TRUE OR FALSE

2-Jul-15

Thursday

1. Management accountants are licensed and regulated by laws.

2. Management consulting/accounting services are applicable only to big companies.

3. Competence and Management advisory/accounting services (MAS) can be acquired by

formal college education , experience in traditional services performed
by CPA's and social performance of management advisory services.

4. If a firm is not reasonably competent to undertake a specific management

services engagement (accounting services) it should employ a specialist to undertake the job
on a temporary basis.

5. A MAS firm should accept only those engagement which it is qualified to perform.

6. a CPA is not bound by the code of professional ethics in his practice of MAS.

7. A CPA may advertise his practice if management advisory services in

a newspaper of limited circulation.

8. A CPA is allowed to inform his present client that he is engaged in the practice
of management advisory services.

9. A CPA may inclued in his calling card aside from being the a CPA the words
"management consultant/accountant".

10. A CPA may accept engagements as consultant of a firm which is already being
retained by another CPA without informing the latter of such proposed
engagement.

11. A CPA firm enganged in MAS work may employ a non-CPA specialist as a
memberof its staff in MAS.

12. The code of professional ethics is not violated if a CPA firm employs non-CPA
as a staff in its MAS division and designate him as a principal.

13. A CPA may form a partnership with non-CPA for the exclusive purpose of
engagement in management advisory service and for public accounting.

14. A CPA firm may admit as partner a non-CPA specialist for the purpose of
rendering MAS.

15. Rendition of MAS to an audit client may impair the independence of the CPA.

16. CPA's have historically been business consultants to their clients.

17. The Primary purpose of MAS is to improve the client

Page 1 of 21

firm's use of its capabilities and resources to achieve the objecives of the firm.
F

18. It is desirable but not necessary that in performing management advisory

services, a practitioner must act with integrity and objectivity and be independent
in mental attitude.

19. Engagements may be performed by practitioners/management accountants even if they h

competence in the analytical approach and process, and in technical subject matter
under consideration.

20. Due professional care may or may not be exercised in the performance of a
management advisory/accounting services engagement.

21. Before accepting an engagement, a practitioner (management accountant) does not have
client of any reservations he has regarding anticipated benefits.

22. Before undertaking an engagement, a practitioner is to inform his client of some

if not all of the significant matters related to the engagement.

23, Engagements are to be adequately planned, supervised, and controlled.

24. Especially under time pressure , it is not so necessary that sufficient relevant
data has to be obtained, documented, and evaluated in developing conclusion and
recommendations.

25. Not all significant matters relating to the results of the engagement need be
communicated to the client.

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ed by

ke the job

Page 3 of 21

n if they have no

s not have to notify the

Page 4 of 21

TRUE OR FALSE

19-Jul-16

Tuesday

Prelim

1. Management accountants are not licensed and regulated by laws.

2. Management consulting/accounting services are applicable to all companies.

3. Competence and Management advisory/accounting services (MAS) can be acquir

formal college education , experience in traditional services performed
by CPA's and social performance of management advisory services.

4. If a firm is not reasonably competent to undertake a specific management

services engagement (accounting services) it should employ a specialist to undertak
on a temporary basis.

5. A MAS firm should accept only those engagement which it is qualified to perform.

6. a CPA is bound by the code of professional ethics in his practice of MAS.

7. A CPA may advertise his practice if management advisory services in

a newspaper of limited circulation.

8. A CPA is allowed to inform his present client that he is engaged in the practice
of management advisory services.

9. A CPA may inclued in his calling card aside from being the a CPA the words
"management consultant/accountant".

10. A CPA may accept engagements as consultant of a firm which is already being
retained by another CPA without informing the latter of such proposed
engagement.

11. A CPA firm enganged in MAS work may employ a non-CPA specialist as a
memberof its staff in MAS.

12. The code of professional ethics is violated if a CPA firm employs non-CPA
as a staff in its MAS division and designate him as a principal.

13. A CPA may form a partnership with non-CPA for the exclusive purpose of
engagement in management advisory service and for public accounting.

14. A CPA firm may admit as partner a non-CPA specialist for the purpose of
rendering MAS.

15. Rendition of MAS to an audit client may impair the independence of the CPA.

16. CPA's have historically been business consultants to their clients.

17. The Primary purpose of MAS is to improve the client

Page 5 of 21

firm's use of its capabilities and resources to achieve the objecives of the firm.
T

18. It is desirable and necessary that in performing management advisory services,

a practitioner must act with integrity and objectivity and be independent in mental
attitude.

19. Engagements may be performed by practitioners/management accountants eve

competence in the analytical approach and process, and in technical subject matter
under consideration.

20. Due professional care may or may not be exercised in the performance of a
management advisory/accounting services engagement.

21. Before accepting an engagement, a practitioner (management accountant) does

the client of any reservations he has regarding anticipated benefits.

22. Before undertaking an engagement, a practitioner is to inform his client of some

if not all of the significant matters related to the engagement.

23, Engagements are not to be adequately planned, supervised, and controlled.

24. Especially under time pressure , it is necessary that sufficient relevant data
has to be obtained, documented, and evaluated in developing conclusion and
recommendations.

25. All significant matters relating to the results of the engagement need be
communicated to the client.

26. The statement of financial position, income statement and statement of cash flo
are used for financial accounting as well as for management accounting

27. In Just In Time, working captial position is improved byr recovery of funds that
were tied up in inventories

28. Theory of Consraints is not a sequential process of identifying and removing con
in a system

29. The value chain is an analysis tool that firms use to identify the specific steps re
to provide a product only to the customer

30. Cross functional approach to management is not crucial in managing the time to

31. The statement of financial position shows the results of operations.

32. The statement of income includes the analysis of working capital

33. The creditors like suppliers and owners provide the investment of the company

Page 6 of 21

34.Cash flow from operating activities consider changes in working capital

35. Working capital is used in analysing current ratio.

36. The cash flow statement required by the PAS -7 provides information about cash
outflows during an accounting period segregated according to operating activities, i
and financing activities wherby indirect method is used to disclose major classes of
cash payments

37. Managers, investors, lenders and Accountants are subjective in analyzing the fin
to identify the strenghts and weaknesses of the Company.

38. In analyzing financial statements, management accountant develops knowledge

quality of management. The major areas that mayb be covered ion the analysis are:
capital structure and long term solvency, operating efficiency and profitability and s
including irrelevant information.

39. One of the limitations of financial statements analysis is the information derived
not absolute measures of performance in any and all of the areas of business operat

40. Horizontal and Vertical analysis are important to Management Accountants in fin
analysis. The following techniques considers the following: a) Horizontal Analysis fo
(Increase and Decrease Method) b) Trend Percentage,c) Common size financial state
ratios. The preparation of common size statement is also known as horizantal analys

Page 7 of 21

to all companies.

s (MAS) can be acquired by

management
specialist to undertake the job

s qualified to perform.

ged in the practice

CPA the words

ich is already being

specialist as a

ploys non-CPA

ve purpose of

he purpose of

dence of the CPA.

Page 8 of 21

ives of the firm.

ent advisory services,

dependent in mental

ment accountants even if they have no

hnical subject matter

performance of a

ment accountant) does not have to notify

orm his client of some

d, and controlled.

ent relevant data

conclusion and

ment need be

statement of cash flows

overy of funds that

ing and removing constraints

y the specific steps required

managing the time to market.

ment of the company

Page 9 of 21

formation about cash inflows and

operating activities, investing activities
lose major classes of gross receipts and

ve in analyzing the financial statements

t develops knowledge of the firm and the

d ion the analysis are: short term solvency,
and profitability and segmented analysis

e information derived by the analysis are

eas of business operations

ent Accountants in financial statement

Horizontal Analysis fo Comparative Statemens
on size financial statements and financial
n as horizantal analysis.

Page 10 of 21

Multiple choice
A

19-Jul-16

Tuesday

Prelim

1. Delta Coroporation wrote off a P100 uncollectible account receivable against the P12
balance in its allowance account. Compare the current ratio before the write-off (X) with
the current ratio (Y).
a. X equals Y
b. X is less than Y
c. X is greater than Y
d. Cannot be determined

2. Epsilon Company has a current ratio of 2 to 1. A transaction reduces the current ratio
Compare the working capital before the trasaction (X) and the working capital before th
trasaction (Y).
a. X is greater than Y
b. X is less than Y
c. X equals Y
d. Cannot be determined

3. A company has a current ratio of 2 to 1. This Ratio will decrease if the company
a. Acquire machinery on account
b. Pays a large account payable which had been a curren liability
c. Receives a 5% stock dividend on one of its marketable securities
d. Sell merchandise for more than cost and records sale using the
perpetual inventory method

4. The transaction that will increase a company's positive current ratio is

.
a. Borrow money on a short-term note
b. Sell a temporary investment at a loss
C. Reclassification of account debiting current portion of long term debt
d. Use the equity method to reflect earnings of an investment
e. None of the above

5. What ratio would be used to answer the question of; is the income retained in
the business profitably used?

a. Ratio of net income to net sales, net sales to fixed operating asset,
b. Ratio net income to net sales, to total borrowed funds, to owners' equity, to common
c. Ratio of net income to borrowed funds and owner's equity
d. Ratio if net sales to cost of goods sold and to operating expenses
e. None of the above
D

6. The calculation of the number of times interest is earned involves dividing

a. Net income by annual bond interest expense
b. Net income plus income taxes by annual bond interest expense
c. Sinking fund earnings by annual bond interest expense
Page 11 of 21

d. Net income before interest and taxes divided by annual interest charges
C

7. The ratio of total cash, trade receivables and marketable securities to current
liabilites is
a. Working capital ratio
b. The current ratio
c. The acid test ratio
d. Significant if the result is 2 to 1 or better

8. Gross (profit) margin variables analysis may be used to determine the amount
of variations in the
a. Cost of goods sold accounted for by a change in sales price
b. Operating expenses caused by a change in the physical sales volume
c. Physical sales volume caused by a change in sales price
d. Sales and cost of goods sold accounted for by changes in sales price and physical
volume
e. None of the above

9. Selected information from the accounting records of the Strenght Company are as
follows:
Net accounts receivable at Dec. 31, 2014
Net accounts receivable at Dec. 31, 2015
Accounts Receivable turnover (ARTO)
Inventories at Dec. 31, 2014
Inventories at Dec. 31, 2015
Inventory turnover (Inty TO)
Operating expenses
Number of days in a year
Current Assets - December 31, 2015
Applicable formulas:
1
AR TO =
Net Credit Sales/ Ave. Receivable
2
Inty TO =
Cost of Sales/ Ave. Inventory
3
Ave Coll =
No. of days in a year/ AR TO
4
Ave no. of Days to sell or consume the ave inventory =

What was Strenght's Net Income for 2015

a. P 150,000
b. 200,000
c. 300,000
d. 400,000
e. 100,000
E

10. Same data as in (9). Assuming a business year consisting of 360 days,
what was Strength's number of days; sales in average receivable
an inventories for 2015, respectively
a. 30 and 30
b. 60 and 60
Page 12 of 21

c. 60 and 75
d. 63 and 77
e. 72 and 90
C

11. Same data as in (9). Assuming the Company's accounts payble at the
end of December 31, 2015 is P 500,000.00. What was Strenght's Working
Capital
a. P 400,000.00
b. 450,000.00
c. 1,700,000.00
d. 700,000.00

12. On January 1, 2014, the Zarah Company's beginning inventory was P300,000.00
During 2014, Zarah purchased P1,900,000 of additional inventory.
On December 31, 2014, Zarah's ending inventory was P500,000. What is the inventory
turnover for 2014?
a. 3.60
b. 3.80
c. 4.60
d. 4.00
e. 4.25

Page 13 of 21

receivable against the P1200

before the write-off (X) with

on reduces the current ratio.

he working capital before the

crease if the company

rrent ratio is

g term debt

e income retained in

ng asset,
owners' equity, to common stock

involves dividing

Page 14 of 21

terest charges

securities to current

etermine the amount

ales volume

sales price and physical

trenght Company are as

900,000
1,000,000
5 to 1
1,100,000
1,200,000
4 to 1
50,000
360
2,200,000

Receivable

ave inventory =

No. of days in a year/ Invty TO

g of 360 days,

Page 15 of 21

payble at the
ght's Working

entory was P300,000.00

000. What is the inventory

Page 16 of 21

Statement Reconstruction Using Ratios 13-20

The following ratios and other data pertain to the financial statement of the Sanjose Company for the year ended December 31,
2014:
Current ratio
Acid test ratio
Working capital
Fixed assets to stockholders' equity ratio
Inventory turnover (based on cost of closing inventory
Gross profit percentage
Earnings per share
Average age of outstanding AR (based on calendar year of 365 days)
Capital stock outstanding
Earnings for the year as a percentage of captital stock

1.75 to 1
1.27 to 1
33,000
0.625 to 1
4X
40%
0.5
73
20,000
25%

The company has no prepaid expenses, deferred, intangibles assets or long term liabilities. Reconstruct in as much detail as is
possible the Company's statement of finanancial position and statement of income for the year ended December 31, 2014, show
supporting computation in good form

San Jose Company

Statement of Income
For the year Ended December 31, 2014
Sales
Cost of sales (4)
Gross profit
Expenses
Net Income (1)

San Jose Company

Statement of Financial Position
December 31, 2014
Assets
Current assets:
Cash
Accounts receivable (5)
Merchandise Inventory (3)
Total Current Assets (2)
Fixed Assets (8)
Total Assets

Liabilities and Stockholders' Equity

Current liablities
Accounts payable (2)
Stockholders' Equity
Capital Stock (Issued 20,000 shares(6)
Retained Earnings
Total liabilities and Stockholders' Equity

Consider the following Formulas:

1
Earning per share =
2
Working Capital =
3
Current Ratio =
4
Inventory Turnover =
5
Average collection period =
6
Net Income=
7
Current assets + Fixed Assets =
8
Fixed Assets Ratio =

Net Income/Common Stock Outstanding

Current Assets - Current liabilities
Current Assets / Current liabilities
Cost of sales/Average Inventory
365 Days/ Receivable Turnover
25% of Capital Stock
Current liabilities + Stockholders Equity
Fixed Assets / Stockholders Equity

Page 17 of 21

Statement Reconstruction Using Ratios

The following ratios and other data pertain to the financial statement of the Sanjose Company for t
2014:
Current ratio
Acid test ratio
Working capital
Fixed assets to stockholders' equity ratio
Inventory turnover (based on cost of closing inventory
Gross profit percentage
Earnings per share
Average age of outstanding AR (based on calendar year of 365 days)
Capital stock outstanding
Earnings for the year as a percentage of captital stock

The company has no prepaid expenses, deferred, intangibles assets or long term liabilities. Recons
possible the Company's statement of finanancial position and statement of income for the year end
supporting computation in good form
San Jose Company
Statement of Income
For the year Ended December 31, 2014
Sales
Cost of sales (4)
Gross profit
Expenses
Net Income (1)
San Jose Company
Statement of Financial Position
December 31, 2014
Assets
Current assets:
Cash
Accounts receivable (5)
Merchandise Inventory (3)
Total Current Assets (2)
Fixed Assets (8)
Total Assets

Page 18 of 21

100%
60%
40%

140,800.00
84,480.00
56,320.00

33%
7%

46,320.00
10,000.00

7%

Sanjose Company for the year ended December 31,

0.75
1.75 to 1
1.27 to 1
33,000
0.625 to 1
4X
40%
0.5
73
20,000
25%

1.75
1.27

365
Days

term liabilities. Reconstruct in as much detail as is

ncome for the year ended December 31, 2014, show

10,000.00

27,720.00
28,160.00
21,120.00
77,000.00
55,000.00
132,000.00

Page 19 of 21

Problems:

19-Jul-16

The following data represent the ratios for the furniture Manufacturing industry for 2015
Estimated Annual sales
Sales to stockholders' equity
Current Liabilities to stockholders' equity
Total Liabilites to stockholders' Equity
Current Ratio
Net Sales to inventory
Average Collection period
Fixed Assets to stockholders' equity

P400,000
4 times
50%
80%
2.2
8 times
40 days
70%

Required:
From the given above complete the pro-forma financial position/balance sheet
Aldous Furniture Designs
Balance Sheet
31-Dec-15

Cash
Accounts Receivable
Inventory
Total Current Assets
Fixed Assets
Total Assets

Current Liabilities
Long-term Liabilities
Total Liabilities
Stockholders' equity
Total Liabilities and Equity

lance sheet