P1 review with ans

Identify the letter of the choice that best completes the statement or answers the question.
1. Delta Corporation has applied you with the following list of its bank accounts and cash at December 31, 2007? Checking
account (compensating balance of P15, 000with no restriction)
P48, 000
Savings account, 2%
30, 000
Certificate of deposit, 6 months; 10%, due April 20, 2008
60, 000
Money market (30-day certificate), current rate, 9.75%
40, 000
Payroll account
20, 000
Certificate of deposit, 2 years, 12%, due February 15, 2008
75, 000
Petty cash
P 274,500
What should be the balance to be reported as “Cash and Cash Equivalent” in the December 31, 2007 balance sheet of
Delta Corporation?
a. P 139,500
b. P199, 500
c. P214,500
d. P274,500
2.The December 31,2008 trial balance of Jasmine Company includes the following accounts:
Petty Cash Fund
Current account — PNB
Current account—ONE Bank
Money market placement-Land Bank
Time deposit — Security Bank
The petty cash fund is composed of the following:
Coins and currencies
Petty cash vouchers
- Gasoline
- Supplies
- Cash advances to employees
Employee’s check returned by hank marked NSF
Check drawn by the company payable to the order of the petty cash
custodian, representing salary for the month
A sheet of paper with names of employees together with contribution
for a birthday gift of a co-employee in the amount of
* A check of P100,000 wash drawn against PNB current account dated and recorded December 29,2008 but delivered to
payee on January 15,2009.
* Security Bank time deposit is set aside for land acquisition in early January 2009
The December 31, 2008 balance sheet should report “cash and cash equivalents” at
a. P5,150,000
b. P5,135,000
c. P5,140,000
d. P7,135,000
3. On July 31, 2010, Elvira’s cash book showed a balance on hand of P198,270 compared with a balance of P190,910 shown
in his bank statement. He discovered the following:
a. Checks drawn by Elvira during July, amounting to P6,350, P9,490 and P7,000, had been entered in the cash book hut had
not been presented at the bank by the end of the month.
b. Elvira had forgotten to enter in the cash payment book a standing order of P5,000 relating to a trade subscription.
c. The bank had incorrectly credited Elvira’s account with a dividend receipt, of P2500 relating to another customer.
d. Bank charges of P10,500 shown on the bank statement had not yet been entered In the cash book.
e. Checks received from customers amounting to P21,100 were entered in the cash book on July 31 but were not credited
on the bank statement until August 3.
f. Direct credits from customers of P18,000 and P34100 had been paid direct into the bank but no entry had
been made in the cashbook.
g. The payments side of the cash book for July had been undercast by P10,000 (this means that the total of the payments
side is understated by P10,000).
h. The statement shows an item “return check P7,200”. This has not yet been accounted for in the cash
What is the correct cash balance? . .
a. 173,670
b. 184,170
c. 191,670
d. 186,670
4. On December 31,2009, the balance of accounts receivable of Jalena Company was P6,000,000 and the January
1,2009 balance of allowance for doubtful accounts was P800,000. The following data were gathered:
Credit Sales
Doubtful accounts are provided for as percentage of credit sales. The accountant calculates the percentage
annually by using the experience of the three years prior to the current year. How much should be reported as allowance
for doubtful accounts on December 3I 2009?
a. 1, 100,000
b. P800,000
c. P1,300,000
d. P1,250,000
5. On October 1,2009, Sandara Company assigned on a nonnotification basis accounts receivable of P6,000,000 to a bank
in consideration for a loan 75% of the receivables less a 2% service fee on the accounts assigned. The loan was evidenced
by a 12% note payable issued by Sandara to the bank. On December 31, 2009 Sandara collected assigned accounts of
P3,500,000, allowing sales discounts of P100,000 and remitted the entire collection to the bank in partial payment for the
loan. The bank applied first the collection to the Interest and the balance to the principal. In its December 31, 2009 financial
statements, Sandara should disclose its “equity In the assigned accounts” in the amount.
a. 1,265,000
b. 1,365,000
c. 1,400,000
d. 3,265,000
6. On February 1, 2010, Henson Company factored receivables with a carrying amount of P300,000 to Agee Company.
Agee Company assesses a finance charge of 3% of the receivables and retains 5% of the receivables. Relative to this
transacton, you are to determine the amount of loss on sale to be reported in the income statement of Henson Company
for February.
Assume that Henson factors the receivables on a without recourse basis. The loss to be reported is
a. P0
b. P9,000
c. P15,000
d. P24,000
7.The physical inventory of Pangasian Company on December 31, 2009, showed merchandise with a cost of P4,000,000 was
on hand at that date. You also have discovered the following items were all excluded from the count:
a. Merchandise costing P160,000, which was held by Pangasinin on conslgment. The consignor Is a subsidiary.
b. A special machine, fabricated to order for a customer costing P400,000, was finished and specifically segregated in the
bank part of the shipping room on December 31, 2009. The customer was billed on that due date and the machine
excluded from inventory although it was shipped on January 4, 2010.
c. Merchandise costing P80,000, which was shipped by Pangasinan f.o.b. destination to a customer on December 31, 20O9.
The customer expects to receive the merchandise on January 3, 2010.
d. Merchandise costlng P120,000, which was shipped by Pangasinan f.o.b. shipping point to a customer on December
e. Merchandise costing P50,000 shipped by a vendor f.o.b shipping point on December 28, 2009 and received by
Pangasinan on January 10, 2Q10.
The corrected balance of Pangasinan’s inventory should be
b. P4,130,000
c. P4,480,000
d. P4,690,000
8. Transactions for the month of June were:
June 1
400 @ P3.20
June 2 300 @ P5.50
1,100 @ 3.10
600 @ 3.30
900 @ 3.40
250 @ 3.50
6 [email protected] 5.50
9 [email protected] 5.50
10 200 @ 6.00
18 [email protected] 6.00
25 [email protected] 6.00
Assuming that perpetual inventory records are kept in.pesos, the ending inventory on a FIFO basis is
a. P1,900
b. P1,920
c. P2,065
d. P2,100
9. Flavia Manufacturing began operations 3 years ago. On October 1, 2009, a fire broke out in the warehouse destroying all
inventories. The information available is presented below.
January 1
October 1
500, 000
Accounts Receivable
800, 000
500, 000
Accounts payable
400 000
650, 000
Collection on actounts recivable, January 1 to October 1
6, 500, 000
Payments to suppliers, Januaryl to October 1
5, 200, 000
Goods out on consignment at October 1, at cost
400, 000
6, 000, 000
7, 500, 000
Gross profit on sales
1, 650, 000
1, 725, 000
What is the inventory loss suffered because of the fire?
a. P900,000
b. P425, 000
c. P200,000
8, 000, 000
2, 000, 000
d. P825,000
10. At December 31,2007, thefollowing information was available from Huff Company’s accounting records:
Additional markups
Sales for the year totalled P5,530,000. Markdowns amounted to P70,000. Under the average cost approach of retail
method. Huff’s inventory at December 31,2007 was
a. 1,540,000
b. 1,400,000
c. 994,000
d. 980,000
11. Lin Company reported the following marketable security held as available for sale on its December 31, 2007 statement
of financial position:
New company ordinary shares, at cost
Market adjustment for unrealized loss
Market value
At December 31, 2008, the market value of Lin’s investment in the New Company was P850,000. As a result of the increase in
market value, Lin’s statement shareholders’ equity for the year 2008 should report
a. An unrealized gain of P150,000
b. A realized gain of P50,000
c. A net unrealized loss of P150,000
d. No unrealized gain or loss
12. Flexible Company has reported the following investments before the preparation of its December 31, 2011 statement of
financial position:
Equity investment to profit or loss,
Equity investment in available-for-sale
Debt investment in profit or loss
Debt investment in available-for-sale
Included in the equity investment to profit or loss is a P900,000 current fair value of equity investment originally classified as
investment to profit or loss acquired three years ago. The company held the investment for three years due to a large
unexpected downturn in the stock market.
What amount of investment to profit or loss should Flexible Company report in its December 31,2011
a. P2,000,000
b. P3,100,000
c. P4,600,000
13. On January 1, 2008, Prerev Company purchased 10% of another entity’s outstanding ordinary shares for P5,000,000. The
investment is classified as a nonmarketable security and accounted for appropriately under the cost method. The following
date pertain to the investee’s operations for 2008 and 2009
Net Income
Dividend paid
Prerev Company should report a return of investment at
a. P 100,000
b. P 500,000
c. P 600,000
14. On January 1, 2006, Boggs Inc. paid P700,000 for 100,000 shares of Mart Corporation representing 20% of Mart’s
outstanding common stock, The following computation was made by Boggs.
Purchase price
20% equity in book value of Mart’s net assets
Excess cost over book value
The excess cost over book value was attributed to goodwill. Mart reported net income for the year ended December 31,
2006 of P300,000. Mart Corporation paid cash dividends of P100,000 on July 1, 2006. If Boggs, Inc. did not exercised
significant influence over Mart Corporation, the amount of net investment revenue Boggs should report from its investment
in Mart would be:
a. P20,000
b. P30,000
c. P60,000
d. P80,000
15. On July 1, 2010, Cola Corporation acquired a held to maturity security in Color Company’s 10-year 12% bonds, with face
value of P5,000,000, for P5,386,300. Interest is payable semi-annually on January 1 and July 1. The bonds mature on July
1,2015. Bonds effective rate is 10%. On December 31, 2011, Cola Corporation sold its debt instrument for P5,500,000.
What amount of gain should Cola Corporation recognize as a result of the disposal?
a. P144,385
b. P176,604
c. P210,434
d. P245,956
16. Jennie Company commenced operations at the beginning of the current year. The following costs are incurred by the
Payment for land
Taxes in arrears on building on land
Demolition of current building on land, net of salvage of P10,000
Survey before construction of new building
Contract price for factory building
Architect fee
Payment to city hall for approval of building construction
Safety fenced around construction site
Safety inspection on building
Removal of safety fence after completion of factory building
New fence surrounding the factory
Driveways, parking bays and safety lighting
Cost of trees, shrubs and other landscaping
The land and factory building respectively be measured at
a. 1,150,000 and 5,495,000
c. 1,650,000 and 5,435,000
b.1,200,000 and 5,435,000
d. 1,400,000 and 5,495,000
17. On January 1, 2007, Sage Company received a grant of 10,000,000 from the foreign government to compensate for
massive losses incurred because of a recent earthquake. The grant requires no fulfilment of certain conditions. The grant
was made for the purpose of giving immediate financial support to the enterprise. It will take Sage Company 2 years to
reconstruct its assets destroyed by earthquake. How much income from the government grant should he recognized by
Sage in 2007?
a. 0
d. 10,000,000
18. On July 1, 2010, Donella Company, a calendar year corporation, purchased the rights to a mine. The total purchase
price was P12,750,000, of which P750,000 was allocable to the land. Estimated reserves were 1,500,000 tons. Donella expects
to extract and sell 25,000 tons per month. Donella purchased new equipment on July 1, 2010 for P7,500,000. The equipment
had a useful life of 8 years. However, after all the resource is removed, the equipment will be of no use and will be sold for
Donella Company should record depletion of the mining equipment for 2010 at
a. 720,000
b. 750,000
c. 900,000
d. 450,000
19. Capiz Company has the following information on January 1, 2008 relating to its land and building.
Accumulated depreciation — Building
There were no additions and disposals during 2008. Depreciation is computed using straight line over 15 years for building.
On June 30,2008, the land and building were revalued as follows:
Replacement Cost
Sound Value
What is the revaluation surplus on June 30, 2008?
a. 120,000,000
b. 125,000,000
20. Tatjana Company was granted a patent On January 1, 2005 and appropriately capitalized P4,500,000 of related costs.
The patents estimated useful life was 15 years. During 2009, Tatjana paid P300,000 legal costs in successfully defending an
attempted infringement of the patent. After the legal action was completed, Tatjana sold the patent to the plaintiff for
P5,000,000. The sale was completed on December 31, 2009. Tatjana took a full year’s amortization in 2009. In its 2009
statement of comprehensive income, what amount should Tatjana report as gain from the sale of the patent?
a. 1,500,000
b. 1,700,000
c. 1,800,000
d. 2,000,000
21. Gisela’s Hear it and Scene It Shop sells a variety of DVD collectibles. Gisela uses premiums as a promotional technique to
sell its merchandise. Customer receive a coupon for each P100 spent on a DVD and may exchange 20 coupons plus P500
for a DVD with the “director’s commentary”. Gisela pays P800 for each premium and estimates that 60% of the coupons
issued to customers will be redeemed. Gisela’ total sales for 2009 was P25,000,000. A total of 4,000 premiums were
purchased during the year and there were 70,000 coupons redeemed as of December 31, 2009. The balance in the
estimate liability for coupons on January 1, 2009 was P150,000. What is the estimated liability for coupons on December 31,
a. 1,050,000
b. 1,350,000
c. 1,600,000
d. 1,200,000
22. Due to extreme financial difficulties, Gemalyn Company has negotiated a restructuring of its 10%, P5,000,000 note
payable due on December 31, .2010. The unpaid interest on the note on such date is P500,000. The creditor has agreed to
reduce the face value to P4,000,000, forgive the unpaid interest, reduce the interest rate to 8% and extend the due date
three years from December 31, 2010. The present value of 1 to 10% for three periods is 0.75 and the present value of an
ordinary annuity of 1 at 10% for three periods is 2.49.
What is the gain on extinguishment of debt to be recognized by Gernalyn Company on December 31, 2010?
a. 540,000
b. 1,203,200
c. 1,703,200
d. 2,000,000
23. On April 1, 2004, Greg Corporation issued, at 99 pIus accrued interest, 2,000 of its 8% 1,000 bonds. The bonds are dated
January 1, 2004, mature on January 1, 2014, and pay interest on July and January 1. Greg paid bond issue costs of 110,000.
From the bond issuance, Greg received net cash of:
a. 2,020,000
b. 1,980,000
c. 1,950,000
d. 1,910,000
24. As an inducement to enter a lease, Arts inc. a lessor, grants Hompson Corp., a lessee, nine months of free rent under a
five year operating lease. The lease is effective on July 1, 2007 and provides for monthly rental of 10,000 to begin April 1,
2008. In Hompson’s statement of financial position for the year ended June 30, 2008, rent payable should be reported at:
a. 0
b. 72,000
c. 92,000
d 102,000
25. On December 31, 2010, Deanne Company leased equipment under a finance lease. Annual lease payments of
P400,000 are due December 31 for 10 years. The equipment’s useful life is 10 years, and the interest rate implicit in the lease
is 10%. The lease obligation was recorded on December 31, 2010 at P2,700,000 and the first lease payment was made on
that date.
What amount should Deanne Company include in current liabilities in relation to the finance lease in its December 31, 2010
statement of financial position?
a. 130,000
b. 70, 000
c. 230,000
d. 400,000
26. Neliza Company uses leases as a method of selling its products in 2010, Nezil Company completed construction of a
passenger ferry. On January 1, 2010, the ferry was leased on a contract specifying that ownership of the ferry will transfer to
the lessee at the end of the lease period. Annual lease payments do not include executory costs. Other terms of the
agreement are as follows:
Original cost of the ferry
Lease payments payable in advance
Estimated residual value
Implicit interest rate
Date of first lease payment
January 1, 2010
Lease term
10 years
Present value of an annuity due 1 at 12% for 10 periods
Present value oft at 12% for 10 periods
What Is the Interest Income for 2010?
a. 1,279,200
b. 1,317,600
c. 1,519,200
d. 1,557,600
27. Black Company reported taxable income of P8,000,000 on Its Income tax return for the year ended December 31,2009,
Its first year of operations. Temporary differences between financial Income and taxable Income for the year are as follows:
Tax depreciation in excess of book depreciation
Accrual for product liability claim in excess of Actual claim
Reportable instalment sales income in excess of
Taxable Instalment sales Income
The enacted Income tax rate is 30% for 2009 and future years. What is the total Income tax expense to be reported in the
2009 income statement?
a. 2,040,000
b. 2,400,000
c. 2,580,000
d. 3,060,000
28. LEDA Company made an accounting profit of P4,000,000 for the year ended December 31, 2010. Included In the
accounting profit were the following items of income and expenses
Donation to political parties
Depredation - 20%
Annual leave expense
Rent revenue
For tax purposes, the depreciation rate is 25%, the annual leave paid Is P800,000 and the rent received Is P1,000,000. The
entity follows the cash basis for tax purposes. The income tax rate is 30%. What is the current liability on December 31,2010?
a. P1,450,000
b. P,200,000
c. P1,290,000
29. Eliot Corporation’s liabilities at December 31, 2009 were as follows:
Accounts payable and accrued interest
5-year 10% Notes payable — due December 31,2012
Part of the loan agreement is for Elliot to appropriate a fixed amount of its retained earnings annually until the amount of
appropriation has equalled the face of the obligation. As of December 31, 201)9, Elliot Corporations has yet to comply with
the loan agreement.
In Its December 31, 2009 balance sheet, Eliot should report current liabilities at
a. P2,000,000
b. P2,500,000
c. P5,000,000
d. P7,000,000
31. During 2009, Jasmin Company issued 50,000 shares of P100 par value convertible preference share capital for P120 per
share. One preference share can be converted into three ordinary shares with P10 par value at the option of the
preference shareholder. On December 31, 2009, when the market value of the ordinary share was P50 per share, all of the
preference share capital was converted. What amount should Jasmin credit to ordinary share capital and share premium
as a result of the conversion?
Ordinary share capital
Share premium
a. 1,500,000
b. 1,500,000
c. 1,500,000
d. 1,500,000
32. Yanina Corporation has the following equity accounts:
Accumulated profits
Asset revaluation reserve
Share capital
Contra equity reserve
Appropriation reserve
Share premium
Foreign translation reserve-credit
Treasury shares t cost
What is Yanina’s amount of shareholders’ equity?
a. 12,900,000
b. 13,900,000
c. 10,100,000
d. 13,300,000
33. On January 1, 2007, Rodriguez Corp. granted share options to corporate executives for the purchase of 10,000 shares of
the company’s P20 par value ordinary share at 70% of the market price on the exercise date, December 30, 2007. On
January 1, 2007, no market price or estimate could be made for the value of the options. All share options were exercised
on December 30, 2007. The quoted market prices of Rodriguez Corp.’s P20 par value ordinary share were as follows:
January 1, 2007
P50 per share
December 30, 2007
P60 per share
As a result of the exercise of the share options and the issuance of the ordinary share, Rodriguez should recognize
compensation expense in 2007 of
a. 180,000
b. 200,000
c. 500,000
d. 600,000
34. Cotton Company a public limited company has granted 100 share appreciation rights to each of its 1, 000 employees in
January 1, 2004. The management feels that as of December 31, 2004, 90% of the awards will vest on December 31, 2006.
The fair value of each share appreciation right on December 31, 2004 is P10. What is the fair value of the liability to be
recorded in the financial statements for the year ended December 31, 2004?
a. 90,000
b. 100,000
c. 300,000
d. 10,000,000
35. The following data are extracted from the stockholders’ equity of Katleya Company:
Share capital P100 par value
Share premium
Retained earnings
During 2009, the company declared and paid cash dividends of P1,000,000 and also declared and issued a stock dividend.
There were no other changes issued and outstanding during 2009, The net income for 2009 was P2,000,000. The retained
earnings on December 31, 2009 should be
b. 5,500,000
c. 6,000,000
d. 6,500,000
36. At December 31, 2008 ad 2009, Hexilon Corporation, had outstanding 30,000 shares of P100 par value 12% cumulative
preference shares and 10,000 ordinary shares with a P10 par value. At December 31,2008, dividends in arrears on the
preference shares were P150, 000. Cash dividends declared in 2009 totalled P800, 000. What amounts were payable on
each class of share?
Preference Shares
Ordinary Shares
a. 720000
80, 000
b. 860,000
c. 510,000
d. 800,000
37. Trim Company was organized on January 1, 2008 with the following capital structure:
10% cumulative preferred stock, par value P10, liquidation value P12, authorized, issued and outstanding 100,000
shares, P1,000,000
Ordinary share, par value P100, authorized 40,000 shares, issued and outstanding 30,000 shares, P3,000,000
The net income for the year ended December 31, 2008 was P6,000,000 and no dividends were declared. What is the
December 31, 2008 book value per common, share?
a. 290
b. 293
c. 300
d. 333
38. Victoria Company had one class of ordinary share capital outstanding and no other securities that are ‘potentially
convertible into ordinary shares. During 2008, 800,000 ordinary shares were outstanding. In 2009, two distributions of
additional ordinary shares occurred: on May 1, 240,000 unissued ordinary shares were sold, and on October 1, a 2-for-1
share split took Into effect. Net Income for 2009 and 2008 was P12,000,000 and P8,000,Q00, respectively. What amounts
should Victoria report as earnings per share in its 2009 and 2008 comparative profit and loss statements?
a. 9.23
b. 9.23
c. 6.25
d. 6.25
39. The Information below pertains to Prancer Company for 2009.
Profit for the year
8% convertible bonds issued at par (P1,000 per bond).
Each bond is convertible into 40 ordinary shares
6% convertible, cumulative preference shares, P100 par value.
Each share is convertible into 3 ordinary shares
Ordinary shares, P10 par value
Share options (granted in prior year) to purchase
50,000 ordinary share at P20 per share
Tax rate for 2009
Average market price of ordinary shares
P25 per share
There were no changes during 2009 in the number of ordinary shares, preference shares, or convertible bonds outstanding.
There is no treasury share.
Compute diluted earnings per share for 2009:
a. P1.70
b. P1.66
c. P142
d. P1:26
40. Ivan Company, was incorporated on January 1, 2009 with proceeds from the Issuance of P7,500,000 in share capital and
borowed funds of P1,100,000. During the first year of operations, revenue from sales and consulting amounted to P8,200,000,
and operating costs and expenses totaled P6,400,000. On December 15, 2009, lvan declared a P300,000 dlvldend payable
to shareholders on January 15, 2010.
No additional activities affected shareholders’ equity In 2009. Ivan’s liabilities increased to P2,000,000 by December 31,2009.
In Ivan’s December 31, 2009 statement of financial position, total assets should be reported at
a. 11,000,000
b. 11,300,000
c. 10,100,000
d. 12,100,000
41. Flores Company keeps limited record. Its assets and liabilities at the beginning and end of the current year are as follows:
Cash in Bank
Accounts receivable, net
Merchandise nventory
Accounts payable
Notes payable — bank
Equipment, net
During the year, the owner withdrew cash of P120,000 and made additional investment of P50,000. How much is the net
income or loss for the year?
a. P 35,000
b. P 85,000
c. P 120,000
d. P 135,000
42. You are given the following information for the year ended October 31, 2009:
Purchases for raw materials
Returns inwards
Decrease in raw materials inventories
Direct wages
Cost of deliveries outwards
Cost of deliveries inwards
Production overheads
Increase in work-in-process inventory
The factory cost value of goods completed is:
a. P 174,000
b. P182,000
c. P 183,000
d. P 202,000
43. During 2009, Alona Company had the foflowing activities related to its financial operations:
Payment for the annual rental of a finance lease that includes
implicit interest of P250,000
Proceeds of a loan that was paid for the purchase of building in 2009
Payment for the acquisition of Alona Company’s ordinary shares
Distribution in 2009 cash dividend declared in 2008 to shareholders
Carrying value of convertible bonds payable
converted to ordinry shares
Interest paid related to the conversion
Proceeds from the issuance of Alona’s P100 par value
ordinary share capital
The net cash provided by or (used) in financing activities was
a. 4,800,000
b. (1,050,000)
c. 4,950,000
d. 4,820,000
44. Cleeneth Company reported net income of P3,000,000 for 2009. Changes occurred in several balance sheet accounts
during 2009 as follows:
Investment in associate, carried at equity
400,000 increase
Premium onbonds payable
50,000 decrease
Accumulated depreciation, caused by major repair of equip.
200,000 increase
Deferred tax liability
150,000 increase
In the 2009 statement of cash flows, ‘how much should be reported as net cash provided by operating activities?
a. P 2,600,OO0
b. P2,700,000
c. P 2,900,000
d. P 2,800,000
45. On January 1,2010 Poe Construction Company changed to the percentage of completion method from cost recovery
method of income recognition. As of December 31,2009, Poe compiled data showing that income - under the cost
recovery method aggregated P7,000,000. If the percentage of completion method had been used, the accumulated
income through December 31,2009,would have been P9,000,000. Assuming an income tax rate of 30%, the cumulative
effect of this accounting change should be reported by Poe in the 2010
a. Retained earnings statement as P2,000,000 credit adjustment to the beginning balance
b. Income statement as P2,000,000 credit
c. Retained earnings statement as a P1,400,000 credit adjustment to the beginning balance
d. Income statement as a Pi,400,000 credit
46. Everest Company has historically reported had debt expense of 5% of sales in each quarter. For the current year, the
company followed the same procedure in the three quarters of the year. However, in the 4 th quarter, the company in
consultation with its auditor, determined that bad debt expense for the entire year should be 405,000. Sales in each quarter
of the year were as follows: 1st quarter, 1,800,000 second quarter :1,350,000 3rd quarter 2,250,000; and 4th quarter 3,600,000.
How much bad debt expense should be recognized for the 4th quarter?
a. 90,000
b. 67,500
c. 135,000
d. 157,500
47. Sexy company and its divisions are engaged solely in manufacturing oerations. The following data pertain to the
industries in which operations were conducted for the year ended Dec.31, 2005.
Rev. Frm Outsiders
Rev. Frm W/in
Operating profit
Identifiable Assets
In Its segment information for 2005, how many reportable segments does Sexy have?
a. 6
b. 5
c. 4
d. 3
48. Gibson Company maintains the accounting records using the cash basis of accounting but uses accrual basis in
preparing its financial statements. During 2009, the entity collected P5,000,000 in fees from clients. At December 31,2008;
accounts receivable of P800,000 and unearned fees of P500,000 had been recorded. At December 31, 2009, accounts
receivable Increased to P1,500,000 while unearned fees Increased to P900,000 in the accrual basis income statement, what
was the service revenue for 2009?
a. 5,000,000
b. 4,700,000
c. 6,100,000
d. 5,300,000
49. During 2009, Pedro Company discovered that the ending inventories reported on its financial statements were incorrect
by the following amounts:
2007 P60,000 understated
2008 P75,000 overstated
Pedro uses the periodic inventory system to ascertain year-end quantities that are converted to amounts using FIFO cost
method. Prior to any adjustments for these errors and ignoring income taxes, Pedro’s retained earnings at January 2O09,
would be
a. Correct
b. P15,000 overstated
c. P75,000 overstated
d. P135,000 overstated
50. Buyer Co. regularly buys shirts from Vendor Company and its allowed trade discounts of 20% and 10% from the list price.
Buyer purchased shirts from vendor on May 27, 2009 and received an invoice with a list price of P100,000 and: payment
terms 2/10, n/30. If buyer uses the net method of recording purchase, the journal entry to record the payment on June 8,
2009 will include
a. A debit to Accounts payable at P72,000.
b. A debit to purchase discounts lost of P1,440.
c. A credit to purchase discounts of P1,440.
d. A credit to cash of P70,650.
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