SIMULATED BOARD EXAM Petty Cash (unreplenished petty

Choose the best answer. cash vouchers 10,000) 50,000

1. Ganas Company provided the following data on Notes Receivable 4M
December 31, 2018: AR, net of accounts with credit
Cash, including sinking fund of 500k 2M balances of 1.5M 6M
Notes Receivable 1.2M Inventory 3M
Notes Receivable Discounted 700,000 Bond sinking fund 3M
AR-unassigned 3M
AR-assigned 800,000 AP, net of suppliers’ accounts with
Allowance for DA 100,000 debit balances of 1M 7M
Equity of Assigned Accounts 500k Notes Payable 4M
Inventory, including 600k of goods in 2.8M Bond payable due June 30, 2019 3M
transit purchased FOB destination. Accrued Expenses 2M
The goods were received Jan 3, 3019
What is the total amount of current assets that What amount should be reported as total current
should be reported on December 31, 2018? assets on December 31, 2018?
a. 7,900,000 a. 19,040,000
b. 8,000,000 b. 20,040,000
c. 7,400,000 c. 20,050,000
d. 7,700,000 d. 24,040,000

2. Sayson Company disclosed the following 4. What amount should be reported as total current
information: liabilities on December 31, 2015?
AP, after deducting debit balance a. 19,000,000
in suppliers accounts amounting b. 16,000,000
to 100,000 4M c. 15,500,000
Accrued expenses 1.5M d. 15,000,000
Credit balances of customer accts 500,000
Stock dividend payable 1M 5. Catriona Gray Company incurred the following
Claims for increase in wages & costs and expenses during the current year:
allowance by employees of the Raw material purchases 4M
entity, covered in a pending lawsuit 400,000 Direct Labor 1.5M
Estimated expenses in redeeming Indirect labor-factory 800,000
Prize coupons 600,000 Factory repairs & maintenance 200,000
What amount should be reported as total current Taxes on Factory building 100,000
liabilities? Depreciation-factory building 300,000
a. 6,700,000 Taxes on salesroom &
b. 6,600,000 general office 150,000
c. 7,100,000 Depreciation-sales equipment 50,000
d. 7,700,000 Advertising 400,000
Sales Salaries 500,000
3-4. Kiligon Company provided the following Office Salaries 700,000
information on December 31, 2018; Utilities (60% applicable to
Cash in Bank, net of overdraft factory) 500,000
of 500,000 5M
 Beginning Ending 8. Blackpink Company purchased a machine on
Raw Materials 300,000 450,000 January 1,2012 for 6M. At the date of acquisition,
Work in Process 400,000 350,000 the machine had a life of 6 years with no residual
Finished Goods 500,000 700,000 value. The machine is being depreciated on a
What is the cost of goods manufactured for the straight-line basis. On January 1, 2015, the entity
current year? determined that the machine had a useful life of 8
years from the date of acquisition with no residual
a. 6,900,000 value.
b. 7,200,000 What is the depreciation of the machine for 2015?
c. 7,100,000 a. 750,000
d. 7,300,000 b. 600,000
c. 375,000
6. Rachel Peters Company reported that the d. 500,000
financial records were destroyed by fire at the end
of the current year. However, certain statistical 9. Bokingo Company has historically reported bad
data related to the income statement are available. debt expense of 5% of sales in each quarter. For
Interest expense 20,000 the current year, the entity followed the same
COGS 2M procedure in the three quarters of the year.
Sales Discount 100,000 However, in the fourth quarter, the entity
The beginning inventory was 400,000 and determined that bad debt expense for the entire
decreased 20% during the year. Administrative year should be 450,000.
expenses are 25% of COGS but only 10% of gross Sales in each quarter of the year were first quarter
sales. 2M, second quarter 1.5M, third quarter 2.5M and
4/5 of the operating expenses relate to sale fourth quarter 4M
activities. What amount of bad debt expense should be
What is the income before tax for the current year? recognized for the 4th quarter?
a. 380,000 a. 200,000
b. 480,000 b. 150,000
c. 330,000 c. 300,000
d. 400,000 d. 400,000
7. On January 1, 2015 Bacadon Company changed 10. Mikee Company reported cash account which
from the average cost method to the FIFO method consisted of the following:
To account for inventory. Ending inventory for Bond sinking fund 1,500,000
each method was as follows: Checking account in BPI (A 3,155,000
2014 2015 320,000 check is still
Sales 10M 13M outstanding per bank statement
COGS 7M 9M Currency and coins awaiting 1,135,000
Operating Exp 1.5M 2M deposit
Income Before tax 1.5M 2M Deposit in a bank closed by BSP 500,000
Tax Expense 450,000 600,000 Petty cash fund including paid 50,000
The entity accrued tax expense on December 31 of vouchers
each year and paid the tax in April of the following Receivables from officers and 175,000
year. The income tax rate is 30%. employees
What amount of net income should be reported in What amount of cash should be reported under the
2015 after the change to the FIFO inventory current assets?
method? a. 4,440,000
a. 1,610,000 b. 4,330,000
b. 2,300,000 c. 4,830,000
c. 1,750,000 d. 5,830,000
d. 1,890,000
11. Which statement is incorrect regarding
inventories?
a. Are recognized in the statement of financial
position if it is probable that the future economic
benefits will flow to the entity and the item has
a cost or value that can be measured reliably
b. Are measured at the LCNRV
c. Are presented as a separate line item in the
statement of financial position
d. Are presented in the statement of financial
position either as current or non-current
12. Which statement is incorrect regarding costs
of inventories?
a. The cost of inventories should comprise all
costs of purchase, costs of conversion and other
costs incurred in bringing the inventories to their
present location and condition.
b. Trade discounts, rebates and other similar
items are deducted in determining the cost of
purchase
c. It may be appropriate to include non-
production overheads or the costs of designing
products for specific customers in the cost of
inventories
d. Foreign exchange differences arising directly
on the recent acquisition of inventories invoiced
in a foreign currency are included in the cost of
inventories
13. Costs of purchase do not include
a. Purchase price
b. Import duties and other non-refundable taxes
c. Transport, handling and other costs directly
attributable to the acquisition of the finished
goods, materials and services
d. Fixed and variable manufacturing overheads
14. Cost of conversion do not include
a. Direct labor
b. Fixed Factory Overhead
c. Variable Factory Overhead
d. Direct Materials
15. The following may be included in the cost of
inventories, except:
a. Administrative Overheads
b. Storage costs
c. Wasted materials, labor and other production
costs
d. Selling Costs
16. Which statement is incorrect regarding cost
formulas?
a. The cost of inventories of items that are not
ordinarily interchangeable shall be assigned by
using specific identification of their individual
costs
b. If specific identification is not required, the
cost of inventories shall be assigned by using
FIFO, LIFO, or weighted average cost formula
c. An entity shall use the same cost formula for
all inventories having a similar nature and use to
the entity
d. For inventories with a different nature or use,
different cost formulas may be justified
17. Which statement is incorrect regarding cost
formulas?
a. Specific Identification of cost means that
specific costs are attributed to identified
inventory
b. The weighted average inventory costing
method is particularly suitable to inventory
where homogeneous products are mixed
together.
c. The average cost formula may be calculated
on a periodic basis, or as each additional
shipment is received, depending upon
circumstances of the entity
d. The FIFO formula assumes that the items of
inventory that were purchased or produced last
are sold first and consequently the items
remaining in the inventory at the end of the
period are those earlier purchased or produced
18. Generally, which inventory costing method
approximates most closely the current cost for
each of the following:
 Cost of Goods Sold Ending Inventory
a. LIFO FIFO
b. LIFO LIFO
c. FIFO FIFO
d. FIFO LIFO
19. Which of the following is not affected by the
inventory valuation method used by an entity?
a. Cost of Goods Sold
b. Net Income of the entity
c. Amounts owed for income taxes
d. Amounts paid to acquire merchandise
20. Which is incorrect regarding writedown of
inventory to net-realizable value?
a. The practice of writing inventories down
below cost to net realizable value is consistent
with the view that assets should not be carried in
excess of the amounts expected to be realized
from their sale or use
b. Materials and other supplies held for use in
the production of inventories are not written
down below cost if the finished products in
which they will be incorporated are expected to
be sold at or above cost.
c. the best available measure of the net realizable
value of materials is the replacement cost
d. Inventories are usually written down on the
basis of a classification of inventory, for
example, finished good, or all the inventories in
a particular operating segment
21. PAS 2 (Inventories) applies to all inventories
except:
a. Work in process arising under construction
contracts, including directly related service
contracts
b. Financial instruments
c. Biological assets related to agricultural
activity and agricultural produce at the point of
harvest
d. All of the above
22. PAS 2 does not apply to the measurement of
inventories held by
a. Producers of agricultural and forest products,
agricultural produce after harvest, and mineral
products , to the extent that they are measured at
NRV in accordance with well-established
practices in those industries
b. Commodity broker traders who measure their
inventories at fair value less costs to sell
c. Both a and b
d. Neither a nor b
23. When an inventory costing formula is
changed, the change is required to be applied:
a. Prospectively and the adjustment taken
through the current profit or loss
b. Retrospectively and the adjustment taken
through the opening balance of accumulated
profits
c. Prospectively and the current period
adjustment recognized directly in equity
d. Retrospectively and the adjustment
recognized as an extraordinary gain or loss
24. A company decided to change its inventory
valuation method from FIFO to LIFO in a period
of rising prices. What was the result of the
change on ending inventory and net income in
the year of change?
Ending Inventory Net Income
a. Increase Increase
b. Increase Decrease
c. Decrease Decrease
d. Decrease Increase
25. The use of gross profit method assumes
a. the amount of gross profit is the same as in
prior years
b. Sales and cost of goods sold have not changed
from previous years
c. Inventory values have not increased from
previous years
d. The relationship between gross profit and
sales remains stable over time
26. The Bayambang Corporation was organized
on January 1, 2017. On December 31, 2018, the
 corporation lost most of its inventory in a The work in process inventory destroyed by fire is
warehouse fire just before the year-end count of a. 366,000
inventory was to take place. Data from the b. 314,612
records disclosed the following: c. 265,000
2017 2018 d. 185,000

Goods Available 4, 069, 4,157,000 28. Pugo uses the retail inventory method. The
for Sale 400 following information is available for the current
Sales 3,940, 000 4,180,000 year:
Sales returns and 80,000 100,000 Cost Retail
allowances Beginning Inventory 1.3M 2.6M
Gross profit rate 21% ?
Purchases 18M 29.2M

On January 1, 2018, the Corporation’s pricing Freight-In 400,000

policy was changed so that the gross profit rate
would be three-percentage points higher than the Purchase returns 600,000 1M
one earned in 2017. Salvaged undamaged Purchase allowances 300,000
merchandise was marked to sell at 120, 000 while
damaged merchandise was marked to sell at 80,000 Departmental 400,000 600,000
had an estimated realizable value of 18,000 Transfer In
How much is the inventory loss due to fire? Net Markup 600,000
a. 918,200
Net Markdown 2M
b. 947,000
c. 856,200 Sales 24.7M
d. 824,600
27. The work-in process inventory of Burp Sales returns 350,000
Company were completely destroyed by fire on
Sales Discounts 200,000
June1, 2018. You were able to establish physical
inventory figures as follows: Employee Discounts 600,000
January 1, June 1,
2018 2018 Loss from Breakage 50,000

Raw Materials 60,000 120,000 The estimated cost of inventory at the end of the
current year using the conventional method?
Work-in- 200,000 ? a. 3,200,000
process b. 3,000,000
Finished Goods 280,000 240,000 c. 3,250,000
d. 3,360,000
Sales from January 1 to May 31, were 546,750.
Purchases of raw materials were 200,000 and freight
on purchases 30,000. Direct labor during the period
29. If the cash balance shown in the accounting
was 160,000. It was agreed with insurance adjusters
records is less than the correct cash balance and
that an average gross profit rate of 35% based on
neither the entity nor the bank has made any errors,
cost be used and that direct labor cost was 160% of
there must be
factory overhead.
 a. Deposits credited by the bank but not yet (recorded by bank as
recorded by the entity a charge)
b. Deposits in transit
c. Outstanding checks 31. The deposits in Transit as of October 31 is
d. Bank charges not yet recorded by the entity a. 72, 050 c. 51, 050
b. 70, 250 d. 42, 050
30. Which of the following statements in relation
to petty cash fund is false? 32. The outstanding checks as of October 31 is
a. Each disbursement from petty cash should be a. 27, 800 c. 37, 150
supported by a petty cash voucher. b. 28, 700 d. 31, 750
b. the creation of a petty cash fund requires a
journal entry to reflect the transfer of fund out of 33. Bon Company showed a cash account balance of
the general cash account 4, 500, 000 at the month-end. The bank statement did
c. At any time, the sum of the cash in the petty cash not include a deposit of 230, 000 made on the last day
fund and the total of petty cash vouchers should of the month.
equal the amount for which the petty cash fund was The bank statement showed a collection by the bank
established. of 94, 000 for the depositor and a customer check for
d. With the establishment of an imprest petty cash 32, 000 because it was NSF.
fund, one person is given the authority and A customer check for 45, 000 was recorded by the
responsibility for issuing checks to cover minor depositor as 54, 000 and a check written for 79, 000
disbursements was recorded as 97, 000.
What amount should be reported as cash in bank?
a. 4, 765, 000 c. 4, 819, 000
31-32. Christopher Company deposits all receipts b. 4, 571, 000 d. 4, 801, 000
and makes all payments by check. The following
information is available from the cash records: 34. Friendship Company provided the bank
September 30 Bank Reconciliation statement for the month of April which included the
Balance per Bank 262, 460 following information:
Add: DIT 21, 000 Bank Service Charge for April 15, 000
Deduct: OC (38, 000) Check deposited by Friendship 40, 000
Balance per Books 245, 460 during April was not collectible
and has been marked NSF by the
Month of October Per Bank Per Book bank and returned
Results In comparing the bank statement to its own records,
Balance October 31 279, 950 303, 550 the entity found the following:
Oct Deposits 107, 840 158, 890 Deposits made but not yet 130, 000
Oct checks 111, 000 100, 800 recorded by bank
Oct note collected 30, 000 0 Checks written and mailed but not 100, 000
(not included in Oct yet recorded by bank
deposits) All deposits in transit and outstanding checks have
Oct Bank service 350 0 been properly recorded in the entity’s books.
charge A customer check for 35, 000 payable to Friendship
Oct NSF check of a 9, 000 0 Company had not yet been deposited and had not
customer returned been recorded by the entity.
by the bank
The cash in bank account balance per ledger is 38. Which method of recording bad debt loss is
920,000. consistent with accrual accounting?
What is the adjusted cash in bank on April 30? a. Allowance Method
a. 900, 000 b. 930, 000 b. Direct write-off method
c. 865, 000 d. 965, 000 c. Percent of Sales Method
d. Percent of Accounts Receivable method
35. Opiso Company provided the following
information at year-end: 39. The advantage of relating the bad debt
Balance per Book 540, 000 experience to AR is that this approach
Balance per BS 500, 000 a. Gives a reasonably accurate measurement of
Deposit in bank closed by BSP 245, 000 receivables in the statement of FP
DIT 45, 000 b. Relates bad debt expense to the period of sale
OC 65, 000 c. is the only generally accepted method for
Currency and Coins on Hand 56, 500 measuring accounts receivable
Petty Cash inckuding 10, 000 87, 000 d. Makes estimate of uncollectible accounts
paid vouchers necessary
Bank Service Charge not yet 60, 000
taken up in books 40. VIP Hotel manages an extensive network of
boutique hotels in the country. The entity has
What total amount of cash should be reported as significant AR from three customers namely:
current asset at year-end? Kail Eduave 5M
Julz Yong 9M
a. 631, 500 b. 613, 500 Mikee Delos Santos 8M
c. 651, 300 d. 615, 300
36. Trade receivables are classified as current assets Others, Not individually significant 4.5M
if these are reasonably expected to be collected The entity has determined that Julz Yong receivable
a. Within 1 year is impaired by 1.5M and Mikee Delos Santos
b. Within the normal operating cycle receivable is impaired by 2M. The receivable from
c. Within 1 year or within the operating cycle, Kail Eduave is not impaired.
whichever is shorter The entity has also determined that a composite rate
d. Within 1 year or within the operating cycle, of 5% is appropriate to measure impairment on all
whichever is longer other AR.
What is the total impairment loss of AR?
37. Where the operating cycle extends beyond a. 4, 825, 000 b. 3, 975, 000
c. 3, 500, 000 d. 3, 725, 000
1year because of normal credit terms as in the case
of installment sales of household appliances 41. Top Company followed the procedure of
a. It is proper to classify the entire receivables as debiting ba debt expense for 2% on all new sales.
current assets with disclosure of the amount not Sales ABD
realizable within 1 year, if material. 2016 3M 40, 000
b. The entire receivables are shown as non-current 2017 2.8M 60, 000
assets 2018 3.5M 80, 000
c. The portion due in 1 year is shown as current and What amount was written off in 2018?
the balance as non-current a. 50, 000 b. 10, 000
d. The receivables are not recognized c. 70, 000 d. 86, 000
42. Capetown Company began operations on January
1, 2017. The entity has found that the estimated bad
debt expense has been consistently higher than actual
bad debts. Management proposed lowering the
percentage from 3% of credit sales to 2%. Credit
sales for 2018 totaled 5M & accounts written off as
uncollectible during 2018 totaled 550, 000. What is
the BDE for 2015?
(a) 150k (b) 100k (c) 550k (d) 240k
43. Which statement is incorrect regarding the equity
method of accounting for investment in associate?
a. the investment is initially recognized at cost
b. the investor’s profit or loss include its share of the
investee’s P&L and the investor’s OCI includes its
share of the investee’s OCI
c. Distributions received from the investee reduce the
carrying amount of the investment
d. Change in the fair value of the investment is
recognized in OCI
44. How is goodwill arising on the acquisition of an
associate dealt with in the financial statements?
a. it is amortized
b. it is impairment tested individually
c. it is written off against P&L
d. Goodwill is not recognized separately within the
carrying amount of the investment
45. If there is any excess of the investor’s share of
the net fair value of the associate’s identifiable assets
and contingent liabilities over the cost of the
investment, that is, negative goodwill, how should
that excess be treated?
a. It should be included in the carrying amount of the
investment
b. It should be written off against RE
c. It should be disclosed separately as part of the
investor’s equity
d. It should be included as income in the
determination of the investor’s share of the
associate’s P&L for the period
46. Disay Company sold accounts receivable without
recourse with face amount of 6M. The factor charged
15% commission on all accounts receivable factored
and withheld 10% of the accounts factored as
protection against customer returns and other
adjustments. The entity had previously established
an allowance for doubtful accounts of 200, 000 for
these accounts. By year-end, the entity had collected
the factor’s holdback there being no customer returns
and other adjustments.
What amount of cash was initially received?
a. 4, 500, 000
b. 5, 400, 000
c. 5, 100, 000
d. 6, 000, 000
47. What is the loss on factoring?
a. 700, 000
b. 900, 000
c. 200, 000
d. 0
48. Gloria Company acquired a 40% interest in an
asscociate, Alta Company, for 5M on January 1,
2015.
At the acquisition date, there were no differences
between fair value and carrying amount of
identifiable assets and liabilities.
Alta Company reported the following net income
and dividend for 2015 and 2016:
2015 2016
Net Income 2M 3M
Dividend Paid 800,000 1M
The following transactions occurred between
Glorious Company and Alta Company:
*On January 1, 2015, Alta Company sold an
equipment costing 500,000 to Glorious Company
for 800,000. Glorious Company applied a 10%
straight-line depreciation.
*On July 1, 2016, Alta Company sold an
equipment for 900,000 to Glorious Company.
The carrying amount of the equipment is 500,000
at the time of sale. The remaining life of the
equipment is 5 years and Glorious Company used
the straight-line depreciation.
*On December 1, 2016, Alta Company sold an
inventory to Glorious Company for 2.8M
The inventory had a cost of 2M and was still on
hand on December 31, 2016.
 What is the investor’s share in the profit of the
associate for 2015?
49. What is the carrying amount of the investment
in associate on December 31, 2015?
a. 5,692,000
b, 5M
c. 5, 372,000
d. 5,360,000

50. What is the carrying amount of the investment

in associate on December 31, 2016?
a. 5,692,000
b. 5,704,000
c. 5,720,000
d. 6,120,000

“There are two ways of spreading light: to be the

candle or the mirror that reflects it.”
-Edith Wharton

Prepared By:
King Christopher R Laganao, CPA