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SUCCEED REVIEW CENTER

PRACTICAL ACCOUNTING PROBLEMS 1
Final Pre-Board Examination
Multiple Choice: Select the best answer from the given choices and write it down on your answer sheet.
1.

On January 1, 2014, Jamie Company provided the following data in connection with its defined benefit plan:
Fair value of plan assets
Projected benefit obligation
Prepaid/Accrued benefit cost

10,000,000
(13,000,000)
( 2,000,000)

Selected transactions affecting the plan for 2014 are the following:
Current service cost
Past service cost
Contribution to the plan
Actual return
Benefits paid to retirees
Decrease in PBO due to changes in actuarial assumptions
Remeasurement gain on plan assets
Present value of benefits settled
Settlement price

2.

3.

4.

5.

6.

7.

2,500,000
800,00
3,100,000
1,500,000
3.000.000
400,000
500,000
900,000
800,000

What is the 2014 benefit expense?

a. 3,500,000
b. 3,600,000
c. 3,100,000
d. 4,500,000
Lauren Company grants 150 share options to each of its 500 employees on January 1, 2014, and exercisable starting
December 31, 2016 for a 2-year period. Each grant is conditional upon the employee working for the entity over the next
three years. The entity estimates that the fair value of each option is P40. On the basis of weighted average probability,
the entity estimates that 20% (100 employees) of the employees will leave during the three-year period and forfeit their
rights to the share options. During 2014, 20 employees leave, and Lauren still believes that 20% is a fair estimate of
employee departures. During 2015, a further 22 employees leave. Due to the low turnover as of December 31, 2015,
Lauren revises its estimate of total employee departures over the three-year period from 20% to 15%. During 2016, a
further 18 employees leave. What is the compensation expense to be recognized by Lauren for the share options in
2016?
a. 900,000
b. 850,000
c. 940,000
d. 700,000
On January 1, 2014, Zenny Company granted 60,000 share options to employees. The share options will vest at the end
of three years provided the employees remain in service until then. The option price is P110 and the par value per share
is P100. At the date of grant, the company concluded that the fair value of the share options couldnt be measured
reliably. The share options have a life of 4 years, which means that the share options can be exercised within one year
after vesting. The share prices are P112 on December 31, 2014, P116 on December 31, 2015, P125 on December 31,
2016 and P135 on December 31, 2017. All share options were exercised on December 31, 2017. What was the
additional paid in capital from the exercise of the share options?
a. 2,000,000
b. 1,500,000
c. 2,100,000
d.
0
Williams Company has granted 100 share appreciation rights to each of its 1,000 employees on January 1, 2013 that will
vest on December 31, 2015 and payable on January 1, 2016. The management feels as of December 31, 2013, 90% of
the awards will vest. And this expectation had remained the same on December 31, 2014. The fair value of each share
appreciation right on December 31, 2013 is P15 and on December 31, 2014 is P20. What is the salaries expense to be
recognized in the 2014 income statement for share appreciation rights?
a. 1,200,000
b. 1,800,000
c.
700,000
d.
750,000
The shareholders equity of Bradford Company on December 31, 2015, consists of the following capital balances:
Preference shares, 10%, P100 par,
P110 liquidation price 150,000 shares
15,000,000
Ordinary shares, P100 par, 200,000 shares
20,000,000
Subscribed ordinary shares, net of subscription receivable of
P4,000,000
6,000,000
Treasury ordinary shares, 50,000 shares at cost
4,000,000
Share premium
3,000,000
Retained earnings
20,000,000
Dividends on the preference shares have not been paid for 3 years. What is the book value per ordinary share?
a. 156
b. 190
c. 172
d. 184
Soulful Company had on class of ordinary share outstanding and no other securities that are potentially convertible into
ordinary shares. During 2016, 1,000,000 shares of ordinary shares were outstanding. In 2017, two distributions of
additional ordinary shares occurred: on May 1, 300,000 unissued ordinary shares were sold, and on July 1, a 2-for-1stock
split was issued. Net income for 2017 was P15,000,000 and P12,000,000 for 2016. What amounts should Soulful report
as earnings per share in its 2017 and 2016 comparative profit and loss statements?
2017
2016
a. 12.50
12.00
b.
6.25
12.00
c. 12.50
6.00
d.
6.25
6.00
At December 31, 2014, Alton Company had 900,000 ordinary shares outstanding. On September 1, 2015, an additional
300,000 ordinary shares were issued. In addition, Alton had P10,000,000 of 6% convertible bonds outstanding at
December 31, 2014, which are convertible into 600,000 shares of ordinary shares. No bonds were converted into
ordinary shares in 2015. The net income for the year ended December 31, 2015, was P3,750,000. Assuming the income

PAGE 2
tax rate was 30%, what should be the diluted earnings per share for the year ended December 31, 2015 (rounded to the
nearest centavo)?
a. 2.61
b. 2.35
c. 3.75
d. 2.72
8. Michelle Company an SME reported P5,000,000 of net income in its 2014 income statement. The auditor questioned
several items that were included in its computation of net income that are listed as follows:
Amortization of goodwill
50,000
Amortization of trademark
20,000
Interest on loans used to finance construction of building
100,000
Direct cost on acquisition of investment in
associate carried at equity
35,000
Fair value gain on associate carried at equity
200,000
What is the adjusted net income of Michelle under PFRS for SMEs?
a. 5,170,000
b. 4,835,000
c. 4,885,000
d. 5,105,000
9. On July 1, Patriots Corporation had 200,000 of P10 par ordinary shares outstanding. The market price of the stock was
P12 per share. On the same date, Patriots declared a 1-for-2 reverse stock split. The par value of the stock was increased
from P10 to P20, and one new P20 par share was issued for each two P10 par shares outstanding. Immediately before
the 1-for-2 reverse stock split, Patriots' share premium was P650,000. What should be the balance in Patriots' share
premium account immediately after the reverse stock split?
a.
850,000
c. 450,000
b. 1,050,000
d. 650,000
10. The following information pertains to Whinny Companys defined benefit pension plan for the year 2014:
Prepaid pension cost, January 1
500,000
Current service cost
2,000,000
Interest cost
600,000
Interest income
800,000
Actual return on plan assets
900,000
Past service cost
300,000
Increase in PBO due to changes in actuarial assumptions
500,000
If the accrued pension cost on December 31, 2014 is P400,000, how much was the amount of contributions during the
year to the plan?
a. 2,400,000
b. 1,600,000
c. 2,000,000
d. 2,500,000
11. On December 31, 2015, Lowe Company reported P4,000,000 of appropriated retained earnings for the construction of a
new office building which was completed in 2016 at a total cost of P5,000,000. In 2016, Lowe appropriated P2,000,000 of
retained earnings for acquisition of treasury shares. None of these shares have been reissued or retired during the year.
Also, cash of P5,000,000 was restricted for the retirement of bonds payable due in 2018. In its December 31, 2016 balance
sheet, Lowe should report what amount of appropriated retained earnings?
a.
2,000,000
b.
7,000,000
c. 11,000,000
d.
6,000,000
12. The following is the shareholders equity section of Francis Corporation at December 31, 2016:
12% Fully participating, cumulative preference shares, P50 par
authorized 100,000 shares; 88,000 shares issued
4,400,000
Ordinary shares, P20 par; authorized 500,000
4,000,000
Share premium
8,600,000
Retained earnings
13,000,000
Total
30,000,000
Less: Treasury ordinary shares at cost (P150 per share)
3,000,000
Total shareholders equity
27,000,000

13.

14.

15.

16.

Dividends have been paid on preference shares up to December 31, 2015. On December 31, 2016, Francis wants to pay
cash dividends of P5.00 a share to its ordinary shareholders. How much should be the total amount of cash dividends to
be declared on December 31, 2016?
a. 1,942,800
b. 1,428,000
c. 2,000,000
d. 1,800,000
On January 1, 2012, Ace Company acquired a building for P5,000,000. The building is depreciated using straight-line
method based on a useful life of 10 years with no residual value. On January 1, 2016, the building is revalued at a
replacement cost of P8,000,000 with no change in useful life. The 2016 pretax accounting income before depreciation is
P5,000,000. The income tax rate is 30% and there are no other temporary differences at the beginning of 2016. What is
the deferred tax liability on December 31, 2016?
a. 630,000
b. 540,000
c. 750,000
d. 450,000
Aretha Company carries P5,000,000 comprehensive public liability insurance with a P500,000 deductible clause. A suit
for personal injury damages was brought against Aretha in 2015. Aretha's counsel believes it probable that the insurance
company will settle out of court for an estimated amount of P3,000,000. At December 31, 2015, Aretha should report
provision of
a. 5,000,000
b. 2,250,000
c. 3,000,000
d.
500,000
On January 1, 2016, Rose Company leased a machine to Leah Company for eight years requiring payments of
P1,500,000 at the beginning of each year. The lease does not transfer ownership of the asset to Leah and neither does it
have a bargain purchase option. The machine cost P9,040,000, which is the fair value at the lease date. The equipment
has a useful life of ten years. Leah Company does not guarantee the residual value which was estimated by Rose at
P500,000. Roses implicit interest rate is 10% and present value factors are as follows:
Present value of an annuity due of 1 at 10% for 8 periods
5.87
Present value of an ordinary due of 1 at 10% for 8 periods
5.33
Present value of 1 at 10% for 8 periods
.47
Rose appropriately recorded the lease as a direct financing lease. What is the carrying amount of the lease receivable on
January 1, 2016 after the first lease payment was made?
a. 12,500,000
b. 11,000,000
c.
7,540,000
d.
9,040,000
On January 1, 2016, Claudine Company signed an eight-year non-cancelable lease for a new machine requiring
P600,000 annual payments at the beginning of each year. The machine has a useful life of 12 years, with no residual
value. Title passes to Claudine at the lease expiration date. Claudine uses straight-line depreciation for all of its plant
assets. Aggregate lease payments have a present value on January 1, 2016 of P4,320,000 based on an appropriate rate
of interest. What is Claudines 2016 depreciation expense for this leased machine?

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a. 600,000
b. 360,000
c. 540,000
d.
0
17. On January 1, 2015, Mack Company granted to an employee the right to choose either shares or cash payment. The
choices are as follows:
*
*

Share alternative equal to 30,000 shares with a par value of P40.

Cash alternative cash payment equal to the market value of 40,000 shares.

The grant is conditional upon the completion of three years service. On grant date, on January 1, 2015, the share price is
P45. After taking into account the effect of vesting restrictions, Mack Company has estimated that the fair value of the
share alternative to be P63. The fair value of the shares on December 31, 2015, 2016 and 2017 were 69, 72 and 70,
respectively. What is the compensation expense for the for the year ended December 31, 2017?
a. 850,000
b. 710,000
c. 740,000
d. 910,000
18. On May 5, 2016, Jensen Corporation exchanged 40,000 shares of its P25 par value treasury shares for a patent owned
by Benson Company. The treasury shares were acquired in 2015 for P1,200,000. On May 5, 2016, Jensen's ordinary
shares were quoted at P45 per share, and the patent had a carrying value of P1,500,000 on Benson's books. What
amount should Jensen should record the patent?
a. 1,500,000
b. 1,000,000
c. 1,200,000
d. 1,800,000
19. On January 1, 2016 Carmelo Company purchased investment securities for P1,500,000. The securities are classified as
trading. By December 31, 2016, the securities had a fair value of P2,500,000 but had not yet been sold. The company
also recognized a P400,000 restructuring charge during the year. The restructuring charge is composed of an impairment
write-down on a manufacturing facility. Tax rules do not allow a deduction for the write-down unless the facility is actually
sold; the facility was not sold by the end of the year. Excluding the trading securities and the restructuring the charge,
income before taxes for the year was P5,000,000. The income tax rate for the current year and future years is 30%.
What is Carmelos deferred tax expense?
a. 180,000
b. 300,000
c. 120,000
d. 420,000
20. Powell Company reported the following in its statement of shareholders equity on December 31, 2015:
Share capital, P10 par value, authorized 5,000,000 shares,
issued 2,000,000 shares
20,000,000
Share premium
10,000,000
Retained earnings (total)
25,000,000
Total shareholders equity
50,000,000
On January 1, 2015, Powell acquired 200,000 ordinary shares at P25 each. During 2015, Powell declared and paid a
cash dividend of P5 per share and recapitalized the ordinary shares into no par ordinary shares with a stated value of
P20. No retirement or reissuance of the treasury shares occurred during the year. Net income for the year ended
December 31, 2015 was P8,000,000. What is the balance of unappropriated retained earnings on December 31, 2015?
a.
7,000,000
b.
9,000,000
c. 19,000,000
d. 17,000,000
21. Haire Company manufactures furniture upholstery according to customers specifications. Due to the specialized service
rendered by Haire, a nonrefundable deposit of 20% of the contract price is required from customers for each order made.
This deposit is credited to a customers advances account which has a balance of P1,000,000 on January 1, 2016. In
2016, Haire received and accepted orders from various customers with a total contract price of P15,000,000. As of
December 31, 2016, Haire had already made shipments to customers of P13,200,000, while orders for P1,500,000 were
canceled and a sales value of P650,000 were returned for minor design modifications. What is the balance of the
customers advances account at December 31, 2016?
a. 1,360,000
b. 1,060,000
c.
930,000
d. 1,180,000
22. On January 2, 2016, Hummingbird Company sold 8% bonds with a face value of P900,000. These bonds mature in five
years, and interest is paid semiannually on June 30 and December 31. The bonds were sold for P830,400 to yield 10%.
Using the effective interest method of computing interest, how much should be charged to interest expense in 2016?
a. 83,524
b. 83,040
c. 83,316
d. 90,000
23. On July 1, 2016, Butter Corporation issued its 12% P5,000,000, ten-year bonds at a premium of P880,000. Each P1,000
bond had 5 detachable stock warrants eligible for the purchase of one share of Butters P50 par value ordinar for P75.
Immediately after the bonds were issued, Butters 12% bonds excluding the warrants were selling at 110 while the
warrants and the ordinary shares had quoted market values of P20 and P75 respectively. What amount of the bond issue
proceeds should Butter record as an increase in shareholders equity?
a. 500,000
b. 105,000
c. 490,000
d. 380,000
24. Horner Company records its purchases at gross amount but wishes to change to recording purchases net of discounts.
Discounts available on purchases recorded from October 1, 2015 to September 30, 2016, totaled P150,000. Of this
amount, P80,000 is still available in the accounts payable balance. The balances in the accounts as of and for the year
ended September 30, 2016, before conversion are:
Purchases
5,000,000
Purchase discounts taken
25,000
Accounts payable
1,200,000
What is the accounts payable balance as of September 30, 2016, after conversion?
a. 1,120,000
b. 1,050,000
c. 1,095,000
d. 1,200,000
25. On December 31, 2016, Lions Company leased a building under a finance lease for 10 years. It contracted to pay
P2,000,000 annual rent on December 31, 2016 and on December 31, for the next nine years. The finance lease liability
was recorded at P14,000,000 on December 31, 2016 before the first payment was made. The equipment useful life is 12
years and the rate implicit in the lease is 9%, however Lions incremental borrowing rate is 10%. Lions uses the straightline method in depreciating similar assets. What amount should Lions include in its current liabilities on December 31,
2016 as a result of this finance lease?
a.
800,000
c. 2,000,000
b.
920,000
d.
740,000
26. On December 1, 2016, Lucca Corporation leased office space for 5 years at a monthly rental of P50,000. On that date
Lucca paid the landlord the following amounts:
Rent deposit
200,000
First month's rent
50,000
Last month's rent
50,000
Installation of new walls and offices
480,000

PAGE 4
Total
780,000
The entire amount of P780,000 was charged to rent expense in 2016. What amount should Lucca have charged to
expense for the year ended December 31, 2016?
a.
50,000
b.
58,000
c. 100,000
d. 258,000
27. Armco Company embarked on a promotional program whereby a T- is given away for every 10 bottle crowns returned plus
P5. Armco Company estimates that only 40% of the bottle crowns in the hands of consumers will be presented for
redemption. The following information is available
Quantity
Amount
Bottles
1,000,000
40,000,000
T-shirts bought for give-away
15,000
225,000
T-shirts distributed to customers
10,000
At the close of the first year, what amount should Armco recognize an estimated liability for promotional items?
a. 375,000
b. 450,000
c. 250,000
d. 300,000
28. On January 1, 2016, Muriel Company issued 5,000 of its 12%, P1,000 face value bonds for P5,600,000, including accrued
interest. The bonds are dated October 1, 2015, mature on October 1, 2020 and pay interest annually on October 1. The
bonds were issued through an underwriter to whom Muriel paid bond issue cost of P150,000. On January 1 2016, what
should Muriel report as bonds payable?
a. 5,600,000
b. 5,450,000
c. 5,150,000
d. 5,300,000
29. On December 31, 2016, Michael Company sold a machine to Scottie and simultaneously leased it back for five years.
Pertinent information at this date follows:
Sales price
Carrying amount
Present value of reasonable lease rentals
(P1,000,000 for 5 years @ 12%)
Estimated remaining useful life

30.

31.

32.

33.

34.

35.

P5,000,000
4,200,000
3,600,000
12 years

In Michaels December 31, 2016 statement of financial position, what is the deferred profit from the sale of this machine?
a.
800,000
b. 1,200,000
c. 1,400,000
d.
0
On January 1, 2016, Collins Company leased a warehouse to Cuthbert under an operating lease for ten years at
P800,000 per year, payable the first day of each lease year. Collins paid P360,000 to a real estate broker as a finder's fee.
The warehouse is depreciated at P200,000 per year. During 2016, Collins incurred insurance and property tax expense
totaling P150,000. What was Collins' net rental income for 2016?
a.
90,000
b. 414,000
c. 440,000
d. 450,000
Oasis Company acquires rights to a patent. Oasis remits royalties earned and due on October 31, of each year.
Additionally, on the same date, Oasis pays in advance estimated royalties for the next year. Oasis adjusts prepaid
royalties at year-end. Information for 2015 is:
Jan. 1 Prepaid royalties
1,500,000
Oct 31. Royalty payment (expense method)
2,200,000
Dec. 31 Year-end adjustment to expense
300,000
What is the amount of prepaid royalties on December 31, 2015?
a. 1,200,000
b. 1,800,000
c. 1,900,000
d. 2,500,000
Murphy Company provided the following information for the year ended December 31, 2014:
Net income
2,000,000
Total assets
14,950,000
Share capital
5,600,000
Share premium
2,400,000
Dividends declared
1,200,000
Prior period adjustment for 2013 overdepreciation
500,000
The debt to equity ratio is 30% at December 31, 2014. What was the retained earnings balance on January 1?
a. 1,165,000
b. 2,165,000
c. 3,200,000
d. 2,200,000
Bernville Corporation reports on a calendar-year basis. Its 2013 and 2014 financial statements contained the following
errors:
2013
2014
Over(under)statement of ending inventory
P(1,000,000)
P 400,000
Depreciation understatement
400,000
600,000
Failure to accrue salaries at year end
800,000
1,200,000
What is the net overstatement on the January 1, 2015 retained earnings?
a. 2,600,000.
b. 2,400,000.
c. 2,200,000.
d. 1,600,000.
On January 1, 2015, Marie Company purchased 50,000 units at P100 per unit. During the year, the entity sold 40,000
units at P180 per unit. The entity paid P700,000 for operating expenses. The current replacement cost on December 31,
2015 is P150 per unit. What is the total realized and unrealized holding gain for 2015 under current cost accounting?
a. 1,500,000
b. 1,000,000
c. 2,100,000
d.
500,000
The following information was obtained from the analysis of selected accounts of Sheryl Company for the year ended
December 31, 2015.
Increase in long-term debt
5,000,000
Purchase of treasury shares
1,000,000
Depreciation and amortization
1,500,000
Gain on sale of equipment
500,000
Proceeds from issuance of ordinary shares
4,000,000
Purchase of equipment for cash
7,000,000
Proceed from sale of equipment
2,000,000
Payment of dividends
2,500,000
Net income
8,000,000
Increase (decrease) in working capital accounts:
Accounts receivable
2,000,000
Inventory
(3,500,000)

PAGE 5

36.

37.

38.

39.

40.

41.

42.

Trade accounts and notes payable

4,000,000
Income tax payable
(4,500,000)
Cash balance January 1, 2015
6,000,000
What is the cash provided by financing activities?
a. 10,000,000
b.
5,500,000
c.
6,500,000
d.
500,000
Doris Corporation purchased a new machine on August 1, 2015. A P1,000,000 down payment was made and three
monthly installments of P500,000 each are to be made beginning on September 1, 2015. The cash price would have
been P2,400,000. Doris paid no installation charges under the monthly payment plan but a P30,000 installation charge
would have been incurred with a cash purchase. What is the amount to be capitalized as the cost of the machine?
a. 2,500,000
b. 2,400,000
c. 2,430,000
d. 2,530,000
Olsen Company uses the composite method of depreciation and has a composite rate of 25%. During 2016, it sold
assets with an original cost of P500,000 and a residual value of P100,000 for P300,000 and eventually acquired P900,000
of new assets with a residual value of P150,000. Information regarding the original group of assets as of January 1, 2016
is presented below:
Total cost
5,000,000
Total residual value
800,000
Accumulated depreciation
1,000,000
What was the depreciation expense recorded by Olsen Company in 2016?
a. 1,000,000
b. 1,312,500
c. 1,350,000
d. 1,100,000
Fremont Company acquired a mineral right for P5,280,000 in January 2015. The mine has removable ore estimated at
1,200,000 tons. After it has extracted all the ore, Fremont will be required by law to restore the land to its original
condition at an estimated cost of P500,000 and with a present value of P360,000. Fremont believes it will be able to sell
the property afterwards for P600,000. During 2015, Fremont incurred P720,000 of development cost preparing the mine
for production and removed 100,000 tons but only sold 60,000 tons of ore. In it 2015 income statement, what amount
should Fremont report as depletion?
a. 480,000
b. 270,000
c. 288,000
d. 300,000
Maia Company entered into a P15,000,000 fixed contract with Tanya Company by the end of 2007 for the construction of
a new building. On January 1, 2015, Maia obtained a loan of P15,000,000 at an interest rate of 12% to finance specifically
the construction. Availments from the loan may be made quarterly at unequal amounts. Actual interest incurred for 2015
was P1,400,000. Prior to their disbursement, the proceeds from the loan were temporarily invested and earned interest of
P50,000. The building was completed on December 31, 2015. Additional costs incurred during the construction were
P200,000 for plans, specifications and blueprint, and P100,000 for architectural design and supervision. What is the cost
of the building?
a. 16,350,000
b. 16,650,000
c. 16,400,000
d. 15,300,000
Armani Company is reviewing one of its business segments for impairment. The carrying value of the segments net
assets is P25,000,000. Management has produced two computations for the value in use of the business segment. The
first value is P19,000,000, which excludes the benefit to be derived from future restructuring of the business segment.
The second value is 22,000,000, which includes the benefit to be derived from future restructuring. The fair value less
cost to sell for the business segment is P18,000,000. How much is the impairment loss that should be recognized by
Armani Company?
a. 6,000,000
b. 3,000,000
c. 7,000,000
d. 2,000,000
On January 1, 2016, Sweet Company had capitalized cost of 5,000,000 for a new computer software product with an
economic life of 5 years. Sales for 2016 for the software product amounted to P5,000,000. The total sales of the software
over its economic life are expected to be P20,000,000. However, the pattern of the future sales from the computer
software cannot be determined reliably. It was also determined that the recoverable amount of the software is P4,200,000
on December 31, 2016. In its 2016 statement of financial position, what is the computer softwares carrying amount?
a. 4,000,000
b. 3,750,000
c. 4,200,000
d. 5,000,000
Perkins Company had the following bank reconciliation at March 31:
Balance per bank statement, 3/31
1,200,000
Add: Deposit in transit
320,000
Total
1,520,000
Less: Outstanding checks
( 225,000)
Balance per books, 3/31
1,431,600
Data per bank statement for the month of April follow:

Deposits
645,000
Disbursements
590,000
All reconciliation items at March 31 cleared through the bank in April. Outstanding checks at April 30 totaled 162,000
while deposit in transit were 251,000. What is the amount of cash receipts per books in April?
a. 487,000
b. 714,000
c. 645,000
d. 576,000
43. On January 1, 2016, Pujols Corporation needed cash to meet current operating needs. Pujols factored some P4,000,000
of accounts receivable to BPI. An allowance for doubtful accounts of 10% of the receivable balance is maintained by
Pujols. The bank withheld 10% of the purchase price as protection against sales returns and allowances and charged a
commission fee of 20% on the gross accounts receivable balance. Sales returns against the factored receivables during
the collection period totaled P50,000. How much was recognized as a loss from the sale of Pujolss receivables to BPI?
a. 800,000
b. 500,000
c. 400,000
d. 600,000
44. For the year ended December 31, 2015, Cassy Company estimated its allowance for uncollectible accounts using the
year-end aging of accounts receivable. The following data are available:
Allowance for uncollectible accounts, 1/1/15
Provision for uncollectible accounts during 2015
(2% on credit sales of P20,000,000)
Uncollectible accounts written off, 11/30/15
Recovery of accounts considered worthless
Estimated uncollectible accounts per aging, 12/31/15

800,000
400,000
300,000
100,000
1,150,000

PAGE 6
What is the year end adjustment to the allowance for doubtful accounts
a. 150,000 credit
b. 550,000 debit
c. 150,000 debit
d. 550,000 credit
45. Josephine Companys trial balance of income statement accounts for the year ended December 31, 2016 showed the
following
Debit
Credit
Sales
1,800,000
Costs of sales
920,000
Administrative expenses
100,000
Loss on sale of equipment
30,000
Sales commissions
120,000
Interest income
50,000
Freight out
40,000
Loss on early retirement of long term debt
10,000
Uncollectible account expense
30,000
______
1,250,000
1,850,000
Other information:
Finished goods inventory:
January 1
400,000
December 31
270,000
In Josephines 2016 income statement, what amount should Josephine report as the cost of goods manufactured?
a. 1,050,000
b.
790,000
c.
750,000
d.
920,000
46. On June 20, 2014, a fire destroyed the entire uninsured merchandise inventory of the Adamson Company. The following
data are available:
Inventory, January 1
P 300,000
Purchases, January 1 through June 20
2,200,000
What is
the
Sales, January 1 through June 20
2,400,000
Markup percentage on cost
25%
approximate inventory loss as a result of the fire?
a. 700,000
b. 580,000
c. 280,000
d. 400,000
47. James Company reported the following equity securities held as AFS in its December 31, 2013 statement of financial
position:
Jones Company ordinary shares, at cost
Market adjustment for unrealized loss
Market value

2,000,000
( 300,000)
1,700,000

On December 31, 2014, the market value of James investment is P1,950,000. As a result of the change in market value,
James statement of comprehensive income for 2014 should report
a. An unrealized loss of P50,000.
c. An unrealized gain of P50,000.
b. An unrealized gain of P250,000.
d. Neither unrealized gain nor loss.
48. In January 1, 2010 Stellar Company established a sinking fund with its issue of bonds due in 2015. A bank was appointed
as an independent trustee of the fund. On December 31, 2014, the trustee held P580,000 cash in the sinking fund
account representing P500,000 in annual deposits to the fund and P80,000 of interest earned on those deposits. How
should the sinking fund be reported in Stellars statement of financial position at December 31, 2014?
a. No part of the sinking fund should appear in Stellars statement of financial position
b. P80,000 should appear as a current asset
c. P580,000 should appear as a current asset
d. P580,000 should appear as a noncurrent asset
49. Petro Company purchased 1,000 llamas on January 1, 2015. These llamas will be sheared semiannually and their wool
sold to specialty clothing manufacturers. The llamas were purchased for P148,000. During 2015 the change in fair value
due to growth and price changes is P9,400, the wool harvested but not yet sold is valued at net realizable value of
P18,000, and the change in fair value due to harvest is (P1,150). What is the value of the llamas on Petros statement of
financial position on December 31, 2015?
a. 156,250
b. 148,000
c. 146,850
d. 128,850
50. The following information is provided for the current year:
Revenue
Income from continuing operations
Net income
Selling and administrative expenses
Income before income tax

1,200,000
150,000
135,000
750,000
300,000

What is the amount of discontinued operations?

a. ( 30,000)
b. 120,000

c.

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150,000

d. ( 15,000)