Review - PRACTICAL ACCOUNTING 1 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 1,500 Total 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 50,000 Current account — PNB 4,000,000 Current account—ONE Bank (250,000) Money market placement-Land Bank 1,000,000 Time deposit — Security Bank 2,000,000 The petty cash fund is composed of the following: Coins and currencies 17,000 Petty cash vouchers - Gasoline 1,000 - Supplies 2,000 - Cash advances to employees 3,000 Employee’s check returned by hank marked NSF 4,000 Check drawn by the company payable to the order of the petty cash custodian, representing salary for the month 18,000 A sheet of paper with names of employees together with contribution for a birthday gift of a co-employee in the amount of 5,000 Total 50,000 * 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 book. 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 Writeoffs Recoveries 2006 9,000,000 400,000 30,000 2007 13,000,000 600,000 70,000 2008 15,000,000 700,000 120,000 2009 20,000,000 650,000 150,000 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 29,2009. 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 a.P4,530,000 b. P4,130,000 c. P4,480,000 d. P4,690,000 8. Transactions for the month of June were: June 1 (Balance) 3 7 15 22 Purchases 400 @ P3.20 Sales 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 Inventory 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 2006 2007 Sales 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 2008 8, 000, 000 2, 000, 000 d. P825,000 10. At December 31,2007, thefollowing information was available from Huff Company’s accounting records: Cost Retail Inventory 735,O00 1,015,000 Purchases 4,165,000 5,775,000 Additional markups 210,000 4,900,000 7,000,000 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 1,000,000 Market adjustment for unrealized loss (200,000) Market value 800,000 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, P1,500,000 Equity investment in available-for-sale 2,000,000 Debt investment in profit or loss 4,000,000 Debt investment in available-for-sale 3,000,000 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 d.P5,500,000 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 2008 2009 Net Income 2,000,000 3,000,000 Dividend paid None 6,000,000 Prerev Company should report a return of investment at a. P 100,000 b. P 500,000 c. P 600,000 d.P0 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 P700,000 20% equity in book value of Mart’s net assets 500,000 Excess cost over book value P200,000 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 entity: Payment for land 1,000,000 Taxes in arrears on building on land 40,000 Demolition of current building on land, net of salvage of P10,000 100,000 Survey before construction of new building 60,000 Contract price for factory building 5,000,000 Architect fee 230,000 Payment to city hall for approval of building construction 120,000 Safety fenced around construction site 35,000 Safety inspection on building 30,000 Removal of safety fence after completion of factory building 20,000 New fence surrounding the factory 80,000 Driveways, parking bays and safety lighting 550,000 Cost of trees, shrubs and other landscaping 250,000 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 b.5,000,000 c.2,500,000 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 P300,000. 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. Land 50,000,000 Building 450,000,000 Accumulated depreciation — Building 75,000,000 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 Land 65,000,000 65,000,000 Building 600,000,000 480,000,000 What is the revaluation surplus on June 30, 2008? a. 120,000,000 b. 125,000,000 c.135,000,000 d.160,000,000 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, 2009? 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 9,000,000 Lease payments payable in advance 2,000,000 Estimated residual value 1,000,000 Implicit interest rate 12% Date of first lease payment January 1, 2010 Lease term 10 years Present value of an annuity due 1 at 12% for 10 periods 6.33 Present value oft at 12% for 10 periods 0.32 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 800,000 Accrual for product liability claim in excess of Actual claim 1,200,000 Reportable instalment sales income in excess of Taxable Instalment sales Income 2,600,000 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 1,000,000 Depredation - 20% 1,600,000 Annual leave expense 700,000 Rent revenue 1,200,000 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 d.P1,368,500 29. Eliot Corporation’s liabilities at December 31, 2009 were as follows: Accounts payable and accrued interest P2,000,000 5-year 10% Notes payable — due December 31,2012 5,000,000 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 3,500,000 b. 1,500,000 4,500,000 c. 1,500,000 6,000,000 d. 1,500,000 0 32. Yanina Corporation has the following equity accounts: Accumulated profits 2,500,000 Asset revaluation reserve 1,000,000 Share capital 5,000,000 Contra equity reserve 500,000 Appropriation reserve 1,500,000 Share premium 3,000,000 Foreign translation reserve-credit 800,000 Treasury shares t cost 400,000 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: 12/31/2008 12/31/2009 Share capital P100 par value 5,000,000 5,100,000 Share premium 2,500,000 2,900,000 Retained earnings 5,000,000 ? 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 a.4,000,000 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. 860,000 440,000 c. 510,000 290,000 d. 800,000 0 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? 2009 2008 a. 9.23 10.00 b. 9.23 5.00 c. 6.25 10.00 d. 6.25 5.00 39. The Information below pertains to Prancer Company for 2009. Profit for the year 1,200,000 8% convertible bonds issued at par (P1,000 per bond). Each bond is convertible into 40 ordinary shares 2,000,000 6% convertible, cumulative preference shares, P100 par value. Each share is convertible into 3 ordinary shares 3,000,000 Ordinary shares, P10 par value 500,000 Share options (granted in prior year) to purchase 50,000 ordinary share at P20 per share 500,000 Tax rate for 2009 40% 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: BEG END Cash in Bank 30,000 50,000 Accounts receivable, net 50,000 70,000 Merchandise nventory 100,000 80,000 Accounts payable 40,000 20,000 Notes payable — bank 20,000 25,000 Equipment, net 80,000 60,000 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 112,000 Returns inwards 8,000 Decrease in raw materials inventories 8,000 Direct wages 42,000 Cost of deliveries outwards 4,000 Cost of deliveries inwards 3,000 Production overheads 27,000 Increase in work-in-process inventory 10,000 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 1,100,000 Proceeds of a loan that was paid for the purchase of building in 2009 6,000,000 Payment for the acquisition of Alona Company’s ordinary shares 400,000 Distribution in 2009 cash dividend declared in 2008 to shareholders 1,500,000 Carrying value of convertible bonds payable converted to ordinry shares 2,000,000 Interest paid related to the conversion 130,000 Proceeds from the issuance of Alona’s P100 par value ordinary share capital 1,800,000 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. Segments Rev. Frm Outsiders Rev. Frm W/in Operating profit Identifiable Assets R 18,000 2,000 3,600 40,000 S 13,000 3,000 2,800 36,000 T 7,000 5,000 2,400 28,000 U 4,500 1,500 1,200 16,000 V 5,400 3,600 1,400 14,000 W 3,000 0 600 6,000 Total 48,900 17,100 12,000 140,000 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.