2nd Flr, GF Partners Bldg, 139 H.V. dela Costa, Salcedo Village, Makati City 3 Flr.

Equitable PCI Building, 2070 Claro M. Recto ,Manila Tel.7348895/7349198

rd

Practical Accounting 1
Income Statement Part I 1.

Prof. Rommel M. Valdez

The following items were among those that were reported on Cyprus Co.s income statement for the year ended December 31, 2004: Legal and audit fees P170,000 Rent for office space 240,000 Interest on acceptances payable 210,000 Loss on abandoned data processing equipment used in operations 35,000 The office space is used equally by Cyprus sales and accounting departments. What amount of the above items should be classified as general and administrative expenses in Cyprus income statement? a. P500,000 c. P410,000 b. P290,000 d. P325,000

2.

Information concerning the first month of operations of Avon is presented below. (The periodic inventory system is used.) Transportation-in P 760 Total purchases on account 22,200 Purchase returns on account 700 Transportation-out 810 Total recorded as cash purchases 9,140 Purchase allowances on account 1,350 Inventory at the end of the month 4,800 Sales discounts 750 Refunds for defective items purchased for cash 400 Error made by bookkeeper debiting supplies expense for cash purchase of merchandise 790 The correct cost of goods sold is a. P16,110 b. P24,890 c. P25,640 d. P26,450 The Do It Corporation presented the following income statement and statement of retained earnings for the year ended December 31, 2004 as developed by its bookkeeper who has completed 12 units of accounting. Do It Corporation Revenue Statement December 31, 2004 Net sales P 390,000 Less: Dividends declared (P3.50 per common shares) 15,000 Revenues P 375,000 Less: Selling expenses 41,600 Gross profit P333,400 Less: Operating expenses Interest expense 8,200 Cost of goods sold 227,400 Provision for income taxes 23,920 Net operating income P 83,880 Add: Dividend revenue 3,600 General and administrative expenses 48,600

3.

P1 Net income

Income Statement Part 1

Page 2 P 28,880

Retained Earnings Statement December 31, 2004 Beginning retained earnings Add: Net income Adjusted retained earnings Less: Loss on sale of land Ending retained earnings The corrected net income after taxes is a. P44,000 b. P39,000 4.

P116,000 28,880 P144,880 8,000 P136,880 c. P34,000 d. P35,880

Augusta Co.s trial balance of income statement accounts for the year ended December 31, 2004 showed the following: Debit Credit Sales P1,150,000 Cost of sales P480,000 Administrative expenses 140,000 Loss on sale of equipment 20,000 Sales commissions 100,000 Interest income 50,000 Freight out 30,000 Loss on early retirement of long-term debt 40,000 Uncollectible accounts expense 30,000 _____________ _____________ P840,000 P1,200,000 Other information Finished goods inventory: January 1, 2004 800,000 December 31, 2004 720,000 Augustas income tax rate is 35%. In Augustas 2004 income statement, what amount should Augusta report as the cost of goods manufactured? a. P560,000 b. P430,000 c. P590,000 d. P400,000

5.

You are given the data as follows for CHIN UP CORP.: Net assets at the beginning of the year Net assets at the end of the year Dividends declared Capital stock issued The net income (loss) is a. P45,000 b. P36,000 c. P44,000

P130,000 175,000 8,000 7,000 d. P46,000

6.

Brandon Co.s accounting records for the year ended December 31, 2003 included the following information: Work in process inventory increase P0 Finished goods inventory increase 70,000 Raw materials purchases 860,000 Raw materials inventory decrease 30,000 Freight-out 90,000 Direct labor 400,000 Manufacturing overhead 600,000

P1

Income Statement Part 1 Cost of goods sold of Brandon for 2003 is: a. P1,910,000 b. P1,900,000 c. P1,820,000

Page 3 d. P1,790,000

7. The following information is given for Mint Company: Freight-in P2,000; Purchase returns P3,000; Selling expenses P150,000; Ending inventory P80,000. The cost of goods sold is equal to 800% of selling expenses. What is the cost of goods available for sale? a. P1,200,000 b. P1,205,000 8. c. P1,275,000 d. P1,280,000

The following information for the Lilac Company for the year 2003: Gross profit on sales Cost of goods manufactured Goods in process inventory, beginning Goods in process inventory, ending Finished goods inventory, beginning Finished goods inventory, ending P 76,800 272,000 22,400 30,400 36,000 41,600 d. P348,800

How much was the sales of Lilac Company for the year 2003? a. P335,200 b. P343,200 c. P347,200

9. After the initial year of operations, the Beige Company had the following data in its operating results: Net income is P750,000. Selling expenses are 12.5% of sales and also equal to 25% of cost of goods sold. Administrative expenses and other expenses are 17.5% and 5% of sales, respectively. What is Beiges gross profit for the year? a. P5,000,000 b. P2,500,000 c. P1,750,000 d. P750,000

10. The net sales of Ping Mfg. Company in 2003 is P5,800,000. The cost of goods manufactured is P4,800,000. The beginning inventories of Goods in Process and Finished Goods are P820,000 and P650,000, respectively. The ending inventories are: Goods in Process P750,000; Finished Goods P550,000. The selling expenses and general and administrative expenses are 5% and 2.5% of cost of sales, respectively. What is Pinks net income for the year 2003? a. P900,000 b. P457,250 c. P532,500 d. P830,000

11. Net income of Silver Company for the year ended December 31, 2003 was P480,000. Percentage distribution of some of the items in the income statement was as follows: Selling expenses 10% of sales; Administrative Expenses, excluding bad debts 15% of sales (also equal to 25% of cost of sales); Bad debts Expenses 3% of sales. What was the amount of Silver Companys sales during 2003? a. P1,920,000 b. P3,200,000 c. P4,000,000 12. d. P4,800,000

The factory accounts of Silang Corp. for the year ended December 31, 2003 were gathered: Manufacturing cost totaled P900,000; cost of goods manufactured was P800,000, of which factory overhead was 75% of direct labor. Overhead was 25% of total manufacturing cost. Beginning work-in-process inventory January 1, 2003 was 60% of ending work-inprocess inventory, December 31, 2003. Manufacturing costs for the year ended December 31, 2003 submitted to you by the factory accountant was as follows: Raw material used P375,000

P1 Direct labor Factory overhead Total

Income Statement Part 1 300,000 225,000 P900,000

Page 4

Assuming cost percentage relationships as stated are correct. . Work-in-process at December 31, 2003 was: a. P200,000 c. P250,000 b. P225,000 d. P275,000

For questions 13 15: The 2003 operations of Ecru Company resulted in the following: Cost of goods sold amounted to P3,500,000. The beginning inventory is P500,000 greater than the ending inventory, the latter being equivalent to 20% of purchases during the period. Gross profit of the company is 30% of net sales. Total operating expense amounted to 60% of the gross profit while sales returns and allowances amounted to 2% of net sales. The company is subject to income tax rate of 35%. 13. 14. 15. What was the companys net sales for the period? a. P3,500,000 b. P4,100,000 c. P5,000,000 What was the amount of net income after income tax? a. P210,000 b. P390,000 c. P600,000 What was the total purchases for the period? a. P600,000 b. P1,100,000 c. P3,000,000 d. P5,100,000 d. P900,000 d. P4,100,000