Reference no: EM133108795

Questions -

Q1. The cash balance of Darwin Company on January 1, 2017 was P8,000,000. During 2017, the changes in certain accounts were.

Accounts receivable 2,000,000 increase

Inventory 1,500,000 decrease

Accounts payable 3,000,000 decrease

Total sales and cost of goods sold were P30,000,000 and P20,000,000 respectively. All sales and purchases were made on credit Various expenses of P5,000,000 were paid in cash. There were no other pertinent transactions. What is the cash balance on December 31, 2017?

A. 13,000,000

B. 16,500,000

C. 10,500,000

D. 9,500,000

Q2. On January 1, 2019, companies AA, BB and CC established a "joint operation" to manufacture a product they each need in their respective operations. They will contribute equal amounts and agreed to share on the production output equally. AA contributed cash of P200,000; BB contributed equipment with a carrying cost of 215,000; and CC contributed machinery with a carrying cost of P185,000. Both non-monetory contributions had a fair value of P200,000 each. The equipment will be depreciated over 5 years and net machinery over 10 years. Compute the net amount of plant assets (equipment & machinery) CC will show in its own balance sheet at December 31, 2019.

a. P 108,833 c. P 160,333

b. P 55,500 d. P 58,500

Q3. Jerico Company reported liabilities totaling P1, 230,000. The following information relates to those liabilities:

Jerico reported a P100, 000 bank loan payable. However, Jerico intends to repay this loan in January of the following year.

Jerico has reported a P40, 000 liability for the estimated cost of future warranty repairs based on product sales for the past year.

Jerico is being sued for P350, 000 by a disgruntled employee. Jerico's attorney thinks that it is possible that Jerico will lose the case. Jerico has not yet recorded any liability for this potential loss.

Jerico receives consulting services from a local CPA. Expected services by the CPA for the coming year will cost P35, 000. No liability has been recorded.

Jerico has reached an agreement with a major customer. Jerico expects to provide services totaling P400, 000 over the coming three years. The customer has already paid Jerico P100, 000. No liability has been recorded. After considering these items, what should be the total of Jerico's reported liabilities?

a. P1, 230, 000 c. P1,290,000

b. P1, 630, 000 d. P1,330,000

Q4. A firm needs P2 million of new long-term financing. The firm is considering the sale of common stock or a convertible bond. The current market price of the common stock is P42 per share. To sell this new issue, the stock would have to be underpriced by P2 and sold for P40 per share. The firm currently has 300,000 shares of common stock outstanding. The alternative is to issue 20-year. 10 percent, and P1,000 par-value convertible bonds. The conversion price would be set at P50 per share, and the bond could be sold at par. The earnings for the firm are expected to be P500,000 in the coming year. Assuming the firm chooses the sale of common stock, the earnings per share in the coming year will be?

a. P1.43

B. P1.44

C. P1.45

D. P1.47

Q5. Excel Company is a leading educational institution with student population of more than 50,000. Excel continuously maintains good quality education and a roster of qualified professors. As a result, Excel continuously produces top graduates in several fields. As at December 31, Excel has an outstanding receivable balance of P23,250,000 broken down into: 0-60 days outstanding, P9,000,000; 61-120 days outstanding, P6,750,000; and over 120 days outstanding, P7,500,000. Estimated percent uncollectible of these accounts is 1%, 2% and 6%, respectively. Excel wrote off 525,000 of its accounts receivable and recovered P50,000 from accounts previously written of in prior year. As at January 1, Excel has an allowance for uncollectible accounts of P650,000. Based on the aging analysis, Excel should report doubtful accounts expense for the year at

a. P675,000 c. P550,000

b. P500,000 d. P475,000

On December 31, 2019 a foreign subsidiary of ARTS-PRTC COMPANY, a Philippine corporation, submitted the following balance sheet measured in its local currency. Monetary Assets FC Monetary liabilities FC 200,000 180,000

Non-monetary 800,000 Non-monetary 20,000

Assets Liabilities

Share capital 400,000

Share premium 100,000

Retained earnings 300,000

Total FC Total FC 1,000,000

The relevant exchange rates for one (1) unit of the FC are as follows:

Current rate - P0.34 Historical rate - P0.31 Average rate - P0.30

Q6. Assuming the Retained Earnings of the subsidiary on December 31, 2019 translated to the Philippine pesos is P91,525, what amount of cumulative translation adjustment must be reported in the consolidated balance sheet presented in Philippine pesos on December 31, 2019?

a. P25,000 c. P24,525

b. P24,255 d. P25,475

Q7. Assume for this problem that ABC Company agreed to service the loans without explicitly stating the compensation. The fair value of the service is P50. What are the net proceeds received and the gain (loss) on the sale?

Net proceeds received Gain (loss)

a. P2,200 P 200

b. P2,250 P 250

c. P2,150 P 150

d. P2,200 P(250)

Q8. A, a stockholder of ABC Corporation, is indebted to ABC Corporation, amounting to P25,000. At the end of the taxable year, he received a noticed that the corporation cancelled his indebtedness. As a result

a. A received a gift, and therefore the P25,000 is exempt from income tax

b. A received P25,000 as income and therefore part of his taxable income

c. A is exempt from income tax but the corporation should pay donor's tax

d. A received P25,000 as dividend and therefore subject to final tax

Q9. On January 1 2014, jerica Company acquired 10% of the outstanding ordinary shares of an investee for P4,00,000. On January 1, 2015, the entity acquired an additional 20% of the investee's outstanding ordinary shares for P10,000,000. The fair value of the investee's net assets equaled carrying amount on January 1, 2015, the fair value of the 10% interest on January 1, 2015 was P6,000,000. The investee reported the following:

2014 2015

Dividend paid 2,000,000 3,000,000

Net income 6,000,000 7,000,000

What is the carrying amount of the investment in associate on December 31, 2015?

A. 15,200,000 C. 17,200,000

B. 16,000,000 D. 17,600,000

Q10. Zea Corp. reports on a calendar-year basis. Its 2018 and 2019 financial statements contained the following errors:

2018 2019

Over (under) statement of ending inventory P(10,000)

P4,000 Depreciation understatement 4,000 6,000

Failure to accrue salaries at year end 8000 12,000

As a result of the above errors, 2019 net income would be overstated by

a. P 4000 c. P22,000

b. P16,000 d. P24,000

Q11. Carmela company provided the following information for the current year

Net sales 1,800,000

Freight in 45,000

Purchase discount 25,000

Ending inventory 120,000

Gross margin on sales 40%

What is the cost of goods available for sale?

A. 840,000 C. 1,200,000

B. 960,000 D. 1,220,000

Q12. Balances of the deferred tax accounts of Taxflow Ltd were as follows:

12/31/17 12/31/18

Deferred tax liability P3,200 P2,000

Deferred tax asset 2,650 1,900

Income tax expense for the year ended December 31, 2018 was P1,550. The current tax payable at December 31, 2018 is P200 less than the current tax payable at the preceding year-end. What was the amount of income tax paid during the year ended December 31, 2018?

a. P1,100 c. P2,000

b. P1,500 d. P2,200

Amounts related to the statement of affairs of Distressed Company as of April 30, 2019 follow:

Assets pledged for fully secured liabilities P 80,000

Assets pledged for partially secured liabilities 50,000

Free assets 272,000

Fully secured liabilities 60,000

Partially secured liabilities 80,000

Unsecured liabilities 40,000

Unsecured liabilities without priority 330,000

Q13. Calculated the expected amount recoverable by partially secured creditors in the event of liquidation.

a. P71,000 c. P69,500

b. P50,000 d. P80,000

Q14. On January 1, 2014, Christine Company borrowed P5,000,000 from a bank at a variable rate of interest for 4 years. Interest is payable annually to the bank every December 31 and the principal is due on December 31, 2017. Under the agreement, the market rate of interest every January 1 resets the variable rate for that period and the amount of interest to be paid on December 31, in connection with the loan, the entity entered into a "receive variable fixed" interest rate swap agreement with another bank speculator. The agreement was treated as a cash flow hedge and the market interest rates are January 1, 2014 - 10%, January 1, 2015-14%, January 1,2016-12%, January 1, 2017 - 11% round off PV factor to two decimals. What amount should be reported as derivative asset on December 31, 2015?

A. 169,000 C. 240,000

B. 200,000 D. 464,000

Q15. France Company is a dealer in equipment. At the beginning of current year, an equipment was leased to another entity with the following provisions:

Annual rental payable at the end of each year 1,500,000

Lease term and useful life of machinery 5 years

Cost of equipment 4,000,000

Residual value-unguaranteed 500,000

Implicit interest rate 12%

PV of an ordinary annuity of 1 at 12 % for 5 periods 3.60

PV of 1 at 12% for 5 periods 0.57

At the end of the lease term, the equipment will revert to the lessor.

The entity incurred an initial direct cost of P200,000 in finalizing the lease agreement.

What is the gross investment in the lease?

a. 7,500,000 c. 4,000,000

b. 8,000,000 d. 4,500,000