CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

PRACTICAL ACCOLNTING PROBLEVIS

F irst Preboard Examination

Sunday. July 28.2013

12:30 p.nr. to 2:30 p,m,

SET.\
MULTIPLE CHOICFI: MAIIK FULLY with Pencil No. 2 the letter of your choice ott tlte answer sheet
provicleci. Make the marl< DARK but rlo nrrt use toc rnuch Fresstrre. ERASURES ARE STRICTLY NOT
ALLOWED.

1.

The auclit of Bannecl Cornpany for the y'ear endecl December 31" 2013 was corrrpleted on
-fhe
financial statements were sitjned by the managing director on March 15,
March 1.201a.
20l4ancl 0r.111sys(bytheshareholdersonMarchi! 201,i. I'henextevetltshaveoccitrred.

* On.lairuar.,,

15.2014, a customer orving P900.000 io Banned llled 1or lranknrptcl'' The

ilnanc.iai -ltarcirlents included or', rrllowance firr doubtfill accounts pertaining to tiris
customer cnli, ,.,f p50,000.

{' Banned Cor;pany's issued share capital comprised 100.000 orclinary shares with P100 par
value. The eriiity announcecl a bonus issue of 25.000 shares c-n March l^ 2014.

,'specialized equipment costing P545,000 pr.rrchased on September 1.2013 was destroyed

b,y tire on December 15. 21,13. Banned Company has booked a receivable of P400.000
tl-ont ti-re insurance compan). Aficr the insurance company completetl its investigation on
Febrr-rary l. 2014" it was cjiscovrrecl tirat tire fire took place dr"re to negligerlce of the
machine operator. As a result, the insr-rrer s iiability was zcio on this claim'
What total amourrt o1''':d,lr.rsting events" shoulci lte reporteci on Decenrber 31-

20ll?

a. 1.300.000
b. 1^25U.000
c, 1.345,000
d. 1.445.0t)0
A

2.

Bad Compatiy's tria.l balance reflected the. tbll,rw'ing account balances on

Accor.rnts recc: val:,ie ( iret't
Financial as:ri:i i.lt ;rVTOCl

Ac-cunrulaterl

r::

311;,'a uti
1

on on equ ipment and I'urni tttre

Clash

lnventory,

Equipment
Patent

Pr*paid expenses
Land held for fbture business site

December3l.20l3:
2.400.000
600.000
r.500.000
1 1 00.000
"
3.000,000
1.500"000
400.000
200.000
1.800.000

The inventory inclurJed goods held ci-t cor.rsi5:nnrent atnounting to P500.000. The piitent i'vas
classitled as held {lr:;aie on December 3i.2{11-1. \\'hai anror-rnt of total currerll assets should
be repofied on Decembe; J1.2013?

a. 6.600.000
b. 6,800,000

c.

d.
D

7"200,000
7.1

00.000

3. 'lhe otfice riitplriius, .tccount of Sicli Company had a balance at the beginning of 20li of
P80.000 lreli-,ie rli,r ieversiitg errtry. Piiy-ments for purchases of oflice supplies during 2013
;rrriounted io r)50r].000 and were recorcled as expense, A phvsical count at the end of 2013
re',,ealed ofili:e ilrpplies costing P95.000 were on hand. Reversitig enti'ies are recorded by
Sick.'l-he reqrilrerl acljusting entr),ar the er.rd ot'201i will include a debit to

Ofl'ice Supolies Expense P15.000

b. {Jtl-rce Suptr;iies P15,000
c. Olfice Supplies Expense P485,U00
d, Ofll':e Supplies P95.000

Page 2

4.

Mount Conrpany' provided the fbllowing account balances

c;n

Llecemb*r 31.2013:
3.000.000
1.000.000
8.350,000
r00.000
1.040.000
3.720.000
I.540.000
280.000
205.000
125.000
i 0.000
85.000
40.000
r50.000
105.000

Retairred earnings. .lanuary I

Diviclends deciared

Srlcs
Dividend inconte
Merchandise inventory. January I
Purchases

Salaries

Coritribirtion to emplol'ees' pension firnd

Distribution cost
Miscellaneous expense
Doubt fir I accounts expense
Depleciaticit expense
I-oss crr :iiie o.i secirrities
I.ils:; il',-rn: ill':tedo,* ii oi'obsolete inve ntor\.
lnconte tay"

December 3 I . 201 i \\,as valuecl at P"i00"a(r0 (P850.0C0 less l'} l -i0.000

rr.,ritedo*'n ollobsolete inventory). What is the balance of retalned rarnings on Decemberil.
20l l'l
Ittvetrtorv

cn

a. 2.001t.00{)
t). 11.000.000

i.850.000

d. 5.000.000
B

5.

Czech Compan1,pro.,'ided the fbtlowing infol'rnation oir De,.:enrber 31.

20ii:

Cash htalance per bank statement

Checks outstanding (inciuding certified check oi' Pl 00,000)
Cu:itomer i'ioie c,J;lecteci by tiank for Czech
NSF checks of cilstr:nters returned by bank
lJank service charge shorvn in f)ecember bank statentent
Error nrade b1'(Jzerrir in reccrding a check that ciearecl tlic banll in Decenrbrcr
(check r,,as drawrr in December for Pl00.L]C0 but recorded at Pt0.00C)

Deposit in transit

\\/hat is the cash balancr. per ledger on Decentber

31

4.000.000
500.000
r5c.000
200,000
20.000
90.000
r.300,000

. 2013?

a. +.q00,000
b, 5.060.000

c. 4.880.000
d.
C

6,

.+"q70.0c0

Head (lompany preparcr.! quanerll intelint llnancial statements lrnd used the percentage of
credit sales method in cr):nput;ng ,.1,;ubtfirl ar.:sounts. 'l-he credit sales tbr the first. second.
third enc ircirrth quafters totaled P2.000.000, P1.500.000. F'3,500"000. and P4,000.000
respectively. The dor"rbtful account percentages fbr the first. seconrj. thirC and fourth qlrarters
efl-ective fbr thq entirc) year are 2%.2%.4o/o.and 5olo respectively,. Wlrat arnor.rnt of doubtlul
accotlnts eLpurrse shouid be recognized in the fotrrth quurter irrccirre statement?

a.

200.\t00

b. l3'i"500
c. 270.000
d. 550.000

Page 3

7.

i-ias no cash
Bred Conrpan) :;old goods to w'holesale,:s on ternts ot'5i 15. t-ret -:0' fhe entitv
otl past experience. The
sales but 50% or customers take advar,tage oi tlte discoittrr based
receivable ou
enlrty nsed the gross rnethoii of lecorcling seles. An analy'sis ol accol-tt-its
December I1,2013 revealed the fbllowing:

- 15 days

5,000.0110

Over 30 days

2.000,000
1.000,000

0
16

Collectible

Amount

Age

- 30 days

00%
9A%
700,000
1

What amor11t shquld be reported as net realizirble value of accounts receivable?

a. 7"875.000
b. 7.375.000

c. 7.500.000
d. 8.000.0rt0
C

31,

lvloulr Corirpi.n. accepted fror.n a cr.rstonrer P5.00C.000. 120-clay- 129lo note dated Augr'rst
However'
201j. On S,.ipteirrber jO.2013. the entity discoLrnted the note at the b;tt.ik at 10%0.
transaction as an
the pr,.iceeds r/err-.not received urntii October 1" 2013, The entity treated the
be recogniz-ec1'?
absolr,rte sale. Wrrat amount oiproceeds fiom ihe riiscor-ri-rting siror-rl,J

a.

b
r

d.

5.?00,000
_s.050.000

5.070.000
5.000.000

from the
Oreo Company started operations irr 2011. The loliowing data are abstracted

purchases and sales records:

2All
Number of units purclta:;ed
Nurnber of units soid
Unit cost

2013

2012

160.0i.,c

15_s.00c

i 35.000

10c.00u

145,001j

130.000

40

:,0

60

of goods sold tbr

The entity useri tirc ,-lFO method. What amoLlnt should be rePorted as cost
20 r 3'?

tr.

c.
d.
B

10.

00.000
7.800.000
7.700,00ij
8.300.000

7.1

Ah analysis of the ending inventory

accout-tt
cliscl'.r:.cd the inclusion of the fbllov"ing items:

of

Sun Cornpany

on December 31.

2013

Merchandise in transit purchased on tert-ils:

30"000
200.000
3

CIF
Ex-ship
Mercharrdise out ot-t consignment at :lales price (i rrcl uding rttark
up of 30% oii ccrsi)
Merchandise sent to cttstomer tbr approval (cost of goods. P64.000)

Merchandise held on consignment

What is the redr.rction

a.

i0.000

b.380.000

c. 407.000
d. 444.00t)

oith* inventorl'accor.lilt cn Decenlber:1,21)lj','

390.000
84.000
70.000

Page 4

ll. Coat ('ompan\,''s pricing structure had been establishecl to viclcl - sr.)ss nillriliir r:1'l()% based
olt rr()st. I-ire entit.v provided the fblloiving clata lor the year

cni.lrli1 i. r*,,crnbcr

31.

20li:

Sales
Sales discount

5.000.000
65 "000

Sales returns aird allowance

Inventor\'. .lanuary

l2-5.000
2.500.000
2.000.000
400.000

l)urchases

Inlentorl,. per actual count on Decernber I I

'[he entitv is satistled that all sales and purchases have trei:n firili' and plroperlv
recordt-'d.
What arloLrnt slrould be reporled as reasol-lal:rle estirnate of a slruil'tiigt. irr inverrtor')' ou
Decertrbrer I I l
i.jl .

400.00r1

i;sU.000
c. 750.000
c[. 687.500
h.

l2..lose Contpany is engaged in dair,r'livestock. The entitl'pro'r'icied the iollorving

201

i:

atlloullt of biological assers on JanLran I

lncrease due tc ilrrcirase
Gain attributabie to price change of biological asset
Cain attribr-rtable to physical change of biological asset
lVlilk produced during the r,:c.r br-rt r-rnsolil at 1,car'-end
C'an'f ing

13.

il'hat

tr.ltal antount c1'gair.r .;itoulrj lre recogrriz-ed

l.
b.
c.
d.

7c)0.000

tbr

201

data fbr

5.000.000
2.000.000
1.000.000
600.000
100.000

'r
i']

1.700.000
1.600.000

l.l0{1.000

On Dcceir.iber

3i. 2011. .ltl llank ilrs :i i-',car', kran icccir.:f,i,: *ith a fhce value of

P6.000.000 dateci .lanuarl l. lfji2 thal is rlLic orr l)eccrritr*'r ii.2()16. lnterest is payable
olli-lllirliy ei'er)' Dcc':nri:e: .j i .l gyr. -f'he borrower rnadi-' tirc :equirecl riteicst pir)'ntent on
Decctttirer .) i , 2'.)l 2 Srri iiiitrrired the oank thai ir,teresi iliclLico on L)ecr,nrfLr,r 3 i . 2013 rvill
be piiicl aI Ittttti;rir;:. I'liere is a high probabilitl that f*rrtiriiiilii i,it;ic:lrr,\,uti:ilts
'rili not be
paiil l-.ceat;:re i.lf'linai..cial difficuritl,. The prevailing nta;rtyi lnicr,jsi rate on f)ecenrber jl.
l0l3 is lu%. l-he PV ot I tbr'3 periods i.s 0.771 atgoh and U.751 ar I0%. What is the loarr
inrpairrlent loss on December 3 l. 201 3'l

er.

b.
c.
d.
D

1.90i1.0:l(,

r"6t8.460
I

.491 .110

1.368.000

Conrpany acqurired new eqr"ripment

fbllow'ing data:

14. Qr"rezon

bv excliarrging

Equipnrerrt
AccunrulateC c'leprec iat ion
Irair value
Cash receir r:d on exchange
T'he old and new
':qr.iipment had siglrificantli cliiferenr ;;1sii
loss should ()ue"-on recogr,ize as a resuli of the exchange'.)

a. 500.00,0 loss
h. 500.0C0 gain
c. 200.00() loss
d. 2U0.000 gain

r,rsecl equipnterrt

with the
s.000.000
4.000.000
r.200.000
500.000

flsrvi; What antount of gain or

Page
A

15.

Duripg 2013. Woocly Company purchased 200,000 ordinary shares ibr P6'300"000 as a
*o,trx-ling investment. Tire entitlL elected to nteasltre the investntent at fair valr-re through
other coniprehensive income. The tair value of tl.iese shares was P6,000,000 on Decenrber
11,2013. The eptity sold all of the shares lbr P34 per share on Decentber 3.2014. inctlrring
p2g0.000 in brokeiage contmissions. \\'hat amount of gain on disposal of financial asset
should be recognized in the incotne siatelllelrl 1'rr

it.

b.

520.000
800.000

d.

500.000

l0l4'i

c. 210.000
C

16.

Companv purchased 1Z% bonc'ls, haviug a tace valrte of

p8.000.000. for I,8,607,000, The bonds provicle rhe bonciholders u'itli a 10% yield" are dated
of each
.lanr"rary 1.2013. and mature Januarv l,2018. with interest receivable I)ecenlber 3l
What
"l'he
tlori's.
i:irsh
contlactLtal
business nrodel is to hoid these bonds to coilect
vear.
antourrt of interest income shourlcl be recogrtized by fbi' 2014'l

On Jaluar;, 1.

ri.
1,.

960.000
860,700

d.

900.000

c.
C

17.

201

3. Elly

850^770

On 3arruary 1" 201i. Aint Cornpanr aci-,Lrired 25?o of the orttstanding ordinary shares o1'
another .niity for p,5.000"000. The can'y'ing amolu'rt of the acquiled shares was P4-000.000'
The excess 9f cost sver carr\,ing amounl ras attributable to an rtuicletrtitlable intangible asset
wtlic6 had an indefilite lif'e. Forthe year endeci December 31. 2013. the investee repofiecl net
income of p3.000.000 apd paicl cash di,,,iclends of P500.000 orr ordinary shares and therealter
issr-icci lt)% stoc[< dil,iilencl. \\1hat is the ploptr carrving amoL]Ilt of the investtrlent itr
associate on Decenrber 31. 2011:

a. 5.000.000
b. 5"750"000

c.

d.
D

5.625.000
5.575^000

18, Reverse Company purcliasecl i0% of anoiiri:i'c'irtity's 500,000 outstanding ordinary shares otl
ibr P1.000,000. The investment was accounted for at FVTOCI' On
.lanuary
Decernber i i. 20 i 3. the f'air valite of the inriertment was P 1 "500,000. On January 1 - 2014. the
entity purchased additional 100,000 shares of'the same investee for P3,000.000. On this date'
it was cietermined that the carrying antount oi'the investee"s ttet assets was P9'000.000' All

1.20ti

identitlable assets'carrvir-rg amount eqLraiecl lsip value except fbr land rvhose t'air value
-fhe
investee reponecl eartrings of'P2.000,000 for
exceeded carrying arlount by P1,000.000.
2014 and paid no tjividends. What anror.int shoi-rld be reported as investmettt in associate on
December 31.2014?

a. 4.500,000
b, 4"600.000

c, 4"900"000
d,

s. 1 00.000

19. Doug Company's accounting policy fcr investmeirt properties is thc firir value model. Orle of
its investment properties was measured at P80.000.000 on lJecember 31,2013' I-he property
had been acqr-rired on January l. 20li ibr a total ol P76,000.000. rnade rtp o1'P6q"000.000

paid to the vencior. P3.000.000 paid tc the local autliority'as a property transtbr tax trrrd
P4.000.000 paicl to prof.essionai at1r iser:. T'he Lrseturl lif'e of the property is 40 years. What is
the amount of gain to be recognizecl iii pr'.tlit or loss fbr the yearended December 31.2013'i

a. 4.000.000
b. 7.000,000

c. 8.000"000
d, 5.900.000

Pa6re 6

20. On January' 1,2013. Rizal Company purclra-sed a tract of land r,vith an old building which was
razed shorlly after acquisition. The costs incr-rrred in conneclion with the acquisition were:
Pirrchase price

Agent corlnrission
I-egal f'ees tbr the purchase contract
Title guarantee insLlrance
Cost of razing tire old building
Salvage value of old building materials
Property taxes for 2012 and 2013 (eqLralli, each y,ear)
Option paid for an alternativc lanij r1h1111 u'as not rcilrtired
Cost o l' relocatir-ig sqLlatters

b"000.000

200.000
100"000
20.000

iu0.000
50.000
200.0u0
60"000
i0.C)00

What is the cost ol the lanrl?

a.

6.680.000
b,. 6"740.000
rr 6.570.000
cl 6.780.000

21. Spring Corrpany entered into alr P8.C'r(J.i.)i)il ll'.:t-{ contract uith a certain contractor on
.lanuary' 1.2013 for the construction r-'i'a ner^.'builciirig. On .lanuary 1. 2013. the entity
obtainecj a loan of P8.000.000 at an interest rate of 12ok to finance specitically the
construction. Availrlents fiorn ti-]cr i{lan nia1, ire macie quarterly at unequal antoLlllts. Acttral
interest incun'ed for 2013 uas rr500.00t1. Fiior to rheir disbursement. the proceeds tl'onr tire
ioan rvere temporarily invested arrd eirneC irrlcrest inconie ol'Ir5U.000, Tlre hLrilcling was
completed on December 31.2C13, Adclitionai co.ts iucun'ecl durirTg the construction uere
P100,000 ibr plans. specifications and h,iueprir,t. rind l)150"{r{10 tl:r'architectural design and
supelvision. What is the it-rsi c1 tne t',Lrildi rg on Dece:iiber'li- 2illi'l

rl.
b,

8.800.000

d.

8.850.000

c.
C

8",+s0.0c0
B.i 50.000

22. During 2013, Sole Con-rpany coristruc-'t:ii hLiiiding costing P18.500.000. 1'hr' rveighted
average accumulated expenditlrres on the bLiilding dLrring 2013 totaled P7"800.000.'Ihe
entity borrowed P4,000,000 at 7o/o on .lanitary 1. 2013. Funds not needed lbr c'onstnlctiorl
were temporarily invested in short-terrrr securitie:;. ancl earned Pi20,000 in intelest revenue.
In addition to the construcrion loan. the entity hacl tv,,o otlter noies outstanciing dLrring the
year. P3.000,000. 10-year. 10% notc pryable datecl October I . 201 1 . anci a 5-,r'ear
P2.000.000. 89'o note pa1,able dated November 2. 2011. 'r\hat anroLrnt ol intr'res1 shorrld be
capitalized on Decenrber I I 20li?

a. 574.000
b. 620.000

c.

509,600

d. 629.600
A

23. On .Ianuary l, 2013. the accurnulated dt'preciation account of Doer Company showed a
balance of P3.700,000. At the end o1'2013. aller the ad.jrrsting entries w'ere posted. it shorved
a bala'tce of P3,950,000. During2013" orre of tl.re machines rvith cost of P1,250,000 was sold
fbr P605.000 cash. 'fhis resulted ir-r a loss of P40.000 ]io ollier assets u,ere disposed o1'
clLiring tlre year. How rnuch was the depreciatii:n e\pensc fbr 2013'l

.i

855.000

250.000

b. 93s.000

d.

60s.000

rage
C

24. llercher Company purchasecl a machin,'1.or P8,000.000 on.laniiarY l. i013. l'he rltrchine's
r:sefiri
is i0..,.u.r. w.ith ir.r resiiirral r.'altte and is deprcciated Lrsirlg the cioLrble tli:i:lining

lilt

balance method, Also on tliis date. the cntitt, receii'ed a grant l 1'P-500.000 and the entitl''s
j014. tlre entitl'violated
potic,v- is to cJedr.rct thc grant fror.n the cost uf the.assel. Orr.lrinttar-t' 1.
certairr cor-rrJitions atti,ched to tl-re grant itnd hacl tc-, retrirn P500"000 to the goverlllllellt. What
arnount of deprec!ation expen"se should be recogt'tiz-cd tbr 2Ul4l

a. i.200.000
b. 1.280.000
c. 1"380.000
.i 1.500.000
D

25

On .lapuary, 1. 20i3. Stigma Company purchased buiitling at a cost of P10.000'000 w'ith a

lO-year gselLrl lif'e arrd no residual i,aiLre. The entity r,rsed the straight line deprecation
Og Janu:r.y,i.2015. the entity decideci to use the revaluation nrodel and it ivas
'ret6ocl.
tax
cletermipecl that the thir value cf the equipnrent on this clate is P12.000.000' The inconre
2015'l
r.ate is 30%. \.Vhat is included in the entry to record the revalrtation on.!s.nuar)' l.

a. Debit ac, ur,dlated depreciatioi: P1-000"000

b. D:hrr cler:ircd tax liability Pl.2f)0"000

c.
ti

redit revaluation surpius

Credit revaluation srrrplus
C

P5.000.0()al
P2.800.(t0,-)

26. Ol.Ianuary 1.2013, Act Company pr.rrchased equipurent rviih a cost of P10.440.000' a Lrsefirl
life ol9 vears and nc residr-ral value. The entity Lrsed straight line depreciation' Ott Decenrber
ll^ l0l3 ancl Decernber 31.2014. the enrit\,determinecl that impairment irrdicators are
year etld:
ilreseut. fhe follou,ing inlonlation is available fbl ir-npainrlent testing Llt each
f)ecember 3l , 201'l
Dccember 31.2011
irair value Iess ct;st o1'ciisposal
Valr"re

iu

8.400.000

use

\\/hat is thc girin

8.3 r s.t)(j0

(-rlr

'!'\er

:.i cf tntllititlll.-t-tt

7.850.000
7.91 0.000

rirr'l0l'l'l

ii.880.00t)
b. 560,000

c. 480.000
d. 770.000
A

27. Giget. C'oprpai.r1, acquirecl a tract of lanci 1br P7.000.000 contairlirrg an extractable tnitleral
1".*,,r... The r:ntity is requireci by tlie purchase contract to restore the land to a condition
suitable for recreational use afier it has extracted the minelal resolrrce. Expected restoration
cost at discounted amount u,as P1,500.r.;r-r0, Geological sLlrvey estimated that the recoverable
reserves will be 5,000.000 tons, anci that tlie land will have a value of P1,000.000 afler
restoration. The entity also used equipn]eut to extract the reserves. The equiprrrent had a cost
that the anntral extraction is
of p1.500.000 ancl , l0 u.or irselul life. lt rras deterrrinec'l
'f
1.000,000 tons, l'he equipment lraci no ,ril-rir LrSe . he entity scld all tons extracted lor the
vear. What total amgunt should be recogr-rizerl as riepletion a.ud r-lepreciation expellse fbr the
crtn'ent year?

a.
'r,
c.
d.

.800.000
1"650.000
1"700.000
1

2.000.000

'l-he

patellt was
28. Ei,e Company pr.irchased a patent on .lanuan' i. 2010 fbr P9,000.000.
During
1.2025.
.lanltary
aprortizecl over ihe remaining legal lif-e of l5 ve:rrs erpii'ing otl
201j. the entit,v determiped that the econolt-Irc benellts of tire patellt wotrlcl n,:t last lor-rger
tha6 l2 years fiorr the clate of acqLrisition. Wlrat amoLlt'lt shor-rld be reported as patellt. nct of
accur-riiriate, i irLrtr,tlizatiot-t. on [Jecentber' 3 1 " 201 3?

l.
tr.

c.

rt.

6.400.00U
6"600.000
6-000.000
7.I n0.000

Page
B

29. In an elfbrf to increase sales, Blue Coiitpany iriarig,lratecl a sales prornotion campaign on
.lune 10.2013, wherelry the entity placeci i] colrpoit in eacli package of razc.'r blacies sold. the
coupolls being redeemable tbr a premium, Each premium costs P50 and t-ive coupons must
be presented by, a customer to receive a prentium. The entity estinlated that only 40 percent
of ine coupons issued will not be recieetned. For tiie six tnonths ended December 31' 2013'
tlre t-otlowing information is available:
Packages

400.000
30.000

of razor blades sold

Premiunrs purclrased
Coupons redeemecl

100"000

Wliat is the estimateti pretlium liabilitli on Decemher

-i ! , 201

3'l

a, i.000.000
b. 1.400,000
c. 1.800.000
d.

2.400.000

30. Op January 1.201-i, Kegin Contpany sold a P2,000.C00. t\'.'i;rnl\'-\'ea':', 8 percent bond issue
fbr P2.120"000. Each F1,000 borrci has trr,o detachable $'arrants. eaclr oi'rvhich permits the
purchase of olre share tbr P30. The shares have ii par i'altte oi P25 per share. Immediately
atler the sale of tire boncls, the fair values ale bonds vuilhout'warrilrtls 95. lvarrant 21. arld
ordinary share 28. Whai is ir-rcluded in the en1r,y to recor.j tl:c h'.,nd issile?

a. Credit share wa.rra.nLs ouistlnding

tr. Credit bo:rci prcrrrium P36.01t0
c. Debit honci discount P80.000
d. Credit bond prr-mium Pi2i,'.000
D

.il.

Pii'l.C(JL)

Foot Compei:ry is involveci in iitigation regariling a fatiltv pro.lit;t suici in a prior 1'ear. l'he
c'r-rtity has icnsuite,J v.,irir its,ittorne),anc!detenlined ihat tlrere is:t iCc", c'iauce of losing the
case. T'tre attcrlte.l cstiirated tl-rar tlie tffiolriri.rfpay'ttrcnt *'oul,.l i,; P{110.{.'r10. l\'hat alrount
of liabilitl,is recognized in i.lie statelnent oil'inanciili posrtioit at iire cuC of the currerrt year?

a.
b.

50rJ.(10(j

i00.000

c. 200"000
d.

rJ

32. Dgrirrg 2013. Brave Clonipar:v decided ti; r^,,riieo1'l'Pi.d0tj.C00 tl'o:.n ittventol')'n'hich w'as
over 5 .vears old as it was obsolete. It rvas d;scoi'ered that saics cl P1.500.000 had been
omitttrii front the lrnanciril stetements of 201; Wh.iit ioti.il arriolrnt slto;.rld be reported as prior
p,-'riod err<-'r lir the financial statemen.s oi'101-l l

a. 1.000.000
b. 1,500.(100
c. ?"500.000
d.0
B

33. Enrill'Conipany had saies of P4.0C0,00C during l)ecentber 201?'. Experience showed that
nrerchandisrj eqLtaling 'lo,/o af sales will be retLlrrled wittrin 30 Cays itnd an aclditional 3% rryill
be retullr:d'urithiir 90 davs. Retumcd nrerchi,:rdise is.eadily resaliible. In addition.
merchandise equaling i50zb rii sales rvill b* erclr;ir.lge,-i l'ol' trterchairciise of eclual or greater
viilue. What aniount slroultl bt'repofteLl i1s n.lt sales tirr [,')rr:']lt'toer 1.013'/

a. 4.000.1t00

b. r.600.000
c. 3.000"000
d. i.400.000

Ilage
B

i4. In 1013"

Helen Company decided to di:;continue its Eleclronlcs Division, a separatelv

identiflable cotnponent of business. On f)ecernber i1.2013" thc clivision has not been
conrple'tely scld. Ilon'el'er, negotiatiorrs for the tinal and cornpiete sirle are progressing in a
positive manner anr1 it is probable that the disposal r','ill be contpletecl 'uvithin a ),ear.
Analysis of the recorCs {br the 1'ear clisclosecl tire fblkr*'ing reiatir.e to the Electronics
Div isiorr:

Operating lo:is firr the year

l.ris:; on disposal cf sorle Electronics []ii,isiorr assets riuring 201-1
Expected operating loss in,,"014 preceding trrral disposal
Expected gain in 2011 c:n disposal of division
\Vhat an:ount shoulC be reporteC as pretax loss fiorit Cisconii;iur:rl r.:perrtioir in

il

t,.

8,000.000
500.000
r.000.000
2"000.000

20ij?

8 000.000
it.500"000

c. 9.500.000
d. 7.500.000
B

35, Yves Company and its divisir-rns are engaged soiely'in rranut"acturing. 'l-he entity'reported
the operating profit or loss of its divisions at Segnrenr A P20.000.(Jt)0 profit. Segment B
P10.00C"000 loss, Segnrent C P6,000.000 loss. St'gnrent

P2"000.000 profit. What is the nrirrirrunr c,pc.':ltirrg

classilleci as reportabie segnrent?

b.
c.
cl.
D

I-1

i)t.Ulr0.{i0(,r loss, and Segruent E

urtfit or lr)!s lbr a se6lment to be

1.100,000
2.500,000
2"000.000
1.700.000

i6. On IJecr-'niber i1.2013. Clrar:a Ct,nrpanl'provideri the {ollc;r,rin;, inforrrratiort:

Itetail

Cost
Inventory'. January

735.00C

Purchases

Additional

1.1

6.!.000

markr"rps

I ,01

5.000

5,775,000
210,000

Sales tbr the year totaled P5,530.000. Viarl.:clou,ns anrolntecl to P70,000. Llncier the
approxim:rte lower of everage cost or nullV rrt:ril nrcihcii...,,'hat is the estii-natecJ inventory
on Dccerrrber 3l.2013?

a.
b.
c.
d.
C

1..540.00t)

I.,+00.000
1.078.000

e80.000

37. On.Ianuary 1,201i" Nikita Company receiveci a.5-.,,err',,ariable interest rate loan of
P6.000.000 witlr interest payrnent at the end of each ,"',:'.rr anrl the principal to be repaid on
Decenther:i1.2017. The interest rate lor 2013 is 8% anci tire rate in each slrcceeding year is
eclual tr.-', rttarket interest rate on January I ol'each y'car. On Jarruary i" 201i. tlre entity
entereti into an interest rate s\,ap agreenrent r.r'ith ii financiill instilution to the eff-ect that the
entitl'w'ill receive a swap payment if the interest on.lanrari, I is nio'e tl-ran u?o atrcl wilI nrake
a swail payrnent if the interest is less than 8%. The swap pa),ireills are n-ialie at tlre end of the
),ear. This interest rate swap agreenrent is ciesignated as a eiish llon,herlge. On.lanLrarl' l.
20i,4. the market ratc'of interest is 9ozir. fhe present l'alue of an ori.linarv annuitl,of I at 9?6
ii;L lbur pi:riods is 3.14. fhe prescnt i'alue of ari or,,1inar'\'rrrnriit\ ol I li t)ot tilr fir'..'periocls
is 1.89. Orr December

a. I j j.400
b. 240.000

c. l9-+.+00
d.0

31.20ii.

rr,'iuri amotint should be

rejlortc(l as dcr-ryirtive asset'J

Page

\ianessa Company acriuiled equiprtrent to be r-tsec-l in its matrtrtactLrrirlg

operatio,s. The eqLripment has an estin:aietJ useful lit'e ol'10 years aud att estintated residrral
2013
value of P50"000. ff,. depreciatior-r applicable to this eqr-ripurerrt was P240,000 fbr
the
eqr'ripment'7
of
cost
computecl under the sum of y.urr' digiti, What rvas the acquisition

j8. On.lanuary 1.2011.

a.
h,.

c.

d.
C

l0

1.650,000
1"700,000
1"100.000
2"450.000

'I-he fblltlrving carrl'ing

i9. Eunice Company purchased another erititi, for P5,000.000 cash.
amolnrt and fair roiu. were associated with the itenrs acqLrired in this birsiness conrbination:

Accounts receivable
lnveutory
Covertrtlent contract
Equipmertt
Sholt-term loan pavable

Carr,ving arnount

Fair v:rlue

2.000.000
1.000.000

2.000.000
s00.000
1.000.000
500.0'J0
2.000.000

400"000
2.000"000

l'he fair value associated with the acquired erltity'' s governnlent contrllct is not l:ased 0t1 ilily
legal or contractual relirtiollsirip. In acldilion. for obvioLrs reasott. there is no open tttarket
tlading fbr an intangible ol this sort. \\ihat is tlti .ltiotli' iil alisirrg from the bttsitru'ss
conTbirration?

a. 3"000.000
b. -r.600.000
c. 4.000,000

d.0

40. Il.aeapl Cornpany incurred the fbllou,ing costs dLtring the crtrretrt Yeat':
1"350.000

Modiflcation to the fbrmulation of a chenricai prodttct

Trouble-shooting of breakdowns dil.'ii",i :j0,lr llr.l .i1l 11irrilitciioll
Dc.sign of tools. iigs. ntolds and dies :rn oivirrg lre\v tecllnoio!i\'
Seasolal or other periodic design changes lo exis.ring prodllcts
Laboratory research aimed at discover) c')i'lle\\' tei:huology
ln the inconre statenteltt fbr the cllrrent y-tar. r,lhat anlollllt shotrld be reported
devel,rpuient expensc?

a. 5.200.000
b. 4.700,000

c.

3.850.000

d.3,350.000

ENT)

r,500"000
1.700.000
1.850.000

?.I
as

_s0.000

lesearch and