Batch 17 1st Preboard (P1) (1)

1

DySAS Center for CPA Review

2F & 3F Mitra Building, San Pedro Street, Davao City

Tel. No. (082) 224-43-20: E-mail Address [email protected] Accounting 1

John C. Frivaldo, CPA, MBA

FIRST PRE-BOARD EXAMINATIONS

December 20, 2008 @ 8:00 10:00 am===========================================================

INSTRUCTIONS: Mark the letter of your choice with a VERTICAL LINE on the answer sheet provided. ERASURES NOT ALLOWED.1. Mega Company purchased from Ora Company a P2,000,000, 8% 5-year note that required five equal annual year-end payments of P500,900. The note was discounted to yield a 9% rate to Mega. At the date of purchase, Mega recorded the note at its present value of P1,948,500. What should be the total revenue earned by Mega over the life of this note?

(a) P504,500

(b) P556,000

(c) P800,000

(d) P900,000B

Total payments (500,900 x 5)

P2,504,500

Present value of note

1,948,500

Total interest revenue

P 556,000National Bank grants a 10-year loan to Abbo Company in the amount of P1,500,000 with a stated interest rate of 6%. Payments are due monthly and are computed to be P16,650. National Bank incurs P40,000 of direct loan origination cost and P20,000 of indirect loan origination cost. In addition, National Bank charges Abbo a 4-point nonrefundable loan origination fee.

2. National Bank, the lender, has a carrying amount of:

(a) P1,440,000

(b) P1,480,000(c) P1,500,000(d) P1,520,000 B

Note receivable

P1,500,000

Direct origination cost

40,000

Total

P1,540,000

Nonrefundable origination fee (1,500,000 x 4%) 60,000

Carrying value

P1,480,000The direct origination cost incurred by the bank is a deferred charge to be amortized over the term of the loan. The indirect origination cost incurred by the bank is an outright expense. The nonrefundable origination fee charged by the bank against the borrower is unearned income on the part of the bank and deferred financing charge on the part of the borrower to be amortized over the term of the loan.

3. Abbo, the borrower, has a carrying amount of:

(a) P1,440,000

(b) P1,480,000(c) P1,500,000(d) P1,520,000 A

Note payable

P1,500,000

Nonrefundable origination fee

( 60,000)

Carrying value

P1,440,0004. Impeccable Corporation manufactures and sells electrical generators. On January 1, 2000, it sold an electrical generator costing P700,000 for P1,000,000. The buyer paid P100,000 down and signed a P900,000 non-interest bearing note payable in three equal installments every December 31. Assume the prevailing interest rate for a note of this type is 12%. What is the interest income that should be recognized for the year 2000?

(a) P86,465

(b) P108,000

(c) P179,460

(d) P59,820A

Face value

P900,000

Present value (300,000 x 2.4018)

(720,540)

Unearned interest income

P179,460

Interest income 2000 (720,540 x 12%)

P86,465

5. Roth Company received from a customer a 1 year, P500,000 note bearing annual interest of 8%. After holding the note for 6 months, Roth discounted the note at a nearby bank at an effective interest rate of 10%. What amount of cash did Roth received from the bank?

(a) P540,000

(b) P523,810

(c) P513,000

(d) P495,238C

Maturity value [500,000 + (500,000 x 8%)]P540,000

Discount (540,000 x 10% x 6/12)

( 27,000)

Net proceeds

P513,0006. On June 30, 2003, Ray Company discounted at the bank a customers P60,000, 6-month, 10% note receivable dated April 30, 2003. The bank discounted the note at 12%. Rays proceeds from this discounted note amounted to:

(a) P56,400

(b) P57,600

(c) P60,480

(d) P61,740C

Maturity value [60,000 + (60,000 x 10% x 6/12)]P63,000

Discount (63,000 x 12% x 4/12)

( 2,520)

Net proceeds

P60,480X Corporation factored P6,000,000 of accounts receivable to A Corporation on October 1, 2004. Control was surrendered by X Corporation. A Corporation accepted the receivables subject to recourse for nonpayment. A Corporation assessed a fee of 3% and retains a holdback equal to 5% of the accounts receivable. In addition, A Corporation charged 15% interest computed on a weighted-average time to maturity of the receivables of 54 days. The fair value of the recourse obligation is P90,000.

7. X Corporation will receive and record cash of:

(a) P5,296,850

(b) P5,386,850(c) P5,476,850(d) P5,556,850 B

Accounts receivable

P6,000,000

Factors holdback (6,000,000 x 5%)

( 300,000)

Factoring fee (6,000,000 x 3%)

( 180,000)

Interest (6,000,000 x 15% x 54/365)

( 133,150)

Cash received from factoring

P5,386,850

8. Assuming all receivables are collected, X Corporations cost of factoring the receivables would be:

(a) P313,150

(b) P180,000

(c) P433,150

(d) P613,150A

Factoring fee

P180,000

Interest

133,150

Total cost of factoring

P313,150

9. Sigma Company began operations on January 1, 2004. On December 31, 2004, Sigma provided for uncollectible accounts based on 1% of annual credit sales. On January 1, 2005, Sigma changed its method of determining its allowance for uncollectible accounts by applying certain percentages to the accounts receivable aging as follows:

Days past invoice date

Percent uncollectible

0 30

1

31 90

5

91 180

20

Over 180

80

In addition, Sigma wrote off all accounts receivables that were over 1 year old. The following additional information relates to the years ended December 31, 2005 and 2004:

2005

2004

Credit sales

P3,000,000

P2,800,000

Collections (including recovery) 2,915,000

2,400,000

Accounts written off

27,000

none

Recovery of accounts previously

written off

7,000

none

Days past invoice date at 12/31:

0 30

300,000

250,000

31 90

80,000

90,000

91 180

60,000

45,000

Over 180

25,000

15,000What is the provision for uncollectible accounts for the year ended December 31, 2005?

(a) P39,000

(b) P31,000

(c) P38,000

(d) P11,000B

0 30

(300,000 x 1%)

P 3,000

31 90(80,000 x 5%)

4,000

91 180(60,000 x 20%)

12,000

Over 180(25,000 x 80%)

20,000

Required allowance 12/31/2005

P39,000

Allowance 12/31/2004

(2,800,000 x 1%)

P28,000

Recovery in 2005

7,000

Uncollectible accounts expense

31,000

Total

P66,000

Writeoff in 2005

27,000


P39,000

10. From inception of operations to December 31, 2003, Murr Corporation provided for uncollectible accounts receivable under the allowance method, provisions were made monthly at 2% of credit sales, bad debt written off were charged to the allowance account, recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustments to the allowance account were made. Murrs usual credit terms are net 30 days.

The balance in the allowance for doubtful accounts was P120,000 at January 1, 2004. During 2004, credit sales totaled P9,000,000, interim provisions for doubtful accounts were made at 2% of credit sales, P90,000 of bad debts were written off, and recoveries of accounts previously written off amounted to P15,000. Murr installed a computer facility in November 2004 and prepared an aging of accounts receivable for the first time as of December 31, 2004. A summary of the aging is as follows:

Classification by

Balance in

Estimated %

month of sale

each category

uncollectible

November December 2004P2,000,000

2%

July October

600,000

10%

January June

400,000

25%

Prior to 1/1/2004

200,000

75%

P3,200,000Based on the review of collectibility of the account balances in the prior to 1/1/2004 aging category, additional receivables totaling P60,000 were written off as of December 31, 2004. Effective with the year ended December 31, 2004, Murr adopted a new accounting method for estimating the allowance the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable.

What is the year-end adjustment to the allowance for doubtful accounts as of December 31, 2004?

(a) P305,000

(b) P180,000

(c) P320,000

(d) P140,000D

November December (2,000,000 x 2%)

P 40,000

July October (600,000 x 10%)

60,000

January June (400,000 x 25%)

100,000

Prior to 1/1/2004 (200,000 60,000 x 75%) 105,000


P305,000

Allowance 1/1/2004

P120,000

Recoveries

15,000

Doubtful accounts expense

320,000

Total

P455,000

Writeoffs (90,000 + 60,000)

150,000


P305,000

Correct doubtful accounts expense

P320,000

Recorded amount (2% x 9,000,000)

180,000

Increase in doubtful accounts

P140,000

Doubtful accounts

P140,000

Allowance for doubtful accounts

P140,00011. When examining the accounts of Brute Company, you ascertain that balances relating to both receivables and payables are included in a single controlling account called receivables control that has a debit balance of P4,850,000. An analysis of the make-up of this account revealed the following:

Debit

Credit

Accounts receivable customers

P7,800,000

Accounts receivable officers

500,000

Debit balances creditors

300,000

Postdated checks from customers

400,000

Subscriptions receivable

800,000

Accounts payable for merchandise

P4,500,000

Credit balances in customers accounts

200,000

Cash received in advance from customers

for goods not yet shipped

100,000

Expected bad debts

150,000

After further analysis of the aged accounts receivable, you determined that the allowance for doubtful accounts should be P200,000. What is the correct total of current net receivables?

(a) P8,950,000

(b) P8,800,000(c) P8,600,000(d) P8,850,000 B

Accounts receivable customers

(7,800,000 + 400,000)

P8,200,000


( 200,000)

Accounts receivable officers

500,000

Debit balances creditors

300,000

Total current net receivables

P8,800,00012. The following information is available for the Hook company:

Amount in Thousands

2001

2002

2003

Charge sales

900

1,100

1,000

Cash sales

600

800

700

Total

1,500

1,900

1,700

Accounts receivable

(end of year)

170

230

220

Allowance for doubtful

accounts (end of year)47

30

56

Accounts written off as

uncollectible (during

the year)

2

50

4

Assuming there was no change in the method used for estimating doubtful accounts, what was the balance in the allowance for doubtful accounts at the beginning of 2001?

(a) P 0

(b) P22,000

(c) P45,000

(d) P49,000B

2001

2002

2003

Allowance 1/122,000

47,000

30,000

Expense (squeeze)27,000 33,000 30,000

Total

49,000

80,000

60,000

Writeoff

2,000 50,000 4,000

Allowance 12/3147,000 30,000 56,000

Percentage of charge sales:

200133,000/ 1,100,000=3%

200230,000/ 1,000,000=3%

20033% x 900,000

=27,000 Expense13. Rip Corporation showed the following balances on January 1, 2003:

Accounts receivables

P 600,000


30,000

The following transactions affecting accounts receivable occurred during the year ended December 31, 2003:

Sales cash and credit

P3,280,000

Cash received from cash customers

400,000

Cash received from credit customers,

excluding recovery

2,475,000

Cash received from credit customers who took

advantage of the 2/10, n/30 terms

(included in P2,475,000)

1,470,000

Accounts receivable written off as worthless 20,000

Recoveries of accounts written off

5,000

Credit memoranda for returned credit sales 55,000

Cash refunds to cash customers

10,000

The company uses the percentage of accounts receivable method in determining the allowance for doubtful accounts. What is the net realizable value of accounts receivable on December 31, 2003?

(a) P855,000

(b) P900,000

(c) P850,000

(d) P895,000A

Accounts receivable 1/1

P 600,000

Sales credit (3,280,000 400,000)

2,880,000

Cash received from credit customers,

excluding recovery

(2,475,000)

Sales discounts

( 30,000)

Accounts receivable written off as worthless ( 20,000)

Credit memoranda for returned credit sales ( 55,000)


P 900,000

Accounts collected with discount (1,470,000/98%)P1,500,000

Cash received

1,470,000

Sales discounts (2% x 1,500,000)

P 30,000


P 900,000

Allowance for doubtful accounts (5% x 900,000) ( 45,000)

Net realizable value

P 855,000

14. Excel reported P70,000 of inventory on December 31, 2003, based on physical count. Additional information was given as follows:

a. Included in the physical count were machines billed to a customer, FOB shipping point, on December 31, 2003. The machines had a cost of P3,000 a had been billed at P5,000. The shipment is ready for pick-up by the delivery contractor.

b. Goods were in transit from a vendor. The invoice cost was P8,000 and goods were shipped FOB shipping point on December 31, 2003.

c. Work in process costing P500 was sent to an outside processor for finishing on December 30, 2003.

d. Goods out on consignment amounted to P4,600 (sales price); shipping costs, P120 (markup is 15% on cost).

The correct amount of inventory on December 31, 2003 is:

(a) P85,620

(b) P85,500

(c) P82,620

(d) P82,500C

Inventory per count, Jan. 1, 2003

P70,000

Goods in transit, shipped FOB shipping point

8,000

Work in process job out for finishing

500

Goods out on consignment [(4,600/ 1.15) + 120]

4,120 Inventory as adjusted, Dec. 31 2003

P82,62015. The book value of Goods inventory at the end of 2003 is P95,000. Included in the amount are the following items:

Merchandise in transit, purchased FOB shipping pointP6,800

Goods held as consignee

5,000

Goods out on consignment, at cost plus 50% markup

on cot plus P100 delivery charge

6,100

The correct amount of inventory is:

(a) P83,100

(b) P87,900

(c) P86,200

(d) P88,000D

Inventory per books, December 31

P95,000

Goods held as consignee

( 5,000)

Markup on goods out on consignment

[6,000 (6,000/ 1.50)]

( 2,000)

Inventory as adjusted, December 31

P88,000

16. Compute for the cost of inventory lost in fire using the data below:

Inventory, July 1, 2004

P51,600

Purchases, July 1, 2004 to Jan. 19, 2005

368,000

Sales, July 1, 2004 to Jan. 19, 2005

583,000

Purchase returns

11,200

Purchase discounts taken

5,800

Freight in

3,800

Sales returns

8,600

A fire destroyed the entire inventory except for purchases in transit, FOB shipping point, of P2,000 and goods having a selling price of P4,700 that were salvaged from the fire. The salvaged goods had an estimated value of P2,900. The average gross profit rate on net sales is 40%.

(a) P59,760

(b) P56,940

(c) P62,660

(d) P56,860B

Inventory, July 1, 2004

P 51,600

Purchases, July 1, 2004 to Jan. 19, 2005

368,000

Purchase returns

( 11,200)

Purchase discounts taken

( 5,800)

Freight in

3,800

Available for sale

P406,400

Cost of goods sold:

Net sales (583,000 8,600)

P574,400

Multiply by cost percentage

60% (344,640)

Estimated ending inventory

P 61,760

Goods in transit

( 2,000)

Salvage value of damaged goods

( 2,820)

Estimated inventory lost in fire

P 56,940

17. The following information pertains to Dely Corporations 2004 cost of goods sold:

Inventory, December 31, 2003

P90,000

2004 purchases

124,000

2004 write-off of obsolete inventory

34,000


30,000

The inventory written off became obsolete due to an unexpected and unusual technological advance by a competitor. In its 2004 income statement, what amount should Dely report as cost of goods sold?

(a) P218,000

(b) P184,000

(c) P150,000

(d) P124,000C


P90,000

2004 purchases

124,000

2004 write-off of obsolete inventory

(34,000)


(30,000)

Cost of goods sold

P150,00018. Pine Company prepares monthly income statements. A physical inventory is taken only at year-end; hence, month-end inventories must be estimated. All sales are made on account. The rate of markup on cost is 50%. The following information relates to the month of November:

Accounts receivable, November 1

P102,000


153,000

Collection of accounts receivable during November 255,000

Inventory, November 1

183,600

Purchases of inventory during November

163,200

The estimated cost of the November 30 inventory is:

(a) P122,400

(b) P142,800

(c) P193,800

(d) P224,400B

Inventory, November 1

P183,600

Purchases of inventory during November

163,200

Cost of goods available for sale

P346,800


P153,000

Collection of accounts receivable during November 255,000


(102,000)

Sales

P306,000

Divided by 150% (50% markup on cost)

50%

Estimated cost of goods sold

P204,000

Estimated cost of the Nov. 30 inventory

(346,800 204,000)

P142,800

19. A store uses the gross profit method to estimate inventory and cost of goods sold for interim reporting purposes. Past experience indicates that the average gross profit rate is 25% of sales. The following data relate to the month of October:

Inventory cost, October 1

P255,000

Purchases during the month at cost

683,400

Sales

856,800

Sales returns

30,600

Using the data above, what is the estimated ending inventory at October 31?

(a) P206,550

(b) P214,200

(c) P295,800

(d) P318,750D

Inventory cost, October 1

P255,000

Purchases during the month at cost

683,400

Cost of goods sold

[(856,800 30,600) x 75%](619,650)

Estimated inventory, October 31

P318,75020. The following items were included in Opal Companys inventory account at December 31, 2004:

Merchandise out on consignment, at sales price,

including 40% markup on selling price P28,000

Goods purchased in transit, FOB shipping point 24,000

Goods held on consignment by Opal Company 16,000

Goods out on approval (sales price, P10,000;

cost , P8,000)

10,000

By what amount should the inventory at December 31, 2004 be reduced?

(a) P29,200

(b) P50,000

(c) P54,000

(d) P78,000A

Markup on merchandise out on consignment

(40% x 28,000)

P11,200

Goods held on consignment

16,000

Markup on goods out on approval (10,000 8,000) 2,000

Total inventory reduction

P29,20021. The balance in Reed Companys accounts payable account at December 31, 2000 was P1,225,000 before the following information was considered:

Goods shipped FOB destination on December 21, 20009 from a vendor to Reed were lost in transit. The invoice cost of P45,000 was not recorded by Reed. On December 28, 2000, Reed notified the vendor of the lost shipment.

Goods were in transit from a vendor to Reed on December 31, 2000. The invoice cost was P60,000 and the goods were shipped FOB shipping point on December 28, 2000. Reed received the goods on January 6, 2001.

Goods shipped to Reed, FOB shipping point on December 20, 2000 from a vendor were lost in transit. The invoice price was P50,000. On January 5, 2001, Reed filed a P50,000 claim against the common carrier.

On December 27, 2000, a vendor authorized Reed to return, for full credit, goods shipped and billed at P35,000 on December 20, 2000. The returned goods were shipped by Reed on December 27, 2000. A P35,000 credit memo was received and recorded by Reed on January 6, 2001.

What amount should Reed report as accounts payable in its December 31, 2000 balance sheet?

(a) P1,300,000

(b) P1,345,000 (c) P1,235,000

(d) P1,250,000 A

Accounts payable per book

P1,225,000

A

-

B

60,000

C

50,000

D

( 35,000)

Adjusted accounts payable

P1,300,000Maricar Company, a wholesaler distributor of automotive replacement parts. Initial amounts taken from accounting records are as follows:

Inventory at December 31, 2000 (based on physical count) P1,250,000

Accounts payable at December 31, 2000:

Vendor

Terms

Amount

Baker

2% 10 days, net 30

P 400,000

Charlie

net 30

210,000

Dolly

net 30

300,000

Eagle

net 30

90,000

Full

net 30

Greg

net 30

_________

P1,000,000

Sales in 2000

P9,000,000Additional information is as follows:

A. Parts held on consignment from Charlie to Maricar, the consignee, amounting to P159,000 were included in the physical count of goods on December 31, 2000, and in accounts payable at December 31, 2000.

B. P20,000 of parts which were purchased from Full and paid for in December 2000 were sold in last week of 2000 and appropriately recorded as sales of P28,000. The parts were included in the physical count of goods on December 31, 2000, because the parts were on the loading dock waiting to be picked up by the customers.

C. Parts in transit on December 31, 2000 to customers, shipped FOB shipping point, on December 28, 2000, amounted to P34,000. The customers received the parts on January 6, 2001. Sales of P40,000 including P1,000 freight cost, were recorded by Maricar on January 2, 2001.

D. Retailers were holding P210,000 at cost (P250,000 at retail), of goods on consignment from Maricar the consignor, at their stores on December 31, 2000.

E. Goods were in transit from Greg to Maricar on December 31, 2000. The cost of the goods was P25,000, and they were shipped FOB shipping point on December 29, 2000.

F. A quarterly freight bill in the amount of P2,000 specifically relating to merchandise purchases in December 2000, all of which was still in the inventory at December 31, 2000, was received on January 3, 2001. The freight bill was not included in either the inventory or in accounts payable at December 31, 2000.

G. All of the purchases from Baker occurred during the last seven days of the year. These items have been recorded in accounts payable and accounted for in the physical inventory at cost before discount. Maricars policy is to pay invoices in time to take advantage of all cash discounts, adjust inventory accordingly, and record accounts payable, net of cash discounts.

22. What is the adjusted balance of inventory on December 31, 2000?

(a) P1,250,000

(b) P1,300,000(c) P1,356,000(d) P1,200,000 B

23. What is the adjusted balance of accounts payable on December 31, 2000?

(a) P833,000

(b) P858,000

(c) P860,000

(d) P1,000,000 C

24. What is the adjusted balance of net sales for 2000?

(a) P9,300,000

(b) P9,039,000(c) P9,239,000(d) P8,880,000 B

Inventory

Accounts payableNet sales

Per bookP1,250,000

P1,000,000

P9,000,000

1( 159,000)

( 159,000)

2 ( 20,000)

3

39,000

4 210,000

5 25,000

25,000

6 2,000

2,000

7( 8,000) ( 8,000)

_________

Adjusted P1,300,000

P 860,000

P9,039,000

25. Art Company has determined its cash flows from 2004 operating activities as P5,350,000. The cash balance on January 1, 2004 was P6,500,000. During 2004, the company had the following investing and financing activities. Cash dividends of P3,500,000 were declared and paid. An additional P1,400,000 of cash dividends were declared but remained unpaid at the end of the year.

Machinery with a book value of P1,750,000 was sold for that amount. Additional machinery of P2,600,000 was acquired for cash to replace the one sold.

Note payable of P4,200,000 was taken out of the local bank early in the year. By the end of the year, P1,500,000 of this amount including interest of P300,000 had been repaid.

Bonds payable with a book value of P2,500,000 was converted into common stock having par value of P2,000,000.

How much should be reported as net cash used in financing activities in the 2002 cash flow statement?

(a) P4,700,000

(b) P5,000,000(c) P1,900,000

(d) P500,000D

Payment of dividends

(P3,500,000)

Issuance of note

4,200,000

Partial payment of note

( 1,200,000)

Net cash used in financing activities(P 500,000)

26. The following is Mart Companys comparative balance sheet accounts:

2005

2004

Cash

4,800,000

3,000,000

Accounts receivable

2,300,000

2,400,000

Inventories

4,000,000

3,600,000

Property, plant and equipment 12,800,000

6,000,000

Accumulated depreciation (2,300,000) (2,000,000)

Investment in Max Company5,500,000

6,000,000

Loan receivable

2,700,000

-

Accounts payable

2,000,000

1,800,000

Income tax payable

100,000 500,000

Dividend payable

2,000,000

3,000,000

Capital lease liability

8,000,000

-

Common stock

10,000,000 10,000,000

Additional paid in capital

1,000,000

1,000,000

Retained earnings

6,700,000

2,700,000

a. On December 31, 2005, Mart acquired 20% of Max Companys common stock for P6,000,000. Max report net loss of P2,500,000 for the year ended December 31, 2005. No dividend was paid on Maxs common stock during the year.

b. During 2005, Mart loaned P3,000,000 to Chase Company, an unrelated company. Chase made the first semi-annual principal repayment of P300,000 plus interest of 10% on October 1, 2005.

c. On January 2, 2005, Mart sold equipment costing P1,200,000 with a carrying amount of P700,000, for P800,000 cash.

d. On December 31, 2005, Mart entered into a capital lease for an office building. The present value of the annual rental payments is P8,000,000 which equals the fair value of the building. Mart made the first rental payment of P1,200,000 when due on January 2, 2006.

e. Mart declared cash dividends in one year and paid the dividends in the subsequent year.

Net cash provided by operating activities was:

(a) P6,700,000

(b) P7,700,000(c) P5,700,000(d) P6,200,000 A

Net income (6,700,000 + 2,000,000

2,700,000)

P6,000,000

Investment loss (2,500,000 x 20%)

500,000

Gain on sale (800,000 700,000)

(100,000)

Depreciation (2,300,000 + 500,000

2,000,000)

800,000

Decrease in accounts receivable

100,000

Increase in inventories

(400,000)

Increase in accounts payable

200,000

Decrease in income tax payable

(400,000)

Net cash provided by operating activities P6,700,000

27. Trial balances of Ron Company at December 31 are as follows:

Debits:

2005

2004

Cash

P 875,000

P 800,000

Accounts receivable

825,000

750,000

Inventory

775,000

1,175,000

Property, plant and equipment

2,500,000

2,375,000

Unamortized bond discount

112,500

125,000

Cost of goods sold

6,250,000

9,500,000

Selling expenses

3,537,500

4,300,000

General and administrative expenses 3,425,000

3,782,500

Interest expense

107,500

65,000

Income tax expense

52,500

637,000

Credits:

Allowance for uncollectibles

P 32,500

P 27,500

Accumulated depreciation

412,500

375,000

Trade accounts payable

625,000

437,500

Income taxes payable

67,500

-

Deferred income taxes

132,500

115,500

3% callable bonds payable

1,125,000

500,000

Common stock

1,250,000

1,000,000

Additional paid in capital

227,500

187,500

Retained earnings

1,117,500

1,399,500

Sales

13,470,000

19,467,000

Ron purchased P125,000 equipment during 2005. Ron allocated one-half of its depreciation expense to selling expenses and the remainder to general expenses. Ron uses the direct method to prepare its cash flow statement. What amount should Ron report in its cash flow statement for the year ended December 31, 2005 for cash paid for interest?

(a) P120,000

(b) P107,500

(c) P95,000

(d) P42,500 C

Interest expense

107,500

Amortization of bond discount

(12,500)

Interest paid

95,000

28. The transactions of Art Company for the year 2005 included the following:

Purchase of land for cash (cash was borrowed from bank)3,000,000

Sale of securities for cash

1,000,000

Dividend declared (of which P1,500,000 was paid during

the year)

2,000,000

Issuance of common stock for cash

5,000,000

Payment of bank loan including interest of P200,000

2,200,000

Increase in customers deposits

300,000

The 2005 cash flow statement should report net cash provided by financing activities at:

(a) P4,500,000

(b) P1,500,000(c) P4,300,000(d) P4,800,000 A

Borrowed from bank

3,000,000

Dividends paid

(1,500,000)

Issuance of common stock

5,000,000

Payment of bank loan

(2,000,000)

Net cash provided by financing activities 4,500,000

29. Data below came from the comparative trial balance of Excel Corporation. The books are kept on the accrual basis. Included in the operating expenses are depreciation of P3,100 and amortization of P1,400.

December

2005

2004

Accounts receivable

220,000

245,000

Interest receivable

800

1,700

Inventories

420,000

405,000

Prepaid insurance

3,800

1,900

Accounts payable

364,000

345,000

Other operating expenses payable 18,000

15,000

Net sales

1,200,000

Interest revenue

6,500

Cost of goods sold

800,000

Insurance expense

48,000

Other operating expenses

95,000

Cash paid for operating expenses during the year is:

(a) P137,400

(b) P87,500

(c) P139,600

(d) P102,500A

Other operating expenses

95,000

Increase in operating expenses payable( 3,000)

Insurance expense

48,000

Increase in prepaid insurance

1,900

Depreciation

( 3,100)

Amortization

( 1,400)

Cash paid for operating expenses

137,400

30. Land on January 1, 2003 balance sheet was recorded at P6,000,000. Selected information in the year 2003 from the statement of cash flows follows:

Net income

P20,000,000

Depreciation expense

3,000,000

Loss on sale of land

200,000

Proceeds from sale of land

1,400,000

Investing and financing activities not affecting cash:

Issued preferred stock for land 2,400,000

The value of the land to be disclosed in the balance sheet as of December 31, 2003 is:

(a) P6M

(b) P7M

(c) P8.4M

(d) P6.8MD

Balance of land, Jan. 1, 2003

P6,000,000

Preferred stock issued for land

2,400,000

Cost of land sold (1,400,00 + 200,000)

(1,600,000)

Balance of land, Dec. 31, 2003

P6,800,000

31. Dione Company employs several consulting companies. Some of the companies require payments in advance for performing services while others bill Dione after services are rendered. Dione also leases office space to several law firms. Some law firms are required to pay rent in advance for using their offices while others are allowed to their offices before paying rent. Dione uses the conventional accrual basis of accounting. The amount of cash paid to consulting companies during 2004 was P6,400,000 and the amount of rent revenue earned from leasing office space was P7,800,000. Selected information obtained from the companys comparative balance sheet is shown below:

2004

2003

Prepaid consulting fees

200,000

500,000

Accrued consulting fees

700,000

200,000

Rent receivable

600,000

800,000

Unearned rent revenue

1,000,000

400,000

Under the direct method, the 2004 cash flow statement should report cash received from leasing office space at:

(a) P8,600,000

(b) P7,800,000(c) P8,200,000(d) P7,000,000 A

Rent revenue earned

P7,800,000

Rent receivable, 2002

( 600,000)

Rent receivable, 2001

800,000

Unearned rent revenue, 2002

1,000,000

Unearned rent revenue, 2001

( 400,000)

Cash received from leasing

P8,600,000

32. The balance sheet at December 31 of Love Company showed a cash balance of P200,000. An examination of the books disclosed the following:

a. Cash sales of P15,000 from January 1 to 7, were predated as of December 28 to 31, and charged to the cash account.

b. Customers checks totaling P5,000 deposited with and returned by the bank, NSF, on December 27, were not recorded in the books.

c. Checks of P6,500 in payment of liabilities were prepared before December 31, and recorded in the books, but withheld by the treasurer.

d. Customers postdated checks totaling P4,300 are being held by the cashier as part of cash. The companys experience shows that postdated checks are eventually realized.

e. The cash account includes P30,000 being reserved for the purchase of a mini-computer which will be delivered soon.

How much cash balance is to be shown on the December 31 balance sheet?

(a) P152,200

(b) P166,500

(c) P192,200

(d) P200,000A

Cash balance, per book

P200,000

Cash sales for January 1 to 7

( 15,000)

NSF checks

( 5,000)

Undelivered check

6,500

Customers postdated checks

( 4,300)

Cash for purchase of a computer

( 30,000)

Adjusted cash balance

P152,20033. The balance sheet at December 31,2004 of Lore Company showed a cash balance of P105,600. An examination of the books disclosed the following:

a. The sales book was left open up to January 5, 2005 and cash sales totaling P15,000 were considered as sales in December 2004.

b. Checks of P9,300 in payment of liabilities were prepared before December 31, 2004, recorded in the books, but not mailed or delivered to payees.

c. Customers postdated checks totaling P7,800 deposited with but returned by bank, NSF, on December 27, 2004. Return was not recorded in the books, P1,500.

d. The cash account includes P40,000 earmarked for the purchase of an office equipment which will be delivered soon.

How much cash balance is to be shown on the December 31, 2004 balance sheet?

(a) P105,600

(b) P60,500

(c) P58,400

(d) P50,600D


P105,600

Cash sales for January

( 15,000)

NSF checks

( 1,500)

Undelivered check

9,300


( 7,800)

Cash for purchase of office equipment( 40,000)


P 50,600

34. The balance sheet at December 31 of Live Company showed a cash balance of P91,750. An examination of the books disclosed the following:

a. Cash sales of P12,000 from January 1 to 5, 2005 were predated as of December 28 to 31, 2004 and charged to the cash account.

b. Customers checks totaling P4,500 deposited with and returned by the bank, NSF, on December 27, 2004 were not recorded in the books.

c. Checks of P5,600 in payment of liabilities were prepared before December 31, 2004 and recorded in the books, but withheld by the treasurer.

d. Personal checks of officers, P2,700, were redeemed on December 31, 2004, but returned to cashier on January 2, 2005.

e. The cash account includes P20,000 being reserved for the purchase of an office machine which will be delivered soon.

How much cash balance is to be shown on the December 31 balance sheet?

(a) P91,750

(b) P69,150

(c) P54,750

(d) P90,350C


P 91,750

Cash sales for January

( 12,000)

NSF checks

( 4,500)

Undelivered check

5,600


( 3,400)

Personal checks of officers

( 2,700)

Cash for purchase of a computer

( 20,000)


P 54,750Items 30 to 34:

On October 7, 2004, the cash book of Davao Company showed the following entries:

Receipts

Checks

September 30 (overdraft)

P 0

P5,000

October 1Tuesday

1,200

1,600

2Wednesday

3,000

2,400

3 Thursday

800

1,000

4Friday

6,000

3,400

5 Saturday

4,000

2,500

Cash receipts are deposited at the beginning of every Monday, Wednesday and Friday and in each case includes the receipts of the preceding two working days. The bank statement at the close of October 5 showed:

Balance, September 30 overdraft

P6,500

Deposits

7,000

Checks (includes all checks issued prior to October 4

and also a check for P300 belonging to Cebu

Co., erroneously charged to Davao account 5,800

A check for P256 issued on October 5 had been canceled

by the company but the bookkeeper has not made

any entry for this.

Additional information: undeposited collections October 31, P10,000; outstanding checks October 31, P5,644.

35. The book balance as at October 5, 2004 should be:

(a) (P900)

(b) (P3,900)

(c) P1,100

(d) P1,200A

Balance per book, September 30

(P5,000)

Receipts (October 1 to 5)

15,000

Checks (October 1 to 5)

(10,900)

Balance per book, October 5

(P 900)36. The bank balance as at October 5, 2004 should be:

(a) (P3,900)

(b) (P5,300)

(c) P1,200

(d) P1,100B

Balance per bank, September 30

(P6,500)

Deposits

7,000

Checks

( 5,800)

Balance per bank, October 5

(P5,300)37. The undeposited collections as at September 30, 2004 should be:

(a) P4,000

(b) P3,000

(c) P2,000

(d) P1,000C

Undeposited collections October 31P10,000

Bank receipts

7,000

Book receipts

(15,000)

Undeposited collections September 30P 2,00038. The outstanding checks as at September 30, 2004 should be:

(a) P200

(b) P300

(c) P400

(d) P500D

Outstanding checks October 31P 5,644

Bank disbursements (5,800 300) 5,500

Book disbursements (10,900 256) (10,644)

Outstanding checks September 30 P 50039. The adjusted book and bank balances as at October 5, 2004 should be:

(a) P5,644

(b) P644

(c) P1,144

(d) P344B

Unadjusted balance per bank, Oct.5(P5,300)

Undeposited collections

10,000

Outstanding checks

( 5,644)

Bank error

( 300)

Adjusted balance per bank, Oct. 5(P 644)

40. The balance sheet of Happy Company as of December 31, 2004 showed a cash balance of P68,225, which was determined to consist of the following:

Petty cash fund

P 360

Cash in Metro, per bank statement, with a

check for P600 still outstanding 33,675

Notes receivable in the possession of a

collecting agency

2,500

Undeposited receipts, including a postdated

check for P1,050 and a travelers

check for P1,000

17,800

Bond sinking fund cash

12,750

IOUs signed by employees

495

Paid vouchers, not yet recorded

645

Total

P68,225 At what amount should cash on bank and in bank be reported on Happys balance sheet?

(a) P50,185

(b) P53,475

(c) P62,935

(d) P66,225A

Petty cash fund

P 360

Cash in Metro (33,675 600)

33,075

Undeposited receipts (17,800 1,050) 16,750

Total

P50,185* end of the examination practical accounting 1*

Documents

Batch 17 1st Preboard (P1) (1)