PRACTICAL ACCOUNTING- PROBLEMS II Set A
38.Person Company acquired 80 percent of the outstanding common stock
Of sonar, Inc, by issuing 20,0000 of its P 10 par value shares which are selling at 16, Fees paid to consultants and attorneys in connection with the exchange of shares amounted to P 30,000. Immediately prior to the acquisition ,. The trial balances of the two companies were as follows:
Current assets PARSON BOOK VALUE SONAR
Plant assets P1, 800,000 P 975,000 FAIR VALUE
Investment in marketable 3,000, 000 1,300,000 P 1,025,000
Securities (1,100,000) 300,000 1,400,000
Current liabilities ( 600.000) (800,000) 280,000 Noncurrent liabilities ( 400,000) (400,000) 800,000
Common stock ( 800,000) (200,000) 530,000
Additional paid in capital (1,900,000) (775,000) Retained earnings
On the consolidated balance sheet after acquisition, how much will be the additional paid in capital of the controlling interest, assuming that all the requirements for pooling of interest, have been met?
A. P 1,000,000 B. P 1,200,000 C. P 1, 160,000 D. P 800,000
39. The following information pertains to a river- control project or Rathaus Konstrukt Inc. In Tabuk, Kalinga which was commented in 19X3 and completed the following year:
Cost incurred to date
At June 30, 19X3 P 9, 750,000
At June 30, 19X4 15, 750,000
Estimated total cost At completion
At June 30, 19X3 19,500,000
At June 30, 19X4 20,250,000
The project is a P22,500 fixed- price construction contract and Rathaus uses the percentage- of completion method of accounting. What is the income reported by Rathaus on its Kalinga project on June 30, 19X4?
A. P 750, 000 b. P 1, 500,000 C. P 1, 750,000 D. P 250, 000
40. Ovid company makes use of the two-way analysis of overhead variances. Ovid’s budgeted factory overhead for fixed costs is p 1,200,000 per month, plus a variable factory overhead rate of P96 for every direct labor hour. The standard direct labor hours allowed for May, 19X 6 productions are 432,000 hours. An analysis of the factory
overhead showed that, in May, Ovid had an unfavourable budget (controllable) variance of P24,000 and a favorable volume balnce of P 12,000. What is the applied factory overhead in May?
A. P5, 371,200 B. P5, 359, 200 C. P5, 335, 200 D. P5, 347, 200
41. Paradim Co. recently paid P5,000,000 cash for the net assets of Supreme Co. which had a book value of P 5,000,000 of P4, 000,000 . The book values of the assets and liabilities approximate their fair values except as noted below.
BOOK VALUE FAIR VALUE
Inventory... .P 400,000 P 450,000 Land... 300,000 500,000 Building and equipment, net...1,400,000 1,550,000
68. Which of the two methods ( the present of the automated has higher income at the level of sales of 26,000 units?
a. Present, P 60,000 b. Automated P60,000 c. Present, P 240,000 d. Automated, P 240,000
69. A fira has the following capital structures : 70 debt and 320 equity interest rate on debt is 12 and on common stock is 14 if the weighted average cost of the capital is 9.66 then what is the marginal tax rate?
a. 350 b. 400 c 600 d. 650
70. Samantha Manufacturing recently completed and sold an order of 50 units that had the following costs: Direct materials P1, 500
Direct labor 8,500
Variable overhead 4,000 Fixed overhead 1,400
TOTAL P 15,400
Applied on the basis of direct labor hours. Applied at the rate of 10 of variable cost.
The company has now been requested to prepare a bid order for another set of 50 units of the same product. If an 80 learning curve were applied, Samantha’s total cost on this order would be estimated at
a. P 6,400 b. P 8,600 c. P 9,900 d. P 15,400
47. Timepieces Company manufactures and sells watches that carry a 2- year unconditional warranty against product failure. Based on a reliable statistical, timepieces knows that between the sale and the lapse of the product warranty; 10% of units sold will require an average cost of P 250 per unit for repairs. The following data reflect the recent experience of the company for the past 3 years.
Number of units sold 2008 2009 2010
Number of units repaired: 6,000 8,500 10,000
2008 80 150 200
2009
2010 250 350
400 48. Millennium Company provided the following information for 2010.
Net Income 2, 5000,000
Total Assets 5,600,000
Share Capital 1,000,000
Share Premium 800,000
Treasury shares at cost 200,000
Dividends declared 1,500,000
400,000 Prior period adjustment for overstatement of 2009 ending inventory
The debt to equity ratio 40% ( total liabilities divided by total shareholders’ equity) at December 31,2010 . What was the retained earnings balance on January 1, 2010?
a. 1, 000,000 b. 1,800,000 c. 1, 6000,000 d. 1, 4000,000
49. On July 1, 2010, Dakota Corporation Issued office space for 5 years at a monthly rental of P 75,000. On that date , Dakota paid the lessor P 950,000 which included the following:
Rent deposit 300,000
First months deposit 75,000
Last month’s deposit 75,000
Installation of new walls and offices 500,000
The entire amount of P 950,000 was charged to rent expense in 2010 . Monthly rentals were paid as scheduled from August to December 31, 2010 under the operating lease?
a. 530,000 b. 500,000 c. 125,000 d. 450,000
50. Brisbane company reported the following information for 2010 Sales revenue of P 2,800,000 cost of goods sold of P 1,000,000, distribution costs of P 400,000, administrative expenses of P 350,000, depreciation of P 250,000, interest expense of P 80,000 and income tax expense of P 280,000. All sales were made for cash and all expenses other than depreciation and bond premium amortization of P 20,000 were paid in cash. All current assets and current liabilities remained unchanged. What is the net cash provided by operating activities during 2010? a. 440, 000
b. 690,000 c. 670,000 d. 710. 000
PRACTICAL ACCOUNTING PROBLEMS
ANSWERS
1. Understatement of 2009 warranty cost 600,000 A
2. Cumulative additional depreciation ( 1M/ 10X6) 600,000 Depreciation on carrying amount (2.5M)/5) 500,000 2010 Depreciation 1,100,000 B
3. Perpetual Periodic
Unadjusted balances 3,600,000 3,450,000
Unrecorded sales (200,000)
Goods sold FOB SP (500,000) (500,000)
Goods sold FOB destination (150,000) (150,000)
Goods held on consignment
Goods purchased FOB Dest (arrived) 400,000 (, 100,000)
Obsolete inventory (150,000)
Adjusted inventory 300,000
3,360.000 3,300,000 D
4. Fair value of share alternative 60,000X35) 2,100,000 Less. Fair value of cash alternative (30,000 X 50) 1,500,000
Grant date fair value of equity component 600,000
2009 FV of equity component (60,000//3) 200,000 FV of liability component (30,000X 60/ 3) 600,000 Compensation expense 800,000 2010 FV equity component (60,000/3) 200,000
Fair value of liability component (30,000X75)/ 3X2) – 600,000 900,000
Compensations expense 1,100,000 C
5. Lobstar ( 10,000)X 150) 1,5000,000
Shrimp (50,000X. 80) 4,000,000
Salmon( 30,000X 200) – 400,000 payment 5,600,000
Net unrealized gain 3,100,000 B
6. net investmen 4,204,000
Less: PV of GRV (500,000 x.58) 280,000
Net Investment to be recovered from rentals 3,924,000
Rentals (3,924,000/4.36) 900,000
Gross investment (900,000x6)+ 500,000 residual value 5,900,000
Less : Net Investment 4,204,000
Financial revenue 1,696,000 B
7. Average earnings (4M-500,000)/5 700,000
Capitalization rate 10%
Net assets with goodwill 7,000,000
Less: Fair value without goodwill 5,500,000
Goodwill 1,500,000 C
8. Total market value (except Stellar Company treasury share) 10,600,000
Less: Total cost 10,300,000
9. Accrued pension cost 1/1 (6,500,000-5,000,000) (1,500,000)
Pension expense (1,000,000)
Contributions 1,200,000
Accrued pension cost 12/31 (1,300,000) D
10. Accounting Profit 1,200,000
Fines and penalties 500,000
Cash dividends received (800,000)
Accounting profit subject to tax 900,000
Unrealized gain on trading securities (taxable) (200,000)
Reversal of deductible temporary difference (600,000)
Reversal of taxable temporary difference 350,000
Taxable profit 450,000 B
11. Gross profit from instalment accounts receivable(120,000/30%) 400,000
Instalment accounts receivable (400,000/40%) 1,000,000 C
12. average general price index number (150 +300)/2 225
Cash 300,000 AR 800,000 Inventory (1,200,000 x 300/225) 1,600,000 PPE (2,000,000 x 300/125) 4,800,000 Total assets 7,500,000 Accounts payable 400,000 Bonds payable 700,000 Total liabilities 1,100,000 Contributed capital (1.2 M x 300/100) 3,000,000 RE (SQUEEZE) 3,550,000 B
Less ; Treasury shares (350,000 x 300/140) 750,000
SHE (7,500,000-1,100,000) 6,400,000
13. Replacement cost 9,000,000
Less:Accumolated depreciation (9M x 25%) 2,250,000
Sound Value 6,750,000
Less: Carrying amount 5,250,000
Revaluation surplus-gross 6/30/10 1,500,000
Less: Deferred tax lability (1.5 Mx 30%) 450,000
Revaluation surplus-net 6/30/10 1,050,000
Less Realization (1,050,000/5x6/12) 105,000
Revaluation surplus-net 12/31/10 945,000 A
Percentage of accumulated depreciation (1,750/7,000) 25% 14. Payment for operating expenses
(1,000-120-30+400-550+100-150) 650,000 B
15. cost 3,500,000
Less: Accumulated depreciation (3M x 10% x 3) 900,000
Carrying amount 1/1/10 2,600,000
2010 Depreciation (2.6 M-500)x 7/28) (7 years remaining) 525,000 D
16. PBO (5M +600+ (12% x 5M)-900-100) 5,200,000 B
17. 10 dairy cattle- 3 years old 580,000
2 hogs-4 years old 600,000
15 horses-2 year old 1,350,000
8 Carabao’s -3.5 years old 290,000
4 dairy cattle-1.5 years old 200,000
6 carabaos-1 yr old 140,000
Carrying amount on 12/31/10 3,160,000 A
18.FV of land and building (lower than PV of minimum lease payments) 5,950,000 B 19. Net. Income to ordinary shareholders (900,000 x 15) 13,500,000
Dividends on preference shares 500,000
Total net income 14,000,000
Divide by : (900,000 plus (400,0000) 1,200,000
Diluted EPS 11.67 C
21. Total shareholders 10,400,000 Less: PSHE (1.25 M +250)+(1.25 M x 10% x 4 years) 2,000,000
Ordinary shareholders’ equity 8,400,000
Divide by (230,000 treasury) 210,000
Book value per ordinary share 4000 A
22. Increase in contributed capital (8.5 M -5M) 3,500,000
Stock dividend (4M x 25%) (1,000,000)
Donated capital (800,000)
Proceeds from share issuance 1,700,000
Accumulated profits beg 1,500,000
Stock dividends (4M x 25%) (1,000,000)
Cash dividends declared during the year (SQUEEZE) (800,000)
Net income 2,500,000
Accumulated profits end 2,200,000
Barrowing paid (1,500,000)
Proceeds from shares issued 1,700,000
Dividends paid (800,000 + 500,000 beginning dividends payable) (1,300,000)
Net cash used in financing activities (1,100,000) B
23. total cash dividends (500+300) 800,000
Fair value of property dividend at date of payment on 5/1/2010 1,400,000 Fair value of share dividend at date of declaration (10% x 200,000 x 15 ) 300,000
Decrease in RE 2,500,000C
24. Royalty income for first half of the year 800,000 Royalty income for second half of the year (10M x 10%) 1,000,000
2011 Royalty Income 1,800,000 A
25. Account receivable 4,000,000
Less: Required allowance 300,000
NRV. 3,700,000 A
26. Proceeds 3,000,000
Cash Surrender Value (145,000)
Unexpired Insurance premium (90,000/ 12 x 2) (15,000)
Gain 2,840,000 B
27. Accrued liability on Dec. 31 , 2010 1,200,000 C
28. profit (900,000/30%) 3,000,000 B
29. 2010 compensation expense –market value on 12/31/2010 2,100,000 B
30. balance per bank statement’ 1,250,000
Deposit in transit 200,000
Outstanding checks (80,000)
Bank service charges 25,000
Interest income (75,000)
Error in recording check (73,000-37,000) (36,000)
31 Adjusted accounts payable (2.5 M +150T-300T) 1,284,000
32. Accumulated depreciation 12/31/09 3,000,000
Impairment loss 2,000,000
Depreciation expense in 2010 (4M/4 years) 1,000,000
Total 6,000,000
33. option price (50,000x 100) 6,000,000
Share options outstanding 2,000,000
Total 8,000,000
Less : Par value of shares issued (50,000 x 100) 5,000,000
Share premium 3,000,000 B
34. Payment for real property 2,000,000
Sale of AFS (500 + 100) 600,000
Purchase of H & E (800,000)
Advances to other companies (2,000,000)
Cost of patent (150,000)
Net cash used 4,350,000 B
35. Cost 5,000,000
Less: 2006 and 2009 amortization (5M/ 5 x 2) ( Lease term) 2,000,000
Less: 2010 amortization (3M / 4 years) ( remaining life of asset) 750,000
CA 12/31/10 depreciation 2,250,000 A
36. Adjusted RE 1/1/10 (3M-400,000x 70%) 3,220,000 A
37. Collections 5,000,000
Rent receivable and 400,000
White off 50,000
Total 5,450,000
Less: Rent receivable beginning 700,000
Rental revenue-accrual 4,750,000B
38. Accrued liability-12/31/2010 (25 x 50,000) 1,250,000 Less: Accrued liability or 12/31/2009 (17 x 50, 000) 850,000
2010 compensation expense 400,000 B 39. B=552,250-10B 1,108=550,000 Bonus =(550.000/1.10) 500,000 B 40. Preference dividend in 2009 (10M x 12%) 1,200,000 Preference dividend in 2010 (10M x 24%) 2,400,000 Ordinary dividends (130,000 -30,000)x 12 1,200,000
Total dividend declaration 2,800,000 A
2010 ordinary dividend rate (12.00 divided by 50.00) 24%
41. BI 500,000
Net purchases 5,300,000
TGAS 5,800,000
Less: Adjusted EI (600,000 + 80,000) 680,000
COS 5,120,000 A
42. 10% preference shares issued (4M-3M equals 1 M/100 par 10,000
Subscription price (300,000/25%) 1,200,000
Less: Par value 500,000
Increase in share premium from subscription 700,000
Increase in share premium-10% PS (1,500,000-300) 1,200,000
Increase in share premium from subscription (700,000)
Share premium from issuance 500,000
Proceeds from shares issued (1M par +500T share premium) 1,500,000
Divide by shares issued 10,000
Average issue price 150 B
43. Fair value on Dec. 31, 2010 5,600,000
Less: Amortized cost on Dec 31,2010 5,248,700
Unrealized gain on available for sale securities 251,300 A 44. carrying amount of the liability extinguished (5M + 1.2M) 6,200,000
Carrying amount of inventory (2,500,000)
Fair value of shares (40,000 x 60) (2,400,000)
Gain on extinguishment 1,300,000 B
45.Issued price (6M x 110%) 6,600,000
Less: FV of bonds ex-warrants 5,600,000
Equity component 1,000,000
Excess over par from issuance of shares (150-100) x ( 6,000 x 20) 6,000,000
Total share premium 7,000,000 A
46. PCF (18,000 + 5,000) 23,000 C
47. 2009 Warranty expense (850x250) 212,500
Less: 2009 Warranty services from 20009 sales (250 x 250) 62,500
12/31/09 warranty liability 150,000
2010 Warranty expense (1,000 x 250) 250,000
Total 400,000
Less : 2010 Warranty services from 2009 and 2010 sales (750 x 250) 167,500
48. Total shareholders’ equity (5.6 M/140%) 4,000,000
Contributed capital (1M + 800,000) (1,800,000
Treasury shares 200,000
Retained earnings 12/31 2,400,000
Retained earnings on Jan. 1 (SQUEEZE) 1,600,000 B
Net income 2,500,000
Dividend declared (1,500,000)
Error (400,000)
Retained earnings –Dec. 31 2,400,000
49. Rental expense from July 1 to December (75,000 x 8) 450,000 Amortization of improvements (500,000/ 5x6/12) 50,000
Total expense related to operating lease 500,000 B
50. Net cash provided by operating activities
(2,800-1,000-400-350-100-280) 670,000 C
Interest paid (80,000+20,000) 100,000 B
PROBLEM I
The following information was obtained in the audit of the cash account of CHELSEE COMPANY as of December 31, 2010. Assume that the CPA satisfied himself as to the propriety of the cash book the bank statements and the returned checks, except as noted:
1. The bookkeepers bank recon dilation at November 30, 2010 Balance per bank statement P 194,000
Add: Deposit in transit 11,000
Total P 205,000
Less: Outstanding checks
No. 1434 P 1,400
1562 7,500
1571 5,800
1584 8,000
1591 300 23,000
Balance per books P182,000
2. A summary of the bank statement for December 2010. Balance brought forward P 194,000
Deposits 1,487,000
Total P 1,681,000
Charges (1,325,000)
Balance, December 31, 2010 P356,000
3. Included with cancelled checks returned with the December bank statement were the checks listed below 4. The Chelsee Company discounted its. Own 60 day note for P 90,000 with the bank on December 1, 2010.
The discount rate was 6 percent. The accountant recorded the proceeds as a cash receipt at the face value of the note.
5. The accountant records customers dishonoured checks as a reduction of cash receipts. When the
dishonoured checks are red posited they are recorded as regular cash receipt. Two NSF checks for P 1,800 and P 2,200 were returned by the bank during December. Both checks were redeposit and were recorded by the accountant.
6. Cancellations of Chelsee Company checks are recorded by a reduction of cash disbursement
7. December bank charges were P200; in addition, a P100 service charge was made in December for the collection of a note receivable in November. These charges were not recorded on the books.
8. Check no. 1434 listed in the November outstanding checks was drawn in 2008. Since the payee cannot be located, the president of Chelsee Company agreed to the CPA’s suggestion that the check be written back into the accounts by a journal entry.
9. Outstanding checks at December 31,2010, totalled P 49,400 including checks 1432 and 1584
10. The cut-off bank statement disclosed that the bank had recorded a deposit of P 24,000 on January 2, 2011. The accountant had recorded this deposit on the books of December 31, 2010 and then mailed the deposit to the bank.
Cancelled checks returned with the December Bank statement Number Date of check Amount of check Comments
1562 11/28/10 750 This check was in payment of invoice for 57,500 and was recorded in the cash book as P 7,500
1571 11/28/10 5800 This check was in the payment of an invoice for P 5, 800 and was recorded in the cash book as P 5,800
1583 12/04/10 1,500 Examination of this check revealed that it was unsigned A discussion with the client disclosed that it had been mailed inadvertently before it was signed. The check was endorsed and deposited by the payee and processes by the bank even though it was a legal nullity. The check was recorded in the cash disbursements journal.
1588 12/12/10 8,000 This check replaces 1584. Which was returned by the payee because it was mutilated? Check 1584 was not cancelled on the books
12/19/10 2,000 This was counter check drawn at the bank by the president of the company as a cash advance for travel expense. The president overlook informing the bookkeeper about the check
12/20/10 3,000 The drawer of this check was the Celsea Company
1595 12/20/10 3,500 This check had been NSF and returned to the payee because the bank had erroneously believed that the check was drawn by the Chelseen company. Subsequently, the payee was advised to redeposit the check
1599 01/05/11 100,000 This check given to the payee on December 30, 2010 as a post dated check with the understanding that it would not be deposited until January 5. The check was not recorded on the books in December.
1. What is the correct amount of outstanding checks on December 31? a. P41,400
b. P33,250 c. P48,000 d. P40,000
2. What is amount of cash receipts per book in December? a. P1,496,900
b. P1,504,900 c. P1,495,100 d. P1,487,000
3. What is amount of cash disbursement per book in December? a. P1,254,850
b. P1,252,850 c. P1,256,850 d. P1,248,850
4. What is the cash in bank balance per book as of December 31? a. P426,050
b. P428,250 c. P430,050 d. P343,050
5. What is the adjusted cash balance as of December 31? a. P343.000 b. P340,200 c. P347,000 d. P344,200 PROBLEM NO. 2 CALACHUCHI CORP.
ACCOUNT BALANCE INVOICE
CUSTOMER DEC 31,2010 DATE AMOUNT Aruy , Inc. P35,180 12/06/10 11/29/10 14,600 21,180 Naku Co. 20,920 09/27/10 08/20/10 2,000 8,920 Syak Corp. 30,600 12/08/10 10/25/10 20,000 10,600 Trip Co 45,140 11/17/10 10/09/10 23,140 22,000 Uy Co. 31,600 12/12/10 12/02/10 19,200 12,400 Xak Co. 17,400 09/12/10 17,400
Age of Accounts Rate 0-30 days 1% 31-60 days 1.5% 61-90 days 3% 91-120 days 10% Over 120 days 50%
The allowance for bad debts account had a debit balance of P5,500 on December 31, 2010 before adjustment. 6. The company’s accounts receivable under 61-90 days category should be
a. P 32,600 b. P44,320 c. P 44,600 d. P 42,000
7. The company’s accounts receivable under 91-120 category should be a. P 38,320
b. P 40,000 c. P 29,400 d. P 12,000
8. The allowance for bad debts to be reported on the statement on financial position at December 31, 2010 is a. P 9,699
b. P 15, 199 c. P 4,199 d. P5, 500
9. What entry should be made on December 31, 2010, to adjust the allowance for bad debts account? a. Bad debt expense 15,199
Allowance for bad debts 15,199 b. Bad debt expense 4,199
Allowance for bad debts 4,199
c. Allowance for bad debts 5,500
Bad debts expense 5,500
d. Bad debt expense 9,699
Allowance for bad debts 9,699
PROBLEM NO. 3
The MALAWI COMPANY is an importer and wholesaler. Its merchandise is purchased from a number of suppliers and is warehoused until sold to consumers.
In conducting his audit for the year ended December 31,2010, the company CPA determined that the system of internal control was good. Accordingly, he observed the physical. Inventory at an interim date, November 30, 2010 , instead of at year end.
The following information was obtained from the general ledger.
Inventory, January 1, 2010 P 90,000
Inventory, November 30, 2010 225,000
Sales for eleven months ended November 30, 2010 800,000
Sales for year ended December 31, 2010 950,000
Purchases for eleven months ended November 30,2010 (before audit adjustments) 720,000 Purchases for year ended December 31, 2010 (before audit adjustment) 810,000 Additional Information is as follow:
a. Goods received on November 28 but recorded as purchases in December 10,000 b. Deposits made in October 2010 for purchases to be made in 2011 but charge
To purchase 14,000
c. Defective merchandise returned to suppliers:
Total at November 30, 2010 5,000
Total at December 31, 2010, excluding November items 7,000 d. Goods shipped in November under FOB destination and received in
December were recorded as purchase in November 18,500
e. Through the carelessness of the client warehouseman, certain goods
Were damaged in December and sold in the same month at its cost. 20,000 f. Audit of the clients November inventory summary revealed the following:
Items duplicated 3,000
Purchases in transit
Under FOB shipping point 12,000
Under FOB destination 18,500
Items counted but not included in the inventory summary 7,000
11. What is the correct amount of net purchases for the month of December 2010? a. P83,000
b. P91,500 c. P82,500 d. P101,500
12. The correct inventory on November 30, 2010 is a. P206,500
b. P214,500 c. P237,000 d. P218,500
13. What is the gross profit for eleven months ended November 30, 2010? a. P234,000
b. P217,000 c. P224,000 d. P237,500
14. What is the cost of sales ratio for eleven months ended November 30, 2010? a. 73%
b. 70% c. 28% d. 72%
15. What is the estimated inventory on December 31, 2010? a. P183,100
b. P175,900 c. P184,400 d. P190,000 PROBLEM NO. 4
You have been asked by the proprietor of the SOMALIA CO. to verify the accountability of the cashier bookkeeper, who was allowed to take a vacation leave a few days ago
A. The bank reconciliation statements prepared by the cashier bookkeeper are presented below: November 30, 2010
Balance per bank statement P 21,500
Cash on hand 500 Total 22,000 Outstanding checks: No. 2520 P2, 000 2521 1,400 2522 1,900 (3,300)
Erroneous bank charge 2,000
Erroneous bank credit (500)
Book balance P20,200
December 31, 2010
Balance per bank statement P 135,000
Cash on hand 6,300 Total 141,300 Outstanding checks No. 2674 P31, 000 2675 10,300 2676 5,000 (41,300)
Erroneous bank charge 3,000
Erroneous bank credit (600)
Book balance P 102,400
B. The cash in Bank account in the general ledger shows the following debits and credits during December Cash in bank
Dec.
1balance P 20,200 2 Received from customers 4,500 7 Received from customers 5,000 12 Received from customers 20,000 17 Received from customers 30,000 23 Received from customers 9,000 27 Received from customers 70,000 31 Received from customers 48,500 Total P198,200 Dec. 1Checks Issued P2,000 5 Checks Issued 5,200 14 Checks Issued 31,000 24 Checks Issued 46,000 28 Checks Issued 7,600 31balaced 102,400 Total P198,200
C. the following summarized transactions were taken from the bank statements for the months of December 2010. Balance, December 1, 2010
Total deposits
The total deposits per bank statement include:
a. Collection of notes receivable P 5,000 b. Correction of November erroneous bank charge 2,000 c. December 10 deposit of Lava, Inc. Credited in error to Somalia 600
Total P3, 500
D. cash on hand per count in the morning of January 2, 2011 amounted to P 6, 300
E. before leaving his company for a one week vacation, the proprietor had left several signed blank checks that the cashier bookkeeper had cashed for his personal use.
16. What is the adjusted cash balance on November 30, 2010? a.P16,500
b.P13,200 c.P20,200 d.P14,500
17. The amount of uncounted in December is a.P11,000
b.P13,200 c.P9,000 d.P15,100
18. The amount of unrecorded/unsupported disbursements in December is a.P15,100
b.P10,900 c.P7,000 d.P5,000
19. What is the total cash shortage as of December 31, 2010? a.P26,000
b.P15,100 c.P33,000 d.P7,000
20. What is the adjusted cash balance on December 31, 2010 a.P102,400
b.P125,000 c.P87,400 d.P111,400
Indicators that the assets of the unit were impaired. The carrying amounts of the assets and liabilities of the unit at December 31, 2010 were:
Buildings P4, 200,000
Accumulated depreciation –buildings (1,800,000)
Factory machinery 2,200,000
Accumulated depreciation –machinery (400,000)
Goodwill 150,000
Inventory 800,000
Receivables 400,000
Allowance for doubtful accounts (50,000)
Cash 200,000
Accounts payable 300,000
Loans 200,000
- Depreciated at P 600,000 per annum - Depreciated at P 450,000 per annum
POTPOT: determined the value use of the unit to be P 5,350,000. The receivables were considered to be collectible, except those considered doubtful.
During the year 2011, POTPOT increased the depreciation charge on building to P650, 00 per annum, and to P 500,000 per annum for factory machinery. The inventory on hand at January 1, 2011 was sold by the end of the year, at December 31, 2011, POTPOT Company, due to a retum in the market to use of the traditional barrels for wines and an increase in wine production, assessed the recoverable amount of the cash generating unit to be P 300,000 greater than the carrying amount of the unit. As a result, POTPOT recognized a reversal of the impairment loss.
21. What amount of impairment loss on December 31, 2010 should be allocated to inventory? a.P56,000
b.P 28, 829 c.P32,000 d.P 0
22. What is the factory Machinery net carrying amount (after allocation of impairment kiss) on December 31,2010? a.P 1, 735, 135 b.P 1, 674, 000 c.P 1,800, 000 d.P 1, 728, 000
23. What amount or reversal of impairment loss should be recognized on December 31, 2011? a.P 300, 000
b.P 268, 000 c.P 168, 000 d.P 200, 000
24. Assume that the recoverable amount at December 31, 2011 was P 200,000 greater than the carrying amount of the cash generating unit. What is the net carrying amount of the buildings after recognition of the impairment recovery?
a.P 1,313, 219 b.P 1, 768, 781 c.P 1, 800, 000 d.P 1,750, 000
25. Assume that the recoverable amount at December 31, 2011 was P 200,000 greater than the carrying amount of the cast generating unit and that the recoverable amount of the Buildings was P 1,750,000. What is the next carrying amount of the factory machinery after the recognition of the impairment recovery?
a.P 1,332,000 b.P1,313,219 c.P1,228,000 d.P 1,324,000
Goding , Inc. preference 60,000 1,200,000 1,290,000 trading Sonata Co. ordinary
(30% ownership) 600,000 34,200,000 33,900,000 investment in
Associate Jordan Co. ordinary 750,000 2,025,000 1,500,000 available for sale
BORDO COMPANY’S investment had the following market values at December 31, 2010 Omar Co. ordinary P 3,060,000
Goding, Inc. preference 1,290,000 Sonata Co. ordinary 33,450,000 Jordan Co. ordinary 1,700,000
Assume that all of the above securities were acquired in 2009 and none of the indicated declines in market value are considered other than temporary.
26. Which of the following should be reported in Bordo’s 2009 income statement? a.Unrealized loss of P 60,000
b.Unrealized loss of P 585, 000 c.Unrealized loss of P 200, 000 d.Unrealized loss of P 150, 000
27. What amount of loss in the above securities should be included in Bordo’s statement of comprehensive income for the year ended December 31, 2009 as component of other comprehensive income?
a.P 675,000 b.P 465, 000 c.P 585, 000 d.P525,000
28. Assume that Jordan Co.s ordinary shares market decline is other than temporary. What valuation entry is required for this investment at December 31, 2009 under this change in assumption?
a.Impairment loss 525,000
Investment in AFS securities 525,000
b.Unrealized loss on AFS securities 525,000
Investment in AFS securities 525,000
c.Impairment loss 525,000
Unrealized loss on AFS securities 525,000 d.No valuation entry is necessary 525,000
Assume that the investment categories remain the same and that all declines in 2009 and 2010 are temporary except for the 2009 decline in Jordan Co.s ordinary shares
29. In its 2009 income statement, Bordo should report a.Unrealized gain of P 150, 000
b.Unrealized gain of P 410, 000
d.Unrealized gain of P 210, 000
30. What amount of gain should be included in Bordo’s statement of comprehensive income for the year ended December 31, 2010 as component of other comprehensive income?
a.P 0 b.P 200,000 c.P 325,000 d.P525,000 2008 P 127,000 2009 150,000 2010 128,500
You are performing the audit for the year ended December 31,2010. During your examination you discover the following errors
a. As a result of errors in the physical count, ending inventories were misstate as follows: December 31, 2009 P14, 000 overstated
December 31, 2010 P23, 000 understated
b. On December 29, 2010. Dominica recorded as a purchase, merchandise in transit which cost P 15,000. The merchandise was shipped FOB Destination and had not arrived by December 31. The merchandise was not included in the ending inventory.
c. Dominica records sales on the accrual basis but failed to record sales on account made the end of each year as follows
2008 P4, 000
2009 5,000
2010 3,500
d. The company failed to record accrued office salaries as follows December 31, 2008 P 10,000
December 31, 2009 14,000
e. On March 1, 2009, a 10% stock dividend was declared and distributed. The par value of the shares amounted to 10,000 and market value was P 13,000. The stock dividend was recorded as follows Miscellaneous expense 13,000
Ordinary share capital 10, 000
Retained earnings 3,000
f. On July 2009, Dominica acquired a three year insurance policy. The three year premium of P6,000 was paid on that date , and entire premium was recorded as insurance expense.
g. On January 1, 2010 Dominica retired bonds with a book value of P 120, 000 for P 106, 000 the gain was incorrectly deferred and is being amortized over 10 years as a reduction of interest expense on other outstanding obligations.
31. What is the adjusted net income for the year ended December 31, 2008? a.P 133,000
b.P 117, 000 c.P121,000 d.P 113, 000
32. What is the adjusted net income for the year ended December 31, 2009/ a.P 151, 000
b.P 187, 000 c.P 104, 400 d.P 203, 600
33. What is the adjusted net income for the year ended December 31, 2010? a.P129, 600
b.P131,000 c.P 104, 400 d.P 203, 600
34. What adjusting entry should be made on December 31, 2010, to correct the error describe in item B?
a. Purchases 15,000 Accounts payable 15,000 b. Accounts payable 15,000 Purchases 15,000 c. Accounts payable 15,000 Cash 15,000
d. No adjusting journal entry is necessary
35. The adjusting entry on December 31, 2009, to correct the error described in item E should include a debit to a. Retained earnings of P 16, 000
c. Share premium of P 3,000
d. Miscellaneous expenses of P 3,000
PROBLEM NO. 8
In making the first adult of the Delivery Equipment account of DELTA CORPORATION as of December 31, 2010, you encounter the following facts.
DATE PARTICULARS DEBIT CREDIT
1/1/08 Tracks 1,2,3, and 4 P3,200,000
3/15/09 Replacement of Truck 3 tires 25,000
7/01/09 Truck 5 800,000
7/10/09 Reconditioning of truck 4, which was damaged in a collision 35,000
9/1/09 Insurance recovery on truck 4 accident P33,000
10/01/09 Sale of truck 2 600,000
4/01/10 Truck 6 1,000,000 150,000
5/2/10 Repainting of truck 1 27,000
6/30/10 Truck 7 720,000
12/1/10 Cash received on lease of truck 7 22,000
Accumulated Depreciation
DATE PARTICULARS DEBIT CREDIT
12/31/08 Depreciation expense P300,000
12/31/09 Depreciation expense 300,000
12/31/10 Depreciation expense 300,000
Additional information:
1. On July 1,2009, Truck 3 was traded in for a new truck , truck 5 costing P 850,000 the selling party allowed a P 50, 000 trade in value for the old truck
2. On April 1, 2010, truck 6 was purchased for P 1,000,000; truck 1 and cash of p 850,000 being given for the new truck
3. You are instructed by the senior in charge of the audit to accept the depreciation rate of 20% by unit basis 4. Unit cost of trucks 1 to 4 is at P 800,000 each
36. The net increase (decrease) in retained earnings should be a.(P1,102,000)
b.(P545,000) c.P 80,000 d.(P1,022,000)
37. What is the loss on trade in of Truck No. 3? a.P430,000
b.P510,000 c.P560,000 d.P0
38. What is the gain on sale of Truck no. 2? a.P120,000
b.P200,000 c.P80,000 d.P 0
39. What is the loss on trade in of Truck No.1? a.P290,000
b.P170,000 c.P150,000 d.P 0
40. What is the correct cost of truck No. 5? a.P850,000
b.P800,000 c.P900,000 d.P560,000
41. What is the correct cost of truck No. 6? a.P440,000
b.P305,000 c.P800,000 d.P1,000,000
a.P725,000 b.P305,000 c.P605,000 d.P600,000
43. The entry correct depreciation expense for 2010? a.P552,000
b.P592,000 c.P712,000 d.P300,000
44. The entry correct the depreciatin charges for the years 2008/through 2010 should include a credit to accumulated depreciation of
a.P645,000 b.P937,000 c.P900,000 d.P292,000
45. The balance of the Delivery Equipment accounts at December 31, 2010 should be. a.P5,770,000
b.P3,320,000 c.P4,170,000 d.P3,370,000 PROBLEM NO. 9
The GUNDING Co. is on calendar year basts. The following data were found during your audit.
a. Goods in transit shipped FOB shipping point on December 28 by a supplier in the amount of P 100,000 had been excluded from the inventory and further testing revealed that the purchase had been recorded.
b. Goods costing P 30, 000 had been received, included in inventory, and recorded as a purchase. However, upon your inspection the goods were found to be defective and would be immediately returned.
c. Materials costing P170,000 and billed on December 30 at a selling price of P 264,000 had been segregated in the warehouse of shipment to a customer. The materials had been excluded from inventory as a signed purchase order had been received from the customer. Terms FOB destination.
d. Goods costing P 70, 000 was out on consignment with Gundara Inc. since the monthly statement from Gundara listed those materials as on hand, the items had been excluded from the final inventory and invoiced on December 31 at P 80,000.
e. The sale of P 150,000 worth of materials and costing p 120,000 had been shipped FOB point of shipment on December 31. However, this inventory was found to be included in the final inventory.
f. Goods costing P 100,000 and selling for P140,000 had been segregated , but not shipped at December 31, and were not included in the inventory. A review of the customer’s purchase order set forth terms as FOB destination. The sale had not been recorded.
g. Your client has an invoice from a supplier, terms FOB shipping point, but the goods had not arrived as yet. However, these materials costing P134,000 had been included in the inventory count, nut no entry had been made for their purchase.
h. Merchandise costing p 200,000 had been recorded as a purchase but not included in Inventory. Terms of sale are FOB shipping point according the supplier warehouse which had arrived by December 31.
Further Inspection of the clients records revealed the following December 31 balances: Inventory, P
1,350,000; Accounts receivable, P 630,000 ; accounts payable, P 690,000; sales P6,032,000; Purchases, P 3, 150,000; Net Income , P727,000.
Based on the preceding information, determine the adjusted balances of the following: 46. Inventory a.P700,000 b.P934,000 c.P1,900,000 d.P1,840,000 47. Accounts receivable a.P286,000 b.P380,000 c.P146,000 d.P405,000 48. Purchases a.P3,354,000 b.P3,150,000 c.P3,254,000 d.P3,120,000 49. Sales a.P5,848,000 b.P6,376,000 c.P5,683,000
d.P5,768,000 50. Net Income a.P769,000 b.P569,000 c.P829,000 d.P709,000 PROBLEM 10:
Presented below are COMBANTRIN COMPANY’S comparative statements of financial position and income statements
COMBANTRIN COMPANY
COMPARATIVE STATEMENTS OF FINANCIAL POSITION December 31, 2010 and 2009 Assets 2010 2009 Current assets Cash P119,000 P98,000 Accounts receivable 312,000 254,000 Inventory 278,000 239,000 Prepaid expenses 35,000 21,000
Total current assets 744,000 612,000
Available for sale securities 59,000
Property, plant and equipment 536,000 409,000
Accumulated depreciation (76,0000) (53,000)
Total noncurrent assets 519,000 356,000
Total assets P1,263,000 P968,000
Liabilities and shareholders’ equity Current assets
Accounts payable P212,000 P198,000
Accrued expenses 98,000 76,000
Dividends payable 10,000 _________
Total current liabilities 350,000 274,000
Notes payable-due 2012 125,000 __________
Total liabilities 475,000 274,000
Shareholder equity:
Ordinary share capital 600,000 550,000
Retained earnings 188,000 144,000
Total shareholders’ equity 788,000 694,000
Total liabilities and shareholders’ equity P1,263,000 P968,000
COMBANTRIN COMPANY
CONDENSED COMPARATIVE INCOME STATEMENTS For the Years Ended December 31, 2010 and 2009
Net sales 2010 2009
Cost of goods sold P3, 561,000 P3, 254,000
Gross income 2,789,000 2,568,000
Expenses 772,000 686,000
Net income 521,000 486,000
Additional information for COMBANTRIN COMPANY
a. All accounts receivable and accounts payable relate to trade merchandise b. The proceeds from the notes payable were used to finance plant expansion c. Ordinary shares were sold to provide additional working capital
Compute the following for 2010.
46. Cash collected from accounts receivable (assume all sales are on account) a.P3,619,000
b.P3,503,000 c.P3,561,000 d.P3,249,000
47. Total purchases (assume all purchases of inventory are on account) a.P2,828,000
b.P2,789,000 c.P2,550,000 d.P2,750,000
48. Cash payments made on accounts payable to suppliers a.P2,630,000
b.P2,842,000 c.P2,828,000 d.P2,814,000
49. Net cash provided by operations a.P689,000
b.P191,000 c.P222,000 d.P199,000
50. Cash receipts not provided by operations a.P175,000
b.P177,000 c.P50,000 d.P125,000 SET A
1. A, B and C are partners in a universal partnership of profits engaged in operation of taxis. The partners contributed:
A- 100 Toyota Vios B- 3,000 aqm land C- Fuel and oils
Which of the following is correct?
a. In case of loss due to fortuitous event, the partnership bears the loss
b. The partnership becomes the owner of the things contributed to the partnership
c. The partners retained the ownership over the things they contributed hence; they will bear the risk of loss.
d. The partnership begins from the moment of the execution of the contract , except if stipulated otherwise
2. Which of the following statements is not correct?
a. The creditor acquires real right to the fruits of the thing from the time they have been delivered b. An oral sale of land made by its owner in unenforceable
c. The buyer acquires real right to the fruits of the thing from the perfection of the sale d. A sale of land made by an agent without a written authority from the owner is void
3. A 16 years old sold his property to B, who did not notice that A is a minor. One year later B sold the property to C who knew that A is a minor. Can A ask for annulment of the sale?
a. Yes, because C is in bad faith b. No, because B is in good faith
c. No, because B is not capable of returning the property
d. Yes, whether C is in good faith or in bad faith because the title of B is voidable
4. A promissory note reads I Promise to pay A,B, C and D P24,000 Sgd. E, F and G. B can collect from E a. P 24,000
b. P 8,000 c. P 6,000 d. P 2,000
5. Today, S sold to B in S is name the land of O, without authority from O, B bought the land in good faith. The contract provides that the delivery will be 30 days from today. The contract is
a. Valid if S owns the land on the day of delivery
b. Void , because S was not the owner of the land when the contract was perfected c. Unenforceable, because S had no authority to sell the land
d. Voidable, because S is guilty of fraud
6. A, B and C are solidary debtors of D for P90, 000 where the due date is on April 1, 2011. On January 1, 2011, A paid D P90, 000. Later A demanded reimbursement from B. if B effects reimbursement to A on July 1, 2011. Which of the following is correct?
a. B pays A P60,000 plus interest from January 1,2011 to July 1, 2011 b. B pays A P30,000 plus interest from January 1,2011 to July 1, 2011 c. B pays A P30,000 plus interest from April 1,2011 to July 1, 2011 d. B pays A P45,000 plus interest from April 1,2011 to July 1, 2011
7. S sold his agricultural land to B for P1M .The FMV is P1.5 M. B. paid s in counterfeit peso bills. The sale is a. Void, because the cause is illegal
b. Valid, because the cause is the selling price of PIM
c. Rescissible, because of lesion which is more than ¼ of the value of the property d. Voidable, because of the fraud committed by B.
8. As regard cash dividend, which of the following is correct/
a. Declared by the board of majority vote and ratified by the stockholders by the majority vote.
b. Declared by the board of majority vote and ratified by the stockholders by ½ vote of the outstanding capital stock
c. Declared by the board of majority vote and need not be ratified by the stockholders d. Declared by the board by 3/2 vote and need not be ratified by the stockholders
9. A barrowed from B P2M and the secure its payment A orally agreed to deliver his 8 hectare agricultural land by way of antichresis and to pay 12% interest per annura. Which is correct?
a.The contracts of loan and antichresis are both valid b.The contracts of loan is valid but antichresis is void c.The contracts of antichresis is valid but loan is void d.Both contracts of loan and antichresis are void 10. Elements of contracts of pledge and mortgage , except.
a.Both are necessary contracts b.Both are real contracts
c.Both cannot exist without a valid obligation
d.In case of default, the creditors cannot appropriate the things pledged or mortgaged 11. Which of the following statements is not correct
a.An agreement to constitute a commodatum is binding and is perfected from the moment there is meeting of minds
b.Fixed, savings and current deposits of money in banks and similar institutions shall be governed by the provisions concerning muthium
c.Precarium is a kind of commodatum where the bailor may demand the thing loaned at will
d.In case of extraordinary expenses , the debtor in mutuum will shoulder 50% if he is in actual use of the thing barrowed
12. A contributed PIM, B contributed PIM and C contributed services. they agreed to divide the profits and losses equality . in case of loss of P3M for how much, if any, is C liable?
a.Nothing because an industrial partner is exempt from losses b.PIM but with reimbursement from A and B equality
c.A and B shall shoulder the loss equality at P1.5M each d.PIM, as stipulated
13. As regards the corporate by-laws , which of the following is true?
a.To adopt, amend or repeal 3/2 of the outstanding capital stock is needed
b.To delegate to the board of directors the power to amend, repeal or adopt new by-laws, majority of the outstanding capital stock
c.To revoke the power delegated to the board to amend, repeal or adopt new by-laws 3/2 of the outstanding capital stock
d.To amend, repeal or adopt new by-laws, majority of the outstanding capital stock. 14. A contract of antichresis is
a.A contract of mortgage whereby possession of the mortgaged property is given to the creditor b.A contract of loan secured by a real property, where possession is retained by the debtor c.A contract of loan without security
d.A consensual contract as it is perfected by mere consent
15. A subscribed to 1,000 voting shares of stock of X Corporation. She paid 25% of the said subscription during the stockholders meeting can A vote all her subscribed shares/
a.No, because the subscription has not yet been fully paid
b.No, because A’s shares have become delinguent which cannot be voted c.Yes, as to the paid percentage of subscription
d.Yes, because unpaid shares not delinquent can be voted
16. To defraud his creditor , A sold his property to B (who was in good faith). Later B sold the property to C, who was in bad faith. May the creditor rescind the sale?
a.Yes, because C, is bad faith b.No, because B is in good faith
c.No, because B is not capable of returning the property d.Yes, because the contract is rescissible
17. A was having his house repaired by B, who needed construction materials , so A orally told the seller C, give B the materials , I shall be responsible. I shall pay in 30 days. C delivered the materials As a result,
b.The contract is enforceable because A did not make a special promise to answer for the default of another person
c.The contract shall be enforceable if there is ratification by A
d.The contract shall be unenforceable if the value is at least P 500.00
18. Under the negotiable instruments law to be a holder in due course , the holder must have acquired the instrument before it is overdue . does this apply to the payee to whom the maker issued an overdue note?
a.Yes, because the payee is still considered a holder
b.Yes, because issuance to the payee is not considered a negotiation
c.No, because the law does not distinguish between payee and subsequent holder d.No, because the payee is privy to the contract between himself and the maker
19. In which of the following is demand necessary to make the debtor in delay in the performance of his obligation?
a.When the time of performance is of the essence b.When the time of performance has been stipulated c.When the law so provides
d.When demand would be useless
20. With written authority from his principal, the agent sold orally the land of the principal. The sale is a.Rescissible
b.Voidable c.Uncoforceable d.Void
21. Without authority from B, A orally sold B’s house in B’s name. The sale is a.Rescissible
b.Voidable c.Uncoforceable d.Void
22. S sold B his land on September 19, 2010. On September 25, an absolute deed of sale was executed and notarized on September 30, the sale was registered with the Registry of Deeds , On October 5, B took actual possession of the land by building a fence thereon. When did B acquire ownership of the land?
a.On September 19 b.On September 25 c.On September 30 d.On October 5
23. S sold to B his car on September 19, 2010. On September 25, an absolute deed of sale was executed and notarized . on September 30, the sale was registered with the LTO. On October 5, B took actual possession of the car. When did B acquire title to the car?
a.On September 19 b.On September 25 c.On September 30 d.On October 5
24. A and B are co owners of a percel of land A donated his share to C can B redeem the said share from C? a.Yes, because the law looks with disfavour at co-ownership
b.No, because legal redemption applies only in case of onerous transfers c.No, unless he enforce his right through count action
d.Yes, but in proportion to his interest in the land as co-owner
25. D’owes C a sum of money with M as mortgagor of his land to secure the loan. Is the mortgage valid even if the mortgagor is not the debtor?
a.Yes, provided M is the absolute owner of the property mortgaged b.Yes, provided it is in writing and registered
c.No, the mortgagor must be the debtor himself d.No, unless the mortgagor is a co-debtor
26. In three of the following case s, the agency cannot be revoked without a just cause except: a.It is means of fulfilling an obligation already existing
b.A bilateral contract depends upon it
c.It is coupled with interest common to the great and principal d.Partner is appointed manager in the articles of partnership
27. P appoints A as guarantee commission agent to sell his products A sold them to B who failed to pay despite the diligent efforts of A in collecting is A still liable for the purchase price?
a.Yes, because of the guarantee commission given to him b.No, because he was not at fault in the collection
c.No, if her returns to guarantee commission
d.Yes, but he is not entitled anymore to the commissions
28. P appointed A1 and A2 as his agents for a common transaction and they agreed that they shall be solidarity liable for P for damages in case of violations of their obligations as such. What is the agent at fault the only one liable for damages even if solidarity has been stipulated?
a.If the other agent is not at fault
b.Both of them shall be liable always since solidarity was agreed upon c.If the one at fault shall answer for all the damages
d.If the one at fault acted in excess of authority
29. A, B, and C entered into an oral contract of partnership each contributing P2M each of the common fund but failed to register the partnership with the SEC. In the partnership valid/
a.No, because every contract of partnership having a capital of three thousand pesos or more in money or property must be in public instrument and registered with the SEC
b.Yes, because public instrument is necessary is case of contributions of immovable’s c.Yes, because a partnership contract does not require a specific form to be valid
d.No, because registration with the SEC is essential for a partnership to be valid and acquire judicial personality
30. A and B are co-owners of a parcel of land from where they share the profits equally as co-heirs in inheritance. Is there a partnership
a.There is a prima facie presumption of partnership because of the equal sharing of profits
b.There is no partnership because co-ownership by itself does not establish a partnership despite the sharing of profits
c.There is no partnership since in partnership, division of profits is not always necessary among partners d.There is a prima facie presumption of partnership they being co-owners and co-possessors
31. A and B are partners in AB partnership. While A was performing his duties as a partner in the course of business , he negligently cause damage to X and third person. Who shall be liable to X and up to what extent?
a.Only the partnership is still liable it being a juridical person separate and distinct from the partners b.Only A shall be liable for he is the only one at fault
c.Both A and B shall be liable solidarity to X
d.A,B and the partnership are all liable solidarity to X
32. A, B, and C as partners in a partnership stipulated that A shall not share in the profits and losses. Is the agreement valid?
a.Yes, among the partners but not valid to third persons b.Yes, valid as long as third persons are not prejudiced
c.Not valid stipulations exempting a partner from sharing in the profits and losses d.Not valid as against third persons or partnership creditors
33. In the matter of management of the corporation this is supreme a.President
b.Chairman of the Board of Directors c.Stockholders
d.Board of Directors 34-37 A promissory note reads
“I promise to pay P or order Php 100,000. Sgd. M, The promissory note was issued by M to P in payment of
merchandise purchased from P. However, P delivered only Php 60,000. Later P. made a qualified endorsement to A, who was not aware of the partial absence of consideration. Thereafter, A made a special endorsement to B, then B made a blank endorsement to C both B and C are aware of the partial absence of consideration.
34. In the hands of A, A can collect from M a.Php 100,000
b.Php 60,000 c.Php 40,000 d.P 0
35. In the hands of B, B can collect from M a.Php 100,000
b.Php 60,000 c.Php 40,000 d.P 0
36. Using the preceding number, if M dishonours the nota, B can collect from P a.Php 100,000
b.Php 60,000 c.Php 40,000 d.P 0
37. In the hands of C, C can collect from M a.Php 100,000
b.Php 60,000 c.Php 40,000 d.P 0
38. Which of the following is not negotiable?
a.I promise to pay P or order Php 100,000 , 30 days after date Sgd M
b.I promise to pay P or bearer Php 100,000 Sgd M
c.Pay to P or order Php 100,000 on Dec. 25, 2010 Sgd M d. Pay to P or bearer Php 100,000 and charge the name against my deposit with you Sgd M to Y 39-40
39. M male a negotiable promissory note payable to the order of P. later made a special endorsement to A. Then B stole the note from A and indorsed it to C who received the note in good faith. Later C indorsed the note to D. which of the following is correct?
a.D can collect from M but not from A b.If M will not pay , D can collect from P c.C can collect from endorsers P and B
40. Using the preceding number, if M pays D in good faith, which of the following is incorrect? a.The obligation of M is extinguished
c.The obligation of P is extinguished d.A should collect from B, the thief
41. When a property is transferred during lifetime to relieve the transferor from the burden of the management of such property, and the transfer of its subject to tax, the basis of the tax is
a.The FMV at the time of donation
b.The FMV at the time of death of the donor
c.The FMV at the time the donor required the property d.The cost of the property in the hands of the donor 42. Which of the following taxes had been replaced by the VAT?
a.Percentage tax on international air and shipping carriers doing business in the Philippines b.Tax on life insurance premiums
c.Caterer a tax on operators of restaurant and eating places d.Tax on agents of foreign insurance companies
43. The DOC RESTAURANT, a VAT registered taxpayer , issued the following official receipt dated September 18, 2010.
2 pieces of crispy chicken P200.00
Siomai special 45. 00
Sago gulaman 85.00
Mushroom and chicken soup 100.00 Braised beef with cauliflower 240.00
Coke light in can (2xP40) 80.00 P750.00
Locat tax 15.00
Service charge 60.00
Total P825.00
The output vat on the sale is a.P99.00
b.P 88.39 c.P80.36 d.P90.00
44. Mr. And Mrs. A donated a conjugal agricultural land to their son who is getting married with ten (10) months after the date of donation. The fair market value at the time of marriage was P 800,000, but its fair market value at the time of donation was P 600,000. The donated property was subject to P100,000 mortgage which was assumed by the donors.
The taxable net gift of Mr. A is a.P240,000
b.P290,000 c.P390,000 d.P 340,000
45. An individual taxpayer is qualified to substituted filing of income tax return if he meets the following requisite except:
a.Pure compensation income only b.One employer during the calendar year c.Creditable withholding tax is correct d.Should be a minimum wage earner
46. A taxpayer received as assessment notice on February 14, 2010. He filed a motion for consideration with the BIR on February 22, 2010. The submission of necessary documents to support his motion for consideration is
a.March 14, 2010 b.April 23, 2010 c.April 15, 2010 d.March 22, 2010
47. Under absolute community of property, which of the following is a community property? a.Property inherited by the surviving spouse during the marriage
b.Property bought during the marriage using the money inherited of the decedent before marriage c.Personal belongings (e.g. clothes , shoes, etc.) bought during the marriage for the exclusive use of the
decedent
d.Jewelry inherited by the decedent during the marriage
48. Which of the following properties owned by a non resident alien decedent is not subject to the rule of reciprocity?
a.Shares of stock in a Philippine domestic corporation
b.Investment in stock in a US corporation 80% of the business of which is in the Philippines c.Investment in bonds in a US corporation that have acquired business suits in the Philippines d.40% share in a Philippines partnership
49. Which of the following shall not be exempt from value added tax?
a.Sales by the agricultural cooperatives duly registered with the Cooperative Development Authority to their members as well as sale of their products, whether in its original state or processes form to non members
b.Gross receipts from the lending activities by credit of multipurpose cooperatives duly registered with the Cooperative Development Authority whose lending operation is limited to their members
c.Sales of non agricultural, non-electric and non credit cooperatives duly registered with Cooperative Development authority if the capital contribution of each member does not exceeds P 15,000 d.Sales of electric cooperatives duly registered with Cooperative Development Authority relative to the
generation and distribution of electricity
50. A common carrier by land is engaged in the transport of passenger , goods and cargoes . A’s gross receipts amounted to P3M, 50% of which came from transport of passengers. He is not VAT registered, what
business taxes will A pay? a. 12% value added tax b. 3% common carrier tax
c. 3% tax on VAT exempt persons on gross receipts from transport of goods and cargoes and 3 ½ common carrier tax on gross receipts from transport of passengers
d. 12% VAT on gross receipts from transport of goods and cargoes and 3% common carriers tax on gross receipts from transport of passengers.
51. A keeper of garage whose gross receipts for the year exceed P 1,500,000 is subject to: a. Value added tax
b. Common carrier tax c. Excise tax
d. Franchise tax
52. The following are related to the tax assessment of a tax payer
Assessment received January 1,2010
Petition for reconsideration filed with BIR February 1,2010 Documents supporting the petition filed with BIR February 7, 2010 Decision of BIR denying the petition received by the taxpayer March 22, 2010 Second request for reconsideration filed with BIR March 30, 2010 Decision of denial of second request for reconsideration was received April 12, 2010 Last day to appeal to the Court of Tax Appeals
a.May 12, 2010 b.July 4, 2010 c.May 4, 2010 d.June 4, 2010
53. Which of the inherent powers may be exercised even by public service corporations and public utilities? a.Power of taxation
b.Power of eminent domain c.Police power
d.A and B
54. A law was passed by Congress which granted tax amnesty to those who have not paid income taxes for a certain year without at the same time providing for the refund of taxes to those who have already paid them . the law is:
a.Valid because Congress provided for a valid classification
b.Not valid because those who did not pay their taxes are favoured over those have paid their taxes c.Valid because Congress has the sole discretion of determining whom to tax
d.Not valid because only the grant amnesty is the sole prerogative of the precedent 55. How long must the books of accounts be kept?
a.For a period beginning to preceding taxable year until the last day of the current taxable year b.For a period beginning the current taxable until the last day of the following taxable year
c.For a period beginning from the last entry in each book until the last day prescribed within which the Commissioner is allowed to make an assessment
d.For a period of 3 years beginning from the current taxable year until the last day of the third taxable year
56. Due to financial difficulties , ABC Corp requested taht its 2009 income tax liability of P400,000 be paid in four (4) equal monthly instalments , starting April 15, 2010. Its request for instalment payment was approved on April 8, 2010. The tax due on May 15, 2010 is.
a.P 100,000 b.P 101, 667 c.P 105, 000 d.P106, 667
57. Which of the following is not correct?
a.A tax credit certificate validity issued by the BIR may be used as credit against internal revenue taxes except against withholding tax
b.All taxes imposed and collected by the BIR are internal revenue taxes
c.Public Officials who acquire information on violation of internal revenue laws in the performance of their duties during their incumbency are entitled to informer reward.
d.The proceedings on the protest in the BIR is an administrative proceedings
58. On March 31, 2010, A received 100 shares of stock with a fair market value P 120/share as of March 31, 2010. The shares of stock were intended to pay the services rendered by A on November 20, 2009, at which time the fair market value was P 100/share. The per value per share if P50. The income A is
a.P12,000 b.P 10,000 c.P5,000 d.P7,000
59. Which of the following statements is not correct?
a.An article subject to excise tax may be exempt from vat b.An article subject to excise tax may be subject to vat
c.A tax payer may be have two business where one as subject to vat and the other is subject to percentage tax
d.Manufacturers and importers of goods are subject to excise tax
60. Mr. Araki a non resident alien stockholders, received a dividend income of P300,000 in 2010 from a
domestic corporation whose gross income from within and without the Philippines for three years preceding 2010 show:
Source of income 2007 2008 2009
From within the Philippines P 16,000,000 P12,000,000 P24,000,000 From without the Philippines 18,000,000 14,000,000 16,000,000 How much of the individual income received by Mr. Araki considered income from sources within the Philippines?
a.Zero b.P156,000 c.P300,000 d.P144,000
61. Which of the following is not a condition imposed by the constitution for the exercise of the power of eminent domain?
a.The consent of the owner of the private property to sell the same to the government b.The payment of just compensation
c.The observance of due process in making of private property d.The existence of public use of the taking of a private property
62. Mr. Bagongbahay acquired his old principal residence in 1990 at a cost of P4M. he sold the said property on January 1, 2010 for P16M, although the FMV on that date was P20M. within the reglementary period, Bagongbahay acquired his new principal residence for P 12M.
Which of the following is incorrect?
a.Bagongbahay has to pay capital gains tax of P 300,000 b.The cost basis for the new principal residence is P3.2 M c.The utilized amount of the gross selling price is P 12M
d.If the proceeds were not used to buy a new principal residence, the capital gains 63-64- For the month of August and September 2010, ABC Bank has the following income/loss
Interest income with maturity August September
- Of less than 5 years P800,000 P1M
- Of more than 5 years 800,000 1M
rentals 400,000 800,000
Net trading gain (Loss) (100,000) 200,000
63. The gross receipts tax of ABC Bank for August is a.P76,000
b.P68, 000 c.P69,000 d.P63,000
64. The gross receipts tax of ABC Bank for September is a.P125,000
b.P130,000 c.P116,000 d.P123,000
65. Which of the following is not subject to vat? a.Non life insurance premiums
b.Non life reinsurance
c.Non life insurance commissions d.Non life reinsurance commissions
66. It is aspect of taxation that administrative in character and the power to exercise it is vested on the Department of Finance
a.Levying b.Collection c.Imposition d.Legislation
67. For donor tax purposes this is a stranger to the donor a.Daughters of a brother
b.Son of an uncle
c.Grandson of sons granddaughter d.Granddaughter of mother’s sister
68. 68. -70. A , caregiver , is under three year employment contract with a hospital in USA . His wire , B and a minor child live in the Philippines. He earns P70,000 (converted) a month for the annual income of P840,000, A shall pay income tax
a.For the entire amount it being taxable in the Philippines
b.Of nothing because as OFW, he is considered a non resident citizen c.For half the full amount because the other half pertains to his wife d.For the ½ share of his wife because the wife is a resident citizen
69. Using the above data, if A puts 30% of his earnings in a dollar deposit account with a local , interest income therein
a.Is taxable for the full amount at 7.5% final withholding tax b.Of P 126,000 shall be taxed at 7.5% final withholding tax
c.Maybe exempt from income tax provided he presents proof of non residency to the bank d.Of P840, 000 shall be taxed at 7.5% final withholding tax
70. If the dollar deposits account above is joint ( with B) with the same percentage of earning invested , interest income in that account
a.Is capable for the full amount at 7.5 % final withholding tax b.Of P126,000 shall be taxed at 7.5% final withholding tax
c.May be exempt from the income tax provided he presents proof of non residency to the bank d.Of P840,000 shall be taxed at 7.5% final withholding tax
71. A filed his income tax return for the calendar year 2007 on March 20, 2008. When is the last day for the BIR to collect assuming A did not pay the tax due upon filing?
a.March 20, 2011 b.April 15, 2011 c.April 15, 2013 d.March 20, 2013
72. Using the above data, assuming A filed his income tax return on April 20, 2008 and the return is not fraudulent, when is the last day for the BIR to make an assessment ?
a.April 20, 2011 b.April 15, 2011 c.April 20, 2013 d.April 15, 2013
73. Using the above data , if the BIR issued a deficiency income tax assessment on March 10, 2010, when is the last day for the BIR to collect?
a.March 10, 2013 b.April 15, 2013 c.March 10, 2015 d.April 15, 2015
74. A filed his ITR for 2008 on April 15, 2009 and will pay his tax liability in instalment. The return shown an income tax due of P100,000 and income tax withheld of P60,000. If A pays the 2nd instalment only on
October 15, 2009, the amount to be paid (excluding compromise penalty)is a.P26,000
b.P35,000 c.P55,000 d.P37,500
75. On April 15, 2010 , A filed his income tax return for his 2009 income and paid the tax due thereon. In 2011. A discovered that he made an overpayment in his income tax return. He filed a written claim for refund of tax erroneously collected with the CIR on October 1, 2011. On April 14, 2012, without receiving a decision on his claim for refund, A filed in the CTA a petition for review on his claim for refund of tax erroneously collected. Which of the following is incorrect?
a.The CTA did not acquire jurisdiction over the petition for review because the appeal is premature, there being no decision yet on said claim for refund
b.The CTA jurisdiction is to review by appeal decisions of the BIR Commissioner so if there is no decision there is nothing to review
c.The CTA acquired jurisdiction over the petition since it is the right of a taxpayer to go to the CTA with or without decision rendered by the BIR Commissioner
d.The CTA acquired jurisdiction over the petition as the peremptory period of 2 years within which a claim for refund is about to expire and the failure of the CIR to act on the claim is tantamount to denial of the claim
76. One of the following is not exempt from VAT
a.Lease of the residential units with a monthly rental not exceeding P10,000 b.Services subject to percentage tax
c.Services rendered by individuals pursuant to employer –employee relationship d.Export sales by persons who are vat-registered
77. A sold a personal property held as capital asset be acquired 9 years ago with an acquisition cost P50,000 for P 270,000. The payment shall be made of the following terms. Cash down payment of P40,000 and
additional P 10,000 at the end of the year sale. The property sold has been mortgaged for P 160,000 which assumed by the buyer issued a note payable for the balance which is to be paid equally in two years following the year of sale. The contract price is.
a.P 270,000 b.P110,000 c.P 120,000 d.P130,000
78. The taxable profit for the first year is a.P120,000
