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PRACTICAL ACCOUNTING ONE REVIEWERS / TESTBANKS
- In an audit of Selena Company on December 31, 2009, the following information is gathered: Balance per book 6,700, Customer’s check 200, Depositor’s note charged to account 650, Customer’s note collected by bank 120, Outstanding checks 800, Checkbook printing charge 2, Certified checks included in the outstanding checks 100, Deposit in transit 1,200, Interest earned on deposits net of 20% final tax 32, The adjusted cash in bank of Selena Company on December 31, 2009 is a. 6,050,000 b. 6,700,000 c. 6,000, d. 5,300, Balance per book 6,700, Customer’s NSF check ( 200,000) Depositor’s note charged to account ( 650,000) Customer’s note collected by bank 120, Checkbook printing charge ( 2,000) Interest earned on deposits 32, Balance per books 6,000,
- On January 1, 2009, Everlasting Company purchased serial bonds with a face value of P4,000,000 and a stated interest rate of 10% to be held to maturity. The stated interest is payable annually on December 31. The bonds are acquired to have an effective yield at 12%. The bonds mature at annual installments of P1,000,000 every January 1, beginning in January 1, 2010 and every January 1 thereafter. What is the market price of the bond investment on January 1, 2009? (Round off present value factors to 2 decimal places)
a. 4,000,000 b. 3,776,000 c. 3,842, d. 3,876, PV of 1/1/10 cash flow (1.4M x .89) 1,246, PV of 1/1/11 cash flow (1.3M x .80) 1,040, PV of 1/1/12 cash flow (1.2M x .71) 852, PV of 1/1/13 cash flow (1.1M x .64) 704, Total 3,842,
- On December 31, 2009, the balance of accounts receivable of Jalena Company was P6,000,000 and the January 1, 2009 balance of allowance for doubtful accounts was P800,000. The following data were gathered: Credit Sales Write offs Recoveries 2006 9,000,000 400,000 30, 2007 13,000,000 600,000 70, 2008 15,000,000 700,000 120, 2009 20,000,000 650,000 150, Doubtful accounts are provided for a percentage of credit sales. The accountant calculates the percentage annually by using the experience of the three years prior to the current year. Hpw much should be reported as allowance for doubtful accounts on December 31, 2009? a. 1,100,000 b. 800,000 c. 1,300,000 d. 1,250, Total writeoff (400 + 600 + 700) 1,700, Less: Total recovery (30 + 70 + 120) 220, Net writeoff 1,480, Divided by total credit sales 37,000, Doubtful accounts expense rate 4% Beg. ADA 800, Writeoff ( 650,000) Recovery 150, DAE (20M x 4%) 800, ADA, end 1,100,
Collection on accounts receivable, 1/1 to 10/ 6,500, Payments to suppliers, 1/1 to 10/ 5,200, Goods out on consignment at October 1, at cost 400, 2006 2007 2008 Sales 6,000,000 7,500, 8,000, Gross profit on sales 1,650,000 1,725, 2,000, What is the inventory loss suffered as a result of the fire? a. 900,000 b. 425,000 c. 200,000 d. 825, Sales (6,500,000 – 800,000 + 500, 6,200, Purchases (5,200 – 400 + 650) 5,450, GP % (27.5% + 23% +25%) / 3 or (5,375/21,500) 25% GAS (500,000 + 5,450,000) 5,950, Less: Estimated COS (6.2M x (1-25%) 4,650, Estimated ending inventory 1,300, Less: Cost of goods out on consignment 400, Estimated fire loss 900,
- On January 1, 2009, Katherine Company purchased 20% of the outstanding ordinary share capital of David Company for P4,000,000, of which P1,000,000 was paid in cash and P3,000,000 payable with 12% annual interest on December 31,
- Katherine also paid P500,000 to a business broker who helped find a suitable business and negotiated to purchase.
At the time of the acquisition, the fair value of David’s identifiable assets and liabilities were equal to their carrying value except for an office building which has a fair value in excess of book value of P2,000,000 and an estimated life of 4 years. David’s shareholder’s equity on January 1, 2009 was P13,000,000. During 2009, David reported net income of P6,000,000 and paid dividends of P4,000,000. What amount should Katherine Company report as investment in associate on December 31, 2009? a. 4,300,000 b. 4,800,000 c. 4,900, d. 4,500, Cost 4,500, Share in net income (6M x 20%) 1,200, Dividends ( 800,000) Amortization ( 100,000) Carrying amount 12/31/09 4,800,
- During 2009, Judith Company Corporation constructed a new hydro electric power plant at a cost of P25,000,000. The expenditures for this facility, which was finished late in 2009, were incurred evenly during the year. The entity had the following loans among Judith’s liabilities outstanding on December 31, 2009: 12% note to finance construction of the hydro-electric power plant, dated January 1, 2009, P10,000,000 that was unpaid as of December 31, 2009. Investments were made on the excess borrowings from this loan and income of P50,000 was realized from deposits and other investments during 2009. 8%, 20-year bonds payable issued at face value on January 1, 2001, P40,000,000. 15%, 5-year mortgage note payable, dated March 1, 2006, P10,000,000. What is the amount of interest that was capitalized as cost of new building? a. 2,560,000 b. 1,385,000 c. 1,200, d. 2,325, Average expenditures (25M / 2) 12.5M
Removal of old equipment 100, Cost of installation 50, Cost of redecoration of office in connection with the purchase 250, Insurance taken during delivery 20, Repairs incurred while in transit 10, Transportation costs 30, If the invoice was paid on March 31, 2009, what should be the cost of equipment? a. 2,760,000 b. 3,425,000 c. 2,900, d. 3,010, Purchase price net of discount (2,800 -140) 2,660, Direct cost (50 + 20 + 30) 100, Total cost 2,760,
- The inventory control account balance of Luca Company at December 31, 2009 was P4,000,000 using the perpetual inventory system. A physical count conducted on that day found inventory on hand worth of P3,400,000. Net realizable value for each inventory item held for sale exceeded cost. An investigation of the discrepancy revealed the following: a. Goods costing P300,000 were sold on credit to Fernando Company for P500,000 on December 28, 2009 FOB destination. The goods were still in transit on December 31,
- The sales invoice was raised and processed on December 31, 2009. b. Goods costing P450,000 were purchased on credit FOB destination from Kimi Company on December 29, 2009. The goods were received on December 30, 2009 and included in the physical count. The purchase invoice was received on January 2, 2010. c. Goods costing P150,000 were purchased on credit from Alistair Company on December 27, 2009 FOB shipping point. The goods were shipped on December 28, 2009 but, as they had not arrived by December 31, 2009, were not included in the
physical count. The purchase invoice was received and processed on December 31, 2009. d. Goods worth P200,000 held on consignment from Jensen Company had been included in the physical count. e. On December 31, 2009, Luca Company sold goods costing P750,000 on credit FOB shipping point to Ruben Company for P1,000,000. The goods were dispatched from the warehouse on December 31, 2009 but the sales invoice had not been raised at that date. f. Damaged inventory items valued P350,000 were discovered during the physical count. These items were still recorded as of December 31, 2009 but were omitted from the physical count records pending their writeoff. What is Luca Company’s adjusted inventory amount? a. 3,650,000 b. 3,600,000 c. 4,100, d. 4,000, Unadjusted perpetual balance 4,000, Recorded goods sold FOB destination 300, Unearned merchandise that had been received 450, Unrecorded goods sold FOB shipping point ( 750,000) Damaged goods ( 350,000) Adjusted perpetual balance 3,650, Unadjusted periodic balance 3,400, Uncounted goods sold FOB destination 300, Goods in transit purchased FOB shipping point 150, Goods held on consignment ( 200,000) Adjusted periodic balance 3,650,
- Lene Company uses straight line depreciation for its property, plant and equipment. Balances of the property, plant and equipment and related accumulated depreciation accounts on
FV of land acquired by issuing of shares 2,000, Special assessment 50, FV of donated land 1,800, Total cost 3,850,
- Dominika Company purchased another entity for P8,000, cash. The acquiree had total liabilities of P1,500,000. Dominika Company’s assessment of the fair value of the assets it obtained when it purchased the other entity is as follows: Cash 500, Accounts receivable – net 1,000, Inventory 800, Property, plant and equipment – net 3,000, In-process research and development 2,000, Assembled workforce 1,200, What is the goodwill arising from the acquisition? a. 2,200,000 b. 3,000,000 c. 1,000, d. 700, Acquisition cost 8,000, Less: FV on net assets acquired (7.3M-1.5M) 5,800, Goodwill 2,200,
- The following were taken from the incomplete financial data of Sam Company, a calendar year merchandising corporation: December 31, 2005 December 31, 2006 Trade accounts receivable 840, 780, Inventory 1,500, 1,000, Accounts payable 950, 980, Accrued gen. & admin. expense 130, 170,
Prepaid selling expense 150, 130, PPE, net 1,650, 1,420, Patent 425, 300, Investment in Associate 550, 720, The following additional information were made available: cash payments for selling and administrative expense was 900,000, payments for purchases, net of discounts of 70,000 was 1,530,000. Equipment with a book value of 200,000 was sold for 250,000. There were no acquisitions of PPE and other transactions affecting net income during the period. There no acquisitions of investment during the year 2006. If the company reported a net income of 270,000, what is the amount of collections on trade receivables in 2006? a. 2,425,000 b. 2,470,000 c. 3,285, d. 3,485, Net income 270, Gain on sale of equipment ( 50,000) Income from investment in associates ( 170,000) Depreciation 30, Amortization of patent 125, Selling and Admin. expenses 960, Gross profit 1,165, Sales 3,225, Cost of sales 2,060, Gross profit 1,165, Cost of sales: Beg. Inv. 1,500, Purchases 1,630, Purchase discounts ( 70,000)
31, 2006, but returned to cashier on January 2, 2007. How much is the cash balance that should be shown in the December 31, 2006? a. 91,750 b. 69,150 c. 54,750 d. 43, Balance per book 91, Cash sales for 2007 dated 2006 (12,000) NSF ( 4,500) Undelivered check 5, Post dated check ( 3,400) Cash set aside for computer (20,000) Personal check ( 2,700) Correct cash balance 54,
- Your client, Mills Corporation, requests your assistance in determining the amount of loss and in filing in insurance claim in connection with a fire on June 15, 2006 that destroyed some of the company’s inventory and accounting records. You were able to obtain the following information from available records. The last physical inventory was taken on December 31, 2005. At the time, total (at cost) amounted to P210,789.80. Accounts payable were P110,106.42 on December 31, 2005 and P126,945.37 at the time the fire occurred. Payments to vendors from December 31, 2005 to the date of fire totaled P641,871.56. All sales are on account and account receivable were P135,009. at December 31, 2005 to the date of fire amounted to P876,195.50. Almost all the merchandising items are sold approximately 30% in excess of cost. As at June 15, 2006, the total cost of inventory items not destroyed by the fire amounted to P144,882.33. How much is the loss incurred by the company as a result of the fire? a. 72,055.23 b. 216,937.56 c. 275,668. d. 430,785. Beginning inventory 210,789. Purchases 658,710.
TGAS 869,500.
Cost of sales (848,331.57 / 130%) 652,562. Estimated inventory 216,937. Goods based on counting 144,882. Inventory loss 72,055. Accounts payable Accounts receivable 641,871.56 110,106.42 135,009. 876,195. 658,710.51 848,331. 126,945.37 107,145.
- Marcel Company purchased 5,000 shares of Boniface Co. par P100 at P120 on July 2006. Marcel Company classified the securities as available for sale. Marcel Company received a cash dividend of 1 share dividend at P10 per share on the stock and was granted to purchase 1 share at 105 for every 4 shares held. The share had a market value ex-right of P115 and the right had a value of P5. On December 20, 2006, the company sold 2, rights at P7.50 and exercised remaining rights. What is the average unit cost of the total investment as of December 31, 2006? a. 95.83 b. 99.52 c. 98.70 d.
Upon acquisition P600,000 5, Share dividend - 1, Share rights (5/20 x P600,000) ( 25,000)
Balance of original investment P575,000 6, Cost of new investment on exercise of rights Cash paid (4,000 rights / 4 x P105) P105, Cost of rights exercised (4,000/6,000 x P25,000) 16, Cost of new investment P121,
Total cost of patent (120 + 17 + 24.5) P161, Less: Amortization for 2 years (161.5 x 2/20) 16250 Carrying value P145,
- Pearl Company began operations on January 1, 2005. On December 31, 2005, Pearl provided for uncollectible accounts based on 1% of annual credit sales. On January 1, 2006, Pearl changed its method of determining its allowance for uncollectible accounts by applying certain percentage to the accounts receivable aging as follows: Days past invoice date Percent deemed to be uncollectible 0-30 1 31-90 5 91-180 20 Over 180 80 In addition, Pearl wrote off all accounts receivable that were over 1 year old. The following additional information relates to the year ended December 31, 2005 and 2006: 2006 2005 Credit sales P6,000,000 P5,600, Collections 5,830,000 4,800, Accounts written off 54,000 none Recovery of accounts previously Written off 14,000 none Days past invoice date @ 12/ 0-30 600,000 500, 31-90 160,000 180, 91-180 120,000 90, Over 180 50,000 30, What is the provision for uncollectible accounts for the year ended December 31, 2006? a. 22,000 b. 62,000 c. 76,000 d. 78, Required allowance for bad debts – 2006
600,000 x 1% = P 6, 160,000 x 5% = 8, 120,000 x 20% = 24, 50,000 x 80% = 40,000 P 78, Accounts written off 54, Total P132, Beginning balance (1% P5,600,000) 56, Recovery 14,000 70, Bad debts P 62, Items 20 to 21: On June 30, 2010, Cape Company purchased 25% of the outstanding ordinary shares of Bit Co. at a total cost of P2,100,000. The book value of Bit Co.’s net assets on acquisition date was P7,200,000. For the following reasons, Cape was willing to pay more than book value for Bit Co. stock:
- Bit Co. has depreciable assets with a current fair value of P180,000 more than their book value. These assets have a remaining useful life of 10 years. - Bit co. owns a tract of land with a current fair value of P900,000 more than its carrying amount. - All other identifiable tangible and intangible assets of Bit Co. have current fair values that are equal to their carrying amounts. Bit reported net income of P1,620,000, earned evenly during the current year ended December 31, 2010. Also in the current year, it declared and paid cash dividends of P315,000 to its ordinary shareholders. Market value of Bit Co.’s ordinary shares at December 31, 201o0 is P9 million. Cape Company’s financial year-end is December 31.
- What is the total amount of goodwill of Bit Co. based on the price paid by Cape Company? (a) P300,000 (b)P1,080,000 (c) P120,000 (d) P30,
- What amount of investment revenue should Cape report on its income statement for the year ended December 31, 2010 under the equity method?
the bonds are quoted at 105. What amount of unrealized gain on these bonds should be reported on the 2009 statement of changes in equity? (a)P169,450 (b) P199,500 (c) P300, (d) P179, 25.On January 1, 2009, Sweet Company purchased 5-year bonds with face value of P8,000,000 and stated interest of 10% per year payable semi-annually January 1 and July 1. The bonds acquired to yield 8%. What is the purchase price of the bonds? (a)P7,382,400 (b) P8,617,600 (c) P8,648,800 (d) P7,351,
- Abe Company, lessor, leases its equipment under an operating lease. The lease term is 5 years and the lease payments are made in advance on January 1 of each year as shown in the following schedule: January 1, 2005 1,000, January 1, 2006 1,000, January 1, 2007 1,400, January 1, 2008 1,700, January 1, 2009 1,900, On December 31, 2006, Abe Company should recognize rent receivable at: (a)P1,400,000 (b) P800,000 (c) P400, (d) P 0 Average rent (7M/ 5) P1,400, Rent income for 2005 and 2006 (1.4M x 2) P2,800, Rent received for 2005 and 2006 (1M + 1M) 2,000, Rent receivable – 12/31/ P4,800,
- Might Company purchased a tractor on January 1, 2009 at a cost of P1,600,000 for the purpose of leasing it. The tractor is estimated to have a useful life of 5 years with scrap of P100,000. Depreciation is on a straight line basis. On April 1,
2009, Might entered into a lease contract for the lease of the tractor for a term of two years up to March 31, 2011. The lease fee is P50,000 monthly and the lessee paid P600,000, the lease for one year. Might paid P120,000 commission associated with negotiating the lease, P15,000 minor repairs, and P10,000 transportation of the tractor to the lessee during
- Might Company should report net rent revenue for the year 2009 at: (a) P160,000 (b) P235,000 (c) P80, (d) P85, Rental from April 1 to December 31, 2009 (50,000 x 9) P450, Depreciation (1,600,000 – 100,000/5) (300,000) Commission (120,000/ 2 x 9/12) ( 45,000) Repairs ( 15,000) Transportation ( 10,000) Net rent revenue P 80,
- In the long-term liabilities section of its balance sheet at December 31, 2008, Mix Company reported a capital lease obligation of P750,000, net of current portion of P13,636. Payments of P90,000 were made on both January 2, 2009 and January 2, 2010. Mix’s incremental borrowing rate on the date of lease was 11% and the lessor’s implicit rate, which was known to Mine, was 10%. In its December 31, 2009 balance sheet, what amount should Mix report as capital lease obligation, net of current portion? (a) P660,000 (b) P735,000 (c) P763, (d) P742, Total lease liability, Dec. 31, 2008 (750,000 + 13,636) P763, Payment on January 2, 2009 P90, Interest for 2007 (10% x 763,636) (76,364) ( 13,636) Lease liability, December 31, 2009 P750, Payment on January 2, 2010 P90, Interest for 2010 (10% x 750,000) (75,000) ( 15,000)
