Northern CPAR: Practical Accounting II – FINAL PRE-BOARD EXAMINATION

NORTHERN CPA REVIEW

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4 Floor Pelizloy Centrum, Lower Session Road, Baguio City, Philippines
Mobile Numbers: SMART 09294891758 & GLOBE 09272128204
E-mail: ncpar@yahoo.com
REX B. BANGGAWAN, CPA, CPA

PRACTICAL ACCOUNTING II
FINAL PRE-BOARD EXAMINATION

INSTRUCTION: Shade the letter corresponding to the answer of your choice in

the answer sheet provided for. Erasure is not allowed.

1. The partnership of Henedina and Helena reported the following results of

operation for the year 2008:

Sales P 5,000,000-
Cost of goods sold ( 2,000,000)
Gross profit P 3,000,000-
Administrative expenses, inclusive
of salaries and bonuses ( 1,400,000)
Net income P 1,600,000-

Bonus is computed as 20% of net income before salaries of P40,000 to

Henedina and P60,000 to Helena, but after the bonus. Compute the amount
of bonus.
a. P400,000 c. P340,000
b. P425,000 d. P500,000

2. PP contributed a P24,000 and CC contributed P48,000 to a form

partnership, and they agreed to share profits in the ratio of their
original capital contributions. During the first year of operations, they
made a profit of P16,290; PP withdrew P5,050 and CC P8,000. At the start
of the following year, they agreed to admit GG into the partnership. He
was to receive a one-fourth interest in the capital and profits upon
payment of P30,000 to PP and CC, whose capital accounts were to be
reduced by transfers to GG’s capital account of amounts sufficient to
bring them back to their original capital ratio.

How should the P30,000 paid by GG be divided between PP and CC?

a. PP, P9,825; CC, P20,175. c. PP, P10,000; CC, P20,000
b. PP, P15,000; CC, P15,000. d. PP, P9,300; CC, P20,700

3. The estate administrator of D Corporation, which is undergoing

liquidation, reported the following:
Total free assets P 100,000
Total assets pledged to fully secured debt 80,000
Total assets pledged to partially secured debt 40,000
Priority liabilities 30,000
Fully secured debt 60,000
Partially secured debt 50,000
Unsecured debt without priority 110,000

If the assets were sold at net realizable values, how much shall
partially secured creditors receive?
a. P37,500 c. P32,500
b. P47,500 d. P42,500

4. The administrator of Sunji, Inc. which was forced into a bankruptcy

proceeding, reported the following after 6 months of liquidation:

Assets to be realized P 1,000,000

Assets acquired 200,000
Assets realized 400,000
Assets not realized 700,000
Liabilities to be liquidated 1,100,000
Liabilities assumed 150,000
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Northern CPAR: Practical Accounting II – FINAL PRE-BOARD EXAMINATION
Liabilities liquidated 450,000
Liabilities not liquidated 800,000
Supplementary debits 200,000
Supplementary credits 300,000

At the start of liquidation, Sunji, Inc. has P50,000 capital deficiency.

What is the ending balance of cash?
a. P40,000 c. P60,000
b. P50,000 d. P70,000

5. Agency J of the Government has the following data during the year:

Allotments and NCAs received P 4,000,000

Total cash expenses 3,000,000
Depreciation expenses 200,000
Capital expenditures (purchases of fixed assets) 800,000

Agency J should report net operating surplus of

a. P 200,000 c. P 600,000
b. P 400,000 d. P 800,000

6. An option has a fair value of P100,000 in an organized option market on

December 31, 2010. The put option was for 100 kilos of gold for P40,000 a
kilo. As of that date, gold sells P39,800 a kilo. The intrinsic value of
the option as of December 31, 2010 is
a. P 0. c. P80,000.
b. P 20,000. d. P99,800.

7. Environ is a non-profit charitable institution. During 2010, it recorded

the following transactions:
 Receipt of P1,000,000 donation from a donor who specified that the sum
shall be used for building acquisition
 Receipt of specialized equipment from a donor worth P400,000
restricted for research
 Receipt of P300,000 from another non-profit institution which
stipulates that the donation shall not be used until 2012
 Receipt of P200,000 from a donor who stipulated that it is to be used
for interest payment on Environs unpaid plant loan
 Receipt of P1,000,000 unrestricted grants from various donors which
the Board of Trustees restricted for operational expenses
 Total expenses, P800,000 broken down as: P600,000 program expenses and
P200,000 support expenses which is includes P20,000 interest expense
paid from the P200,000 grant.
 Equipments with book value of P300,000 were sold for P350,000

The net change in unrestricted net asset during 2010 is

a. P270,000 increase c. P250,000 increase
b. P220,000 increase d. P780,000 decrease

8. The net cash provided by financing activities is

a. P1,500,000 inflow c. P1,900,000 inflow
b. P1,850,000 inflow d. P2,250,000 inflow

The following problem applies for Number 9 through 11:

9. Bright hedges a forecasted purchase transaction using a call option
acquired at P200,000 on November 1, 2009. The option gives Bright the
right to purchase 1,000 kilos of gold for P40,000/kilo. The option
expires January 30, 2010. Bright designated the intrinsic value of the
option as hedge of the forecasted purchase transaction. The gold and the
option and were quoted in their respective markets as follows:

Gold price/kilo Option

November 1, 2009 P 40,000 P 200,000
December 31, 2009 P 40,500 P 600,000
January 30, 2010 P 40,800 P 800,000

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NCPAR…driven for real excellence! P2 by Rex B. Banggawan, CPA, MBA P2 – 5 Batch – PB03
Northern CPAR: Practical Accounting II – FINAL PRE-BOARD EXAMINATION
Bright purchased 1,100 kilos of gold on January 30, 2010 and resold 660
kilos for P42,000/kilo in 2010. The mount of gain or loss related to the
option to be presented in the statement of other comprehensive income for
2010 is
a. P 400,000 c. P 200,000
b. P 300,000 d. P 800,000

10. What is the income effect of the option in the 2010 profit or loss?
a. P380,000 increase c. P480,000 increase
b. P280,000 increase d. P100,000 decrease

11. What is the adjusted cost of goods sold in 2010?

a. P26,928,000 c. P26,548,000
b. P26,448,000 d. P27,408,000

12. Petroenergy forecasted to purchase 1,000,000 barrels of oil on January

1, 2010. On January 1, 2008, Petroenery entered into a futures contract
to purchase 1,000,000 barrels of oil for P6,000 per barrel on January 1,
2011. On December 31, 2008 and December 31, 2009, the price of a barrel
of oil is P6,100 and P6,150, respectively. Assume that the relevant
discount rate is 10%.

Compute the value of the futures contract on December 31, 2008.

a. P0 c. P82,644,628
b. P100,000,000 d. P90,909,091

13. Compute the gain/loss on futures contract in equity on December 31,

2009.
a. P0 c. P136,363,636
b. P50,000,000 d. P150,000,000

14. On December 1, 2010, Pines sold various merchandise to a foreign

customer on account for $100,000 n/60. The following were the relevant
exchange rates to the dollar:

December 1, 2010 P 50
December 31, 2010 P 48
January 31, 2011 P 52
Which statement is incorrect?
a. Pines should report P200,000 forex loss as of December 31, 2010
b. Pines should report P400,000 forex gain as of December 31, 2011
c. Pines should report P4,800,000 receivables as of December 31, 2010
d. Pines should receive P5,000,000 on settlement

15. AA operates a wholly owned subsidiary in a foreign country whose

functional currency is Yen. At the end of 2010, the subsidiary reports
Y10,000,000 in assets, P4,500,000 in liabilities and P3,000,000 in issued
equity. Accumulated profits increased by Y1,500,000 with a profit of
Y2,000,000 and dividends of Y500,000 made at the middle of the year. The
following may be relevant in translating the financial statements of the
foreign subsidiary:
Historical rates P1:Y2.3
January 1, 2010 P1:Y2.2
2010 average P1:Y2.1
December 31, 2010 P1:Y2.0

Compute the translated shareholder’s equity of the foreign subsidiary as

of December 31, 2010.
a. P2,750,000 c. P7,500,000
b. P5,500,000 d. P11,000,000

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NCPAR…driven for real excellence! P2 by Rex B. Banggawan, CPA, MBA P2 – 5 Batch – PB03
Northern CPAR: Practical Accounting II – FINAL PRE-BOARD EXAMINATION
16. Hyper Corporation which operates in a hyperinflationary environment
has the following accounts:

Land CU
2,000,000
Mortgage receivable 2,000,000
Financial asset at fair value through 3,000,000
profit or loss

The land was acquired on January 1, 2008 and the mortgage was
initially recognized in the balance sheet on January 1, 2009. The
financial asset at fair value through profit or loss was acquired on
the mid-half of 2009.
Index Exchange
rates
January 1, 2008 100 CU 1,000/P1
January 1, 2009 240 CU 2,000/P1
2009 average 400 CU 2,400/P1
December 31, 2009 500 CU 2,500/P1

Compute the total amount to be reported for the above accounts in the
restated balance sheet as of December 31, 2009.
a. P15,333,333 c. P6,133,333
b. P15,000,000 d. P15,750,000

17. The translated total amount of the above accounts in the translated
balance sheet as of December 31, 2009 is
a. P6,133.333 c. CU15,750,000
b. P6,000.000 d. CU15,333,333

18. The comparative equity section of the balance sheet of Ruselle

Company, a foreign subsidiary, is shown below:
12/31/2009 12/31/2009 12/31/2010
(unstranslated) (Translated) (unstranslated)
Ordinary shares $ 1,000,000 P 50,000,000 $ 1,000,000
Share premium 400,000 17,200,000 400,000
Accumulated profit 200,000 10,200,000 300,000
$ 1,600,000 P 77,400,000 $ 1,700,000

During 2010, Russelle reported P400,000 profit. Dividends were declared

on December 15, 2009. The following exchange rates between the dollar ($)
and Peso, the reporting currency, were compiled:
December 31, 2010 P 48.00
December 15, 2010 48.50
2010 average 49.00

Compute the 12/31/2010 balance of Translation adjustment gain or loss.

a. P1,550,000 gain c. P850,000 loss
b. P1,050,000 loss d. P850,000 gain

19. First Rate, Inc. acquired Excellence, Inc. through equity swap
resulting in First Rate acquiring whole of the 1,000,000 ordinary shares
of Excellence by issuing 800,000 of its previously unissued ordinary
shares. The equity of First Rate and Excellence show the following before
combination:
First Rate Excellence
Ordinary shares, P10 par P 4,000,000 P10,000,000
Share premium 3,000,000 4,000,000
Accumulated profit 2,000,000 2,000,000

The net assets of both First Rate, Inc. and Excellence approximate fair
values and their shares were both trading at P20 per share at the date of
acquisition. What amount of goodwill should be reported on the
consolidated balance sheet at the date of acquisition?
a. P 0 c. P1,000,000
b. P 500,000 d. P1,200,000

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NCPAR…driven for real excellence! P2 by Rex B. Banggawan, CPA, MBA P2 – 5 Batch – PB03
Northern CPAR: Practical Accounting II – FINAL PRE-BOARD EXAMINATION
20. On January 1, 2008, Hexagon acquired 80% of Octagon in a purchase
business combination. Hexagon paid P2,400,000 in the purchase of 80%
interest. Octagon’s book value of net assets were P2,500,000. The excess
of cost over book value acquired is attributed to undervalued equipment
with a 5 year remaining useful life. Octagon reported P400,000 and
P200,000 profits in 2008 and 2009, respectively. Octagon also declared
P300,000 dividends during 2008 and 2009. What amount should be reported
as non-controlling interest in net assets as of December 31, 2009?
a. P2,160,000 c. P2,360,000
b. P2,320,000 d. P2,450,000

21. On May 1, 2008, Investor acquired 8,000 of the 10,000 outstanding

shares of Investee for a total price of P960,000. During 2008, Investor
received the following dividends:

Date declared Date paid Dividends per share

April 15, 2008 May 15, 2008 P4 per share
October 15, 2008 November 15, 2008 P8 per share

Investee reported P50,000 net income for the year ended December 31,
2008. P20,000 of these were earned in the first quarter of 2088. How much
dividend income should Investor present in its 2008 separate financial
statements?
a. P 0 c. P 64,000
b. P 40,000 d. P 96,000

22. Pater holds 40% interest in Lad, a jointly controlled entity. The
income statement of Pater and Lad is presented below:

Pater Lad
Sales P 1,500,000 P1,000,000
Cost of sales 700,000 600,000
Administrative expenses 200,000 100,000
Selling expenses 200,000 200,000
Profit 400,000 100,000

Lad sold Pater goods costing P200,000 for P250,000. 2/5 of these remained
unsold by Pater as of December 31, 2009. What should Pater and Lad
reports as consolidated cost of sales using proportional consolidation?
a. P832,000 c. P848,000
b. P846,000 d. P860,000

The following applies for Numbers 21 and 22:

23. On January 1, 2008, Pyrite acquired 60% of the net assets of Copper.
The acquisition cost of Pyrite included a P240,000 premium which is
allocated as follows:
 Inventory P 60,000
 Building (10-year rem. life) 120,000
 Land 60,000

On July 1, 2008, Pyrite sold an item of equipment to Copper at a gain of

P100,000. This equipment is depreciated by Copper over a 4 year useful
life. Copper also sold Pyrite various goods costing P200,000 at a gross
profit of 20%. 40% of these remained in the inventory of Pyrite as of
December 31, 2009. Pyrite and Copper reported profits of P400,000 and
P300,000, respectively. Both Pyrite and Copper uses FIFO method for
inventories and straight line method for fixed asset depreciation.

Compute the 2009 consolidated net income.

a. P 580,500 c. P 689,000
b. P 668,000 d. P 693,000

24. Compute the 2009 non-controlling interest in net income.

a. P 83,200 c. P 107,200
b. P105,600 d. P 112,000

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Northern CPAR: Practical Accounting II – FINAL PRE-BOARD EXAMINATION
25. The records of Titanium Home office and its Baguio Branch for 2009 is
shown below:
Home Baguio
Office Branch
Beginning inventory P 60,000 P 25,000
Purchases 250,000 60,000
Shipments to branch 80,000 -
Mark-up on branch inventory 22,000 -
Shipments from home office - 80,000
Ending inventory 40,000 20,000

Effective January 1, 2009, Titanium home office began billing its Baguio
branch 25% above cost. The ending inventory of the home office and the
branch did not include P12,000 and P8,000 merchandise, respectively,
which were held out by consignees. P5,000 of the branch beginning
inventory were purchased externally. Half of the branch ending inventory
per count plus those held by consignees are purchased externally.

What is the billing rate on cost of the home office on 2008 shipments to
the branch?
a. 10.00% d. 12.50%
b. 11.11% d. 12.00%

26. What is the combined cost of goods sold for 2009?

a. P315,000 c. P299,000
b. P342,000 d. P325,000

27. Hallway, a customer of Corridor Trading, had an account balance of

P82,500 when the generator he purchased from the latter was repossessed.
The generator was previously sold to him by Corridor for P137,500 on
installment at a gross profit of 40%. Assuming the repossessed generator
had an appraised value of P44,550, what will be the gain (loss) to be
recognized by Corridor upon repossession?
a. (P22,770) c. (P4,950)
b. P11,550 d. (P37,950)

28. On January 3, 2009, Goldi licensed Fishy to operate its franchise for
P5,000,000. Fishy made a 20% downpayment and submitted a P4,000,000 9%-
note payable in four annual installments of P1,000,000, inclusive of
interest, every December 31. It was further agreed that Goldi charges
additional 5% franchise fee on Fishy’s monthly sales. Fishy reported
P1,000,000 and P1,500,000 sales in November and December, respectively.
What should Goldi report as total franchise revenue during 2009?
a. P5,125,000 c. P5,485,000
b. P4,364,720 d. P4,656,295

29. Pioneer Construction accepted a contract with a cost escalation

clause. Construction data were as follows:

2009 2010
Contract price P 900,000 P 1,080,000
Cost incurred 200,000 600,000
Estimated cost to complete 400,000 100,000

Using percentage of completion cost to cost-input measure, the gross

profit in 2010 is
a. P160,000 c. P74,429
b. P 60,000 d. P225,714

30. On July 1, 2009, Heart Company signed an agreement to operate as a

franchisee of the Lung Corporation for an initial franchise fee of
P120,000. The same date, Heart paid P40,000 and agreed to pay the balance
in four equal annual payments of P20,000 beginning July 1, 2010. The
collectability of the balance is reasonably assured and no future
services are required of the franchisor. Heart can borrow at 14% for a
loan of this type.

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Northern CPAR: Practical Accounting II – FINAL PRE-BOARD EXAMINATION
Present value factors are as follows:
Present value of 1 at 14% for 4 periods 0.59
Future amount of 1 at 14% for 4 periods 1.69
PV of an ordinary annuity of 1 at 14% for 4 periods 2.91

What total revenue from the franchise should Lung Corporation record for
the year ended December 31, 2009?
a. P102,274 c. P98,200
b. P101,251 d. P40,000

31. On March 1, 2008, Maxi Chicken entered into a franchise agreement with
four franchisees, Zola, Jobilly, Donald and Joliville. The standard
franchising contract of Maxi Chicken requires an initial franchise fee of
P200,000. A 40% downpayment is required and the balance is payable in
eight quarterly installments. The following table summarizes the data
pertaining to each franchise:
Services
Probability performed as Total costs
Franchisee of full of 12/31/2008 incurred
collection
Zola Doubtful 30% P 30,000
Jobilly Likely Substantial 90,000
Donald Doubtful Substantial 95,000
Joliville Likely 40% 40,000
Assuming that very minimal services are required of Zola for Jobilly and
Donald, compute the amount of revenue to be recognized by Maxi Chicken
for 2008.
a. P 110,000 c. P400,000
b. P 270,000 d. P310,000

32. Supreme Construction expects to complete its P1,500,000 fixed price

contract at a total cost of P1,250,000. This cost estimate is inclusive
of P750,000 previously incurred. The additional P500,000 cost is expected
to bring the remaining 40% construction activities into completion. Using
the percentage of completion-output method, what should be the balance of
the Construction in Progress (CIP) account?
a. P1,350,000. c. P900,000
b. P1,400,000 . d. P850,000

33. The records of Benedict, Inc. which uses installment accounting shows
the following:
2009 2010
Installment notes receivable P 100,000 P 80,000
Discounts 24,184 16,603
Deferred gross profit 18,954 ??
How much total income is recognized in 2010?
a. P 5,000 c. P 3,105
b. P 12,581 d. P10,686

34. SEndo sold certain equipments costing P100,000 at 60% mark-up above
cost. Term of the sale requires 20% downpayment and 8 monthly
installments. SEndo accounts for this sale using the installment method.
The buyer subsequently defaulted on the third payment. Sendo repossessed
the equipment which now has fair value of P72,000 after reconditioning
cost of P2,000. The gain on repossession is
a. P10,000 c. P20,000
b. P12,000 d. P22,000

35. Ohm sold a specialized machine for P300,000 at a mark-up of 50% above
cost. A trade-in was accepted as a downpayment and was allowed a trade-in
value of P50,000. The balance was payable in five semi-annual
installments starting June 6, 2009. Ohm uses the installment method to
account for the sale. Assuming that the trade-in has a fair value of
P70,000, compute the realized gross profit as of December 31, 2009.
a. P28,570 c. P37,500
b. P32,284 d. P45,000

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Northern CPAR: Practical Accounting II – FINAL PRE-BOARD EXAMINATION
36. Roger Corporation accumulated the following cost information for its
two products, A and B:
A B Total
Production volume 2,000 1,000
Total direct man. labor hrs. 5,000 20,000 25,000
Setup cost per batch P 1,000 P 2,000
Batch size 100 50
Total setup costs incurred P20,000 P40,000 P60,000
DMLH per unit 2 1

A traditional costing system would allocate setup costs on the basis of

direct manufacturing labor hours (DMLH). An ABC system would trace costs
by spreading the costs per batch over the units in a batch. What is the
setup cost per unit of product A under each costing system?
Traditional ABC
a. P 4.80 P 10.00
b. P 2.40 P 10.00
c. P40.00 P200.00
d. P 4.80 P 20.00

37. Exxon sets its normal capacity at 100,000 hours. For 2010, Exxon
estimates an expected capacity of 80,000 hours. At normal capacity, Exxon
budgeted the following manufacturing overheads:
Total fixed overhead P 4,000,000
Total variable overhead 8,000,000
Total factory overhead P 12,000,000
During 2010, Exxon’s actual production was 86,000 hours with actual
factory overhead of P11,500,000. What would have been the total factory
overhead variance if the FOH application rate was based on expected
capacity?
a. P 320,000 under c. P1,180,000 over
b. P 320,000 over d. P1,180,000 under

38. Worley Company has underapplied overhead of P45,000 for the year ended
December 31, 2010. Before disposition of the underapplied overhead,
selected December 31, 2010 balances from Worley’s accounting records are
as follows:
Sales P 1,200,000
Cost of goods sold 720,000
Inventories:
Direct materials 36,000
Work in process 54,000
Finished goods 90,000
The underapplied overhead is deemed material by management. In its 2010
income statement, Worley should report cost of goods sold of
a. P682,500 c. P756,000
b. P684,000 d. P757,500

39. Asus Manufacturing uses a process cost system to manufacture laptop

computers. The following information summarizes operations relating to
laptop computer model Krazee during the quarter ending March 31:
Units Direct Materials
Work in process inventory, January 1 100 P 50,000
Started during the quarter 500
Completed during the quarter 400
Work in process inventory, March 31 200
Costs added during the quarter P 720,000
Beginning work in process inventory was 50% complete for direct
materials. Ending work in process inventory was 75% complete for direct
materials. What is the total value of material costs in ending work in
process inventory using the FIFO unit cost inventory valuation method?
a. P183,000 c. P210,000
b. P194,000 d. P216,000

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Northern CPAR: Practical Accounting II – FINAL PRE-BOARD EXAMINATION
40. The Forming Department is the first of a two-stage production process.
Spoilage is identified when the units have completed the Forming process.
Costs of spoiled units are assigned to units completed and transferred to
the second department in the period spoilage is identified. The following
information concerns Forming’s conversion costs in May 2003:
Units Conversion costs
Beginning work in process (50% complete) 2,000 P 10,000
Units started during May 8,000 75,500
Spoilage—normal 500
Units completed and transferred 7,000
Ending work in process (80% complete) 2,500
Using the weighted-average method, what was Forming’s conversion cost
transferred to the second production department?
a. P59,850 c. P67,500
b. P64,125 d. P71,250

41. Tarzan Company employs a job order cost system. Its manufacturing
activities in July 2008, its first month of operation, are summarized as
follows:
JOB NUMBERS
1201 1202 1203 1204
Direct materials P7,000 P5,800 P11,600 P5,000
Direct labor cost 6,600 6,000 8,400 2,400
Direct labor hours 1,100 1,000 1,400 400
Units produced 200 100 1,000 300

Manufacturing overhead is applied at rate of P2 per direct labor hour for

variable overhead, P3 per hour for fixed overhead.

Jobs 1201, 1202 and 1203 were completed in July.

What is the cost of the uncompleted jobs?

a. P62,900 c. P9,400
b. P62,500 d. P9,500

42. Elaine Co. produces main products Kul and Wu. The process also yields
by-product Zef. Net realizable value of by-product Zef is subtracted from
joint production cost of Kul and Wu. The following information pertains
to production in July 2003 at a joint cost of P54,000:
Product Units produced Market value Additional cost after split-off
Kul 1,000 P40,000 P 0
Wu 1,500 35,000 0
Zef 500 7,000 3,000
If Lane uses the net realizable value method for allocating joint cost,
how much of the joint cost should be allocated to product Kul?
a. P18,800 c. P26,667
b. P20,000 d. P27,342

43. SLUCB College allocates support department costs to its individual

schools using the step method. Information for May 2010 is as follows:
Support departments
Maintenance Power
Costs incurred P 99,000 P 54,000
Service percentages provided to:
Maintenance -- 10%
Power 20% --
School of Accountancy 30% 20%
School of Technology 50% 70%
100% 100%
What is the amount of May 2010 support department costs allocated to the
School of Accountancy?
a. P40,500 c. P46,100
b. P42,120 d. P49,125

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Northern CPAR: Practical Accounting II – FINAL PRE-BOARD EXAMINATION
44. Paradox Manufacturing produces monoblock chairs on order. An order for
1,000 chairs of a particular design was received from a customer and was
tagged as Job BC12-1000. The chairs were processed in batches of 100
units because of capacity constraints. Materials are added at the start
then processed to completion. When the third batch was at 40% processing,
the customer changed the specifications of the order. The total
accumulated costs of Job BC12-1000 before the change were:

Direct materials P 24,000

Direct labor 21,600
Applied factory overhead 17,280
P 62,880

The third batch were reworked to meet the new specification at a total
direct labor of P12,000. The first two batches cannot be reworked and are
treated as spoiled. However, they can be sold at P150 per chair.

Paradox applies factory overhead based on direct labor costs. Soledad

completed the 900 remaining chairs at an average cost of P250 per chair.

What is the compound entry to record the spoilage and rework of Job BC12-
1000?
a. Spoilage goods inventory 30,000
Payroll (direct labor) 12,000
Applied factory overhead 18,000
b. Spoilage goods inventory 30,000
Payroll (direct labor) 12,000
Applied factory overhead 9,600
Work in process 8,400
c. Spoilage goods inventory 30,000
Payroll (direct labor) 12,000
Work in process 18,000
d. None of these.

45. What is the total cost of Job BC12-1000?

a. P243,840 c. P253,440
b. P238,480 d. P279,480

46. Dong uses process costing. It applies materials as follows: 20% at 30%
of processing, 30% at 50% of processing and 50% at 80% of processing.
Dong inspects at two points: at 40% of processing and at 75% of
processing. The following schedules shows an analysis of the flow of
processed units:

Beginning units (90% complete) 200,000

Started into process 800,000
Units transferred out 600,000
Ending units (60% incomplete) 200,000
Spoilage at 1st inspection point 150,000
Spoilage at 2nd inspection point 50,000

Using First-in, First-out method, what is the equivalent unit of

production for materials?
a. 495,000 c. 755,000
b. 555,000 d. 855,000

47. Information concerning Department II of Texas Instruments, Inc. is as

follows:

Units Cost Transfer In Materials Conversion Total Cost

Work in process, beg. 5,000 P 6,300 P 2,900 P P 3,400 P 6,300
Units transferred in 35,000 58,000 17,500 25,500 15,000 58,000
40,000 P64,300 P20,400 P25,500 P18,400 P64,300
Units completed 37,000
Work in process, end 3,000

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NCPAR…driven for real excellence! P2 by Rex B. Banggawan, CPA, MBA P2 – 5 Batch – PB03
Northern CPAR: Practical Accounting II – FINAL PRE-BOARD EXAMINATION
Conversion costs were 20% complete as to the beginning work in process
and 40% complete as to the ending work in process. All materials are
added at the end of the process. Simon Co. uses the weighted average
method.

The total of transferred in costs in the ending inventory is

a. P0 c. P1,530
b. P1,500 d. P1,650

48. The following relates to the production process of ABC Manufacturing

which uses weighted average process costing:
Units at the start of the year (40% processed) 100,000
Units transferred in 500,000
Units at the end of the process (60% processed) 200,000

ABC Manufacturing has two inspection points. The following spoiled

units were identified at each inspection point:
Inspection point A (at 20% of processing) 20,000
Inspection point B (at 75% of processing) 10,000
Assuming direct materials is added at the start of the process,
compute for the equivalent units of production of conversion costs.
a. 370,000 c. 501,500
b. 381,500 d. 461,500

49. Zircon Manufacturing Company manufactures its product in two

departments. It applies raw materials when at 50% processing in
Department A while materials is applied gradually in Department B. The
following summarizes the operations of the two departments during
February:
Department A Department B
Units in beginning inventory 30,000 10,000
Units started or transferred in 120,000
Units in ending inventory 20,000 40,000

Percentage of completion of the beginning and closing inventories of

both department is as follows:
Department A Department B
Beginning inventory 40% 15%
Ending inventory 30% 80%
A normal shrinkage of 10% occurs at 20% of processing in Department A.
Assuming that Zircon Manufacturing Company uses FIFO method, compute
for the equivalent units of production for material at Department A
and Department B, respectively.
a. 118,000; 148,500 c. 130,000; 160,500
b. 108,000; 138,500 d. 130,000; 150,500

50. Asian Furniture Company manufactures two joint products and it uses
the net realizable value method for allocating joint costs. Product A
sells for P30 while Product B sells for P60. Joint costs for June, 2001
were:
Materials P 30,000
Direct labor 15,000
Factory overhead 10,000
Further processing costs after the split-off point in order to finish the
products into their final form amounted to P24,000 for Product A and
P36,000 for Product B. The total units produced during the month were
2,000 for Product A and 1,000 for Product B.

The amount of joint costs allocated to Product A was:

a. P33,000 c. P22,000
b. P27,500 d. P36,000

---- End of Examination ----

11
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NCPAR…driven for real excellence! P2 by Rex B. Banggawan, CPA, MBA P2 – 5 Batch – PB03