ACC17-FAR

TAKE HOME ACTIVITIES 1 AND 2

TEST I

1. A company’s trial balance totals were:

Debit …………………….₱387,642
Credit ……………………₱379,511

A suspense account was opened for the difference. Which of the following errors would have the
effect of reducing the difference when corrected?
a. The petty cash balance of ₱500 has been omitted from the trial balance
b. ₱4,000 received for rent of part of the office has been correctly recorded in the cash book and
debited to Rent expense account
c. No entry has been made in the records for a cash sale of ₱2,500
d. ₱3,000 paid for repairs to plant has been debited to the plant asset account.

2. A company paid its property taxes on October 1 for the period October 1, year 1 to September
30, year 2. When the payment was made the company debited property taxes expense and
credited cash for ₱8,000. The adjusting entry at December 31, year 1 would include which of the
following:
a. debit prepaid property taxes, ₱6,000.
b. credit prepaid property taxes, ₱6,000.
c. credit property tax expense, ₱2,000.
d. debit property tax expense, ₱6,000.

3. If during an accounting period an expense item has been incurred and consumed but not yet
paid for or recorded, the end-of-period adjusting entry would involve
a. a liability account and an asset account.
b. an asset or contra asset account and an expense account.
c. a liability account and an expense account.
d. a receivable account and a revenue account.

4. A trial balance
a. proves that debits and credits are equal in the ledger.
b. supplies a listing of open accounts and their balances that are used in preparing financial
statements.
c. is normally prepared three times in the accounting cycle.
d. all of these.

5. It is a formal record where transactions are initially recorded.

a. Journal entries c. Master file
b. Ledger d. Journal

6. It is the basic storage of information in accounting.

 a. Journal entry c. Debit or Credit
b. T-account d. Account

7. Which of the following is a recordable event or item?

a. Changes in managerial policy
b. The value of human resources
c. Changes in personnel
d. None of these

8. Errors revealed by a trial balance are

a. those errors resulting from transposition but not transplacement.
b. those errors resulting from either transposition or transplacement.
c. transplacement and transposition errors on both sides of a journal entry.
d. those errors which that have caused the total debits and total credits to be unequal.

9. Adjusting entries are necessary to

1. obtain a proper matching of revenue and expense.
2. achieve an accurate statement of assets and equities.
3. adjust assets and liabilities to their fair value.
a. 1 c. 3
b. 2 d. 1 and 2

10. Factors that shape an accounting information system include the

a. nature of the business c. volume of data to be handled.
b. size of the firm d. all of these.

11. An accrued revenue can best be described as an amount

a. collected and currently matched with expenses.
b. collected and not currently matched with expenses.
c. not collected and currently matched with expenses.
d. not collected and not currently matched with expenses.

12. At the end of the current year, the prepaid insurance account showed a debit the balance of
₱5,000; the balance at the beginning of the year was ₱6,000, and during the year the insurance
premiums paid amounted to ₱8,000. Assuming insurance premium payments are initially
entered in the prepaid insurance account ,the adjusting entry at the end of the year would
include:
a. debit prepaid insurance ₱9,000
b. credit prepaid insurance ₱1,000
c. debit insurance expense ₱7,000
d. debit insurance expense ₱9,000

13. When an item of revenue is collected and recorded in advance, it is normally called a(n)
___________ revenue.
a. accrued c. unearned
 b. prepaid d. cash

14. The information below was taken from the bank transfer schedule prepared during the audit of
Fox Co.’s financial statements for the year ended December 31, 2001. Assume all checks are
dated and issued on December 30, 2001.
Bank Accounts Disbursement date Receipt date
Check no. From To Per books Per bank Per books Per bank
101 National Federal Dec. 30 Jan. 4 Dec. 30 Jan. 3
202 County State Jan. 3 Jan. 2 Dec. 30 Dec. 31
303 Federal American Dec. 31 Jan. 3 Jan. 2 Jan. 2
404 State Republic Jan. 2 Jan. 2 Jan. 2 Dec. 31

Which of the following checks might indicate kiting?

a. #101 and #303.
b. #202 and #404
c. #101 and #404
d. #202 and #303

15. Trask Corporation's checkbook balance on December 31, 2001 was ₱8,000. In addition, Trask
held the following items in its safe on December 31:

Check payable to Trask Corporation, dated January 2, 2002, not

included in December 31 checkbook balance ₱2,000
Check payable to Trask Corporation, deposited December 20,
and included in December 31 checkbook balance, but
returned by bank on December 30, stamped "NSF." The
check was redeposited Jan. 2, 2002, and cleared Jan. 7 400
Post-dated checks 150
Check drawn on Trask Corporation's account, payable to a
vendor, dated and recorded December 31, but not mailed until
1,000
January 15, 2002

The proper amount to be shown as cash on Trask's balance sheet at December 31, 2001, is
a. ₱7,600.
b. ₱8,000.
c. ₱8,600.
d. ₱9,750.

16. Bank statements provide information about all of the following except
a. checks cleared during the period.
b. NSF checks.
c. bank charges for the period.
d. errors made by the company.

17. Which of the following items would be added to the book balance on a bank reconciliation?
 a. Outstanding checks
b. A check written for ₱63 entered as ₱36 in the accounting records
c. Interest paid by the bank
d. Deposits in transit

18. In preparing a bank reconciliation, interest paid by the bank on the account is
a. added to the bank balance.
b. subtracted from the bank balance.
c. added to the book balance.
d. subtracted from the book balance.

19. In preparing a monthly bank reconciliation, which of the following items would be added to the
balance reported on the bank statement to arrive at the correct cash balance?
a. Outstanding checks
b. Bank service charge
c. Deposits in transit
d. A customer's note collected by the bank on behalf of the depositor

20. Bank reconciliations are normally prepared on a monthly basis to identify adjustments needed in
the depositor's records and to identify bank errors. Adjustments should be recorded for
a. bank errors, outstanding checks, and deposits in transit.
b. all items except bank errors, outstanding checks, and deposits in transit.
c. book errors, bank errors, deposits in transit, and outstanding checks.
d. outstanding checks and deposits in transit.

21. In preparing its bank reconciliation for the month of February, James Company has made
available the following information:
Balance per bank statement, February 28 ₱18,025
Deposit in transit, February 28 3,125
Outstanding checks, February 28 2,875
Check erroneously deducted by bank from James' 125
account, February 10
Bank service charges for February 25

What is the corrected cash balance at February 28?

a. ₱18,125
b. ₱18,150
c. ₱18,275
d. ₱18,400
Use the following information for the next three questions:
The accounting records and bank statement of Entity A show the following information:

SUBSIDIARY LEDGER
CASH IN BANK - BPI CURRENT ACCOUNT
Date Description Debit Credit Balance
6/1 Bal. forwarded 881,000
6/11 Check #1113 130,800 750,200
6/15 Check #1114 220,000 530,200
6/16 Deposit 295,800 826,000
6/22 Deposit 670,000 1,496,000
6/24 Check #1115 80,000 1,416,000
6/28 Check #1116 380,000 1,036,000
6/29 Deposit 160,000 1,196,000

METROBANK
BANK STATEMENT - ENTITY A

Description Debit Credit Balance

Date
6/1 Bal. forwarded 881,000
6/10 Deposit 350,000 1,231,000
6/15 Payment 2,000 1,229,000
6/15 Check #1114 220,000 1,009,000
6/16 Deposit 295,800 1,304,800
6/20 Payment 50,000 1,254,800
6/22 Deposit 670,000 1,924,800
6/24 Check #1115 80,000 1,844,800
6/26 Check #1113 130,800 1,714,000
6/28 Deposit 410,000 2,124,000

Additional information:
 The payments of ₱2,000 and ₱50,000 shown on the bank statement pertain to the cost of
checkbook requested from the bank and the monthly amortization of a bank loan, respectively.
The loan payment includes payment for interest of ₱8,000.
 Deposits shown on the bank statement but not on the cash ledger represent collections of
accounts receivable.

22. How much is the deposit in transit?

a. 160,000
b. 102,000
c. 52,000
d. 380,000
23. How much is the credit memo?
a. 52,000
b. 160,000
c. 760,000
d. 380,000

24. How much is the adjusted cash balance?

a. 1,940,000
b. 1,760,000
c. 1,380,000
d. 1,904,000

Use the following information for the next three questions:

Information on ABC Co. is shown below:
30-Jul Aug. 31
Book balance 132,200 180,000
Book debits 60,000
Book credits ?
Bank balance 100,600 169,000
Bank debits 20,600
Bank credits ?
Notes collected by bank 10,000 35,000
Debit memos 7,800 8,900
Understatement of book receipts - 2,800
Deposit in transit 45,000 43,800
Outstanding checks 11,200 3,900

25. How much is the adjusted receipts in August?

a. 78,800
b. 80,700
c. 88,700
d. 87,800

26. How much is the adjusted disbursements in August?

a. 13,300
b. 17,800
c. 16,200
d. 14,300

27. How much is the adjusted balance of cash on August?

a. 136,200
b. 134,400
c. 132,600
d. 208,900
28. Under the allowance method of recognizing bad debts on trade accounts receivable, the effect of
writing off an account to an entity's working capital is
a. increase
b. decrease
c. either a or b depending on the current level of the entity's working capital
d. no effect

29. JG Company had an accounts receivable balance of ₱40,000 on December 31, 2001, and ₱65,000
on December 31, 2002. The company wrote off ₱10,000 of accounts receivable during 2002, and
collected ₱2,000 on an account written off in 2000. Sales for the year 2002 totaled ₱520,000. All
sales were on account. The amount collected from customers on accounts receivable during 2002,
including recoveries, was
a. ₱487,000. c. ₱510,000.
b. ₱485,000. d. ₱495,000.

30. RGI Company had an accounts receivable balance of ₱45,000 on December 31, 2001, and ₱60,000
on December 31, 2002. The company wrote off ₱12,000 of accounts receivable during 2002, and
collected ₱2,500 on an account written off in 2000. Sales for the year 2002 totaled ₱550,000. All
sales were on account. The total collections from customers in 2002 were
a. ₱535,000. c. ₱538,000.
b. ₱523,000. d. ₱525,500.

31. At the close of its first year of operations, December 31, 2004, Linn Company had accounts
receivable of ₱490,000, after deducting the related allowance for doubtful accounts. During 2004,
the company had charges to bad debt expense of ₱90,000 and wrote off, as uncollectible,
accounts receivable of ₱40,000. What should the company report on its balance sheet at
December 31, 2004 as accounts receivable before the allowance for doubtful accounts?
a. ₱620,000 c. ₱440,000
b. ₱540,000 d. ₱360,000

32. Before year-end adjusting entries, Bass Company's account balances at December 31, 2004 for
accounts receivable and the related allowance for uncollectible accounts were ₱700,000 and
₱45,000, respectively. An aging of accounts receivable indicated that ₱62,500 of the December 31
receivables are expected to be uncollectible. The net realizable value of accounts receivable after
adjustment is
a. ₱682,500. c. ₱592,500.
b. ₱637,500. d. ₱655,000.

33. During the year, Jantz Company made an entry to write off a ₱4,000 uncollectible account.
Before this entry was made, the balance in accounts receivable was ₱80,000 and the balance in
the allowance account was ₱4,500. The net realizable value of accounts receivable after the write-
off entry was
a. ₱80,000. c. ₱71,500.
b. ₱79,500. d. ₱75,500.
34. The following information is available for Reagan Company:
Allowance for doubtful accounts at December 31, 2003 ₱ 8,000
Credit sales during 2004 400,000
Accounts receivable deemed worthless and written
off during 2004 9,000

It has been determined that an allowance for doubtful accounts of ₱9,500 is needed at December 31,
2004. What amount should Reagan record as "bad debt expense" for the year ended December 31,
2004?
a. ₱8,500 c. ₱10,500
b. ₱9,500 d. ₱17,500

Use the following information for the next two questions:

A trial balance before adjustments included the following:
Debit Credit
Sales ₱425,000
Sales returns and allowance ₱14,000
Accounts receivable 53,000
Allowance for doubtful accounts 760

35. If the estimate of uncollectibles is made by taking 1% of net sales, the amount of the adjustment
is
a. ₱3,350. c. ₱4,250.
b. ₱4,110. d. ₱4,870.

36. If the estimate of uncollectibles is made by taking 10% of gross account receivables, the amount
of the adjustment is
a. ₱4,540. c. ₱5,224.
b. ₱5,300. d. ₱6,060.

37. For the month of December, the records of Balin Corporation show the following information:
Cash received on accounts receivable ₱ 70,000
Cash sales 60,000
Accounts Receivable, December 1 160,000
Accounts Receivable, December 31 148,000
Accounts Receivable written off as uncollectible 2,000

The corporation uses the direct write-off method in accounting for uncollectible accounts receivable.

What are the gross sales for the month of December?

a. ₱118,000 c. ₱130,000
b. ₱120,000 d. ₱144,000
38. An analysis and aging of accounts receivable of the Lucille Company at December 31, 2002,
showed the following:

Accounts Receivable .................................. ₱840,000

Allowance for Doubtful Accounts
(before adjustment) ................................ 36,000 (cr)
Accounts estimated to be uncollectible ............... 76,800

Compute for the net realizable value of the accounts receivable of Lucille Company at December 31,
2002.
a. ₱804,000 c. ₱763,200
b. ₱799,200 d. ₱727,200

39. Spongebob Squarepants lent ₱2,000 to Squidward for one year at 10% interest, all due at
maturity. He insisted the terms of the transaction be formalized in promissory note. In this
situation
a. the maturity value of the note is ₱2,000.
b. Spongebob Squarepants is considered the maker of the note and records the note as an asset
in his accounting records.
c. Spongebob Squarepants is considered the maker of the note and records the note as a
liability in his accounting records.
d. Squidward is considered the maker of the note and records the note as a liability in his
accounting records.

40. Scott Company received a one-year non-interest-bearing note receivable. When the note
receivable was recorded, which of the following were debited or credited?

Interest Receivable Discount on Note Receivable

a. Yes Yes
b. Yes No
c. No Yes
d. No No

41. The periodic cash flows from a debt instrument may be computed by
a. multiplying the future cash flows from the note by an appropriate present value factor.
b. dividing the initial carrying amount by an appropriate present value factor.
c. adding together the periodic interest income and the amortization.
d. dividing the face amount by the life of the instrument.

42. On May 1, 2004 a company purchased a new machine which it does not have to pay for until
May 1, 2006. The total payment on May 1, 2006 will include both principal and interest.
Assuming interest at a 10% rate, the cost of the machine would be the total payment multiplied
by what time value of money factor?
a. Future value of annuity of 1
b. Future value of 1
 c. Present value of annuity of 1
d. Present value of 1

43. What is the effective interest rate of a bond or other debt instrument measured at amortized
cost?
a. The stated coupon rate of the debt instrument.
b. The interest rate currently charged by the entity or by others for similar debt instruments
(i.e., similar remaining maturity, cash flow pattern, currency, credit risk, collateral, and
interest basis).
c. The interest rate that exactly discounts estimated future cash payments or receipts through
the expected life of the debt instrument or, when appropriate, a shorter period to the net
carrying amount of the instrument.
d. The basic, risk-free interest rate that is derived from observable government bond prices.

44. Which of the following is true regarding non-interest bearing note receivables?
a. they are always discounted to their present value on initial recognition
b. they include a specified principal amount but an unspecified interest amount
c. they include a specified principal and specified interest
d. they cause no interest income to be recognized over their term
e. they include an unspecified principal and an unspecified interest

45. A company received two one-year notes in payment for merchandise sold. One note has a face
amount of ₱6,000 and was interest-bearing at an annual rate of 18 percent. The other note has a
face amount of ₱7,080 and was non-interest-bearing (its implied interest rate was 18 percent)
a. The total amount of cash ultimately to be received will be more for the interest-bearing note.
b. Both notes will cause the same total interest to be recognized.
c. The amount of interest revenue which should be recognized is more for the interest-bearing
note.
d. The amount which should be credited to sales revenue is more for the noninterest-bearing
note

46. Gary Snail Inc., received a 3-year non-interest bearing trade note for ₱50,000 on January 1, 20x1.
The current interest rate at that time was 15% for similar notes. Gary Snail recorded the receipt
of the note as follows:

(Dr) Notes receivable – trade ₱50,000

(Cr) Sales ₱50,000

The effect of this accounting for the notes receivable Gary Snail’s profit for years 20x1, 20x2 and 20x3
and retained earnings at the end of 20x3, respectively, shall to
a. overstate, overstate, understate, no effect
b. overstate, understate, understate, no effect
c. overstate, understate, understate, understate
d. no effect on any of these
47. Which of the following statements regarding interest methods of allocations is not true?
a. The term “interest methods of allocation” refers both to the convention for periodic
reporting and to the several approaches to dealing with changes in estimated future cash
flows.
b. Interest methods of allocation are reporting conventions that use present value techniques in
the absence of a fresh-start measurement to compute changes in the carrying amount of an
asset or liability from one period to the next.
c. Interest methods of allocation are grounded in the notion of current cost.
d. Holding gains and losses are generally excluded from allocation systems.

48. Which of the following is not an objective of using present value in accounting measurements?
a. To capture the value of an asset or a liability in the context of a particular entity.
b. To estimate fair value.
c. To capture the economic difference between sets of future cash flows.
d. To capture the elements that taken together would comprise a market price if one existed.

49. On July 1, 2002, Cornell Corp. received a one-year note with a face value of ₱900,000 and a stated
interest rate of 15 percent in exchange for a machine with a fair value of ₱1,000,000. Compute the
effective interest rate for Cornell Corp.
a. 16.67 percent
b. 15.0 percent
c. 3.5 percent
d. 11.11 percent

50. A 10 percent, ₱3,000, 3-month note receivable discounted at 12 percent for 2 months will result in
net proceeds of
a. ₱3,075.00.
b. ₱3,013.50.
c. ₱3,000.00.
d. ₱3,005.25.

TEST II

1. Entity A needs guidance in accounting for its inventories. Entity A should refer to which of the
following?
a. PAS 1
b. PAS 2
c. PAS 7
d. PAS 8

2. The debit side of a trial balance totals ₱800 more than the credit side. Which one of the following
errors would fully account for the difference?
a. ₱400 paid for plant maintenance has been correctly entered in the cash book and credited to
the plant asset account.
b. Discount received ₱400 has been debited to discount allowed account.
 c. A receipt of ₱800 for commission receivable has been omitted from the records.
d. The petty cash balance of ₱800 has been omitted from the trial balance.

3. To reduce in accounting costs, a firm always expenses its routine operating expenditures
immediately and then makes an adjusting entry at the end of the year if needed. For example, it
received ₱1,200 for one year's rent from a tenant on August 1 and immediately recorded ₱1,200
of rent revenue. The rental period begins August 1.The adjusting entry required at December 31
would include
a. cr. unearned rent ₱700 c. cr. rent revenue ₱700
b. dr. rent revenue ₱500 d. dr. unearned rent ₱500

4. Transactions are posted to the

a. book of original entry c. log book
b. book of final entry d. facebook

5. Why are certain costs capitalized when incurred and then depreciated over subsequent
reporting periods?
a. To reduce the income tax liability
b. To aid management in cash-flow analysis
c. To reflect the consumption of economic benefits from the asset
d. To adhere to the accounting constraint of conservatism

6. Which of the following would not be a correct form for an adjusting entry?
a. A debit to a revenue and a credit to a liability
b. A debit to an expense and a credit to a liability
c. A debit to a liability and a credit to a revenue
d. A debit to an asset and a credit to a liability

7. Which of the following is considered when depreciating an asset?

a. The cost of the asset
b. The useful life of the asset
c. The change in the fair value of the asset
d. Both a and b.

8. The information below is from the books of the Seminole Corporation on June 30:

Balance per bank statement ₱11,164

Deposits in transit 1,340
Bank charges not recorded 16
Note collected by bank and not recorded on books 1,120
Outstanding checks 1,100
NSF checks - not recorded on books nor redeposited 160

Assuming no errors were made, how much is the cash balance per books on June 30 before any
reconciliation adjustments?
 a. 11,404
b. 10,980
c. 10,460
d. 11,440

9. Under the allowance method of recognizing bad debts on trade accounts receivable, the effect of
writing off an account to an entity's current ratio is
a. increase
b. decrease
c. increase if the entity's current ratio is higher than 1 prior to the write-off; decrease if the
entity's current ratio is lower than 1 prior to the write-off
d. no effect

10. On December 31, Central Savings & Loan discounted a 3-month, ₱70,000, non-interest-bearing
note dated October 31, at 12 percent. How much is the proceeds from the discounting?
a. 63,900
b. 48,550
c. 30,380
d. 69,300

11. Grant Company accepted a ₱400,000 face value, 6-month, 10 percent note dated May 15 from a
customer. On that same date Grant discounted the note at Eagle National Bank at a 12 percent
discount rate. How much cash should Grant receive from the bank on May 15?
a. ₱400,000
b. ₱396,000
c. ₱394,800
d. ₱387,200

12. Goods in transit that are shipped f.o.b. destination should be

a. included in the inventory of the seller.
b. included in the inventory of the buyer.
c. included in the inventory of the shipping company.
d. none of these.

13. Cross Co. accepted delivery of merchandise which it purchased on account. As of December 31,
Cross had recorded the transaction, but did not include the merchandise in its inventory. The
effect of this on its financial statements for December 31 would be
a. net income, current assets, and retained earnings were understated.
b. net income was correct and current assets were understated.
c. net income was understated and current liabilities were overstated.
d. net income was overstated and current assets were understated.

14. All of the following costs should be expensed in the period they are incurred except for
a. manufacturing overhead costs for a product manufactured and sold in the same accounting
period.
b. costs which will not benefit any future period.
 c. depreciation of idle manufacturing capacity resulting from an unexpected plant shutdown.
d. storage costs that are necessary in bringing the asset to its intended condition.

15. Which of the following cost flow formulas can be applied by an entity whose inventories that are
purchased last are sold first?
a. LIFO d. b or c
b. FIFO e. None of these
c. Weighted average cost

16. On June 1, 2004, Noll Corp. sold merchandise with a list price of ₱30,000 to Linn on account. Noll
allowed trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made
f.o.b. shipping point. Noll prepaid ₱600 of delivery costs for Linn as an accommodation. On June
12, 2004, Noll received from Linn a remittance in full payment amounting to
a. ₱16,464. b. ₱17,052. c. ₱17,064. d. ₱16,794.

17. The following information was derived from the 2004 accounting records of Kelly Co.:
Kelly's Goods
Kelly's Central Warehouse Held by Consignees
Beginning inventory ₱260,000 ₱ 28,000
Purchases 950,000 140,000
Freight-in 20,000
Transportation to consignees 10,000
Freight-out 60,000 16,000
Ending inventory 290,000 40,000
Kelly's 2004 cost of sales was
a. ₱940,000.
b. ₱1,000,000.
c. ₱1,068,000.
d. ₱1,078,000.

18. Dial Corp.'s accounts payable at December 31, 2004 totaled ₱800,000 before any necessary year-
end adjustments relating to the following transactions:
 On December 27, 2004, Dial wrote and recorded checks to creditors totaling ₱350,000 causing an
overdraft of ₱100,000 in Dial's bank account at December 31, 2004. The checks were mailed out
on January 10, 2005.
 On December 28, 2004, Dial purchased and received goods for ₱200,000, terms 2/10, n/30. Dial
records purchases and accounts payable at net amounts. The invoice was recorded and paid
January 3, 2005.
 Goods shipped f.o.b. destination on December 20, 2004 from a vendor to Dial were received
January 2, 2005. The invoice cost was ₱65,000.

At December 31, 2004, what amount should Dial report as total accounts payable?
a. ₱1,411,000.
b. ₱1,346,000.
 c. ₱1,050,000.
d. ₱1,000,000.

19. The balance in Iwig Co.'s accounts payable account at December 31, 2004 was ₱400,000 before
any necessary year-end adjustments relating to the following:
 Goods were in transit to Iwig from a vendor on December 31, 2004. The invoice cost was ₱50,000.
The goods were shipped f.o.b. shipping point on December 29, 2004 and were received on
January 4, 2005.
 Goods shipped f.o.b. destination on December 21, 2004 from a vendor to Iwig were received on
January 6, 2005. The invoice cost was ₱25,000.
 On December 27, 2004, Iwig wrote and recorded checks to creditors totaling ₱30,000 that were
mailed on January 10, 2005.
In Iwig's December 31, 2004 balance sheet, the accounts payable should be
a. ₱430,000
b. ₱450,000.
c. ₱475,000.
d. ₱480,000.

20. Gear Co.'s accounts payable balance at December 31, 2004 was ₱1,100,000 before considering the
following transactions:
 Goods were in transit from a vendor to Gear on December 31, 2004. The invoice price was
₱80,000, and the goods were shipped f.o.b. shipping point on December 29, 2004. The goods
were received on January 4, 2005.
 Goods shipped to Gear, f.o.b. shipping point on December 20, 2004, from a vendor were lost in
transit. The invoice price was ₱50,000. On January 5, 2005, Gear filed a ₱50,000 claim against the
common carrier.

In its December 31, 2004 balance sheet, Gear should report accounts payable of
a. ₱1,230,000.
b. ₱1,180,000.
c. ₱1,150,000.
d. ₱1,100,000.

21. Dark Co. recorded the following data pertaining to raw material X during January 2004:
Date Units Unit cost
1/1/04 On hand 3,200 ₱2.00
1/11/04 Issue 1,600
1/22/04 Purchase 4,000 ₱2.35

The moving-average unit cost of X inventory at January 31, 2004 is

a. ₱2.18.
b. ₱2.22.
c. ₱2.25.
d. ₱2.35.
22. Barlow Company's Accounts Payable balance at December 31, 2002, was ₱1,800,000 before
considering the following transactions:
 Goods were in transit from a vendor to Barlow on December 31, 2002. The invoice price was
₱100,000, and the goods were shipped FOB shipping point on December 29, 2002. The goods
were received on January 4, 2003.
 Goods shipped to Barlow FOB shipping point on December 20, 2002, from a vendor were lost in
transit. The invoice price was ₱50,000. On January 5, 2003, Barlow filed a ₱50,000 claim against
the common carrier.

In its December 31, 2002 balance sheet, Barlow should report Accounts Payable of
a. 1,950,000 b. 1,900,000 c. 1,850,000 d. 1,800,000

23. The balance in Master Company's accounts payable account at December 31, 2002, was
₱1,100,000 before considering the following information:
 Goods shipped FOB shipping point on December 20, 2002 from a vendor to Master were lost in
transit. The invoice cost of ₱20,000 was not recorded by Master. On January 6, 2003, Master filed
a ₱20,000 claim against the common carrier.
 On December 27, 2002, a vendor authorized Master to return, for full credit, goods shipped and
billed at ₱35,000 on December 2, 2002. The returned goods were shipped by Master on December
27, 2002. A ₱35,000 credit memo was received and recorded by Master on January 6, 2003.

What amount should Master report as accounts payable in its December 31, 2002, balance sheet?
a. 1,120,000 b. 1,115,000 c. 1,085,000 d. 1,065,000

24. The balance in Stockwell Company's accounts payable account on December 31, 2002, was
₱1,225,000 before the following information was considered:
 Goods shipped FOB destination on December 21, 2002, from a vendor to Stockwell were lost
in transit. The invoice cost of ₱45,000 was not recorded by Stockwell. On December 28, 2002,
Stockwell notified the vendor of the lost shipment.
 Goods were in transit from a vendor to Stockwell on December 31, 2002. The invoice cost
was ₱60,000, and the goods were shipped FOB shipping point on December 28, 2002.
Stockwell received the goods on January 6, 2003.

What amount should Stockwell report as accounts payable in its December 31, 2002, balance sheet?
a. 1,330,000 b. 1,285,000 c. 1,270,000 d. 1,225,000

25. When using the periodic inventory system, which of the following generally would not be
separately accounted for in the computation of cost of goods sold?
a. Trade discounts applicable to purchases during the period
b. Cash (purchase) discounts taken during the period
c. Purchase returns and allowances of merchandise during the period
d. Cost of transportation-in for merchandise purchased during the period

26. Goods out on consignment are

a. included in the consignee's inventory.
 b. recorded in a Consignment Out account which is an inventory account.
c. recorded in a Consignment In account which is an inventory account.
d. all of these

27. Miller Company needs an estimate of its ending inventory balance. The following information is
available:
Cost Retail
Sales revenue ............................. ₱180,000
Beginning inventory ....................... ₱ 35,000 62,000
Net purchases ............................. 100,000 135,000
Gross margin percentage ................... 30%

Given this information, when using the gross margin estimation method, ending inventory is
approximately
a. ₱1,000.
b. ₱9,000.
c. ₱19,000.
d. ₱11,650.

28. The following information is available for the Becca Company for the three months ended June
30 of this year:

Inventory, April 1 of this year ...................... ₱1,200,000

Purchases ............................................ 4,500,000
Freight-in ........................................... 300,000
Sales ................................................ 6,400,000

The gross margin was 25 percent of sales. What is the estimated inventory balance at June 30?
a. ₱880,000
b. ₱933,000
c. ₱1,200,000
d. ₱1,500,000

29. Petersen Menswear, Inc. maintains a markup of 60 percent based on cost. The company's selling
and administrative expenses average 30 percent of sales. Annual sales were ₱1,440,000.
Petersen's cost of goods sold and operating profit for the year are

Cost of Operating
Goods Sold Profit

a. ₱864,000 ₱144,000
b. ₱864,000 ₱432,000
c. ₱900,000 ₱108,000
d. ₱900,000 ₱432,000
30. On October 31, a flood at Payne Company's only warehouse caused severe damage to its entire
inventory. Based on recent history, Payne has a gross profit of 25 percent of net sales. The
following information is available from Payne's records for the ten months ended October 31:
Inventory, January 1 .................................. ₱ 520,000
Purchases ............................................. 4,120,000
Purchase returns ...................................... 60,000
Sales ................................................. 5,600,000
Sales discounts ....................................... 400,000

A physical inventory disclosed usable damaged goods which Payne estimates can be sold for
₱70,000. Using the gross profit method, the estimated cost of goods sold for the ten months ended
October 31 should be
a. ₱680,000.
b. ₱3,830,000.
c. ₱3,900,000.
d. ₱4,200,000.

31. Davis Company's accounting records indicated the following information:

Inventory, 1/1/02 ..................................... 1,000,000

Purchases during 2002 ................................. 5,000,000
Sales during 2002 ..................................... 6,400,000

A physical inventory taken on December 31, 2002, revealed actual ending inventory at cost was
₱1,150,000. Davis' gross profit on sales has regularly been about 25 percent in recent years. The
company believes some inventory may have been stolen during the year. What is the estimated
amount of missing inventory at December 31, 2002?
a. ₱50,000
b. ₱200,000
c. ₱350,000
d. ₱450,000

32. On June 19, 2002, a fire destroyed the entire uninsured merchandise inventory of the Allen
Merchandising Company. The following data are available:

Inventory, January 1 .................................. ₱ 80,000

Purchases, January 1 through June 19 .................. 560,000
Sales, January 1 through June 19 ...................... 776,000
Markup percentage on cost ............................. 25%

What is the approximate inventory loss as a result of the fire?

a. ₱19,200
b. ₱27,200
c. ₱34,000
d. ₱58,000
33. Product X sells for ₱12.00; selling expenses are ₱2.40; normal profit is ₱3.00. If the cost of
Commodity X is ₱7.80, the lower of cost and NRV is
a. ₱5.40.
b. ₱6.00.
c. ₱6.60.
d. ₱7.80.

34. The following information is available for Torino Corp. for its most recent year:

Net sales ............................................. ₱3,600,000

Freight-in ............................................ 90,000
Purchase discounts .................................... 50,000
Ending inventory ...................................... 240,000

The gross margin is 40 percent of net sales. What is the cost of goods available for sale?
a. ₱1,680,000
b. ₱1,920,000
c. ₱2,400,000
d. ₱2,440,000