QUIZBOWL PRACTICE
QUIZBOWL PRACTICE
BUSINESS LAW BUSINESS LAW 1.
1. ConContratract ct witwith a h a falfalse se caucause se is:is: a
a.. vvooiiddaabbllee cc. . uunneennffoorrcceeaabbllee b
b.. vvooiidd dd..aallll ooff tthheeaabboovvee BB 2.
2. An An obobliligagatition on whwherereiein n vavaririouous s ththingings s arare e dudue, e, bubut t ththe e papaymymenent t of of alall l is requis requirired in ed in orordeder r toto distinguish the obligation is called:
distinguish the obligation is called: a
a.. ssiimmpplle e oobblliiggaattiioonn cc. . ccoonnooiinnt t oobblliiggaattiioonn b
b.. aalltteerrnnaattiivve e oobblliiggaattiioonn d. d. ffaaccuullttaattiivve e oobblliiggaattiioonn CC !.
!. A contrA contract whact where boere both parth parties aties are incre incapabapable of gile of giving coving consent insent is:s: a
a.. vvooiiddaabbllee cc. . uunneennffoorrcceeaabbllee b
b.. vvooiidd dd..aallll ooff tthheeaabboovvee CC ".
". #hi#hich is ch is the the lealeast dst defeefectictive cove contrntractact$$ a
a.. rreesscciissssiibblle e ccoonnttrraacctt cc. . uunneennffoorrcceeaabblle e ccoonnttrraacctt b
b.. vvooiiddaabblle e ccoonnttrraacctt d. d. vvooiid d ccoonnttrraacctt A A %.
%. & sold to B a spec& sold to B a specifiific car for 'c car for '1((1((,((( pa,((( payabyable in four )le in four )"* equ"* equal insal instatallmllmentents. s. +ir+irst and sest and seconcondd installments, B fa
installments, B failed to pay. iled to pay. he right of & he right of & is:is: a
a.. ee--aacct t ffuullffiillllmmeent nt oof f tthhe e oobblliiggaattiioonn cc. . ddeemmaannd d ppaayymmeennt t ffrroom m BB b
b.. ccaanncceel l tthhe e ssaallee dd. . alll al oof f tthhe e aabboovvee /.
/. A sold to B thA sold to B the forme former0s horer0s horse for 'se for '%,(((. %,(((. o dato date is fi-ee is fi-ed by the pad by the parties forties for the perr the performaformance of thence of theirir respective obliga
respective obligations. tions. he obligation he obligation of A is:of A is: a.
a. to delto deliver tiver the horhe horse immse immediatediately as ely as there there is a peis a perfectrfected coned contracttract b.
b. to deto delivliver ther the hore horse upse upon paon paymeyment by B ont by B of '%,f '%,(((((( c.
c. to delito deliver thver the horse we horse within a rithin a reasoneasonable tiable time of twme of two months fo months from the crom the contraontract datect date d.
d. to to resrescincind td the he concontratract act as ts therhere ie is ns no to timeimed fd fi-ei-ed fd for or the the deldeliveivery ry and and paypaymenmentt BB .
. ' appo' appointed A inted A as his aas his agent wgent with geith general neral powerpowers on 3as on 3anuary nuary 1. 1. he nehe ne-t da-t day, 4 tray, 4 transactnsacted bused businessiness with A.
with A. 5n 3anuary %, ' revo6ed the ag5n 3anuary %, ' revo6ed the agency and published it in a newspaper oency and published it in a newspaper of general circulation.f general circulation. 7oweve
7owever, 4 did not read the newspaper, 4 did not read the newspaper publicar publication. tion. After % days, )3anuAfter % days, )3anuary 1(* 4 consummatary 1(* 4 consummateded another transaction wit
another transaction with A. h A. 8s the act 8s the act of A binding agaof A binding against '$inst '$ a.
a. yeyes, bs, bececauause 4 ise 4 is in s in gogood fod faiaithth b.
b. no, becauno, because the agese the agency is consincy is considered rdered revo6eevo6ed and its pubd and its publicatlication is a suffion is a sufficient wicient warninarningg c.
c. no, becno, because tause the powhe power is er is genergeneral, thal, there mere must bust be a spe a special ecial powerpower d
d.. yyeess, , bbeeccaauusse e tthheerre e wwaas s nno o ssppeecciiaal l nnoottiicce e sseennt t tto o 44 BB 9.
9. ' appo' appointed A ainted A as his ags his agent oraent orally to selly to sell his pll his parcel oarcel of land ff land for '1(,or '1(,(((. (((. +ive d+ive days afays after, A soter, A sold to Bld to B the parcel of land f
the parcel of land for '9,((( by means of a pubor '9,((( by means of a public instrument e-ecuted lic instrument e-ecuted between A and B. between A and B. #hat is#hat is the effect and status of sale between A and B$
the effect and status of sale between A and B$ a.
a. the sathe sale is vle is valid balid because ecause it wait was e-ecs e-ecuted iuted in a publn a public instic instrumentrument b.
b. the sale is unthe sale is unenforenforceablceable because because the agene the agent acted bet acted beyond the scyond the scope of his auope of his authorithority forty for selling the land for less than the price instructed
selling the land for less than the price instructed c.
c. the sathe sale is le is void void becabecause thuse the appe appointmointment oent of the f the agent agent is oris oralal d.
d. the salthe sale can be rae can be ratifietified althd although the aough the appoinppointment of tment of A is oralA is oral, becaus, because the sale the sale by A to Be by A to B is
is in in a a public public instrument instrument CC .
. pled pledged hged his riis ring to C ng to C for 'for '1(,(((. 1(,(((. fai failed tled to pay o pay his obhis obligaligation on tion on time. time. C solC sold it ad it at publt public aucic auctiontion for '9,(((.
for '9,(((. a.
a. C caC can recn recover over the the deficdeficiency iency even even withwithout sout stipultipulatioationn b.
b. C cannoC cannot rect recover tover the defhe deficienciciency even y even if theif there is sre is stiputipulatilationon c.
c. C caC cannonnot ret recocovever thr the dee defificicienencycy d
d. C . C ccaan n rreeccoovveer r tthhe e ddeeffiicciieennccyy BB 1(.
1(. A, A, B, B, anand d C C boborrrrowowed ed frfrom om '!'!((,((,(((((, (, anand d as as a a sesecurcuritity, y, ththey ey momortrtgagageged d ththeieir r undundivividideded agricultural land
agricultural land to . to . &ubsequently, A &ubsequently, A paid 'paid '1((,(((. 1((,(((. 8s the 8s the mortgage on mortgage on A0s share A0s share of the laof the landnd e-tinguished$
e-tinguished$ a.
a. yes, byes, becausecause the e the obligobligatioation of A n of A on thon the debt e debt is onlis only '1(y '1((,((((,((( b.
b. yes, the oyes, the obligabligation of ttion of the debthe debtors is oors is oint, A is aint, A is answernswerable onable only for 'ly for '1((,(((1((,((( c.
c. no, becano, because the obuse the obligaligation is soltion is solidaridary, paymey, payment in parnt in part shall not et shall not e-ting-tinguish the ouish the obligabligationtion secured by the mortgage
secured by the mortgage d.
d. no, becauno, because mortgse mortgages are conages are considersidered indived indivisiblisible, payme, payment in part shaent in part shall not e-till not e-tinguishnguish the
the mortgage mortgage 11.
11. A and B are partneA and B are partners engagrs engaged in real estaed in real estate businete business. ss. A learneA learned that C was interd that C was interested in buyested in buying aing a certain parcel of land owned by the part
certain parcel of land owned by the partnership, even for a higher price. nership, even for a higher price. #ithout informing B, A was#ithout informing B, A was able to ma6e B sell to him )A* his )B0s* sha
able to ma6e B sell to him )A* his )B0s* share in the partnership. re in the partnership. hen A sold the land at a big prohen A sold the land at a big profit.fit. a.
a. A is lA is liable iable to B to B for tfor the lahe lattertter0s sha0s share in tre in the prhe profitofit b.
b. C is C is liablliable to B e to B for tfor the lahe lattertter0s sha0s share in re in the pthe profitrofit c.
c. the pthe partneartnership rship is dis dissolvissolved wed when A hen A becabecame tme the sohe sole owle ownerner d
12.
12. he remedy of capitalist phe remedy of capitalist partners against an industartners against an industrial partner who engagrial partner who engaged in a business for himself ed in a business for himself without the e-pressed permission from the partnership is:
without the e-pressed permission from the partnership is: a.
a. to competo compel the indusl the industriatrial partnl partner to sell his ier to sell his interenterest to the saist to the said capitd capitalist palist partneartnersrs b.
b. to e-cto e-clude hilude him from m from sharisharing in tng in the profhe profits of its of the pathe partnerrtnershipship c.
c. to remto remove him ove him as maas manager nager if he iif he is appos appointed ainted as manas manager of ger of the pathe partnerrtnershipship d
d.. tto o ee--ppeel l hhiim m ffrroom m tthhe e ppaarrttnneerrsshhiip p aannd d ccllaaiim m ffoor r mmaannaaggeerrss 1!.
1!. 7o7ow w mamany ny nunumbmber er of voteof votes s of of ththe e BoBoarard d of ireof irectctorors s arare e rereququirired ed to to chchanange the ge the naname of me of aa corporation$
corporation$ a.
a. 2;! v2;! vote ote of aof all mll membembers ers of tof the Bhe Boaroardd b.
b. 2;! 2;! vovote te of of alall pl preresesentnt c.
c. mamaoriority votty vote of ale of all prel presensent const constittitutiuting a quong a quorumrum d
d.. mmaaoorriittyy vvootteeooff tthhee BBooaarrdd 1".
1". After a corporaAfter a corporation is dissolvetion is dissolved, it shall nevertheld, it shall nevertheless be continued to enable it to liquidatess be continued to enable it to liquidate its e its affaaffairsirs for a period of:
for a period of: a
a.. 11 yyeeaarr cc.. !! yyeeaarrss b
b.. 22 yyeeaarrss dd..%% yyeeaarrss CC 1%.
1%. An endorsemAn endorsement which specient which specifies the persofies the person to n to whom, or to whose order the instrwhom, or to whose order the instrument is to beument is to be payable is called:
payable is called: a
a.. bbllaann6 6 eennddoorrsseemmeenntt cc. . qquuaalliiffiieed d eennddoorrsseemmeenntt b
b.. ssppeecciiaal l eennddoorrsseemmeenntt d. d. rreessttrriiccttiivve e eennddoorrsseemmeenntt BB 1/.
1/. #hich of the followin#hich of the following is g is not considnot considered a necessarered a necessary requiremy requirement in order to ma6e an ent in order to ma6e an instrinstrumentument negotiable$
negotiable$ a.
a. it muit must be st be payapayable oble on deman demand or nd or at a at a fi-efi-ed futd future ture timeime b.
b. it muit must be ist be in wrin writinting and sg and signigned by ted by the mahe ma6er6er c.
c. it muit must be st be paypayablable onle only to a y to a spspeciecifiefied ped persorsonn d
d.. iit t mmuust st ccoonnttaaiin n aan n uunnccoonnddiittiioonnaal l pprroommiisse e tto o ppaay y a a ssuum m cceerrttaaiin n iin n mmoonneeyy CC
MANAGEMENT ADVISORY SERVICES MANAGEMENT ADVISORY SERVICES 1.
1. <anag<anageriaerial accoul accounting inting is simils similar to ar to finanfinancial acial accountccounting in ting in that:hat: a.
a. both aboth are govre governed erned by genby generalerally accely accepted apted accountccounting pring principlincipleses b.
b. botboth dh deal eal witwith eh econconomiomic ec evenventsts c.
c. botboth coh concencentrntratate on e on hishistortoricaical col costssts d
d.. bbootth h ccllaassssiiffy y rreeppoorrtteed d iinnffoorrmmaattiioon n iin n tthhe e ssaamme e wwaayy BB 2.
2. As voAs volumlume ince increareasesses, ave, averagrage cose cost per ut per unitnit a
a.. iinnccrreeaasseess cc. . rreemmaaiinns s ccoonnssttaanntt b
b.. ddeeccrreeaasseess dd. . iinnccrreeaassees s iin n pprrooppoorrttiioon n tto o tthhe e cchhaanngge e iin n vvoolluummee BB !.
!. ConContritributbution marion margin pergin percencentagtage is "(= and conte is "(= and contribributiution maron margin per ungin per unit is '12. it is '12. #hi#hich of thech of the following is true$
following is true$ a
a.. vvaarriiaabblle e ccoosst t ppeer r uunniit t iis s ''1199 cc. . sseelllliinng g pprriicce e iis s ''""99 b
b.. rreettuurrn n oon n ssaallees s iis s 1122== dd. . vvaarriiaabblle e ccoosst t ppeerrcceennttaagge e iis s 1122== A A ".
". A manaA manager cger could ould not rnot reasoneasonable sable state tate a tara target pget profit rofit as a:as a: a.
a. pepeso so amamouount nt peper ur uninit st sololdd b.
b. perpercentcentage age of of tottotal al pespeso so salealess c.
c. totottaal pl peseso ao amomoununtt d
d.. ppeerrcceennttaagge e oof f tthhe e pprrooffiit t aat t bbrreeaa66>>eevveen n ppooiinntt %.
%. #hi#hich of the folloch of the followinwing costs is releg costs is relevanvant in t in decdecidiiding whetng whether to sell oiher to sell oint prodnt productucts at s at splsplit off orit off or process them further$
process them further$ a.
a. the unthe unavoavoidaidable coble costs of fsts of furturther pher procrocessessinging b.
b. the athe avoivoidadable coble costs osts of furf furthether pror procescessinsingg c.
c. the vathe variariable cble cost of oost of operperatiating thng the oine oint prot procescesss d
d.. tthhe e ccoosst t oof f mmaatteerriiaalls s uusseed d tto o mmaa66e e tthhe e ooiinnt t pprroodduuccttss BB /.
/. < has < has 1(( uni1(( units ots of an of an obsolebsolete pate part. rt. he vhe variaariable coble cost to st to produproduce thece them was m was '! pe'! per unir unit. t. hey chey couldould not be sold for '2 each and it would cost '% to m
not be sold for '2 each and it would cost '% to ma6e them now. a6e them now. he parts could be rewor6ed fohe parts could be rewor6ed for '/r '/ each and sold for '1".
each and sold for '1". #hat is the monetary advanta#hat is the monetary advantage of rewor6ing the parts over the ne-ge of rewor6ing the parts over the ne-t bestt best action$
action$ a
a.. ''22(((( bb. . ''%%(((( cc. . ''//(((( dd. . ''99((( ( CC .
. &coot&cooter Comer Company ppany producroducts thrts three proee products fducts from a rom a oint point process rocess costicosting for ng for '1((,('1((,(((. ((. he folhe followinglowing information is available:
information is available:
Cost
Cost to to &elling &elling priceprice &
&eelllliinng g pprriiccee pprroocceessss aafftteer r ffuurrtthheerr ?
?nniitts s aat t sspplliitt>>ooffff ffuurrtthheerr pprroocceessssiinngg A A 11((,,(((((( ''22% % ''//((,,(((((( ''!!(( B B 22((,,(((((( ''!!( ( ''22((,,(((((( ''!!%% C C !!((,,(((((( ''11( ( ''((,,(((((( ''11%% #hich
#hich products products should should be be processed processed further$further$ a
a. . A A oonnllyy bb. . A A aannd d BB cc. . B B aannd d C C dd. . AA, , B B aannd d C C CC 9.
9. BudgeBudgets sts set aet at vert very higy high leh levels vels of pof perforerformancemance:: a.
a. assassist iist in plan planninning thng the opee operatrationions of the cos of the compampanyny b.
b. stimulstimulates ates peoplpeople to pee to perforrform bettm better thaer than they n they ordiordinarilnarily wouldy would c.
c. are hare helpfuelpful in l in evalevaluatinuating the g the perfperformanormance of ce of managmanagersers d
d.. ccaan n lleeaad d tto o lloow w lleevveells s oof f ppeerrffoorrmmaannccee .
. #hich of th#hich of the followe following is a diffing is a differencerence betweee between a static budn a static budget and a flget and a fle-ible-ible budgete budget$$ a.
a. a fle-iba fle-ible budgele budget includt includes only vares only variable coiable costs, a statsts, a static budget iic budget includncludes only fies only fi-ed cost-ed costss b.
c.
c. a a flefle-ib-ible budgele budget gives difft gives differeerence allonce allowanwances for diffces for differeerent levelnt levels s of actiof activitvity, y, a a stastatictic budget does not.
budget does not. d
d.. nnoonnee CC
1(.
1(. &am manufa&am manufacturectures a single produs a single product. ct. 8t 6eeps it8t 6eeps its inventos inventory of finishry of finished goods at twiced goods at twice the cominge the coming mon
month0th0s s budbudgetgeted ed salsales, es, invinvententory ory of of raw raw matmaterierials als at at 1%(= 1%(= of of the the comcoming ing monmonth0th0s s budbudgetgeteded produ
productionction. . @ach unit of o@ach unit of output reutput requirequires two pounds of mas two pounds of materiaterials. ls. he prodhe productiouction budget isn budget is, in, in units: <ay
units: <ay, 1,((( 3une, 1,2(( 3uly, 1,!(( August, 1,((( 3une, 1,2(( 3uly, 1,!(( August, 1,/((. , 1,/((. aw materaw material purchaial purchases in 3une wouldses in 3une would be:
be:
a
a.. 22,,//((( ( ppoouunnddss b. b. 22,,""((( ( ppoouunnddss cc. . 11,,99((( ( ppoouunnddss dd. . 22,,((( ( ppoouunndds s 11.
11. #hich of th#hich of the following be following budgets is usuaudgets is usually prepared lly prepared first$first$ a
a.. ccaassh h ddiissbbuurrsseemmeenntts s bbuuddggeett cc. . pprroodduuccttiioon n bbuuddggeett b
b.. mmaatteerriiaalls s ppuurrcchhaassees s bbuuddggeett dd. . ccaassh h bbuuddggeett CC 12.
12. &tres&tress has prepas has prepared salred sales to be '"(,(es to be '"(,((( in 3une, '"%,(( in 3une, '"%,((( in 3uly and '((( in 3uly and '%%,((( in Aug%%,((( in August. ust. &tre&tressss collects !(= of a month0s sales in the month of sale, %(= in the month following the sale, and 2(= collects !(= of a month0s sales in the month of sale, %(= in the month following the sale, and 2(= in the second month following the sale.
in the second month following the sale. he accounts receivable balahe accounts receivable balance on August !1 would be:nce on August !1 would be: a
a.. ''11//,,%%(((( bb. . ''"",,%%(((( cc. . ''!!99,,%%(((( dd. . nnoot t ggiivveenn BB 1!.
1!. he paybac6 he paybac6 criterion fcriterion for capitaor capital investment l investment decisions:decisions: a.
a. is concis conceptuaeptually suplly superior erior to thto the intere internal ranal rate of rte of return eturn critecriterionrion b.
b. ta6ta6es intes into conso consideideratration thion the time ve time valualue of monee of moneyy c.
c. givgives pes priorioritrity to ry to rapiapid red recovcovery oery of casf cashh d
d.. eemmpphhaassiiees s tthhe e mmoosst t pprrooffiittaabblle e pprrooeeccttss CC 1".
1". 8f an inv8f an investment has a estment has a positive net positive net present value,present value, a.
a. its intits internal rernal rate of rate of return ieturn is greas greater thater than the compn the company0any0s cost of cas cost of capitapitall b.
b. cost cost of caof capitapital e-cl e-ceeds eeds the the cutofcutoff raf rate of te of returreturnn c.
c. its intits internal rernal rate of rate of return ieturn is less ts less than the cohan the companympany0s cutof0s cutoff rate of rate of retuf returnrn d
d.. tthhe e ccuuttoofff f rraatte e oof f rreettuurrn n ee--cceeeedds s tthhe e ccoosst t oof f ccaappiittaall A A 1%.
1%. An investmeAn investment opportunnt opportunity costing '%,((ity costing '%,((( ( is e-pecteis e-pected to d to yield net cash flows of '22,((( annuallyyield net cash flows of '22,((( annually for % year
for % years. s. he cost of he cost of capital is capital is 1"=. 1"=. he boo6 rhe boo6 rate of rate of return would beturn would be:e:
a.
a. 1199..== bb. . %%99..== cc. . 11""..!!== dd. . !!..""!!!!== A A
1/.
1/. &cot ivi&cot ivision hasion has the s the following following results results for for the the year:year:
eevveennuueess ''""((,,(((((( Dariable
Dariable e-penses e-penses 2/(,(((2/(,((( +i-ed
+i-ed e-penses e-penses !((,(((!((,((( otal divi
otal divisional asssional assets are '1,(((,(ets are '1,(((,(((. ((. he compahe company0s minimny0s minimum requirum required rate of return is 1"=.ed rate of return is 1"=. esidual income is:
esidual income is: a
a. . ''!!"",,(((((( b. b. ''!!//,,(((((( cc. . ''""((,,(((((( dd. . ''%%22,,(((((( CC 1.
1. 8f the variabl8f the variable overhead stande overhead standard is based on ard is based on direcdirect labor hours and actual hours wor6et labor hours and actual hours wor6ed e-ceedd e-ceed standard hours allowed, the result is:
standard hours allowed, the result is: a.
a. a fava favoraorable lble laboabor effr efficiiciencency vary varianiancece b.
b. an unan unfavorfavorable able variavariable oble overheverhead sad spendipending vang variancriancee c.
c. a favoa favorarable vable variariable ovble overherhead spead spendending vaing variariancence d
d.. aan n uunnffaavvoorraabblle e vvaarriiaabblle e oovveerrhheeaad d eeffffiicciieennccy y vvaarriiaannccee
AUDITING THEORY AUDITING THEORY
1.
1. #hich of th#hich of the followe following profing professioessional servnal services wouices would be consild be considered adered an attesn attest engagt engagement$ement$ a.
a. A consultA consulting serving service engaice engagement tgement to provido provide compute computer procer processing aessing advice to a cldvice to a client.ient. b.
b. An engaAn engagement gement to repoto report on comprt on compliance liance with stwith statutatutory reqory requiremuirements.ents. c.
c. An incAn income tome ta- ena- engagemgagement to ent to prepaprepare thre the incoe income tame ta- ret- returns.urns. d
d.. hhe e ccoommppiillaattiioon n oof f ffiinnaanncciiaal l ssttaatteemmeenntts s ffrroom m a a cclliieenntt00s s aaccccoouunnttiinng g rreeccoorrddss.. BB 2.
2. he audihe audit t worwor6 6 perperforformed by each assimed by each assistastance shounce should be ld be revreviewiewed to ed to detdetermermine whetine whether it washer it was adequately performed and to evaluate whether the
adequately performed and to evaluate whether the a.
a. AuditAuditor0s syor0s system of qstem of qualituality contry control has beol has been mainten maintained aained at a high lt a high level.evel. b.
b. esulesults are consts are consisteistent with the cont with the conclusinclusions to be preons to be presentesented 8n the audid 8n the auditor0tor0s reports report.. c.
c. Audit pAudit procedrocedures peures perforrformed are med are apprapproved in thoved in the profee professionassional standl standardsards.. d.
d. AudAudit has been perfit has been performormed by ed by perpersonsons s havhaving adeing adequaquate technte technicaical trainl training and profing and proficiiciencency y asas a
auuddiittoorrss.. BB
!.
!. #hich of the fo#hich of the followillowing serving services is a C'A geneces is a C'A generally rrally requireequired perfod performing whrming when conducen conducting a persting a personalonal financial planning engagement$
financial planning engagement$ a.
a. AssistAssisting the cing the client tlient to idento identify taify tas6s thas6s that are est are essentiasential in ordl in order to act oer to act on plannin planning ng decisdecisions.ions. b.
b. AssistAssisting ting the clihe client to ent to ta6e ta6e actioaction on pn on planninlanning decg decisionisions.s. c.
c. <on<onitoitorinring prog progregress in ss in achachievieving ging goaloals.s. d
d.. ??ppddaattiinng g rreeccoommmmeennddaattiioonns s aannd d rreevviissiinng g ppllaannnniinng g ddeecciissiioonnss.. A A ".
". ?pon disc?pon discoveriovering materng material misstial misstatemeatement in a client0nt in a client0s financis financial statal statements thements that the clienat the client would nott would not revis
revise, an auditor withde, an auditor withdrew from the engagrew from the engagement. ement. 8f as6ed by the success8f as6ed by the successor auditoor auditor about ther about the termination of the engagement, the predecessor auditor should
termination of the engagement, the predecessor auditor should a.
a. &tat&tate that he fe that he found maound materiterial misstal misstatemeatements thants that the clit the client wouent would not reld not revise.vise. b.
b. &ug&uggesgest tht that that the suce succescessor asor as6 ths6 the clie clientent.. c.
c. &ugges&uggest that tt that the succehe successor obssor obtain ttain the clienhe client0s pet0s permissrmission to diion to discuss tscuss the reahe reasons.sons. d
%.
%. Eou are a CEou are a C'A reta'A retained by tined by the manahe manager of a cooger of a cooperatperative retiive retiremenrement villat village to do wrge to do write>uite>up wor6. p wor6. EouEou are e-pected to prepare unaudited financial statement with each page mar6ed FunauditedG and are e-pected to prepare unaudited financial statement with each page mar6ed FunauditedG and accom
accompanied by a disclaimpanied by a disclaimer of opinion stating no audit was made. er of opinion stating no audit was made. 8n perform8n performing the wor6, youing the wor6, you discover that there a
discover that there are no invoices to supporre no invoices to support '2%,((( of the manager0t '2%,((( of the manager0s claimed disbursements. s claimed disbursements. hehe manager informs you that all the d
manager informs you that all the disbursements are proper. isbursements are proper. #hat should you do$#hat should you do$ a.
a. &ubmit t&ubmit the e-peche e-pected stated statementements but omit tts but omit the '2%,((he '2%,((( of unsupp( of unsupported diorted disbursbursementsements.s. b.
b. 8nc8ncludlude e the the unsunsuppupportorted ed didisbusbursersemenments ts in in the the stastatemtementents s becbecausause e you you are are not not e-pe-pectected ed toto ma6e an audit.
ma6e an audit. c.
c. 5btai5btain n from from the the manamanager ger a a writwritten ten statstatement ement that that you you infoinformed rmed him him of of the the missimissing ng invoicinvoiceses and that he gave his
and that he gave his assurance that the disbursements were proper.assurance that the disbursements were proper. d.
d. otifotify thy the owe owners ners that that some some of of the the claimclaimed ded disburisbursemensements ats are re unsupunsupporteported ad and nd withdwithdrew rew if if thethe ssiittuuaattiioon n iis s nnoot t ssaattiissffaaccttoorriilly y rreessoollvveedd..
/.
/. he obecthe obective of ive of assurance assurance services iservices is best s best described described asas a.
a. 'ro'rovidviding ming more rore relieliablable infe informormatiation.on. b.
b. @n@nhahancncining deg decicisision mon ma6a6iningg c.
c. CompComparing iaring internanternal infol informatrmation and ion and policpolicies wiies with thoth those of ose of other fther firms.irms. d
d. 8. 8mmpprroovviinng g tthhe e ffiirrmm00s s oouuttccoommeess.. BB .
. he e-pahe e-pansinsion of on of the attthe attest functest function has resulion has resulted in attested in attestattation stanion standardards of ds of repreportorting that areing that are organied differently fr
organied differently from the standards of reportom the standards of reporting included in HAA&. ing included in HAA&. Consequently, the attestatConsequently, the attestationion standards of reporting
standards of reporting a.
a. CovCover oer one lene level vel and and forform of am of assussuranrance.ce. b.
b. efleeflect the lict the limitatmitation of the uion of the use of cerse of certain rtain reporteports to specs to specified uified users.sers. c.
c. CoConcncerern onn one bae basisic asc assesertrtioion.n. d.
d. ArAre e inainapppplilicacablble e whwhen en ususerers s hahave ve esestatablblisishehed d ththe e crcrititereria ia agagaiainsnst t whwhicich h asassesertrtioions ns araree m
meeaassuurreedd.. BB
9.
9. #hich of the fo#hich of the followillowing field wong field wor6 or reporr6 or reporting stating standarndards includds included in HAA& e-plied in HAA& e-plicitly cocitly corresprresponds to anonds to an attestation standard$
attestation standard$ a.
a. A A susufffficicieient undent undersrstatandndining g of inteof internrnal contal controrol l is to is to be obtbe obtaiainened d to plato plan n ththe e auaudidit t anand d toto determine the nature, timing, and e-tent of
determine the nature, timing, and e-tent of tests to be performed.tests to be performed. b.
b. he repohe report shall idert shall identintify those cirfy those circumcumstastances in which such princnces in which such principliples )HAA'* have not beenes )HAA'* have not been consistently observed in the current period in
consistently observed in the current period in relation to the preceding period.relation to the preceding period. c.
c. 8nfor8nformatiomation disclosn disclosures in the fiures in the financianancial stateml statements are to be reents are to be regardgarded as reasoed as reasonably adnably adequatequatee unless otherwise stated in the report.
unless otherwise stated in the report. d.
d. &uf&uffificicienent t cocompmpetetenent t evevididenentitial al mamatttter er is is to to be be obobtatainined ed ththrorougugh h ininspspecectitionon, , obobseservrvatatioion,n, inquiries, and confirmations to afford a reasonable basis for an opinion regarding the financial inquiries, and confirmations to afford a reasonable basis for an opinion regarding the financial ssttaatteemmeennttss uunnddeerraauuddiitt..
.
. #hen enga#hen engaged to compiged to compile unaudle unaudited finited financiaancial stateml statements for a prients for a private compvate company, the accany, the accountaountant0snt0s responsibility to detect errors, irregularities, and illegal acts
responsibility to detect errors, irregularities, and illegal acts a.
a. oes noes not e-ot e-ist uist unless nless the pthe partiarties haves have a we a writtritten agen agreemereement.nt. b.
b. AriseArises from the acs from the accountcountant0s obant0s obligatligation to applion to apply normal auy normal auditinditing procedg procedures.ures. c.
c. 8s to design pr8s to design proceduocedures to provires to provide reasode reasonable assnable assurancurance of detecte of detecting matering material misstial misstatemeatements.nts. d.
d. 8s limit8s limited to infoed to informing thrming the client te client that the enghat the engagemeagement cannont cannot be reliet be relied upon to discd upon to disclose frlose fraud. aud. 1(.
1(. A violation of the A violation of the profession0s ethical profession0s ethical standards most lstandards most li6ely occurs when a i6ely occurs when a C'A whoC'A who a.
a. has beehas been admitn admitted to thted to the Bar repe Bar represenresents on letts on letterheterhead to be aad to be an attorn attorney and a Cney and a C'A.'A. b.
b. 7as not p7as not preparepared a newred a newsletsletter perter permits tmits the publhe publisher tisher to attro attribute iibute it to the Ct to the C'A.'A. c.
c. 8s contr8s controller of a boller of a ban6 perman6 permits the baits the ban6 to use the cn6 to use the controontroller0ller0s C'A tits C'A title in the lisle in the listing of oting of officefficers inrs in its publications.
its publications. d.
d. <a<ainintatainins s a a sesepapararatete, , didiststininct ct prpracactitice ce bubut t foformrms s an an asassosociciatatioion n wiwith th otother C'As her C'As fofor r ooinintt ad
advevertrtisisining. g. hhe ge groroup up prpracactiticeces ps pubublilic ac accccouountntining ug undnder er ththe ae assssocociaiatitionon0s 0s nanameme.. 11.
11. #hen a C'A #hen a C'A is associais associated with financted with financial statemial statements that do not ents that do not complcomply with promulgay with promulgated HAA'ted HAA' because the statements would be misleading without the departure, the C'A is not required to because the statements would be misleading without the departure, the C'A is not required to disclose
disclose a.
a. hhe de depepaartrturure.e. b.
b. he apphe appro-imro-imated efated effects of tfects of the depahe departure in corture in comparmparison to the apison to the applicaplication of HAA'tion of HAA'.. c.
c. he reahe reason the dson the departeparture doeure does not havs not have a matee a material arial affect offect on the stan the statementements.ts. d
d.. hhe e rreeaassoonns s ccoommpplliiaanncce e wwoouulld d bbe e mmiisslleeaaddiinngg.. CC
THEORY OF ACCOUNTS THEORY OF ACCOUNTS 1.
1. #hy does A&C wa#hy does A&C warn agairn against ma6innst ma6ing comparg comparisons of the diisons of the disaggrsaggregateegated informd informatioation disclosen disclosed by twod by two different companies$
different companies$ a.
a. the dthe data iata is not s not an acan actual ptual part oart of thf the finae financial ncial statstatementementss b.
b. the identthe identificaification of specition of specific segmfic segments may be done dients may be done differefferently by diffntly by different coerent companimpanieses c.
c. the infothe informatrmation is not vieion is not viewed in repwed in reportinorting trendg trends betwees between past and pn past and present oresent operaperationstions d
d.. ddiiffffeerreennt t ttyyppees s oof f rreevveennuuees s aarre e iinncclluuddeed d bby y ssoomme e ccoommppaanniieess BB 2.
2. 8n 8n ththe e prepreparparatiation on of consoof consolidlidatated finaned financiacial l stastatemtementents, where subsis, where subsidiadiary is ry is not 1((= ownednot 1((= owned,, eliminations are made of the
eliminations are made of the following, e-cept:following, e-cept: a.
a. all dall diviividendends deds declaclared bred by suby subsidsidiariariesies b.
b. intintercercompompany any opeopen an accoccount unt balbalancancee c.
d
d.. ccaarrrryyiinng g vvaalluue e oof f tthhe e iinnvveessttmmeenntt A A !.
!. A pro>A pro>forforma stma stateatemenment ordt ordinainarilrily shaly shall be:l be: a.
a. cocolulumnmnar ar in in foformrmatat b.
b. shoshowinwing condg condensensed hised histortoricaical statl statemeementsnts c.
c. prpro>o>foformrma a adaduuststmementntss d.
d. prpro>o>foformrma ra resesulultsts #hich
#hich of of the the above above items items are are reflected$reflected$ a
a. . A A aannd d B B oonnllyy cc. . AA, , BB, , C C aannd d b
b.. CCaanndd oonnllyy d.d. AA,,BB aanndd CC ".
". ConConsolsolidaidated finated financincial stateal statemenments will be ts will be prepreparpared for parened for parent t and subsand subsidiidiary when any of ary when any of thethe following, e-cept:
following, e-cept: a.
a. contrcontrol is temol is temporarporary as when suy as when subsidibsidiary muary must be dist be disposed osposed of under cf under courtourt b.
b. it is it is an issuean issuer r of regisof registertered secured securitiities, ban6es, ban6s, finans, finance compace company, invesny, investmetment compant company,ny, investment house
investment house c.
c. the totathe total liabill liability of any eity of any entity intity in the groun the group is more thp is more than '%( millan '%( million or the tion or the total liaotal liabilitbility of y of the group is more than '1%( million
the group is more than '1%( million d
d.. iif f ppaarreennt t aannd d ssuubbssiiddiiaarriiees s aarre e eennggaaggeed d iin n ddiissssiimmiillaar r aaccttiivviittiieess A A %.
%. 8f annua8f annual maor rel maor repairs mapairs made in the first qde in the first quartuarter and paid foer and paid for in the seconr in the second quartd quarter clearer clearly benefly benefit theit the entire year, when should they
entire year, when should they be e-pensed$be e-pensed$ a.
a. in fin fulull in tl in the fhe firirst qst quauartrterer b.
b. in fin fulull in tl in the she sececonond qud quararteterr c.
c. an alan alloclocateated pord portiotion in ean in each quch quartarter of ter of the yehe yearar d.
d. all e-peall e-penses affnses affecting mecting more than one qore than one quarteuarter should be rer should be recognicognied in the last yeed in the last year of thear of the ffiissccaall yyeeaarr CC
/.
/. hhe e &e&eptptemembeber r !(, !(, 2(2((!, (!, phphysysicical al ininveventntorory y CoCompmpanany y apapprpropopririatatelely y ininclclududed ed '!'!,9,9(( (( of of merchandise purchased
merchandise purchased on account which waon account which was not recorded is not recorded in purchases until n purchases until 5ctober 2((!. 5ctober 2((!. #hat#hat effect will this error have on &eptember !(,
effect will this error have on &eptember !(, 2((! assets, liabilities, retained earnings, and earning for2((! assets, liabilities, retained earnings, and earning for the year then ended,
the year then ended, respectively$respectively$ a.
a. undunderserstattate, no effee, no effect, ovct, overserstatatedted, overs, overstattatee b.
b. no eno effectffect, ov, oversterstate, ate, underunderstatestate, u, undersnderstatetate c.
c. no effno effectect, unde, understrstateate, over, overstastate, ovte, overserstattatee d
d.. nno o eeffffeecctt, , uunnddeerrssttaattee, , uunnddeerrssttaattee, , oovveerrssttaattee CC .
. A compA company soany sold a used old a used operperatiationaonal assel asset at a '2(,t at a '2(,((( lo((( loss. ss. he lohe loss shoss should be cluld be classassifiified on theed on the income statement as:
income statement as: a
a.. aan n ee--ttrraaoorrddiinnaarry y iitteemm cc. . a a pprriioorr>>ppeerriiood d aadduussttmmeenntt b
b.. aan n ooppeerraattiinng g ee--ppeennssee dd. . aan n uunnuussuuaal l oor r iinnffrreeqquueennt t iitteemm BB 9.
9. eporeporting e-tting e-traorraordinardinary items on the incomy items on the income stateme statement more closent more closely follely follows which conows which concept of netcept of net income:
income: a
a.. aalll l iinncclluussiivvee cc. . ffuulll l ddiisscclloossuurre e pprriinncciippllee b
b.. ccuurrrreennt t ooppeerraattiinngg dd. . mmuullttiipplle e sstteepp A A .
. A company has ideA company has identifintified one of its busined one of its business segmeess segments as being the prnts as being the productoduction of compution of computer softwer software.are. #h
#hicich h of of ththe e fofollllowowining g shoshoululd d nonot t be be ininclclududed ed in in dedetetermrmininining g hihis s segsegmementnt0s 0s rerevevenunue e foforr disaggregation purposes$
disaggregation purposes$ a.
a. intintereerest ist inconcome on me on intintersersegmegment lent loanoanss b.
b. interinterest est incomincome on e on interintersegmsegment ent tradtrade re receivaeceivablesbles c.
c. interinterest iest income ncome on ton trade rade receireceivablevables wits with outh outside side partpartiesies d
d.. iinntteerreesst t iinnccoomme e oon n llooaanns s mmaadde e tto o oouuttssiidde e ppaarrttiieess A A 1(.
1(. A firm identifiA firm identified four busineed four business segmentss segments as s as reporreportabltable out e out of a total of of a total of 9 subunits of the firm based9 subunits of the firm based on the identifiable a
on the identifiable assets criterion. ssets criterion. otal company sales e-clotal company sales e-cluding intersegment sales uding intersegment sales are '2,(((,(((are '2,(((,((( for the year, and the sum of sales for the four identifi
for the year, and the sum of sales for the four identified segmented segments is s is '1,!((,'1,!((,(((. (((. hereherefore, thefore, the firm:
firm: a.
a. need need not rnot reporeport on t on a sea segment gment basibasis for s for this this perioperiodd b.
b. must idemust identify ontify one or more adne or more additioditional segmenal segments for sents for segmentgmental disclal disclosure puosure purposerposess c.
c. must dmust disciscloslose only te only the fouhe four subr sub>un>units aits as segs segmenmentsts d
d.. ttrreeaat t aalll l ssuubb>>uunniitts s oof f tthhe e ffiirrm m aas s rreeppoorrttaabbllee BB
PRACTICAL ACCOUNTING 1 PRACTICAL ACCOUNTING 1 1.
1. 5n ecemb5n ecember !1, a corporer !1, a corporation had a woration had a wor6ing capi6ing capital )currtal )current* ratent* ratio of 2, and reportio of 2, and reported the folloed the followingwing accounts:
accounts:
A
Asssseettss @@qquuiittiieess C
Caassh h ''"",,(((((( AAccccoouunntts s ppaayyaabblle e ''22,,(((((( A
Accccoouunntts s rreecceeiivvaabbllee 11!!,,(((((( #a#aggees s ppaayyaabblle e //,,(((((( 88nnvveennttoorry y //,,//(((( 88nntteerreesst t ppaayyaabblle e "",,(((((( '
'rreeppaaiid d iinnssuurraanncce e 11,,(((((( BoBonndds s ppaayyaabbllee 11"",,(((((( @
@qquuiippmmeennt t ))nneett* * 22"",,(((((( eettaaiinneed d eeaarrnniinnggs s 22,,//(((( herefore,
herefore, the the balance balance in in the the allowance allowance for for doubtful doubtful accounts accounts was:was:
2.
2. 5de, 8n5de, 8nc. has %,c. has %,(((,((( sh(((,((( shares ares of commof common stoon stoc6 outsc6 outstanditanding on eng on ecembecember !1, 2((r !1, 2((!. !. An addAn additionitionalal 1,(((,((( shares of common stoc6 were issued on April 1, 2((", and %((,((( more on 3uly 1, 2((". 1,(((,((( shares of common stoc6 were issued on April 1, 2((", and %((,((( more on 3uly 1, 2((". 5n 5ctober 1, 2((", 5de iss
5n 5ctober 1, 2((", 5de issued 1(,((( '1,((ued 1(,((( '1,((( face value, = conv( face value, = convertibertible bonds. le bonds. @ach bond is@ach bond is convertible into "( shares of common stoc6 and were considered potential common shares and no convertible into "( shares of common stoc6 and were considered potential common shares and no bonds wer
bonds were converte converted into commoed into common stoc6 in 2((". n stoc6 in 2((". #hat is the numb#hat is the number of shares to be used iner of shares to be used in computing basic earnings per share and
computing basic earnings per share and diluted earnings per share, respectively$diluted earnings per share, respectively$ ))aa* * %%,,%%((,,((((( ( aannd d %%,,%%((,,(((((( ))cc* * //,,((((((,,((((( ( aannd d //,,11((((,,((((((
))bb* * %%,,%%((,,((((( ( aannd d //,,11%%((,,(((((( ))dd* * //,,((((((,,((((( ( aannd d //,,((((,,(((((( CC !.
!. he folhe following ilowing informnformatioation is avain is available flable for #a6or #a6i 3eweli 3ewelry and Hry and Hift &tift &tore:ore:
eett iinnccoommee ''%%,,((((((
eepprreecciiaattiioon n ee--ppeennsse e 22,,%%(((( 88nnccrreeaasse e iin n ddeeffeerrrreed d ttaa- - lliiaabbiilliittiiees s %%(((( ecrease
ecrease in in cash cash !,(((!,((( ecrease
ecrease in in accounts accounts receivable receivable 2,(((2,((( 88nnccrreeaasse e iin n iinnvveennttoorriiees s ,,((((((
eeccrreeaasse e iin n aaccccoouunntts s ppaayyaabblle e %%,,(((((( 8ncrease
8ncrease in in accrued accrued liabilities liabilities 1,(((1,((( 88nnccrreeaasse e iin n pprrooppeerrtty y aannd d eeqquuiippmmeennt t 11"",,(((((( 8ncrease
8ncrease in in short>term short>term notes notes payable payable 1,(((1,((( ecrease
ecrease in in long>term long>term notes notes payable payable ",(((",((( #hat
#hat is is the the net net cash cash flow flow from from financing financing activities$activities$
))aa* * ''11%%,,(((((( ))bb* * ))''11%%,,((((((* * ))cc* * ''11,,(((((( ))dd* * ))''11"",,((((((** A A ".
". A company prA company provideovides resides residential cantial carpet clerpet cleaning at a rataning at a rate of '2" per month or '2e of '2" per month or '2%( per year if pa%( per year if paidid one year in advance.
one year in advance. @-amination of the ba@-amination of the ban6 deposits revealed the follown6 deposits revealed the following:ing: Accounts receivable 1;1
Accounts receivable 1;1 '12,/(('12,/(( Cash
Cash collected collected from from customers customers )including )including advances* advances* 19,(((19,((( Advances from customers 12;!1
Advances from customers 12;!1 2,/((2,/(( Accounts receivable 12;!1
Accounts receivable 12;!1 ,/((,/(( Advances from customers 1;1
Advances from customers 1;1 2,(((2,((( evenue
evenue for for the the year year was:was:
))aa* * ''11"",,""(((( ))bb* * ''11%%,,//(((( ))cc* * ''1122,,//(((( ))dd* * ''11,,""(((( A A %.
%. he folhe following ilowing informnformatioation were fon were found in thund in the boo6s oe boo6s of Inighf Inight Corpt Corporatoration:ion:
eeccoonncciilleed d bbaallaanncce e iin n <<eettrroobbaann6 6 cchheecc66iinng g aaccccoouunntt ''11,,//((..%%((
eeccoonncciilleed d bbaallaanncce e iin n BB''8 8 cchheecc66iinng g aaccccoouunntt ) ) ""((22..((((** B
Baallaanncceeiinn ''BB 2299,,%%((((..(((( C
Ceerrttiiffiiccaatte e oof f ddeeppoossiit t ))11%%( ( ddaayys s mmaattuurriittyy** !!((((,,((((((..(((( '
'eettttyy ccaasshh ffuunndd %%,,((((((..(((( '
'oossttaaggeessttaammppss 11,,((((((..(((( @
@mmppllooyyeeee00ss 8855?? 11,,22%%((..(((( @
@mmppllooyyeeeess0 0 ttrraavveel l adadvvaannccees s 11//,,""((((..(((( C
Caassh h oon n hhaannd d ))uunnddeeppoossiitteed d ssaallees s rreecceeiippttss* * !!11,,((""..((((
rraavveelleerr00s s cchheecc66s s //,,((((((..(((( C
Cuussttoommeerr00s s ppoossttddaatteed d cchheecc6 6 22,,((""..(((( otal
otal cash cash to to be be reported reported on on balance balance sheet sheet was:was:
))aa* * ''!!"",,22((11..%%(( ))bb* * ''!!%%11,,((!!..%%(( ))cc* * ''//""99,,..%%(( ))dd* * ''//"",,22((11..%%( ( A A
/.
/. he Henhe Henuinuine Compe Company reany requiquireres addis additiotional canal cash for itsh for its busis businesness. s. HenHenuinuine has decie has decided to use itded to use it accounts receivable to raise additional cash as
accounts receivable to raise additional cash as follows:follows: a.
a. 5n 3un5n 3une !(, 2((!e !(, 2((!, it ass, it assignigned '2(ed '2((,(((,((( of acco( of accountunts reces receivaivable of Hble of Hel +iel +inannance Comce Compapany. ny. 8t8t received an advance from Hel of 9%= of the assigned accounts receivable, less a commission on received an advance from Hel of 9%= of the assigned accounts receivable, less a commission on the advance of !=.
the advance of !=. 'rior to ecember !1, 'rior to ecember !1, 2((!, it collected '1%(,((( on the assigned 2((!, it collected '1%(,((( on the assigned accountsaccounts receivable and remitted '1/(,((( to Hel, '1(,((( of which represented interest on the advance receivable and remitted '1/(,((( to Hel, '1(,((( of which represented interest on the advance from Hel.
from Hel. b.
b. 5n ecem5n ecember 1, 2((!, it sober 1, 2((!, it sold '!((,ld '!((,((( of net acc((( of net accounts reounts receivaceivable to the +able to the +actorctoring Comping Company forany for '2/(,(((.
'2/(,(((. he receivables he receivables were sold outright were sold outright on a nonrecourse baon a nonrecourse basis.sis. c.
c. 5n ecem5n ecember 2, 2ber 2, 2((!, it r((!, it receiveceived an aded an advance ovance of '1((,f '1((,((( from t((( from the omehe omestic Bastic Ban6 by pln6 by pledginedgingg '12(,((( of its accounts receivable.
7ow much
7ow much is is the totathe total l e-pe-pensenses es to to be reporbe reported in ted in the incomthe income e stastatemtement for ent for the year the year endendeded ecember !1, 2((!$
ecember !1, 2((!$
))aa* * ''11((,,(((((( ))bb* * ''""((,,(((((( ))cc* * ''11%%,,11(((( ))dd* * ''%%%%,,11(((( .
. BaBasesed on td on the ihe infnforormamatitionon:: Credit
Credit sales sales '12,((( '12,((( creditcredit Co
Collllecectitionons s on on acaccocoununts ts rerececeivivabable le duduriring ng ththe e yeyear ar 11(,(,((((( ( crcrededitit Cash
Cash sales sales 91(,((( 91(,((( creditcredit ?nadusted
?nadusted balance balance in in allowance allowance for for doubtful doubtful %( %( debitdebit &
&aallees s rreettuurrnns s aannd d aalllloowwaannccees s ffoor r ccrreeddiit t ssaallees s "",,((((( ( ddeebbiitt Accounts
Accounts receivable, receivable, beginning beginning of of the the year year 1",((( 1",((( debitdebit
8f bad debts are estimated to be 1 J= of ending accounts receivable, in the adusting entry to 8f bad debts are estimated to be 1 J= of ending accounts receivable, in the adusting entry to recognie bad debts, you would
recognie bad debts, you would debit bad debt e-pense for:debit bad debt e-pense for:
))aa* * ''22!!(( ))bb* * ''11(( ))cc* * ''11!!(( ))dd* * ''1199(( A A 9.
9. 7ole Co7ole Company umpany uses a perpses a perpetual ietual inventnventory sysory system. tem. he comhe company0pany0s beginns beginning inving inventorentory of a pary of a particulaticularr style of large screen Ds and its purchases during the month of 3anuary were as follows:
style of large screen Ds and its purchases during the month of 3anuary were as follows: K
Kuuaannttiitty y ??nniit t CCoosst t oottaal l CCoosstt B
Beeggiinnnniinng g iinnvveennttoorry y ))33aann. . 11* * ""(( ''22(((( ' ' 99,,(((((( '
'uurrcchhaasse e ))33aann. . 1122* * 22( ( 22221 1 "",,""22(( '
'uurrcchhaasse e ))33aann. . 2299** 11( ( 11%%9 9 11,,%%99((
oottaall (( ''11"",,(((((( 5n 3anuar
5n 3anuary 1%, 7ole Company 1%, 7ole Company held its annual lary held its annual large screen D &ale age screen D &ale ay. y. 5n this day, %% of these5n this day, %% of these Ds were sold
Ds were sold. . he remaining he remaining 1% units ab1% units above remain iove remain in inventory an inventory at 3anuary t 3anuary !1. !1. Assuming that Assuming that 7ole7ole uses the L8+5 flow assumption, the cost of goods sold to be recorded at 3anuary 1% is:
uses the L8+5 flow assumption, the cost of goods sold to be recorded at 3anuary 1% is:
))aa* * ''1111,,""22(( ))bb* * ''1111,,(((((( ))cc* * ''1111,,!!11%% ))dd* * ''1111,,""//(( A A .
. 5n 3anua5n 3anuary 1, ry 1, 11, &tar Comp, &tar Company paiany paid d '1,'1,2((,2((,((( for "(,((((( for "(,((( ( shashareres s of Comeof Comet Corpot Corporatrationion0s0s common stoc6 which represents a 2%= investment in the net assets of Comet. &tar has the ability to common stoc6 which represents a 2%= investment in the net assets of Comet. &tar has the ability to e-ercise significant influence over Comet.
e-ercise significant influence over Comet. &tar r
&tar receiveeceived a divd a dividend idend of '! peof '! per sharr share from Ce from Comet iomet in 1. Cn 1. Comet romet reporteported net ied net income oncome of f '/"(,((( for the year ended ecember !1, 1.
'/"(,((( for the year ended ecember !1, 1. he b
he balance alance on &taon &tar0s r0s balance balance sheet sheet account account investment investment in in Comet Comet Corporation Corporation at at ecember ecember !1,!1, 1 should be:
1 should be:
))aa* * ''11,,22((((,,(((((( ))bb* * ''11,,22""((,,(((((( ))cc* * ''11,,!!//((,,(((((( ))dd* * ''11,,""99((,,((((( B( B 1(.
1(. he stoc6holders0 equithe stoc6holders0 equity of etro Comy of etro Company on ecember !1, pany on ecember !1, 2((2 includes the following2((2 includes the following:: 1
122= = pprreeffeerrrreed d ssttoocc66, , 22((,,((((( ( sshhaarreess, , ''11((( ( ppaar r vvaalluuee 22,,((((((,,(((((( 1
1""= = pprreeffeerrrreed d ssttoocc66, , 11((,,((((( ( sshhaarreess, , ''!!((( ( ppaar r vvaalluuee !!,,((((((,,(((((( C
Coommmmoon n ssttoocc66, , %%((,,((((( ( sshhaarreess, , ''11((( ( ppaar r vvaalluuee %%,,((((((,,((((((
eettaaiinneedd eeaarrnniinnggss 22,,22""((,,(((((( Additional
Additional paid paid in in capital capital 1,%((,(((1,%((,((( he 12= stoc6 is cumulat
he 12= stoc6 is cumulative and fully parive and fully participticipatingating. . he 1"= stoc6 is noncumulhe 1"= stoc6 is noncumulativative and fullye and fully part
participaicipating. ting. ividividends in arrends in arrears are fears are for ! years. or ! years. #hat is th#hat is the boo6 value boo6 value per share per share of commone of common stoc6$
stoc6$
))aa* * ''11!!22 ))bb* * ''1122// ))cc* * ''11(((( ))dd* * ''111122 11.
11. &ty&tyle le ComCompanpany y is is e-pe-perieriencencing ing finfinancancial ial difdifficficultulty y and and is is negnegotiotiatiating ng debdebt t resrestrutructucturinring g witwith h itsits credi
creditors to retors to relieve itlieve its financs financial streial stress. ss. &tyle ha&tyle has a '2,%((,((s a '2,%((,((( note paya( note payable to ?nitble to ?nited Ban6. ed Ban6. hehe ban6 is considering acceptance of an equity interest in &tyle Company in the form of 2((,((( shares ban6 is considering acceptance of an equity interest in &tyle Company in the form of 2((,((( shares of common stoc6
of common stoc6 valued at valued at '12 per sha'12 per share. re. he par vahe par value of common lue of common is '1( per is '1( per share. share. 7ow much is7ow much is the gain from the debt
the gain from the debt restructuring$restructuring$
))aa* * ''%%((((,,(((((( ))bb* * ''11((((,,(((((( ))cc* * ''""((((,,(((((( ))dd* * ' (' (
12.
12. 5n 3uly 1, 2((2, urable Company p5n 3uly 1, 2((2, urable Company purchased ose Corporaturchased ose Corporation 1(>year, 12= bonds with face ion 1(>year, 12= bonds with face valuevalue of '!((,((( for '!2",(((, which included '12,((( of accrued interest. he bonds, which mature on of '!((,((( for '!2",(((, which included '12,((( of accrued interest. he bonds, which mature on <arch 1, 2((, pay interest semi>
<arch 1, 2((, pay interest semi>annually on <arch 1 and &eptannually on <arch 1 and &eptember 1. ember 1. urable appropriaturable appropriately usesely uses the strai
the straight line methoght line method of amortiad of amortiation. tion. he amount of incomhe amount of income urable shoule urable should report for thed report for the calendar year 2((2 as a
calendar year 2((2 as a result of this long>term investment$result of this long>term investment$
))aa* * ''11//,,22(((( ))bb* * ''11,,11(((( ))cc* * ''1199,,(((((( ))dd* * ''!!((,,(((((( 1!.
1!. 5n 3uly 1, 2((2, 5n 3uly 1, 2((2, ey purchey purchased '1,ased '1,(((,((( of #(((,((( of #est Comest Company0pany0s 9= bonds due at 3s 9= bonds due at 3uly 1, 2(12. uly 1, 2(12. eyey e-pects to hold t
e-pects to hold the bond until mathe bond until maturity. urity. he bonds, which pahe bonds, which pay interest semiannuay interest semiannually on 3anuary 1lly on 3anuary 1 and 3uly 1, were purcha
and 3uly 1, were purchased for '9%,((( to yield 1(=. sed for '9%,((( to yield 1(=. 8n its income statem8n its income statement for the year ent for the year endedended ecember !1, 2((2, ey should report interest income at:
ecember !1, 2((2, ey should report interest income at:
1".
1". 5n 5n 3u3uly 1, ly 1, 2(2((2(2, , oogeger r CoCo. . papaid id '1'1,1,19,(9,((( (( fofor r 1(1(= = 2(>2(>yeyear ar bobondnds s wiwith a th a faface ce amamouount nt of of '1,(((,(((.
'1,(((,(((. 8nterest is 8nterest is paid on paid on ecember !1 and ecember !1 and 3une !(. 3une !(. he bonds whe bonds were purchased ere purchased to yield to yield 9=.9=. oger uses the effective inter
oger uses the effective interest method to recognie interest est method to recognie interest income from investment. income from investment. #hat should#hat should be reported as carrying amount of the bonds in oger0s ecember !1, 2((2 balance sheet$
be reported as carrying amount of the bonds in oger0s ecember !1, 2((2 balance sheet$ ))aa* * ''11,,22((,,(((((( ))bb* * ''11,,1199,,(((((( ))cc* * ''11,,11%%,,22( ( ))dd* * ''11,,11!!,,((%%((
1%.
1%. 7eart Company lea7eart Company leased a new machine fsed a new machine from Ash Company on rom Ash Company on ecember !1, 2((2 under a ecember !1, 2((2 under a lease withlease with the following pertinent information:
the following pertinent information: L
Leeaasseetteerrmm 99 yyeeaarrss A
Annnnuuaal l rreennttaal l ppaayyaabblle e aat t bbeeggiinnnniinng g oof f eeaacch h lleeaasse e yyeeaarr ''%%((((,,(((((( ?
?sseeffuul l lliiffe e oof f tthhe e mmaacchhiinnee 11( ( yyeeaarrss '
'rreesseennt t vvaalluue e oof f tthhe e 9 9 lleeaasse e ppaayymmeenntts s aat t 1122;;!!11;;22((((22 ''22,,%%99((,,(((((( <achine
<achine reverts reverts to to Ash Ash at at lease lease e-piration e-piration datedate he machine has a fair value of '
he machine has a fair value of '2,9((,((( at the inception of the lease. 2,9((,((( at the inception of the lease. 7eart uses the straight line7eart uses the straight line metho
method of depreciad of depreciation. tion. +or the year ended ece+or the year ended ecember !1, 2((!, how much deprecimber !1, 2((!, how much depreciatioation shouldn should 7eart record for the capitalied lease machine$
7eart record for the capitalied lease machine$
))aa* * ''!!%%((,,(((((( ))bb* * ''!!2222,,%%(((( ))cc* * ''2299((,,(((((( ))dd* * ''22%%99,,((((((
PRACTICAL ACCOUNTING 2 PRACTICAL ACCOUNTING 2 1.
1. 8n the ca8n the calendalendar year 2r year 2(((, the p(((, the partneartnership rship of A and B of A and B realrealied a nied a net proet profit of 'fit of '2"(,(((2"(,(((. . he cahe capitapitall accounts of the partners show
accounts of the partners show the following postings:the following postings: A,
A, Capital Capital B, B, CapitalCapital
eebbiitt CCrreeddiitt eebbiit t CCrreeddiitt 33aann.. 11 ''1122((,,(((((( ''99((,,(((((( < <aay y 1 1 ''22((,,(((((( ''11((,,(((((( 33uullyy 11 22((,,(((((( A Auugg 11 11((,,(((((( 5 5cctt 11 11((,,(((((( %%,,((((((
8f 2(= interest based on the capital at the end of the year is allowed and given and the balance of 8f 2(= interest based on the capital at the end of the year is allowed and given and the balance of the '2"(,((( profit is divided equally, the total share of A and B, respectively, are:
))aa* * ''112211,,%%((((, , ''111199,,%%(((( ))cc* * ''1122!!,,((((((, , ''1111,,(((((( )b*
)b* '12",(((, '12",(((, '11/,((( '11/,((( )d* )d* '122,/2%, '122,/2%, '11,!% '11,!% A A 2.
2. L and < L and < are paare partnrtners witers with a h a proprofit and losfit and loss ratio of %:2s ratio of %:2% and capit% and capital balaal balancences of s of '1('1((,((,((( and(( and '%(,(((, respectively.
'%(,(((, respectively. is to be admit is to be admitted into the partted into the partnership by purchasing a nership by purchasing a 2(= interest in the2(= interest in the capital, profits and losses f
capital, profits and losses for '/(,(((. or '/(,(((. Assuming goodwill is not recAssuming goodwill is not recorded, the capital balances of orded, the capital balances of LL and < after the admission of are:
and < after the admission of are:
))aa* * ''99((,,((((((, , ''""((,,(((((( ))cc* * ''111122,,((((((, , ''!!99,,((((((
))bb* * ''1122((,,((((((, , ''//((,,(((((( ))dd* * oot t ggiivveenn A A !.
!. he follhe followiowing balang balance shence sheet is preseet is presentented for the partnd for the partnersership of , hip of , @ and + @ and + who shawho share profre profits andits and losses in the ratio of %:!:2, respectively:
losses in the ratio of %:!:2, respectively: C
Caassh h ' ' //((,,(((((( LiiaLabbiilliittiieess ''11""((,,(((((( 5
5tthheer r aasssseetts s %%""((,,(((((( , , CCaappiittaal l 2299((,,(((((( @,
@, Capital Capital 1/(,(((1/(,((( +,
+, Capital Capital 2(,(((2(,(((
oottaall ''//((((,,((((( ( oottaall ''//((((,,(((((( he
he partners partners decided decided to to liquidate liquidate the the partnership. partnership. 8f 8f the the other other assets assets are are sold sold for for '"((,(((, '"((,(((, howhow should the available cash be
should the available cash be distributed to each partner, respectively$distributed to each partner, respectively$
))aa* * ''2299((,,((((((, , ''11//((,,((((((, , ''22((,,(((((( ))cc* * ''22((//,,((((((, , ''1111"",,((((((, , ' ' ((
))bb* * ''2211((,,((((((, , ''111199,,((((((, , ''99,,(((((( ))dd* * ''22((%%,,((((((, , ''1111%%,,((((((, , ' (' ( ".
". ew @ra Corew @ra Corp. bills its nep. bills its newly estwly establisablished branhed branch for mercch for merchandihandise at 1"(= of costse at 1"(= of cost. At the end of its. At the end of its first month, the branch reported, among
first month, the branch reported, among other things, the following:other things, the following: <
<eerrcchhaannddiisse e ffrroom m hhoomme e ooffffiicce e ))aat t bbiilllleed d pprriiccee** ''2299,,(((((( <
<eerrcchhaannddiisse e ppuurrcchhaasseed d llooccaalllly y bby y bbrraanncch h 11((,,(((((( 8n
8nveventntorory, y, &e&eptptemembeber r !(, !(, of of whwhicich h 2,2,(((((.(.(( (( arare e of of lolocacal l pupurcrchahaseses s ,,((((((
eett ssaalleess ffoorrmmoonntthh ""!!,,%%(((( he
he branch branch inventory inventory at at cost cost should should be be reported reported atat
))aa* * ''!!99,,(((((( ))bb* * '',,(((((( ))cc* * '',,(((((( ))dd* * oonne e oof f tthhe e aabboovve e BB %.
%. 7ill Com7ill Company begpany began operaan operations on 3antions on 3anuary 1, 2(((, anuary 1, 2(((, and approd appropriapriately uses thtely uses the instae installment mellment method of thod of accounting.
accounting. ata availata available for 2((( able for 2((( are as foare as follows:llows: 8n
8nststalallmlmenent t acaccocoununts ts rerececeivivabablele, , 1212;!;!1;21;2(((((( '%'%((((,((,(((( 88nnssttaallllmmeennt t ssaallees s ((((,,(((((( Cost
Cost of of goods goods sold, sold, as as percentage percentage of of sales sales /(=/(= ?sing the installment method, 7ill0s realied gross profit for 2
?sing the installment method, 7ill0s realied gross profit for 2 ((( would be:((( would be:
))aa* * ''!!//((,,(((((( ))bb* * ''22""((,,(((((( ))cc* * ''22((((,,(((((( ))dd* * ''11//((,,(((((( /.
/. he Cenhe Centrtral 'laial 'lains &ubdns &ubdiviivisiosion sells resn sells resideidentintial subdal subdiviivisiosion lots in instan lots in installmllmentent. . he folhe followlowinging information was ta6en from the accounting records of Central 'lains &ubdivision as at ecember !1, information was ta6en from the accounting records of Central 'lains &ubdivision as at ecember !1, 2(((:
2(((:
88nsnstatallllmmenent t acaccocoununtts s rrececeieivavablble, e, 1;1;1;1;22(((((( ''%%%%,(,((((( 8n
8nststalallmlment ent acaccocountunts s rerececeivivabablele, , 12;12;!1!1;2;2((( ((( 9"(,(9"(,((((( ?
?nnrreeaalliieed d ggrroosss s pprrooffiitt, , 11;;11;;22((((( ( !!!!,,%%(( 88nnssttaallllmmeennt t ssaallees s %%((,,(((((( 7ow
7ow much much is is the the realied realied gross gross profit profit in in 2((($2((($
))aa* * ''""22,,%%(((( ))bb* * ''!!!!,,%%(( ))cc* * ''!!99,,(((((( ))dd* * ''!!99,,22%%((
.
. 5n Apri5n April , l , 119, art Co. pai9, art Co. paid '/2(,d '/2(,((( for all the iss((( for all the issued and outued and outstastandinding commng common stocon stoc6 of 6 of #al#alll Corp. in
Corp. in a transaction a transaction properly accounted properly accounted as a purchase. as a purchase. he recorded he recorded assets and liaassets and liabilities of bilities of #all#all Corp. on April 1, 19:
Corp. on April 1, 19: C
Caasshh '' //((,,(((((( 88nnvveennttoorryy 1199((,,(((((( 'roperty M @quipment )net of accumulated
'roperty M @quipment )net of accumulated d
deepprreecciiaattiioon n oof f ''2222((,,((((((* * !!22((,,(((((( Hoodwill ) net of accumulated amortiation of
Hoodwill ) net of accumulated amortiation of '
'%%((,,(((((( 11((((,,(((((( L
Liiaabbiilliittiieess ))1122((,,((((((**
eett AAsssseettss ''%%""((,,((((((
5n April 1, 19, #all0s inventory had a fair value of '1%(,(( and the property and equipment )net* 5n April 1, 19, #all0s inventory had a fair value of '1%(,(( and the property and equipment )net* had a fair value of '!9(,(((. #hat is the amount of goodwill resulting from the business combination$ had a fair value of '!9(,(((. #hat is the amount of goodwill resulting from the business combination$
))aa* * ''11%%((,,(((((( ))bb* * ' ' 1122((,,(((((( ))cc* * ''%%((,,(((((( ))dd**''22((,,((((( ( A A 8tems 9 and :
8tems 9 and :
5n ecember !1, 19, &a-e Corp. was merged into 'oe Corp. 8n the business
5n ecember !1, 19, &a-e Corp. was merged into 'oe Corp. 8n the business combination, 'oecombination, 'oe issued 2((,((( shares of its '1( par common stoc6,
issued 2((,((( shares of its '1( par common stoc6, with a mar6et price of '19 per share, for all ofwith a mar6et price of '19 per share, for all of &a-e0s common stoc6. he
&a-e0s common stoc6. he stoc6holders0 equity section of each company0s balance sheet stoc6holders0 equity section of each company0s balance sheet immediatelyimmediately before
before the the combination combination was: was: 'oe'oe &a-e
&a-e
C
Coommmmoon n ssttoocc66 ''!!,,((((((,,(((((( ''11,,%%((((,,(((((( Additional paid in capital
Additional paid in capital 1,!((,((( 1,!((,((( 1%(,(((1%(,(((
eettaaiinneed d eeaarrnniinng g 2,,%2 %((((,,((((( ( 99%%((,,(((((( '/,9((,(((
'/,9((,((( '2,%((,((('2,%((,((( 9.
9. AssAssumume e ththat at ththe e memergrger er ququalalififieies s fofor r trtreaeatmtmenent t as as a a pupurcrchahasese. . 8n 8n ththe e eececembmber er !1,!1,119,9, consolidated balance sheet, additional paid in capital should
consolidated balance sheet, additional paid in capital should be reported atbe reported at
))aa* * ''%%((,,(((((( ))bb* * ''11,,!!((((,,(((((( ))cc* * ''11,,""%%((,,(((((( ))dd* * ''22,,((((,,(((( .
. Assume tAssume that the merhat the merger quager qualifielifies for tres for treatmenatment as a pooling ot as a pooling of interef interests. 8n the sts. 8n the ecembecember !1,19er !1,19,, consolidated balance sheet, additional paid in capital should
consolidated balance sheet, additional paid in capital should be reported atbe reported at
))aa* * ''%%((,,(((((( ))bb* * ''11,,!!((((,,(((((( ))cc* * ''11,,""%%((,,(((((( ))dd* * ''22,,((((,,(((((( A A 1(.
1(. Iim <anufaIim <anufacturcturing uses a ing uses a proceprocess cost system to manufacss cost system to manufacture ust ensitture ust ensity &ensors for the miningy &ensors for the mining industry.
industry. he following information perthe following information pertains to operations for the month of <aains to operations for the month of <ay 2(((:y 2(((:
?nits
?nits
Be
Begiginnnnining g wowor6 r6 in in prprococesess s ininveventntorory, y, <a<ay y 1 1 1/1/,(,((((( &
&ttaarrtteed d iin n pprroodduuccttiioon n dduurriinng g <<aayy 11((((,,(((((( C
Coommpplleetteed d pprroodduuccttiioon n dduurriinng g <<aay y 22,,(((((( @
@nnddiinng g wwoorr6 6 iin n pprroocceesss s iinnvveennttoorryy, , <<aay y !!1 1 22",",((((((
he beginning inventory was /(= complete for materials and 2(= complete for conversion costs. he beginning inventory was /(= complete for materials and 2(= complete for conversion costs. he ending inventory was (= complete for materials and "(= complete for conversion costs. he ending inventory was (= complete for materials and "(= complete for conversion costs.
Costs
Costs pertaining pertaining to to the the month month of of <ay <ay are are as as follows:follows: a.
a. BegBeginninning inveing inventontory costs are: materry costs are: materialials, s, '%"'%",%/(,%/( dirdirect laboect labor, r, '2('2(,!2,!2( ( and factand factoryory overhead, '1%,2"(.
overhead, '1%,2"(. b.
b. CosCost t incincurrurred durined during <ay g <ay areare: : matmaterierials usedals used, , '"/'"/9,((9,((( direc( direct labort labor, , '19'192,92,99( and9( and factory overhead, '!1,1/(.
factory overhead, '!1,1/(. ?sing
?sing the the +8+5 +8+5 method, method, the the equivalent equivalent units units of of production production for for materials materials are:are:
))aa* * ,,//((( ( uunniittss ))bb* * 11(("",,((((( ( uunniittss ))cc* * 11((,,22((( ( uunniittss ))dd* * 11((99,,((((( ( uunniitts s BB 11.
11. ational <ar6eting ational <ar6eting Corp. uses a Corp. uses a ob order ob order costing system. costing system. 8t has t8t has three production dhree production departments, 4, E epartments, 4, E and N.
and N. he manufacturing cost he manufacturing cost budget for 2((( is budget for 2((( is as follows:as follows:
eepptt. . 4 4 eepptt. . E E eepptt. . NN
iirreecct t mmaatteerriiaallss ''//((((,,(((((( ''""((((,,(((((( ''22((((,,((((((
iirreecct t llaabboor r 22((((,,((((( ( %%((((,,((((( ( ""((((,,(((((( <
<aannuuffaaccttuurriinng g oovveerrhheeaad d //((((,,((((( ( 11((((,,((((( ( 22((((,,(((((( +or
+or 3ob 3ob o. o. (1>9 w(1>9 which hich was was completed completed in in 2(((, dir2(((, direct ect materials materials cost cost was was '%,((( a'%,((( and nd directdirect labor cost was as follows:
labor cost was as follows:
eepptt. . 44 ''""((,,(((((( eepptt. . EE ''11((((,,(((((( eepptt. . NN ''22((,,(((((( he
he corporation corporation applies applies manufacturing manufacturing overhead overhead to to each each ob ob order order on on the the basis basis of of direct direct laborlabor cost, using departmental rates predetermined at the beginning of
cost, using departmental rates predetermined at the beginning of the year based on thethe year based on the manufacturing cost budget.
manufacturing cost budget.
he total manufacturing cost of 3ob o. (1>9 which was completed in 2((($ he total manufacturing cost of 3ob o. (1>9 which was completed in 2((($
