a 5:3:2 ratio, respectively. Yomi wishes to leave the partnership, so the assets are revalued and are found to be overvalued by P120,000. If each partner had a capital balance of P400,000 prior to Yomis notification of withdrawal, what amount should Yomi be allowed to withdraw from the partnership?A. P280,000B. P360,000C. P340,000D. P460,000

47. If a bonus is traceable to the old partners rather than to a new partner, it is allocate among the partners according to thea. capital ratio of the old partnersb. capital ratio of the new partnershipc. Profit and loss ratio of the old partnershipd. Profit and loss ratio of the new partnership48. Allegro Corp. declared a 5% share dividend on its P10,000 issued and outstanding shares of P2 par value ordinary shares, which had a fair market value of P5 per share before the share dividend was declared. This share dividend was distributed 60days after the declaration date. By what amount did Allegros shareholders equity decrease as a result of the share dividend declaration?A. P-0-C. P1,000B. P500D. P2,500

49. At December 31, 2008 and 2009, Z Corporation had 3,000 shares of P100 par, 5% cumulative preferences shares outstanding. No dividends were in arrears as of December 31,2007. Z Corp. did not declare dividends during 2008. During 20009, Z Corp. paid cash dividend of P10,000 on its preference shares. Z Corp. should report dividends in arrears in its 2009 financial statements asa. An accrued liability of P15,000b. A disclosure of P15,000c. An accrued liability of P20,000d. A disclosure of P20,000

50. Which of the following is the most useful in analyzing companies of different sizes?a. Comparative Statementsb. Common-size financial statementsc. Price-level accountingd. Profitability index