EASY

1. It is one of the basis for determining impairment loss. It is the present value of
discounted value of future cash flows expected to be derived from an asset.
What is it? Value in use
2. A Qualifying asset is an asset that necessarily takes a substantial period of
time to get ready for its intended use or sale.
3. Theoretically, receivables and payables are presented in the balance sheet at
discounted value. If receivables are short-termed they are presented at face
value. What is the principle that justifies the presentation at face value?
Materiality
4. Non-current assets acquired with the intention of leasing or renting them out
are called investment properties.
5. On January 1, 2006, the balance sheet of Jazz Comp showed total assets of
P7,000,000, total liabilities of 3,000,000 and retained earnings of 400,000.
During the year the corporation issued 20,000 shares atP125 per share.
Dividend were paid amounted to P450,000. The balance sheet at the end of
2006 showed totals assets of P8,300,000 and total liabilities of P4,000,000.
The result of operations during the year is (1,750,000). Enclosed in
parenthesis if loss.
6. The following changes in account balances of Manhattan Corp. during 2006
were
Presented below:

Assuming there were no changes to retained earnings other than for dividend
payment of P500,000, the net income or (loss) for the year 2006 is
(1,000,000).
7. The partnership of LD Company had a net income of P8,000.00 for the month
ended September 30, 2005. Sarsi purchased an interest in the LD Company of
Liz and Dick by paying Liz P32,000 for half of her 50% profit sharing interest
on October 1, 2005. At this time Liz capital balance was P24,000 and Dick
capital balance was P56,000. Liz should receive a debit to her capital account
of 12,000.
8. The following information is available for Al Jarreau Corp. for the year 2006.

Cost of goods sold for the year is 5,300,000.

9. In January 2002, Lee Rit Company purchased a machine for P2,640,000 and
depreciated it by the straight lime method using and an estimated life of 8
years with no salvage. On January 1, 2006, Lee Rit determined that the asset
had a useful life of 10 years and a salvage value of 40,000.
The accumulated depreciation at the end of the year 2007 is 1,746,666.

10. During 2006, Patti Austin Corporation decided to change from LIFO to FIFO to
conform with the new Philippine Accounting Standards. Inventory balances
under each method were as follows:

Ignoring income tax, in its 2006 statement of changes in equity, retained

earnings beginning should be increased or decreased by 800,000 (enclosed in
parenthesis if decreased).

AVERAGE
1. Larry Carlton Company had net income of 2,800,000 for the year ended
December 31, 2006 after giving effect to the following events which occurred
during the year.
The decision was made on May 1, 2006 to discontinue the meat packing
segment. The meal packing segments assets was sold on February 20, 2007.
Operating gain from January 1, 2006 to April 30, 2006 was 400,000. From May
1 to December 31, 2006, the gain is 200,000, January 1 to February 15, 2007,
operating loss of P100,000. Impairment loss was recognized at December 31,
2006 at 200,000. The tax is 35%.
The income from continuing operation is 2,540,000.
2. Total debits and total credits in selected accounts of Chick Company, after
closing entries were posted on December 31, 2006 are given below:

What is the cost of ending inventory? 870,000.

3. In its first year of operations, Good Companys sales were as follows:

The cost of goods sold for the year was P900,000. If collection on installment
during the year amounted to P240,000, how much was the total gross profit
realized at the end of the year? 230,000.
4. Stan Getz Corporation and its division are engaged solely in manufacturing.
The following data presents the operating profits and losses of the segments:

A segment is reportable if the operating profit or loss of a segment is at least

680,000.

5. Tony Bennett Companys 1,200,000 net income for the quarter ended June 30,
2006, included the following after-tax items:
A 205,000 gain from change in accounting policy recognized in April. Loss due
to earthquake on January 20, P400,000 was allocated equally during the year.
In addition Tony Bennett paid P480,000 commissions to sales employees due
to excellent performance in the third quarter, was allocated equally during the
year.
The corrected income for the quarter ended June 30, 2006 is 1,170,000.
6. On November 15, 2005, Hurly of Manila, ordered merchandise FOB shipping
point from Nippon Company of Japan for 500,000 yen. The merchandise was
shipped and invoiced to Hurly on December 10, 2005. Hobbies paid the
invoice on January 10, 2006. The exchange rates for yens on the respective
dates are as follows:

In Hobbies December 31, 2005 income statement, the forex gain (loss) to be
reported is 5,000.
7. On January 2, 2009, Haraya Company Purchased 10% of Ross Companys
outstanding common shares for P5,000,000. Haraya is the largest single
shareholder in Ross reported net income of P3,000,000 and paid dividends of
P1,000,000. In its December 31, 2009 balance sheet, what amount shall Haray
report as investments in Ross? 5,200,000.
8. A branch store in Cagayan was established by Marco on March 1. Shipments of
merchandise billed to this branch at 125% of cost, were as follows: March 5,
P120,000; March 10, P50,000; and March 20, P35,000.
On March 24, the branch returned defective merchandise worth P3,050 and on
March 31, it reported a net loss of P6,200 and merchandise inventory of
P85,000. In the home office books, the branch net income (loss) is 17,190.
9. Katherine Company was incorporated on January 1, 2009, with P4,000,000
form the issuance of stock and borrowed funds of P1,000,000. During the first
year of operations, net income was P3,000,000. On December 15, Katherine
paid a P2,000,000 cash dividend. No additional activities affected owners
equity in 2009. At December 31, 2009, balance sheet, total assets should be
reported at 7,000,000
10. Information on Rex Companys direct material-costs for May 2006 is as
follows:
Actual quantity of direct materials purchase and used
Actual cost of direct materials
Unfavorable direct materials usage variance
Standard quantity of direct materials allowed for May
production.

30,000
kilos
P84,000.00
P 3,000.00
29 kilos

For the month of May, what was Rexs direct materials price variance? 6,000
favorable.

DIFFICULT
1. On January 2, 2006, JC Company established a non-contributory defined
benefit plan covering all employees and contributed P1,000,000 to the plan.
At December 31, 2006, JC determined that the 2006 current service and

interest cost on the plan amount to P620,000. The expected and actual rate of
return on plan assets for 2006 was 10%.
What should be reported on December 31, 2006 as prepaid pension cost?
480,000.

2. An analysis of the records of a proprietor disclosed the changes for the year
2006 and the supplementary data listed below:

During 2006, the proprietor borrowed P1,000,000 in notes from the bank and
paid off notes of 600,000 and interest of 120,000. Interest of 60,000 is accrued at
the end of 2006. There was no accrued interest on notes payable at the beginning
of the year.
In 2006, the proprietor paid obligations of the business worth 400,000 and made
withdrawals of 250,000.
What is the net income or (loss) for the year 2006? (210,000).
3. True Value Company manufactured electric drills to the exact specifications of
various customers. During April 2005,Job 403 for the production of 1,100 units
was completed at the following costs per unit:
Direct materials
Direct labor
Applied factory overhead

P10
8
12

Finished inspection of Job disclosed 50 defective units and 100 spoiled

units. The defective units were reworked at a total cost of P500, and the
spoiled units were sold to an employee for P1,500.
What would be the unit cost of the good units produced on Job? P32.
4. On April 1, 2009 Geraldine began operating a service proprietorship with an
initial cash investment of P500,000. The Proprietorship provided P1,000,000 of
service in April and received full payment in May. The proprietorship incurred
expenses of P400,000 in April which, were paid in June. During May, Geraldine
drew P100,000 against the capital account. What was the proprietorship
income for the two months ended May 31, 2009 under the cash basis
1,000,000.
5. Green Company provided the following information with respect to its defined
benefit plan for the year 2006.
Projected benefit obligation
January 1
December 31
Contribution to the plan
Benefits paid to retirees
Settlement discount rate

3,000,000
3,500,000
600,000
500,000
10%

What is the current service cost for the year 2006? 700,000.