QUIZ 1 P R A C 1

Problem 1: Aaron Company sells subscription to a specialized directory that is published semi annually and
shipped
to subscribers on April 15 and October 15.
Subscriptions received after March 31 and September 30 cutoff dates are held for the next publication.
Cash from subscriber is receive evenly during the year and is credited to deferred revenues from
subscriptions.
Data relating to 2009 are as follows:
Deferred revenues from subscriptions,
balance 12/31/08 P 1,500,000
Cash receipts from subscribers P 7,200,000

In its December 31 2009 balance sheet, Aaron should report deferred revenues from subscription of
a. P 1,800,000 c. P 3,600,000
b. P 3,300,000 d. P 5,400,000
• Problem 2 : At January 1, a sole proprietorship’s asset totaled P210,000, and its liabilities amounted to P
120,000. During the year, owner investments amounted to P 72,000, And owners withdrawal totaled
P75,000. At year end, assets totaled P 270,000 and liabilities amounted to P 171,000. The amount of net
income for the year was

a. P 0 c. 9,000
b. P6,000 d. 12,000
 
Problem 3 The following pertains to Bull Company’s biological assets: 

• Price of the asset in the market P 5,000

• Estimated commission to brokers and dealers 500

• Estimated transport cost and other cost necessary to get

asset to the market 300

• Selling price in a binding contract to sell P 5,200

The entity’s biological assets should be valued at

a. P 4,700 b.4,400 c. 4,500 d. 4,200
Problem 4 : Buyer Co. regularly buys shirts from Vendor Company and
is allowed trade discounts of 20% and 10% from the last price. Buyer
purchased shirts from Vendor on May 27, 2009 and received an
invoice with a list price of P 100,000 and payment terms 2/10, n/30. If
buyer uses the net method of recording purchases, the journal entry to
record the payment of June 8, 2009 will include

a. A debit to Accounts payable P 72,000

b. A debit on purchase discount lost of P 1,400
c. A credit to purchase discount of P 1,400
d. A credit to Cash of P 70,560
• Problem 5: White Airlines sold a used jet aircraft to brown company for P 800,000 accepting a five year 6%
note for the entire amount. Browns incremental borrowing rate was 14%. The annual payment of principal
and interest on note was to be P189,930. The aircraft could have been sold at an established cash price of
P 651,460. The present value of an ordinary annuity of P1 at 8% for five periods is 3.99. The aircraft should
be capitalized on Browns book at
a. P 949,650 c. P 757,820
b. P 800,000 d. P 651,460
 
• Problem 6 : A factory equipment with an estimated useful life of 10 years was purchased by Carranglan Co.
on December 30, 2005. The equipment was expected to have a residual value of P 5,000 at the end of its
service life. The sum of the years’ digit method was used in computing depreciation. For the year ended
December 31, 2009 the depreciation applicable to this equipment was P 42,000. The cost of the factory
equipment purchased on December 30, 2005 was

a. P 325,000 c. P 335,000
b. P 293,750 d. P 330,000
• Problem 7: A factory equipment with an estimated useful life of 10 years was purchased by Carranglan Co.
on December 30, 2005. The equipment was expected to have a residual value of P 5,000 at the end of its
service life. The sum of the years’ digit method was used in computing depreciation. For the year ended
December 31, 2009 the depreciation applicable to this equipment was P 42,000. The cost of the factory
equipment purchased on December 30, 2005 was

a. P 325,000 c. P 335,000
b. P 293,750 d. P 330,000
Bonus Question: Which city is known as the "Walled City?"
a. Malolos c. Makati

b. Intramouros d. Valenzuela
Problem 1 : Roxy Company had the following information relating to its account receivble:

• Accounts receivable at 12/31/2008 P 1,300,000

• Credit sales for 2009 5,400,000

• Collection from customers for 2009, excluding recovery 4,750,000

• Accounts written off 9/30/2009 125,000

• Collection of accounts written off in prior year ( customer credit was not re established) 25,000
• Estimated uncollectible receivables per aging of receivables at 12/31/2009 165,000

• On December 31, 2009 the amortized cost of accounts receivables is

• a. P 1,825,000 c. P 1,635,000

• b. P 1,800,000 d. P 1,600,000
Problem 2 : Quitino, Inc. and its subsidiaries have provided you, their PFRS specialist, with a list of the
properties they own:
• Land held by Quirino, Inc. for undetermined future use, P 5,000,000.
• A vacant building owned by Quirino, Inc. and to be leased out under an operating lease, P 20, 000, 000.
• Property held by a subsidiary of Quirino, Inc., a real estate firm, in the ordinary course of its business, P 30,
000, 000.
• Property held by Quirino, Inc. for use in production, P 1, 000, 000.
• A hotel owned by Sugo Inc, a subsidiary of Quirino, Inc., and for which Sugo, Inc. provides security services
for its guests belongings P 50,000,000.
• A building owned by Quirino, Inc being leased out to Status Inc, a subsidiary of Quirino Inc., P 20,000,000.

How much will be reported as investment properties in Quirino, Inc. and its subsidiaries consolidated financial
statements?
a. P 75,000,000 c. P 95,000,000
b. P 25,000,000 d. P 45,000,000
Problem 3 : House Publishers offered a contest in which the winner would receive P 1 million payable over 20
years. On December 31, 2009, House announced the winner of the contest and signed a note payable to the
winner for P 1 million, payable in P 50,000 installments every January 2. Also on December 31, 2009 House
purchased an annuity for P 418,000 to provide the P 950,000 prize monies remaining after the first P 50,000
installment which was paid on January 2, 2010. In its 2009 income statements, what should House report as
contest prize expense?

a. P 0 c. P 468, 250
b. P 418, 250 d. P 1,000,000
Problem 4 : . An entity has spent P 600,000 in developing a new product. These cost meet the definition of an
intangible asset under PAS 38 and have been recognize in the balance sheet. These costs have been
recognized as an expense for tax purposes. At the year end the intangible asset is deemed to be impaired by
P 50,000. The tax base of intangible asset at year end is

a. P 600,000 c. P 50,000
b. P 550,000 d. P 0
Problem 5: An entity has granted share option to its employees. The total expense to the vesting
date of December 31, 2010, has been calculated as P 8 million. The entity has decided to settle
the award early, on December 31, 2009. The expense charge in the income statement since the
grant date of January 1, 2007, had been year to December 31, 2007, 2 million, and year to
December 31, 2008, 2.1 million. The expense that would have been charge in the year to
December 31, 2009 was P 2.2 million. What would be the expense charged in the income
statement for the year December 31, 2009?

a. P 2.2 million c. P 3.9 million

b. P 8.0 million d. P 2.0 million
Problem 6 : An entity prepares quarterly interim financial reports in accordance with PAS 34.
The entity sells electrical goods, and normally 5% of customer claims on their warranty. The
provision in the first quarter was calculated as 5% of sales to date, which was P20,000,000.
However, in the second quarter, a design fault was found and warranty claims were expected to
be 10% for the whole year. Sales in the second quarter were P30,000,000 . What would be the
provision charged in the second quarters income statement?

a. P 3,000,000 c. P 2,250,000

b. P 4,000,000 d. P 5,000,000

 
Problem 7 : On January 1, 2009, the lending company made a P 200,000 8% loan. The interest
is receivable at the end of each year, with the principal amount to be received at the end of 5
years. As of December 31, 2009, the interest for the current year has not been received nor
recorded because the borrower is experiencing financial difficulties. The lending company
negotiated a restructuring of the loan. The payment of all of the interest based on the original
will be delayed until the end the 5 year loan term. In addition, the amount of principal
repayment will be dropped from P 200,000 to P 100,000. The prevailing interest rate for similar
type of the loan as of December 31, 2009 is 10%.

The loan impairment loss to be recognize in 2009 profit or loss is

a. P 67,700 c. P 77,492

b. P 73,506 d. P 0
• 1. THE FITNESS HEALTH SPA CHARGES A NON REFUNDABLE ANNUAL MEMBERSHIP FEE OF P 6,000 FOR ITS
SERVICES. FOR THIS FEE, EACH MEMBER RECEIVES A FITNESS EVALUATION (VALUE P 1,000 ), A MONTHLY
MAGAZINE (ANNUAL VALUE P 320), AND 2 HOURS USE OF THE EQUIPMENT EACH WEEK (ANNUAL VALUE P 7,000) .
EACH OF THE THREE ELEMENTS OF THE ANNUAL MEMBERSHIP CAN BE PURCHASED SEPARATELY. THE INITIAL
DIRECT COSTS TO OBTAIN THE MEMBERSHIP ARE P1,200. THE DIRECT COST OF THE FITNESS EVALUATION IS P
500, AND THE MONTHLY DIRECT COSTS TO PROVIDE THE OTHER SERVICES ARE ESTIMATED TO BE P 150 PER
PERSON. A MEMBERSHIP WAS SOLD TO A CUSTOMER ON APRIL 1, 2009.

• THE TOTAL FEES EARNED BY THE COMPANY ON THIS MEMBERSHIP FOR THE YEAR ENDED DECEMBER 31, 2009 IS:

• A. P 6,000 C. P 4,500

• B. P 4,600 D. P 4,750
PROBLEM 2:
• ON JANUARY 1, 2009, ROCKETS CORPORATION ISSUED A P 3 MILLION 6% CONVERTIBLE BONDS AT PAR.
THE BONDS ARE REDEEMABLE AT A PREMIUM OF 10% ON DECEMBER 31, 2012 OR IT MAY BE CONVERTED
INTO ORDINARY SHARES ON THE BASIS OF 50 SHARES FOR EACH P 1,000 BOND AT THE OPTION OF THE
HOLDER. THE INTEREST RATE OF THE EQUIVALENT BOND WITHOUT THE CONVERSION RIGHTS WOULD
HAVE BEEN 10%. THE ISSUANCE OF CONVERTIBLE BONDS ON JANUARY 1, 2009 INCREASED THE ENTITY’S
EQUITY BY (ROUND-OFF PRESENT VALUE FACTORS TO FOUR DECIMAL PLACES)

• A. P 175, 518 B. P 380, 418 C. P 73,068 D. P 0

PROBLEM 3
• DETROIT CORP. SELLS EQUIPMENT WITH A CARRYING AMOUNT P 150,000 TO PISTONS CORP. FOR
P170,000 WHEN THE EQUIPMENTS FAIR VALUE IS P 100,000 AND THEN ENTERS INTO A CANCELABLE
OPERATING LEASE AGREEMENT TO USE THE EQUIPMENT FOR TWO YEARS. IN THE CURRENT YEAR, HOW
MUCH PROFIT WOULD DETROIT CORP. RECORD ON THE SALE OF THE EQUIPMENT.

• A. P 20,000 B. P 70,000 C. P 50,000 D. NIL

PROBLEM 4
• AN ENTITY GRANTS TO AN EMPLOYEE THE RIGHT TO CHOOSE EITHER 1,000 PHANTOM SHARES, IE A RIGHT TO A CASH
PAYMENT EQUAL TO THE VALUE OF 1,000 SHARES OR 1,200 SHARES. THE GRANT IS CONDITIONAL UPON THE COMPLETION OF
THREE YEARS SERVICE.

• AT GRANT DATE, THE ENTITY’S SHARE PRICE IS P 50 PER SHARE. AT THE END OF YEARS 1 AND 2, THE SHARE PRICE IS P 52 AND
P 55 RESPECTIVELY. THE ENTITY ESTIMATES THAT THE GRANT DATE FAIR VALUE OF THE SHARE ALTERNATIVE IS P 48 PER
SHARE.

• COMPUTER FOR THE AMOUNT TO BE RECOGNIZE AS COMPENSATION EXPENSE IN YEAR 2.

• A. P 21,867 B. P 15,750 C. P 14,000 D. P15,050
PROBLEM 5
• CITIMART INC. WAS GRANTED A PARCEL OF LAND BY A LOCAL GOVERNMENT AUTHORITY. THE CONDITION ATTACHED TO
THIS GRANT WAS THAT CITIMART INC. SHOULD CLEAN UP THIS LAND AND LAY ROADS BY EMPLOYING LABORERS FROM
THE VILLAGE IN WHICH THE LAND IS LOCATED. THE ENTIRE OPERATION WILL TAKE THREE YEARS AND IS ESTIMATED TO
COST P 100 MILLION. THIS AMOUNT WILL BE SPENT IN THIS WAY: P 20 MILLION EACH IN THE FIRST AND SECOND YEARS
AND P 60 MILLION IN THE THIRD YEAR. THE FAIR VALUE OF THIS LAND IS CURRENTLY P 120 MILLION. HOW MUCH SHOULD
BE RECOGNIZE AS INCOME FROM GOVERNMENT GRANT AT THE END OF THE FIRST YEAR?

• A. P 20,000,000 C. P 40,000,000

• B. P 24,000,000 D. P 0 
PROBLEM 6
• SEASON’S INC ACQUIRED AN ASSET THAT HAD A COST OF P 130,000. THE ASSET IS BEING DEPRECIATED
OVER A 5 YEAR PERIOD USING THE SUM OF THE YEAR’S DIGIT METHOD. IT HAS A SALVAGE VALUE
ESTIMATED AT P 10,000. THE LOSS/GAIN IF THE ASSET IS SOLD FOR P 38,000 AT THE END OF THE THIRD
YEAR IS

• A. P 4,000 GAIN C. P 68,000 LOSS

• B. P 20,000 LOSS D. P 92,000 LOSS

PROBLEM 7
• SMART COMPANY HAS P 3,000,000 NOTE RECEIVABLE FROM SALE OF PLANT BEARING INTEREST AT 12% PER
ANNUM. THE NOTE IS DATED JUNE 1, 2008. THE NOTE IS PAYABLE IN 3 ANNUAL INSTALLMENTS OF P 1,000,000
PLUS INTEREST ON THE UNPAID BALANCE EVERY JUNE 1. THE INITIAL PRINCIPAL AND INTEREST PAYMENT WAS
MADE ON JUNE 1, 2009.

• THE INTEREST INCOME FOR 2009 IS

• A. P 300,000 C. P 210,000
• B. P 290,000 D. P 140,000