MIDTERM EXAMINATION

FINANCIAL ACCOUNTING 1

NAME: SCORE:
PROFESSOR: DATE:

INSTRUCTIONS: WRITE YOUR FINAL ANSWER AT THE END PAGE OF EXAM.

STRICTLY NO ERASURES. PLEASE PROVIDE SOLUTIONS AS NECESSARY.
GOODLUCK!

Walkaway Company started business at the beginning of the current

year. The entity established an allowance for bad debts estimated at
5% credit sales. During the year, the entity had written off P25,000
of uncollectible accounts. Analysis of the accounts showed that
merchandise purchased in the current year amounted to P4,500,000 and
ending merchandise inventory was P750,000. Goods were sold at 40%
above cost. Sales on account amounted to 80% of total sales. Total
collections from customers, excluding cash sales amounted to
P3,000,000.

1. What is the cost of goods sold?

a. 3,750,000
b. 4,500,000
c. 2,700,000
d. 2,250,000

2. What is the balance of accounts receivable at year-end?

a. 1,175,000
b. 1,200,000
c. 2,225,000
d. 990,000

3. What is the balance of allowance for doubtful accounts at year-end?

a. 210,000
b. 185,000
c. 262,500
d. 237,500

Colossal Company provided the following transactions affecting

accounts receivable during the year ended Dec. 31, 2015:

Sales (cash and credit) 5,900,000

Cash received from credit customers, all
of whom took advantage of the discount
 feature of the entity’s credit
terms 4/10, n/30 3,024,000
Cash received from cash customers 2,100,000
Accounts receivable written off as worthless 50,000
Credit memorandum issued to credit customers
for sales returns and allowances 250,000
Cash refunds given to cash customers for
Sales returns and allowances 20,000
Recoveries on accounts receivable written
off as uncollectible in prior periods
(not included in cash amount stated above) 80,000
The following balances were taken from the Jan. 1, 2015 statement of
financial position:

Accounts Receivable 950,000

Allowance for bad debts 90,000

The entity provided for net uncollectible account losses by crediting

allowance for bad debts for 2% of net credit sales for the current
period.

4. What is the balance of accounts receivable on December 31, 2015?

a. 1,300,000
b. 1,426,000
c. 1,280,000
d. 1,220,000

5. What is the balance of allowance for bad debts after adjustment on

December 31, 2015?
a. 120,000
b. 188,480
c. 108,480
d. 188,080

From inception of operations, Omnipotent Company provided for

uncollectible accounts expense under the allowance method using the
percentage of sales method. No year-end adjustments to the allowance
account were made.

The balance in the allowance for doubtful accounts was P330,000 on

January 1, 2015.

During the current year, credit sales totalled P20,000,000, interim

provisions for doubtful accounts were made at 3% of credit sales,
P100,000 of bad debts were written off, and recoveries of accounts
previously written off amounted to P20,000.

An aging of accounts receivable was made for the first time on

December 31, 2015.

Aging Balance Uncollectible

0 – 60 4,000,000 5%
61 – 180 1,500,000 10%
181 – 360 1,000,000 25%
Over 360 550,000 80%
Based on the review of collectability of the account balances in the
“over 360 days” aging category, additional accounts totalling P50,000
are to be written off on December 31, 2015.

Effective with the year ended December 31, 2015, the entity adopted
the new accounting method for estimating the allowance for doubtful
accounts at the amount indicated by the year-end aging of accounts
receivable.

6. What is the year-end adjustment to the allowance for doubtful

accounts on December 31, 2015?
a. 1,000,000
b. 800,000
c. 600,000
d. 200,000

Persevere Company is a dealer in equipment. On December 31, 2015, the

entity sold equipment in exchange for a noninterest bearing not
requiring give annual payments of P500,000. The first payment was made
on December 31, 2016.

The market interest rate for similar notes was 8%. The relevant
present value factors are:

PV of 1 at 8% for 5 period 0.68

PV of an ordinary annuity of 1 at 8% for 5 periods 3.99

7. On December 31, 2015, what is the carrying amount of note

receivable?
a. 2,500,000
b. 1,995,000
c. 1,700,000
d. 1,495,000
8. What amount of interest income should be reported for 2016?
a. 505,000
b. 101,000
c. 159,600
d. 119,600

9. What is the carrying amount of the note receivable on December 31,

2016?
a. 1,645,600
b. 2,145,600
c. 2,000,000
d. 1,495,000

On December 31, 2015, Flirt Company sold for P3,000,000 an old

equipment having an original cost of P5,400,000 and carrying amount of
P2,400,000. The terms of the sale were P600,000 down payment and
P1,200,000 payable on December 31 of the next two years. The sale
agreement made no mention of interest. However, 9% would be a fair
rate for this type of transaction. The present value of an ordinary
annuity of 1 at 9% for two years is 1.76.

10. What is the interest income for 2016?

a. 216,000
b. 190,080
c. 108,000
d. 106,000

11. What is the carrying amount of the note receivable on December 31,
2016?
a. 1,200,000
b. 1,102,080
c. 2,302,080
d. 1,009,920

Immoderate Bank granted a loan to a borrower on January 1, 2015. The

interest on the loan is 10% payable annually starting December 31,
2015. The loan matures in three years on December 31, 2017.

Principal amount 5,000,000

Direct origination cost incurred 100,000
Indirect origination cost incurred 50,000
Origination fees charged against the borrower 340,000
After considering the origination fee charged against the borrower and
the direct origination cost incurred, the effective rate on the loan
is 12%.

12. What is the carrying amount of the loan receivable on January 1,

2015?
a. 4,760,000
b. 5,000,000
c. 4,810,000
d. 4,660,000

13. What is the interest income for 2015?

a. 571,200
b. 500,000
c. 476,000
d. 547,200

14. What is the carrying amount of the loan receivable on December 31,
2015?
a. 5,000,000
b. 4,760,000
c. 4,831,200
d. 4,910,944

On December 31, 2015, Oregon Bank recorded an investment of P5,000,000

in a loan granted to a client. The loan has a 10% effective rate
payable annually every December 31. The principal is due in full at
maturity on December 31, 2018. Unfortunately, the borrower is
experiencing significant financial difficulty and will have a
difficult time in making full the payment. The bank projected that the
entire principal will be pain at maturity and 4% interest or P200,000
will be paid annually on December 31 of the next three years. There is
no accrued interest on December 31, 2015. The present value of 1 at
10% for three periods is 0.75, and the present value of an ordinary
annuity of 1 at 10% for three periods is 2.49.

15. What is the impairment loss for 2015?

a. 752,000
b. 600,000
c. 250,000
d. 748,000

16. What is the interest income for 2016?

a. 200,000
b. 424,800
 c. 224,800
d. 500,000

17. What is the carrying amount of the loan receivable on December 31,
2016?
a. 5,000,000
b. 3,750,000
c. 4,472,800
d. 4,672,800

On December 31, 2015, London Bank granted a P5,000,000 loan to a

borrower with 10% stated rate payable annually and maturing in 5
years. The loan was discounted at the market interest rate of 12%.
Unfortunately, the financial condition of the borrower worsened
because of lower revenue. On December 31, 2017, the bank determined
that the borrower would pay back only P3,000,000 of the principal at
maturity. However, it was considered likely that interest would
continue to be paid on the P5,000,000 loan. The present value of 1 at
12% is .57 for five periods and .71 for three periods. The present
value of an ordinary annuity of 1 at 12% is 3.60 for five periods and
2.40 for three periods.

18. What is the amount of cash paid to the borrower on December 31,
2015?
a. 4,400,000
b. 4,500,000
c. 5,000,000
d. 4,650,000

19. What is the carrying amount of the loan receivable on December 31,
2017?
a. 4,650,000
b. 4,790,000
c. 4,772,960
d. 4,720,000

20. What is the impairment loss on loan receivable to be recognized

for 2017?
a. 2,000,000
b. 1,442,960
c. 1,922,960
d. 1,670,000

On December 1, 2015, Solvent Company assigned specific accounts

receivable totalling P5,000,000 as collateral on a P4,000,000 12% note
from a certain bank. The entity will continue to collect the assigned
accounts receivable. In addition to the interest on the note, the bank
also charged a 5% finance fee deducted in advance on the assigned
accounts. The December collections of assigned accounts receivable
amounted to P2,000,000 less cash discount of P200,000. On December 31,
2015, the entity remitted the collections to the bank in payment for
the interest accrued on December 31, 2015 and the note payable. The
entity accepted sales returns of P100,000 on the assigned accounts and
wrote off assigned accounts of P300,000.

21. What amount of cash was received from the assignment of accounts
receivable on December 1, 2015?
a. 4,000,000
b. 3,800,000
c. 4,750,000
d. 3,750,000

22. What is the carrying amount of note payable on December 31, 2015?
a. 1,840,000
b. 2,140,000
c. 2,240,000
d. 2,200,000

23. What amount should be disclosed as the equity of Solvent Company

in assigned accounts on December 31, 2015?
a. 260,000
b. 400,000
c. 360,000
d. 760,000

24. On July 1, 2015, Karma Company sold equipment to a customer for

P1,000,000. The entity accepted a 10% note receivable for the entire
sale price. This note is payable in two equal annual instalments of
P500,000 plus accrued interest on December 31, 2015 and December 31,
2016. On July 1, 2016, the entity discounted the note at a bank at an
interest rate of 12%. What is the amount received from the discounting
of note receivable?
a. 484,000
b. 493,500
c. 503,500
d. 517,000

25. On August 1, 2015, Obstacle Company’s P1,000,000 one-year,

noninterest-bearing own note due July 31, 2016 was discounted at the
bank at 10.8%. The entity used the straight line method of amortizing
discount. What is the carrying amount of the note payable on December
31, 2015?
a. 1,000,000
b. 995,000
c. 937,000
d. 892,000

26. Apex Company accepted from a customer P1,000,000 face amount, 6-

month, 8% note dated at the beginning of current year. On the same
date, Apex discounted the not with recourse at the bank at a 10%
discount rate. The discounting is accounted for as a secured
borrowing. What is the interest expense to be recognized on the date
of discounting?
a. 50,000
b. 40,000
c. 52,000
d. 12,000

27. Brilliant Company purchased motorcycles from various countries for

export to other countries. The entity has incurred the following costs
during the current year:

Cost of purchases based on vendors’ invoices 5,000,000

Trade discounts on purchases already deducted
from vendors’ invoices 500,000
Import duties 400,000
Freight and insurance on purchases 1,000,000
Other handling costs relating to imports 100,000
Salaries of accounting department 600,000
Brokerage commission paid to agents for
arranging imports 200,000
Sales commission paid to sales agents 300,000
After-sales warranty costs 250,000

What is the total cost of the purchases?

a. 5,700,000
b. 6,100,000
c. 6,500,000
d. 6,700,000

28. A physical count on December 31, 2015 revealed that Joyous Company
had inventory with a cost of P4,410,000. The following items were
excluded from this amount:

 Merchandise of P610,000 is held by Joyous on consignment.

 Merchandise costing P380,000 was shipped by Joyous FOB destination
to a customer on December 31, 2015. The customer was expected to
receive the goods on January 5, 2016.
 Merchandise costing P460,000 was shipped by Joyous FOB shipping
point to a customer on December 29, 2015. The customer was expected
to receive the goods on January 10, 2016.
 Merchandise costing P830,000 shipped by a vendor FOB destination on
December 31, 2015 was received by Joyous on January 15, 2016.
 Merchandise costing P510,000 purchased FOB shipping point was
shipped by the supplier on December 31, 2015 and received by Joyous
on January 5, 2016.

What amount of inventory should be reported on December 31, 2015?

a. 5,300,000
b. 4,690,000
c. 3,800,000
d. 4,920,000

29. Venice Company included the following in inventory on December 31,

2015:

Merchandise out on consignment at sale price,

including 40% mark-up on sales 1,400,000
Goods purchased in transit, shipped FOB
shipping point 1,200,000
Goods held on consignment by Venice 900,000

At what amount should the inventory on December 31, 2015 be reduced?

a. 1,460,000
b. 3,500,000
c. 2,300,000
d. 1,740,000

30. Audacity Company counted the ending inventory on December 31,

2015. The entity reported inventory before any corrections at
P2,000,000. None of the following items were included when the total
amount of the ending inventory was computed:

 P150,000 in goods located in the entity’s warehouse that are on

consignment from another entity.

 P200,000 in goods that were sold by the entity and shipped on

December 30 and were in transit on December 31, 2015.
 The goods were received by the customer on January 2, 2016. Terms
were FOB destination.

 P300,000 in goods that were purchased by the entity and shipped on

December 30 and were in transit on December 31, 2015.

The goods were received by the entity on January 2, 2016. Terms were
FOB shipping point.

 P400,000 in goods that were sold by the entity and shipped on

December 30 and were in transit on December 31, 2015.

The goods were received by the customer on January 2, 2016. Terms

were FOB shipping point.

What amount of inventory should be reported on December 31, 2015?

a. 2,500,000
b. 2,350,000
c. 2,900,000
d. 2,750,000

31. Faith Company reported inventory on hand at year-end valued at a

cost of P950,000. The following items were not included in this
inventory amount:

Item 1: Purchased goods in transit, shipped FOB destination,

invoice price P30,000, which includes freight charge of
P1,500.
Item 2: Goods held on consignment by Faith Company at a sale price
of P28,000, including sales commission of 20% of the sale
price.
Item 3: Goods sold to a customer, under terms FOB destination,
invoiced for P18,500 which includes P1,000 freight charge
to deliver goods. Goods are in transit. The selling price
is 140% of cost.
Item 4: Purchased goods in transit, terms FOB shipping point,
invoice price P50,000, freight cost P2,500.
Item 5: Goods out on consignment to a consignee, sale price
P35,000, shipping cost of P2,000.

What is the adjusted cost of inventory at year-end?

a. 1,042,000
b. 1,043,000
c. 1,040,000
d. 1,073,500
32. Shindig Company is preparing the 2015 year-end financial
statements. Prior to any adjustments, inventory is valued at
P7,600,000. The following information has been found relating to
certain inventory transactions:

 Goods costing P1,000,000 are on consignment with a customer. These

goods are not included in the year-end inventory figure.
 Goods costing P250,000 were received from a vendor on January 4,
2016. The related invoice was received and recorded on January 12,
2016. The goods were shipped on December 31, 2015, terms FOB
shipping point.
 Goods costing P850,000 were shipped on December 31, 2015, and were
delivered to the customer on January 2, 2016. The terms of the
invoice were FOB shipping point. The goods were included in ending
inventory for 2015 even though the sale was recorded in 2015.
 A P350,000 shipment of goods to a customer on December 31, 2014
terms FOB destination, was not included in the year-end inventory.
The goods cost P260,000 and were delivered to the customer on
January 8, 2015. The sale was properly recorded in 2016.
 An invoice for goods costing P350,000 was received and recorded as a
purchase on December 31, 2015. The related goods, shipped FAS, were
in transit on December 31, 2015 and received on January 2, 2016, and
were not included in the physical inventory.
 Goods costing P650,000 are on consignment from a vendor. These goods
are not included in the year-end inventory figure.
 A P1,050,000 shipment of goods to a customer on December 30, 2015,
terms FOB destination, was recorded as a sale in 2015. The goods,
costing P840,000 and delivered to the customer on January 6, 2016,
were not included in the 2015 inventory.

What is the correct inventory on December 31, 2015?

a. 9,100,000
b. 8,100,000
c. 9,950,000
d. 9,450,000

33. Integrity Company submitted an inventory list on December 31, 2015

which showed a total of P5,000,000.

 Excluded from the inventory was merchandise costing P80,000 because

it was transferred to the delivery department for packaging on
December 28, 2015 and for shipping on January 2, 2016.
 The bill of lading and other import documents on a merchandise were
delivered by the bank and the trust receipt accepted by the entity
on December 28, 2015. Taxes and duties have been paid on this
shipment but the broker did not deliver the merchandise until
January 7, 2016. Delivered cost of the shipment totalled P800,000.
This shipment was not included in the inventory on December 31,
2015.
 A review of the entity’s purchase orders showed a commitment to buy
P100,000 worth of merchandise from a supplier. This was not included
in the inventory because the goods were received on January 3, 2016.
 Supplier’s invoice for P300,000 worth of merchandise dated December
28, 2015 was received through the mail on December 30, 2015 although
the goods were in transit on December 31, 2015 and arrived only on
January 4, 2016. Shipment term is CIF. This item was included in the
December 31, 2015 inventory by the entity.
 Goods costing at P20,000 were received from a supplier on December
28, 2015 for approval. The inventory team included this merchandise
in the list but did not place any value on it. On January 4, 2016,
the entity informed the supplier the long distance telephone of the
acceptance of the goods and the supplier’s invoice was received on
January 7, 2016.
 On December 27, 2015, an order of P25,000 worth of merchandise was
placed. This was included in the year-end inventory although it was
received only on January 5, 2016. The seller shipped the goods FOB
destination.

What is the correct inventory on December 31, 2015?

a. 5,855,000
b. 6,155,000
c. 5,555,000
d. 5,830,000

34. Confident Company had the following transactions in 2015:

 The entity sold goods to a customer for P50,000, FOB shipping point
on December 30, 2015.
 The entity sold three pieces of equipment on a contract over a
three-year period. The sale price of each piece of equipment is
P100,000. Delivery of each piece of equipment is on February 10 of
each year. In 2015, the customer paid a P200,000 down payment, and
will pay the P50,000 per year in 2016 and 2017. Collectability is
reasonably assured.
 On January 1, 2015, the entity signed a contract for P200,000 for
goods to be sold on account. Payment is to be made in two
 instalments of P100,000 each on December 1, 2015 and December 1,
2016. The goods are delivered on October 2, 2015. Collection is
reasonably assured, and the goods may not be returned.
 The entity sold goods to a customer on July 1, 2015 for P500,000. If
the customer does not sell the goods to retail customers by December
31, 2016, the goods can be returned. The customer sold the goods to
retail customers on October 1, 2016.

What amount of sales revenue should be reported in 2015?

a. 350,000
b. 850,000
c. 450,000
d. 550,000
Fancy Company is a wholesale distributor of automotive replacement
parts. Initial amounts taken from accounting records on December 31,
2015 are as follows:

Inventory at December 31 based on physical count 1,250,000

Accounts payable 1,000,000
Sales 9,000,000

Additional information:

A. Parts held on consignment from another entity to Fancy Company,

the consignee, amounting to P165,000, were included in the
physical count on December 31, 2015, and in accounts payable on
December 31, 2015.

B. P20,000 of parts which were purchased and paid for in December

2015, were sold in the last week of 2015 and appropriately
recorded as sales of P28,000.

The parts were included in the physical count on December 31,

2015, because the parts were on the loading dock waiting to be
picked up by the customers.

C. Parts in transit on December 31, 2015 to customers, shipped FOB

shipping point, on December 28, 2015, amounted to P34,000.

The customers received the parts on January 6, 2016. Sales of

P40,000 to the customers for the parts were recorded by Fancy
Company on January 2, 2016.
D. Retailers were holding P210,000 at cost and P250,000 at retail,
of goods on consignment from Fancy Company, at their stores on
December 31, 2015.

E. Goods were in transit from a vendor to Fancy Company on December

31, 2015. The cost of goods was P25,000.

The goods were shipped FOB shipping point on December 29, 2015.

35. What is the correct amount of inventory?

a. 1,300,000
b. 1,320,000
c. 1,334,000
d. 1,090,000

36. What is the correct amount of accounts payable?

a. 835,000
b. 960,000
c. 975,000
d. 860,000

37. What is the correct amount of sales?

a. 9,250,000
b. 9,290,000
c. 9,040,000
d. 9,000,000

Quarry Company, a manufacturer of small tools, provided the following

information for the year ended December 31, 2015:

Inventory at December 31 based on physical count 1,750,000

Accounts payable at December 31 1,200,000
Net Sales 8,500,000

Additional information is as follows:

A. Included in the physical count were tools billed to a customer

FOB shipping point on December 31, 2015. These tools had a cost
of P28,000 and were billed at P35,000. The shipment was in
loading dock waiting to be picked up by the common carrier.

B. Goods were in transit from a vendor to Quarry Company on December

31, 2015. The invoice cost was P50,000 and the goods were shipped
FOB shipping point on December 29, 2015.
C. Work in process inventory costing P20,000 was sent to an outside
processor for plating on December 30, 2015.

D. Tools returned by customers and held pending inspection in the

returned goods area on December 31, 2015 were not included in the
physical count. On January 8, 2016, the tools costing P26,000
were inspected and returned to inventory. Credit memos totalling
P40,000 were issued to the customers on the same date.

E. Tools shipped to a customer FOB destination on December 26, 2015,

were in transit on December 31, 2015, and had a cost of P25,000.
Upon notification of receipt by the customer on January 2, 2016,
Quarry Company issued a sales invoice for P42,000.

F. Goods, with an invoice cost of P30,000, received from a vendor at

5:00 P.M. on December 31, 2015, were recorded on a receiving
report dated January 2, 2016. The goods were not included in the
physical count, but the invoice was included in accounts payable
on December 31, 2015.

G. Goods received from a vendor on December 26, 2015 were included

in the physical count. However, the related P60,000 vendor
invoice was not included in accounts payable on December 31, 2015
because the accounts payable copy of the receiving report was
lost.

H. On January 3, 2016, a monthly freight bill in the amount of

P20,000 was received. The bill specifically related to
merchandise purchased in December 2015, one-half of which was
still in the inventory on December 31, 2015. Freight charge was
not included in either the inventory or in accounts payable on
December 31, 2015.

38. What is the correct amount of inventory?

a. 1,883,000
b. 1,911,000
c. 1,885,000
d. 1,925,000

39. What is the correct amount of accounts payable?

a. 1,330,000
b. 1,280,000
c. 1,250,000
d. 1,270,000
40. What is the correct amount of net sales?
a. 8,460,000
b. 8,500,000
c. 8,465,000
d. 8,425,000

41. Mischief Company had 15,000 units of product A on hand at January

1, costing P21 each. Purchases of product A during the month of
January as follows:
Units Unit cost
January 10 20,000 22
18 25,000 23
28 10,000 24

A physical count on January 31 shows 25,000 units of product A on

hand.

What is the cost of the inventory on January 31 under the FIFO method?
a. 585,000
b. 555,000
c. 535,000
d. 525,000

42. Lockout Company revealed the following inventory card on February

28:
Purchase Units Balance
Cost Units used units
Jan. 10 100 2,000 2,000
31 1,000 1,000
Feb. 8 110 3,000 4,000
9 return from factory
(Jan. 10 lot) (100) 4,100
28 1,100 3,000

What is the weighted average cost of the inventory on February 28?

a. 318,000
b. 315,000
c. 312,000
d. 330,000

43. Reality Company recorded the following data pertaining to a raw

material during the month of January:
Units
Date Received Cost Issued On hand
Jan. 1 Inventory 200 8,000
Jan. 8 Issue 4,000 4,000
Jan. 20 Purchase 12,000 240 16,000

What is the moving average unit cost on January 31?

a. 220
b. 224
c. 230
d. 240

44. Celibacy Company provided the following information for the year
ended December 31, 2015:

Inventory, January 1 650,000

Purchases 2,300,000
Purchase returns 80,000
Freight in 60,000
Sales 3,400,000
Sales discounts 20,000
Sales returns 30,000

On December 31, 2015, a physical inventory revealed that the ending

inventory was only P420000. The gross profit on sales has remained
constant at 30% in recent years. The entity suspects that some
inventory may have been pilfered by one of the entity’s employees. On
December 31, 2015, what is the estimated cost of missing inventory?
a. 151,000
b. 165,000
c. 420,000
d. 585,000

45. On September 30, 2015, a fire at Elusive Company’s only warehouse

caused severe damage to the entire inventory. Based on recent history,
the entity has a gross profit of 30% on cost of sales. The following
information is available from the records for the nine months ended
September 30, 2015:

Inventory, January 1 550,000

Purchases 3,000,000
Net sales 3,640,000

A physical inventory disclosed usable damaged goods which can be sold

to a jobber for P50,000. What is the estimated cost of goods sold for
the nine months ended September 30, 2015?
a. 2,750,000
b. 2,485,000
 c. 2,548,000
d. 2,800,000

46. Nicque Company provided the following information for the current
year:

Sales 2,750,000
Beginning inventory 300,000
Ending inventory 180,000
Gross margin 20%

What amount was reported as purchases?

a. 2,320,000
b. 2,080,000
c. 2,220,000
d. 2,020,000

47. Green horn Company provided the following information for the
current year:

Accounts Receivable, January 1 800,000

Accounts Receivable collected 2,600,000
Cash sales 500,000
Inventory, January 1 1,200,000
Inventory, December 31 1,100,000
Purchases 2,000,000
Gross profit on sales 900,000

What is the balance of accounts receivable on December 31?

a. 700,000
b. 1,200,000
c. 1,700,000
d. 1,300,000

On October 15, 2015, a fire destroyed all inventory of Sham Company in

a rented stockroom. The records of the entity showed the following
information:

Inventory, January 1 500,000

Sales, January 1 - October 15 3,840,000
Sales returns and allowances 40,000
Purchases, January 1 - October 15 3,560,000
Purchase returns and allowances 60,000
Cost of stock in display room, not destroyed 320,000
Summary of prior years’ sales:
2014 2013 2014
Sales 3,700,000 3,500,000 3,000,000
Gross profit 1,295,000 1,050,000 750,000

48. If the trend in gross profit rate continues, what is the estimated
cost of merchandise lost in the fire on October 15, 2015?
a. 1,400,000
b. 1,720,000
c. 1,530,000
d. 1,210,000

49. If the average gross profit rate is used, what is the estimated
cost of merchandise lost in the fire on October 15, 2015?
a. 1,400,000
b. 1,720,000
c. 1,340,000
d. 1,020,000

50. In December 2015, Unanimous Company had a significant portion of

inventory stolen. The entity determined the cost of inventory not
stolen to be P100,000.
2015 2014
Purchases 5,200,000 5,000,000
Purchase return and allowance 240,000 200,000
Sales 7,880,000 8,200,000
Sales return and allowance 80,000 200,000
Beginning inventory 1,200,000 2,000,000

What is the estimated cost of the stolen inventory?

a. 700,000
b. 600,000
c. 644,000
d. 144,000

-END OF EXAMINATION-
“You don’t have to be successful to become happy. But you should
be happy to become successful.”
“Success is not something you pursue, success is something you
attract by the person you become”
“Failure is just an event, not a person”
 Answer Sheet
1.A 11.B 21.D 31.A 41.A
2.A 12.A 22.C 32.D 42.A
3.B 13.A 23.C 33.A 43.C
4.A 14.C 24. D 34.A 44.A
5.B 15.A 25.C 35.A 45.D
6.D 16.B 26.D 36.D 46.B
7.B 17.C 27.D 37.C 47.A
8. C 18.D 28.A 38.B 48.A
9.A 19.C 29.A 39.A 49.D
10.B 20.B 30.A 40.D 50.B