MOCK BOARD EXAMINATION

FINANCIAL ACCOUNTING THEORY

1. The currently reported net income is based on
a. Financial capital
c. Borrowed capital
b. Physical capital
d. Invested and borrowed capital
2. Before 2005, Glen D. Company used the cash basis of accounting As of December 31,2005, Glen D changed to the accrual
basis. Glen D cannot determine the beginning supplies inventory. What is the effect of Glen Ds in ability to determine beginning
supplies inventory on its 2005 accrual basis net income and December 31, 2005, accrual basis owners equity?
2005 net income
12/31/05 owners equity
a. No effect
No effect
b. No effect
Overstated
c. Overstated
No effect
d. Overstated
Overstated
3. The premium on a three-year insurance policy expiring on December 31, 2004 was paid in total on January 1, 2002. The
original payment was initially debited to a prepaid asset account. The appropriate journal entry has been recorded on December
31, 2002. The balance in the prepaid asset account on December 31, 2002 should be
a. Zero
b. The same as it would been if the original payment had been debited initially to an expense account
c. The same as the original payment
d.
Higher than if the original payment had been debited initially to an expense account
4. In a statement of cash flow which of the following items is reported as cash flow from financing activities?
I.
Payments to retire mortgage notes
II.
Interest payments on mortgage notes
III.
Dividends payments
a. I,II, and III
b. II and III
c. I only
5. A business combination is accounted for appropriately as a purchase.
determining the combined corporations net income for the current period?
Direct cost
Of acquisition
a.
Yes
b.
Yes
c.
No
d.
No

d. I and III
Which of the following should be deducted in
General expenses
related to acquisition
No
Yes
Yes
No

6. On January 1,2005, XYZ Company signed a 5-year contract enabling it to use patented manufacturing process beginning in
2005. A royalty is payable for each product produced, subject to a minimum annual Fee. Any royalties in excess of the minimum
will be paid annually. On the contract date, XYZ prepaid a sum equal to two years minimum annual fees. In 2005, only
minimum fees were incurred. The royalty prepayment should be reported on the December 31, 2005 financial statements as
a. Expenses only
c. Current asset and expenses
b. Current and noncurrent asset
d. Noncurrent asset
7. The effect of the change in accounting estimate should be
a. Accounted for in the period of change only
b. Accounted for in the period of change and future periods if the change affects both
c. Treated as an extraordinary item
d. Shown as a correction of retained earnings
8. Retrospective application means that any resulting adjustment from a change in accounting policy should be reported as
a. Correction of the opening balance of retained earnings
b. Separate item in the income statement as part of income from ordinary activities
c. Extraordinary item
d. Discounting operation

9. It means the preparation of financial statements for a period of less than one year,
a. Interim financial reporting
b. Segment reporting
c. Year-end reporting
d. Financial reporting
10. The cost incurred that clearly benefit the entire year are allocated over the interim periods benefited. The concept of interim
financial reporting is known as
a. Integral view
c. Consolidated entity view
b. Independent view
d. Cost and benefit view
11. A bank reconciliation is
a. A formal financial statement that list all of the bank account balance of an enterprise.
b. A merger of two banks that previously were competitors
c. A statement sent by the bank to depositor on a monthly basis.
d. A schedule that accounts for the differences between an enterprises cash balances as shown on its bank statement and the
cash balance shown in its general ledger.
12. If accounts receivable are pledge against borrowings, the amount of accounts receivable pledge should be
a. Excluded from total receivables with disclosure
b. Excluded from total receivables without disclosure

c.
d.

Included in total receivables with disclosure

Included in total receivables without disclosure

13. Inventories do not encompass

a. Merchandise purchased by a retailer and held for resale
b. Land and other property held for resale by subdivision company or real estate developer
c. Finished goods produced
d. Abnormal amounts of wasted materials, labor and other production cost.
14. In an operating lease, the equal monthly rentals payments made by the lessee should be.
a. Allocated between interest expense and depreciation expense.
b. Allocated between interest expense and reduction of lease liability
c. Recorded as reduction of lease liability
d. Recorded as rental expense
15. Which is not part of the accounting standard setting process in the Philippines?
a. Preparation and approval by a Task Force of a draft of the proposed SFAS.
b. Distribution of the exposure draft for comments to PICPA members, FINEX members and others interested parties.
c. Publication in the Official Gazette or in a newspaper of general circulation
d. Approval by the Professional Regulation Commission
PRACTICAL ACCOUNTING PROBLEM 1
16. Mari Companys December 31, 2005 unadjusted current assets and stockholders equity are as follows.
Cash
500,000
Marketable equity securities (Including P 1,000,000
of Mari Common stock)
4,000,000
Trade accounts receivable
3,500,000
Inventories
1,000,000
Common Stock
5,000,000
Retained earnings
2,000,000
In its 2005 statement of changes in equity, the total amount of equity at December 31, 2005 is.
a. 7,000,000
b. 8,000,000
c. 6,000,000
d. 9,000,000
17. When preparing a draft of its December 31, 2005 balance sheets, Grace Company reported net assets totaling P8, 000,000.
Included in the assets section of the balance sheet were:
Treasury stock of Grace Company at cost
800,000
Idle and abandoned property
50.000
Cash surrender value
40,000
Unrealized loss from decline in value of available for sale securities 200,000
At what amount should Graces net assets be reported in the December 31, 2005 balance Sheet?
a. 8,000,000
b. 8,800,000
c. 7,200,000
d. 7,000,000

18. Kat Company was incorporated on January 1, 2003, with P4, 000,000 from the issuance of stock and borrowed funds of P
1,000,000. During the first year of operations, net income was P3, 000,000. On December 15, Kat paid a P2, 000,000 cash
dividend. No additional activities affected owners equity in 2005. At December 31,2005, Kats liabilities had increased to P
2,000,000. In Kats December 31 2005, balance sheet, total assets should be reported at
a. 4,000,000
b. 9,000,000
c. 7,000,000
d. 6,000,000
19. The following information was taken from Car Companys accounting records for the year ended December 31, 2005:
Increase in goods in process inventory
200,000
Decrease in raw materials inventory
100,000
Increase in finished goods inventory
300,000
Raw materials purchased
4,000,000
Direct labor payroll
2,000,000
Factory overhead
3,000,000
Freight out
400,000
The 2005 cost of goods sold is
a. 8,900,000

b. 9,000,000

20. Aim Companys income statement for the year 2005 shows;
Income before income tax and extraordinary item
Gain on life insurance included in above income (nontaxable)
Extraordinary loss due to earthquake damage

c. 8,600,000

d. 9,400,000

4,000,000
500,000
1,000,000

The income tax rate 35%. How much should be reported as the provision for income tax in the 2005 income statement?
a. 1,320,000
b. 1,155,000
c. 875,000
d. 990,000
21. Lia Company accepted from a customer a P 5,000,000, 90 day, 12% note dated August 31,2005. On September 30, 2005,
Lia discounted the note at 12%. However, the proceeds were not received until October 1, 2005. In the September 30, 2005
balance sheet, the amount receivable from the bank includes interest revenue of.
a. 103,000
b. 150,000
c. 100,000
d. 47,000
22. On December 31, 2005, Chris Company had the following cash balances:
Cash in Bank
3,000,000
Petty cash fund (unrepelnished expenses, P5, 000 on 12/31/05)
20,000
Time deposit, due March 1, 2006, six months
500,000
Cash in bank included P200,000 of compensating balance against short term borrowing arrangement at December 31, 2005.
The compensating balance is legally restricted as to withdrawal of Chris. In the correct assets section of the December 31,2005
balance sheet what total amount should be reported as cash and cash equivalents?
a. 3,315,000

b. 3,320,000

c. 2,815,000

d. 2,820,000

23. Elle Company determined that the net realizable value of its accounts receivable at December 31, 2005, based on an aging
of the receivables, was P 4,000,000. Additional information is as follows:
Allowance for uncollectible accounts- 1/1/05
Uncollectible accounts written off during 2005
Uncollectible accounts recovered during 2005
Accounts receivable- December 31, 2005

100,000
80,000
20,000
3,700,000

For the 2005, what would be the uncollectible accounts expense?

a. 300,000
b. 260,000

c. 200,000

d. 380,000

24. Medy Companys inventory at December 31,2005 was P 4,000,000 based on physical count priced at cost and before any
necessary adjustment for the following:

Merchandising costing P 200,000 shipped FOB destination from a vendor on December 30, 2005 was
received and recorded on January 5, 2006.

Goods in the shipping area were excluded from inventory although shipment was not made until January 4,
2006. The goods billed to the customer FOB shipping point on December 30,2005, had a cost of P300, 000.
What amount should Medy report as inventory on December 31,2005?
a. 4,600,000
b. 4,200,000
c. 4,300,000

d. 4,000,000

25. On January 1, 1987, the Victoria Company purchased for P85,000 a building that was expected to have a 25-year useful life
with no residual value at the end of its useful life. The straight-line method of depreciation was no change in residual value.
What is the balance in the Accumulated Depreciation account at December 31, 2003, assuming that the Victoria Company
properly accounted for the change?
a. P 62,050

b. P 57,800

c. P 68,809

d. P72, 250

26. The following condensed income statement of Summer Corporation is presented for two years ended December 31, 2001
and 2003:
2004
2003
Net sales P 10,000,000
P 9,000,000
Cost of sales.
6,000,000
6,000,000
Gross profit.... P 4,000,000
Operating expense..
2,500,000

P 3,000,000
2,000,000

Operating Income .. P 1,500,000

Gain on sale of a segment .
900,000

P 1,000,000
-

2,400,000
1,000,000
Income tax expense....
720,000
300,000
Net Income .. P 1,680,000
P 700,000
============
===========
On January 1, 2004, summer entered into an agreement to sell for P 2,000,000 one of its separate operating divisions. The sale
resulted in a gain on disposition of P 900,000 on November 12, 2004, and qualifies as discounted segments. This divisions
contribution to summer reported income taxes for each was as follows:
2004
P (700,000)
loss
2003
P (400,000)
loss
Assume an income tax rate of 30%.
In the preparation of a revised comparative income statement, summer should report under the caption Discounted Operation
for 2004 and 2003, respectively.
a.
b.
c.
d.

Income of P140, 000 and loss of P280, 000.

Income of P140, 000 and a loss of P0.
Income of P200, 000 and a loss of P 400, 000.
A loss of P 700, 000 and a loss of P 400, 000.

27. The following segments were identified for a firm:

Segment
Operating profit (loss)
#1
P 100,000
#2
(100,000)
#3
(1,100,000)
#4
(125,000)
Which of the four segments is a reportable segment?
a. 3 only b. 3 and 4 only
c. 4 only d. none are reputable segments
28. On January 5, 2003, Red co. paid P 60,000 for insurance on its buildings for the calendar year 2003. In the first week of April
2003, the company made unanticipated major repairs to its equipment at a cost of P240, 000. These repairs benefited operations
for the remainder of 2003. How should these expenses be reflected in Red Cos quarterly income statement?
Three Months Ended
a.
b.
c.
d.

3/31
P 15,000
60,000
75,000
15,000

6/30
P95,000
240,000
75,000
255,000

P 95,000
75,000
15,000

9/30
P 95,000
75,000
15,000

12/31

29. Midway Company had the following transaction during 2005.

P 1,200,000 pretax loss on foreign currency due to a major unexpected devaluation by the foreign

government.

P 500,000 pretax loss from discounting operation.

P 1,000,000 pretax loss on equipment damage by an earthquake. This is the first earthquake ever to strike in Midways area.
Midway also received P 1,500,00 from its insurance company to replace a building, with a carrying value of P400, 000 that
had been destroyed by the earthquake.
What amount should Midway report in its 2005 income statement as extraordinary loss before tax?
a. 100,000
b. 1,300,000
c. 1,800,000
d. 0
30. The following information pertains to Seda Companys pension plan:
Actual estimate of projected benefit obligation on at January 1, 2005. P 72,000
Services cost for 2005 .. 18,000
Pension benefits paid during 2005 15,000
Assumed discount rate .
10%
It no change in actuarial estimates occurred during 2005, Sedas projected benefit obligation at December 31, 2005 was:
a. P 64,200
b. P75, 000
c. P 79,200
d. P 82,200
31. Bond Company leased equipment from Howe, Inc. on December 31,2005 for ten-year period (the useful life of the asset)
expiring December 30, 2015. Equal annual payments under the lease are P 100,000 value at December 31, 2005 of the minimum
lease payments over the lease term, discounted at 10% (the implicit rate computed by Howe and Known by Bond) was P
676,000. Bonds incremental borrowing rate was 12% at December 31, 2005. The lease is appropriable accounted for as a capital
lease, what should be the balance in Bonds liability under capital lease account at December 31, 2006?
a. P 533,600
b. P 545, 120
P 607,960
d. P 800,000
32. On January 1, 2005, Ward Corporation issued its 9% bonds in the face amount of P 2,000,000, which mature on January 1,
2005. The bonds were issued for P 1,878,000 to yield 10% resulting in bond discount of P 122,000. Ward uses the interest method
of amortizing bond discount, interest is payable annually on December 31. At December 31, 2005, Wards unamortized bond
discount should be
a. P 114,200
b. P 104,000
c. P 103,220
d. P 102,000
33. On July 1,2005, Walton Company leased office premises for a three-year period at an annual rental of P36, 000 payable on
July 1 each year. The first rent payment was made July 1, 2005; Walton paid P24, 000 as a lease bonds to obtain a three-year
lease instead of the lessors usual lease term six years. In its December 31, 2005 balance sheet, Walton should report prepaid rent
of
a. P 18,000
b. P 22,000
c. P 24,000
d. P38, 000
34. On December 30, 2006, Drew Company leased equipment under a capital lease for a period of ten years. It contracted to pay
P 90,000 annual rent on December 31, 2005 and on December 31 of each of the next nine years. The capital lease liability was
appropriately recorded at P 608,400 on December 31, 2006 before the first payment. The leased equipment has a useful life of 12
years and the interest rate implicit in the lease is 10%. Drew uses the straight-line method in depreciating all equipment. In
recording the December 31, 2007 payment, Drew should reduce the capital lease liability by
a. 38,160
b. 50,700
c. 51,840
d. 60,840
35. On August 1,2004, Bamco Company purchased a new, machine on a deferred payments basis. A down payment of P 100,000
was made and 4 monthly installments of P 250,000 each are to be made beginning on September 1, 2004. The cash equivalent
price of the machine was P950, 000. Bamco incurred and paid installation cost amounting to P 30,000. The amount to be
capitalized as the cost of the machine is
a. 950,000
b. 980,000
c. 1,100,000
d. 1130,000
36. On September 1, 2004 Ron Company issued 10,000 shares of its P26 par treasury common stock for a parcel of land to be
held for future plant site. Ron acquired the treasury shares at a cost of P 30 per share. Rons common stock had a fair market
value of P 40 per share on September 1, 2004. Ron received P 50,000 from the sale of scrap when an existing structure on the site
razed. At what amount should the land be carried?
a. 400,000
b. 350,000
c. 300,000
d. 250,000
37. On January 1, 2004, ABC Company obtained a loan of P 20,000,000 at an interest rate of 10% specifically to finance the
construction of its new building. Availments from the loan were made quarterly in equal amounts. Total borrowing cost amounted
to P 125,000. Prior to their disbursement, the proceeds of the loan were temporarily invested and earned interest income
amounting to P 20,000. The building was completed on December 31, 2004. The amount of capitalizable borrowing cost is
a. 125,000
b. 105,000
c. 200,000
d. 195,000

38. Joane Company acquired property in early 2004 which is believed to include valuable mineral deposit; the cost of the
property was P 9,000,000. Geological estimates indicate that approximately 10,000,000 tons of mineral may be economically
extracted. It is further estimated that the property can be sold for P 2,500,000 to be used for commercial development following
mineral extraction. For P 800,000, Joane is legally required to restore the land to its original condition. After initial acquisition,
the following cost were incurred:
Exploration cost
3,500,000
Development cost related to drilling and development of wells
3,200,000
Development cost related to production equipment
4,600,000
The company extracted 3,500,000 tons of the minerals in 2004. What is the depletion for 2004?
a. 5,775,000
b. 6,510,000
c. 4,900,000
d. 4,620,000
39. The following account balances relating to property, plant and equipment of Cycle Company appear on the books on
December 31, 2004
Land
2,000,000
Building
15,000,000
Accumulated depreciation
3,750,000
Machinery
3,000,000

Accumulated depreciation

1,500,000

Assets have been carried at cost since their acquisition. All assets were acquired on January 1, 1994. The straight-line method is
used. On January 1, 2004, the company wishes to show property, plant and equipment at revalued amount. On such date,
competent appraisers submitted the following:
Replacement cost
5,000,000
25,000,000
5,000,000

Land
Building
Machinery
What is the revaluation surplus?
a. 15,000,000

b. 11,500,000

c. 30,000,000

d. 8,500,000

40. During December 2004, Bubba Company determined that there had been a significant decrease in market value of its
equipment used in its manufacturing process. At December 31, 2004, Bubba compiled the information below:
Original cost of equipment
Accumulated depreciation

500,000
300,000

Expected undiscounted net future cash inflows related to the continued used and eve
Eventual disposal
175,000
Fair value of equipment
125,000
What is the amount of impairment loss that should be reported on Bubbas income statement for the year ended December 31,
2004?
a. 325,000

b. 375,000

c. 75,000

d. 25,000S

41. Summa Company manufactures a special product. To promote the sale of the product, a premium is offered to customers who
send in three wrappers and remittance of P25. The distribution cost per premium is P5. Data for the premium are:
2004
2005
Sales
4,000,000
5,000,000
Premium purchases at P80 each
400,000
416,000
Number of premiums distributed
In next period
200
500
The premium expenses for 2005 should be
a.
464, 000
b. 348,000
c. 360,000
d. 0
42. Fores Company has an agreement to pay its sales manager a bonds of 5% of the companys earnings. The income for the year
before bonus and tax is 5,000,000. Income tax rate is 32% of income after bonus. The bonus is computed after deduction for both
bonus and tax. What is the amount of bonus for the year (round of to the nearest peso)?
a. 250,000

b. 164,410

c. 241,780

d. 172,630

43. For the year ended December 31, 2004, Marie Company showed a pretax financial income of P5, 000,000. To compute
taxable income, the following items are noted:
Depreciation deducted for tax purposes in excess of book depreciation
Proceeds received from life insurance on death of officer
Cash received in included in financial income of which P120, 000
Will be taxable in 2005
Income tax rate

200,000
500,000
200,000
32%

What amount should Marie Company report as total income tax expense for the year ended December 31, 2004?
a. 1,600,000
b. 1,337,600
c. 1,440,000
d. 1,542,000
44. Tobago Company has a define benefit plan for its employees. The memorandum records showed the following balances on
January 1, 2004:
Fair value of plan assets
5,000,000
Unamortized past service cost
500,000
Unrecognized actuarial loss
1,000,000
Unamortized transition loss
150,000
Accrued benefit obligation
7,500,000
Assume the past service cost and the actuarial loss should be amortized over 5 years and the transition loss is amortized over 3
years. The transition for 2004 involving the defined benefit plan include the following:
Current service cost
900,000
Interest cost
750,000
Expected and actual return
600,000
Contribution to the plan
1,400,000
Benefits paid to retirees
800,000
What is the 2004 total benefit expense?
a. 1,400,000
b. 1,200,000
c. 1,650,000
d. 1,250,000
45. On January 1, 2004, Doro Corporation granted an employee an option to purchase 3,000 shares of Doros P5 par value
common stock at P20 per share. The option became exercisable on December 31, 2005, after the employee compiered two years
of service. The option was exercised on January 10, 2006,
The market prices of stock were as follows:
January 1, 2004
December 31, 2004
January 10, 2006

30
50
45

For 2004, Doro should recognize compensations expense of

a. 45,000

b. 37,5000

c. 15,000

d. 0

MANAGEMENT ADVISORY SERVICES

46. La Nona Corporation products Lutang, an inflatable life vest that may be used of blood, La Nona expected October sales of
Lutang to 42,000 units at P15 each. Production of each unit of Lutang requires the used of some purchased components:
Units required Per Lutang
Purchase Cost
Part 1
1
P0.50
Part 2
2
0.25
Part 3
3
1.00
Variable conversion cost per unit of Lutang totals P3.00. Fixed overhead is P1.00 per unit, computed based on normal capacity of
500,000 units. La Nona plans the following beginning and ending inventories for the month of October and uses standard
absorption costing for valuing inventories, Variances are recognized and closed at the end of the calendar year
Item
October 1
Lutang
12,000
Part 1
21,000
Part 2
32,000
Part 3
14,000
La Ninya's budgeted gross profit for October is:
a. 2,814,000
b. 2,800,000
c. 2,830,000

October 31
10,000
9,000
10,000
6,000
d. 2,784,000

47. The four categories of cost associated with product quality cost are:
a. External failure, internal failure, prevention, and carrying
b. External failure, internal failure, prevention, and appraisal
c. External failure, internal failure, training and appraisal
d. Warranty, product liability, training and appraisal
48.Which one of the following is least likely to be involved in establishing standard cost for evaluation purpose?
a. Top management
b. Line management
c. Budgetary accountants
d. Industrial engineers
49. Product x has sales of P200, 000, a variable cost ratio of 80% and a margin of safety of P80, 000. What is Product Xs fixed
cost?
a. P24, 000

b P16, 000

c. P96, 000

d. P80, 000

50. A CPA should reject a management advisory services engagement if:

a. He audits the financial statements of a subsidiary of the prospective client
b. His recommendations are to be reviewed by the clients.
c. The proposed engagement is not accounting method.
d. It would require him to make management decisions for the prospective client.
51. In determining cost behavior in business, the cost function is often expressed as Y=A+Bx. Which one of the following cost
estimation methods should not be used in estimating fixed and variable cost for the equation?
a. Graphic method
b. Simple regression
c. High & low point method
d. Multiple regression
52. Which of the following statements is correct?
a. Trend percentages in financial statements would be an example of vertical analysis.
b. If earnings remain uncharged and the price earnings ratio goes up, them one would expect the market price of a stock to
go down.
c. Book value per share is a good predictor of either earnings potential or debt paying ability.
d. If a companys return on total assets is substantially higher than its cost of borrowing, then the common stockholders
would normally want the company to have a high-to-equity ratio.
53. Division A of a company is currently operating at 50% capacity. It produces a single product and sells all its production to
outside customers for P13 per unit. Variable cost are P7 per unit, and fixed cost are P0 per unit at the current production level,
Division B, which currently purchases this product from an outside supplier for P12 per unit, would like to purchase the product
from Division A. Division A will operate at 80% capacity to meet outside customers and Division Bs demand. What is the
minimum price that Division A should charge Division B for this product?
a. P7.00 per unit

b. P10.40 unit

c. P12.00 per unit

d. P13.00 per unit

54. Cool Coat Company estimates that 60,000 special zippers will be used in the manufacture of mens jacket during the next
year. Tomorrow Zipper Company has quoted a price of P60 per zipper. Cool Coat would refer to purchases 5,000 units per month,
but Tomorrow is unable to guarantee this delivery schedule. To ensure availability of these zippers, Cool Coat is considering the
purchase of all 60,000 units at the beginning of the year. Assuming Cool Coat can invest cash at 12%, the companys opportunity
cost of purchasing the 60,000 units at the beginning of the year is
a. P 2,160

b. P 3,960

c. P 4,320

d. P 1,980

55. El Ninyo Company purchased a new machine on January 1 of this year for P90, 000 with an estimated useful life of 5 years
and a salvage value of P 10,000. The machine is expected to produce cash flow from operations, net of income taxes, of P36, 000
a year in each of the next 5 years. The new machines salvage is P20, 000 in years 1 and 2 and
P15, 000 in years 3 and 4. What will be the bailout (rounded) for this new machine?

a. 14 years

b. 22 years

c. 19 years

d. 34 years

PRACTICAL ACCOUNTING 2
56. Cagayan Company operates a branch in Iligan City. The following are gathered from the records at the end of the year:
H.O Books
Branch Books
Inventory, January 1
P 60,000
P 40,000
Purchases
750,000
150,000
Allowances for mark-up in branch inventory
98,750
Shipment to branch/ from home office
375,000
468,750
Sales
920,000
882,500
Investors at December 31, 2005
Home Office
70,000
Branch: From Home Office
20,000
From outsider
21,000
The cost of good sold of the branch (net of overvaluation)
a. P 371,000
b. P 431,000
c. P 513,250
d. P522, 250
Items 57 & 58, Butuan Company sells goods on installment basis. At the end of each year, it recognizes gross profit in the year of
collections and considers each collection to be composed of cost and gross profit elements.
January 1, 2005
December 31, 2005
Installment Contract receivables-2003
P 24,040
P0
Installment Contract receivables-2004
344,460
67,440
Installment Contract Receivables-2003
410,090
During 2005, upon default in payment by customers, the company repossessed the merchandise having an estimated resale
value of P1, 900 (after reconditioning cost of P200). The sales had been in 2004 for P5, 400 and P3, 200 for P5, 400 and P3,
200 had been collected before the default. The company recorded the default and repossession by a debit to merchandiseRepossessed and credit to installment contract receivable-2002 for uncollected balance. The companys gross profit and
ratios follow:
2005
2004
2003
Gross Profit
P222,740
P146,880 P133,000
Rate
37%
34%
35%
57.) The total realized gross profit in 2005:
a. 173,240.50
b. 174,688.50
58.) The gain (loss) on repossession:
a. P (381)
b. P (330)

c. 184,259.50

c. P0

d. 172,852.50

d. P (248)

59. LDCU Company began business on January 1, 2004 and uses the installment method of accounting revenues. The following
information is available for the years ended 2004 and 2005:
2002
2003
Sales
P 500,000
P1, 000,00
Gross profit realized on sales made in:
2004
75,000
45,000
2005
100,000
Gross Profit percentages
30%
40%
What amount of total Installment accounts receivables that should be reported in its December 31, 2005 Balance Sheet?
a. P 612,500

b. P 650,000

c. P 850,000

d. P 887,500

60. Bukidnon Company owns 80% of subsidiary Companys common stock during 2005; Bukidnon sold Subsidiary P 125,000 of
inventory on the same terms as sales made to third parties. Subsidiary sold all of the inventory purchase from Bukidnon. The
following information pertains to the Bukidnon and the Subsidiary sales for 2005.
Bukidnon
Subsidiary
Sales
P 500,000
P 350,000
Cost of sales
200,000
175,000
The cost of sales for 2005 Combined Income Statement:
a. 375,000
b. 340,000

c. 250,000

d. 215,000

61. On June 30,2005, Parent company issued shares of its P 5 par common stock in a pooling of interest type of combination. The
stockholders equity immediately before the combination were:
Parent Co.
Subsidiary Co.
Common Stock
P 3,250,000
P 1,000,000
APIC
2,200,000
800,000
Retained Earnings
3,050,000
2,700,000
Both companies operate as separate business maintaining accounting with years ending December 31, 2005. For 2005, the net
income and dividends paid from separate company operation were:
Net Income
Six months ended June 30, 2005
Six months ended December 31, 2005

Parent Co.
P 500,000
550,000

Subsidiary Co.
P 150,000
250,000

Dividends Paid April 1, 2005

October 1, 2005

650,000

175,000

In the June 30, 2005, the consolidated balance sheet total minority interest should be reported at:
a. P 475,000
b P 472,300
c. P 457,000
d. P 450,000
62. The following were among Ozamis Companys 2005 cost:
Normal spoilage
Standard manufacturing cost
Freight out
Excess of actual manufacturing cost over standard
Actual prime manufacturing costs
The actual factory overhead for 2003 is:
a. P90,000
b. P80,000

c. P110,000

P 10,000
200,000
20,000
40,000
160,000
d. 240,000

Items 63 and 64, Surigao company had these accounts at the times was acquired by Philippine Company:
Cash
P36,000
Inventories
P120,000
Accounts receivable
457,000
Plant Assets
696,400
Liabilities
350,800
Philippine Company paid P 1,400,000 for 100% of the stocks of Surigao. It was determined that fair values if inventories and
plant assets were P 133,000 and P 900,000.
63. In the books of Philippine Company, this transaction resulted to:
a. Goodwill- P 441,000
b. Goodwill- P 224,800
c. Assets decreased P 224,800d. Assets increased P224, 800
64. The net assets (excluding goodwill, if any) recorded in the books of the acquiring Company was:
a. P1, 400,000
b. P 1,175,200
c. P 1,309,000
d. P 958,200
65. COC Company bought a fixed assets for US 10,000 dollar on November 31, 2005 when the exchange rate was P 46=US 1
dollar. At December 31, 2005. The companys year-end, the supplier of the fixed asset has not been paid and the exchange rate at
the time was P50 = US 1 dollar. The company ha snot taken out a forward exchange contract for this payment to hedge against
adverse rate movements.
At the year end, the cost of the (1) fixed asset and (2) creditor that will be recorded;
a. (1) 50,000 (2) 50,000
b. (1) 46,000 (2) 50,000
c. (1) 46,000 (2) 46,000
d. (1) 50,000 (2) 46,000

END OF EXAMINATION

(ANSWER KEY)

MOCK BOARD EXAMINATION

FINANCIAL ACCOUNTING THEORY
1.A
2.C
3.B
4.D
5.C
6.B
7.B
8.A
9.A
10.A

11.D
12.C
13.D
14.D
15.C

PRACTICAL ACCOUNTING PROBLEM 1

16.C
17.D
18.C
19.C
20.C
21.D
22.A
23.B
24.C
25.A
26.B
27.B
28.A
29.D
30.D

31.A
32.A
33.A
34.A
35.B
36.B
37.B
38.C
39.B
40.C
41.B
42.B
43.C
44.D
45.C

MANAGEMENT ADVISORY SERVICES

46.A
47.B
48.A
49.A
50.D
51.D
52.D
53.A
54.D
55.C
PRACTICAL ACCOUNTING 2
56.D
57.D
58.D
59.C
60.C
61.C
62.B
63.B
64.B
65.A