CPAR P1 Final PB.docx

CPA REVIEW SCHOOL OF THE PHILIPPINES PRACTICAL ACCOUNTING PROBLEMS 1 Final Preboard Examination SET A 1. Joanna Company had a trademark that was licensed to Marie Company for royalties of 15% of sales of the trademarked items. Royalties are payable semiannually on March 15 for sales in July through December of the prior year, and on September 15 for sales in January through June of the current year. The entity received royalties of P1,000,000 and P1,200,000 on March 15, 2014 and March 15, 2015, respectively, and P1,500,000 and P1,700,000 on September 15, 2014 and September 15, 2015, respectively. The license estimated that sales of the trademarked items would total P6,000,000 for July through December 2015. What amount of royalty revenue should be reported in 2015? a. 2,600,000 b. 2,900,000 c. 3,800,000 d. 4,100,000 2. On January 1, 2014, the city government provided Eros Company a zero interest, P8,000,000 loan with a 4-year term. The prevailing market rate of interest for this type of loan is 8%. The PV of 1 at 8% for 4 periods is 0.735, and the PV of an ordinary annuity of 1 at 8% for 4 periods is 3.312. What amount of deferred grant income should be recognized on December 31,2015? a. 2,120,000 b. 1,649,600 c. 1.141,568 d. 0 3. On January 1, 2014, Karlo Company constructed building costing P4,215,000. The weighted average accumulated expenditure on the building during 2014 was P3,900,000. The entity borrowed P2,000,000 at 7.5% on January 1, 2014. Funds not needed for construction were temporarily invested in short-term securities, and earned P59,000 in interest revenue. In addition to the construction loan, the entity had two other notes outstanding during the year: a P1,500,000, 10-year, 10% note payable dated October 1, 2012, and a 5-year P1,000,000, 8%, note payable dated November 2, 2013. Construction was completed on December 31, 2014 and the building is to be leased out under an operating lease. What is the initial cost of the building on December 31, 2014? a. 4,215,000 b. 4,165,800 c. 4,539,800 d. 4,480,800 4. On December 31, 2014, Laurence Company reported bonds payable having a face amount of P2,000,000 and unamortized discount of P160,000. The bonds were retired at 102 on October 31, 2015. Accrued interest on October 31, 2015 amounted to P50,000 which was paid in cash. The annual discount amortization for 2015 was P30,000. What amount of gain or loss on extinguishment should be recognized for 2015? a. 170,000 loss b. 125,000 loss c. 175,000 loss d. 175,000 gain 5. Orville Company is a dealer in equipment. The entity leased equipment to a lessee on January 1, 2014 for an eight-year period expiring January 1, 2022. Equal annual payments under the lease are due at the end of each year beginning December 31, 2014. The lease agreement included a guarantee residual value of P200,000 and an implicit interest rate of 10%. It was determined that the fair value of the asset is P3,000,000, the carrying amount is P2,500,000 and that the present value of the minimum lease payment at 10% is P2,760,900. The PV of 1 at 10% for 8 periods is 0.467, and the PV of an ordinary annuity of 1 at 10% for 8 periods is 5.335. What is the total financial revenue over the lease term? a. 1,558,538

b. 1,498,594 c. 1,379,156 d. 1,439,100 6. Cristy Company acquired a new machine which had a cash price of P2,100,000. The payment terms are down payment P500,000, note payable in 3 equal annual installments of P600,000 each year, and 10,000 ordinary shares with par value of P20 and fair value of P35 per share. Prior to use, the entity incurred installation cost of P80,000. What amount of discount on note payable should be recognized on the date of purchase? a. 1,250,000 b. 550,000 c. 150,000 d. 0 7. On December 31, 2014, Mark Company presented the following current assets: Cash Accounts receivable Inventory Initial direct cost in leasing equipment to a lessee in a sales type lease

3,200,000 2,000,000 2,800,000 200,000

The accounts receivable consisted of the following items: Customers’ account Account receivable – assigned (net of equity of assignee in accounts assigned, P60,000) Advances to subsidiary Allowance for sales return Claim against shipper for goods lost in transit Subscription receivable due on December 31, 2015

1,420,000 240,000 260,000 ( 120,000) 100,000 100,000

What amount should be recognized as total current assets on December 31, 2014? a. 8,000,000 b. 7,800,000 c. 7,700,000 d. 7,740,000 8. Klaus Company followed the calendar year as the accounting period. The 2014 financial statements were authorized for issue on March 31, 2015.    

On February 1, 2015, the entity determined that the total cost of the equipment purchased is P3,700,000. The asset was purchased on November 12, 2014. On March 15, 2015, the entity discovered that the 2014 depreciation expense was overstated by P470,000. On March 20, 2015, the entity issued 100,000 ordinary shares at par of P10 per share. On March 27, 2015, the entity filed a case against another entity for patent infringement. The legal counsel assessed that it is probable that the entity will win the case for an amount of P550,000.

What total amount should be reported as adjusting events on December 31, 2014? a. 5,720,000 b. 5,170,000 c. 4,170,000 d. 3,700,000 9. Julius Company had the following account balances on December 31, 2014: Cash in bank Cash on hand Cash fund set aside for dividend payable in 2015 Cash fund set aside for land acquisition in 2015

5,200,000 350,000 200,000 1,500,000

The cash in bank included P250,000 compensating balance against short-term borrowing and is not legally

restricted as to withdrawal. The cash on hand included a check of P100,000 payable to the entity dated January 3, 2015. What amount should be reported as cash under current assets on the December 31, 2014? a. 5,750,000 b. 5,650,000 c. 7,150,000 d. 5,400,000 10. Meredith Company provided the following information: January 1, 2014 Account receivable Allowance for doubtful accounts Sales on account Cash collection from customers

December 31, 2014

2,400,000 120,000 16,000,000 14,000,000

The cash collections included recovery of P20,000 from a customer whose account had been written off as worthless in 2013. During 2014, it was necessary to recognize doubtful accounts expense of P200,000 and write off worthless accounts of P60,000. On December 1, 2014, a customer settled an account by issuing a 12%, sixmonth note for P800,000. What is the net realizable value of accounts receivable on December 31, 2014? a. 3,280,000 b. 3,340,000 c. 3,560,000 d. 3,260,000 11. Jesus Company factored P3,000,000 of accounts receivable without recourse. The factor required an assessment fee of 10% of the accounts factored and holdback of 15% of the accounts factored for possible sales returns and allowances. The accounts factored had related allowance for doubtful accounts of P200,000. What amount of loss on factoring should be recognized? a. 750,000 b. 650,000 c. 300,000 d. 100,000 12. On December 31, 2014, Erica Company experienced a decline in the value of inventory resulting in a writedown from P2,400,000 to P2,000,000. The entity used the loss method in 2014 to record the necessary adjustment. In 2015, market conditions have improved dramatically. On December 31, 2015, the inventory had a cost of P3,000,000 and NRV of P3,500,000. Cost of goods sold before LCNRV measurement for 2015 was P5,600,000. What amount of cost of goods sold should be reported for 2015? a. 5,100,000 b. 5,200,000 c. 6,000,000 d. 5,600,000 13. Ferdinand Company used the retail inventory method to value inventory. The following information is available for the current year: Cost Retail Beginning inventory

1,500,000

2,500,000

Purchases Freight in Net markup Net markdown Employee discounts Sales Sales discount

7,250,000 168,250

10,000,000

What is the estimated cost of ending inventory using the conventional approach? a. 1,590,000 b. 1,614,600

425,000 1, 635,000 50,000 10,250,000 750,000

c. 1,097,100 d. 1,166,100 14. On December 31, 2014, Grace Company appropriately reported P100,000 unrealized loss. There was no change during 2015 in the composition of the portfolio of equity securities designated at FVTOCI. The entity provided the following information: Security Cost Fair value at 12/31/2015 X 1,250,000 1,600,000 Y 1,000,000 900,000 Z 1,750,000 1,000,000 What unrealized loss should be reported in the statement of comprehensive income for the year ended December 31, 2015?

15.

16.

17.

18.

19.

a. 500,000 b. 600,000 c. 400,000 d. 0 On January 1, 2014, Christine Company borrowed P5,000,000 from a bank at a variable rate of interest for 4 years. Interest is payable annually to the bank every December 31 and the principal is due on December 31, 2017. Under the agreement, the market rate of interest every January 1 resets the variable rate for that period and the amount of interest to be paid on December 31. In connection with the loan, the entity entered into a “receive variable, pay fixed” interest rate swap agreement with another bank speculator. The agreement was treated as a cash flow hedge and the market interest rates are January 1, 2014 – 10%, January 1, 2015 – 14%, January 1, 2016 – 12%, January 1, 2017 – 11%. Round off PV factor to two decimals. What amount should be reported as derivative asset on December 31, 2015? a. 464,000 b. 169,000 c. 240,000 d. 200,000 On January 1, 2014, Arlyn Company had capitalized cost of P6,000,000 for a new computer software with an economic life of 4 years. Sales for 2014 amounted to P3,000,000. The total sales of software over the economic life are expected to be P10,000,000. The pattern of future sales cannot ne measured reliably. On December 31, 2014, the software had a fair value less cost of disposal of P4,400,000. What net amount of the capitalized software cost should be reported on December 31, 2014? a. 6,000,000 b. 4,200,000 c. 4,500,000 d. 4,400,000 During 2014, Mei Company introduced a new life of machines that carry a three-year warranty against defects. Based on experience, warranty costs are estimated at 2% of sales in the year of sale, 4% in the year after sale, and 6% in the second year after sale. Sales were P1,200,000, P3,000,000 and P4,200,000 for 2014, 2015 and 2016, respectively. Actual warranty expenditure were P18,000, P90,000 and P270,000 for 2014, 2015 and 2016, respectively. What amount should be reported as warranty liability on December 31, 2016? a. 630,000 b. 408,000 c. 30,000 d. 0 Merill Company offers a cash rebate of P50 on each P200 packages of biscuits sold during the year. Historically, 30% of the customers mail in the rebate form. During the year, 7,700 packages of biscuits are sold, and 1,470 P50 rebates are mailed to customers. What amount of rebate liability should be recognized at year-end? a. 311,500 b. 115,500 c. 73,500 d. 42,000 Adrian company leased an office space from a lessor at an annual rental of P300,000 on January 1, 2014. The lease will commence on January 1, 2014 and will end on December 31, 2017. The lease agreement specifies that rental will be paid at the beginning of each year and will increase at 10% annually. What amount of rent expense should be recognized for 2015? a. 300,000

b. 330,000 c. 348,075 d. 363,000 20. Kathleen Company prepared the following reconciliation for the first year of operations: Pretax financial income for 2014 Tax exempt interest revenue Temporary difference Taxable income

21.

22.

23.

24.

25.

9,000,000 ( 750,000) (2,250,000) 6,000,000

The temporary difference will reverse evenly in 2015 and 2016 at an enacted tax rate of 35% in 2015 and 32% in 2016. The tax rate for 2014 is 30%. What amount should be reported as deferred tax asset or liability on December 31, 2014? a. 753,750 asset b. 753,750 liability c. 720,000 asset d. 720,000 liability Salve Company reported plan assets at fair value of P2,000,000 and projected benefit obligation of P4,000,000 on December 31, 2014. On January 1, 2014, the prepaid/accrued benefit cost account had a credit balance of P1,500,000. During the year, the entity recognized contributions of P1,200,000 and remeasurement loss P600,000. There was no remeasurement gain or loss on January 1, 2014. What amount of employee benefit expense was recognized for 2014? a. 1,700,000 b. 1,200,000 c. 1,100,000 d. 500,000 On December 31, 2014, Veronica Company reported fair value of plan asets P9,000,000 and projected benefit obligation P9,400,000. On December 31, 2015, the entity reported fair value of plan assets P9,900,000 and projected benefit obligation P11,000,000. During 2015, contribution was P1,260,000 and benefits paid were P1,125,000. The discount rates for 2014 and 2015 were 10% and 9% respectively. What is the remeasurement gain or loss attributable to plan assets for 2015? a. 45,000 gain b. 45,000 loss c. 135,000 loss d. 135,000 gain On January 1, 2014, Troy Company reported share capital P20 par P2,000,000, share premium P1,000,000 and retained earnings P3,500,000. The entity used the cost method of accounting for treasury shares. During 2014, the entity acquired 20,000 treasury shares for P600,000, sold 15,000 treasury shares at P25 per share and declared the remaining treasury shares as dividends when the fair value of the share is P40. Net income for 2014 was P1,500,000. What amount should be reported as retained earnings on December 31, 2014? a. 4,775,000 b. 4,800,000 c. 4,925,000 d. 4,725,000 On January 1, 2014, Norren Company granted key executives 160,000 share options at an option price of P35 per share. Market prices of the share were P46 and P51 on December 31, 2014 and 2015 respectively. The options were granted as compensation for services to be rendered over a two-year period beginning January 1, 2014. The Black-Scholes option pricing model determined total compensation expense to be P1,600,000. What amount of compensation expense should be recognized for 2015? a. 2,800,000 b. 1,760,000 c. 1,600,000 d. 800,000 On December 31, 2014, Richard Company had 300,000 ordinary shares and 5%, P100 par value 10,000 cumulative preference share outstanding. No dividends were declared on either the preference or ordinary shares in 2014 or 2015. On January 30, 2016, prior to the issuance of financial statements for 2015, the entity declared a 100% share dividend on ordinary shares. Net income for 2015 was P950,000. What amount of basic earnings per share should be reported in the 2015 financial statements? a. 1.50

b. 1.58 c. 3.00 d. 3.17 26. On December 31, 2014, Donne Company had 1,200,000 ordinary shares outstanding. On September 1, 2015, an additional 600,000 ordinary shares were issued. The entity issued P12,000,000 of 6% convertible bonds on October 1, 2015, convertible into 800,000 ordinary shares. No bonds were converted in 2015. The net income for 2015 was P4,500,000 and the income tax rate was 30%. What amount should be reported as diluted earnings per share for 2015? a. 3.21 b. 2.89 c. 2.27 d. 2.10 27. Kevin Company sustained heavy losses for several years and underwent quasi-reorganization via recapitalization on December 31, 2014. The entity provided the following information: Fair value Carrying amount Inventory Equipment

5,700,000 7,200,000

6,000,000 8,000,000

The share capital is P6,000,000 with a P6 par value, share premium is P1,500,000 and the deficit is P6,200,000 before the adjustments. The par value is reduced by 1/3 of the original amount. What amount must the shareholders contribute in order to eliminate the deficit? a. 6,200,000 b. 3,800,000 c. 1,800,000 d. 0 28. Czarina Company provided the following information during the first year of operations: Purchases on account 6,200,000 Ending inventory 2,200,000 Sales on account 5,600,000 Accounts receivable and accounts payable have ending balances at year-end of P1,400,000 and P1,200,000 respectively. Other expenses paid amount to P1,000,000 during the year and equipment with a 5-year useful life was purchased for P600,000 during the year. The accounting policy is full year depreciation in the year of purchase using straight-line. What is the net income under cash basis accounting? a. 480,000 b. 400,000 c. 280,000 d. 340,000 29. Jeric Company purchased machinery on January 1, 2014 for P6,300,000. The entity used the sum of years’ digits method with no residual value to depreciate the asset for the first two years of the estimated six-year life. In 2016, the entity changed to the straight-line depreciation method. The depreciation recorded under sum of years’ digits method totaled P1,800,000 for 2014 and P1,500,000 for 2015. The depreciation under straight-line would have been P1,050,000 each for 2014 and 2015. The tax rate is 30%. What is the cumulative effect of this change as an adjustment of retained earnings on January 1, 2016? a. 1.350,000 b. 1,200,000 c. 840,000 d. 0 30. Rachel Company reported the following for the current year: Unrealized loss on futures contract designated as cash flow hedge Revaluation surplus during the year Unrealized gain on financial asset at FVTOCI Remeasurement gain on employee benefits Gain on translation of financial statements of a foreign operation Loss from change in fair value attributable to credit risk of a financial liability designated at FVTPL

500,000 350,000 150,000 120,000 150,000 200,000

In preparing the statement of comprehensive income, what net amount should be reported in other comprehensive income that may not be recycled to profit or loss? a. 350,000 b. 420,000 c. 620,000 d. 470,000 31. Lourdes Company reported that assets decreased by P9,000,000 and liabilities also decreased by P16,000,000 in the current year. It was determined that a financial asset at FVTOCI decreased by P400,000 due to fair value change and an investment in associate increased by P600,000 due to share in the net income of the associate. The entity received equipment valued at P500,000 from a shareholder as donation and corrected a prior period error resulting from an overstatement of ending inventory for P1,500,000. What is the net income for the current year? a. 8,000,000 b. 8,400,000 c. 7,800,000 d. 6,900,000 32. During 2014, Patrick Company changed from the cost recovery method to the percentage of completion method. The tax rate is 30%. Gross profit figures are as follows:

Cost recovery method Percentage of completion

2012

2013

2014

3,800,000 6,400,000

5,000,000 7,600,000

5,600,000 8,400,000

How should this accounting change be reported in 2014? a. b. c. d.

5,600,000 increase in profit or loss 3,640,000 increase in profit or loss 5,600,000 increase in retained earnings 3,640,000 increase in retained earnings

33. Rowelma Company reported the following during the year ended December 31,2014:  It was decided to write off P1,000,000 from inventory as it was obsolete.  Sales of P1,500,000 had been omitted from the financial statements for 2013. What amount should be reported as prior period error in the financial statements for 2014? a. 2,500,000 b. 1,000,000 c. 1,500,000 d. 500,000 34. Jessa Company reported P4,750,000 net income for the quarter ended September 30,2014 which included the following after tax items:  

A P3,000,000 expropriation gain, realized on April 30,2014, was allocated equally to the second, third, and fourth quarters of 2014. An P800,000 cumulative-effect loss resulting from a change in inventory valuation method was recognized on August 1,2014.

The entity paid P2,400,000 on February 1,2014, for 2014 calendar year property taxes. Of this amount, P600,000 was allocated to the third quarter ended September 30, 2014. What amount should be reported as net income for the third quarter? a. b. c. d.

4,550,000 5,150,000 5,550,000 5,750,000

35. At year-end, Janna Company reported allowance for doubtful accounts with a debit balance of P50,000 and net sales of P9,000,000 before adjustment. The entity estimated uncollectible accounts receivable at 5% of net sales. What is the allowance for doubtful accounts at year-end? a. 500,000 b. 450,000 c. 400,000 d. 550,000 36. Joan Company prepared the following bank reconciliation dated June 30 of the current year. Balance per bank Deposits in transit Outstanding checks Balance per book

9,800,000 400,000 (1,400,000) 8,800,000

There were total deposits of P6,500,000 and charges for disbursements of P9,000,000 for July per bank statement. All reconciliation items on June 30 cleared the bank on July 31. Deposits in transit totaled P900,000 and checks outstanding amounted to P1,000,000 on July 31. What is the amount of cash in bank to be reported on July 31? a. 7,200,000 b. 6,200,000 c. 7,000,000 d. 8,600,000 37. On December 31, 2014, Gabriel Company sold a machine in exchange for a noninterest bearing note requiring ten annual payments of P500,000. The buyer made the first payment on December 31, 2014. The market interest rate for similar notes at date of issuance was 8%. The PV of 1 at 8% is 0.50 for 9 periods and 0.46 for 10 periods. The PV of an ordinary annuity of 1 at 8% is 6.25 for 9 periods and 6.71 for 10 periods. On the December 31, 2014, what is the carrying amount of the note receivable? a. 2,250,000 b. 2,300,000 c. 3,125,000 d. 3,355,000 38. John Company measured inventory at LCNRV. The entity provided the following information regarding inventory: Historical cost Estimated selling price Expected selling price Cost to complete and sell Replacement cost

5,000,000 4,500,000 4,700,000 250,000 4,000,000

What amount should be reported as inventory at LCNRV? a. 5,000,000 b. 4,000,000 c. 4,250,000 d. 4,450,000 39. On January 1, 2014, Jenica Company acquired 10% of the outstanding ordinary shares of an investee for P4,000,000. On January 1, 2015, the entity acquired an additional 20% of the investee’s outstanding ordinary shares for P10,000,000. The fair value the investee’s net assets equaled carrying amount on January 1, 2015. The fair value of the 10% interest on January 1, 2015 was P6,000,000. The investee reported the following:

Dividend paid Net income

2014

2015

2,000,000 6,000,000

3,000,000 7,000,000

What is the carrying amount of the investment in associate on December 31, 2015? a. b. c. d.

16,000,000 17,200,000 15,200,000 17,600,000

40. During the current year, Kim Company had the following transactions pertaining to a new office building: Purchase price of land and an old unusable building Legal fees for contract to purchase land Architect fee Demolition of old building to make room for new building construction Sale of scrap from old building Construction cost of new building fully completed

3,000,000 100,000 400,000 250,000 50,000 15,000,000

What amount should be reported as initial cost of the new building? a. 15,600,000 b. 15,750,000 c. 15,700,000 d. 15,500,000 41. Alyssa Company owned a machine that was bought on January 1, 2011 for P8,000,000. The machine was estimated to have a useful life of five years and residual value of P500,000. The entity used the sum of years’ digits method of depreciation. On January 1, 2014, the entity determined that the total useful life of the machine should have been four years and the residual value is P600,000. What amount should be recorded as depreciation expense on the machine for 2014? a. 2,000,000 b. 1,000,000 c. 1,400,000 d. 700,000 42. On January 1, 2009, Nicole Company purchased a new building at a cost of P6,000,000. Depreciation was computed on the straight line basis at 4% per year. On January 1, 2014, the building was revalued at a fair value of P8,000,000. What is the revaluation surplus on December 31, 2014? a. 3,072,000 b. 1,900,000 c. 3,040,000 d. 1,920,000 43. Ben Company provided the following calculation of an impairment loss on December 31, 2014:

Carrying amount Impairment loss Adjusted carrying amount

Goodwill

Net assets

3,000,000 (3,000,000) -

9,000,000 (2,000,000) 7,000,000

There has been a favorable change in the estimate of the recoverable amount of the net assets. The recoverable amount is now P8,000,000 on December 31, 2015. The carrying amount of the net assets would have been P7,200,000 on December 31,2015 if there was no impairment loss recognized on December 31, 2014. Assets are depreciated at 20% of reducing balance. What gain on reversal of impairment should be recognized in 2015? a. 1,000,000 b. 2,400,000 c. 1,600,000 d. 0 44. Jeff Company incurred the following costs during the current year: Routine on-going effort to refine, enrich or improve an existing product Design, construction and testing of preproduction models Quality control during commercial production Laboratory research for discovery of new knowledge What is the total research and development expense? a. 4,700,000 b. 5,500,000 c. 5,800,000 d. 6,600,000

2,500,000 2,200,000 3,000,000 3,600,000

45. During 2014, Rina Company is the defendant in a patent infringement lawsuit. The lawyers believe there is a 30% chance that the court will dismiss the case and the entity will incur no outflow of economic benefits. However, if the court rules in favor of the claimant, the lawyers believe that there is a 20% chance that the entity will be required to pay damages of P200,000 and an 80% chance that the entity will be required to pay damages of P100,000. Other outcomes are unlikely. The court is expected to rule in late December 2015. There is no indication that the claimant will settle out of court. A 7% risk adjustment factor to the probability-weighted expected cash flows is considered appropriate to reflect the uncertainties in the cash flow estimates. An appropriate discount rate is 5% per year. The present value of 1 at 5% for one period is 0.95. what is the measurement of the provision for lawsuit? a. 85,396 b. 36,594 c. 89,880 d. 0

46. David Company reported the following machinery on December 31, 2014:

Acquired in December 2011 Acquired in December 2013

Cost

Accumulated depreciation

4,000,000 1,000,000

1,600,000 200,000

Index numbers at the end of each year are 120 for 2011, 125 for 2013 and 350 for 2014. What should be the reported in a hyperinflation statement of financial position prepared on December 31, 2014 as the carrying amount of machinery? a. 8,960,000 b. 7,800,000 c. 9,240,000 d. 3,200,000 47. At the current year-end, Danica Company issued 4,000 ordinary shares of P100 par value in connection with stock dividend. The market value per share on the date of declaration was P150 the shareholders’ equity immediately before issuance of stock dividend comprised share capital P100 par 2,000,000, share premium P3,000,000 and retained earnings P1,500,000. What amount should be reported as retained earnings immediately after the stock dividend? a. 1,100,000 b. 1,500,000 c. 2,100,000 d. 900,000 48. On December 31, 2014, Alvin Company had a P4,950,000 balance in the advertising expense account before any year-end adjustments.  

Radio and television advertising spots broadcast during December 2014 were billed to Alvin on January 4, 2015. The invoice cost of P250,000 was paid on January 15, 2015. Included in the P4,950,000 is P300,000 for newspaper advertising for a January 2015 sales promotional campaign.

What amount should be reported as advertising expense for 2014? a. b. c. d.

4,650,000 4,900,000 5,000,000 5,200,000

49. Rea Company had a balance of P4,100,000 in the professional fee expense account on December 31, 2014, before considering year-end adjustments relating to the following:  

Consultants were hired for a special project at a total fee not to exceed P3,250,000. The entity had recorded P2,750,000 of this fee based on billing for work performed in 2014. The attorney’s letter requested by the auditor dated January 31, 2015, indicated that legal fees of P300,000 were billed on January 15, 2015 for work performed in November 2014, and unbilled fees for December 2014 were P350,000/

What amount should be reported for professional fees expense for 2014? a. 5,250,000 b. 4,750,000 c. 4,400,000 d. 4,100,000 50. Jacqueline Company reported net income of P3,000,000 for the current year. Changes occurred in certain accounts as follows: Equipment Accumulated depreciation Note payable

250,000 increase 400,000 increase 300,000 increase

During the year, the entity sold equipment costing P250,000 with accumulated depreciation of P120,000 for a gain of P50,000. In December of the current year, the entity purchased equipment costing P500,000 with P200,000 cash and a 12% note payable of P300,000. In the statement of cash flows, what amount should be reported as net cash provided by operating activities? a. 3,400,000 b. 3,470,000 c. 3,520,000 d. 3,570,000 END