D9.docx

Review 105-----------Day 9

b. Internal as well as external year-end reports c. Estimate of inventory destroyed by fire or other casualty d. Rough test of the validity of an inventory cost determined under either periodic or perpetual system.

THEORY OF ACCOUNTS 1. The credit balance that arises when a net loss in a purchase commitment is recognized should be a. Presented as a current liability b. Subtracted from ending inventory c. Presented as an appropriation of retained earnings d. Presented in the income statement 2. When using a perpetual inventory system I. No purchases account is used. ll. A cost of goods sold account is used. lll. Two entries are required to record a sale. a. I and II only

b. II only

c. II and III only

d. I, II and III

3. Which one of the following inventory costing method lends itself most to manipulation of reported net income among periods. a. LIFO perpetual b. FIFO perpetual c. LIFO periodic d. FIFO periodic 4. During periods of arising prices, when the FIFO inventory cost flow method is used, a perpetual inventory system would a. Not be permitted b. Result in a higher ending inventory than a periodic system inventory system c. Result in the same ending inventory as a periodic system d. Result in a lower ending inventory than a periodic inventory system 5. Generally, which inventory costing method approximates most closely the current cost for each of the following: Cost of goods sold Ending inventory a. LIFO FIFO b. LIFO LIFO c. FIFO FIFO d. FIFO LIFO 6. To produce an inventory valuation which approximates the lower of average cost or market using the conservative retail inventory method, the computation of the ratio of cost to retail should a. Include markups but not markdowns c. Include markups and markdowns b. Ignore both markups and markdowns d. Include markdowns but not markups 7. The gross margin method of estimating ending inventory may be used for all of the following except a. Internal as well as external interim reports

8. The gross profit method of inventory valuation is invalid when a. A portion of the inventory is destroyed. b. There is substantial increase in inventory during the year. c. There is no beginning inventory because it is the first year of operation. d. The gross profit percentage applicable to goods in the ending inventory is different from the percentage applicable to goods sold during the period. 9. A financial instrument is any contract that gives rise to a. A financial asset only b. A financial liability only c. A financial asset of one entity and a financial liability of another entity only d. A financial asset of one entity and a financial liability or equity instrument of another entity 10. A financial asset is any asset that is (choose the incorrect one) a. Cash b. An equity instrument of another entity. c. Contractual right to receive cash or another financial asset from another entity. d. Contractual roght to exchange financial assets or financial liabilities with another entity under conditions that potentially unfavorable to the entity. 11. Financial assets include a. Accounts payable b. Inventories

c. Notes receivable d. Prepaid expenses

12. A financial liability is any liability that is a contractual obligation I. To deliver cash or another financial asset to another entity. II. To exchange financial assets or financial liabilities with another entity under conditions that potentially unfavorable to the entity. a. I only b. II only c. Both I and II d. Neither I nor II 13. Equity security a. Encompasses any instrument representing ownership shares and the right to acquire ownership shares. b. Is a security that represents a creditor relationship with the enterprise. c. Is the residual interest in the enterprise. d. Includes redeemable preferred stock, treasury stock and convertible bonds. 14. “Available for sale securities” are a. Debt securities acquired with positive intent and ability of holding them until maturity.

b. Debt and equity securities acquired by an enterprise with the intent of selling them in the “near term” or very soon. c. Debt securities that are purchased and held indefinitely and will be available to be sold in response to liquidity needs. d. Financial assets with fixed or determinable payments that are not quoted in an active market. 15. The following statements relate to investments in trading and available for sale securities. Which is the incorrect statement? I. Realized and unrealized gains and losses on trading securities are recognized in income. II. Realized and unrealized gains and losses on available for sale securities shall be excluded from earnings and reported as a separate component of stockholders’ equity a. I only b. II only c. Both I and II d. Neither I nor II

How much is the adjusted cash balance as of December 31, 2005? a. P459,000 c. P39,000 b. P536,000 d. P1,619,000

2. Manapla Company computed a pretax financial income of P15,000,000 for the year ended December 31, 2005. In preparing the tax return, the following differences are noted between financial income and taxable income. Nondeductible expense Nontaxable revenue Estimated warranty cost that was recognized as expense in 2005 but deductible for tax purposes when paid Excess tax depreciation over financial depreciation

2,000,000 1,000,000 1,500,000 500,000

What is the current tax expense for 2005 if the tax rate is 32%? a. P5,120,000 c. P4,800,000 b. P5,440,000 d. P5,600,000

P1 1. The Plaridel Corporation was organized on January 3, 2005 with an authorized capital stock of P5,000,000. At December 31, 2005 of the same year, the general ledger of said Company showed the following accounts and balances: Accounts receivable Merchandise inventory Land Building Furniture and fixtures Accounts payable Notes payable – bank Common stock Additional paid capital Sales Expenses paid (excluding purchases)

P 200,000 250,000 1,200,000 1,600,000 400,000 420,000 500,000 1,500,000 100,000 5,800,000 725,000

Your review of the bank statement for December disclosed the following information: Bank balance, December 31, 2005 Bank service charge Deposits in transit Total checks not returned by the bank

P 524,500 6,000 62,500 128,000

Your review also revealed that the cash received of P62,500 on December 31, 2005 was deposited on January 2, 2006. The company’s mark up on sales is 40%.

3. Cadiz Company has the following financial statement elements for which the December 31, 2005 book value is different from the December 31, 2005 tax basis: Book value Tax basis Difference Equipment 5,500,000 4,000,000 1,500,000 Prepaid officers’ insurance policy 50,000 0 50,000 Warranty liability 500,000 0 500,000 Computer software cost 2,250,000 0 2,250,000 The difference between the book value and tax basis of the equipment is due to accelerated depreciation for tax purposes. The insurance premium on the officers’ insurance policy is paid on December 31 2005 and the amount is a nondeductible expense for tax purposes. The warranty liability is the estimated warranty cost that was recognized as expense in 2005 but deductible for tax purposes when actually paid. In January 2005, Cadiz Company incurred P3,000,000 of computer software cost. Considering the technical feasibility of the project, this cost was capitalized and amortized over 4 years for accounting purposes. However, the total amount was expensed in 2005 for tax purposes. The income tax rate is 32%. As a result of these differences, Cadiz Company shall report a deferred tax liability on December 31, 2005 at a. P1,200,000 c. P1,040,000 b. P1,216,000 d. P 480,000 4. Sagay Company provides the following tax effects of temporary differences at the end of 2005:

Deferred tax asset (liability) Accelerated depreciation (500,000) Additional cost in inventory for tax purposes 200,000

Related asset classification Noncurrent Current (300,000)

A valuation allowance was not considered necessary. Sagay anticipates that P150,000 of the deferred tax liability will reverse in 2006. In its December 31, 2005 balance sheet, what amount should Sagay report as noncurrent deferred tax liability? a. P300,000 c. P150,000 b. P500,000 d. P200,000

5. La Carlota Company is determining the amount of its pretax financial income for 2005 by making adjustment to taxable income from the company’s 2005 tax return. The tax return indicates taxable income of P15,000,000 on which a tax liability of P4,800,000 has been recognized. Following is a list of items that may be required to determine pretax financial income from the amount of taxable income. Accelerated depreciation for income tax purposes was P2,000,000 and straight line financial depreciation is P1,500,000.

b. P2,880,000

d. P2,784,000

8. What is the deferred tax liability on December 31, 2005? a. P576,000 c. P672,000 b. P480,000 d. P 0 9. What is the 2005 total income tax expense? a. P2,624,000 b. P2,720,000

c. P2,880,000 d. P2,784,000

10. What is the revaluation surplus on December 31, 2005? a. P1,020,000 c. P1,224,000 b. P1,500,000 d. P 924,000 11. Pampanga Company’s December 31, 2005 balance sheet reported the following current assets: Cash Accounts receivable Inventory Prepaid expenses Equipment used and held for resale

Insurance premium of P100,000 on the life of an officer with La Carlota Company as beneficiary was not included as a deduction in the tax return. Interest on treasury bills was not included in the tax return. During the year, La Carlota received P2,500,000 on these investments. What was La Carlota Company’s pretax financial income? a. P15,500,000 c. P18,000,000 b. P17,400,000 d. P17,900,000

On January 1, 2001, Manapla Company acquired a building for P5,000,000. The building is depreciated using straight line method based on a useful life of 10 years with no residual value. On January 1, 2005, the building is revalued at a replacement cost of P8,000,000 with no change in useful life. The 2005 pretax accounting income before depreciation is P9,000,000. The income tax rate is 32% and there are no other temporary differences at the beginning of 2005. 6. What is the deferred tax liability arising from the revaluation on January 1, 2005? a. P960,000 c. P384,000 b. P576,000 d. P 0 7. What is the 2005 current tax expense? a. P2,720,000

c. P2,624,000

3,000,000 5,200,000 2,000,000 700,000 100,000 11,000,000

An analysis of the accounts receivable disclosed that accounts receivable comprised the following: Trade accounts receivable Allowance for doubtful accounts Selling price of Pampanga Company’s unsold goods sent to XYZ Company on consignment at 125% of cost and excluded from Pampanga’s ending inventory

4,000,000 ( 300,000)

1,500,000

5,200,000 At December 31, 2005, the total current assets should be a. P10,600,000 c. P10,700,000 b. P 9,800,000 d. P 9,900,000 12. The trial balance of Arayat Company reflected the following liability account balances on December 31, 2005: Accounts payable Bonds payable, due 2006 Discount on bonds payable Deferred tax liability Dividends payable

4,000,000 8,000,000 1,000,000 1,500,000 3,000,000

Income tax payable Note payable, due 1/15/2007

500,000 2,500,000

In its December 31, 2005 balance sheet, Arayat should report current liabilities at a. P16,000,000 c. P17,000,000 b. P14,500,000 d. P16,500,000 13. Candaba Company was incorporated on January 1, 2005, with proceeds from the issuance of P15,000,000 in common stock and borrowed funds of P5,000,000. During the first year of operations, revenue from sales and consulting amounted to P20,000,000, and operating costs and expenses totaled P12,000,000. On December 15, Candaba declared a P2,000,000 cash dividend payable to stockholders on January 15, 2006. No additional activities affected owners’ equity in 2005. Candaba’s liabilities increased to P7,000,000 by December 31, 2005. On December 31, 2005 balance sheet, total assets should be reported at a. P30,000,000 c. P22,000,000 b. P21,000,000 d. P28,000,000

Interest on acceptances payable Loss on abandoned data processing equipment Insurance

1,000,000 500,000 200,000

The office space is used equally by the sales and accounting departments. What amount should be classified as general and administrative expenses? a. P8,200,000 c. P6,200,000 b. P5,200,000 d. P5,000,000

MAS

1. A weakness of the internal rate of return method for screening investment projects is that it: A. does not consider the time value of money B. implicitly assumes that the company is able to reinvest cash flows from the project at the company’s discount rate 14. Apalit Company’s December 31, 2005 unadjusted current assets and stockholders’ equity are C. implicitly assumes that the company is able to reinvest cash flows from the project at as follows: the internal rate of return D. fails to consider the timing of cash flows Cash 5,000,000 Trading securities (including P2,000,000 of Apalit Company’s common stock) 2. The method of budgeting which adds one month’s budget to the end of the plan when 8,000,000 the current month’s budget is dropped from the plan refers to Trade accounts receivable 10,000,000 A. Long-term budget C. Incremental budget Inventory 7,000,000 B. Operations budget D. Continuous budget Total current assets 30,000,000 Common stock 15,000,000 Additional paid in capital 3,000,000 Retained earnings (including appropriated for contingencies of P3,000,000) 7,000,000 Total equity 25,000,000

3. To avoid waste and maximize efficiency when transferring products among divisions in a competitive economy, a large diversified corporation should base transfer prices on: A. Full cost C. variable costs B. replacement cost D. market price

15. The following items were among those that were reported on Bulacan Company’s income statement for the year ended December 31, 2005:

4. MC Industries manufactures a product with the following costs per unit at the expected production of 30,000 units: Direct materials P 4 Direct labor 12 Variable manufacturing overhead 6 Fixed manufacturing overhead 8 The company has the capacity to produce 40,000 units. The product regularly sells for P40. A wholesaler has offered to pay P32 a unit for 2,000 units. If the firm is at capacity and the special order is accepted, the effect on operating income would be A. a P20,000 increase C. a P4,000 increase B. a P16,000 decrease D. P0

Legal and audit fees Rent for office space

5. Using the information presented below, calculate the total overhead spending variance. Budgeted fixed overhead P10,000

The trading securities and inventory are reported at their costs which approximate market values. In the 2005 statement of changes in equity, the total amount of equity at December 31, 2005 is a. P25,000,000 b. P23,000,000

c. P20,000,000 d. P22,000,000

2,000,000 6,000,000

Standard variable overhead (2 DLH at P2 per DLH) Actual fixed overhead Actual variable overhead Budgeted volume (5,000 units x 2 DLH) Actual direct labor hours (DLH) Units produced A. P500 U C. P1,000 U B. P800 U D. P1,300 U

P4 per unit P10,300 P19,500 10,000 DLH 9,500 4,500

6. Compared to other firms in the industry, a company that maintains a conservative working capital policy will tend to have a a. Greater percentage of short-term financing. b. Greater risk of needing to sell current assets to repay debt. c. Higher ratio of current assets to fixed assets. d. Higher total asset turnover. 7. A firm following an aggressive working capital strategy would a. Hold substantial amount of fixed assets. b. Minimize the amount of short-term borrowing. c. Finance fluctuating assets with long-term financing. d. Minimize the amount of funds held in very liquid assets. 8. Fidelity Company uses a flexible budget system and prepared the following information for the year: Fidelity operated at 80 percent of capacity during the year, but applied factory overhead based on the 90 percent capacity level. Assuming that actual factory overhead was equal to the budgeted amount of overhead, how much was the overhead volume variance for the year? Percent of Capacity 80 Percent 90 Percent Direct labor hours 24,000 27,000 Variable factory overhead P54,000 P60,750 Fixed factory overhead P81,000 P81,000 Total factory overhead rate pre DLH P5.625 P5.25 A. P9,000 U B. P15,750 U

C. P9,000 F D. P15,750 F

9. BE&H Co. is considering dropping a product. Variable costs are $6.00 per unit. Fixed overhead costs, exclusive of depreciation, have been allocated at a rate of $3.50 per unit and will continue whether or not production ceases. Depreciation on the equipment is P20,000 a year. If production is stopped, the equipment can be sold for P18,000, if production continues, however, it will be useless at the end of 1 year and will have no salvage value. The selling price is P10 a unit. Ignoring taxes, the minimum units to be sold in the current year to break even on a cash flow basis is A. 4,500 units C. 1,800 units B. 5,000 units D. 36,000 units

10. The following data relate to Homer Company which sells a single product: Unit selling price P 20.00 Purchase cost per unit 11.00 Sales commission, 10% of selling price 2.00 Monthly fixed costs P80,000 The firm’s salespersons would like to change their compensation from a 10 percent commission to a 5 percent commission plus P20,000 per month in salary. They now receive only commission. The change in compensation plan should change the monthly breakeven point by A. 1,071 Increase B. 1,071 Decrease

C. 1,538 Increase D. 1,538 Decrease

Questions 11 & 12 are based on the following information. Information about Rose Company is as follows: Output (units) Selling price per unit Input quantities: Materials (pounds) Labor (hours) Input prices: Materials (per pound) Labor (per hour)

2001 80,000 P25

2002 84,000 P25

4,000 3,200

4,000 3,250

P5.00 P7.00

P5.50 P7.50

11. What are the materials productivity, and labor productivity ratio for 2001? A. B. C. Materials 20.00 100.00 25.00 Labor 25.00 95.45 24.00

D. 20.00 24.00

12. By how much did profits change as a result of changes in productivity related to materials, and labor, respectively? A. B. C. D. Materials P(1,100) P1,100 P(625) P625 Labor P (825) P 825 P 625 P625 Questions 13 thru 15 are based on the following information. At the beginning of the year, Joshua Corporation initiated a quality improvement program. The program was successful in reducing scrap and rework costs. To help assess the impact

of the quality improvement program, the following data was collected for the current and preceding year. Preceding Year Current Year Sales P1,000,000 P 1,000,000 Recruiting 1,000 1,500 Packaging inspections 2,500 4,000 Downtime 20,000 15,000 Reinspection 40,000 25,000 Product inspection 5,000 10,000 Product liability 35,000 27,500 13. As a result of quality improvements, profits have increased by A. P32,500 C. P7,500 B. P20,500 D. P5,00 14. If quality costs had been reduced to 2.5 percent of sales in the current year, profits would have increased by A. P177,000 B. P58,000

C. P61,000 D. P25,000

15. For the current year, the respective percentages based on sales of the different quality costs, respectively, are: Prevention Appraisal Internal Failure External failure A. 0.15% 1.40% 2.50% 1.50% B. 0.15% 1.40% 4.00% 2.75% C. 0.65% 1.00% 1.50% 4.25% D. 0.65% 1.00% 2.50% 1.50% AP BARBIE COMPANY was formed on July 1, 2008. It was authorized to issue 600,000 shares of P10 par value common stock and 200,000 shares of 8 percent P25 par value, cumulative and nonparticipating preferred stock. BARBIE COMPANY has a July 1- June 30 fiscal year. The ff information relates to the shareholders’ equity accounts of BARBIE COMPANY: COMMON STOCK Prior to the 2010-2011 fiscal year, BARBIE COMPANY had 220,000 shares of outstanding common stock issued as follows: 1. 190,000 shares were issued for cash on July 1,2008, at P31 per share. 2. On July 24,2008, 10,000 shares were exchanged for a plot of land which cost the seller P140,000 in 2002 and had an estimated market value of P440,000 on July 24,2008. 3. 20,000 shares were issued on March 1,2010; the shares had been subscribed for P42 per share on October 31, 2009. During the 2010-2011 fiscal year, the ff transactions regarding common stock took place: 2010

Oct. 1

Nov. 30 Dec. 15

Subscriptions were received for 4,000 shares at P46per share. Cash of P184,000 was received in full payment for 4,000shares and stock certificates were issued. BARBIE purchased 4,000 shares of its own stock on the open market at P39 per share. BARBIE declared a 5% stock dividend for stockholders of record on January 15,2011, to be issued on January 31,2011. BARBIE was having a liquidity problem and could not afford a cash dividend at the time. BARBIE’s common stock was selling at P52 per share on December 15,2010.

2011 June 20

BARBIE sold 1,000 shares of its own common stock that it had purchased on November 30,2010, for P42,000 PREFERRED STOCK BARBIE issued 100,000 shares of preferred stock at P44 per share on July 1,2009. CASH DIVIDENDS BARBIE has followed a schedule of declaring cash dividends in December and June with payment being made to shareholders of record in the following month. The cash dividends which have been declared since inception of the company through June 30,2011, are shown below: Declaration Date Common Stock Preferred stock 12/15/09 P0.30 per share P1.00 per share 06/15/10 P0.30 per share P1.00 per share 12/0510 ---P1.00 per share No cash dividends were declared during June 2011 due to the company’s liquidity problems. RETAINED EARNINGS As of June 30, 2010, BARBIE’s retained earnings account had a balance of P1,380,000. For the fiscal year ending June 30, 2011, BARBIE reported net income of P80,000. In March 2010, BARBIE received a term loan from Badingding National Bank. The bank requires BARBIE to establish a sinking fund and restrict retained earnings for an amount equal to the sinking fund deposit. The annual sinking fund payment of P100,000 is due on April 30 each year; the first payment was made on schedule on April 30,2011. Based on the foregoing and the result of your audit, answer the following: 1. Unappropriated retained earnings at June 30,2011 is A. P788,000 B. P571,000 C. P217,000 D. P1,033,000 2. Total number of common shares issued and outstanding at June 30, 2011 is A. P248,000 B. P251,000 C. P232,000 D. P235,000 3. Treasury stock at June 30,2011 is A. P117,000 B. P30,000 C. P37,000 D. P156,000 4. Total shareholder’s equity at June 30,2011 is A. P13,117,000 C. P12,783,000 B. P13,576,000 D. P13,000,000

At the beginning of year 1, Entity a grants share options to each of its 100 employees working in the sales department. The share options will vest at the end of year 3, provided that the

employees will remain in the entity’s employ, and provided that the volume of sales of a particular product increases by at least an average of 5% per year. If the volume of sales of the product increases by an average of between 5% and 10% per year, each employee will receive 100 share options. If the volume of sales increases by an average of between 11% and 15% each year, each employee will receive 200 share options. If the volume of sales increases by an average of 16% or more, each employee will receive 300 share options. On grant date, Entity A estimates that the share options have a fair value of P20 per option. Entity A also estimates that the volume of sales of the product will increase by an average of bet 11% and 15% per year, and therefore expects that, for each employee who remains in service until the end of year 3, 200 share options will vest. The entity also estimates, on the basis of a weighted average probability, that 20% of employees will leave before the end of year 3. By the end of year 1, seven employees have left and the entity still expects that a total of 20 employees will leave by the end of year 3. Hence, the entity expects that 80 employees will remain in service for the three-year period. Product sales have increased by 12% and the entity expects this rate of increase to continue over the next 2 years. By the end of year 2, a further 5 employees have left, bringing the total to 12 to date. The entity now expects only 3 more employees will leave during year 3, and therefore expects a total of 85% employees will remain at the end of year 3. Product sales have increased by 20%, resulting in an average of 16% over the 2 years to date. The entity now expects that sales will average 16 percent or more over the three-year period, and hence expects each sales employee to receive 300 share options at the end of year 3. By the end of year 3, a further two employees have left. Hence, 14 employees left during the three-year period, and 86 employees remain. The entity’s sales have increased by an average of 16 % over the three years. Based on the preceding info, answer the ff: 5. What is the compensation expense for year 1? A. P106,667 B. P53,333 C. P160,000 D. P172,000 6. What is the compensation expense for year 2? A. P286,667 B. P180,000 C. P233,333 D. P168,000 7. What is the compensation expense for year 3? A. P114,667 B. P176,000 C. P282,667 D. P188,000 8. What is the cumulative compensation expense for years 1, 2 and 3? A. P320,000 B. P516,000 C. P344,000 D. P172,000 9. At the end of year 2, the entity should report share options outstanding of? B. P328,000 B. P266,667 C. P286,667 D. P340,000

An entity grants to an employee the right to choose either 1,000 phantom shares (i.e., right to a cash payment equal to the value of 1,000 shares) or 1,200 shares with a par value of P10 per share. The grant is conditional upon the completion of the 3 years’ service. If the employee chooses the share alternative, the shares must be held for 3 years after vesting date. At grant date, the entity’s share price is P50 per share. At the end of years 1, 2 and 3, the share price is P52, P55, and P60 respectively. The entity does not expect to pay dividends in

the next 3 years. After taking into account the effects of the post-vesting transfer restrictions, the entity estimates that the grant date fair value of the share alternative is P48 per share. At the end of the year 3, the employee chooses: Scenario 1: the cash alternative Scenario 2: the equity alternative Based on the preceding information, answer the ff: 10. What is the total fair value of the equity component as a result of the share- based payment transaction with settlement alternatives? A. P7,600 B. P10,000 C. P2,400 D. P0 11. What is the compensation expense in year 1? A. P17,333 B. P19,866 C. P19,333 D. P23,334 12. What is the compensation expense in year 2? A. P19,866 B. P17,333 C. P21,867 D. P19,333 13. What is the compensation expense in year 3? A. P23,334 B. P25,867 C. P19,333 D. P19,866 14. If the employee has chosen the cash alternative, the amount to be paid at the end of year 3 should be A. P55,000 B. P67,600 C. P52,000 D. P60,000 15. If the employee has chosen the share alternative, the amount of share premium to be recognized is A. P7,600 B. P55,600 C. P60,000 D. P67,200

BLT 1. A was forced by B to sign a contract. C, a creditor of A wants to annul the contract. Is C allowed by law to do so? a. No, because a third person cannot assail a void contract. b. Yes, because the contract is voidable and C is damaged. c. No, because a third person cannot assail a voidable contract. d. Yes, a third person can annul a rescissible contract. 2. To defraud his creditors, A sold his real property to B. B now seeks to register the sale. X, a creditor, seeks to prevent the registration on the ground that it is a rescissible contract. Despite X’s objection, may the land be registered in B’s name? a. No, because the contract is rescissible and therefore without effect. b. No, because the sale is voidable and after annulment is not binding. c. Yes, because the contract although voidable is valid and binding. d. Yes, because the contract although rescissible is valid, binding and enforceable before rescission. 3. A made a donation to B. later A contracted several debts. What A has left as assets are much less than his present liabilities. May the donation to B be rescinded? a. No, because the debts were incurred after the donation has been made. b. No, if A gave guaranty or security for his debts. c. Yes, because the donation is rescissible being in fraud of creditors. d. Yes, because A has become insolvent after the donation.

4. To defraud hi creditor, A sold his property to B (who is in good faith). Later, B sold the property to C, who is in bad faith. May the creditor rescind the sale? a. Yes, because the third person C, is in bad faith. b. No, because the third person is in good faith. c. No, because the contract is voidable and not rescissible. d. Yes, because the contract is rescissible. 5. To defraud his creditor, A sold his house to X. When however the creditor wanted to collect his credit, somebody lent A enough money. Is the sale rescissible? a. Yes, because it was entered into fraud of creditors. b. No, because the creditor can collect the credit due to him. c. No, because the debtor has become in good faith when he was lent enough money to pay his debts. d. Yes, because the debtor was in bad faith when he sold his house to X. 6. A orally sold to B a house at 16 Kiko St. Malate, Manila. In the written deed of sale, both forgot the true number of the house and instead wrote on the contract, “No.18 Kiko St. Malate, Manila” The remedy shall be: a. Annulment of a voidable contract because of mutual mistake. b. Reformation of instrument because of lack of meeting of minds. c. Reformation of instrument because of mutual error. d. Declaration of nullity of the contract because if the uncertainty of the intention as to the object. 7. A loan for P800.00 was orally contracted. May the lender receive the sum lent? a. No, because the contract is unenforceable. b. No, because the contract must be in writing to be valid. c. Yes, because the debtor ratifies the loan. d. Yes, because the contract is enforceable. 8. When his father died but before the delivery of the property to him, a son sold his share of the property inherited. Is the sale valid? a. No, because future inheritance cannot be sold. b. Yes, because future inheritance can be the object of the contract. c. Yes, because what has been sold is present inheritance. d. No, because the son was not the owner due to lack of delivery to him. 9. A VAT-registered person is engaged in the sale of VAT taxable goods and at the same time is also engaged in non-VAT business, in the same business establishment. During the quarter made sales of goods in the amount of P300,000 plus a value-added tax of P36,000. The sales of the non-VAT business amounted to P200,000 with a separate percentage tax of P6,000 for a total of P206,000. During the same quarter, repairs on the building amounted to P50,000 plus value-added tax of P6,000. Supplies purchased for common use amounted to P10,000 plus P1,200 value-added tax.

10. Mrs. Kina Pos Sahangin, a Filipino, died November 1, 2008 survived by her husband. At the date of death, she has P2,000,000 cash in bank and 100,000 shares holding of Pure Joke Corporation with a sales value of P100 per share at the date of death. On January 15, she made a gift of P3,000,000 (real property) to her husband. She is insured for P1,000,000 designating her estate as beneficiary. The premium was paid from her exclusive property. The last will and testament of Mrs. Kina Pos Sahangin reveals that her shares of stock in Pure Joke Corporation shall be contributed to the local government of Tagaytay City for the maintenance of public park, and the balance shall be given to her husband. Mrs. Kina Pos Sahangin’s executor field and paid the follow tax returns: Donor’s tax for gift to her husband Estate Tax

P 204,000 34,840

The transfer tax still due for the estate tax of Mrs. Kina Pos Sahangin. a. P116,160 b. P160,160 c. P356,160 Rates of Estate Tax. –

Over

But Not Over

The Tax Shall be

Plus

Of the Excess Over

P 200,000

Exempt 0

5%

P 200,000

P 200,000

500,000

500,000

2,000,000

P 15,000

8%

500,000

2,000,000

5,000,000

135,000

11%

2,000,000

5,000,000

10,000,000

465,000

15%

5,000,000

10,000,000

And Over

1,215,000

20%

10,000,000

The creditable input tax is: a.

P28,800

b. P4,463

c.

P7,200

d. P4,320

d. 560,160

11. A race track bettor won on the following bets:  On forecast, a bet of P1,000 and dividend of P100 per P20-ticket

 On ordinary , a bet of P500 and dividend of P1,000 per P50-ticket  On double, a bet of P200 and dividend of P200 per P20-ticket Total percentage tax due from the winnings was P2 a. P682

b. P1,182

c. P1,280

d. P1,530

12. An invoice issued for the sale of VAT taxable goods shows the following: Total invoice amount 50,400 Less: Trade discount of 5%

2,520

Net

47,880

If VAT taxpayer enjoys partial tax exemption of 40% including VAT and the amount is VAT inclusive, how much is the output tax? a. P3,628

b. P3,447

c. P3,240

d. P3,216

13. An alteration committed by a stranger to a negotiable instrument is: a. Policitacion b. Spoliation c. Option contract d. Material alteration 14. Which of the following does not discharge a negotiable instrument? a. Intentional cancellation of the instrument by the holder. b. Payment by the party primarily liable to holder or his authorized representative. c. Payment by maker of a promissory note before maturity date. d. Voluntary surrender of the instrument by the holder to the maker without collecting. 15. Which is not correct? The acceptor by accepting a negotiable instrument a. Admits the capacity of the payee to endorse. b. Admits the genuineness of the drawer’s signature. c. Admits the genuineness of the endorser’s signature. d. Admits that he will pay it according to the tenor of his acceptance.

The assets and equities of the Queen, Reed, and Stac Partnership at the end of its fiscal year on October 31,2011 are as follows: Assets Cash P15,000 Receivables-net 20,000 Inventory 40,000 Plant assets-net 70,000 Loan to Reed 5,000 Total assets P150,000 Liabilities and Equity Liabilities P50,000 Loan from Stac 10,000 Queen, capital-30% 45,000 Reed, capital-50% 30,000 Stac, capital-20% 15,000 Total liab. & equity P150,000 The patners decide to liquidate the partnership. They estimate that the noncash assets, other than the loan to Reed, can be converted into P100,000 cash over the two-months period ending December 31,2011. Cash is to be distributed to the appropriate parties as it becomes available during the liquidation process. 1. The partner most vulnerable to partnership losses on liquidation is: a.Queen c.Reed and Queen equally b.Reed d.Stac 2. Using the same information, and P65,000 is available for first distribution, it should be paid to: Priority creditors Queen Reed Stac a. P60,000 P5,000 P0 P0 b. 60,000 1,500 2500 1,000 c. 50,000 5,000 0 10,000 d. 50,000 12,000 0 3,000 The following data are provided by the Troubled Company: Assets at the book value P150,000 Assets at net realizable value 105,000 Liabilities at book value: Fully secured mortgage 60,000 Unsecured accounts and notes payable 70,000 Unrecorded liabilities: Interest on bank notes 500 Estimated cost of administering estates 6,000 The court has appointed a trustee to liquidate the company:

1.The journal entry made by the trustee to record the assets and liabilities should include an estate deficit of: a.P31,500 c.P25,500 b. 31,000 d. 25,000 2.Using the same information above, the statement of affairs prepared by the trustee at this time should include an estimated deficiency to unsecured creditors of: a. P45,000 c.P31,500 b. 39,000 d. 25,000 Anson and Baylon formed a joint venture. Their capital contributions, and profit and loss ratio are presented below:

a.P92,137.50

Contributions Profit and Cash Merchandise Loss ratio Anson P5,000 P8,000 50% Baylon 6,000 50% A summary of the joint venture activities is presented below: Purchase of merchandise by Baylon P4,000 Expenses paid by Baylon: Mayor’s permit 400 Freight on merchandise contributed by Anson 300 Delivery expenses of merchandise sold 200 Sales (all of the merchandise contributed and purchased by Baylon and one-half of those contributed by Anson)-Selling price 14,000 1. The balance of the joint venture account before profit or loss distribution is: a. P4,900 b.P14,000 c.P14,000 d.none

8.. Using the same information above, the realized gross profit on installment sales in 2010: a.P9,728 b.P7,049 c.P4,800 d. zero

2. Using the same information above, the profit(loss) of the joint venture is: a. P(450) b.P750 c. P(750) d. P450 3. Using the same information above, how much would Anson receive in the final settlement assuming he took the unsold merchandise of cost? a. P13,000 b. P12,625 c.P8,475 d.P8,515 Johnson Enterprises uses the cost recovery method for all installment sales: Complete the following table: 2010 2011 2012 Installment sales P80,000 P95,000 P? Cost of installment sales ? 56,050 68,250 Gross profit percentage 38% ? 35% Cash collections: 2010 sales 25,600 46,400 5,600 2011 sales 22,800 ? 2012 sales 32,550 Realized gross profit on installment sales ? ? 16,050 4.The installment sales in 2012:

b.P105,000 c.P112,612.50 d.P195,000

5..Using the same information,the cost of installment sales in 2010: a.zero b.P30,400 c.P47,619 d.P49,600 6.. Using the same information above, the cost of installment sales in 2010: a.29% b.41% c.59% d.cannot be determined 7.. Using the same information above, the collection in 2012 for 2011 sales: a.P10,400 b.P33,250 c.P43,700 d.48,600

9.. Using the same information above, the realized gross profit on installment sales in 2011: a.P8,664 b.P9,348 c.P18,012 d.P22,400 TM partnership begins its first year of operations with the following capital balances: Tray Capital May Capital

P200,000 P100,000

According to the partnership agreement. All profits will be distributed as follows: a. Tan will be allowed a monthly salary of P20,000 with P10,000 assigned to May. b. The partners will be allowed with interest equal to 10 percent of the capital balance as of the first day of the year. c. Tan will be allowed a bonus of 10 percent of the net profit after bonus. d. The remainder will be divided o the basis of the beginning capital for the first year and equally for the second year. e. Each partner is allowed to withdraw up to P10,000n a year. Assume that the net loss for the first year of operations is P15,000 with net income of P55,000 in the subsequent year. Assume further hat each partner withdraws the maximum amount from the businesses each period. 10. What is the balance of Tan’s capital account at the end of the second year? a. P264,750 b. P284,750 c. P180,000 d. P184,750

11. Jaime Dizon, a partner in an accounting firm, decided to withdraw from the partnership. Dizon’s share of the partnership profits and losses was 20%. Upon withdrawing from the partnership, he was paid P74,000 in final settlement for his interest. The total of the partners’ capital accounts before recognition of partnership goodwill prior to Dizon’s withdrawal was P210,000. After his withdrawal, the remaining partners’ capital accounts, excluding their share of goodwill, totalled P160,000. The implied goodwill of the firm was: a. P120,000 b. P140,000 c. P160,000 d. P250,000

d. P10,000 Al tan and Rey Lee formed a joint venture on January 1, 2008 to operate two stores to be managed by each venture. They agreed to contribute cash as follows: Tan Lee

P30,000 P20,000

Profits and losses are to be divided in the capital ratio. All the venture transactions are for cash, and the cash receipts and disbursements of the venture during the four-month period, handled through the venturer’s bank accounts, are as follows:

The accountant of Holy company under liquidated provided the following data: Assets at book value Assets at net realizable value Liabilities at book value: Fully secured mortgage payable Unsecured accounts and notes payable Unrecorded Liabilities: Interest on bank notes Administrative Expenses

P100,000 75,000

Tan P78,920 62,275

Cash receipts Cash disbursements

Lee P65,425 70,695’

The remaining assets are sold for P60,000. 40,000 45,000 250 4,000

A trustee is appointed tp liquidate the company.

14. What is the joint venture profit (loss) after selling the remaining non-cash assets? a. P11,375 b. P21,375 c. P(31,375) d. 31,375

12. The entry made by the trustee to record the assets and liabilities should include estate equity of:

15. The P60,000 cash should be divided between the venturers as follows:

a. P14,250 b. P14,000 c. P10,250 d. P10,520

a. b. c. d.

13. Using the data above, what is the estimated deficiency to unsecured creditors? a. P35,000 b. P31,000 c. P14,250

Tan P 16,180 P 21,905 P 26,180 P48,095

Lee P43,820 P38,095 P33,820 P11,905