PRACTICAL ACCOUNTING 1 – Exam

Items 1 to 3:
The following adjusted trial balance has been prepared for Vice Corporation.
Debit Balance Accounts
Cost of goods sold P230,000
Distribution and administrative expenses (including
interest and rearrangement costs) 130,000
Income tax expense 51,500
Cash 44,000
Short-term investments (at fair value) 12,000
Accounts receivable 70,000
Merchandise inventory * 72,000
Office supplies inventory 2,000
Investments in bonds of Alta Corp. (long-term),
cost (market value, P35,000) 33,000
Land (plant site in use) 10,000
Plant and equipment 120,000
Franchise (less amortization) 8,000
Rearrangement cost ** 15,000
Idle equipment held for disposal 7,500
Dividends declared and paid during 2003 40,000
P845,000
Credit Balance Accounts
Sales revenue P490,000
Accumulated depreciation, plant and equipment 40,000
Accounts payable 50,000
Income taxes payable 11,000
Bonds payable 50,000
Allowance for doubtful accounts 3,000
Premium on bonds payable (unamortized) 1,000
Common stock, par P10 (authorized 50,000 shares) 150,000
Excess of issue price over par of common stock 18,000
Retained earnings, 1/1/2003 32,000
P845,000
* Perpetual inventory system
** Amortization period is 3 years; this is the unamortized balance on
12/31/2003
1. Earnings per share on common stock outstanding:
(a) P1.57 (b) P4.17 (c) P5.23 (d) P13.90 C
2. Total non-current assets:
(a) P90,000 (b) P186,000 (c) P138,500 (d) P153,500 D

3. Total contributed capital:

(a) P150,000 (b) P168,000 (c) P238,500 (d) P278,500 B

Items 4 to 6:
Hole Company uses a perpetual inventory system. The company’s beginning inventory of a
particular style of large screen TVs and its purchases during the month of January were as
follows:
Quantity Unit Cost Total Cost
Beginning inventory (Jan. 1) 40 P200 P 8,000
Purchase (Jan. 12) 20 221 4,420
Purchase (Jan. 28) 10 158 1,580
Total 70 P14,000
 On January 15, Hole Company held its annual large screen TV Sale Day. On this day, 55 of
these TVs were sold. The remaining 15 units above remain in inventory at January 31.

4. Assuming that Hole uses the FIFO flow assumption, the cost of goods sold to be recorded at
January 15 is:
(a) P11,420 (b) P11,000 (c) P11,315 (d) P11,460 C

5. Assuming that Hole uses the LIFO flow assumption, the cost of goods sold to be recorded at
January 15 is:
(a) P11,420 (b) P11,000 (c) P11,315 (d) P11,460 A

6. Assuming that Hole uses the average cost flow assumption, the cost of goods sold to be
recorded at January 15 is:
(a) P11,385 (b) P11,450 (c) P11,315 (d) P11,460 A

For items 7 and 8:

Bagong Sikat had the following investment transactions in the capital stock of Masaya, Inc.:
Jan.5 Bought 400 common shares, par P100, at P88 per share.
June 15 Received 10% stock dividend.
Aug 31 Received P4 cash dividend for each share of stock.
Oct. 10 Received stock rights to buy one new share at P135 for every 5 shares held.
Market value of right, P4; market value of stock ex-right, P156.

7. The unit cost of the stock after the stock dividend on June 15 is:
(a) P 75 (b) P 85 (c) P 90 (d) P 80 D

8. After receipt of the stock rights on October 10, the unit cost per share is:
(a) P 78 (b) P 80.50 (c) P 82 (d) P 81.50 A

9. On January 2, 2000, a calendar-year corporation sold 5% bonds with a face value of

P100,000. These bonds mature in five years, and interest is paid semi-annually on June 30
and December 31. The bonds were sold for P95,735 to yield 6%. Using the yield method
of computing interest, how much should be charged to interest expense in 2000?
(a) P4,147 (b) P4,265 (c) P5,755 (d) P5,853 C

10. The following pertains to Restive Company for the year ended December 31, 2002:
Retained earnings – unappropriated, January 1 P400,000
Underdepreciation of 2000 due to fundamental error 200,000
Net income 2002 600,000
Dividends – common and preferred 300,000
Change in accounting policy from straight line to
accelerated method – debit adjustment 150,000
Retained earnings appropriated for treasury stock 100,000
How much is the total retained earnings at December 31, 2002?
(a) P500,000 (b) P600,000 (c) P850,000 (d) P1,050,000 B