PRACTICAL ACCOUNTING- PROBLEMS IISet A

38.Person Company acquired 80 percent of the outstanding common stock Of sonar, Inc, by issuing 20,0000 of its P 10 par value shares which are selling at 16, Fees paid to consultants and attorneys in connection with the exchange of shares amounted to P 30,000. Immediately prior to the acquisition ,. The trial balances of the two companies were as follows:

Current assetsPARSONBOOK VALUESONARPlant assetsP1, 800,000P 975,000FAIR VALUEInvestment in marketable3,000, 0001,300,000P 1,025,000 Securities(1,100,000)300,000 1,400,000Current liabilities( 600.000)(800,000) 280,000Noncurrent liabilities( 400,000)(400,000) 800,000Common stock( 800,000)(200,000) 530,000Additional paid in capital(1,900,000)(775,000)Retained earnings

On the consolidated balance sheet after acquisition, how much will be the additional paid in capital of the controlling interest, assuming that all the requirements for pooling of interest, have been met?

A. P 1,000,000B. P 1,200,000C. P 1, 160,000D. P 800,000

39. The following information pertains to a river- control project or Rathaus Konstrukt Inc. In Tabuk, Kalinga which was commented in 19X3 and completed the following year:

Cost incurred to date At June 30, 19X3P 9, 750,000 At June 30, 19X4 15, 750,000Estimated total costAt completion At June 30, 19X319,500,000 At June 30, 19X420,250,000The project is a P22,500 fixed- price construction contract and Rathaus uses the percentage- of completion method of accounting. What is the income reported by Rathaus on its Kalinga project on June 30, 19X4?

A. P 750, 000b. P 1, 500,000C. P 1, 750,000D. P 250, 000

40. Ovid company makes use of the two-way analysis of overhead variances. Ovids budgeted factory overhead for fixed costs is p 1,200,000 per month, plus a variable factory overhead rate of P96 for every direct labor hour. The standard direct labor hours allowed for May, 19X 6 productions are 432,000 hours. An analysis of the factory overhead showed that, in May, Ovid had an unfavourable budget (controllable) variance of P24,000 and a favorable volume balnce of P 12,000. What is the applied factory overhead in May?

A. P5, 371,200B. P5, 359, 200C. P5, 335, 200D. P5, 347, 200

41. Paradim Co. recently paid P5,000,000 cash for the net assets of Supreme Co. which had a book value of P 5,000,000 of P4, 000,000 . The book values of the assets and liabilities approximate their fair values except as noted below.

BOOK VALUEFAIR VALUEInventory..............................P 400,000P 450,000Land...................................... 300,000500,000Building and equipment, net...............1,400,000 1,550,000

68. Which of the two methods ( the present of the automated has higher income at the level of sales of 26,000 units?a. Present, P 60,000b. Automated P60,000 c. Present, P 240,000d. Automated, P 240,000

69. A fira has the following capital structures : 70 debt and 320 equity interest rate on debt is 12 and on common stock is 14 if the weighted average cost of the capital is 9.66 then what is the marginal tax rate?a. 350b. 400c 600d. 650

70. Samantha Manufacturing recently completed and sold an order of 50 units that had the following costs:Direct materials P1, 500Direct labor 8,500Variable overhead 4,000Fixed overhead 1,400TOTALP 15,400

Applied on the basis of direct labor hours.Applied at the rate of 10 of variable cost.

The company has now been requested to prepare a bid order for another set of 50 units of the same product.

If an 80 learning curve were applied, Samanthas total cost on this order would be estimated ata. P 6,400b. P 8,600c. P 9,900d. P 15,400

47. Timepieces Company manufactures and sells watches that carry a 2- year unconditional warranty against product failure. Based on a reliable statistical, timepieces knows that between the sale and the lapse of the product warranty; 10% of units sold will require an average cost of P 250 per unit for repairs. The following data reflect the recent experience of the company for the past 3 years.

Number of units sold20082009 2010Number of units repaired:6,0008,50010,0002008 80150 20020092010250 350 400

48. Millennium Company provided the following information for 2010.

Net Income2, 5000,000Total Assets5,600,000Share Capital1,000,000Share Premium 800,000Treasury shares at cost 200,000Dividends declared1,500,000 400,000Prior period adjustment for overstatement of 2009 ending inventoryThe debt to equity ratio 40% ( total liabilities divided by total shareholders equity) at December 31,2010 . What was the retained earnings balance on January 1, 2010?a. 1, 000,000b. 1,800,000c. 1, 6000,000d. 1, 4000,000

49. On July 1, 2010, Dakota Corporation Issued office space for 5 years at a monthly rental of P 75,000. On that date , Dakota paid the lessor P 950,000 which included the following:

Rent deposit300,000First months deposit 75,000Last months deposit 75,000Installation of new walls and offices500,000

The entire amount of P 950,000 was charged to rent expense in 2010 . Monthly rentals were paid as scheduled from August to December 31, 2010 under the operating lease?a. 530,000b. 500,000c. 125,000d. 450,000

50. Brisbane company reported the following information for 2010 Sales revenue of P 2,800,000 cost of goods sold of P 1,000,000, distribution costs of P 400,000, administrative expenses of P 350,000, depreciation of P 250,000, interest expense of P 80,000 and income tax expense of P 280,000. All sales were made for cash and all expenses other than depreciation and bond premium amortization of P 20,000 were paid in cash. All current assets and current liabilities remained unchanged. What is the net cash provided by operating activities during 2010?

a. 440, 000b. 690,000c. 670,000d. 710. 000

PRACTICAL ACCOUNTING PROBLEMSANSWERS1. Understatement of 2009 warranty cost600,000 A

2. Cumulative additional depreciation ( 1M/ 10X6)600,000 Depreciation on carrying amount (2.5M)/5)500,000 2010 Depreciation 1,100,000 B

3. PerpetualPeriodicUnadjusted balances3,600,0003,450,000Unrecorded sales(200,000)Goods sold FOB SP(500,000)(500,000)Goods sold FOB destination(150,000)(150,000)Goods held on consignmentGoods purchased FOB Dest (arrived)400,000(, 100,000)Obsolete inventory (150,000)Adjusted inventory 300,000 3,360.000 3,300,000 D

4. Fair value of share alternative 60,000X35)2,100,000Less. Fair value of cash alternative (30,000 X 50)1,500,000Grant date fair value of equity component 600,0002009FV of equity component (60,000//3) 200,000FV of liability component (30,000X 60/ 3)600,000Compensation expense800,0002010FV equity component (60,000/3)200,000Fair value of liability component (30,000X75)/ 3X2) 600,000 900,000 Compensations expense1,100,000 C

5. Lobstar ( 10,000)X 150) 1,5000,000Shrimp (50,000X. 80)4,000,000Salmon( 30,000X 200) 400,000 payment 5,600,000Net unrealized gain 3,100,000 B 6. net investmen 4,204,000Less: PV of GRV (500,000 x.58)280,000Net Investment to be recovered from rentals3,924,000Rentals (3,924,000/4.36)900,000Gross investment (900,000x6)+ 500,000 residual value5,900,000Less : Net Investment4,204,000Financial revenue 1,696,000 B

7. Average earnings (4M-500,000)/5700,000Capitalization rate10%Net assets with goodwill7,000,000Less: Fair value without goodwill5,500,000Goodwill1,500,000 C

8. Total market value (except Stellar Company treasury share)10,600,000Less: Total cost10,300,000Unrealized gain on trading securities300,000

9. Accrued pension cost 1/1 (6,500,000-5,000,000)(1,500,000)Pension expense(1,000,000)Contributions1,200,000Accrued pension cost 12/31(1,300,000) D

10. Accounting Profit1,200,000Fines and penalties500,000Cash dividends received (800,000)Accounting profit subject to tax900,000Unrealized gain on trading securities (taxable)(200,000)Reversal of deductible temporary difference(600,000)Reversal of taxable temporary difference350,000Taxable profit450,000 B

11. Gross profit from instalment accounts receivable(120,000/30%)400,000Instalment accounts receivable (400,000/40%)1,000,000 C12. average general price index number (150 +300)/2225Cash 300,000AR800,000Inventory (1,200,000 x 300/225)1,600,000PPE (2,000,000 x 300/125)4,800,000Total assets7,500,000

Accounts payable 400,000Bonds payable700,000Total liabilities1,100,000

Contributed capital (1.2 M x 300/100)3,000,000RE (SQUEEZE)3,550,000 BLess ; Treasury shares (350,000 x 300/140)750,000SHE (7,500,000-1,100,000)6,400,000

13. Replacement cost9,000,000Less:Accumolated depreciation (9M x 25%)2,250,000Sound Value6,750,000Less: Carrying amount5,250,000Revaluation surplus-gross 6/30/101,500,000Less: Deferred tax lability (1.5 Mx 30%)450,000Revaluation surplus-net 6/30/101,050,000Less Realization (1,050,000/5x6/12)105,000Revaluation surplus-net 12/31/10945,000 APercentage of accumulated depreciation (1,750/7,000) 25%

14. Payment for operating expenses(1,000-120-30+400-550+100-150)650,000 B

15. cost3,500,000Less: Accumulated depreciation (3M x 10% x 3)900,000Carrying amount 1/1/102,600,0002010 Depreciation (2.6 M-500)x 7/28) (7 years remaining)525,000 D

16. PBO (5M +600+ (12% x 5M)-900-100)5,200,000 B

17. 10 dairy cattle- 3 years old580,0002 hogs-4 years old600,00015 horses-2 year old1,350,0008 Carabaos -3.5 years old290,0004 dairy cattle-1.5 years old200,0006 carabaos-1 yr old140,000Carrying amount on 12/31/103,160,000 A

18.FV of land and building (lower than PV of minimum lease payments)5,950,000 B19. Net. Income to ordinary shareholders (900,000 x 15)13,500,000Dividends on preference shares500,000Total net income14,000,000Divide by : (900,000 plus (400,0000)1,200,000Diluted EPS11.67 C

20. Deficit eliminated (1M +200+400+300)1,900,000 A

21. Total shareholders10,400,000Less: PSHE (1.25 M +250)+(1.25 M x 10% x 4 years)2,000,000Ordinary shareholders equity8,400,000Divide by (230,000 treasury)210,000Book value per ordinary share4000 A

22. Increase in contributed capital (8.5 M -5M)3,500,000Stock dividend (4M x 25%) (1,000,000)Donated capital(800,000)Proceeds from share issuance1,700,000

Accumulated profits beg1,500,000Stock dividends (4M x 25%)(1,000,000)Cash dividends declared during the year (SQUEEZE)(800,000)Net income2,500,000Accumulated profits end2,200,000Barrowing paid(1,500,000)Proceeds from shares issued1,700,000Dividends paid (800,000 + 500,000 beginning dividends payable)(1,300,000)Net cash used in financing activities(1,100,000) B

23. total cash dividends (500+300)800,000Fair value of property dividend at date of payment on 5/1/20101,400,000Fair value of share dividend at date of declaration (10% x 200,000 x 15 )300,000Decrease in RE2,500,000C

24. Royalty income for first half of the year800,000Royalty income for second half of the year (10M x 10%)1,000,0002011 Royalty Income1,800,000 A

25. Account receivable4,000,000Less: Required allowance300,000NRV.3,700,000 A

26. Proceeds3,000,000Cash Surrender Value(145,000)Unexpired Insurance premium (90,000/ 12 x 2)(15,000)Gain2,840,000 B

27. Accrued liability on Dec. 31 , 2010 1,200,000 C28. profit (900,000/30%)3,000,000 B29. 2010 compensation expense market value on 12/31/20102,100,000 B30. balance per bank statement1,250,000Deposit in transit200,000Outstanding checks (80,000)Bank service charges25,000Interest income(75,000)Error in recording check (73,000-37,000)(36,000)31 Adjusted accounts payable (2.5 M +150T-300T)1,284,000

32. Accumulated depreciation 12/31/093,000,000Impairment loss2,000,000Depreciation expense in 2010 (4M/4 years)1,000,000Total6,000,000

33. option price (50,000x 100)6,000,000Share options outstanding 2,000,000Total 8,000,000Less : Par value of shares issued (50,000 x 100)5,000,000Share premium3,000,000 B

34. Payment for real property2,000,000Sale of AFS (500 + 100)600,000Purchase of H & E(800,000)Advances to other companies(2,000,000)Cost of patent(150,000)Net cash used4,350,000 B

35. Cost5,000,000Less: 2006 and 2009 amortization (5M/ 5 x 2) ( Lease term)2,000,000Carrying amount 12/31/093,000,000Less: 2010 amortization (3M / 4 years) ( remaining life of asset)750,000CA 12/31/10 depreciation2,250,000 A

36. Adjusted RE 1/1/10 (3M-400,000x 70%)3,220,000 A

37. Collections5,000,000Rent receivable and 400,000White off50,000Total5,450,000Less: Rent receivable beginning700,000Rental revenue-accrual4,750,000B

38. Accrued liability-12/31/2010 (25 x 50,000)1,250,000Less: Accrued liability or 12/31/2009 (17 x 50, 000)850,0002010 compensation expense400,000 B

39. B=552,250-10B1,108=550,000Bonus =(550.000/1.10)500,000 B 40. Preference dividend in 2009 (10M x 12%)1,200,000Preference dividend in 2010 (10M x 24%)2,400,000Ordinary dividends (130,000 -30,000)x 121,200,000Total dividend declaration2,800,000 A2010 ordinary dividend rate (12.00 divided by 50.00)24%

41. BI 500,000Net purchases5,300,000TGAS5,800,000Less: Adjusted EI (600,000 + 80,000)680,000COS5,120,000 A

42. 10% preference shares issued (4M-3M equals 1 M/100 par10,000Subscription price (300,000/25%)1,200,000Less: Par value500,000Increase in share premium from subscription700,000

Increase in share premium-10% PS (1,500,000-300)1,200,000Increase in share premium from subscription(700,000)Share premium from issuance500,000

Proceeds from shares issued (1M par +500T share premium)1,500,000Divide by shares issued10,000Average issue price150 B

43. Fair value on Dec. 31, 20105,600,000Less: Amortized cost on Dec 31,20105,248,700Unrealized gain on available for sale securities251,300 A

44. carrying amount of the liability extinguished (5M + 1.2M)6,200,000Carrying amount of inventory(2,500,000)Fair value of shares (40,000 x 60)(2,400,000)Gain on extinguishment1,300,000 B

45.Issued price (6M x 110%)6,600,000Less: FV of bonds ex-warrants5,600,000Equity component1,000,000Excess over par from issuance of shares (150-100) x ( 6,000 x 20)6,000,000Total share premium7,000,000 A

46. PCF (18,000 + 5,000)23,000 C47. 2009 Warranty expense (850x250)212,500Less: 2009 Warranty services from 20009 sales (250 x 250)62,50012/31/09 warranty liability150,0002010 Warranty expense (1,000 x 250)250,000Total400,000Less : 2010 Warranty services from 2009 and 2010 sales (750 x 250)167,50012/31/10 Warranty liability212,500 D

48. Total shareholders equity (5.6 M/140%)4,000,000Contributed capital (1M + 800,000)(1,800,000Treasury shares200,000Retained earnings 12/312,400,000

Retained earnings on Jan. 1 (SQUEEZE)1,600,000 BNet income2,500,000Dividend declared(1,500,000)Error(400,000)Retained earnings Dec. 312,400,000

49. Rental expense from July 1 to December (75,000 x 8)450,000Amortization of improvements (500,000/ 5x6/12)50,000Total expense related to operating lease500,000 B

50. Net cash provided by operating activities(2,800-1,000-400-350-100-280)670,000 CInterest paid (80,000+20,000)100,000 B

PROBLEM I The following information was obtained in the audit of the cash account of CHELSEE COMPANY as of December 31, 2010. Assume that the CPA satisfied himself as to the propriety of the cash book the bank statements and the returned checks, except as noted:

1. The bookkeepers bank recon dilation at November 30, 2010Balance per bank statementP 194,000Add: Deposit in transit 11,000TotalP 205,000

Less: Outstanding checksNo. 1434P 1,40015627,50015715,80015848,000159130023,000Balance per booksP182,000

2. A summary of the bank statement for December 2010.Balance brought forwardP 194,000Deposits1,487,000TotalP 1,681,000Charges(1,325,000)Balance, December 31, 2010P356,0003. Included with cancelled checks returned with the December bank statement were the checks listed below4. The Chelsee Company discounted its. Own 60 day note for P 90,000 with the bank on December 1, 2010. The discount rate was 6 percent. The accountant recorded the proceeds as a cash receipt at the face value of the note.5. The accountant records customers dishonoured checks as a reduction of cash receipts. When the dishonoured checks are red posited they are recorded as regular cash receipt. Two NSF checks for P 1,800 and P 2,200 were returned by the bank during December. Both checks were redeposit and were recorded by the accountant.6. Cancellations of Chelsee Company checks are recorded by a reduction of cash disbursement7. December bank charges were P200; in addition, a P100 service charge was made in December for the collection of a note receivable in November. These charges were not recorded on the books.8. Check no. 1434 listed in the November outstanding checks was drawn in 2008. Since the payee cannot be located, the president of Chelsee Company agreed to the CPAs suggestion that the check be written back into the accounts by a journal entry.9. Outstanding checks at December 31,2010, totalled P 49,400 including checks 1432 and 158410. The cut-off bank statement disclosed that the bank had recorded a deposit of P 24,000 on January 2, 2011. The accountant had recorded this deposit on the books of December 31, 2010 and then mailed the deposit to the bank.

Cancelled checks returned with the December Bank statementNumberDate of checkAmount of checkComments

156211/28/10750This check was in payment of invoice for 57,500 and was recorded in the cash book as P 7,500

157111/28/105800This check was in the payment of an invoice for P 5, 800 and was recorded in the cash book as P 5,800

158312/04/101,500Examination of this check revealed that it was unsigned A discussion with the client disclosed that it had been mailed inadvertently before it was signed. The check was endorsed and deposited by the payee and processes by the bank even though it was a legal nullity. The check was recorded in the cash disbursements journal.

158812/12/108,000This check replaces 1584. Which was returned by the payee because it was mutilated? Check 1584 was not cancelled on the books

12/19/102,000This was counter check drawn at the bank by the president of the company as a cash advance for travel expense. The president overlook informing the bookkeeper about the check

12/20/103,000The drawer of this check was the Celsea Company

159512/20/103,500This check had been NSF and returned to the payee because the bank had erroneously believed that the check was drawn by the Chelseen company. Subsequently, the payee was advised to redeposit the check

159901/05/11100,000This check given to the payee on December 30, 2010 as a post dated check with the understanding that it would not be deposited until January 5. The check was not recorded on the books in December.

1. What is the correct amount of outstanding checks on December 31?a. P41,400b. P33,250c. P48,000d. P40,0002. What is amount of cash receipts per book in December?a. P1,496,900b. P1,504,900c. P1,495,100d. P1,487,0003. What is amount of cash disbursement per book in December?a. P1,254,850b. P1,252,850c. P1,256,850d. P1,248,8504. What is the cash in bank balance per book as of December 31?a. P426,050b. P428,250c. P430,050d. P343,0505. What is the adjusted cash balance as of December 31?a. P343.000b. P340,200c. P347,000d. P344,200PROBLEM NO. 2CALACHUCHI CORP. ACCOUNT BALANCEINVOICE

CUSTOMERDEC 31,2010DATEAMOUNT

Aruy , Inc.P35,18012/06/1011/29/1014,60021,180

Naku Co.20,92009/27/1008/20/102,0008,920

Syak Corp.30,60012/08/1010/25/1020,00010,600

Trip Co45,14011/17/1010/09/1023,14022,000

Uy Co.31,60012/12/1012/02/1019,20012,400

Xak Co.17,40009/12/1017,400

The estimated bad debt rates below are based on Calachuchi crops receivable collection experience.

Age of AccountsRate0-30 days1%31-60 days1.5%61-90 days3%91-120 days10%Over 120 days50%

The allowance for bad debts account had a debit balance of P5,500 on December 31, 2010 before adjustment.6. The companys accounts receivable under 61-90 days category should bea. P 32,600b. P44,320c. P 44,600d. P 42,0007. The companys accounts receivable under 91-120 category should bea. P 38,320b. P 40,000c. P 29,400d. P 12,0008. The allowance for bad debts to be reported on the statement on financial position at December 31, 2010 isa. P 9,699b. P 15, 199c. P 4,199d. P5, 5009. What entry should be made on December 31, 2010, to adjust the allowance for bad debts account?a. Bad debt expense15,199Allowance for bad debts15,199b. Bad debt expense4,199Allowance for bad debts4,199c. Allowance for bad debts5,500Bad debts expense5,500d. Bad debt expense9,699Allowance for bad debts9,699

PROBLEM NO. 3 The MALAWI COMPANY is an importer and wholesaler. Its merchandise is purchased from a number of suppliers and is warehoused until sold to consumers.

In conducting his audit for the year ended December 31,2010, the company CPA determined that the system of internal control was good. Accordingly, he observed the physical. Inventory at an interim date, November 30, 2010 , instead of at year end.

The following information was obtained from the general ledger.Inventory, January 1, 2010P 90,000

Inventory, November 30, 2010225,000

Sales for eleven months ended November 30, 2010800,000

Sales for year ended December 31, 2010950,000

Purchases for eleven months ended November 30,2010 (before audit adjustments)720,000

Purchases for year ended December 31, 2010 (before audit adjustment)810,000

Additional Information is as follow:a. Goods received on November 28 but recorded as purchases in December10,000b. Deposits made in October 2010 for purchases to be made in 2011 but charge To purchase14,000c. Defective merchandise returned to suppliers:Total at November 30, 20105,000Total at December 31, 2010, excluding November items7,000d. Goods shipped in November under FOB destination and received in December were recorded as purchase in November18,500e. Through the carelessness of the client warehouseman, certain goods Were damaged in December and sold in the same month at its cost.20,000f. Audit of the clients November inventory summary revealed the following:Items duplicated3,000Purchases in transitUnder FOB shipping point 12,000Under FOB destination18,500Items counted but not included in the inventory summary7,000Errors in extension that overvalued the items4,000

11. What is the correct amount of net purchases for the month of December 2010?a. P83,000b. P91,500c. P82,500d. P101,50012. The correct inventory on November 30, 2010 is a. P206,500b. P214,500c. P237,000d. P218,50013. What is the gross profit for eleven months ended November 30, 2010?a. P234,000b. P217,000c. P224,000d. P237,50014. What is the cost of sales ratio for eleven months ended November 30, 2010?a. 73%b. 70%c. 28%d. 72%15. What is the estimated inventory on December 31, 2010?a. P183,100b. P175,900c. P184,400d. P190,000PROBLEM NO. 4You have been asked by the proprietor of the SOMALIA CO. to verify the accountability of the cashier bookkeeper, who was allowed to take a vacation leave a few days ago

A. The bank reconciliation statements prepared by the cashier bookkeeper are presented below:

November 30, 2010Balance per bank statementP 21,500Cash on hand 500Total 22,000

Outstanding checks:No. 2520P2, 00025211,40025221,900(3,300)Erroneous bank charge2,000Erroneous bank credit (500)Book balance P20,200

December 31, 2010Balance per bank statementP 135,000Cash on hand 6,300Total 141,300Outstanding checks No. 2674P31, 000267510,3002676 5,000 (41,300)Erroneous bank charge3,000Erroneous bank credit(600)Book balanceP 102,400

B. The cash in Bank account in the general ledger shows the following debits and credits during December Cash in bank Dec. 1balance P 20,200 2 Received from customers 4,500 7 Received from customers 5,00012 Received from customers 20,00017 Received from customers 30,00023 Received from customers 9,00027 Received from customers 70,00031 Received from customers 48,500Total P198,200 Dec. 1Checks Issued P2,0005 Checks Issued 5,20014 Checks Issued 31,00024 Checks Issued 46,00028 Checks Issued 7,600

31balaced 102,400Total P198,200

C. the following summarized transactions were taken from the bank statements for the months of December 2010.Balance, December 1, 2010Total depositsThe total deposits per bank statement include:a. Collection of notes receivable P 5,000b. Correction of November erroneous bank charge 2,000c. December 10 deposit of Lava, Inc. Credited in error to Somalia 600Total P3, 500

D. cash on hand per count in the morning of January 2, 2011 amounted to P 6, 300E. before leaving his company for a one week vacation, the proprietor had left several signed blank checks that the cashier bookkeeper had cashed for his personal use.16. What is the adjusted cash balance on November 30, 2010?a. P16,500b. P13,200c. P20,200d. P14,50017. The amount of uncounted in December isa. P11,000b. P13,200c. P9,000d. P15,10018. The amount of unrecorded/unsupported disbursements in December isa. P15,100b. P10,900c. P7,000d. P5,00019. What is the total cash shortage as of December 31, 2010?a. P26,000b. P15,100c. P33,000d. P7,00020. What is the adjusted cash balance on December 31, 2010a. P102,400b. P125,000c. P87,400d. P111,400

Indicators that the assets of the unit were impaired. The carrying amounts of the assets and liabilities of the unit at December 31, 2010 were:

BuildingsP4, 200,000Accumulated depreciation buildings(1,800,000)Factory machinery2,200,000Accumulated depreciation machinery(400,000)Goodwill150,000Inventory800,000Receivables400,000Allowance for doubtful accounts(50,000)Cash200,000Accounts payable300,000Loans200,000 Depreciated at P 600,000 per annum Depreciated at P 450,000 per annum

POTPOT: determined the value use of the unit to be P 5,350,000. The receivables were considered to be collectible, except those considered doubtful.

During the year 2011, POTPOT increased the depreciation charge on building to P650, 00 per annum, and to P 500,000 per annum for factory machinery. The inventory on hand at January 1, 2011 was sold by the end of the year, at December 31, 2011, POTPOT Company, due to a retum in the market to use of the traditional barrels for wines and an increase in wine production, assessed the recoverable amount of the cash generating unit to be P 300,000 greater than the carrying amount of the unit. As a result, POTPOT recognized a reversal of the impairment loss.

21. What amount of impairment loss on December 31, 2010 should be allocated to inventory?a. P56,000b. P 28, 829c. P32,000d. P 022. What is the factory Machinery net carrying amount (after allocation of impairment kiss) on December 31,2010?a. P 1, 735, 135b. P 1, 674, 000c. P 1,800, 000d. P 1, 728, 00023. What amount or reversal of impairment loss should be recognized on December 31, 2011?a. P 300, 000b. P 268, 000c. P 168, 000d. P 200, 00024. Assume that the recoverable amount at December 31, 2011 was P 200,000 greater than the carrying amount of the cash generating unit. What is the net carrying amount of the buildings after recognition of the impairment recovery?a. P 1,313, 219b. P 1, 768, 781c. P 1, 800, 000d. P 1,750, 00025. Assume that the recoverable amount at December 31, 2011 was P 200,000 greater than the carrying amount of the cast generating unit and that the recoverable amount of the Buildings was P 1,750,000. What is the next carrying amount of the factory machinery after the recognition of the impairment recovery?a. P 1,332,000b. P1,313,219c. P1,228,000d. P 1,324,000

Goding , Inc. preference60,0001,200,0001,290,000tradingSonata Co. ordinary(30% ownership)600,00034,200,00033,900,000investment in Associate

Jordan Co. ordinary750,0002,025,0001,500,000available for sale

BORDO COMPANYS investment had the following market values at December 31, 2010

Omar Co. ordinaryP 3,060,000Goding, Inc. preference1,290,000Sonata Co. ordinary33,450,000Jordan Co. ordinary1,700,000

Assume that all of the above securities were acquired in 2009 and none of the indicated declines in market value are considered other than temporary.

26. Which of the following should be reported in Bordos 2009 income statement?a. Unrealized loss of P 60,000b. Unrealized loss of P 585, 000c. Unrealized loss of P 200, 000d. Unrealized loss of P 150, 00027. What amount of loss in the above securities should be included in Bordos statement of comprehensive income for the year ended December 31, 2009 as component of other comprehensive income?a. P 675,000b. P 465, 000c. P 585, 000d. P525,00028. Assume that Jordan Co.s ordinary shares market decline is other than temporary. What valuation entry is required for this investment at December 31, 2009 under this change in assumption?a. Impairment loss525,000Investment in AFS securities525,000b. Unrealized loss on AFS securities525,000Investment in AFS securities525,000c. Impairment loss525,000Unrealized loss on AFS securities525,000d. No valuation entry is necessary525,000

Assume that the investment categories remain the same and that all declines in 2009 and 2010 are temporary except for the 2009 decline in Jordan Co.s ordinary shares29. In its 2009 income statement, Bordo should reporta. Unrealized gain of P 150, 000b. Unrealized gain of P 410, 000c. Gain on impairment recovery of P 200, 000d. Unrealized gain of P 210, 00030. What amount of gain should be included in Bordos statement of comprehensive income for the year ended December 31, 2010 as component of other comprehensive income?a. P 0b. P 200,000c. P 325,000d. P525,000

2008P 127,0002009150,0002010128,500

You are performing the audit for the year ended December 31,2010. During your examination you discover the following errorsa. As a result of errors in the physical count, ending inventories were misstate as follows:December 31, 2009P14, 000overstatedDecember 31, 2010P23, 000understated

b. On December 29, 2010. Dominica recorded as a purchase, merchandise in transit which cost P 15,000. The merchandise was shipped FOB Destination and had not arrived by December 31. The merchandise was not included in the ending inventory.

c. Dominica records sales on the accrual basis but failed to record sales on account made the end of each year as follows2008P4, 00020095,00020103,500

d. The company failed to record accrued office salaries as followsDecember 31, 2008P 10,000December 31, 200914,000

e. On March 1, 2009, a 10% stock dividend was declared and distributed. The par value of the shares amounted to 10,000 and market value was P 13,000. The stock dividend was recorded as followsMiscellaneous expense13,000Ordinary share capital 10, 000Retained earnings3,000

f. On July 2009, Dominica acquired a three year insurance policy. The three year premium of P6,000 was paid on that date , and entire premium was recorded as insurance expense.

g. On January 1, 2010 Dominica retired bonds with a book value of P 120, 000 for P 106, 000 the gain was incorrectly deferred and is being amortized over 10 years as a reduction of interest expense on other outstanding obligations.

31. What is the adjusted net income for the year ended December 31, 2008?a. P 133,000b. P 117, 000c. P121,000d. P 113, 00032. What is the adjusted net income for the year ended December 31, 2009/a. P 151, 000b. P 187, 000c. P 104, 400d. P 203, 60033. What is the adjusted net income for the year ended December 31, 2010?a. P129, 600b. P131,000c. P 104, 400d. P 203, 60034. What adjusting entry should be made on December 31, 2010, to correct the error describe in item B?a. Purchases 15,000Accounts payable15,000b. Accounts payable15,000Purchases 15,000c. Accounts payable15,000Cash15,000d. No adjusting journal entry is necessary35. The adjusting entry on December 31, 2009, to correct the error described in item E should include a debit toa. Retained earnings of P 16, 000b. Ordinary share capital of P 10,000c. Share premium of P 3,000d. Miscellaneous expenses of P 3,000

PROBLEM NO. 8

In making the first adult of the Delivery Equipment account of DELTA CORPORATION as of December 31, 2010, you encounter the following facts. DATEPARTICULARSDEBITCREDIT

1/1/08Tracks 1,2,3, and 4P3,200,000

3/15/09Replacement of Truck 3 tires25,000

7/01/09Truck 5800,000

7/10/09Reconditioning of truck 4, which was damaged in a collision35,000

9/1/09Insurance recovery on truck 4 accidentP33,000

10/01/09Sale of truck 2600,000

4/01/10Truck 61,000,000150,000

5/2/10Repainting of truck 127,000

6/30/10Truck 7720,000

12/1/10Cash received on lease of truck 722,000

Accumulated DepreciationDATEPARTICULARSDEBITCREDIT

12/31/08Depreciation expenseP300,000

12/31/09Depreciation expense300,000

12/31/10Depreciation expense300,000

Additional information:1. On July 1,2009, Truck 3 was traded in for a new truck , truck 5 costing P 850,000 the selling party allowed a P 50, 000 trade in value for the old truck2. On April 1, 2010, truck 6 was purchased for P 1,000,000; truck 1 and cash of p 850,000 being given for the new truck3. You are instructed by the senior in charge of the audit to accept the depreciation rate of 20% by unit basis4. Unit cost of trucks 1 to 4 is at P 800,000 each

36. The net increase (decrease) in retained earnings should bea. (P1,102,000)b. (P545,000)c. P 80,000d. (P1,022,000)37. What is the loss on trade in of Truck No. 3?a. P430,000b. P510,000c. P560,000d. P038. What is the gain on sale of Truck no. 2?a. P120,000b. P200,000c. P80,000d. P 039. What is the loss on trade in of Truck No.1?a. P290,000b. P170,000c. P150,000d. P 040. What is the correct cost of truck No. 5?a. P850,000b. P800,000c. P900,000d. P560,00041. What is the correct cost of truck No. 6?a. P440,000b. P305,000c. P800,000d. P1,000,00042. What is the correct depreciation expense for 2009?a. P725,000b. P305,000c. P605,000d. P600,00043. The entry correct depreciation expense for 2010?a. P552,000b. P592,000c. P712,000d. P300,00044. The entry correct the depreciatin charges for the years 2008/through 2010 should include a credit to accumulated depreciation ofa. P645,000b. P937,000c. P900,000d. P292,00045. The balance of the Delivery Equipment accounts at December 31, 2010 should be.a. P5,770,000b. P3,320,000c. P4,170,000d. P3,370,000

PROBLEM NO. 9

The GUNDING Co. is on calendar year basts. The following data were found during your audit.

a. Goods in transit shipped FOB shipping point on December 28 by a supplier in the amount of P 100,000 had been excluded from the inventory and further testing revealed that the purchase had been recorded.b. Goods costing P 30, 000 had been received, included in inventory, and recorded as a purchase. However, upon your inspection the goods were found to be defective and would be immediately returned.c. Materials costing P170,000 and billed on December 30 at a selling price of P 264,000 had been segregated in the warehouse of shipment to a customer. The materials had been excluded from inventory as a signed purchase order had been received from the customer. Terms FOB destination.d. Goods costing P 70, 000 was out on consignment with Gundara Inc. since the monthly statement from Gundara listed those materials as on hand, the items had been excluded from the final inventory and invoiced on December 31 at P 80,000.e. The sale of P 150,000 worth of materials and costing p 120,000 had been shipped FOB point of shipment on December 31. However, this inventory was found to be included in the final inventory.f. Goods costing P 100,000 and selling for P140,000 had been segregated , but not shipped at December 31, and were not included in the inventory. A review of the customers purchase order set forth terms as FOB destination. The sale had not been recorded.g. Your client has an invoice from a supplier, terms FOB shipping point, but the goods had not arrived as yet. However, these materials costing P134,000 had been included in the inventory count, nut no entry had been made for their purchase.h. Merchandise costing p 200,000 had been recorded as a purchase but not included in Inventory. Terms of sale are FOB shipping point according the supplier warehouse which had arrived by December 31.

Further Inspection of the clients records revealed the following December 31 balances: Inventory, P 1,350,000; Accounts receivable, P 630,000 ; accounts payable, P 690,000; sales P6,032,000; Purchases, P 3, 150,000; Net Income , P727,000.

Based on the preceding information, determine the adjusted balances of the following:46. Inventory a. P700,000b. P934,000c. P1,900,000d. P1,840,00047. Accounts receivable a. P286,000b. P380,000c. P146,000d. P405,00048. Purchases a. P3,354,000b. P3,150,000c. P3,254,000d. P3,120,00049. Sales a. P5,848,000b. P6,376,000c. P5,683,000d. P5,768,00050. Net Incomea. P769,000b. P569,000c. P829,000d. P709,000

PROBLEM 10:Presented below are COMBANTRIN COMPANYS comparative statements of financial position and income statements

COMBANTRIN COMPANYCOMPARATIVE STATEMENTS OF FINANCIAL POSITIONDecember 31, 2010 and 2009

Assets20102009

Current assets

CashP119,000P98,000

Accounts receivable312,000254,000

Inventory278,000239,000

Prepaid expenses35,00021,000

Total current assets744,000612,000

Available for sale securities59,000

Property, plant and equipment536,000409,000

Accumulated depreciation(76,0000)(53,000)

Total noncurrent assets519,000356,000

Total assetsP1,263,000P968,000

Liabilities and shareholders equity

Current assetsAccounts payableP212,000P198,000

Accrued expenses98,00076,000

Dividends payable10,000_________

Total current liabilities 350,000274,000

Notes payable-due 2012125,000__________

Total liabilities475,000274,000

Shareholder equity:Ordinary share capital600,000550,000

Retained earnings188,000144,000

Total shareholders equity788,000694,000

Total liabilities and shareholders equityP1,263,000P968,000

COMBANTRIN COMPANYCONDENSED COMPARATIVE INCOME STATEMENTSFor the Years Ended December 31, 2010 and 2009

Net sales20102009Cost of goods soldP3, 561,000P3, 254,000Gross income2,789,0002,568,000Expenses772,000686,000Net income 521,000486,000P251,000P200,000

Additional information for COMBANTRIN COMPANY a. All accounts receivable and accounts payable relate to trade merchandiseb. The proceeds from the notes payable were used to finance plant expansionc. Ordinary shares were sold to provide additional working capital

Compute the following for 2010.46. Cash collected from accounts receivable (assume all sales are on account)a. P3,619,000b. P3,503,000c. P3,561,000d. P3,249,00047. Total purchases (assume all purchases of inventory are on account)a. P2,828,000b. P2,789,000c. P2,550,000d. P2,750,00048. Cash payments made on accounts payable to suppliersa. P2,630,000b. P2,842,000c. P2,828,000d. P2,814,00049. Net cash provided by operationsa. P689,000b. P191,000c. P222,000d. P199,00050. Cash receipts not provided by operationsa. P175,000b. P177,000c. P50,000d. P125,000

SET A1. A, B and C are partners in a universal partnership of profits engaged in operation of taxis. The partners contributed:A- 100 Toyota ViosB- 3,000 aqm landC- Fuel and oilsWhich of the following is correct?a. In case of loss due to fortuitous event, the partnership bears the lossb. The partnership becomes the owner of the things contributed to the partnershipc. The partners retained the ownership over the things they contributed hence; they will bear the risk of loss.d. The partnership begins from the moment of the execution of the contract , except if stipulated otherwise2. Which of the following statements is not correct?a. The creditor acquires real right to the fruits of the thing from the time they have been delivered b. An oral sale of land made by its owner in unenforceablec. The buyer acquires real right to the fruits of the thing from the perfection of the saled. A sale of land made by an agent without a written authority from the owner is void3. A 16 years old sold his property to B, who did not notice that A is a minor. One year later B sold the property to C who knew that A is a minor. Can A ask for annulment of the sale?a. Yes, because C is in bad faithb. No, because B is in good faithc. No, because B is not capable of returning the propertyd. Yes, whether C is in good faith or in bad faith because the title of B is voidable4. A promissory note reads I Promise to pay A,B, C and D P24,000 Sgd. E, F and G. B can collect from Ea. P 24,000b. P 8,000c. P 6,000d. P 2,0005. Today, S sold to B in S is name the land of O, without authority from O, B bought the land in good faith. The contract provides that the delivery will be 30 days from today. The contract isa. Valid if S owns the land on the day of deliveryb. Void , because S was not the owner of the land when the contract was perfectedc. Unenforceable, because S had no authority to sell the landd. Voidable, because S is guilty of fraud6. A, B and C are solidary debtors of D for P90, 000 where the due date is on April 1, 2011. On January 1, 2011, A paid D P90, 000. Later A demanded reimbursement from B. if B effects reimbursement to A on July 1, 2011. Which of the following is correct?a. B pays A P60,000 plus interest from January 1,2011 to July 1, 2011b. B pays A P30,000 plus interest from January 1,2011 to July 1, 2011c. B pays A P30,000 plus interest from April 1,2011 to July 1, 2011d. B pays A P45,000 plus interest from April 1,2011 to July 1, 20117. S sold his agricultural land to B for P1M .The FMV is P1.5 M. B. paid s in counterfeit peso bills. The sale isa. Void, because the cause is illegalb. Valid, because the cause is the selling price of PIMc. Rescissible, because of lesion which is more than of the value of the propertyd. Voidable, because of the fraud committed by B.8. As regard cash dividend, which of the following is correct/a. Declared by the board of majority vote and ratified by the stockholders by the majority vote.b. Declared by the board of majority vote and ratified by the stockholders by vote of the outstanding capital stockc. Declared by the board of majority vote and need not be ratified by the stockholdersd. Declared by the board by 3/2 vote and need not be ratified by the stockholders9. A barrowed from B P2M and the secure its payment A orally agreed to deliver his 8 hectare agricultural land by way of antichresis and to pay 12% interest per annura. Which is correct?a. The contracts of loan and antichresis are both validb. The contracts of loan is valid but antichresis is voidc. The contracts of antichresis is valid but loan is voidd. Both contracts of loan and antichresis are void10. Elements of contracts of pledge and mortgage , except.a. Both are necessary contractsb. Both are real contractsc. Both cannot exist without a valid obligationd. In case of default, the creditors cannot appropriate the things pledged or mortgaged11. Which of the following statements is not correcta. An agreement to constitute a commodatum is binding and is perfected from the moment there is meeting of mindsb. Fixed, savings and current deposits of money in banks and similar institutions shall be governed by the provisions concerning muthiumc. Precarium is a kind of commodatum where the bailor may demand the thing loaned at willd. In case of extraordinary expenses , the debtor in mutuum will shoulder 50% if he is in actual use of the thing barrowed12. A contributed PIM, B contributed PIM and C contributed services. they agreed to divide the profits and losses equality . in case of loss of P3M for how much, if any, is C liable?a. Nothing because an industrial partner is exempt from losses b. PIM but with reimbursement from A and B equalityc. A and B shall shoulder the loss equality at P1.5M eachd. PIM, as stipulated 13. As regards the corporate by-laws , which of the following is true?a. To adopt, amend or repeal 3/2 of the outstanding capital stock is needed b. To delegate to the board of directors the power to amend, repeal or adopt new by-laws, majority of the outstanding capital stockc. To revoke the power delegated to the board to amend, repeal or adopt new by-laws 3/2 of the outstanding capital stockd. To amend, repeal or adopt new by-laws, majority of the outstanding capital stock.14. A contract of antichresis isa. A contract of mortgage whereby possession of the mortgaged property is given to the creditorb. A contract of loan secured by a real property, where possession is retained by the debtorc. A contract of loan without securityd. A consensual contract as it is perfected by mere consent15. A subscribed to 1,000 voting shares of stock of X Corporation. She paid 25% of the said subscription during the stockholders meeting can A vote all her subscribed shares/a. No, because the subscription has not yet been fully paidb. No, because As shares have become delinguent which cannot be voted c. Yes, as to the paid percentage of subscription d. Yes, because unpaid shares not delinquent can be voted16. To defraud his creditor , A sold his property to B (who was in good faith). Later B sold the property to C, who was in bad faith. May the creditor rescind the sale?a. Yes, because C, is bad faithb. No, because B is in good faithc. No, because B is not capable of returning the propertyd. Yes, because the contract is rescissible17. A was having his house repaired by B, who needed construction materials , so A orally told the seller C, give B the materials , I shall be responsible. I shall pay in 30 days. C delivered the materials As a result,a. The contract is unenforceable because A made an oral agreement to answer for the debt of Bb. The contract is enforceable because A did not make a special promise to answer for the default of another personc. The contract shall be enforceable if there is ratification by Ad. The contract shall be unenforceable if the value is at least P 500.0018. Under the negotiable instruments law to be a holder in due course , the holder must have acquired the instrument before it is overdue . does this apply to the payee to whom the maker issued an overdue note?a. Yes, because the payee is still considered a holderb. Yes, because issuance to the payee is not considered a negotiationc. No, because the law does not distinguish between payee and subsequent holderd. No, because the payee is privy to the contract between himself and the maker19. In which of the following is demand necessary to make the debtor in delay in the performance of his obligation?a. When the time of performance is of the essence b. When the time of performance has been stipulated c. When the law so providesd. When demand would be useless20. With written authority from his principal, the agent sold orally the land of the principal. The sale isa. Rescissibleb. Voidablec. Uncoforceabled. Void21. Without authority from B, A orally sold Bs house in Bs name. The sale is a. Rescissibleb. Voidablec. Uncoforceabled. Void22. S sold B his land on September 19, 2010. On September 25, an absolute deed of sale was executed and notarized on September 30, the sale was registered with the Registry of Deeds , On October 5, B took actual possession of the land by building a fence thereon. When did B acquire ownership of the land?a. On September 19b. On September 25c. On September 30d. On October 523. S sold to B his car on September 19, 2010. On September 25, an absolute deed of sale was executed and notarized . on September 30, the sale was registered with the LTO. On October 5, B took actual possession of the car. When did B acquire title to the car?a. On September 19b. On September 25c. On September 30d. On October 524. A and B are co owners of a percel of land A donated his share to C can B redeem the said share from C?a. Yes, because the law looks with disfavour at co-ownershipb. No, because legal redemption applies only in case of onerous transfersc. No, unless he enforce his right through count actiond. Yes, but in proportion to his interest in the land as co-owner25. Dowes C a sum of money with M as mortgagor of his land to secure the loan. Is the mortgage valid even if the mortgagor is not the debtor?a. Yes, provided M is the absolute owner of the property mortgagedb. Yes, provided it is in writing and registeredc. No, the mortgagor must be the debtor himselfd. No, unless the mortgagor is a co-debtor26. In three of the following case s, the agency cannot be revoked without a just cause except:a. It is means of fulfilling an obligation already existingb. A bilateral contract depends upon itc. It is coupled with interest common to the great and principald. Partner is appointed manager in the articles of partnership 27. P appoints A as guarantee commission agent to sell his products A sold them to B who failed to pay despite the diligent efforts of A in collecting is A still liable for the purchase price?a. Yes, because of the guarantee commission given to himb. No, because he was not at fault in the collectionc. No, if her returns to guarantee commissiond. Yes, but he is not entitled anymore to the commissions28. P appointed A1 and A2 as his agents for a common transaction and they agreed that they shall be solidarity liable for P for damages in case of violations of their obligations as such. What is the agent at fault the only one liable for damages even if solidarity has been stipulated?a. If the other agent is not at faultb. Both of them shall be liable always since solidarity was agreed uponc. If the one at fault shall answer for all the damagesd. If the one at fault acted in excess of authority29. A, B, and C entered into an oral contract of partnership each contributing P2M each of the common fund but failed to register the partnership with the SEC. In the partnership valid/a. No, because every contract of partnership having a capital of three thousand pesos or more in money or property must be in public instrument and registered with the SECb. Yes, because public instrument is necessary is case of contributions of immovablesc. Yes, because a partnership contract does not require a specific form to be validd. No, because registration with the SEC is essential for a partnership to be valid and acquire judicial personality 30. A and B are co-owners of a parcel of land from where they share the profits equally as co-heirs in inheritance. Is there a partnershipa. There is a prima facie presumption of partnership because of the equal sharing of profitsb. There is no partnership because co-ownership by itself does not establish a partnership despite the sharing of profitsc. There is no partnership since in partnership, division of profits is not always necessary among partnersd. There is a prima facie presumption of partnership they being co-owners and co-possessors31. A and B are partners in AB partnership. While A was performing his duties as a partner in the course of business , he negligently cause damage to X and third person. Who shall be liable to X and up to what extent?a. Only the partnership is still liable it being a juridical person separate and distinct from the partnersb. Only A shall be liable for he is the only one at faultc. Both A and B shall be liable solidarity to Xd. A,B and the partnership are all liable solidarity to X32. A, B, and C as partners in a partnership stipulated that A shall not share in the profits and losses. Is the agreement valid?a. Yes, among the partners but not valid to third personsb. Yes, valid as long as third persons are not prejudicedc. Not valid stipulations exempting a partner from sharing in the profits and lossesd. Not valid as against third persons or partnership creditors33. In the matter of management of the corporation this is supremea. Presidentb. Chairman of the Board of Directorsc. Stockholdersd. Board of Directors34-37 A promissory note readsI promise to pay P or order Php 100,000. Sgd. M, The promissory note was issued by M to P in payment of merchandise purchased from P. However, P delivered only Php 60,000. Later P. made a qualified endorsement to A, who was not aware of the partial absence of consideration. Thereafter, A made a special endorsement to B, then B made a blank endorsement to C both B and C are aware of the partial absence of consideration. 34. In the hands of A, A can collect from Ma. Php 100,000b. Php 60,000c. Php 40,000d. P 035. In the hands of B, B can collect from Ma. Php 100,000b. Php 60,000c. Php 40,000d. P 036. Using the preceding number, if M dishonours the nota, B can collect from Pa. Php 100,000b. Php 60,000c. Php 40,000d. P 037. In the hands of C, C can collect from Ma. Php 100,000b. Php 60,000c. Php 40,000d. P 038. Which of the following is not negotiable?a. I promise to pay P or order Php 100,000 , 30 days after date Sgd Mb. I promise to pay P or bearer Php 100,000Sgd Mc. Pay to P or order Php 100,000 on Dec. 25, 2010Sgd Md. Pay to P or bearer Php 100,000 and charge the name against my deposit with you Sgd M to Y39-4039. M male a negotiable promissory note payable to the order of P. later made a special endorsement to A. Then B stole the note from A and indorsed it to C who received the note in good faith. Later C indorsed the note to D. which of the following is correct?a. D can collect from M but not from Ab. If M will not pay , D can collect from Pc. C can collect from endorsers P and B40. Using the preceding number, if M pays D in good faith, which of the following is incorrect?a. The obligation of M is extinguished b. A can collect from Mc. The obligation of P is extinguished d. A should collect from B, the thief41. When a property is transferred during lifetime to relieve the transferor from the burden of the management of such property, and the transfer of its subject to tax, the basis of the tax isa. The FMV at the time of donationb. The FMV at the time of death of the donorc. The FMV at the time the donor required the propertyd. The cost of the property in the hands of the donor42. Which of the following taxes had been replaced by the VAT?a. Percentage tax on international air and shipping carriers doing business in the Philippinesb. Tax on life insurance premiums c. Caterer a tax on operators of restaurant and eating placesd. Tax on agents of foreign insurance companies43. The DOC RESTAURANT, a VAT registered taxpayer , issued the following official receipt dated September 18, 2010.2 pieces of crispy chickenP200.00Siomai special45. 00Sago gulaman85.00Mushroom and chicken soup100.00Braised beef with cauliflower240.00Coke light in can (2xP40)80.00P750.00Locat tax 15.00Service charge60.00TotalP825.00

The output vat on the sale isa. P99.00b. P 88.39c. P80.36d. P90.0044. Mr. And Mrs. A donated a conjugal agricultural land to their son who is getting married with ten (10) months after the date of donation. The fair market value at the time of marriage was P 800,000, but its fair market value at the time of donation was P 600,000. The donated property was subject to P100,000 mortgage which was assumed by the donors.The taxable net gift of Mr. A isa. P240,000b. P290,000c. P390,000d. P 340,00045. An individual taxpayer is qualified to substituted filing of income tax return if he meets the following requisite except:a. Pure compensation income onlyb. One employer during the calendar yearc. Creditable withholding tax is correctd. Should be a minimum wage earner46. A taxpayer received as assessment notice on February 14, 2010. He filed a motion for consideration with the BIR on February 22, 2010. The submission of necessary documents to support his motion for consideration isa. March 14, 2010b. April 23, 2010c. April 15, 2010d. March 22, 201047. Under absolute community of property, which of the following is a community property?a. Property inherited by the surviving spouse during the marriageb. Property bought during the marriage using the money inherited of the decedent before marriagec. Personal belongings (e.g. clothes , shoes, etc.) bought during the marriage for the exclusive use of the decedentd. Jewelry inherited by the decedent during the marriage48. Which of the following properties owned by a non resident alien decedent is not subject to the rule of reciprocity?a. Shares of stock in a Philippine domestic corporation b. Investment in stock in a US corporation 80% of the business of which is in the Philippinesc. Investment in bonds in a US corporation that have acquired business suits in the Philippinesd. 40% share in a Philippines partnership49. Which of the following shall not be exempt from value added tax?a. Sales by the agricultural cooperatives duly registered with the Cooperative Development Authority to their members as well as sale of their products, whether in its original state or processes form to non membersb. Gross receipts from the lending activities by credit of multipurpose cooperatives duly registered with the Cooperative Development Authority whose lending operation is limited to their membersc. Sales of non agricultural, non-electric and non credit cooperatives duly registered with Cooperative Development authority if the capital contribution of each member does not exceeds P 15,000d. Sales of electric cooperatives duly registered with Cooperative Development Authority relative to the generation and distribution of electricity50. A common carrier by land is engaged in the transport of passenger , goods and cargoes . As gross receipts amounted to P3M, 50% of which came from transport of passengers. He is not VAT registered, what business taxes will A pay?a. 12% value added taxb. 3% common carrier taxc. 3% tax on VAT exempt persons on gross receipts from transport of goods and cargoes and 3 common carrier tax on gross receipts from transport of passengersd. 12% VAT on gross receipts from transport of goods and cargoes and 3% common carriers tax on gross receipts from transport of passengers. 51. A keeper of garage whose gross receipts for the year exceed P 1,500,000 is subject to:a. Value added taxb. Common carrier taxc. Excise taxd. Franchise tax52. The following are related to the tax assessment of a tax payerAssessment receivedJanuary 1,2010Petition for reconsideration filed with BIRFebruary 1,2010 Documents supporting the petition filed with BIRFebruary 7, 2010Decision of BIR denying the petition received by the taxpayerMarch 22, 2010Second request for reconsideration filed with BIRMarch 30, 2010Decision of denial of second request for reconsideration was received April 12, 2010

Last day to appeal to the Court of Tax Appealsa. May 12, 2010b. July 4, 2010c. May 4, 2010d. June 4, 201053. Which of the inherent powers may be exercised even by public service corporations and public utilities?a. Power of taxationb. Power of eminent domainc. Police powerd. A and B54. A law was passed by Congress which granted tax amnesty to those who have not paid income taxes for a certain year without at the same time providing for the refund of taxes to those who have already paid them . the law is:a. Valid because Congress provided for a valid classificationb. Not valid because those who did not pay their taxes are favoured over those have paid their taxesc. Valid because Congress has the sole discretion of determining whom to taxd. Not valid because only the grant amnesty is the sole prerogative of the precedent 55. How long must the books of accounts be kept?a. For a period beginning to preceding taxable year until the last day of the current taxable yearb. For a period beginning the current taxable until the last day of the following taxable yearc. For a period beginning from the last entry in each book until the last day prescribed within which the Commissioner is allowed to make an assessmentd. For a period of 3 years beginning from the current taxable year until the last day of the third taxable year56. Due to financial difficulties , ABC Corp requested taht its 2009 income tax liability of P400,000 be paid in four (4) equal monthly instalments , starting April 15, 2010. Its request for instalment payment was approved on April 8, 2010. The tax due on May 15, 2010 is.a. P 100,000b. P 101, 667c. P 105, 000d. P106, 66757. Which of the following is not correct?a. A tax credit certificate validity issued by the BIR may be used as credit against internal revenue taxes except against withholding taxb. All taxes imposed and collected by the BIR are internal revenue taxesc. Public Officials who acquire information on violation of internal revenue laws in the performance of their duties during their incumbency are entitled to informer reward. d. The proceedings on the protest in the BIR is an administrative proceedings58. On March 31, 2010, A received 100 shares of stock with a fair market value P 120/share as of March 31, 2010. The shares of stock were intended to pay the services rendered by A on November 20, 2009, at which time the fair market value was P 100/share. The per value per share if P50. The income A isa. P12,000b. P 10,000c. P5,000d. P7,00059. Which of the following statements is not correct?a. An article subject to excise tax may be exempt from vat b. An article subject to excise tax may be subject to vatc. A tax payer may be have two business where one as subject to vat and the other is subject to percentage taxd. Manufacturers and importers of goods are subject to excise tax60. Mr. Araki a non resident alien stockholders, received a dividend income of P300,000 in 2010 from a domestic corporation whose gross income from within and without the Philippines for three years preceding 2010 show:Source of income200720082009

From within the PhilippinesP 16,000,000P12,000,000P24,000,000

From without the Philippines 18,000,00014,000,00016,000,000

How much of the individual income received by Mr. Araki considered income from sources within the Philippines?a. Zerob. P156,000c. P300,000d. P144,00061. Which of the following is not a condition imposed by the constitution for the exercise of the power of eminent domain?a. The consent of the owner of the private property to sell the same to the government b. The payment of just compensationc. The observance of due process in making of private propertyd. The existence of public use of the taking of a private property62. Mr. Bagongbahay acquired his old principal residence in 1990 at a cost of P4M. he sold the said property on January 1, 2010 for P16M, although the FMV on that date was P20M. within the reglementary period, Bagongbahay acquired his new principal residence for P 12M.Which of the following is incorrect?a. Bagongbahay has to pay capital gains tax of P 300,000b. The cost basis for the new principal residence is P3.2 Mc. The utilized amount of the gross selling price is P 12Md. If the proceeds were not used to buy a new principal residence, the capital gains

63-64- For the month of August and September 2010, ABC Bank has the following income/lossInterest income with maturityAugustSeptember

Of less than 5 years P800,000P1M

Of more than 5 years800,0001M

rentals400,000800,000

Net trading gain (Loss)(100,000)200,000

63. The gross receipts tax of ABC Bank for August isa. P76,000b. P68, 000c. P69,000d. P63,00064. The gross receipts tax of ABC Bank for September isa. P125,000b. P130,000c. P116,000d. P123,00065. Which of the following is not subject to vat?a. Non life insurance premiumsb. Non life reinsurancec. Non life insurance commissionsd. Non life reinsurance commissions66. It is aspect of taxation that administrative in character and the power to exercise it is vested on the Department of Financea. Levying b. Collectionc. Impositiond. Legislation67. For donor tax purposes this is a stranger to the donora. Daughters of a brother b. Son of an unclec. Grandson of sons granddaughter d. Granddaughter of mothers sister 68. 68. -70. A , caregiver , is under three year employment contract with a hospital in USA . His wire , B and a minor child live in the Philippines. He earns P70,000 (converted) a month for the annual income of P840,000, A shall pay income taxa. For the entire amount it being taxable in the Philippinesb. Of nothing because as OFW, he is considered a non resident citizenc. For half the full amount because the other half pertains to his wife d. For the share of his wife because the wife is a resident citizen 69. Using the above data, if A puts 30% of his earnings in a dollar deposit account with a local , interest income thereina. Is taxable for the full amount at 7.5% final withholding taxb. Of P 126,000 shall be taxed at 7.5% final withholding taxc. Maybe exempt from income tax provided he presents proof of non residency to the bankd. Of P840, 000 shall be taxed at 7.5% final withholding tax70. If the dollar deposits account above is joint ( with B) with the same percentage of earning invested , interest income in that accounta. Is capable for the full amount at 7.5 % final withholding taxb. Of P126,000 shall be taxed at 7.5% final withholding taxc. May be exempt from the income tax provided he presents proof of non residency to the bankd. Of P840,000 shall be taxed at 7.5% final withholding tax71. A filed his income tax return for the calendar year 2007 on March 20, 2008. When is the last day for the BIR to collect assuming A did not pay the tax due upon filing?a. March 20, 2011b. April 15, 2011c. April 15, 2013d. March 20, 201372. Using the above data, assuming A filed his income tax return on April 20, 2008 and the return is not fraudulent, when is the last day for the BIR to make an assessment ?a. April 20, 2011b. April 15, 2011c. April 20, 2013d. April 15, 201373. Using the above data , if the BIR issued a deficiency income tax assessment on March 10, 2010, when is the last day for the BIR to collect?a. March 10, 2013b. April 15, 2013c. March 10, 2015d. April 15, 201574. A filed his ITR for 2008 on April 15, 2009 and will pay his tax liability in instalment. The return shown an income tax due of P100,000 and income tax withheld of P60,000. If A pays the 2nd instalment only on October 15, 2009, the amount to be paid (excluding compromise penalty)is a. P26,000b. P35,000c. P55,000d. P37,50075. On April 15, 2010 , A filed his income tax return for his 2009 income and paid the tax due thereon. In 2011. A discovered that he made an overpayment in his income tax return. He filed a written claim for refund of tax erroneously collected with the CIR on October 1, 2011. On April 14, 2012, without receiving a decision on his claim for refund, A filed in the CTA a petition for review on his claim for refund of tax erroneously collected. Which of the following is incorrect?a. The CTA did not acquire jurisdiction over the petition for review because the appeal is premature, there being no decision yet on said claim for refundb. The CTA jurisdiction is to review by appeal decisions of the BIR Commissioner so if there is no decision there is nothing to reviewc. The CTA acquired jurisdiction over the petition since it is the right of a taxpayer to go to the CTA with or without decision rendered by the BIR Commissioner d. The CTA acquired jurisdiction over the petition as the peremptory period of 2 years within which a claim for refund is about to expire and the failure of the CIR to act on the claim is tantamount to denial of the claim76. One of the following is not exempt from VATa. Lease of the residential units with a monthly rental not exceeding P10,000b. Services subject to percentage taxc. Services rendered by individuals pursuant to employer employee relationshipd. Export sales by persons who are vat-registered77. A sold a personal property held as capital asset be acquired 9 years ago with an acquisition cost P50,000 for P 270,000. The payment shall be made of the following terms. Cash down payment of P40,000 and additional P 10,000 at the end of the year sale. The property sold has been mortgaged for P 160,000 which assumed by the buyer issued a note payable for the balance which is to be paid equally in two years following the year of sale. The contract price is.a. P 270,000b. P110,000c. P 120,000d. P130,00078. The taxable profit for the first year isa. P120,000b. P60,000c. P30,000d. P15,00079. XYZ filed its income tax return and paid the tax due for calendar year 2008 showing a tax liability of P175,000. However, upon audit, it was discovered that its income tax return was false or fraudulent because it did not report other taxable income. Per investigation the correct income tax due is P 350,000. The corporation was duly informed of this finding through a preliminary assessment notice. Failing to protect on time against the preliminary assessment notice, a formal letter of demand and assessment notice was issued on May 31, 2010 calling for payment of deficiency income tax on or before July 15, 2010. The amount due on July 15, 2010 isa. P 306,250b. P 437, 500c. P240, 625d. P612, 50080. Where no notice or audit or investigation of tax return, statement or declaration has been actually served upon the taxpayer, the tax return may be modified, changed or amended by the taxpayer , from the date of such filing, within.a. 30 daysb. 180 daysc. 3 yearsd. 5 years

SET A

1. In comparing management accounting, which of the following statements is true?a. Both are historical cost as their primary unit of measurementb. Both depend on the double entry system of accountingc. Both require adherence to PFRSd. Financial accounting reports are more objectives , whereas management accounting reports are more subjective2. Management accounting and financial accounting are similar in which of the following respects?a. Both use the sense unit of measurementb. Both rely heavily on the double entry systemsc. Both produce almost all of their respective informational reports on a routine monthly basisd. Both provide relevant and useful information to management3. Firms with a high degree of operating leveragea. Will have a more significant shift in income as sales volume changesb. Have lower fixed costsc. Have low contribution margin ratiosd. Are less dependent volume to add profits4. The treasurer function includesa. Tax administrationb. Evaluating and consultingc. Investor relationsd. Economic appraisal5. The use of information systems facilities on focus on the collection, organization, integration and long term storage of entity wide data is known asa. Data independenceb. Data miningc. Data redundancyd. Data warehousing6. Which of the following technologies would an organization use to prevent access to its private network?a. Digital signatureb. Firewallc. Web assurance serviced. Encryption7. Which of the following systems is one where the transactions are posted and the master and open files are updated, immediately?a. Microcomputer systemb. Mainframe computer systemc. Batch systemd. Real times system8. Which of the following controls most likely would assure that an organization can reconstruct its files?a. Hardware controls that are built into the computer by the computer manufacturerb. Back up copies of the data and program files that are stored away from originals c. Personnel, who are independent of data input , perform parallel simulationsd. System flowcharts that provide accurate descriptions of input and output operations 9. Which of the following statements about the visual fir method is (are) true?I. The method results in the creation of a scatter diagramII. The method is not totally objective because of the manner in which the cost line is determinedIII. The method is especially helpful in the determination of outliersa. II onlyb. I and IIc. I and IIId. I, II and III10. A flatter slope is the variable cost line indicates aa. High variable cost per unitb. High influence of activity on total variable costc. Low influence of activity on total variable costsd. Large amount of fixed costs11. Cielos Hotdog Stand sells hotdogs for P25 each. The variable costs per hotdog are P10. Cielos fixed costs are currently P 8,000 per month. Cielo is considering expending her business to three hotdog stands which will increase fixed costs per month by P 12,000.If Cielos does expand her business to three stands, how many additional hotdogs will need to be sold per year in order to break even?

a. 800b. 600c. 9600d. 720012. Do Dante Corporation is contemplating to method a new product that requires an increases in fixed costs by P 1,400,000 for production of 50,000 units or less and P1,800,000 for more than 50,000 units. The variable costs ratio is 60 percent of sales. The product is expected to sell for P80 per unit. How any units must Don Dante sell just breakeven?a. 43,750b. 56,250c. 50,000d. Either 43,750 or 56,25013. In most companies , machines break down occasionally and employees are often less than perfect which type of standard acknowledges these characteristics when determining the standard cost of a product?a. Efficiency standardb. Ideal standardc. Practical standardd. Budgeted standard

Question number 14 and 15 are based on the followingMoon Products applies fixed overhead at a rate of P3 per direct labor hour. Each unit produced is expected to take 2 direct labor hours. Moon expected production in the current year to be 10,000 units but 9,000 units were actually produced. Actual direct labor hours were 19,000and actual fixed overhead costs were P 62,00014. Moons fixed overhead spending variance is:a. P 8,00 Fb. P 8,000Uc. P 2,000 Fd. P 2,000U15. Moons fixed overhead volume variance is:a. P 2,000b. P 6,000c. P 8,000d. P016. Which of the following statements is correct regarding budgeting?a. Is a primary focused on past performanceb. Is primarily bookkeeping taskc. It should be build from the ground up each yeard. It involves input from a broad range of managers17. It is most budget in the master budget is likely thea. Cash budgetb. Capital budgetc. Personnel budgetd. Purchases budget18. Which of the following is not a typical cash outflow associated with a capital investment?a. Repairs and maintenance needed for purchased equipmentb. Additional operating costs resulting from the capital investmentc. Salvage value received when the newly purchased equipment is soldd. Purchase price of a new equipment19. Depreciation charges indirectly affect the after tax flow because the company a. Can deduct depreciation expenses on their financial statements, reducing reported income before taxb. Can deduct depreciation expenses on their financial statements , increasing cash inflowsc. Can deduct depreciation expenses on their income tax returns, reducing cash outflow for taxesd. Cannot deduct depreciation expenses on their income tax returns20. The calculation of the profitability index (PI) is most helpful for which type of decisions?a. Screening b. Preferencec. Qualitatived. Short term21. O Mai Mai Company purchased an asset costing P 90,000. Annual operating cash inflows are expected to be P 20,000 each year for six years. No salvage value is expected at the end of the asset life. The company applies a 16 percent minimum acceptable rate of return for this kind of investment . the details of the present values at 16% sex periods andPresent value of ordinary annuity of 1 3.6847Present value of annuity due of 14.2743

Assuming Omaimai cost of capital is 16 percent , what is the asset net present value? ( ignore income taxes)

a. P 16,306b. P30,000c. P4,514d. P4,80022. Pacam, Inc. Requires all its capital investment to generate an internal rate of return of 14 percent the company is considering an investment costing P80,000 that is expected to generate equal annual cash inflows for 5 years. The present value of 1 . end of 5 years is 0.51937 and the present value inequity of 1 is 3.4331 based on 14 percent required rate of return.To meet the 14% minimum acceptable rate return, the estimated annual cash inflow (ignoring income taxes) is :a. P23,803b. P51,550c. P274,648d. P154,033Question Nos. 23 through 25 are based on the followingLakewood Company is considering the purchases of a purpose bottling machine for P 280,000. It is expected to have a useful life of 7 years with a zero terminal disposal price. The plant manager estimates the following savings in cash operating costs

YEARANNUAL CASH SAVINGS

1P140,000

2110,000

380,000

460,000

540,000

630,000

730,000

Lakewood uses required rate of return of 12% in its capital budgeting decisions. remittal tax rate of 40%. The company uses straight-line depreciation. The present value of annuity of 1 at 12% for years 4,56376. The details of the present value YEARANNUAL CASH SAVINGS

10.89286

20.79719

30.71178

40.63552

50.56743

60.50663

70.45235

23. The number of years to recover the amount investment isa. 4.83 yearsb. 3.63 yearsc. 2.38 yearsd. 4.00 years24. What is the net present value of this investment?a. P4,723b. P8,559c. P(2.159)d. P025. What is the accounting rate of return based on initial investmenta. 6.43%b. 12.86%c. 20.71%d. 41.42%26. Escape Company regularly pays its accounts payable on the tenth day and enjoys the 2 percent cash discount , term: net 30. Because of an oversight, one supplier invoice is not paid within the discount period but paid 10 days after. What is the annual cost of that incident of paying an invoice on the 20th day instead of the tenth day? Use 360 days a yeara. 73.44%b. 36.73%c. 30.02%d. 2.04%27. P18,591,650 at 8 persons on a one year discounted loan, what is the effective interest rate?a. 8.00 percentb. 8.70 percentc. 9.07 percentd. 7.41 percent28. Toledo, Inc. Has recently calculated the inventory turnover for current year to be 30 . in prior years , the same ratio was always lower. Which of the following statements would be the best interpretation for the reason for the ratios change?a. The company had less sales in the current year then in prior years b. The company purchased less inventory in the current year than in prior yearsc. The company took fewer days to sell its inventory in the current year than in prior yearsd. The company took more days to sell its inventory in the current year than in prior years29. Which of the following statements is true regarding a companys segment margin?a. It is primarily used to make short term decisions such as cost volume profit (CVP) analysis and special order decisionsb. It ignores all fixed costsc. It is primarily a measure of long term profitabilityd. It should not be used to make decisions on whether or not to drop a product line30. Which of the following statements about the balanced scorecard approach is false?a. It requires managers to focus on financial measures more than nonfinancial measuresb. It looks at performance from the following perspectives, financial, customer, internal business and learning and growthc. It helps balance short term operating performance with long term strategiesd. It recognizes that traditional measures of performance are often not adequate to fully assess companys performance31. Determining the market share for a companys product would be a measure of performance , which perspective of the balanced scorecard?a. Internal businessb. Customerc. Financiald. Learning and growth32. Which of the following statement about quality costs is true?a. Even in theory , external failure costs can never be reduced to zero b. The less of companys spreads on prevention costs, the less they will have to spend on internal failure costs in the futurec. If a company produces and sells a defective product, external failure cost are likely to exceed all the other types of quality costsd. Low level of internal failure costs usually indicators that more attention needs to be paid to prevention and appraisal costs33. HNW Ltd. Manufactures and sells food processors. A popular consumer magazine has recently evaluated food processors and has ranked HNWs processors as being of poor quality. As a result HNWs management team has begun to analyze all costs associated with their food processors in more detail and the following data has been compiled:Scrap costsP 80,000

Quality training75,000

Warranty claims100,000

Rework costs50,000

Inspection of incoming materials30,000

Product quality audits60,000

Statistical process control40,000

What are HNWs total internal failure costs?a. P 50,000b. P130,000c. P230,000d. P170,00034. Which of the following items used to measure customer response time would not be used to measure manufacturing cycle time?a. Time it takes to process raw materials into a completed productb. Time spent waiting for a machines availabilityc. Time spent inspecting the materials for quality controld. Time spent delivering the product to the customer

Question Nos. 35 and 36 are based on the following informationPolka Devices normally produces and sells 62,000 units CK-6 each month. CK -6 is a small electrical relay used in the automotive industry as a component part in various products. The selling price is P46 per unit, variable costs are P42 per unit, fixed manufacturing overhead expenses total P280,000 per month, and fixed selling expenses total P88,000 per month.Strikes in the companies that purchase the bulk of the CK-6 units have caused Polks Devices sales to temporarily drop to only 26,000 units per month. Polka devices estimates that the strikes will last for about two months, after which sales of CK-6 should return to normal. Due to the current low level of sales, however, Polica Devices is thinking about closing down its own plant during the strikes. If Polks Devices does close down its plant, it is estimated that fixed manufacturing overhead expenses can be reduced to P210,000 per month and that fixed selling expenses can be reduced by 10% . start up expenses at the end of two months shutdown period would total P4,000. Since Polica Devices uses just in time production methods, no inventories are on hand.35. Assuming that the strikes continue for two months as estimated, how much would the advantage or disadvantage of closing the plant?a. P 54,400 disadvantageb. P 58,400 disadvantagec. P 50,400 disadvantaged. P 29,200 disadvantage36. At what level of sales (in units) for two month period should Polica Devices be indifferent between closing the plant or keeping it open?a. 38,400 unitsb. 39,400 unitsc. 39,000 unitsd. 38,000 units37. Vera Cruz Company has projected cost of goods sold P 2 million including fixed costs of P100,000 and variable costs are expected to be 75 percent of net sales. What will be the projected net sales/a. P 2,133,333b. P2,400,000c. P2,666,667d. P3,200,00038. Gibo Zamora sells helium balloons in Luneta Park on Saturdays as a means on making some extra spending money. He buys balloons from a party store at P12 each and sells them at a price of P30.00 each. Demand of the balloons ranges between 35 and 45 per day. Gibo normally purchases 40 balloons. The helium losca its resilence in a couple of days, so balloons not sold cannot be saved for the following Saturday. Gibo usually just releases the balloons that do not sell. As he watched the most recent batch of the five balloons floating into space, he thought surely, there must be some way to void this waste. What is the estimated on Gibo profit if the helium canister is rented assuming there are 5 balloons being unsold?a. No effectb. Increase the profit by P150c. Increase the profit by P90d. Decrease the profit by P80Use the following data for Ulap Company in answering numbers 39 and 40

20102009

Net salesP5,520,000P4,000,000

Cost of goods sold3,795,0003,000,000

Gross profitP1,725,000P1,000,000

39. Assume that the selling price increased by 20 percent effective January 1, 2010. What is the amount of increase in sales due to change in selling price and units sold, respectively?a. b. P920,000 and P 600,000c. P 1,104,000 and P416,000d. P720,000 and P800,000e. P (1,380,000) and P2,900,00040. 41. Independent of question number 39 , assuming that the cost price per unit decreased by 4 percent effective January 1, 2010. How much were the change in sales due to change in quantity sold and change in cost of goods sold due to change in unit cost? Change in sales change to cost of Goods Sold Due Change in Quantityto change in unit cost a. P1,270,800 increaseP158,125 decreaseb. P249,200 increaseP953,125 decreasec. P1,262,400 increaseP151,800 decreased. P1,262,400 increaseP953,125 decrease42. The primary purpose of management advisory service isa. To conduct special studies, preparation of recommendations , development of plans and provision of advice and assistance in their implementationb. To provide services or to fulfil some social needc. To improve the clients use of its capabilities and resources to achieve the objectives of the organizationd. To earn the best rate of return on resources entrusted to its care with safety of investment being taken into account and consistent with the firms social and legal responsibilities43. The fixed overhead application rate is a function of a predetermines normal activity level. If standard hours allowed for good output equal predetermined activity level for a given period the volume variance will bea. b. Zeroc. Favorabled. Unfavourablee. All of the above44. 45. The AMVians is planning its annual Blast Extravaganza. The extravaganza committee has assembled the following expected costs for the event:Dinner per personP70Programs and souvenier per person30Orchestra15,000Tickets and advertising7,000Auditorium rental48,000Floor show and strolling entertainment10,000

The committee members would like to charge P300 per person for the evening activitiesAssuming that only 250 persons are expected to attend the extravaganza, what ticket price must be charged to breakeven?a. b. P420c. P350d. P320e. P39046. 47. Gabgalang Company uses a monthly cost formula for overhead of P50,000 + 30,000 for each direct labor hour worked. For the coming year, gabgalang plans to manufacture 200,000 units. Each unit requires five minutes of direct labor. Gabgalang total budgeted overhead for the coming year is a. b. P550,000c. P1,200,000d. P1,100,000e. P650,00048. 49. How will a favorable volume variance affect net income under each following methods? ABSORPTION VARIABLE a. Reduceno effectb. Reduceincreasec. Increaseno effectd. Increasereduce50. The following information has been extracted from Bautista & Magsombol Companys financial records for its first year of operations?

Units produced10,000Units sold7,000Variable costs per unitDirect materialsP8Direct labor9Factory overhead3Selling4Fixed costs:Manufacturing overheadP70, 000Selling 30,000

Based on absorption costing, Bautista & Magsombols income in its first year of operations will bea. P21,000 higher than it would be under variable costingb. P70,000 higher than it would be under variable costingc. P30,000 higher than it would be under variable costingd. Higher than it would be under variable costing, but he exact difference cannot be determinable from this information51. Balara Company has intra company service transfers from Internal Division , a cost center, to World Division , a profit center. Under stable economic conditions, which of the following transfer prices is likely to be most conductive to evaluating whether both divisions have met their responsibilities?a. b. Actual costc. Market priced. Standard variable coste. Negotiated price52. 53. De Chavez Company is considering an investment in a new casting machine to replace its existing one. Information on the existing machine and the replacement machine follows:

Cost of new machineP40,000Net annual savings in operating costs9,000Salvage value now of the old machine6,000Salvage value of the old machine in 8 years0Salvage value of the new machine in 8 years5,000Estimated 8 years

What is the expected payback period for the new machine?a. 4.44 yearsb. 3.22 yearsc. 4.00 yearsd. 3.78 years54. Kiel Dimayaga Company has a total assets turnover of a 0.30 and a profit margin of 10 percent Patrick. The President , is unhappy with the current return on assets and be thinks it could be doubled. This could be accomplished (1) by increasing the profit margin to 12 percent , and (2) by increasing the total assets turnover. What new asset turnover ratio, along with the 12 percent profit margin, is required to double the return on assets?a. 25%b. 50%c. 36%d. 60%55. The examples of activating at the product level includea. Scheduling , setting up and movingb. Designing changing and advertisingc. Beating, lighting and securityd. Cutting, painting and packaging56. A systematized approach knows as acro-based budgetinga. Presents the