PRACTICAL ACCOUNTING ONE REVIEWERS / TESTBANKS1. In an audit of Selena Company on December 31, 2009, the following information is gathered: Balance per book 6,700,000 Customer’s check 200,000 Depositor’s note charged to account 650,000 Customer’s note collected by bank 120,000 Outstanding checks 800,000 Checkbook printing charge 2,000 Certified checks included in the outstanding checks 100,000 Deposit in transit 1,200,000 Interest earned on deposits net of 20% final tax 32,000 The adjusted cash in bank of Selena Company on December 31, 2009 is a. 6,050,000 b. 6,700,000 c. 6,000,000 d. 5,300,000 Balance per book 6,700,000 Customer’s NSF check ( 200,000) Depositor’s note charged to account ( 650,000) Customer’s note collected by bank 120,000 Checkbook printing charge ( 2,000) Interest earned on deposits 32,000 Balance per books 6,000,000 2. On January 1, 2009, Everlasting Company purchased serial bonds with a face value of P4,000,000 and a stated interest rate of 10% to be held to maturity. The stated interest is payable annually on December 31. The bonds are acquired to have an effective yield at 12%. The bonds mature at annual installments of P1,000,000 every January 1, beginning in January 1, 2010 and every January 1 thereafter. What is the market price of the bond investment on January 1, 2009? (Round off present value factors to 2 decimal places) a. 4,000,000 b. 3,776,000 c. 3,842,000 d. 3,876,000 PV of 1/1/10 cash flow (1.4M x .89) 1,246,000 PV of 1/1/11 cash flow (1.3M x .80) 1,040,000 PV of 1/1/12 cash flow (1.2M x .71) 852,000 PV of 1/1/13 cash flow (1.1M x .64) 704,000 Total 3,842,000 3. 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 Write offs 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 a percentage of credit sales. The accountant calculates the percentage annually by using the experience of the three years prior to the current year. Hpw much should be reported as allowance for doubtful accounts on December 31, 2009? a. 1,100,000 b. 800,000 c. 1,300,000 d. 1,250,000 Total writeoff (400 + 600 + 700) 1,700,000 Less: Total recovery (30 + 70 + 120) 220,000 Net writeoff 1,480,000 Divided by total credit sales 37,000,000 Doubtful accounts expense rate 4% Beg. ADA 800,000 Writeoff ( 650,000) Recovery 150,000 DAE (20M x 4%) 800,000 ADA, end 1,100,000 4. Esplanade Company sells a variety of merchandise to its customers. On December 31, 2009, the balance of Esplanade’s ending inventory account was P3,000,000, and the allowance for inventory writedown account before any adjustment was P150,000. Relevant information about the proper valuation of inventories and the breakdown of inventory cost and market data at December 31, 2009, are as follows: Cost Replacement Sales NRV Normal Cost Price Profit Bags 800,000 900,000 1,200,000 550,000 250,000 Shoes 1,200,000 1,200,000 1,300,000 1,100,000 150,000 Clothing 700,000 1,000,000 1,250,000 950,000 300,000 Lingerie 500,000 600,000 1,000,000 350,000 300,000 How much loss on inventory writedown is included in 2009 cost of sales? a. 50,000 b. 200,000 c. 400,000 d. 250,000 Lower of cost or NRV on item by item basis (550 + 1M + 700 + 350) 2,600,000 Less: Total cost 3,000,000 Required allowance for inventory writedown 400,000 Less: Beginning allowance 150,000 Loss on writedown 250,000 5. 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 400,000 650,000 000.000 Estimated ending inventory 1. 1/1 to 10/1 6.000 + 5.000 Less: Estimated COS (6.725.500.500. of which P1.000 – 800.000 Gross profit on sales 1.650.000 6. 2009.000. 1/1 to 10/1 5.000.000 to a business broker who helped find a suitable business and negotiated to purchase.000 8. Collection on accounts receivable.2M x (1-25%) 4.000 + 500.650.000 7.375/21. Katherine also paid P500.000 c.000 What is the inventory loss suffered as a result of the fire? a.000 1.000 Purchases (5. 200.200. 2010.300.5% + 23% +25%) / 3 or (5.500) 25% GAS (500. Katherine Company purchased 20% of the outstanding ordinary share capital of David Company for P4. 425.000 2.000 2006 2007 2008 Sales 6.000.200 – 400 + 650) 5.000.200.000 d.000 was paid in cash and P3. at cost 400. On January 1.000 6.000 Estimated fire loss 900.450. .500. 900.000.000.000 Payments to suppliers.000 payable with 12% annual interest on December 31. 825.000 b.000 Goods out on consignment at October 1.950.450.000) 5.000 GP % (27.000 Less: Cost of goods out on consignment 400.000 Sales (6. 1. At the time of the acquisition. 1.000 b.000 Average expenditures (25M / 2) 12. the fair value of David’s identifiable assets and liabilities were equal to their carrying value except for an office building which has a fair value in excess of book value of P2.000) Amortization ( 100. David’s shareholder’s equity on January 1.500.000.000 was realized from deposits and other investments during 2009.000.000 d.000.000 Cost 4.000.300. 4. which was finished late in 2009. 4. The entity had the following loans among Judith’s liabilities outstanding on December 31. were incurred evenly during the year. P40.5M . 2009. dated March 1.000) Carrying amount 12/31/09 4.560.000. 4. 8%.200. During 2009.000 c. During 2009.500. 2009: 12% note to finance construction of the hydro-electric power plant.000. 2009? a.800.000 d. What is the amount of interest that was capitalized as cost of new building? a.000. 20-year bonds payable issued at face value on January 1.325. 2006. Investments were made on the excess borrowings from this loan and income of P50. P10. P10. 4.000 c.000 Share in net income (6M x 20%) 1.000.000. 2. 2009. 2.200. 15%. David reported net income of P6.000 and an estimated life of 4 years.385. What amount should Katherine Company report as investment in associate on December 31.000 b.000.000.000 7.000 and paid dividends of P4. Judith Company Corporation constructed a new hydro electric power plant at a cost of P25.800. The expenditures for this facility. dated January 1. 2001.000 Dividends ( 800. 2009 was P13. 5-year mortgage note payable.000.000.000 that was unpaid as of December 31.900. To obtain cash quickly. 2009. 2009.4M x 12% x 6/12) 384. 84. The principal and the interest are payable on September 1.000 1.000 Less: Discount (6.7M Divide by the total Principal (40M + 10M) 50M Capitalization rate 9.000 8. Interest on BP (8% x 40M) 3. 100. 6.000 Total borrowing cost eligible for capitalization 1.000. Amanda Company received from a customer an 8-month.000 Loss on discounting ( 84.500.000 b. 2009.000 Less: Principal and interest receivable (6M x 10% x 2/12) 6.000 d. On January 1. Marla Company acquired new equipment on account on March 1. The bank charged a discount rate of 12%.385. The following information is available: List price 3.2M Interest on MP (15% x 10M) 1.000 note bearing an annual interest rate of 10%. What is the loss on note receivable discounting to be recognized by Amanda? a.100.000 General borrowings 235.000 c.000 Proceeds 6.4% Specific borrowings (10M x 12%) – 50.400.000) 9.016.5M Total 4. 2009 with a 5% discount if paid with in 15 days. Amanda discounted the note with East-West Bank on March 1.150.000 Maturity value (6M x 10% x 8/12) 6.000 Trade discount 20% . 384. 400. 010. Removal of old equipment 100. 2009. 2010.660. 3.425.000 Total cost 2.000 Direct cost (50 + 20 + 30) 100.800 -140) 2. as they had not arrived by December 31. 2009. The goods were still in transit on December 31.000 Cost of redecoration of office in connection with the purchase 250. Goods costing P450. 2009.760.900. The inventory control account balance of Luca Company at December 31.000 using the perpetual inventory system.000 Purchase price net of discount (2. The goods were received on December 30. The goods were shipped on December 28. 2009 was P4.000 on December 28.000 were purchased on credit FOB destination from Kimi Company on December 29.760.000 b.000 Insurance taken during delivery 20. 2. The sales invoice was raised and processed on December 31. 2009 FOB destination.000 d. 2009 but. Goods costing P300.000. what should be the cost of equipment? a. 3. 2009 and included in the physical count.000 were purchased on credit from Alistair Company on December 27. b. 2009.000 Repairs incurred while in transit 10.000 10. A physical count conducted on that day found inventory on hand worth of P3. c. 2009 FOB shipping point. An investigation of the discrepancy revealed the following: a.000 Transportation costs 30. were not included in the . 2.400.000 were sold on credit to Fernando Company for P500.000 Cost of installation 50.000. The purchase invoice was received on January 2. 2009. Goods costing P150. Net realizable value for each inventory item held for sale exceeded cost.000 If the invoice was paid on March 31.000 c. What is Luca Company’s adjusted inventory amount? a.600. 3.000 b.000.400. physical count.000.000 Goods in transit purchased FOB shipping point 150.650.000. f. 2009.000 c. 4.000 Uncounted goods sold FOB destination 300.000 Unadjusted perpetual balance 4.000) Damaged goods ( 350. The goods were dispatched from the warehouse on December 31. Luca Company sold goods costing P750. Balances of the property.000. The purchase invoice was received and processed on December 31.000 11.650. 2009 but the sales invoice had not been raised at that date. plant and equipment. Damaged inventory items valued P350.000 on credit FOB shipping point to Ruben Company for P1. 3.000 were discovered during the physical count.100.000 Unearned merchandise that had been received 450. 4. These items were still recorded as of December 31. Goods worth P200. e. Lene Company uses straight line depreciation for its property.000 d. 2009. On December 31. plant and equipment and related accumulated depreciation accounts on . 2009 but were omitted from the physical count records pending their writeoff.000 held on consignment from Jensen Company had been included in the physical count. d.000 Unadjusted periodic balance 3.000 Recorded goods sold FOB destination 300.000) Adjusted periodic balance 3.000 Unrecorded goods sold FOB shipping point ( 750.000) Adjusted perpetual balance 3.000 Goods held on consignment ( 200.650. The donated land is fairly valued at P1. Dinara paid P50.600.000. Depn. Dinara Company made the following property.850. plant and equipment expenditures: Land and building acquired from Samantha Company 7.000 c.000 Accum.100.000. 1/1 5.000 d. Depn.000 and P6.200.000 d. 3.000) Depreciation expense (SQUEEZE) 2. Depn.800.000 for the donated land transfer. plant and equipment during 2009.000 12. However. During the year.000 loss.600.000 Repairs and reconditioning cost made to the building 250. 2.000 Remodeling of office space including new partitions and walls 400.000 Accum.000 and on December 31. Dinara also received land from a shareholder to facilitate to relocation of its main offices in the city. 4.000 Reconstruction of sidewalk and fences 100. 2009 are P20. 2009 are P25. Dinara issued 50.000 respectively.000 ordinary shares of its P100 par value ordinary shares.200. machinery was sold for P3.000 that resulted in a P400. 3.000.000.000 and P5.000.000 and P6.000 b. During 2009. What is the depreciation expense for 2009? a. What is the total cost of the land acquisition? a.000 Special tax assessment 50. On the date of purchase.000 Accum. From sold equipment (5M – (3M + 400) (1.200. 12/31 6. the shares had a market value of P140 per share and the land and building had a fair value of P2.000 . 3. January 1.900.600.800.000.200.000 c.000. 1. 2.000.000.000 b.000. Lene did not purchase property. 3.000 In exchange for the land and building acquired from Samantha.800. 500.200.5M) 5.000 Total cost 3.000.000 FV of donated land 1.200.000 Accounts payable 950. 1.000 In-process research and development 2.000 Inventory 800. FV of land acquired by issuing of shares 2.000 780.000 1. Dominika Company purchased another entity for P8.800.000 b.000 Accounts receivable – net 1. 2006 Trade accounts receivable 840. plant and equipment – net 3.000.000.3M-1.500. 2.000 .800.000 Special assessment 50. a calendar year merchandising corporation: December 31.000. & admin.000.000. 2005 December 31.000 14.000 980.000 Accrued gen.000. 3.000 cash.000 Property.850.000.000.000 What is the goodwill arising from the acquisition? a.000.000 Assembled workforce 1. The following were taken from the incomplete financial data of Sam Company.000 Less: FV on net assets acquired (7.000 13.000 170. expense 130.000 Inventory 1.000 d.000 Goodwill 2.000 Acquisition cost 8. 700. The acquiree had total liabilities of P1.200.000 c. Dominika Company’s assessment of the fair value of the assets it obtained when it purchased the other entity is as follows: Cash 500. 000.000 Patent 425.000 Investment in Associate 550. net 1.000 Sales 3.630. 3.000) Depreciation 30.530.650.060.000) Income from investment in associates ( 170.000 The following additional information were made available: cash payments for selling and administrative expense was 900. payments for purchases.000 Gain on sale of equipment ( 50. Prepaid selling expense 150.000 Gross profit 1.000 Cost of sales 2.000 300.000 c. net of discounts of 70. 2.485. what is the amount of collections on trade receivables in 2006? a. 3.000 was sold for 250.000 b.000 1. 2.000 Net income 270. 1.000. There no acquisitions of investment during the year 2006.000 PPE.000 Purchase discounts ( 70.000.000) .470.165.000 Gross profit 1. expenses 960.500. Inv.285.000 Cost of sales: Beg. Equipment with a book value of 200.425.000.000 Purchases 1. There were no acquisitions of PPE and other transactions affecting net income during the period .225.000 130.000 Selling and Admin.000 d.000 was 1. If the company reported a net income of 270.420.000 720.000 Amortization of patent 125.165. 000 Accounts payable Accounts Receivable 1. The company’s experience shows that post-dated checks are eventually realized.000 being reversed for the purchased of a mini-computer which will be delivered soon.000 840.000.600 in payment of liabilities were prepared before December 31. 31. 2006 were not recorded in the books. Customer’s check totaling P4.825. Post-dated checks totaling P3.000 AB (130.200.000 sold .000 780. 2006 and recorded in the books.000) Selling & Admin (accrual) 960.000 PB 150.000 3. but withheld by the treasurer.420.000 3.530.000 15.000 70. 30. 2006 and charged to the cash account. Checks of P5.500 deposited with and returned by the bank “NSF” on December 27.000 950.000 from January 1 to 7 were pre-dated as of December 28.000 200.650. The cash account includes P20.000 980.000) AB (130. Ending inventory (1.400 are being held by the cashier as part of cash.750. P2.000 1. Personal checks officers. The balance sheet at December 31.000) COS 2.000 Cash paid – Selling & Admin 900.000 Property. An examination of the books disclosed the following: Cash sales of P12.000 AE 170.630.060.700 were “redeemed” on December . plant & equipment 1.000 depreciation 1. 2006 of Mall Company showed a cash balance of P91. 2005 to the date of fire totaled P641. 2007.37 at the time the fire occurred. Payments to vendors from December 31. The last physical inventory was taken on December 31.23 b. Accounts payable were P110.550 Balance per book 91.785.21 d.700) Correct cash balance 54. How much is the loss incurred by the company as a result of the fire? a.50. 275.18 at December 31. 43.88 Beginning inventory 210. the total cost of inventory items not destroyed by the fire amounted to P144. 69.42 on December 31. 2006 that destroyed some of the company’s inventory and accounting records.710. At the time. 216. 2006? a. total (at cost) amounted to P210.56 c. 72.195. As at June 15.600 Post dated check ( 3.000) Personal check ( 2. 2005.789.750 b.500) Undelivered check 5.51 .945.871.80. All sales are on account and account receivable were P135.150 c.56.882. 2006. 91.80 Purchases 658.055.000) NSF ( 4.400) Cash set aside for computer (20. 430. 54. 31. 2005 to the date of fire amounted to P876.789.750 d. Your client.33. Mills Corporation. requests your assistance in determining the amount of loss and in filing in insurance claim in connection with a fire on June 15. Almost all the merchandising items are sold approximately 30% in excess of cost. 2005 and P126.937.750 Cash sales for 2007 dated 2006 (12. but returned to cashier on January 2. 2006.009. You were able to obtain the following information from available records.668. How much is the cash balance that should be shown in the December 31.750 16.106. 1.945. the company sold 2.56 Goods based on counting 144.25 17. 99.000 Share rights (5/20 x P600.37 107. TGAS 869.18 876.000 Cost of new investment on exercise of rights Cash paid (4.000 shares of Boniface Co.000/6.50 658.500. Marcel Company classified the securities as available for sale.145.331. 105. On December 20.000 rights at P7.009.195.000 Cost of rights exercised (4. 2006? a. What is the average unit cost of the total investment as of December 31.000 Share dividend .937.562.710.882.106.33 Inventory loss 72.667 .42 135. 95.871. 2006.52 c. 98.57 / 130%) 652.51 848.000 5.000 rights / 4 x P105) P105.50 and exercised remaining rights. par P100 at P120 on July 2006.70 d.000) _____ Balance of original investment P575.000) ( 25. Marcel Company received a cash dividend of 1 share dividend at P10 per share on the stock and was granted to purchase 1 share at 105 for every 4 shares held.055.31 Cost of sales (848.000 x P25.75 Estimated inventory 216.331.57 126.000) 16.667 Cost of new investment P121. The share had a market value ex-right of P115 and the right had a value of P5. Marcel Company purchased 5.56 110.83 b.00 Upon acquisition P600.000 6.23 Accounts payable Accounts receivable 641. paid P35.000 Expense of drawing required by the patent office to be submitted with the patent application 17. and building of the machine. Cost Shares Unit cost Original P575.000 Fees paid to Government patent office to process application 24. developed a new machine that reduces the time required to insert the fortunes into their fortune cookies.500 d.667 7.000 New 121.200 in legal fees to successfully defend the patent against an infringement suit by Alliance Company. Trooper had a machine patented. Trooper Enterprises. 142. On January 1.667 1.697 . 2007? a.000 6. The following expenses were incurred in developing and patenting the machine: Research and development laboratory expenses P250.000 Legal expense to obtain patent 120. development.500 b.000 P99. 2007.52 18.500 On January 2. Trooper Enterprises. What is the carrying value of the patent in December 31. Inc. 60% of the time was spent in actual building of the machine 150. 2006.000 Wages and employees work on the research. Inc. Because the process is considered valuable to the fortune cookie industry.000 Metal used in construction of the machine 80.000 Total 696. 145.350 c.000 Blueprints expenses to design the machine 32. 178. 175. On January 1.000 30.000 c. Pearl provided for uncollectible accounts based on 1% of annual credit sales.000 Accounts written off 54.5) P161. Pearl changed its method of determining its allowance for uncollectible accounts by applying certain percentage to the accounts receivable aging as follows: Days past invoice date Percent deemed to be uncollectible 0-30 1 31-90 5 91-180 20 Over 180 80 In addition.830.500 Less: Amortization for 2 years (161. Total cost of patent (120 + 17 + 24.000 500.000 91-180 120.000 P5.000 Required allowance for bad debts – 2006 . 2005 and 2006: 2006 2005 Credit sales P6. 76.000 180. 62. Pearl wrote off all accounts receivable that were over 1 year old. 2005.000 Collections 5. 22.000 d. 2006.000 4. 78. 2005. Pearl Company began operations on January 1.000 31-90 160.000 90.350 19.000. On December 31.5 x 2/20) 16250 Carrying value P145.800.000 Over 180 50.000 b. The following additional information relates to the year ended December 31. 2006? a.000 none Days past invoice date @ 12/31 0-30 600.000 none Recovery of accounts previously Written off 14.000 What is the provision for uncollectible accounts for the year ended December 31.600. 000 to its ordinary shareholders.000 70. Market value of Bit Co. Cape Company purchased 25% of the outstanding ordinary shares of Bit Co. . For the following reasons.All other identifiable tangible and intangible assets of Bit Co.000 50. owns a tract of land with a current fair value of P900. The book value of Bit Co. What is the total amount of goodwill of Bit Co.000 21.000 P 78.000 160. earned evenly during the current year ended December 31. 2010 under the equity method? . Bit reported net income of P1. 2010.000 (d) P30.100. stock: .000 (b)P1. 2010. 20. 600.000 x 80% = 40.Bit Co. it declared and paid cash dividends of P315.000) 56.080. What amount of investment revenue should Cape report on its income statement for the year ended December 31.’s ordinary shares at December 31.000 Items 20 to 21: On June 30.000 x 1% = P 6.000 Accounts written off 54. at a total cost of P2. Cape Company’s financial year-end is December 31.000 more than its carrying amount.000.000 Bad debts P 62. Cape was willing to pay more than book value for Bit Co.200.000 x 20% = 24. has depreciable assets with a current fair value of P180. These assets have a remaining useful life of 10 years.000 (c) P120.620. have current fair values that are equal to their carrying amounts. based on the price paid by Cape Company? (a) P300.000 x 5% = 8.Bit co.000 Recovery 14.000 more than their book value.’s net assets on acquisition date was P7. .600. Also in the current year.000.000 120.000.000 Total P132. 201o0 is P9 million.000 Beginning balance (1% P5. 900. 2009.000 16. 2009.250.000 Less: Amortization (200.000 Total 816. 2009? (a) P772.500.On January 1. The bonds mature on December 31. For the year ended December 31.000 and paid cash dividends of P40.070. on December 31.000 / 10) 20.750 22. 2011 and pay interest of 8% annually every December 31 with a 10% effective yield.000 for P1. for P800.500 (b) P2. 2010 should be: (a) P2.000 x20%) 36. Under the equity method.221.In January 2009.000.000 Original investment 800.000 23. acquired 20% of the outstanding common stock of Davis Co. On December 31.000 24.000 (d) P2.000 (d) P 808. The book value of the acquired shares was P600.100. What is the proper carrying value of Farley’s investment in Davis at December 31. Pie Company purchased available-for-sale debt securities with face value of P2. (a) P202.000 (c) P800. This investment gave Farley the ability to exercise significant influence over Davis.000 Carrying value of Farley’s investment 808. 2009.500 (b) P200.000 (b) P780. .250 (c) P78.500 including transaction costs of P100. Farley Corp. Davis reported net income of P180.000.750 (d) P123.000 Add: Share in net income (180. The excess of cost over book value was attributed to an identifiable intangible asset which was undervalued on Davis’ balance sheet and which had a remaining useful life of ten years.000 Less: Dividends (40.000.000 (c) P2. the carrying value of Cape Company’s investment in ordinary shares of Bit Co.000 on its common stock.000 x 20%) 8. 4M x 2) P2.000 (b) P800.000 Rent receivable – 12/31/2006 P4.000 Rent received for 2005 and 2006 (1M + 1M) 2.000 Rent income for 2005 and 2006 (1.000 January 1.800.400.000. What amount of unrealized gain on these bonds should be reported on the 2009 statement of changes in equity? (a)P169. 2009. lessor.000 (d) P 0 Average rent (7M/ 5) P1.000 January 1.800.On January 1.617. Abe Company.400. 2009 1.000 27.000 January 1.000 for the purpose of leasing it. 2008 1.400 (b) P8.400.000 January 1. The lease term is 5 years and the lease payments are made in advance on January 1 of each year as shown in the following schedule: January 1. 2009 at a cost of P1. .600.700.000.500 25.800 (d) P7. On April 1.000 On December 31.000 (d) P179.351. What is the purchase price of the bonds? (a)P7.000.900.000.200 26. 2006. Depreciation is on a straight line basis. leases its equipment under an operating lease.000.000 (c) P400.648.382. Abe Company should recognize rent receivable at: (a)P1. 2007 1. The bonds acquired to yield 8%.600 (c) P8. Might Company purchased a tractor on January 1. 2006 1. The tractor is estimated to have a useful life of 5 years with scrap of P100. Sweet Company purchased 5-year bonds with face value of P8.450 (b) P199.000 and stated interest of 10% per year payable semi-annually January 1 and July 1. the bonds are quoted at 105. 2005 1.500 (c) P300. 000) .000/5) (300. Might entered into a lease contract for the lease of the tractor for a term of two years up to March 31.364) ( 13.636) Lease liability. and P10.000 (b) P735.000 minor repairs.000 + 13.000 Interest for 2007 (10% x 763.000 (c) P763. Mix’s incremental borrowing rate on the date of lease was 11% and the lessor’s implicit rate.000) Commission (120.000 Rental from April 1 to December 31.000 (d) P85.000 x 9) P450.000 28. Dec. Mix Company reported a capital lease obligation of P750. 2011. In its December 31.000 – 100.000 Interest for 2010 (10% x 750.000) Repairs ( 15.000) Transportation ( 10. 2009 and January 2. 2010 P90. Might paid P120.000 (b) P235. 2008. Payments of P90. 31. 2009 P90.000.636 Payment on January 2.000 monthly and the lessee paid P600. 2009. P15.000 Payment on January 2.000 transportation of the tractor to the lessee during 2009.000 commission associated with negotiating the lease. 2008 (750.636) (76. which was known to Mine.636) P763. Might Company should report net rent revenue for the year 2009 at: (a) P160. what amount should Mix report as capital lease obligation.000. 2009 balance sheet.000/ 2 x 9/12) ( 45.000) (75.000 Depreciation (1. the lease for one year.636.000) Net rent revenue P 80.500 Total lease liability. In the long-term liabilities section of its balance sheet at December 31. 2010.000 were made on both January 2. net of current portion? (a) P660. was 10%. 2009 (50.000 (c) P80.000) ( 15. The lease fee is P50. 2009 P750. December 31.636 (d) P742.600. net of current portion of P13. 2010.000 Long-term portion (remainder) 735.000 Total lease liability. 2009 to reflect adjusting events after the end of reporting period? (a)P1. a manufacturing plant was destroyed by fire resulting in a financial loss of P2. No allowance had been made against this debt in the draft financial statements.600. 2010 P735.000 4. 2009.000 Current portion (represented by principal payment on January 2.290. Pertinent account balances are: 2009 2008 Prepaid interest expense 200.000 29. On December 30.000 50.000 Bad debt loss 340.000 Total adjusting entries 3.000 (d) P690.750. Heidi uses the direct method to prepare its cash flow statement.000 (c) P2. Lease liability.600. 2009 P750.750.000 Loss due to fire 2.000 was declared and a contractual profit share payment of P350. 2010. Jen Company is completing the preparation of its draft financial statements for the year ended December 31. 2010.290. 2009. a dividend of P1. What total amount should be recognized in profit or loss for the year ended December 31.000 (b) P3.500.000 Contractual profit share payment 350. both based on the profit for the year ended December 31. On March 15. December 31.000 . 2010. plant and equipment 5. a customer went into liquidation having owed the entity of P340.000 30. On February 1.000 Property.600.000 was made.000 for the past 5 months. December 31. The financial statements are authorized for issue on March 31. 2010) P 15.000.000. 000 General and administrative expenses 6.100.200.000 500.600. beg. 500.000 1.000 (b) P1.000 Accumulated depreciation 900. Heidi allocated one-third of its depreciation to selling and the remainder to administrative.000 of inventory on December 31.000 300.565.000 Less: Prepaid interest.000 A Interest expense 800. 2009.000 Selling expenses 7.000 150.000 Income tax expense 1. based on physical count. What amount should Heidi report in its 2009 cash flow statement as cash paid for interest? (a) P1. Excel reported P70.500. 2009.000 Add: Prepaid interest.000.000 31.000 Deferred income tax liability 200. Included in the physical count were small equipments billed to a customer. 200.000 (d) P750.000 55. beg. .000 8.000 400.000 Total 1. 50.200.000 750.150.000 7.000 Interest payable.000 Allowance for uncollectible accounts 65.000 Accrued interest payable 300.000 Interest expense 800. end. Additional information was given as follows: a.000 Interest paid 1.850. 300. 50.000 400.000 (c) P1. FOB shipping point.300. end.000 in equipment during 2009.100. Unamortized bond discount 250.000 Interest payable.000 Heidi purchased P500. on December 31.000 Income tax payable 1.000 700.100.000.000 3.000 Amortization of bond disc. The invoice cost was P8. 2010. The shipment is ready for pick-up by the delivery contractor.620 32. 2009 was P1.600 (sales price). 2009.000 claim against the common carrier. Reed received the goods on January 6.000 before the following information was considered: . 2009.Goods shipped FOB destination on December 21. Reed filed a P50.620 (b) P85.600/ 1. Dec. shipping costs.120 Inventory as adjusted. The invoice cost of P45.225. d. On January 5. Reed notified the vendor of the lost shipment. shipped FOB shipping point 8. The invoice price was P50. 2009. The balance in Reed Company’s accounts payable account at December 31.000 Work in process job out for finishing 500 Goods out on consignment [(4.15) + 120] 4. 31 2009 P82. 2009 is: (a) P85. 2010. Goods out on consignment amounted to P4. 2009 from a vendor were lost in transit.000 and goods were shipped FOB shipping point on December 31.Goods shipped to Reed. . Jan. The invoice cost was P60. On December 28. 1.620 (d) P82.Goods were in transit from a vendor to Reed on December 31. P120 (markup is 15% on cost).000 and the goods were shipped FOB shipping point on December 28. FOB shipping point on December 20.500 C Inventory per count. . Work in process costing P500 was sent to an outside processor for finishing on December 30. 2009 from a vendor to Reed were lost in transit.000 was recorded by Reed. The correct amount of inventory on December 31. .500 (c) P82. c. The small equipments had a cost of P3. 2009.000. 2009 P70.000 had been billed at P5. 2009.000.000 Goods in transit. b. Goods were in transit from a vendor. goods shipped and billed at P35.000) Adjusted accounts payable P1. December 31 390.000 C 50.000 Accounts receivable.000 on December 20. 2009.000 Total liabilities – December 31 390. The returned goods were shipped by Reed on December 27.000 Total assets.000 C Accounts payable per book P1.000 Net income 110. January 1 130. 2009. for full credit. Following data reselected information on Marbel Company for the year 2009: Cash balance.000 Stockholders’ equity. December 31 880.000 (b) P150. January 1 190.000 Collections from customers 2.255.000 (c) P110.000 Stockholders’ equity – December 31 490.000 33. A P35.100.000 (b) P1.000 (c) P1.000 (d) P70.255.000) B 60.000 Total liabilities.000 The net income of Marbel for 2009 is: (a)P490.300. 2009 statement of financial position? (a) P1.000 Total assets.000 Accounts receivable.000 . December 31 360. What amount should Reed report as accounts payable in its December 31. 2010. January 1 750.000 (d) P1. 2009.000 credit memo was received and recorded by Reed on January 6.345.On December 27. a vendor authorized Reed to return.000 D ( 35.000 Cash balances.000 C Total assets – December 31 880.250. December 31 160. January 1 380.000 A ( 45..225.000 Stockholders’ equity – January 1 380. the net increase in stockholders’ equity is already the net income for the year.500. 2012. P100 (d) cash.000. The goods were included in the physical count.700. the journal entry to record replenishment should include credit (s) to the following account (s): (a) petty cash.000 Sales returns 200. cash short and over.000 and a net realizable value of 2.000 Inventory 2.Since there are no dividends declared and issuance of capital stock during the year. determined by physical count. Gross Sales 7. These goods were sold on FOB destination terms and were in transit on December 31.500. If a petty cash fund is established in the amount of P250.000 credit sale of goods costing 150.500. had a cost of 3.000 Inventory losses 120. The company uses the perpetual method to record inventory transactions.000. P95. Kayumanggi recorded a 200. How much should be reported as cost of goods sold for 2012? a. and contains P150 in cash and P95 in receipts for disbursements when it is replenished. Kayumanggi Company’s unadjusted trial balance on December 31. P75 (c) cash. P100 D Expenses (100 – 5) P95 Cash short and over (100 – 95) 5 Cash (250 – 150) P100 35. 34. 2012 appears below.000. No inventory writedown has been recorded for the year. 2012.000 Inventory on hand.800.000 .000 Cost of goods sold 5. 5. On December 15. P5 (b) petty cash. 000 d. 3.400.200.000.000 c.000. Inc.000 450.000.000.720.000 Share capital 4. Marikitka Corporation accounting records show the following numbers below at the end of each year: 2012 2011 Borrowings 3.000.000 b. 5.000 2.000 800.000 36.000. Depreciation charged for the current year was P200.000 Retained earnings 1. net of dividend of 700. 3. an equipment with original cost of P300.000 Accumulated depreciation 300.050.000 1.700. provided the following numbers for the preparation of the 2012 financial statements.000 vendor financing arising on the acquisition of a property.000 37.620. 3.000 were repaid during 2012 and new borrowings include 300. December 31 January 1 Fixed Assets 1.000 was disposed of for a gain of P50.900. The company has a policy to depreciate all their .000. Also during the year. 4. Net change in retained earnings comprises profit for 2012 of 900. 5.100.200. 5. Mirageme Holdings. How much is the financing net cash inflows that should be reported in the 2012 Cash Flow statement? a.000 The company purchased new equipment during the year.000 d.000 Old debts of 500. The movement in share capital arose from issuance of share capital for cash during the year.000 800.000. There was no dividend declared at the beginning and end of the current year.000 c. b. 150. the Company will report a P210. 2012? a. Allowance for doubtful accounts are estimated to be 2% of accounts receivable and is only taken up as an adjustment at year end. Maginoo Corporation had very risky business operations that started on January 1. 540.000.000 respectively as of December 31. 2012.000 39. 2012 balance sheet.000 38. 400. 450. 525. In the same year.000 b.000 (10% of which are by way of cash sales).000.000 d.000. On the December 31. the Company decided to pay in advance premiums on annual insurance policy for fixed assets amounting to P420. how much should be reported as deferred tax liability related to the prepaid insurance? . Should the accrual basis be used for the preparation of the income statement.000 insurance expense in 2012 and 2013. What is the amount of newly acquired fixed assets during the year? a. 500. 725. 2012 prior to any year-end adjustments. the Company management decided to write off customer accounts amounting to 200.assets in 5 years.000 b. 700. Sales in for the year 2012 totaled 120. 2012. The corporate income tax rate is 35%. The insurance premium was a tax deductible expense in the Company’s 2012 cash basis tax return.000.000 c.000 and 500.000 d. Makisig Corporation has an accounts receivable and allowance for doubtful accounts balances of 18.000 c. What is the balance in the Allowance for doubtful accounts on January 1. On July 1. 400.000 Increase in prepaid expenses 1.000 c. 171.850 d.000 . 2012. In its December 31.000 The Company should report as cash provided by operations in its cash flow statement for the year ended December 31.000 Decrease in accounts payable 3. 73.000 Forex Loss 22. 2012 at a.500. 169.500. 50. Inc.000 relating to an invention the patent of which was granted on June 1. 100.000 b. The following data are extracted from the books of accounts: Depreciation 32. has developed another breakthrough product which entails it to incur research and development costs amounting to 126.a. 147.500 b. Dynamo Research should report net patent at a. 2012 balance sheet. 51.000.500 c. 2012. Wowowee Corporation 2nd year in business posted a net income of 70. 0 40. The average patent life for the company is 15 years. 36. Dynamo Research. and its estimated economic life is 10 years.000. The patent right was granted to the company for 20 years.000 for the year ended December 31. The total cost of registering the patent amounted to 54.000.100.400.300 41. On March 2012.750 d.000 Dividends paid 25. 000.500. against the Company for damages in the amount of 15.000 and accelerated depreciation for income tax purposes was P1.200. 32.000.000. the amount that should be reported by the Company under current liabilities shall be a. 2012 financial statements. In the December 31.000 b.300.000 has been reported. 18. Also. 900.850.800. 2012.000. 14.000. Accounts payable. The following are adjustments to the amount of taxable income: Straight-line depreciation on these assets is P800.000.000.000. Contingent liability. 8% due 5/31/2013. 32. Accrued expenses. As at December 31.000. with tax payable of P1. 119. Deferred tax liability.000.000 42. 1. The tax return shows a taxable income of P5. The contingent liability represents the accrual for possible losses on a legal suit filed by Matodas Corp.000 d. 49.000 c.300. 64.000.000 d. with the Company paying 15. Cebu Fantastic Company would like to know the amount of its pretax financial income for the current year by taking adjustments to taxable income as per company's income tax return.000 for damages.000. P15.b. Bonds Payable.000 c. 1. The legal counsel of the Company expects that the litigation shall be settled in 2013.750.000. following are the liabilities of the Company: Promissory notes. 6% due 4/1/2013. 126. .500.000.000.000 43. Carino Milling Corporation ("the Company") operates a huge rice mill operation. recent developments suggest that the deferred tax liability will be reversed next year.450.400. 100.800. 800.100. During the year. 5. 4. 2.200. P800. 5.000.500.000 Accounts payable 140. Cebu Fantastic 's financial income subject to tax for the year should amount to: a. Accounts receivable. There were no adjustments between financial and taxable income. The corporate tax rate is 35%. Estimated corporate tax payable of 400. 2. What is the amount of current assets that company should show in the financial statements? a. Installment dates are due every March 1 and September 1 starting year 2013.Goodwill impairment loss of P500.000 worth of goods and services.000 may be deducted in the income statement but was not included as a deduction in the tax return.000 was received on interest on treasury bills that were not included in the income tax return.000 b.000 was charged to prepaid taxes during the year.000.000 for a 600.000 c.000 . Prepaid taxes 400. the company granted special payment terms to a customer that requires the latter to pay equal semi annual installments of 150.250.000 During the year.000 Other Assets 110.550. 5.000 b.700.000 d. The following accounts came from the adjusted trial balances of Davao Pacific Company at December 31.000 44. net 1. 2012: Cash 750. 060.235.700.000 The Company’s top Operations Managers and Finance department share equally in the use of office space.c. 2012: Capital Stock 700. 1. 1. The corporate tax rate is 35%. Likewise.000. Retained earnings 650. Cost of Goods Sold 2. Logistics and the rest of the Operations departments share in the plant operations space. 90.293.000 c. What is the amount of retained earnings that the Company should report as of December 31.300. The following accounts came from the adjusted trial balances of Iloilo Lines Company at December 31.000.000.000 46.000. 1.500 b.000 Rent for office space 1.000 Rent for plant operations 2. Operating Expenses 800.500 d.800.137.000.000. Premium on Capital Stock 350.000 Interest on bank loan 2. 2.200. Accumulated Depreciation 150.950. 2012: Legal and audit fees 1.000.000 d. Interest Income from Deposits. 1.000. 3.000 Loss on inventory shortages and pilferages 350. The following accounts were extracted from the books of Camarines Goods Company for the year ended December 31. 2012? a. . There were no adjustments between financial and taxable income. Revenue from Sale of Goods 4.00 45.100.000.196. Estimated corporate tax payable of was charged to prepaid taxes during the year. The Company’s cost of goods sold for the current year is a. 3.000 48. Sales returns increased this year to 2% of sales or 300. Mabilis Corp.050.800.000 47.000 c. 2. The following information is available from Bulacan Crispy Company's accounting records for the current year: Purchases 4.000 Premium on Capital Stock 3.000 The company gives out sales discounts to long term customers.000 Purchase discounts 150.000 Beginning inventory 1.000 in value.350.000 Cumulative translation adjustment (equity reduction) 2.800. Sales discounts granted for the year amounted to 250. provided the following information on December 31.000 Ending inventory 1. 4.700. at cost 700. 4.800. 5.000 Freight out 400.000 d.500.000 b.100. 3.650.000 d.600.500.000 . 4.000.000 Retained earnings (post closing or ending) 1.000 Cumulative unrealized gain on available for sale securities 600.000 b.650.What is the amount of general and administrative expenses that should be reflected in the income statement of Camarines Goods? a. 3.450.000.2012: Capital Stock 5.000.000 c.000 Treasury shares. 18.000 b.200. 8. 24. What is the ending Allowance for Doubtful Accounts account balance at the end of the year? a.000 .000 are written off as uncollectible. A company starts the current year with a 18.000 d.000 Receivables 49. 9. a. For monthly reporting purposes. Total credit sales for the year were 800.600.000 c. During the year.000. 26.000 b. 20.000 is recognized.300. The Accounts Receivable account at the end of the year was 600. bad debt expense is recognized based on 3% of credit sales.000 d. 7. During the year. At the end of the year.How much is the contributed capital that should be reported on the financial statement as of December 31.000 Credit balance b.000 in receivables are written off as uncollectible.000 account previously written off as uncollectible is actually collected. for financial statement purposes.300.000. 22.000 Credit balance c.000 c. 2012? a. receivables of 20. 15. bad debt expense of 26. Marilag Company starts the year with an allowance for doubtful accounts balance of 9. 9. Answer not given d.000 credit balance in its Allowance for Doubtful Accounts account. and a 2. 20.000 Credit balance 50.000 (credit). 22. the Allowance for Doubtful Accounts account is adjusted based on anestimated rate of 4% of ending receivables. 000.000. . Accounts receivable of 200. On December 31.000 52. During the year.000. and an Allowance for Doubtful Accounts account of 4. 24. 26.000 b.000 Allowance for Doubtful Accounts account (unadjusted) with a 2. the company collected a total of 2. a company has the following balances in the books: Sales 400. 12.000 d.000 credit balance. 20XX. During the year.000 c.000 d. How much bad debts expense should the company recognize at the end of the year? a. Based on experience.000 sales returns and write offs of 50. the company generated credit sales amounting to 2.000 c. A company reports Sales of 300.000. The company estimates that 4% of sales for the year will be bad. Mabilis company has a beginning Accounts receivable balance of 700.51.000 Accounts receivable 300. 16.8M with 100. the company estimates that 10% of its accounts receivable will be uncollectible. 16. how much bad debt expense should the company recognize at the end of the year? a.000 53. Given the above. 20. 14.000 b. 18.000 credit balance (unadjusted) as of the end of the year.2M. 000 54.000. At the end of the year.000 d. 1. 1. 1. During the year.000.000 with a corresponding Allowance for doubtful accounts of 60. Matipid company has an Accounts receivable beginning balance of 1.000 b. What amount should the company report for gross Accounts Receivable balance at year end? a. At the end of the year.000 worth of receivables already and estimated the uncollectible accounts per receivables aging report of 120. Makunat company has an Accounts receivable beginning balance of 1. How much is the Allowance for doubtful accounts balance as of the end of year? a.9M of it.000 b.000 55. the company extended credit to customers amounting to 5.000 c.5M with its corresponding Allowance for doubtful accounts of 130.000 d.000.At the end of the year. the company estimated future sales returns at 50.000 and uncollectible accounts of 100. 60.000.150. the company has written off 100. During the year.050. 120. 220.3M while collecting 3. the company extended credit to customers amounting to 5.9M of it.200.000. 180.3M and collected 3.000 and estimated the uncollectible accounts per receivables aging report of 100.000 c. 1. The ending balance of Accounts receivable before allowance for doubtful accounts should be .000. the company has written off already 200.100. Other information include: Factoring fee 2% Holdback Value 4% Calculate the loss of Mabait in this factoring transaction: a. Madugas accepted and took over the receivables subject to recourse for non-payment.000 .600.344.900.000 c. It is estimated that the fair value of the recourse obligation is 240. 6.000 d.000 b.000. 2. The weighted average time to maturity of the receivables is computed at 73 days. Mabait Corporation factored 8M of its Accounts Receivable to Madugas Corporation.000 b.700. Other information include: Factoring fee 2% Holdback Value 4% Interest Charge 11% How much cash should Mabait expect from the factoring transaction? a.a. 7. It is estimated that the fair value of the recourse obligation is 624. 7. 7. Malupeet Corporation factored 8M of its Accounts Receivable to Madugas Corporation.000 d. Madugas accepted and took over the receivables subject to recourse for non-payment. 2. 2.000 57. 2.000 56.800.696.000. 560.000 c.520.720. 450.000 Sales on account 4.500. Bayani Corp has the following information relating to cash at December 31.000 c. 480.000 . 950. 1.000 Merchandise returned to suppliers 70.000 Bad debts written off 50.000 Deposits in transit 700.500.000 Notes given to creditors 250. 2011: Bank statement balance 2.600. 720.200.000 Payments on notes payable 50.000. The company records showed the following balances and transactions at year end: Collections received 3.b. 900.000 Provision for doubtful accounts 90.000 d.000 c.000 58.000 Checkbook balance 2.000 d.000 Discounts allowed by creditors 260.000 Purchases on account 3. 880.000 b.000 Discounts given to customers 25.000 Merchandise returned by customer 25.000 Cash 59. 880.000 Payments to creditors 3.900.000 Compute the Net Accounts Receivable at year end: a. 100. 9. 2011 Balance Sheet should report cash as: a.000.000 c. 3.000 d. There is also a check drawn by company to the order of petty cash custodian amounting to 3.000.000 c.200 Digging deeper into the records.500. 3.000 b.800 .500.000 60. 11.000 b.Outstanding checks 200. 5. 10. 3. 3. you realized that there is a Manager's check returned by bank marked "NSF" for 1.500 Paid vouchers: Transportation 200 Gasoline 150 Office supplies 250 Postage stamps 200 Due from employees 1. The petty cash fund account of Magiting Company showed the following: Coins and currency 5. What is the amount of the petty cash fund for balance sheet purposes? a.000 d.000 Bayani's December 31.400. 000.000 with a check for 30.000 in is the form of paid vouchers) 50.000 still outstanding as of balance sheet date.400. Diego Bandido Company's accounting data showed the following information as of December 31.000 c.000 Advances to officers and employees 200. Cash in Metrobank as per bank statement of 2. Unrecorded vouchers paid out of collections and IOUs signed by employees taken also from collections amounted to 40. The undeposited collections includes a postdated customer check for 50.000 worth of paid vouchers.000 Petty cash fund (of which 100.000 Checking account in HSBC 3.500.000 check still outstanding per bank statement.265.000 Deposit in a bank closed by BSP 500.000 d.950.635. The petty cash fund has 5.000 respectively.000. 4.000 The HSBC checking account has 250.350.2011: Petty cash fund of 20.000 b. The correct cash balance that should be shown in the balance sheet is a.000 and 10. The current assets section of the balance sheet of Gregorio Corporation consists of: Bond sinking fund cash 1. 4. 4.945.600.000 and undeposited receipts amounting to 1.595.000. 4.000 Currency and coins awaiting deposit 1.61. what amount should cash on hand and in bank . There was a Bond sinking fund amounting to 900.000 62. Given the above data. 000 There was a compensating balance of 500. The vouchers paid should be recorded as expenses and the IOUs should be shown as advances to employees.000 Time deposit (due February 1. 63.690.690. Cash in bank HSBC 2.000 Petty cash fund 50.000 Undeposited receipts (1.that should be reported on the December 31.320. Malvar Knives Company had the following cash balances as of December 31.000 Solution Petty cash fund 20.670.400.350.000 on the HSBC account maintained against a short term borrowing arrangement made at the end .000 is deducted from the cash in MetroBank because the cash balance given is per bank statement.30.770.000 Revolving fund 100. 4.000 . 2005) 500.400.000 should not be included as cash and should be treated as accounts receivable.740. 3. 2011. 3.000 b.000 Cash in Metrobank (2. 2011 balance sheet? a.000 Total cash on hand and in bank 3. The outstanding check of 30.50.000 d.000 ***The postdated customer check of 50. The bond sinking fund should be shown as noncurrent investment.000) 2.000) 1.350.000 c.000 . 3. of the year. it is not included in the cash balance. 2011? a. 64.000 .050.000 c. The compensating balance should be shown as "cash held as compensating balance" as a current asset because the related loan is short-term.000 b.000 Total cash 2. 2. The 10. What total amount should be reported as cash as of December 31. 2. The term of the time deposit is given as 6 months hence it is not included in the computation as well.500. 2.000 Revolving fund 100.050.000) 1. Petty cash fund was all disbursed out by the end of the year including a 10. 2005 coming from a half year term. 2.000 Petty cash fund 50.550.900.000 ***Since the compensating balance is not withdrawable.040. Terms of three months or less is needed for this to be included as cash. Time deposit is due on January 1.000 Solution Cash in bank (2.000 cash advance is already taken up so this is just a nuisance data that should not be included in the computations. Until the short term loan is settled the company cannot withdraw the compensating balance.000 cash advances to employees coming of the revolving fund.400. Plaridel Publishing Company had the following trial balances at December 31.000 d.2011: .540. 750.000 Cash on hand 250. . the total cash and cash equivalents should be a.000 Cash on hand 250.000 Cash in bank includes P500.250.Cash in Citi 3.000 Treasury bills 500. It should be part of cash if not legally restricted. 2011 balance sheet.000 of compensating balance against short-term borrowing arrangement which is not legally restricted as to withdrawal by the company.500.250.250. it should be treated as other current or non-current asset depending on the loan or bank services it is related. Otherwise.000 c.750.500. 3. Also. There was no mention of any contrary statement for the Treasury bills so it should be assumed as maturing within 90 days.000 ***A compensating balance is the bank's minimum balance requirement that must be maintained in the company's bank account for servicing a checking or demand deposit account or in connection with a borrowing arrangement with the bank.000 b.000 Total cash and cash equivalents 4.000 Special Time Deposits 500. In the current assets section of Company's December 31.000 Treasury Bills 500. 4.000 Solution Cash in Citi 3.000 d. 4. 3. the special deposits account pertains to cash legally restricted for machinery upgrades that is expected to be disbursed in 2012. 700.000 The restricted cash in bank account is opened specifically for building construction expected to be disbursed in Q1 2012.000.000 Treasury bills 3.000-100. 6. 2011? a.300. 8.000 ***The cash in bank set aside for payroll is included in cash because it is for the payment of current liability.Checking 2. The accountant of Bonifacio Holdings presented the following account balances as of December 31. 6. 6.000 Cash in bank .000 Total cash and cash equivalents 6.000 Treasury bills 3.restricted 2. 2012. what amount of "cash and cash equivalents" should be reported as of December 31. .000 Solution Cash in bank . If you are the Accountant of Bonifacio Holdings.Savings 700.2011: Cash in bank .600.Checking 2.000.000 Cash in bank . dated January 5. 2012.000 d.600.500.000 Cash on hand 300.000 check payable to Bonifacio.600.000 Cash on hand (300. The cash on hand includes a P100.500. The Treasury bills are purchased December 1.65.000 c.000 Cash in bank .000 b.Savings 700.000) 200.000. 2011 and due on February 28. 000. how much should be reported as "cash and cash equivalents"? a. 2004.Cash on hand should be reduced by the postdated check. 66. but was mailed only on January 15. dated and recorded on December 31.000 . Treasury bills are classified as cash equivalent because the term is within the 90-day rule. The Accounting Department produced the following data for Aguinaldo Company as of December 31. 980. payable to supplier amounting to 20. The cash in bank restricted for building construction should be classified as a noncurrent investment hence not included in the computation. 1.000 Collectibles balance 1.000 b.960. 1.000 Cash in sinking fund 1.000 c. An investment qualifies as a cash equivalent only when it has a short maturity of three months or less from the date of acquisition.980. The PDC amount should be considered still as accounts receivable. 2011.000 Petty cash fund balance 10. 960. On December 31.000.000. 2012.000 There was also a check drawn on Thor's account. 2011: Checkbook balance 950.000 d. 000 Petty cash fund 50.000 Solution Checking Account (4.450. What amount should be reported as "cash and cash equivalents" at the end of the year? a.000 The time deposit is held for one year and is maturing on March 15.000 dated January 15. On December 31. 2011.000) 4.500. The cash in sinking fund should be considered aa noncurrent investment because it is set aside for the payment of noncurrent liability.000.2012.500.500.000 ***Undelivered cheques as of closing dates should be restored to the cash balance by debiting cash and crediting accounts payable.000 Add: Undelivered cheque balance 20.550. 9. 5.000 d.450.000 b.450. Mabini Wheelchairs. 5. 2011. had the following data related to its cash position: Checking Account Balance 4.000.000 .000 Adjusted cash balance 980.000 + 50.000 Petty cash fund 50.Solution Checkbook balance 950. There was a check amounting to P50.000 Time deposit 4.000 c. Inc.000 Savings deposit 1.2012 in payment of accounts payable that was recorded and mailed on December 31. 9.000 Petty Cash fund 10. 67. the trial balance of Diego Bantay Company reveals the following account balances: Petty cash fund .000 Current account .Citibank 3. 2011 balance sheet should report "cash and cash equivalents" at . the Duetche Bank time deposit is set aside for plant expansion in February 2012. in this case. The December 31. 68.JP Morgan 2.000. it is classified separately in the current assets as marketable securities. it should be treated as cash equivalents.000 and an employee check for P5. 1 year. you should remember that the point of reckoning is the original maturity period which is.000 ***You have to catch the check of P50.Duetche Bank 2. On December 31. Should the original term is 90 days or less.000 dated January 31. 2005.000 that was drawn against CitiBank current account dated and recorded December 29. The time deposit is a noncash equivalent because the term is one year and because of that.000.000.000 is added back to checking account because it is a postdated check to a supplier delivered only on December 31.000 Total cash and cash equivalents 5.HSBC (overdraft) (250.000 Revolving fund . although the time deposit is due within 90 days from balance sheet date.000 Current account .500. And lastly.Finance 40.000) Money market placement .000 Time deposit . 2012.000.000 Note that the petty cash fund includes unreplenished December 2011 petty cash expense vouchers for P10.Savings deposit 1.Operations 20. In this case.2011. There's a check for P45. 2004 but delivered to payee on January 15. 000.000 .000 Solution Petty cash fund (40.090.000 d.045.a. time deposit and treasury bills in the problem given.000 ***The bank overdraft in the HSBC is should be classified as current liability.060. b. On the statement of cash flows in which the operating activities section is prepared under the indirect method. Here is a tip.5. however. Reduces reported net earnings and involves an inflow of cash. Is a direct inflow of cash from investing activities. Reduces reported net earnings but does not involve an outflow of cash.095.000 Total cash and cash equivalents 5. Is an inflow of cash to a reserve account for replacement of assets. CASH FLOWS 69.000 Current account . c. If there is no contrary statements regarding money market placement. it is a noncash expense item and as such does not affect . d.000 Revolving fund 20. depreciation is treated as an adjustment to reported net earnings because depreciation a.000 .000) 3. Note that money market placement is included.090. Duetche Bank time deposit should be noncurrent asset because it is set aside for plant expansion on a future date.000 c. 3. 5.10.000) 25.000 b.090. ***Depreciation is deducted in the calculation of net earnings.000 Money market placement JP Morgan 2. 3.000. they are to be considered as short-term investment of three months or less.Citibank (3.000 + 45. 5. cash. Therefore, it would be added back in to net earnings on the statement of cash flows when using the indirect method. 70. The amortization of bond premium on long-term debt should be presented in a statement of cash flows (using indirect approach for operating activities) as a(n) a. Addition to net income. b. Deduction from net income. c. Investing activity. d. Financing activity. ***If bonds are sold at a discount or premium, the interest expense for the period will differ from the change in cash resulting from payment of interest expense. When the premium is amortized, the interest expense included in income determination is not as large as the interest paid or becoming payable in the period. Because the cash outflow is larger than the deduction in arriving at net income, a deduction from net income is necessary to determine cash provided by operating activities (when using the indirect approach of presenting cash flows from operating activities). 71. A loss on the sale of machinery in the ordinary course of business should be presented in a statement of cash flows (using indirect approach for operating activities) as a(n) a. Outflow of cash. b. Addition to net income. c. Deduction from net income. d. Inflow and outflow of cash. ***The loss decreases net income, but does not reduce cash. Therefore, the loss must be added back to net income to determine cash flows from operating activities. 72. Would the following be added back to net income when reporting operating activities’ cash flows by the indirect method? .......Excess of treasury stock acquisition cost over sales proceeds (cost method) ................... Bond discount amortization A. .............Yes ............................................................Yes B. .............No ..............................................................No C. .............No ..............................................................Yes D. .............Yes .............................................................No ***Under the indirect method of reporting cash flows from operations, income from continuing operations is adjusted for changes in operating-related accounts and noncash expenses, revenues, losses, and gains. Noncash items that were subtracted in determining net income must be added back, including amortization of bond discount since it is a charge against income but does not increase cash. The excess of treasury stock acquisition cost would not be added back to net income when determining operating activities' cash flows because it represents a financing activity. 73. In a statement of cash flows in which the operating activities section is prepared under the indirect method, a gain on the sale of an investment in available-for-sale securities should be presented as a(n) a. Inflow and outflow of cash. b. Outflow of cash. c. Addition to net income. d. Deduction from net income. ***Any gain on the sale of an investment other than trading securities should be included as part of the total proceeds reported in investing activities. However, this gain has been included in net income. Under the indirect method, net income is adjusted for items which affect income but not cash. Therefore, the amount of the gain must be deducted from net income to remove the book gain from the cash flows from operating activities, thereby avoiding double counting the gain. 74. In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for a. Financing activities. b. Lending activities. c. Borrowing activities. d. Operating activities. ***Interest payments to lenders and other creditors are expenses of the company; hence, they are categorized as cash flows from operating activities. 75. In a statement of cash flows, payments to acquire debt instruments of other entities (other than cash equivalents) which will be held until maturity should be classified as cash outflows for a. Lending activities. b. Investing activities. c. Operating activities. d. Financing activities. ***Investing activities include making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment. Cash flows from transactions in held-to- maturity and available-for-sale securities are to be classified as cash flows from investing activities. Conversely, amounts related to securities held for trading are classified as operating activities. 76. Cheesecake Manufacturing Co. purchased a 3-month Treasury bill. In preparing Cheesecake’s statement of cash flows, this purchase would a. Have no effect. b. Be treated as an outflow from financing activities. c. Be treated as an outflow from lending activities. d. Be treated as an outflow from investing activities. ***On the statement of cash flows, the purchase of a 3-month Treasury bill is an acquisition of a security; however, it is considered a cash equivalent and thus would not be included in investing activities. Take note that the exchange of cash for cash equivalents would result in no net change in cash and cash equivalents. ... No ... Lending activities.. plant..... Financing activities...... and equipment and other productive assets should generally be classified as cash inflows from a.. Financing activities...... which is a non-current asset... Operating activities.... ....... .. .. d.. plant.... Investing activities include making and collecting loans. Financing activity A... plant... Investing activity . In a statement of cash flows... ... c. The purchase of treasury stock would not be classified as an investing activity because treasury stock is a SHE item............ .. Yes ***Transactions which involve either an outlay of cash for treasury stock or an inflow of cash from the reissue of treasury stock shall be reported as a financing activity.... ***Involved here is PPE.. d.... as well as acquiring and disposing of debt or equity instruments of other entities..... and equipment and other productive assets.. proceeds from issuing equity instruments should be classified as cash inflows from a..... Selling activities. No B. b... Receipts from sale of property..... b........... 78... The purchase for cash of treasury stock should be presented in a statement of cash flows as a(n) ........ Yes .....77..... Investing activities.. receipts from sale of property.... c. No D...... In a statement of cash flows. Operating activities......... Investing activities.... 79.. Yes . Yes C.. property... No .. and equipment and other productive assets are categorized as cash flows from investing activities. .... .... The retirement of long-term debt by the issuance of common stock should be presented in a statement of cash flows as a . Yes ..... In a statement of cash flows. No D...... Investing activity A.. I and III.. 81.... No B. Interest payments on mortgage is an expense (hence operating). Payments to retire mortgage notes.. Yes . 80.... Dividend payments are included in cash outflows from financing activities.. Yes .. ***Payments to retire mortgage notes are considered cash outflows from financing activities. a.. Interest payments on mortgage notes are included in cash outflows from operating activities because these payments are expenses and included in the determination of net income. II.. and III. Financing activities include obtaining resources from owners and providing them with a return on.............***A SHE item........... I. . Dividend payments. Yes C. II.. which of the following items is reported as a cash outflow from financing activities? I..... d....... c..... No . I only.. while dividend payments affect SHE........... Financing activity .. their investment.. and a return of...... Proceeds from issuing equity instruments are specifically identified as cash inflows from financing activities..... ***Mortgage Note is a long term liability......... Interest payments on mortgage notes... No .... ....... II and III... ... III.. b........... ...................000 d......000) ***The answer is 260....... P870........’s accounting records for the year ended December 31...... P230.....000 Add(Deduct) Rent received .000 b..000 Rent received ....... NO and NO B.. P870.... 2009: Cash received from customers ......... Dividend payment is not included because it is a SHE item and therefore included under financing activities.................000) Taxes paid . (110............... 30........000 c..000 Net cash flow provided by operations for 2008 was a...000 Solution: Cash received from customers ........... The following information is available from Sand Corp..... .... NO and YES ***Financing and investing activities which have no effect on cash flows shall be shown either in a separate schedule of noncash financing and investing activities or in narrative form in the footnotes..... YES and NO C.. not in the body of the statement.........000 Cash paid to suppliers and employees ... (510...... 82.................. P260............ 10.... P220.000 Cash dividends paid ..... 110........D.... YES and YES A.000...000 Taxes paid ........000 Cash paid to suppliers and employees .. P250... 510..... 10......................... ...........75..........700 c.................... .......75....100 Increase in Accounts Payable...700 The increase in AR is deducted from net income because it indicates that cash collected is less than sales revenue................ P75........... The increase in the allowance account is added to net income because it reflects an expense (bad debt expense) which was not a cash payment.(3.200 ..1...100 Decrease in Prepaid Rent... 500 Prepaid rent expense ... P72.. December 31 Accounts receivable ..........500 Net Cash from Operating Activities is...........500 . 9.. January 1 ....... The decrease in prepaid rent is added because it too reflects an expense (rent expense) which was not a cash payment (it was an allocation of previously recorded prepaid rent)........................ P75.....................500 Allowance for U/A ... Mademoiselle Co................300 d................. 400 . Net cash provided by operating activities in the statement of cash flows should be a........ 11..................... P11.000 Add(Deduct) Changes in Working Capital Accounts: Increase in Accounts Receivable.100 Accounts payable ..... 6. has provided the following 2009 current account balances for the preparation of the annual statement of cash flows: ACCOUNTS .200 Mademoiselle’s 2009 net income is P75.........500 Net Income..............2.700 b................ Finally.. the increase in AP is added because it also represents an expense (cost of goods sold) which was not yet paid.........000.... P74...............83....700 ........................... P14..... 4..000) Increase in Allowance for Uncollectible Accounts.. ...000) Total cash used in investing activities.000 b........000 cash which was borrowed from a bank..000 c.’s transactions for the year ended December 31......84.000 cash which was borrowed from a .. Purchased real estate for P425..000......000)....000 The bank borrowing (P550.. Paid dividends of P600. P375.000 cash.... Romantic’s net cash used in investing activities for 2009 was a. Paid P450.000 d.(550..000..000 toward a bank loan. and bank loan payment (P450........ P675. included the following: Purchased real estate for P550. 2009.. 2009.....’s transactions for the year ended December 31... dividend payment (P600.500.000) Sale of investment securities..000 toward a bank loan.000 Purchase of machinery and equipment.. Issued 500 shares of common stock for P250....... P175........(125.000). Matatag Corp... Issued 500 shares of common stock for P250..000).. P50.. 85... Sold available-for-sale investment securities for P500....000) are financing activities. Romantic Corp...000 cash. issuance of stock (P250.175....000. included the following: Paid P450.000..... Purchased machinery and equipment for P125.. Purchased machinery and equipment for P125.000 Purchase of real estate.... ..350... P52....000 Extraordinary loss reported.000 Accumulated Depreciation..21......000....... Sold available-for-sale investment securities for P325. P31..75.................48........ P500......425.. P750..000 c.................000 Net book value...........................000 decrease d.........000.000) Issuance of 500 shares of common stock...250........ Hollyfield received a cash settlement from the insurance company and reported an extraordinary loss of P21.... The building cost P100........000 increase Building Cost........................majority stockholder.......... Matatag’s net cash used in financing activities for 2009 was a...........000 d.......000 86. In Hollyfield’s 2010 cash flow statement.....100............52....000 increase b.000 Payments for bank loans..(450..000) Advances from Stockholder (used to buy real estate)...000........... the net change reported in the cash flows from investing activities section should be a a..... a tornado completely destroyed a building belonging to Hollyfield Corp.................. P1...000 decrease c...000 at the time of the loss.... Paid dividends of P300... In 2010..............000 and had depreciated value of P48............ P10...... P75..............000 b..000 Dividends paid this year. P21.000 .000 Net cash used in financing activities is.......(300......... ....... What was La0 Tze’s cash balance at the end of the year? Answer: P208..... During 2012.000) Net cash provided by financing activities... Inc....P27....000 and proceeds of P40................P250............000 Add: Beginning cash balance.P351. La0 Tze’s cash balance was P27......000 ========================================== 88. there was a sale of land that resulted in a gain of P25.... and add the beginning cash balance... engaged in the following related party transactions: ...... Net Cash provided from Operating Activities.P181........ Pampanga’s Good.... had net cash provided by operating activities of P351. net cash used by investing activities of P420.Net cash flows from investing activities is 31.......... 87. investing......... La0 Tze Co........(P420...000........................000..000 Net Cash used from investing activities. and cash provided by financing activities of P250...000 were received from the sale........000 ---------------------------------------------------------------------------- Net change in cash. and financing activities........000 ---------------------------------------------------------------------------- Ending Cash Balance.000 To calculate the cash balance at the end of the year.........000.... During the year......000...P208....000 on January 1. you should combine the effects of the changes in operating.. 000.150.000.000 d.000. 12.200.000.000.000.510 Which of the two transactions would be disclosed as related party transactions in the Company’s 2012 financial statements? a.000 while Accounts receivable balance is net of accounts with credit balances of 650.000 90. 12. Notes receivable > 3. Neither transaction 89. The following unadjusted account balances have been reported on the financial statements by Tarlac Trucking Company on December 31. . The Key management compensation transaction only b Both transactions c. Notes receivable includes discounted note of 800. 14. Petty cash fund > 70. Notes receivable 3.000. Accounts receivable > 5. Petty cash expenses have not been replenished for 20.000.000.950.000. 13.Sales to affiliated companies >> 3. Inventory > 2.560.225.000.000.000. Deferred charges > 350. 2012 should be a.000. The total current assets for the Balance Sheet as of December 31.000. 2012: Cash in bank > 4.850. The following unadjusted account balances have been reported on the financial statements by Marilag Biscuit Company on December 31.000.000 b.730 Top management personnel compensation >> 2. Cash in bank is net of a checking account’s bank overdraft amounting 250.000.000 c. The Sales to Affiliated Companies transaction only d. 2012: Cash in bank 4. 000 91.300.400.700. 13.000.000. 8.000.400.000. 7.000. January 1 5. Notes receivable includes discounted notes of 800.000 c.000 d.000 b. Notes payable 4. What amount should the Company report as cost of goods sold on its year end Income Statement? a.000. Accounts payable 2.000.000 Loss on inventory writedown 1. 2012 should be a.000. The following information is extracted from the accounting records of Great Year Company's in the computation of cost of goods sold: Inventory. 8.000 while Accounts receivable balance is net of accounts with credit balances of 650.000. December 31 1.000. 9.Accounts receivable 5.500.000.000 b. Inventory 2.000 . Accounts payable is also net of accounts with debit balances of 500.900.200.000 d.500.000 c.600.900. 9. Cash in bank is net of a checking account’s bank overdraft amounting 250. Accruals 1.000 Purchases 7.400.000. 8. 11.500.000.500. The total current liabilities to be reported as of December 31.000 Inventory. Deferred charges 350.000 There was unexpected inventory obsolescence of recently purchased stocks due to technological advances that prompted the Company to writedown some of its inventories. 2010.000 6 years On January 1. . 536.667 b. the management of Milan Company determined that a revision in the estimate associated with the depreciation of plant facilities was necessary. plant and equipment. In its audited financial statements for the year ended December 31. plant and equipment and consequently hired independent valuation experts who can certify the remaining useful lives of the property. 2011.000.000. the Company used the following original cost and useful lives for its property plant and equipment.000. 2012. Management has determined from recent appraisal reports that the expected remaining useful life of the facilities is only 10 years and the estimated residual value should be increased by 200. 633.000 10 years Furniture 3.667 93. purchased on January 1.333 d.000 12 years Machinery 9.000 and an estimated useful life of 15 years.500. had been depreciated using the straight-line method with an estimated residual value of 500. for 7. Marangal Furnitures Corporation was incorporated on January 1. Building 12. The facilities. 293.000. On January 1.92. The results are as follows: Building 10 years Machinery 7 years Furniture 4 years The Company uses the straight line method of depreciation.333 c.000. 586. What is the depreciation expense that should be recognized for the year 2012? a. 2009. 2012 the company decided to review the useful lives of the property. Kuliglig Company provided the following income statement information relating to the current year: Net income 4. 5.200. 1.000 b.300.400.200.000 The amount of recognized gains and losses for the current year should show net amount at a. 5.050. 4.000 c.000 c.400.000 Surplus on revaluation 1. 1. 1.475. 2.000 98.000 b. 2. 1.000 Debit balance foreign currency translation adjustment 75.250.100.742.000 Accounts receivable at December 31 1.000 .000 Inventory turnover 5 to 1 What was the gross margin for end of year? a.175.528.200.What is the amount of depreciation expense for 2012? a.857 97.400.571 d.000 b.000 Unrealized gain on available for sale securities 350. Selected information from the accounting records of Mabini Company is as follows: Accounts receivable at January 1 1.500. 2.000 d.000 Account receivable turnover 6 to 1 Inventory at January 1 800.000 Inventory at December 31 1. 2012? .000 c. dated January 2.000 d. 5. 350.500.000. Treasury bills were purchased on November 30.000 b. 2013.000 100.000 Cash on hand . On January 1.000.400.reserved 2. the Company purchased plant equipment at a cost of 3. 2013.000 d.000.000 Treasury bills 2. the newly hired accountant made an error not to recognize depreciation in the Company’s financial statements. the error was discovered by the auditors. What should be the Depreciation expense on this machine for the year 2012? a.000 99. 2012: Cash in bank . What amount should be reported as "cash and cash equivalents" on December 31.000 check payable to the Company.000 Cash in bank .c. During the preparation of the Company’s 2012 financial statements. 2009.payroll account 2. 2011. 5.000 for its expanding provincial operations. 700. Madel Corporation was established on January 1. 2012 and are due on March 1.000 The cash on hand includes a 100.Kaperahan Corporation had the following account balances on December 31. 2.525. It is the Company policy that this equipment should be depreciated on the straight line method over a five-year period with no residual value. In the year 2011.current account 4. 1.500.675.000 Cash in bank .400. The cash in bank reserved is established for the purchase of custom-made equipment that is expected to be consummated in 2012.100. 8. 8.a. 10.900.000 . 10.800.000 d.000 b.900.800.000 c.