Problem 1

Kabugao Company provided the following information on December 31, 2017:

Cash in bank, net of bank overdraft of P500,000 5,000,000

Petty cash, unreplenished petty cash expenses P10,000 50,000
Note receivable 4,000,000
Accounts receivable, net of customer’s accounts with
Credit balances of P1,500,000 6,000,000
Inventory 3,000,000
Bond sinking fund 3,000,000

Total current assets 21,050,000

Accounts payable, net of supplier’s accounts with debit balances of P1,000,000 7,000,000
Notes payable 4,000,000
Bond payable due June 30, 2018 3,000,000
Accrued expenses 2,000,000

Total current liabilities 16,000,000

1. What amount should be reported as total current assets on December 31, 2017?

a. 19,040,000
b. 20,040,000
c. 20,050,000
d. 24,040,000

2. What amount should be reported as total current liabilities on December 31, 2017?

a. 19,000,000
b. 16,000,000
c. 15,500,000
d. 15,000,000
Problem 2

Trey company provided the following trial balance at year-end which had been adjusted except for
income tax expense:

Cash 600,000
Accounts receivable, net of allowance of P100,000 1,650,000
Prepaid taxes 300,000
Accounts payable 140,000
Share capital 500,000
Share premium 680,000
Retained earnings 630,000
Foreign currency translation adjustment 400,000
Revenue 3,600,000
Expenses 2,600,000

5,550,000

During the current year, estimated tax payments of P300,000 were charged to prepaid taxes. The
entity has not yet recorded income tax expense.

There were no differences between financial and taxable income. The tax rate is 30%.

Included in accounts receivable is P500,000 due from a customer. Special terms granted to this
customer require payment in equal semiannual installment of P125,000 every April 1 and October 1.

1. What amount should be reported as total current assets at year-end?

a. 2,000,000
b. 2,200,000
c. 2,300,000
d. 2,250,000

2. What amount should be reported as total retained earnings at year-end?

a. 1,680,000
b. 1,200,000
c. 1,330,000
d. 1,630,000
Problem 3

Cara Company provided the following information for the current year:

January 1 December 31

Current assets 500,000 ?

Property, plant, and equipment 3,000,000 4,000,000
Current liabilities ? 300,000
Noncurrent liabilities 1,000,000 ?

All assets and liabilities are reported at year-end.

Working capital of P600,000 remained unchanged.

Net income for the current year was P400,000.

No dividends were declared during the year and there were no other changes in shareholder’s equity.

1. What is the amount of current assets on December 31?

a. 900,000
b. 300,000
c. 600,000
d. 450,000

2. What is the shareholder’s equity on December 31?

a. 2,800,000
b. 2,400,000
c. 2,500,000
d. 3,500,000

3. What is the amount of noncurrent liabilities on December 31?

a. 2,400,000
b. 1,300,000
c. 1,800,000
d. 2,100,000
Problem 4

Camarines Company provided the following data at year-end:

Cash 2,000,000
Accounts receivable 3,000,000
Inventory 1,900,000
Prepaid expenses 100,000
Accounts payable, net of debit balance of P50,000 2,450,000
Interest payable 150,000
Income tax payable 300,000
Money claim of the union pending final decision 500,000
Mortgage payable, due in four annual installments 2,000,000

Analysis of cash

Cash in bank 1,650,000

Customer check marked NSF 100,000
Employee IOU 50,000
Deposit with court for case under litigation 200,000

Total cash 2,000,000

Analysis of accounts recievable

Customer’s debit balances 1,600,000

Advances to subsidiary 400.000
Advances to suppliers 200,000
Advances to officers due currently 300,000
Allowance for doubtful accounts (100,000)
Selling price of merchandise invoiced at 120%
of cost, undelivered and excluded from inventory 600,000

Total accounts receivable 3,000,000

a. What amount should be reported as total current assets?

a. 6,050,000
b. 6,350,000
c. 5,550,000
d. 6,100,000

b. What amount should be reported as total current liabilitites?

a. 3,450,000
b. 3,400,000
c. 3,950,000
d. 3,700,000
Problem 5

Gibson Company reported that remuneration and other payments made to the entity’s chief executive
officer during the current year were:

Annual salary 2,000,000

Share options and other share-based payments 1,000,000
Contributions to retirement benefit plan 500,000
Reimbursement of travel expenses for business trips 1,200,000

What total amount should be disclosed as “compensation” to key management personnel?

a. 3,500,000
b. 4,700,000
c. 3,000,000
d. 2,500,000

Problem 6

Brock Company reported operating expenses in two categories, namely distribution and general and
administrative.

The adjusted trial balance at year-end included the following expense and loss accounts for current
year:

Accounting and legal fees 1,200,000

Advertising 1,500,000
Freight out 800,000
Interest 700,000
Loss on sale of long-term investment 300,000
Officer’s salaries 2,250,000
Rent for office space 2,200,000
Sales salaries and commissions 1,400,000

One-half of the rented premises is occupied by the sales department.

What amount should be reported as total distribution costs?

a. 4,800,000
b. 4,000,000
c. 3,700,000
d. 3,600,000
Problem 7

Vigor Company provided the following information for the current year:

Net accounts receivable at January 1 900,000

Net accounts receivable at December 31 1,000,000
Account receivable turnover 5 to 1
Inventory at January 1 1,100,000
Inventory at December 31 1,200,000
Inventory turnover 4 to 1

What is the gross margin for the current year?

a. 150,000
b. 200,000
c. 300,000
d. 400,000

Problem 8

Bicolano Company provided the following data for the current year:

Inventory, January 1 2,000,000

Purchases 7,500,000
Purchase returns and allowances 500,000
Sales returns and allowances 750,000
Inventory on December 31 2,800,000
Gross profit rate on sales 20%

1. What is the cost of goods sold?

a. 6,700,000
b. 6,200,000
c. 7,200,000
d. 9,000,000

2. What is the amount of gross sales for the current year?

a. 7,750,000
b. 8,500,000
c. 7,000,000
d. 9,125,000
Problem 9

Bangladesh Company provided the following information for the current year:

Sales 50,000,000
Cost of goods sold 30,000,000
Distribution costs 5,000,000
General and administrative expenses 4,000,000
Interest expense 2,000,000
Gain on early extinguishment of long-term debt 500,000
Correction of inventory error, net of income tax – credit 1,000,000
Investment income – equity method 3,000,000
Gain on expropriation 2,000,000
Income tax expense 5,000,000
Dividends declared 2,500,000

What is the income from continuing operations?

a. 9,000,000
b. 8,000,000
c. 9,500,000
d. 7,000,000

Problem 10

Tactful Company reported operating expenses other than interest expense for the year at 40% of cost
of goods sold but only 20% of sales. Interest expense is 5% of sales.

The amount of purchases is 120% of cost of goods sold. Ending inventory is twice as much as the
beginning inventory.

The net income for the year is P560,000. The income tax rate is 30%.

1. What is the amount of sales for the year?

a. 2,080,000
b. 1,485,000
c. 2,285,000
d. 3,200,000

2. What is the amount of purchases?

a. 1,600,000
b. 1,920,000
c. 1,280,000
d. 2,240,000
Problem 11

Mercury Company showed cost of goods sold of P4,320,000 in the statement of comprehensive
income after the first year of operations.

The total manufacturing cost comprised the following:

Materials used 50%

Direct labor incurred 30%
Manufacturing overhead 20%

Goods in process at year-end amounted to 10% of the total manufacturing cost.

Finished goods at year-end amounted to 20% of the cost of goods manufactured.

What is the amount of the direct labor cost incurred?

a. 1,800,000
b. 2,400,000
c. 3,000,000
d. 5,400,000

Problem 12

Argentina Company incurred the following costs and expenses during the current year:

Raw material purchases 4,000,000

Direct labor 1,500,000
Indirect labor – factory 800,000
Factory repairs and maintenance 200,000
Taxes on factory building 100,000
Depreciation – factory building 300,000
Taxes on saleroom and general office 150,000
Depreciation – sales equipment 50,000
Advertising 400,000
Sales salaries 500,000
Office salaries 700,000
Utilities – 60% applicable to factory 500,000

Beginning Ending

Raw materials 300,000 450,000

Work in process 400,000 350,000
Finished goods 500,000 700,000
 1. What is the cost of raw materials used?

a. 3,850,000
b. 4,000,000
c. 4,150,000
d. 4,750,000

2. What is the cost of goods manufactured for the current year?

a. 7,450,000
b. 7,200,000
c. 7,100,000
d. 7,300,000

3. What is the cost of goods sold for the current year?

a. 7,300,000
b. 6,900,000
c. 7,600,000
d. 8,300,000

Problem 13

Sheraton Company reported the following information for the current year.

Ending goods in process 1,000,000

Depreciation on factory building 320,000
Beginning raw materials 400,000
Direct labor 1,980,000
Factory supervisor’s salary 560,000
Depreciation on headquarters building 210,000
Beginning goods in process 760,000
Ending raw materials 340,000
Indirect labor 360,000
Purchases of raw materials 2,300,000

What is the cost of goods manufactured for the current year?

a. 5,340,000
b. 5,580,000
c. 5,550,000
d. 5,820,000
Problem 14

Kay Company provided the following information for the current year:

Increase in raw materials inventory 150,000

Decrease in goods in process inventory 200,000
Decrease in finished goods inventory 350,000
Raw materials purchased 4,300,000
Direct labor payroll 2,000,000
Factory overhead 3,000,000
Freight out 450,000
Freight in 250,000

What is the cost of goods sold for the current year?

a. 9,950,000
b. 9,550,000
c. 9,250,000
d. 9,150,000

Problem 15

Darwin Company provided the following information at year-end:

Cash 300,000
Accounts receivable 1,200,000
Inventory, including inventory expected in the ordinary
course of operations to be sold beyond 12 months amounting to P700,000 1,000,000
Prepaid expenses 100,000
Financial asset held for trading 200,000
Equity investment at fair value through other comprehensive income 800,000
Deferred tax asset 150,000

What amount should be reported as total current assets at year-end?

a. 2,800,000
b. 2,550,000
c. 3,600,000
d. 2,100,000