Cpa Aditional Corlyn

PRACTICAL ACCOUNTING- PROBLEMS II

Set A

38.Person Company acquired 80 percent of the outstanding common stock Of sonar, Inc, by issuing 20,0000 of its P 10 par value shares which are selling at 16, Fees paid to consultants and attorneys in connection with the exchange of shares amounted to P 30,000. Immediately prior to the acquisition ,. The trial balances of the two companies were as follows: Current assets Plant assets Investment in marketable Securities Current liabilities Noncurrent liabilities Common stock Additional paid in capital Retained earnings

PARSON P1, 800,000 3,000, 000 (1,100,000) ( 600.000) ( 400,000) ( 800,000) (1,900,000)

BOOK VALUE P 975,000 1,300,000 300,000 (800,000) (400,000) (200,000) (775,000)

SONAR FAIR VALUE P 1,025,000 1,400,000 280,000 800,000 530,000

On the consolidated balance sheet after acquisition, how much will be the additional paid in capital of the controlling interest, assuming that all the requirements for pooling of interest, have been met? A. B. C. D.

P 1,000,000 P 1,200,000 P 1, 160,000 P 800,000

39. The following information pertains to a river- control project or Rathaus Konstrukt Inc. In Tabuk, Kalinga which was commented in 19X3 and completed the following year: Cost incurred to date At June 30, 19X3 P 9, 750,000 At June 30, 19X4 15, 750,000 Estimated total cost At completion At June 30, 19X3 19,500,000 At June 30, 19X4 20,250,000 The project is a P22,500 fixed- price construction contract and Rathaus uses the percentage- of completion method of accounting. What is the income reported by Rathaus on its Kalinga project on June 30, 19X4? A. P 750, 000 b. P 1, 500,000 C. P 1, 750,000 D. P 250, 000 40. Ovid company makes use of the two-way analysis of overhead variances. Ovid’s budgeted factory overhead for fixed costs is p 1,200,000 per month, plus a variable factory overhead rate of P96 for every direct labor hour. The standard direct labor hours allowed for May, 19X 6 productions are 432,000 hours. An analysis of the factory overhead showed that, in May, Ovid had an unfavourable budget (controllable) variance of P24,000 and a favorable volume balnce of P 12,000. What is the applied factory overhead in May? A. B. C. D.

P5, 371,200 P5, 359, 200 P5, 335, 200 P5, 347, 200

41. Paradim Co. recently paid P5,000,000 cash for the net assets of Supreme Co. which had a book value of P 5,000,000 of P4, 000,000 . The book values of the assets and liabilities approximate their fair values except as noted below. BOOK VALUE Inventory............................. .P 400,000 Land...................................... 300,000 Building and equipment, net...............1,400,000

FAIR VALUE P 450,000 500,000 1,550,000

68. Which of the two methods ( the present of the automated has higher income at the level of sales of 26,000 units? a. Present, P 60,000 b. Automated P60,000 c. Present, P 240,000 d. Automated, P 240,000

69. A fira has the following capital structures : 70 debt and 320 equity interest rate on debt is 12 and on common stock is 14 if the weighted average cost of the capital is 9.66 then what is the marginal tax rate? a. 350 b. 400 c 600 d. 650 70. Samantha Manufacturing recently completed and sold an order of 50 units that had the following costs: Direct materials P1, 500 Direct labor 8,500 Variable overhead 4,000 Fixed overhead 1,400 TOTAL P 15,400 Applied on the basis of direct labor hours. Applied at the rate of 10 of variable cost. The company has now been requested to prepare a bid order for another set of 50 units of the same product. If an 80 learning curve were applied, Samantha’s total cost on this order would be estimated at a. P 6,400 b. P 8,600 c. P 9,900 d. P 15,400 47. Timepieces Company manufactures and sells watches that carry a 2- year unconditional warranty against product failure. Based on a reliable statistical, timepieces knows that between the sale and the lapse of the product warranty; 10% of units sold will require an average cost of P 250 per unit for repairs. The following data reflect the recent experience of the company for the past 3 years. Number of units sold Number of units repaired: 2008 2009 2010

2008 6,000 80

2009 8,500 150

2010 10,000 200

250

350 400

48. Millennium Company provided the following information for 2010. Net Income Total Assets Share Capital Share Premium Treasury shares at cost Dividends declared

2, 5000,000 5,600,000 1,000,000 800,000 200,000 1,500,000 400,000

Prior period adjustment for overstatement of 2009 ending inventory The debt to equity ratio 40% ( total liabilities divided by total shareholders’ equity) at December 31,2010 . What was the retained earnings balance on January 1, 2010? a. 1, 000,000 b. 1,800,000 c. 1, 6000,000 d. 1, 4000,000 49. On July 1, 2010, Dakota Corporation Issued office space for 5 years at a monthly rental of P 75,000. On that date , Dakota paid the lessor P 950,000 which included the following: Rent deposit First months deposit Last month’s deposit Installation of new walls and offices

300,000 75,000 75,000 500,000

The entire amount of P 950,000 was charged to rent expense in 2010 . Monthly rentals were paid as scheduled from August to December 31, 2010 under the operating lease? a. 530,000 b. 500,000 c. 125,000 d. 450,000

50. Brisbane company reported the following information for 2010 Sales revenue of P 2,800,000 cost of goods sold of P 1,000,000, distribution costs of P 400,000, administrative expenses of P 350,000, depreciation of P 250,000, interest expense of P 80,000 and income tax expense of P 280,000. All sales were made for cash and all expenses other than depreciation and bond premium amortization of P 20,000 were paid in cash. All current assets and current liabilities remained unchanged. What is the net cash provided by operating activities during 2010? a. 440, 000 b. 690,000 c. 670,000 d. 710. 000 PRACTICAL ACCOUNTING PROBLEMS 1. Understatement of 2009 warranty cost

ANSWERS 600,000 A

2. Cumulative additional depreciation ( 1M/ 10X6) Depreciation on carrying amount (2.5M)/5) 2010 Depreciation

600,000 500,000 1,100,000 B

3.

Perpetual

Periodic

Unadjusted balances Unrecorded sales Goods sold FOB SP Goods sold FOB destination Goods held on consignment Goods purchased FOB Dest (arrived) Obsolete inventory Adjusted inventory

3,600,000 (200,000) (500,000) (150,000)

3,450,000

400,000 (150,000)

(, 100,000)

3,360.000

(500,000) (150,000)

300,000 3,300,000 D

4. Fair value of share alternative 60,000X35) Less. Fair value of cash alternative (30,000 X 50) Grant date fair value of equity component 2009 FV of equity component (60,000//3) FV of liability component (30,000X 60/ 3) Compensation expense 2010 FV equity component (60,000/3) Fair value of liability component (30,000X75)/ 3X2) – 600,000 Compensations expense

2,100,000 1,500,000 600,000

5. Lobstar ( 10,000)X 150) Shrimp (50,000X. 80) Salmon( 30,000X 200) – 400,000 payment Net unrealized gain

1,5000,000 4,000,000 5,600,000 3,100,000 B

6. net investmen Less: PV of GRV (500,000 x.58) Net Investment to be recovered from rentals Rentals (3,924,000/4.36) Gross investment (900,000x6)+ 500,000 residual value Less : Net Investment Financial revenue

4,204,000 280,000 3,924,000 900,000 5,900,000 4,204,000 1,696,000 B

7. Average earnings (4M-500,000)/5 Capitalization rate Net assets with goodwill Less: Fair value without goodwill Goodwill

700,000 10% 7,000,000 5,500,000 1,500,000 C

8. Total market value (except Stellar Company treasury share) Less: Total cost Unrealized gain on trading securities

10,600,000 10,300,000 300,000

200,000 600,000 800,000 200,000 900,000 1,100,000 C

9. Accrued pension cost 1/1 (6,500,000-5,000,000) Pension expense Contributions Accrued pension cost 12/31

(1,500,000) (1,000,000) 1,200,000 (1,300,000) D

10. Accounting Profit Fines and penalties Cash dividends received Accounting profit subject to tax Unrealized gain on trading securities (taxable) Reversal of deductible temporary difference Reversal of taxable temporary difference Taxable profit

1,200,000 500,000 (800,000) 900,000 (200,000) (600,000) 350,000 450,000 B

11. Gross profit from instalment accounts receivable(120,000/30%) Instalment accounts receivable (400,000/40%)

400,000 1,000,000 C

12. average general price index number (150 +300)/2 Cash AR Inventory (1,200,000 x 300/225) PPE (2,000,000 x 300/125) Total assets

225 300,000 800,000 1,600,000 4,800,000 7,500,000

Accounts payable Bonds payable Total liabilities

400,000 700,000 1,100,000

Contributed capital (1.2 M x 300/100) RE (SQUEEZE) Less ; Treasury shares (350,000 x 300/140) SHE (7,500,000-1,100,000)

3,000,000 3,550,000 B 750,000 6,400,000

13. Replacement cost Less:Accumolated depreciation (9M x 25%) Sound Value Less: Carrying amount Revaluation surplus-gross 6/30/10 Less: Deferred tax lability (1.5 Mx 30%) Revaluation surplus-net 6/30/10 Less Realization (1,050,000/5x6/12) Revaluation surplus-net 12/31/10 Percentage of accumulated depreciation (1,750/7,000)

9,000,000 2,250,000 6,750,000 5,250,000 1,500,000 450,000 1,050,000 105,000 945,000 A 25%

14. Payment for operating expenses (1,000-120-30+400-550+100-150)

650,000 B

15. cost Less: Accumulated depreciation (3M x 10% x 3) Carrying amount 1/1/10 2010 Depreciation (2.6 M-500)x 7/28) (7 years remaining)

3,500,000 900,000 2,600,000 525,000 D

16. PBO (5M +600+ (12% x 5M)-900-100)

5,200,000 B

17. 10 dairy cattle- 3 years old 2 hogs-4 years old 15 horses-2 year old 8 Carabao’s -3.5 years old 4 dairy cattle-1.5 years old 6 carabaos-1 yr old Carrying amount on 12/31/10

580,000 600,000 1,350,000 290,000 200,000 140,000 3,160,000 A

18.FV of land and building (lower than PV of minimum lease payments) 19. Net. Income to ordinary shareholders (900,000 x 15) Dividends on preference shares Total net income Divide by : (900,000 plus (400,0000) Diluted EPS

5,950,000 B 13,500,000 500,000 14,000,000 1,200,000 11.67 C

20. Deficit eliminated (1M +200+400+300)

1,900,000 A

21. Total shareholders Less: PSHE (1.25 M +250)+(1.25 M x 10% x 4 years) Ordinary shareholders’ equity Divide by (230,000 treasury) Book value per ordinary share

10,400,000 2,000,000 8,400,000 210,000 4000 A

22. Increase in contributed capital (8.5 M -5M) Stock dividend (4M x 25%) Donated capital Proceeds from share issuance

3,500,000 (1,000,000) (800,000) 1,700,000

Accumulated profits beg Stock dividends (4M x 25%) Cash dividends declared during the year (SQUEEZE) Net income Accumulated profits end Barrowing paid Proceeds from shares issued Dividends paid (800,000 + 500,000 beginning dividends payable) Net cash used in financing activities

1,500,000 (1,000,000) (800,000) 2,500,000 2,200,000 (1,500,000) 1,700,000 (1,300,000) (1,100,000) B

23. total cash dividends (500+300) Fair value of property dividend at date of payment on 5/1/2010 Fair value of share dividend at date of declaration (10% x 200,000 x 15 ) Decrease in RE

800,000 1,400,000 300,000 2,500,000C

24. Royalty income for first half of the year Royalty income for second half of the year (10M x 10%) 2011 Royalty Income

800,000 1,000,000 1,800,000 A

25. Account receivable Less: Required allowance NRV.

4,000,000 300,000 3,700,000 A

26. Proceeds Cash Surrender Value Unexpired Insurance premium (90,000/ 12 x 2) Gain

3,000,000 (145,000) (15,000) 2,840,000 B

27. Accrued liability on Dec. 31 , 2010 28. profit (900,000/30%) 29. 2010 compensation expense –market value on 12/31/2010 30. balance per bank statement’ Deposit in transit Outstanding checks Bank service charges Interest income Error in recording check (73,000-37,000) 31 Adjusted accounts payable (2.5 M +150T-300T)

1,200,000 C 3,000,000 B 2,100,000 B 1,250,000 200,000 (80,000) 25,000 (75,000) (36,000) 1,284,000

32. Accumulated depreciation 12/31/09 Impairment loss Depreciation expense in 2010 (4M/4 years) Total

3,000,000 2,000,000 1,000,000 6,000,000

33. option price (50,000x 100) Share options outstanding Total Less : Par value of shares issued (50,000 x 100) Share premium

6,000,000 2,000,000 8,000,000 5,000,000 3,000,000 B

34. Payment for real property Sale of AFS (500 + 100) Purchase of H & E Advances to other companies Cost of patent Net cash used

2,000,000 600,000 (800,000) (2,000,000) (150,000) 4,350,000 B

35. Cost Less: 2006 and 2009 amortization (5M/ 5 x 2) ( Lease term) Carrying amount 12/31/09

5,000,000 2,000,000 3,000,000

Less: 2010 amortization (3M / 4 years) ( remaining life of asset) CA 12/31/10 depreciation

750,000 2,250,000 A

36. Adjusted RE 1/1/10 (3M-400,000x 70%)

3,220,000 A

37. Collections Rent receivable and White off Total Less: Rent receivable beginning Rental revenue-accrual

5,000,000 400,000 50,000 5,450,000 700,000 4,750,000B

38. Accrued liability-12/31/2010 (25 x 50,000) Less: Accrued liability or 12/31/2009 (17 x 50, 000) 2010 compensation expense

1,250,000 850,000 400,000 B

39. B=552,250-10B 1,108=550,000 Bonus =(550.000/1.10)

500,000 B

40. Preference dividend in 2009 (10M x 12%) Preference dividend in 2010 (10M x 24%) Ordinary dividends (130,000 -30,000)x 12 Total dividend declaration 2010 ordinary dividend rate (12.00 divided by 50.00)

1,200,000 2,400,000 1,200,000 2,800,000 A 24%

41. BI Net purchases TGAS Less: Adjusted EI (600,000 + 80,000) COS

500,000 5,300,000 5,800,000 680,000 5,120,000 A

42. 10% preference shares issued (4M-3M equals 1 M/100 par Subscription price (300,000/25%) Less: Par value Increase in share premium from subscription

10,000 1,200,000 500,000 700,000

Increase in share premium-10% PS (1,500,000-300) Increase in share premium from subscription Share premium from issuance

1,200,000 (700,000) 500,000

Proceeds from shares issued (1M par +500T share premium) Divide by shares issued Average issue price

1,500,000 10,000 150 B

43. Fair value on Dec. 31, 2010 Less: Amortized cost on Dec 31,2010 Unrealized gain on available for sale securities

5,600,000 5,248,700 251,300 A

44. carrying amount of the liability extinguished (5M + 1.2M) Carrying amount of inventory Fair value of shares (40,000 x 60) Gain on extinguishment

6,200,000 (2,500,000) (2,400,000) 1,300,000 B

45.Issued price (6M x 110%) Less: FV of bonds ex-warrants Equity component Excess over par from issuance of shares (150-100) x ( 6,000 x 20) Total share premium

6,600,000 5,600,000 1,000,000 6,000,000 7,000,000 A

46. PCF (18,000 + 5,000) 47. 2009 Warranty expense (850x250) Less: 2009 Warranty services from 20009 sales (250 x 250) 12/31/09 warranty liability 2010 Warranty expense (1,000 x 250) Total Less : 2010 Warranty services from 2009 and 2010 sales (750 x 250) 12/31/10 Warranty liability

23,000 C 212,500 62,500 150,000 250,000 400,000 167,500 212,500 D

48. Total shareholders’ equity (5.6 M/140%) Contributed capital (1M + 800,000) Treasury shares Retained earnings 12/31

4,000,000 (1,800,000 200,000 2,400,000

Retained earnings on Jan. 1 (SQUEEZE) Net income Dividend declared Error Retained earnings –Dec. 31

1,600,000 B 2,500,000 (1,500,000) (400,000) 2,400,000

49. Rental expense from July 1 to December (75,000 x 8) Amortization of improvements (500,000/ 5x6/12) Total expense related to operating lease

450,000 50,000 500,000 B

50. Net cash provided by operating activities (2,800-1,000-400-350-100-280) Interest paid (80,000+20,000)

670,000 C 100,000 B

PROBLEM I The following information was obtained in the audit of the cash account of CHELSEE COMPANY as of December 31, 2010. Assume that the CPA satisfied himself as to the propriety of the cash book the bank statements and the returned checks, except as noted: 1. The bookkeepers bank recon dilation at November 30, 2010 Balance per bank statement P 194,000 Add: Deposit in transit 11,000 Total P 205,000 Less: Outstanding checks No. 1434 P 1,400 1562 7,500 1571 5,800 1584 8,000 1591 300 Balance per books

23,000 P182,000

2. A summary of the bank statement for December 2010. Balance brought forward P 194,000 Deposits 1,487,000 Total P 1,681,000 Charges (1,325,000) Balance, December 31, 2010 P356,000 3. Included with cancelled checks returned with the December bank statement were the checks listed below 4. The Chelsee Company discounted its. Own 60 day note for P 90,000 with the bank on December 1, 2010. The discount rate was 6 percent. The accountant recorded the proceeds as a cash receipt at the face value of the note. 5. The accountant records customers dishonoured checks as a reduction of cash receipts. When the dishonoured checks are red posited they are recorded as regular cash receipt. Two NSF checks for P 1,800 and P 2,200 were returned by the bank during December. Both checks were redeposit and were recorded by the accountant. 6. Cancellations of Chelsee Company checks are recorded by a reduction of cash disbursement 7. December bank charges were P200; in addition, a P100 service charge was made in December for the collection of a note receivable in November. These charges were not recorded on the books. 8. Check no. 1434 listed in the November outstanding checks was drawn in 2008. Since the payee cannot be located, the president of Chelsee Company agreed to the CPA’s suggestion that the check be written back into the accounts by a journal entry. 9. Outstanding checks at December 31,2010, totalled P 49,400 including checks 1432 and 1584 10. The cut-off bank statement disclosed that the bank had recorded a deposit of P 24,000 on January 2, 2011. The accountant had recorded this deposit on the books of December 31, 2010 and then mailed the deposit to the bank.

Cancelled checks returned with the December Bank statement Number Date of Amount Comments check of check 1562 11/28/10 750 This check was in payment of invoice for 57,500 and was recorded in the cash book as P 7,500 1571 11/28/10 5800 This check was in the payment of an invoice for P 5, 800 and was recorded in the cash book as P 5,800 1583 12/04/10 1,500 Examination of this check revealed that it was unsigned A discussion with the client disclosed that it had been mailed inadvertently before it was signed. The check was endorsed and deposited by the payee and processes by the bank even though it was a legal nullity. The check was recorded in the cash disbursements journal. 1588 12/12/10 8,000 This check replaces 1584. Which was returned by the payee because it was mutilated? Check 1584 was not cancelled on the books 12/19/10 2,000 This was counter check drawn at the bank by the president of the company as a cash advance for travel expense. The president overlook informing the bookkeeper about the check 12/20/10 3,000 The drawer of this check was the Celsea Company 1595 12/20/10 3,500 This check had been NSF and returned to the payee because the bank had erroneously believed that the check was drawn by the Chelseen company. Subsequently, the payee was advised to redeposit the check 1599 01/05/11 100,000 This check given to the payee on December 30, 2010 as a post dated check with the understanding that it would not be deposited until January 5. The check was not recorded on the books in December. 1. What is the correct amount of outstanding checks on December 31? a. P41,400 b. P33,250 c. P48,000 d. P40,000 2. What is amount of cash receipts per book in December? a. P1,496,900 b. P1,504,900 c. P1,495,100 d. P1,487,000 3. What is amount of cash disbursement per book in December? a. P1,254,850 b. P1,252,850 c. P1,256,850 d. P1,248,850 4. What is the cash in bank balance per book as of December 31? a. P426,050 b. P428,250 c. P430,050 d. P343,050 5. What is the adjusted cash balance as of December 31? a. P343.000 b. P340,200 c. P347,000 d. P344,200 PROBLEM NO. 2 CALACHUCHI CORP. ACCOUNT BALANCE INVOICE CUSTOMER DEC DATE AMOUNT 31,2010 Aruy , Inc. P35,180 12/06/10 14,600 11/29/10 21,180 Naku Co. 20,920 09/27/10 2,000 08/20/10 8,920 Syak Corp. 30,600 12/08/10 20,000 10/25/10 10,600 Trip Co 45,140 11/17/10 23,140 10/09/10 22,000 Uy Co. 31,600 12/12/10 19,200 12/02/10 12,400 Xak Co. 17,400 09/12/10 17,400 The estimated bad debt rates below are based on Calachuchi crop’s receivable collection experience.

Age of Accounts 0-30 days 31-60 days 61-90 days 91-120 days Over 120 days

Rate 1% 1.5% 3% 10% 50%

The allowance for bad debts account had a debit balance of P5,500 on December 31, 2010 before adjustment. 6. The company’s accounts receivable under 61-90 days category should be a. P 32,600 b. P44,320 c. P 44,600 d. P 42,000 7. The company’s accounts receivable under 91-120 category should be a. P 38,320 b. P 40,000 c. P 29,400 d. P 12,000 8. The allowance for bad debts to be reported on the statement on financial position at December 31, 2010 is a. P 9,699 b. P 15, 199 c. P 4,199 d. P5, 500 9. What entry should be made on December 31, 2010, to adjust the allowance for bad debts account? a. Bad debt expense 15,199 Allowance for bad debts 15,199 b. Bad debt expense 4,199 Allowance for bad debts 4,199 c. Allowance for bad debts 5,500 Bad debts expense 5,500 d. Bad debt expense 9,699 Allowance for bad debts 9,699 PROBLEM NO. 3 The MALAWI COMPANY is an importer and wholesaler. Its merchandise is purchased from a number of suppliers and is warehoused until sold to consumers. In conducting his audit for the year ended December 31,2010, the company CPA determined that the system of internal control was good. Accordingly, he observed the physical. Inventory at an interim date, November 30, 2010 , instead of at year end. The following information was obtained from the general ledger. Inventory, January 1, 2010 Inventory, November 30, 2010 Sales for eleven months ended November 30, 2010 Sales for year ended December 31, 2010

P 90,000 225,000 800,000 950,000

Purchases for eleven months ended November 30,2010 (before audit adjustments) Purchases for year ended December 31, 2010 (before audit adjustment)

720,000 810,000

Additional Information is as follow: a. Goods received on November 28 but recorded as purchases in December b. Deposits made in October 2010 for purchases to be made in 2011 but charge To purchase c. Defective merchandise returned to suppliers: Total at November 30, 2010 Total at December 31, 2010, excluding November items d. Goods shipped in November under FOB destination and received in December were recorded as purchase in November e. Through the carelessness of the client warehouseman, certain goods Were damaged in December and sold in the same month at its cost. f. Audit of the clients November inventory summary revealed the following: Items duplicated Purchases in transit Under FOB shipping point Under FOB destination Items counted but not included in the inventory summary Errors in extension that overvalued the items

10,000 14,000 5,000 7,000 18,500 20,000 3,000 12,000 18,500 7,000 4,000

11. What is the correct amount of net purchases for the month of December 2010? a. P83,000 b. P91,500 c. P82,500 d. P101,500 12. The correct inventory on November 30, 2010 is a. P206,500 b. P214,500 c. P237,000 d. P218,500 13. What is the gross profit for eleven months ended November 30, 2010? a. P234,000 b. P217,000 c. P224,000 d. P237,500 14. What is the cost of sales ratio for eleven months ended November 30, 2010? a. 73% b. 70% c. 28% d. 72% 15. What is the estimated inventory on December 31, 2010? a. P183,100 b. P175,900 c. P184,400 d. P190,000 PROBLEM NO. 4 You have been asked by the proprietor of the SOMALIA CO. to verify the accountability of the cashier bookkeeper, who was allowed to take a vacation leave a few days ago A. The bank reconciliation statements prepared by the cashier bookkeeper are presented below: November 30, 2010 Balance per bank statement Cash on hand Total Outstanding checks: No. 2520 2521 2522 Erroneous bank charge Erroneous bank credit Book balance December 31, 2010 Balance per bank statement Cash on hand Total Outstanding checks No. 2674 2675 2676 Erroneous bank charge Erroneous bank credit Book balance

P 21,500 500 22,000 P2, 000 1,400 1,900

(3,300) 2,000 (500) P20,200 P 135,000 6,300 141,300

P31, 000 10,300 5,000

(41,300) 3,000 (600) P 102,400

B. The cash in Bank account in the general ledger shows the following debits and credits during December Cash in bank Dec. Dec. 1balance P 20,200 1Checks Issued P2,000 2 Received from customers 4,500 5 Checks Issued 5,200 7 Received from customers 5,000 14 Checks Issued 31,000 12 Received from customers 20,000 24 Checks Issued 46,000 17 Received from customers 30,000 28 Checks Issued 7,600 23 Received from customers 9,000 27 Received from customers 70,000 31 Received from customers 48,500 31balaced 102,400 Total P198,200 Total P198,200

C. the following summarized transactions were taken from the bank statements for the months of December 2010. Balance, December 1, 2010 Total deposits The total deposits per bank statement include: a. Collection of notes receivable P 5,000 b. Correction of November erroneous bank charge 2,000 c. December 10 deposit of Lava, Inc. Credited in error to Somalia 600 Total P3, 500

16.

17.

18.

19.

20.

D. cash on hand per count in the morning of January 2, 2011 amounted to P 6, 300 E. before leaving his company for a one week vacation, the proprietor had left several signed blank checks that the cashier bookkeeper had cashed for his personal use. What is the adjusted cash balance on November 30, 2010? a.P16,500 b.P13,200 c.P20,200 d.P14,500 The amount of uncounted in December is a.P11,000 b.P13,200 c.P9,000 d.P15,100 The amount of unrecorded/unsupported disbursements in December is a.P15,100 b.P10,900 c.P7,000 d.P5,000 What is the total cash shortage as of December 31, 2010? a.P26,000 b.P15,100 c.P33,000 d.P7,000 What is the adjusted cash balance on December 31, 2010 a.P102,400 b.P125,000 c.P87,400 d.P111,400

Indicators that the assets of the unit were impaired. The carrying amounts of the assets and liabilities of the unit at December 31, 2010 were: Buildings Accumulated depreciation –buildings Factory machinery Accumulated depreciation –machinery Goodwill Inventory Receivables Allowance for doubtful accounts Cash Accounts payable Loans - Depreciated at P 600,000 per annum - Depreciated at P 450,000 per annum

P4, 200,000 (1,800,000) 2,200,000 (400,000) 150,000 800,000 400,000 (50,000) 200,000 300,000 200,000

POTPOT: determined the value use of the unit to be P 5,350,000. The receivables were considered to be collectible, except those considered doubtful. During the year 2011, POTPOT increased the depreciation charge on building to P650, 00 per annum, and to P 500,000 per annum for factory machinery. The inventory on hand at January 1, 2011 was sold by the end of the year, at December 31, 2011, POTPOT Company, due to a retum in the market to use of the traditional barrels for wines and an increase in wine production, assessed the recoverable amount of the cash generating unit to be P 300,000 greater than the carrying amount of the unit. As a result, POTPOT recognized a reversal of the impairment loss. 21. What amount of impairment loss on December 31, 2010 should be allocated to inventory? a.P56,000 b.P 28, 829 c.P32,000 d.P 0

22. What is the factory Machinery net carrying amount (after allocation of impairment kiss) on December 31,2010? a.P 1, 735, 135 b.P 1, 674, 000 c.P 1,800, 000 d.P 1, 728, 000 23. What amount or reversal of impairment loss should be recognized on December 31, 2011? a.P 300, 000 b.P 268, 000 c.P 168, 000 d.P 200, 000 24. Assume that the recoverable amount at December 31, 2011 was P 200,000 greater than the carrying amount of the cash generating unit. What is the net carrying amount of the buildings after recognition of the impairment recovery? a.P 1,313, 219 b.P 1, 768, 781 c.P 1, 800, 000 d.P 1,750, 000 25. Assume that the recoverable amount at December 31, 2011 was P 200,000 greater than the carrying amount of the cast generating unit and that the recoverable amount of the Buildings was P 1,750,000. What is the next carrying amount of the factory machinery after the recognition of the impairment recovery? a.P 1,332,000 b.P1,313,219 c.P1,228,000 d.P 1,324,000 Goding , Inc. preference Sonata Co. ordinary (30% ownership)

60,000

1,200,000

1,290,000

trading

600,000

34,200,000

33,900,000

investment in Associate

Jordan Co. ordinary

750,000

2,025,000

1,500,000

available for sale

BORDO COMPANY’S investment had the following market values at December 31, 2010 Omar Co. ordinary Goding, Inc. preference Sonata Co. ordinary Jordan Co. ordinary

P 3,060,000 1,290,000 33,450,000 1,700,000

Assume that all of the above securities were acquired in 2009 and none of the indicated declines in market value are considered other than temporary. 26. Which of the following should be reported in Bordo’s 2009 income statement? a.Unrealized loss of P 60,000 b.Unrealized loss of P 585, 000 c.Unrealized loss of P 200, 000 d.Unrealized loss of P 150, 000 27. What amount of loss in the above securities should be included in Bordo’s statement of comprehensive income for the year ended December 31, 2009 as component of other comprehensive income? a.P 675,000 b.P 465, 000 c.P 585, 000 d.P525,000 28. Assume that Jordan Co.s ordinary shares market decline is other than temporary. What valuation entry is required for this investment at December 31, 2009 under this change in assumption? a.Impairment loss 525,000 Investment in AFS securities 525,000 b.Unrealized loss on AFS securities 525,000 Investment in AFS securities 525,000 c.Impairment loss 525,000 Unrealized loss on AFS securities 525,000 d.No valuation entry is necessary 525,000 Assume that the investment categories remain the same and that all declines in 2009 and 2010 are temporary except for the 2009 decline in Jordan Co.s ordinary shares 29. In its 2009 income statement, Bordo should report a.Unrealized gain of P 150, 000 b.Unrealized gain of P 410, 000 c.Gain on impairment recovery of P 200, 000

d.Unrealized gain of P 210, 000 30. What amount of gain should be included in Bordo’s statement of comprehensive income for the year ended December 31, 2010 as component of other comprehensive income? a.P 0 b.P 200,000 c.P 325,000 d.P525,000 2008 2009 2010

P 127,000 150,000 128,500

You are performing the audit for the year ended December 31,2010. During your examination you discover the following errors a. As a result of errors in the physical count, ending inventories were misstate as follows: December 31, 2009 P14, 000 overstated December 31, 2010 P23, 000 understated b. On December 29, 2010. Dominica recorded as a purchase, merchandise in transit which cost P 15,000. The merchandise was shipped FOB Destination and had not arrived by December 31. The merchandise was not included in the ending inventory. c. Dominica records sales on the accrual basis but failed to record sales on account made the end of each year as follows 2008 P4, 000 2009 5,000 2010 3,500 d. The company failed to record accrued office salaries as follows December 31, 2008 P 10,000 December 31, 2009 14,000 e. On March 1, 2009, a 10% stock dividend was declared and distributed. The par value of the shares amounted to 10,000 and market value was P 13,000. The stock dividend was recorded as follows Miscellaneous expense 13,000 Ordinary share capital 10, 000 Retained earnings 3,000 f.

On July 2009, Dominica acquired a three year insurance policy. The three year premium of P6,000 was paid on that date , and entire premium was recorded as insurance expense.

g. On January 1, 2010 Dominica retired bonds with a book value of P 120, 000 for P 106, 000 the gain was incorrectly deferred and is being amortized over 10 years as a reduction of interest expense on other outstanding obligations. 31. What is the adjusted net income for the year ended December 31, 2008? a.P 133,000 b.P 117, 000 c.P121,000 d.P 113, 000 32. What is the adjusted net income for the year ended December 31, 2009/ a.P 151, 000 b.P 187, 000 c.P 104, 400 d.P 203, 600 33. What is the adjusted net income for the year ended December 31, 2010? a.P129, 600 b.P131,000 c.P 104, 400 d.P 203, 600 34. What adjusting entry should be made on December 31, 2010, to correct the error describe in item B? a. Purchases 15,000 Accounts payable 15,000 b. Accounts payable 15,000 Purchases 15,000 c. Accounts payable 15,000 Cash 15,000 d. No adjusting journal entry is necessary 35. The adjusting entry on December 31, 2009, to correct the error described in item E should include a debit to a. Retained earnings of P 16, 000 b. Ordinary share capital of P 10,000

c. Share premium of P 3,000 d. Miscellaneous expenses of P 3,000

PROBLEM NO. 8 In making the first adult of the Delivery Equipment account of DELTA CORPORATION as of December 31, 2010, you encounter the following facts. DATE PARTICULARS DEBIT CREDIT 1/1/08 Tracks 1,2,3, and 4 P3,200,000 3/15/09 Replacement of Truck 3 tires 25,000 7/01/09 Truck 5 800,000 7/10/09 Reconditioning of truck 4, which was damaged in a collision 35,000 9/1/09 Insurance recovery on truck 4 accident P33,000 10/01/09 Sale of truck 2 600,000 4/01/10 5/2/10 6/30/10

Truck 6 Repainting of truck 1 Truck 7

12/1/10

Cash received on lease of truck 7

Accumulated Depreciation DATE PARTICULARS 12/31/08 Depreciation expense 12/31/09 Depreciation expense 12/31/10 Depreciation expense

1,000,000 27,000 720,000

150,000

22,000

DEBIT

CREDIT P300,000 300,000 300,000

Additional information: 1. On July 1,2009, Truck 3 was traded in for a new truck , truck 5 costing P 850,000 the selling party allowed a P 50, 000 trade in value for the old truck 2. On April 1, 2010, truck 6 was purchased for P 1,000,000; truck 1 and cash of p 850,000 being given for the new truck 3. You are instructed by the senior in charge of the audit to accept the depreciation rate of 20% by unit basis 4. Unit cost of trucks 1 to 4 is at P 800,000 each 36. The net increase (decrease) in retained earnings should be a.(P1,102,000) b.(P545,000) c.P 80,000 d.(P1,022,000) 37. What is the loss on trade in of Truck No. 3? a.P430,000 b.P510,000 c.P560,000 d.P0 38. What is the gain on sale of Truck no. 2? a.P120,000 b.P200,000 c.P80,000 d.P 0 39. What is the loss on trade in of Truck No.1? a.P290,000 b.P170,000 c.P150,000 d.P 0 40. What is the correct cost of truck No. 5? a.P850,000 b.P800,000 c.P900,000 d.P560,000 41. What is the correct cost of truck No. 6? a.P440,000 b.P305,000 c.P800,000 d.P1,000,000 42. What is the correct depreciation expense for 2009?

a.P725,000 b.P305,000 c.P605,000 d.P600,000 43. The entry correct depreciation expense for 2010? a.P552,000 b.P592,000 c.P712,000 d.P300,000 44. The entry correct the depreciatin charges for the years 2008/through 2010 should include a credit to accumulated depreciation of a.P645,000 b.P937,000 c.P900,000 d.P292,000 45. The balance of the Delivery Equipment accounts at December 31, 2010 should be. a.P5,770,000 b.P3,320,000 c.P4,170,000 d.P3,370,000 PROBLEM NO. 9 The GUNDING Co. is on calendar year basts. The following data were found during your audit. a. Goods in transit shipped FOB shipping point on December 28 by a supplier in the amount of P 100,000 had been excluded from the inventory and further testing revealed that the purchase had been recorded. b. Goods costing P 30, 000 had been received, included in inventory, and recorded as a purchase. However, upon your inspection the goods were found to be defective and would be immediately returned. c. Materials costing P170,000 and billed on December 30 at a selling price of P 264,000 had been segregated in the warehouse of shipment to a customer. The materials had been excluded from inventory as a signed purchase order had been received from the customer. Terms FOB destination. d. Goods costing P 70, 000 was out on consignment with Gundara Inc. since the monthly statement from Gundara listed those materials as on hand, the items had been excluded from the final inventory and invoiced on December 31 at P 80,000. e. The sale of P 150,000 worth of materials and costing p 120,000 had been shipped FOB point of shipment on December 31. However, this inventory was found to be included in the final inventory. f. Goods costing P 100,000 and selling for P140,000 had been segregated , but not shipped at December 31, and were not included in the inventory. A review of the customer’s purchase order set forth terms as FOB destination. The sale had not been recorded. g. Your client has an invoice from a supplier, terms FOB shipping point, but the goods had not arrived as yet. However, these materials costing P134,000 had been included in the inventory count, nut no entry had been made for their purchase. h. Merchandise costing p 200,000 had been recorded as a purchase but not included in Inventory. Terms of sale are FOB shipping point according the supplier warehouse which had arrived by December 31. Further Inspection of the clients records revealed the following December 31 balances: Inventory, P 1,350,000; Accounts receivable, P 630,000 ; accounts payable, P 690,000; sales P6,032,000; Purchases, P 3, 150,000; Net Income , P727,000. Based on the preceding information, determine the adjusted balances of the following: 46. Inventory a.P700,000 b.P934,000 c.P1,900,000 d.P1,840,000 47. Accounts receivable a.P286,000 b.P380,000 c.P146,000 d.P405,000 48. Purchases a.P3,354,000 b.P3,150,000 c.P3,254,000 d.P3,120,000 49. Sales a.P5,848,000 b.P6,376,000 c.P5,683,000

d.P5,768,000 50. Net Income a.P769,000 b.P569,000 c.P829,000 d.P709,000 PROBLEM 10: Presented below are COMBANTRIN COMPANY’S comparative statements of financial position and income statements COMBANTRIN COMPANY COMPARATIVE STATEMENTS OF FINANCIAL POSITION December 31, 2010 and 2009 Assets

2010

2009

Cash

P119,000

P98,000

Accounts receivable

312,000

254,000

Inventory

278,000

239,000

Prepaid expenses

35,000

21,000

Total current assets

744,000

612,000

Available for sale securities

59,000

Property, plant and equipment

536,000

409,000

Accumulated depreciation

(76,0000)

(53,000)

Total noncurrent assets

519,000

356,000

Total assets

P1,263,000

P968,000

Current assets

Liabilities and shareholders’ equity Current assets Accounts payable Accrued expenses Dividends payable Total current liabilities Notes payable-due 2012 Total liabilities

P212,000 98,000 10,000 350,000 125,000 475,000

Shareholder equity: Ordinary share capital Retained earnings Total shareholders’ equity Total liabilities and shareholders’ equity

600,000 188,000 788,000 P1,263,000

P198,000 76,000 _________ 274,000 __________ 274,000

550,000 144,000 694,000 P968,000

COMBANTRIN COMPANY CONDENSED COMPARATIVE INCOME STATEMENTS For the Years Ended December 31, 2010 and 2009 Net sales Cost of goods sold Gross income Expenses Net income

2010 P3, 561,000 2,789,000 772,000 521,000 P251,000

2009 P3, 254,000 2,568,000 686,000 486,000 P200,000

Additional information for COMBANTRIN COMPANY a. All accounts receivable and accounts payable relate to trade merchandise b. The proceeds from the notes payable were used to finance plant expansion c. Ordinary shares were sold to provide additional working capital Compute the following for 2010. 46. Cash collected from accounts receivable (assume all sales are on account) a.P3,619,000 b.P3,503,000 c.P3,561,000 d.P3,249,000 47. Total purchases (assume all purchases of inventory are on account) a.P2,828,000 b.P2,789,000 c.P2,550,000 d.P2,750,000 48. Cash payments made on accounts payable to suppliers a.P2,630,000 b.P2,842,000 c.P2,828,000 d.P2,814,000 49. Net cash provided by operations a.P689,000 b.P191,000 c.P222,000 d.P199,000 50. Cash receipts not provided by operations a.P175,000 b.P177,000 c.P50,000 d.P125,000 SET A 1. A, B and C are partners in a universal partnership of profits engaged in operation of taxis. The partners contributed: A- 100 Toyota Vios B- 3,000 aqm land C- Fuel and oils Which of the following is correct? a. In case of loss due to fortuitous event, the partnership bears the loss b. The partnership becomes the owner of the things contributed to the partnership c. The partners retained the ownership over the things they contributed hence; they will bear the risk of loss. d. The partnership begins from the moment of the execution of the contract , except if stipulated otherwise 2. Which of the following statements is not correct? a. The creditor acquires real right to the fruits of the thing from the time they have been delivered b. An oral sale of land made by its owner in unenforceable c. The buyer acquires real right to the fruits of the thing from the perfection of the sale d. A sale of land made by an agent without a written authority from the owner is void 3. A 16 years old sold his property to B, who did not notice that A is a minor. One year later B sold the property to C who knew that A is a minor. Can A ask for annulment of the sale? a. Yes, because C is in bad faith b. No, because B is in good faith c. No, because B is not capable of returning the property d. Yes, whether C is in good faith or in bad faith because the title of B is voidable 4. A promissory note reads I Promise to pay A,B, C and D P24,000 Sgd. E, F and G. B can collect from E a. P 24,000 b. P 8,000 c. P 6,000 d. P 2,000 5. Today, S sold to B in S is name the land of O, without authority from O, B bought the land in good faith. The contract provides that the delivery will be 30 days from today. The contract is a. Valid if S owns the land on the day of delivery b. Void , because S was not the owner of the land when the contract was perfected c. Unenforceable, because S had no authority to sell the land

d. Voidable, because S is guilty of fraud 6. A, B and C are solidary debtors of D for P90, 000 where the due date is on April 1, 2011. On January 1, 2011, A paid D P90, 000. Later A demanded reimbursement from B. if B effects reimbursement to A on July 1, 2011. Which of the following is correct? a. B pays A P60,000 plus interest from January 1,2011 to July 1, 2011 b. B pays A P30,000 plus interest from January 1,2011 to July 1, 2011 c. B pays A P30,000 plus interest from April 1,2011 to July 1, 2011 d. B pays A P45,000 plus interest from April 1,2011 to July 1, 2011 7. S sold his agricultural land to B for P1M .The FMV is P1.5 M. B. paid s in counterfeit peso bills. The sale is a. Void, because the cause is illegal b. Valid, because the cause is the selling price of PIM c. Rescissible, because of lesion which is more than ¼ of the value of the property d. Voidable, because of the fraud committed by B. 8. As regard cash dividend, which of the following is correct/ a. Declared by the board of majority vote and ratified by the stockholders by the majority vote. b. Declared by the board of majority vote and ratified by the stockholders by ½ vote of the outstanding capital stock c. Declared by the board of majority vote and need not be ratified by the stockholders d. Declared by the board by 3/2 vote and need not be ratified by the stockholders 9. A barrowed from B P2M and the secure its payment A orally agreed to deliver his 8 hectare agricultural land by way of antichresis and to pay 12% interest per annura. Which is correct? a.The contracts of loan and antichresis are both valid b.The contracts of loan is valid but antichresis is void c.The contracts of antichresis is valid but loan is void d.Both contracts of loan and antichresis are void 10. Elements of contracts of pledge and mortgage , except. a.Both are necessary contracts b.Both are real contracts c.Both cannot exist without a valid obligation d.In case of default, the creditors cannot appropriate the things pledged or mortgaged 11. Which of the following statements is not correct a.An agreement to constitute a commodatum is binding and is perfected from the moment there is meeting of minds b.Fixed, savings and current deposits of money in banks and similar institutions shall be governed by the provisions concerning muthium c.Precarium is a kind of commodatum where the bailor may demand the thing loaned at will d.In case of extraordinary expenses , the debtor in mutuum will shoulder 50% if he is in actual use of the thing barrowed 12. A contributed PIM, B contributed PIM and C contributed services. they agreed to divide the profits and losses equality . in case of loss of P3M for how much, if any, is C liable? a.Nothing because an industrial partner is exempt from losses b.PIM but with reimbursement from A and B equality c.A and B shall shoulder the loss equality at P1.5M each d.PIM, as stipulated 13. As regards the corporate by-laws , which of the following is true? a.To adopt, amend or repeal 3/2 of the outstanding capital stock is needed b.To delegate to the board of directors the power to amend, repeal or adopt new by-laws, majority of the outstanding capital stock c.To revoke the power delegated to the board to amend, repeal or adopt new by-laws 3/2 of the outstanding capital stock d.To amend, repeal or adopt new by-laws, majority of the outstanding capital stock. 14. A contract of antichresis is a.A contract of mortgage whereby possession of the mortgaged property is given to the creditor b.A contract of loan secured by a real property, where possession is retained by the debtor c.A contract of loan without security d.A consensual contract as it is perfected by mere consent 15. A subscribed to 1,000 voting shares of stock of X Corporation. She paid 25% of the said subscription during the stockholders meeting can A vote all her subscribed shares/ a.No, because the subscription has not yet been fully paid b.No, because A’s shares have become delinguent which cannot be voted c.Yes, as to the paid percentage of subscription d.Yes, because unpaid shares not delinquent can be voted 16. To defraud his creditor , A sold his property to B (who was in good faith). Later B sold the property to C, who was in bad faith. May the creditor rescind the sale? a.Yes, because C, is bad faith b.No, because B is in good faith c.No, because B is not capable of returning the property d.Yes, because the contract is rescissible 17. A was having his house repaired by B, who needed construction materials , so A orally told the seller C, give B the materials , I shall be responsible. I shall pay in 30 days. C delivered the materials As a result, a.The contract is unenforceable because A made an oral agreement to answer for the debt of B

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.

b.The contract is enforceable because A did not make a special promise to answer for the default of another person c.The contract shall be enforceable if there is ratification by A d.The contract shall be unenforceable if the value is at least P 500.00 Under the negotiable instruments law to be a holder in due course , the holder must have acquired the instrument before it is overdue . does this apply to the payee to whom the maker issued an overdue note? a.Yes, because the payee is still considered a holder b.Yes, because issuance to the payee is not considered a negotiation c.No, because the law does not distinguish between payee and subsequent holder d.No, because the payee is privy to the contract between himself and the maker In which of the following is demand necessary to make the debtor in delay in the performance of his obligation? a.When the time of performance is of the essence b.When the time of performance has been stipulated c.When the law so provides d.When demand would be useless With written authority from his principal, the agent sold orally the land of the principal. The sale is a.Rescissible b.Voidable c.Uncoforceable d.Void Without authority from B, A orally sold B’s house in B’s name. The sale is a.Rescissible b.Voidable c.Uncoforceable d.Void S sold B his land on September 19, 2010. On September 25, an absolute deed of sale was executed and notarized on September 30, the sale was registered with the Registry of Deeds , On October 5, B took actual possession of the land by building a fence thereon. When did B acquire ownership of the land? a.On September 19 b.On September 25 c.On September 30 d.On October 5 S sold to B his car on September 19, 2010. On September 25, an absolute deed of sale was executed and notarized . on September 30, the sale was registered with the LTO. On October 5, B took actual possession of the car. When did B acquire title to the car? a.On September 19 b.On September 25 c.On September 30 d.On October 5 A and B are co owners of a percel of land A donated his share to C can B redeem the said share from C? a.Yes, because the law looks with disfavour at co-ownership b.No, because legal redemption applies only in case of onerous transfers c.No, unless he enforce his right through count action d.Yes, but in proportion to his interest in the land as co-owner D’owes C a sum of money with M as mortgagor of his land to secure the loan. Is the mortgage valid even if the mortgagor is not the debtor? a.Yes, provided M is the absolute owner of the property mortgaged b.Yes, provided it is in writing and registered c.No, the mortgagor must be the debtor himself d.No, unless the mortgagor is a co-debtor In three of the following case s, the agency cannot be revoked without a just cause except: a.It is means of fulfilling an obligation already existing b.A bilateral contract depends upon it c.It is coupled with interest common to the great and principal d.Partner is appointed manager in the articles of partnership P appoints A as guarantee commission agent to sell his products A sold them to B who failed to pay despite the diligent efforts of A in collecting is A still liable for the purchase price? a.Yes, because of the guarantee commission given to him b.No, because he was not at fault in the collection c.No, if her returns to guarantee commission d.Yes, but he is not entitled anymore to the commissions P appointed A1 and A2 as his agents for a common transaction and they agreed that they shall be solidarity liable for P for damages in case of violations of their obligations as such. What is the agent at fault the only one liable for damages even if solidarity has been stipulated? a.If the other agent is not at fault b.Both of them shall be liable always since solidarity was agreed upon c.If the one at fault shall answer for all the damages d.If the one at fault acted in excess of authority A, B, and C entered into an oral contract of partnership each contributing P2M each of the common fund but failed to register the partnership with the SEC. In the partnership valid/

a.No, because every contract of partnership having a capital of three thousand pesos or more in money or property must be in public instrument and registered with the SEC b.Yes, because public instrument is necessary is case of contributions of immovable’s c.Yes, because a partnership contract does not require a specific form to be valid d.No, because registration with the SEC is essential for a partnership to be valid and acquire judicial personality 30. A and B are co-owners of a parcel of land from where they share the profits equally as co-heirs in inheritance. Is there a partnership a.There is a prima facie presumption of partnership because of the equal sharing of profits b.There is no partnership because co-ownership by itself does not establish a partnership despite the sharing of profits c.There is no partnership since in partnership, division of profits is not always necessary among partners d.There is a prima facie presumption of partnership they being co-owners and co-possessors 31. A and B are partners in AB partnership. While A was performing his duties as a partner in the course of business , he negligently cause damage to X and third person. Who shall be liable to X and up to what extent? a.Only the partnership is still liable it being a juridical person separate and distinct from the partners b.Only A shall be liable for he is the only one at fault c.Both A and B shall be liable solidarity to X d.A,B and the partnership are all liable solidarity to X 32. A, B, and C as partners in a partnership stipulated that A shall not share in the profits and losses. Is the agreement valid? a.Yes, among the partners but not valid to third persons b.Yes, valid as long as third persons are not prejudiced c.Not valid stipulations exempting a partner from sharing in the profits and losses d.Not valid as against third persons or partnership creditors 33. In the matter of management of the corporation this is supreme a.President b.Chairman of the Board of Directors c.Stockholders d.Board of Directors 34-37 A promissory note reads “I promise to pay P or order Php 100,000. Sgd. M, The promissory note was issued by M to P in payment of merchandise purchased from P. However, P delivered only Php 60,000. Later P. made a qualified endorsement to A, who was not aware of the partial absence of consideration. Thereafter, A made a special endorsement to B, then B made a blank endorsement to C both B and C are aware of the partial absence of consideration. 34. In the hands of A, A can collect from M a.Php 100,000 b.Php 60,000 c.Php 40,000 d.P 0 35. In the hands of B, B can collect from M a.Php 100,000 b.Php 60,000 c.Php 40,000 d.P 0 36. Using the preceding number, if M dishonours the nota, B can collect from P a.Php 100,000 b.Php 60,000 c.Php 40,000 d.P 0 37. In the hands of C, C can collect from M a.Php 100,000 b.Php 60,000 c.Php 40,000 d.P 0 38. Which of the following is not negotiable? a.I promise to pay P or order Php 100,000 , 30 days after date Sgd M b.I promise to pay P or bearer Php 100,000 Sgd M c.Pay to P or order Php 100,000 on Dec. 25, 2010 Sgd M d. Pay to P or bearer Php 100,000 and charge the name against my deposit with you Sgd M to Y 39-40 39. M male a negotiable promissory note payable to the order of P. later made a special endorsement to A. Then B stole the note from A and indorsed it to C who received the note in good faith. Later C indorsed the note to D. which of the following is correct? a.D can collect from M but not from A b.If M will not pay , D can collect from P c.C can collect from endorsers P and B 40. Using the preceding number, if M pays D in good faith, which of the following is incorrect? a.The obligation of M is extinguished b.A can collect from M

c.The obligation of P is extinguished d.A should collect from B, the thief 41. When a property is transferred during lifetime to relieve the transferor from the burden of the management of such property, and the transfer of its subject to tax, the basis of the tax is a.The FMV at the time of donation b.The FMV at the time of death of the donor c.The FMV at the time the donor required the property d.The cost of the property in the hands of the donor 42. Which of the following taxes had been replaced by the VAT? a.Percentage tax on international air and shipping carriers doing business in the Philippines b.Tax on life insurance premiums c.Caterer a tax on operators of restaurant and eating places d.Tax on agents of foreign insurance companies 43. The DOC RESTAURANT, a VAT registered taxpayer , issued the following official receipt dated September 18, 2010. 2 pieces of crispy chicken P200.00 Siomai special 45. 00 Sago gulaman 85.00 Mushroom and chicken soup 100.00 Braised beef with cauliflower 240.00 Coke light in can (2xP40) 80.00 P750.00 Locat tax 15.00 Service charge 60.00 Total P825.00 The output vat on the sale is a.P99.00 b.P 88.39 c.P80.36 d.P90.00 44. Mr. And Mrs. A donated a conjugal agricultural land to their son who is getting married with ten (10) months after the date of donation. The fair market value at the time of marriage was P 800,000, but its fair market value at the time of donation was P 600,000. The donated property was subject to P100,000 mortgage which was assumed by the donors. The taxable net gift of Mr. A is a.P240,000 b.P290,000 c.P390,000 d.P 340,000 45. An individual taxpayer is qualified to substituted filing of income tax return if he meets the following requisite except: a.Pure compensation income only b.One employer during the calendar year c.Creditable withholding tax is correct d.Should be a minimum wage earner 46. A taxpayer received as assessment notice on February 14, 2010. He filed a motion for consideration with the BIR on February 22, 2010. The submission of necessary documents to support his motion for consideration is a.March 14, 2010 b.April 23, 2010 c.April 15, 2010 d.March 22, 2010 47. Under absolute community of property, which of the following is a community property? a.Property inherited by the surviving spouse during the marriage b.Property bought during the marriage using the money inherited of the decedent before marriage c.Personal belongings (e.g. clothes , shoes, etc.) bought during the marriage for the exclusive use of the decedent d.Jewelry inherited by the decedent during the marriage 48. Which of the following properties owned by a non resident alien decedent is not subject to the rule of reciprocity? a.Shares of stock in a Philippine domestic corporation b.Investment in stock in a US corporation 80% of the business of which is in the Philippines c.Investment in bonds in a US corporation that have acquired business suits in the Philippines d.40% share in a Philippines partnership 49. Which of the following shall not be exempt from value added tax? a.Sales by the agricultural cooperatives duly registered with the Cooperative Development Authority to their members as well as sale of their products, whether in its original state or processes form to non members b.Gross receipts from the lending activities by credit of multipurpose cooperatives duly registered with the Cooperative Development Authority whose lending operation is limited to their members

c.Sales of non agricultural, non-electric and non credit cooperatives duly registered with Cooperative Development authority if the capital contribution of each member does not exceeds P 15,000 d.Sales of electric cooperatives duly registered with Cooperative Development Authority relative to the generation and distribution of electricity 50. A common carrier by land is engaged in the transport of passenger , goods and cargoes . A’s gross receipts amounted to P3M, 50% of which came from transport of passengers. He is not VAT registered, what business taxes will A pay? a. 12% value added tax b. 3% common carrier tax c. 3% tax on VAT exempt persons on gross receipts from transport of goods and cargoes and 3 ½ common carrier tax on gross receipts from transport of passengers d. 12% VAT on gross receipts from transport of goods and cargoes and 3% common carriers tax on gross receipts from transport of passengers. 51. A keeper of garage whose gross receipts for the year exceed P 1,500,000 is subject to: a. Value added tax b. Common carrier tax c. Excise tax d. Franchise tax 52. The following are related to the tax assessment of a tax payer Assessment received January 1,2010 Petition for reconsideration filed with BIR February 1,2010 Documents supporting the petition filed with BIR February 7, 2010 Decision of BIR denying the petition received by the taxpayer March 22, 2010 Second request for reconsideration filed with BIR March 30, 2010 Decision of denial of second request for reconsideration was received April 12, 2010

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Last day to appeal to the Court of Tax Appeals a.May 12, 2010 b.July 4, 2010 c.May 4, 2010 d.June 4, 2010 Which of the inherent powers may be exercised even by public service corporations and public utilities? a.Power of taxation b.Power of eminent domain c.Police power d.A and B A law was passed by Congress which granted tax amnesty to those who have not paid income taxes for a certain year without at the same time providing for the refund of taxes to those who have already paid them . the law is: a.Valid because Congress provided for a valid classification b.Not valid because those who did not pay their taxes are favoured over those have paid their taxes c.Valid because Congress has the sole discretion of determining whom to tax d.Not valid because only the grant amnesty is the sole prerogative of the precedent How long must the books of accounts be kept? a.For a period beginning to preceding taxable year until the last day of the current taxable year b.For a period beginning the current taxable until the last day of the following taxable year c.For a period beginning from the last entry in each book until the last day prescribed within which the Commissioner is allowed to make an assessment d.For a period of 3 years beginning from the current taxable year until the last day of the third taxable year Due to financial difficulties , ABC Corp requested taht its 2009 income tax liability of P400,000 be paid in four (4) equal monthly instalments , starting April 15, 2010. Its request for instalment payment was approved on April 8, 2010. The tax due on May 15, 2010 is. a.P 100,000 b.P 101, 667 c.P 105, 000 d.P106, 667 Which of the following is not correct? a.A tax credit certificate validity issued by the BIR may be used as credit against internal revenue taxes except against withholding tax b.All taxes imposed and collected by the BIR are internal revenue taxes c.Public Officials who acquire information on violation of internal revenue laws in the performance of their duties during their incumbency are entitled to informer reward. d.The proceedings on the protest in the BIR is an administrative proceedings On March 31, 2010, A received 100 shares of stock with a fair market value P 120/share as of March 31, 2010. The shares of stock were intended to pay the services rendered by A on November 20, 2009, at which time the fair market value was P 100/share. The per value per share if P50. The income A is a.P12,000 b.P 10,000 c.P5,000 d.P7,000

59. Which of the following statements is not correct? a.An article subject to excise tax may be exempt from vat b.An article subject to excise tax may be subject to vat c.A tax payer may be have two business where one as subject to vat and the other is subject to percentage tax d.Manufacturers and importers of goods are subject to excise tax 60. Mr. Araki a non resident alien stockholders, received a dividend income of P300,000 in 2010 from a domestic corporation whose gross income from within and without the Philippines for three years preceding 2010 show: Source of income 2007 2008 2009 From within the Philippines P 16,000,000 P12,000,000 P24,000,000 From without the Philippines 18,000,000 14,000,000 16,000,000 How much of the individual income received by Mr. Araki considered income from sources within the Philippines? a.Zero b.P156,000 c.P300,000 d.P144,000 61. Which of the following is not a condition imposed by the constitution for the exercise of the power of eminent domain? a.The consent of the owner of the private property to sell the same to the government b.The payment of just compensation c.The observance of due process in making of private property d.The existence of public use of the taking of a private property 62. Mr. Bagongbahay acquired his old principal residence in 1990 at a cost of P4M. he sold the said property on January 1, 2010 for P16M, although the FMV on that date was P20M. within the reglementary period, Bagongbahay acquired his new principal residence for P 12M. Which of the following is incorrect? a.Bagongbahay has to pay capital gains tax of P 300,000 b.The cost basis for the new principal residence is P3.2 M c.The utilized amount of the gross selling price is P 12M d.If the proceeds were not used to buy a new principal residence, the capital gains 63-64- For the month of August and September 2010, ABC Bank has the following income/loss Interest income with maturity August - Of less than 5 years P800,000 - Of more than 5 years 800,000 rentals 400,000 Net trading gain (Loss) (100,000)

September P1M 1M 800,000 200,000

63. The gross receipts tax of ABC Bank for August is a.P76,000 b.P68, 000 c.P69,000 d.P63,000 64. The gross receipts tax of ABC Bank for September is a.P125,000 b.P130,000 c.P116,000 d.P123,000 65. Which of the following is not subject to vat? a.Non life insurance premiums b.Non life reinsurance c.Non life insurance commissions d.Non life reinsurance commissions 66. It is aspect of taxation that administrative in character and the power to exercise it is vested on the Department of Finance a.Levying b.Collection c.Imposition d.Legislation 67. For donor tax purposes this is a stranger to the donor a.Daughters of a brother b.Son of an uncle c.Grandson of sons granddaughter d.Granddaughter of mother’s sister 68. 68. -70. A , caregiver , is under three year employment contract with a hospital in USA . His wire , B and a minor child live in the Philippines. He earns P70,000 (converted) a month for the annual income of P840,000, A shall pay income tax

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a.For the entire amount it being taxable in the Philippines b.Of nothing because as OFW, he is considered a non resident citizen c.For half the full amount because the other half pertains to his wife d.For the ½ share of his wife because the wife is a resident citizen Using the above data, if A puts 30% of his earnings in a dollar deposit account with a local , interest income therein a.Is taxable for the full amount at 7.5% final withholding tax b.Of P 126,000 shall be taxed at 7.5% final withholding tax c.Maybe exempt from income tax provided he presents proof of non residency to the bank d.Of P840, 000 shall be taxed at 7.5% final withholding tax If the dollar deposits account above is joint ( with B) with the same percentage of earning invested , interest income in that account a.Is capable for the full amount at 7.5 % final withholding tax b.Of P126,000 shall be taxed at 7.5% final withholding tax c.May be exempt from the income tax provided he presents proof of non residency to the bank d.Of P840,000 shall be taxed at 7.5% final withholding tax A filed his income tax return for the calendar year 2007 on March 20, 2008. When is the last day for the BIR to collect assuming A did not pay the tax due upon filing? a.March 20, 2011 b.April 15, 2011 c.April 15, 2013 d.March 20, 2013 Using the above data, assuming A filed his income tax return on April 20, 2008 and the return is not fraudulent, when is the last day for the BIR to make an assessment ? a.April 20, 2011 b.April 15, 2011 c.April 20, 2013 d.April 15, 2013 Using the above data , if the BIR issued a deficiency income tax assessment on March 10, 2010, when is the last day for the BIR to collect? a.March 10, 2013 b.April 15, 2013 c.March 10, 2015 d.April 15, 2015 A filed his ITR for 2008 on April 15, 2009 and will pay his tax liability in instalment. The return shown an income tax due of P100,000 and income tax withheld of P60,000. If A pays the 2 nd instalment only on October 15, 2009, the amount to be paid (excluding compromise penalty)is a.P26,000 b.P35,000 c.P55,000 d.P37,500 On April 15, 2010 , A filed his income tax return for his 2009 income and paid the tax due thereon. In 2011. A discovered that he made an overpayment in his income tax return. He filed a written claim for refund of tax erroneously collected with the CIR on October 1, 2011. On April 14, 2012, without receiving a decision on his claim for refund, A filed in the CTA a petition for review on his claim for refund of tax erroneously collected. Which of the following is incorrect? a.The CTA did not acquire jurisdiction over the petition for review because the appeal is premature, there being no decision yet on said claim for refund b.The CTA jurisdiction is to review by appeal decisions of the BIR Commissioner so if there is no decision there is nothing to review c.The CTA acquired jurisdiction over the petition since it is the right of a taxpayer to go to the CTA with or without decision rendered by the BIR Commissioner d.The CTA acquired jurisdiction over the petition as the peremptory period of 2 years within which a claim for refund is about to expire and the failure of the CIR to act on the claim is tantamount to denial of the claim One of the following is not exempt from VAT a.Lease of the residential units with a monthly rental not exceeding P10,000 b.Services subject to percentage tax c.Services rendered by individuals pursuant to employer –employee relationship d.Export sales by persons who are vat-registered A sold a personal property held as capital asset be acquired 9 years ago with an acquisition cost P50,000 for P 270,000. The payment shall be made of the following terms. Cash down payment of P40,000 and additional P 10,000 at the end of the year sale. The property sold has been mortgaged for P 160,000 which assumed by the buyer issued a note payable for the balance which is to be paid equally in two years following the year of sale. The contract price is. a.P 270,000 b.P110,000 c.P 120,000 d.P130,000 The taxable profit for the first year is a.P120,000

b.P60,000 c.P30,000 d.P15,000 79. XYZ filed its income tax return and paid the tax due for calendar year 2008 showing a tax liability of P175,000. However, upon audit, it was discovered that its income tax return was false or fraudulent because it did not report other taxable income. Per investigation the correct income tax due is P 350,000. The corporation was duly informed of this finding through a preliminary assessment notice. Failing to protect on time against the preliminary assessment notice, a formal letter of demand and assessment notice was issued on May 31, 2010 calling for payment of deficiency income tax on or before July 15, 2010. The amount due on July 15, 2010 is a.P 306,250 b.P 437, 500 c.P240, 625 d.P612, 500 80. Where no notice or audit or investigation of tax return, statement or declaration has been actually served upon the taxpayer, the tax return may be modified, changed or amended by the taxpayer , from the date of such filing, within. a.30 days b.180 days c.3 years d.5 years

SET A 1. In comparing management accounting, which of the following statements is true? a.Both are historical cost as their primary unit of measurement b.Both depend on the double entry system of accounting c.Both require adherence to PFRS d.Financial accounting reports are more objectives , whereas management accounting reports are more subjective 2. Management accounting and financial accounting are similar in which of the following respects? a.Both use the sense unit of measurement b.Both rely heavily on the double entry systems c.Both produce almost all of their respective informational reports on a routine monthly basis d.Both provide relevant and useful information to management 3. Firms with a high degree of operating leverage a.Will have a more significant shift in income as sales volume changes b.Have lower fixed costs c.Have low contribution margin ratios d.Are less dependent volume to add profits 4. The treasurer function includes a.Tax administration b.Evaluating and consulting c.Investor relations d.Economic appraisal 5. The use of information systems facilities on focus on the collection, organization, integration and long term storage of entity wide data is known as a.Data independence b.Data mining c.Data redundancy d.Data warehousing 6. Which of the following technologies would an organization use to prevent access to its private network? a.Digital signature b.Firewall c.Web assurance service d.Encryption 7. Which of the following systems is one where the transactions are posted and the master and open files are updated, immediately? a.Microcomputer system b.Mainframe computer system c.Batch system d.Real times system 8. Which of the following controls most likely would assure that an organization can reconstruct its files? a.Hardware controls that are built into the computer by the computer manufacturer b.Back up copies of the data and program files that are stored away from originals c.Personnel, who are independent of data input , perform parallel simulations d.System flowcharts that provide accurate descriptions of input and output operations 9. Which of the following statements about the visual fir method is (are) true? I. The method results in the creation of a scatter diagram II. The method is not totally objective because of the manner in which the cost line is determined III. The method is especially helpful in the determination of outliers

a.II only b.I and II c.I and III d.I, II and III 10. A flatter slope is the variable cost line indicates a a.High variable cost per unit b.High influence of activity on total variable cost c.Low influence of activity on total variable costs d.Large amount of fixed costs 11. Cielo’s Hotdog Stand sells hotdogs for P25 each. The variable costs per hotdog are P10. Cielo’s fixed costs are currently P 8,000 per month. Cielo is considering expending her business to three hotdog stands which will increase fixed costs per month by P 12,000. If Cielo’s does expand her business to three stands, how many additional hotdogs will need to be sold per year in order to break even? a.800 b.600 c.9600 d.7200 12. Do Dante Corporation is contemplating to method a new product that requires an increases in fixed costs by P 1,400,000 for production of 50,000 units or less and P1,800,000 for more than 50,000 units. The variable costs ratio is 60 percent of sales. The product is expected to sell for P80 per unit. How any units must Don Dante sell just breakeven? a.43,750 b.56,250 c.50,000 d.Either 43,750 or 56,250 13. In most companies , machines break down occasionally and employees are often less than perfect which type of standard acknowledges these characteristics when determining the standard cost of a product? a.Efficiency standard b.Ideal standard c.Practical standard d.Budgeted standard Question number 14 and 15 are based on the following Moon Products applies fixed overhead at a rate of P3 per direct labor hour. Each unit produced is expected to take 2 direct labor hours. Moon expected production in the current year to be 10,000 units but 9,000 units were actually produced. Actual direct labor hours were 19,000and actual fixed overhead costs were P 62,000 14. Moons fixed overhead spending variance is: a.P 8,00 F b. P 8,000U c. P 2,000 F d.P 2,000U 15. Moons fixed overhead volume variance is: a.P 2,000 b.P 6,000 c.P 8,000 d.P0 16. Which of the following statements is correct regarding budgeting? a.Is a primary focused on past performance b.Is primarily bookkeeping task c.It should be build from the ground up each year d.It involves input from a broad range of managers 17. It is most budget in the master budget is likely the a.Cash budget b.Capital budget c.Personnel budget d.Purchases budget 18. Which of the following is not a typical cash outflow associated with a capital investment? a.Repairs and maintenance needed for purchased equipment b.Additional operating costs resulting from the capital investment c.Salvage value received when the newly purchased equipment is sold d.Purchase price of a new equipment 19. Depreciation charges indirectly affect the after tax flow because the company a.Can deduct depreciation expenses on their financial statements, reducing reported income before tax b.Can deduct depreciation expenses on their financial statements , increasing cash inflows c.Can deduct depreciation expenses on their income tax returns, reducing cash outflow for taxes d.Cannot deduct depreciation expenses on their income tax returns 20. The calculation of the profitability index (PI) is most helpful for which type of decisions? a.Screening b.Preference

c.Qualitative d.Short term 21. O Mai Mai Company purchased an asset costing P 90,000. Annual operating cash inflows are expected to be P 20,000 each year for six years. No salvage value is expected at the end of the asset life. The company applies a 16 percent minimum acceptable rate of return for this kind of investment . the details of the present values at 16% sex periods and Present value of ordinary annuity of 1 3.6847 Present value of annuity due of 1 4.2743 Assuming O’maimai cost of capital is 16 percent , what is the asset net present value? ( ignore income taxes) a. P 16,306 b.P30,000 c.P4,514 d.P4,800 22. Pacam, Inc. Requires all its capital investment to generate an internal rate of return of 14 percent the company is considering an investment costing P80,000 that is expected to generate equal annual cash inflows for 5 years. The present value of 1 . end of 5 years is 0.51937 and the present value inequity of 1 is 3.4331 based on 14 percent required rate of return. To meet the 14% minimum acceptable rate return, the estimated annual cash inflow (ignoring income taxes) is : a.P23,803 b.P51,550 c.P274,648 d.P154,033 Question Nos. 23 through 25 are based on the following Lakewood Company is considering the purchases of a purpose bottling machine for P 280,000. It is expected to have a useful life of 7 years with a zero terminal disposal price. The plant manager estimates the following savings in cash operating costs YEAR 1 2 3 4 5 6 7

ANNUAL CASH SAVINGS P140,000 110,000 80,000 60,000 40,000 30,000 30,000

Lakewood uses required rate of return of 12% in its capital budgeting decisions. remittal tax rate of 40%. The company uses straight-line depreciation. The present value of annuity of 1 at 12% for years 4,56376. The details of the present value YEAR ANNUAL CASH SAVINGS 1 0.89286 2 0.79719 3 0.71178 4 0.63552 5 0.56743 6 0.50663 7 0.45235 23. The number of years to recover the amount investment is a.4.83 years b.3.63 years c.2.38 years d.4.00 years 24. What is the net present value of this investment? a.P4,723 b.P8,559 c.P(2.159) d.P0 25. What is the accounting rate of return based on initial investment a.6.43% b.12.86% c.20.71% d.41.42% 26. Escape Company regularly pays its accounts payable on the tenth day and enjoys the 2 percent cash discount , term: net 30. Because of an oversight, one supplier invoice is not paid within the discount period

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33.

but paid 10 days after. What is the annual cost of that incident of paying an invoice on the 20 th day instead of the tenth day? Use 360 days a year a.73.44% b.36.73% c.30.02% d.2.04% P18,591,650 at 8 persons on a one year discounted loan, what is the effective interest rate? a.8.00 percent b.8.70 percent c.9.07 percent d.7.41 percent Toledo, Inc. Has recently calculated the inventory turnover for current year to be 30 . in prior years , the same ratio was always lower. Which of the following statements would be the best interpretation for the reason for the ratios change? a.The company had less sales in the current year then in prior years b.The company purchased less inventory in the current year than in prior years c.The company took fewer days to sell its inventory in the current year than in prior years d.The company took more days to sell its inventory in the current year than in prior years Which of the following statements is true regarding a company’s segment margin? a.It is primarily used to make short term decisions such as cost volume profit (CVP) analysis and special order decisions b.It ignores all fixed costs c.It is primarily a measure of long term profitability d.It should not be used to make decisions on whether or not to drop a product line Which of the following statements about the balanced scorecard approach is false? a.It requires managers to focus on financial measures more than nonfinancial measures b.It looks at performance from the following perspectives, financial, customer, internal business and learning and growth c.It helps balance short term operating performance with long term strategies d.It recognizes that traditional measures of performance are often not adequate to fully assess company’s performance Determining the market share for a company’s product would be a measure of performance , which perspective of the balanced scorecard? a.Internal business b.Customer c.Financial d.Learning and growth Which of the following statement about quality costs is true? a.Even in theory , external failure costs can never be reduced to zero b.The less of company’s spreads on prevention costs, the less they will have to spend on internal failure costs in the future c.If a company produces and sells a defective product, external failure cost are likely to exceed all the other types of quality costs d. Low level of internal failure costs usually indicators that more attention needs to be paid to prevention and appraisal costs HNW Ltd. Manufactures and sells food processors. A popular consumer magazine has recently evaluated food processors and has ranked HNWs processors as being of “poor quality”. As a result HNWs management team has begun to analyze all costs associated with their food processors in more detail and the following data has been compiled: Scrap costs P 80,000 Quality training 75,000 Warranty claims 100,000 Rework costs 50,000 Inspection of incoming 30,000 materials Product quality audits 60,000 Statistical process control 40,000

What are HNW’s total internal failure costs? a.P 50,000 b.P130,000 c.P230,000 d.P170,000 34. Which of the following items used to measure customer response time would not be used to measure manufacturing cycle time? a.Time it takes to process raw materials into a completed product b.Time spent waiting for a machines availability c.Time spent inspecting the materials for quality control d.Time spent delivering the product to the customer

Question Nos. 35 and 36 are based on the following information Polka Devices normally produces and sells 62,000 units CK-6 each month. CK -6 is a small electrical relay used in the automotive industry as a component part in various products. The selling price is P46 per unit, variable costs are P42 per unit, fixed manufacturing overhead expenses total P280,000 per month, and fixed selling expenses total P88,000 per month. Strikes in the companies that purchase the bulk of the CK-6 units have caused Polks Devices sales to temporarily drop to only 26,000 units per month. Polka devices estimates that the strikes will last for about two months, after which sales of CK-6 should return to normal. Due to the current low level of sales, however, Polica Devices is thinking about closing down its own plant during the strikes. If Polks Devices does close down its plant, it is estimated that fixed manufacturing overhead expenses can be reduced to P210,000 per month and that fixed selling expenses can be reduced by 10% . start up expenses at the end of two months shutdown period would total P4,000. Since Polica Devices uses just in time production methods, no inventories are on hand. 35. Assuming that the strikes continue for two months as estimated, how much would the advantage or disadvantage of closing the plant? a.P 54,400 disadvantage b.P 58,400 disadvantage c.P 50,400 disadvantage d.P 29,200 disadvantage 36. At what level of sales (in units) for two month period should Polica Devices be indifferent between closing the plant or keeping it open? a.38,400 units b.39,400 units c.39,000 units d.38,000 units 37. Vera Cruz Company has projected cost of goods sold P 2 million including fixed costs of P100,000 and variable costs are expected to be 75 percent of net sales. What will be the projected net sales/ a.P 2,133,333 b.P2,400,000 c.P2,666,667 d.P3,200,000 38. Gibo Zamora sells helium balloons in Luneta Park on Saturdays as a means on making some extra spending money. He buys balloons from a party store at P12 each and sells them at a price of P30.00 each. Demand of the balloons ranges between 35 and 45 per day. Gibo normally purchases 40 balloons. The helium losca its resilence in a couple of days, so balloons not sold cannot be saved for the following Saturday. Gibo usually just releases the balloons that do not sell. As he watched the most recent batch of the five balloons floating into space, he thought surely, there must be some way to void this waste. What is the estimated on Gibo profit if the helium canister is rented assuming there are 5 balloons being unsold? a.No effect b.Increase the profit by P150 c.Increase the profit by P90 d.Decrease the profit by P80 Use the following data for Ulap Company in answering numbers 39 and 40 Net sales Cost of goods sold Gross profit

2010 P5,520,000 3,795,000 P1,725,000

2009 P4,000,000 3,000,000 P1,000,000

39. Assume that the selling price increased by 20 percent effective January 1, 2010. What is the amount of increase in sales due to change in selling price and units sold, respectively? a.P920,000 and P 600,000 c.P720,000 and P800,000 b.P 1,104,000 and P416,000 d.P (1,380,000) and P2,900,000 40. Independent of question number 39 , assuming that the cost price per unit decreased by 4 percent effective January 1, 2010. How much were the change in sales due to change in quantity sold and change in cost of goods sold due to change in unit cost? 41. Change in sales change to cost of Goods Sold Due 42. Change in Quantity to change in unit cost a.P1,270,800 increase P158,125 decrease b.P249,200 increase P953,125 decrease c.P1,262,400 increase P151,800 decrease d.P1,262,400 increase P953,125 decrease 43. The primary purpose of management advisory service is a.To conduct special studies, preparation of recommendations , development of plans and provision of advice and assistance in their implementation b.To provide services or to fulfil some social need c.To improve the clients use of its capabilities and resources to achieve the objectives of the organization d.To earn the best rate of return on resources entrusted to its care with safety of investment being taken into account and consistent with the firms social and legal responsibilities

44. The fixed overhead application rate is a function of a predetermines normal activity level. If standard hours allowed for good output equal predetermined activity level for a given period the volume variance will be a.Zero c.Unfavourable b.Favorable d.All of the above 45. The AMVians is planning its annual Blast Extravaganza. The extravaganza committee has assembled the following expected costs for the event: 46. Dinner per person P70 47. Programs and souvenier per person 30 48. Orchestra 15,000 49. Tickets and advertising 7,000 50. Auditorium rental 48,000 51. Floor show and strolling entertainment 10,000 52. 53. The committee members would like to charge P300 per person for the evening activities 54. Assuming that only 250 persons are expected to attend the extravaganza, what ticket price must be charged to breakeven? a.P420 c.P320 b.P350 d.P390 55. Gabgalang Company uses a monthly cost formula for overhead of P50,000 + 30,000 for each direct labor hour worked. For the coming year, gabgalang plans to manufacture 200,000 units. Each unit requires five minutes of direct labor. Gabgalang total budgeted overhead for the coming year is a.P550,000 c.P1,100,000 b.P1,200,000 d.P650,000 56. How will a favorable volume variance affect net income under each following methods? 57. ABSORPTION VARIABLE a.Reduce no effect b.Reduce increase c.Increase no effect d.Increase reduce 58. The following information has been extracted from Bautista & Magsombol Company’s financial records for its first year of operations? 59. 60. Units produced 10,000 61. Units sold 7,000 62. Variable costs per unit 63. Direct materials P8 64. Direct labor 9 65. Factory overhead 3 66. Selling 4 67. Fixed costs: 68. Manufacturing overhead P70, 000 69. Selling 30,000 70. 71. Based on absorption costing, Bautista & Magsombol’s income in its first year of operations will be a.P21,000 higher than it would be under variable costing b.P70,000 higher than it would be under variable costing c.P30,000 higher than it would be under variable costing d.Higher than it would be under variable costing, but he exact difference cannot be determinable from this information 72. Balara Company has intra company service transfers from Internal Division , a cost center, to World Division , a profit center. Under stable economic conditions, which of the following transfer prices is likely to be most conductive to evaluating whether both divisions have met their responsibilities? a.Actual cost c.Standard variable cost b.Market price d.Negotiated price

73. De Chavez Company is considering an investment in a new casting machine to replace its existing one. Information on the existing machine and the replacement machine follows: 74. 75. Cost of new machine P40,000 76. Net annual savings in operating costs 9,000 77. Salvage value now of the old machine 6,000 78. Salvage value of the old machine in 8 years 0 79. Salvage value of the new machine in 8 years 5,000 80. Estimated 8 years 81. 82. What is the expected payback period for the new machine? a.4.44 years b.3.22 years c.4.00 years d.3.78 years 83. Kiel Dimayaga Company has a total assets turnover of a 0.30 and a profit margin of 10 percent Patrick. The President , is unhappy with the current return on assets and be thinks it could be doubled. This could be accomplished (1) by increasing the profit margin to 12 percent , and (2) by increasing the total assets turnover. What new asset turnover ratio, along with the 12 percent profit margin, is required to double the return on assets? a.25% b.50% c.36% d.60% 84. The examples of activating at the product level include a.Scheduling , setting up and moving b.Designing changing and advertising c.Beating, lighting and security d.Cutting, painting and packaging 85. A systematized approach knows as acro-based budgeting a.Presents the plan for only one level of activity and does not adjust to changes in the level of activity b.Presents a statement of expectations for a period of time but does not present a firm commitment c.Divides the activities of individual responsibility centers into a series of packages which are ranked ordinally d.Classifies budget requests by activity and estimates the benefits arising from each activity 86. The CEO of a rapidly growing high technology firm has exercised centralized authority over all corporate functions. Because the company now operates in four geographically dispersed locations. The CEO is considering the advisability of decentralizing operation control over production and sales. Which of the following conditions probably would result from and be a valid reason for decentralizing? a.Greater local control over compliance with government regulations b.More efficient use of headquarters staff officials and specialists c.Quicker and better operating decisions d.Greater economies in purchasing 87. The following are details of the monthly unit cost to manufacture and sell a particular product for Grace Company: 88. Manufacturing cost: 89. Direct materials P3.00 90. Direct labor 4.00 91. Variable indirect 2.00 92. Fixed indirect 1.50 93. 94. Marketing costs: 95. Variable 2.00 96. Fixed 1.00 97. 98. Grace must decide to continue making the product or buy it from outside supplier. The supplier has offered to make the product at the same level of quality that the company can make it. Fixed marketing costs would be unaffected, but variable marketing costs would be reduced by 25% if the company were to accept the proposal. What is the minimum amount per unit that Grace can pay the suppliers without decreasing its operating income? a.P9.50 b.P10.50 c.P11.50 d.P12.50 99. The Salinas Division of Soriano Company expects the following result for 2011. 100. Unit sales 70,000 101. Unit selling price P10 102. Unit variable cost P4 103. Total fixed cost 104. Total fixed costs P300, 000 105. Total investment P500, 000

106. The minimum required RO1 is 15percent, and divisions are evaluated on residual income. A foreign customer has approached Salinas manager with an offer to buy 10,000 units at P7 each. If Salinas accepts the order, it would not lose any of the 70,000 units at the regular price. Accepting the order would increase fixed costs by P10,000 and investment by P40,000 107. 108. What is the minimum price that Salinas could for the order and still maintain its expected residual income? a.P5.00 b.P4.75 c.P5.60 d.P9.00 109. Morr Co. has a total annual cash requirement of P 9,075,000 which are be paid uniformly. Morr has the opportunity to invest the money at 24% per annum. The company spends, on the average P40 for every cash conversion to markeable securities. 110. What is the optimum average cash balance? a.P60,000 b.P45,000 c.P55,000 d.P27,500 111. The dividends and stock price of Feudo Company are expected to grow at 7 percent per year by the end of this year. Feudos common stock sells for P25 per share, it last dividend was P2.50 and the company will pay P2,675 at the end of the current year. Feudo should pay P 2.50 flotation cost. 112. What are the expected returns on retained earnings for Feudo Company? a.17.7 percent b.18.45 percent c.18.89 percent d.19.72 percent 113. Baguio Company’s accounts receivable were P600, 000 at the beginning of the year and P 800,000 the end of the year. Cash sales for the year were P300, 000. The accounts receivable turnover for the year was 5 times. Baguio Company’s total sales for the year were a.P 800,000 b.P 3,300,000 c.P1,300,000 d.P3,800,000 114. The Baraguio Corporation purchases 60,000 headbands per year. The average purchase lead time is 20 working days. Maximum lead time is 27 working days. The corporation works 240 days per year. 115. The appropriate safety stock level and the recorder point for the company are 116. 117. Safety Stock Recorder Point a. 1,750 6,750 b.1,750 5,250 c.1,167 6,750 d.1,167 5,250 118. Almires Building company uses the critical path method to monitor construction jobs. The company’s is currently 2 weeks behind schedule on Job WW. Which subject to a P10,500 per week completion penalty. Path A-B-C-F-G-H-I has a normal completion time of 20 weeks and critical path A-D-E-F-G-H-I- has a normal completion time of 22 weeks. The following activities can be crashed. 119. Activities cost to crash 1 week cost to crash 2 weeks 120. B-C P8,000 P15,000 121. D-E 10,000 19,600 122. E-F 8,800 19,500 123. 124. Almires desires to reduce the normal completion time of job WW and at the same time, report the highest possible income for this year. Almires should crash a.Activity B-C 1 week and Activity EF 1 week b.Activity B-C 2 weeks c.Activity D-E 1 week and activity B-C 1 week d.Activity D-E 1 week and activity E-F 1 week 125. The capital asset pricing model (CAPM) computes the expected return on a security by adding the risk rate return to the incremental yield of the expected market return which is adjusted by the company’s beta. What is MNO’s expected rate of return if the equity market is expected to earn 12 percent; the treasury bonds are currently yielding 5 percent. The beta coefficient for MNO is estimated to be 0.60. MNO is subject to an effective corporate income tax rate of 40%. a.12.00 percent b.9.20 percent c.12.20 percent d.7.20 percent 126. Trading on the equity refers to the a.Amount or working capital b.Amount of capital provided by owners

c.Use of barrowed money to increase the return to owners d.Number of times interest in caned 127. Demand for a product tends to be price inelastic if a.The product is considered a hourly item b.Few goods complements for the product are available c.The population in the market area is large d.People spend a large share of their income on the product 128. Because of the existence of economies of scale , business fines may find that a.Each additional unit of labor is less efficient than the previous unit b.As more labor is added to a factory, increases in output will diminish in the short run c.Increasing the size of a factory will result in lower average cost d.Increasing the size of a factory will result in lower total costs 129. For a given level of tax collections , prices and interest rates, a decrease in governmental purchases will result in a (an) a.Increase aggregate demand b.Decrease in aggregate demand c.Increase in aggregate supply d.Decrease in aggregate supply 130. The most effective fiscal polity program to help reduce demand pull inflation would be to a.Decrease the rate of growth of the money supply b.Increase both taxes and government spending c.Decrease taxes and increase government spending d.Increase taxes and decrease government spending 131. CABRAL industries received an order for a piece of special machinery from Tigok Company. Just as CABRAL completed the machine, Tigok declared bankruptcy, defaulted on the order , and for feted the 10 percent deposit paid on these selling price P72,500 132. 133. CABRAL’s manufacturing manager identified the cost already incurred in the production of the special machinery for Tigok as follows 134. 135. Direct material P16,600 136. Direct labor 21,400 137. 138. Manufacturing overhead 139. Variable P10,700 140. Fixed 5,350 16,050 141. Fixed selling and administrative costs 5,405 142. Total P59, 455 143. 144. Another company , kay Corporation , will buy the special machinery if it is reworked to Kay’s specification. CABRAL offered to sell the reworked machinery to Kay as a special order for P68, 400 Kay agreed to pay the price when it takes delivery in two months. The additional identifiable costs to rework the machinery to Kay specifications are as follows. 145. 146. Direct materials P6,200 147. Direct labor 4,200_____ 148. Total P10,400 149. 150. 151. A second alternative available to CABRAL is to convert the special machinery to the standard model . which sells for P62,500. The additional identifiable costs for this conversion are as follows. 152. 153. Direct materials P2,850 154. Direct labor 3,300 155. Total P6,150 156. 157. The third alternative for CABRAL is to sell the machine as is for a price P52,000, However , the potential buyer of the unmodified machine does not want it for 60 days. This buyer has offered a P7,000 down payment , with the reminder upon delivery. 158. 159. The following additional information is available regarding CABRAL’s operations: 1. The sales commission rate on sales of standard models is 2 percent, while the rate on special orders is 3 percent 2. Normal credit terms for sales of standard models are 2/10, net /30. This means that the customer receives a 2 percent discount if payment is made within 10 days, and payment is due no later than 30 days after billing. Most customers take the 2 percent discount. Credit terms for a special order are negotiated with the customer. 3. The allocation rates for manufacturing overhead and fixed selling and administrative costs are as follows 160. 161. Manufacturing costs: 162. Variable 50% of direct labor costs

163. Fixed 25% direct labor costs 164. Fixed selling and administrative costs 10% of the total manufacturing costs 165. 4. Normal time required for rework is one month 166. 66. How much peso contribution would the sale to Kay Corporation add to CABRAL before tax profit? a.P53,848 b.P55,948 c.P55,900 d.P9,300 67. How much peso contribution would the alternative of converting the special machinery to standard model add to CABRAL’s before tax profit? a.P52,200 b.P54,475 c.P52,825 d.P7,650 68. If Kay makes CABRAL a counteroffer, what is the lowest price CABRAL should accept fot the reworked machinery from Kay? a.P10,400 b.P12,500 c.P10,722 d.P12,887 69. How much would the alternative of selling unmodified machinery to the potential buyer contribute to CABRAL’s before tax profit? a.P50,440 b.P1,740 c.P49,920 d.P49,400 70. A construction company has just completed two bridges over the Visayan area. The first bridge the company ever built required 100 weeks to complete. Now having hired a bridge construction crow with some experience, the company would like to continue building bridges. Because of the investment in heavy machinery needed continuously by this crew, the company believes it wound have to bring the average construction time less than a year (52 weeks) per bridge to earn a sufficient return on investment. The average construction time will follow an 80% learning curve. To bring the average construction time (over all bridges constructed) below one year per bridge, the crew would have to build approximately a.6 additional bridges b.7 additional bridges c.3 additional bridges d.8 additional bridges 167. 168. 169. 170. 171. 172. 173. 174. 175. 176. 177.