CUP 2
EASY ROUND:
1.
Factory overhead includes:
a.
b.
c.
d.
Indirect labor but not indirect materials.
Indirect materials but not indirect labor.
All manufacturing costs, except indirect materials and indirect labor.
All manufacturing costs, except direct materials and direct labor.
2.
a.
b.
c.
d.
The term "conversion costs" refers to:
The sum of direct labor costs and all factory overhead costs.
The sum of raw material costs and direct labor costs.
All costs associated with manufacturing other than direct labor costs.
Direct labor costs incurred to produce units of output.
3.
Which of the following production operations would be most likely to employ a job order system
of cost accounting?
a. Candy manufacturing
b. Crude oil refining
c. Printing text books
d. Flour Milling
4.
a.
b.
c.
d.
When should process costing techniques be used in assigning costs to products?
In situations where standard costing techniques should not be used
If the product is composed of mass-produced homogeneous units
When production is only partially completed during the accounting period
If the product is manufactured on the basis of each order received
5.
At a certain level of operations, per unit costs and profit are as follows: manufacturing costs,
P50; selling and administrative expenses, P10; desired profit, P20. Given this information, the mark-on
percentage to manufacturing cost used to determine selling price must have been:
a. 40 percent.
b. 60 percent.
c. 33 percent.
d. 25 percent.
6.
The amount reported as "Cash" on a company's statement of financial position normally should
exclude
a. postdated checks that are payable to the company.
b. cash in a payroll account.
c. undelivered checks written and signed by the company.
d. petty cash.
7.
When the allowance method of recognizing bad debt expense is used, the entry to record the
write-off of a specific uncollectible account would decrease
a. allowance for doubtful accounts.
b. net income.
c. net realizable value of accounts receivable.
d. working capital.
8.
Which of the following items would be added to the book balance on a bank reconciliation?
a. Outstanding checks
b. A check written for $96 entered as $69 in the accounting records
c. Interest paid by the bank
d. Deposits in transit
9.
a.
b.
c.
d.
When the current year's ending inventory amount is overstated, the
current year's cost of goods sold is overstated.
current year's total assets are understated.
current year's net income is overstated.
next year's income is overstated.
10.
Total sales for a year are $40,000, which includes cash sales of $5,000. The beginning and ending
balances of accounts receivable are $10,000 and $15,000, respectively. How much cash was received
from customers?
a. $30,000
b. $20,000
c. $25,000
d. $35,000
Average round:
1. A company sold office furniture costing $16,500 with accumulated depreciation of $14,000 for $3,200
cash. The journal entry to record the sale would include a __________.
a. Debit to a gain for $700
b. Debit to accumulated depreciation for $14,000
c. Credit to office furniture for $2,500
d. Credit to cash for $3,200
2. If a bond is issued at 105, the market rate of interest was __________.
a. Lower than the contract rate
b. Higher than the contract rate
c. Equal to the market rate
d. Cannot be determined from the facts given
3. A company issues $500,000 10% bonds due in 10 years for $480,000, the company uses the straight-line
method of amortization of the discount. The entry to record semiannual interest will include a
__________.
a. Debit to premium on bonds payable for $2,000
b. Credit to discount on bonds payable for $2,000
c. Debit to interest expense for $26,000
d. Debit to interest expense for $25,000
4. Weaver Corporation was organized on January 1, 2020, at which date it issued 100,000 shares of $10
a.
b.
c.
d.
par common stock at $15 per share. During the period January 1, 2020, through December 31, 2022,
Weaver reported net income of $450,000 and paid cash dividends of $230,000. On January 10, 2022,
Weaver purchased 6,000 shares of its common stock at $12 per share. On December 31, 2022,
Weaver sold 4,000 treasury shares at $8 per share. Weaver uses the cost method of accounting for
treasury shares. What is Weaver's total stockholders' equity on December 31, 2022?
$1,720,000
$1,704,000
$1,688,000
$1,680,000
5.
6. When one of the parties to a contract is compelled to give his consent because of a
reasonable and well-grounded fear of an imminent and grave evil upon his person or
property, or upon the person or property of his spouse, descendants or ascendants, there
is
a. violence
b. intimidation
c. undue influence
d. answer not given
7. Choose contracts which are voidable
a. those undertaken in fraud of creditors when the latter cannot in any other manner
collect the claims due them
b. those where the consent is vitiated by mistake, violence, intimidation, undue
influence or fraud
c. those whose object is outside the commerce of man
d. those where both parties are incapable of giving consent to a contract
8. An official document that empowers a Revenue Officer to examine and scrutinize a Taxpayer’s
books of accounts and other accounting records, in order to determine the Taxpayer’s correct
internal revenue tax liabilities.
a. Notice of Informal Conference
b. Preliminary Assessment Notice
c. Letter of Authority
d. Formal Assessment Notice
9.
Which among the following concepts of taxation is the basis for the situs of income
taxation?
a. Lifeblood doctrine of taxation
b. Symbiotic relation in taxation
c. Compensatory purpose of taxation
d. Sumptuary purpose of taxation
10. A company records item on a cash basis throughout the year and converts to accrual basis
for year end reporting. Its cash-basis net income for the year is P70,000. The company
has gathered the following comparative balance sheet information:
Beginning
of year
End of year
Accounts payable …………………………
P3,000
P1,000
Unearned revenue
300
500
Wages payable
300
400
Prepaid rent
1,200
1,500
Accounts receivable
1,400
600
What amount should the company report as its accrual-based net income for the current year?
a. P68,800
b. P70,200
c. P71,200
d. P73,200
DIFFICULT:
1. The following trial balance of JB Company at December 31, Year 5, has been adjusted
except for income taxes. The income tax rate is 30%.
Debit
Accounts receivable (net)………………………. P 725,000
Accounts payable
Credit
P250,000
Accumulated depreciation
Cash
Contributed capital
Expenses
Goodwill
Prepaid taxes
Property, plant and equipment
Retained earnings, 1/1/year five
Revenues
Total
125,000
185,000
650,000
3,750,000
140,000
225,000
850,000
350,000
_________ 4,500,000
P5,875,000 P5,875,000
During year five, estimated tax payments of P225,000 were paid and debited to prepaid
taxes. There were no differences between financial and taxable income for year five.
Included in accounts receivable is P400,000 due from a loyal customer. Special terms were
granted to this customer to make payments of P100,000 semi-annually every March 1 and
September 1.
In JB Company’s December 31, Year 5 Balance Sheet, what amount should be reported as
current assets?________________
ANSWER: P710,000
2. The following trial balance of an entity on December 31, 2021 has been adjusted except
for income tax expense.
Cash
Accounts receivable
Inventory
Property, plant and equipment
Accounts payable
Income tax payable
Preference share capital
Ordinary share capital
Share premium
Retained earnings – January 1
Net sales and other revenue
Cost of goods sold
Expenses
Income tax expense
6,000,000
14,000,000
10,000,000
25,000,000
9,000,000
6,000,000
3,000,000
15,000,000
4,000,000
9,000,000
80,000,000
48,000,000
12,000,000
11,000,000
126,000,000
__________
126,000,000
During the year, estimated tax payments of P5,000,000 were charged to income tax expense.
The tax rate is 30% on all types of revenue. Inventory and accounts payable included goods
purchased in transit, FOB destination, costing P500,000, and unsold goods held on
consignment at year-end, costing P300,000. The perpetual system is used. The preference share
capital is redeemable mandatorily on December 31, 2026.
What amount should be reported as total shareholders’ equity on December 31, 2021?
ANSWER: 42,000,000
3. The Roberto Company had computed the flow of units for Department A for the month of
May as follows:
Work in process, May 1:
Started into production during May
Units to be accounted for
Materials
Labor
Factory overhead
Total
10,000
39,000
49,000
Beginning
work in process
P20,800
5,200
4,800
P30,800
Added during the
current month
P 97,500
34,920
32,980
P165,400
Materials are added at the beginning of the process. There were 8,000 units of work in process
at May 31. The work in process at May 1 was 70 percent complete as to conversion costs and
the work in process at May 31 was 60 percent complete as to conversion costs. What was the
cost of the goods transferred out using the FIFO method?
ANSWER: 167,800
4. The liabilities section of the balance sheet of Pug Company on December 31, 2021 detailed
the following:
Accounts payable
Notes payable-trade
Bank note payable -10%
Bank note payable – 12%
Accrued expenses
Accrued interest payable
Mortgage note payable – 6%
Bonds payable – 10% due June 30, 2022
2,000,000
2,500,000
800,000
1,000,000
350,000
500,000
4,000,000
5,000,000
The 10% bank note payable is issued on January 1, 2021, payable on demand and interest is
payable every six months. The 12% bank note payable is a two-year note issued on July 1,
2020.
The 6%, 10 year mortgage note was issued on October 1, 2018. Terms of the note give the
holder to demand payment if the company fails to make monthly interest payment. On
December 31, 2021, Pug is three months behind in paying its required interest.
What is the total amount of current liabilities on December 31, 2021?
ANSWER: P16,150,000
5. Metro Inc. reported net income of P150,000 for 2021. Changes occurred in several
accounts during 2021 as follows:
Investment in Videogold carried on equity basis
Accumulated depreciation caused by
Major repair to equipment
Premium on bonds payable
Deferred income tax liability (long-term)
5,500 increase
2,100 decrease
1,400 decrease
1,800 increase
In Metro’s 2021 statement of cash flows, the reported net cash provided by operating
activities should be:
ANSWER: 144,900
CLINCHER:
Corporate acts performed outside of its express, incidental or implied powers are called
_________.
Answer: Ultra-vires acts