PASIG CATHOLIC COLLEGE

COLLEGE DEPARTMENT
AREA OF ACCOUNTANCY
FINAL EXAMINATION
ACCOUNTING 108
PROF. U.C.VALLADOLID
Multiple Choice
Identify the choice that best completes the statement or answers the question.

Q. 1 - 5.
The property, plant and equipment section of So Shuno Corporation’s balance sheet at December 31,
2019 included the following items:

Land P 600,000
Land improvements 280,000
Buildings 2,200,000
Machinery and equipment 1,920,000

The following transactions occurred during 2020:

a) A tract of land was acquired for P300,000. As of December 31, the company has not determined
its future use.

b) A plant facility consisting of land and building was acquired from Reyna Company in exchange for
40,000 shares of So Shuno common stock. On the date of acquisition, So Shuno stock had a
closing market price of P37 per share on the Philippine Stock Exchange. The plant facility was
carried on Reyna books at 220,000 for land and 640,000 for the building on the date of exchange.
Current appraised values for land and building, respectively, are 460,000 and 1,380,000.

c) On May 1, 2020, items of machinery and equipment were purchased at a total cost of 896,000,
inclusive of 12% VAT. Additional costs of 26,000 for freight and 52,000 for installation were
incurred, The client is a VAT registered Company.

d) Expenditures totaling 190,000 were made for new parking lots, streets and sidewalks at the
corporation’s various plant locations. These expenditures had an estimated life of 15 years.

e) A machine costing 160,000 on January 1, 20012, was scrapped on June 30, 2020. Double-
declining-balance depreciation has been recorded on the basis of a 10-year useful life.

f) A machine was sold for 40,000 on July 1, 2020. Original cost of the machine was 88,000 on
January 1, 2017, and it was depreciated on a straight-line basis over an estimated useful life of 7
years and a salvage value of 4,000.

QUESTIONS:

Based on the above and the result of your audit, determine the following:

1. Adjusted balance of Land as of December 31, 2020

a. 970,000 b. 1,060,000 c. 1,270,000 d. 1,460,000

2. Adjusted balance of Buildings as of December 31, 2020

 a. 3,580,000 b. 3,500,000 c. 2,200,000 d. 3,310,000

3. Adjusted balance of Machinery and Equipment as of December 31, 2020

a. 2,646,000 b. 2,550,000 c. 2,472,000 d. 2,710,000

4. Loss on scrapping of machine on June 30, 2020

a. 21,475 b. 24,160 c. 26,845 d. 0

5. Loss on sale of machine on July 1, 2020

a. 6,000 b. 4,000 c. 18,000 d. 0

Q. 6 - 9.
You gathered the following information related to the Patents account of the Dhei So Cookie
Corporation in connection with your audit of the company’s financial statements for the year 2020.

In 2020, Dhei So developed a new machine that reduces the time required to insert the fortunes into its
fortune cookies. Because the process is considered very valuable to the fortune cookie industry, Dhei
So patented the machine. The following expenses were incurred in developing and patenting the
machine:

Research and development laboratory expenses 1,000,000

Metal used in the construction of the machine 320,000
Blueprints used to design the machine 128,000
Legal expenses to obtain patent 480,000
Wages paid for the employees’ work on the research, development, and building
of the machine (60% of the time was spent in actually building the machine)
1,200,000
Expense of drawing required by the patent office to be submitted with the patent
application 68,000
Fees paid to the government patent office to process application 100,000

During 2020, Dhei So paid 150,000 in legal fees to successfully defend the patent against an
infringement suit by Cookie Han Corporation.

It is the company’s policy to take full year amortization in the year of acquisition.

QUESTIONS:

Based on the above and the result of your audit, determine the following:

6. Cost of patent
a. 580,000 b. 1,128,000 c. 648,000 d. 798,000

7. Cost of machine
a. 1,236,000 b. 1,040,000 c. 1,648,000 d. 1,168,000

8. Amount that should charged to expense when incurred in connection with the development of the
patented machine
a. 1,480,000 b. 1,608,000 c. 1,000,000 d. 0
 9. Carrying amount of patent as of December 31, 2020
a. 522,000 b. 1,015,200 c. 583,200 d. 837,900

Q. 10 - 11.
The petty cash fund of Libra Company as of September 4, 2020 the following composition of its petty
cash fund:
Bills and coins counted 2,450
Approved and signed petty cash vouchers
Dated August 2020 3,800
Dated September 1-4, 2020 1,250
IOU from employee 1,800
A check drawn by an employee, dated September 15, 2020 1,100

The petty cash fund has an imprest balance of 10,000. The company’s reporting period ends on August
30.

10. What is the correct balance of the petty cash fund?

a. 3,700 c. 4,250
b.2,450 d. 6,250

11. What is the cash short or over?

a. 400 c. 550
b.700 d. 1,350

Q. 12 - 15.
The accountant of Maharlika Company prepared the following bank reconciliation at December 31,
2020:

Balance per bank statement 350,000

Add: Deposit in Transit 175,250
Note collected by bank 15,000
Total 540,250
Less: Outstanding Checks 246,750
Balance per ledger 293,500

In the course of your examination, you noted the following information:

a. At December 31, 2020, the bank statement and the general ledger showed balances of 350,000
and 293,500, respectively.

b. The cut-off bank statement showed a bank charge on January 2, 2021 for 25,000 representing a
correction of an erroneous bank credit.

c. Included in the list of outstanding checks were the following:

- A check payable to a supplier dated December 29, 2020, in the amount of 15,000
released on January 5, 2021.
- A check representing advance payment to a supplier in the amount of 37,200, the date of
which is January 4, 2021 and released in December 2020.
 d. On December 31, 2020, the company received and recorded a customer’s check dated January
2021 amounting to 50,000.

Using the problem above information, as of December 31, 2020,

12. What is the correct amount of Deposit in Transit?
a. 175,250
b. 215,250
c. 125,250
d. 225,250

13. What is the correct amount of Outstanding Checks?

a. 246,750
b. 194,550
c. 231,750
d. 209,550

14. What is the correct cash balance?

a. 253,500
b. 255,700
c. 218,500
d. 340,700

15. How much was the cash shortage?

a. 55,000
b. 57,200
c. 92,100
d. 30,000

Q. 16 - 19.
The financial statements of Red Bulls Corporation included the following:

December 31, 2020 December 31, 2021

Accounts Receivable 735,000
Allowance for doubtful accounts 16,200
Sales on account 4,500,000
Cash collected from customers 4,200,000

Among the cash collections was the full recovery of a 16,000 receivable from Robert De Leon, a
customer whose account had been written off as worthless late in 2020.

During 2021, it was necessary to write off uncollectible customers’ account totalling 20,200.

On December 1, 2021, a customer settled his account by issuing t Red Bulls Corporation a 9% six-
month note for 250,000.

At December 31, 2021, the accounts receivable included 100,800 past due accounts. After careful study
of all past due accounts, the management estimated the probable loss contained therein was 10%. In
addition, 2% of the current accounts receivable might prove uncollectible.

16. What is the balance of Accounts Receivable as of Dec. 31, 2021?

 a. 780,800
b. 801,000
c. 821,200
d. 1,051,000

17. What is the amount of the current accounts receivable that might prove to be uncollectible?
a. 13,600
b. 14,004
c. 14,408
d. 19,004

18. What is the balance of the allowance for uncollectible accounts before adjustments on December 31,
2021?
a. 4,000
b. 12,000
c. 12,200
d. 32,200

19. What is the balance of the allowance for uncollectible accounts after all necessary adjusting entries
on December 31, 2021?
a. 10,080
b. 12,084
c. 14,004
d. 23,680

Q. 20 - 22.
JP Company’s balance in the Allowance for Uncollectible accounts was 154,000 at January 1, 2020.
During 2020, credit sales totaled 9,000,000, interim provisions for uncollectible accounts were made at
2% of credit sales, 95,000 of bad debts were written off, and recoveries of accounts previously written
off amounted to 15,000. JP installed a computer facility in November 2020 and an aging of accounts
receivable was prepared for the first time as of December 31, 2020. A summary of the aging as follows:

Classification by Month of Sale Balance in Each Category Estimated % Uncollectible

November - December 2020 1,080,000 2%
July - October 2020 650,000 10%
January - June 2020 420,000 25%
Prior to 1/1/2020 150,000 70%

Based on the review of collectibility of the account balances in the “prior to 1/1/2020” aging category,
additional receivables totalling 60,000 were written off as of December 31, 2020. The 70% uncollectible
estimate applies to the remaining 90,000 in the category. Effective with the year ended December 31,
2020, JP adopted a new accounting method for estimating the allowance for uncollectible accounts at
the amount indicated by the year-end aging analysis of the accounts receivable.

20. In the audit adjusting entries, how much additional uncollectible accounts expense should be
provided at December 31, 2020?
a. 60,600 b. 194,000 c. 240,600 d. 254,600

21. How much uncollectible accounts expense should be presented on the statement of comprehensive
income for the year ended December 31, 2020?
 a. 60,600 b. 194,000 c. 240,600 d. 254,600

22. At what amount should Accounts Receivable be presented in the statement of financial position at
December 31, 2020?
a. 1,985,400 b. 1,999,400 c. 2,003,400 d. 2,240,000

Q. 23 - 26.
A portion of the Greenwoods Company’s statement of financial position appears as follows:

Dec. 31, 2021 Dec. 31, 2020

Assets
Cash 353, 300 100, 000
Notes Receivable 0 25, 000
Inventory ? 199, 875
Liabilities
Accounts Payable 75, 000

Greenwoods Company pays for its operating expenses with cash and purchases all inventories
on credit. During 2021, cash totaling 474, 700 was paid on accounts payable. Operating expenses for
2021 totaled 220, 000. All sales are cash sales. The inventory was restocked by purchasing 1,500 units
per month and valued by using periodic FIFO. The unit cost of purchases was 32.60 during January
2021 and increased 0.10 per month during the year. Greenwoods sells only one product. All sales are
made for 50 per unit. The ending inventory for 2020 was valued at 32.50 per unit.

23. How many units were sold during 2021?

a. 20, 960 units
b. 18, 960 units
c. 18, 460 units
d. 8, 828 units

24. What should be the balance of Accounts Payable at December 31, 2021?
a. 75, 000
b. 122, 000
c. 197, 000
d. 596, 700

25. The number of units in the January 1, 2021 inventory is

a. 0
b. 5, 966
c. 6, 100
d. 6, 150

26. The number of units and total cost of ending inventory, respectively, are
a. 5, 690 and 190, 946
b. 5, 690 and 189, 808
c. 5, 190 and 173, 208
d. 5, 190 and 174, 246

Q. 27 - 34.
The investment accounts maintained by Angel Company were shown below:

Available for Sale Securities – Y Company Ordinary

Date Particulars Debit Credit

01-01- Beginning Balance, 3,000 shares 36,000
2020
01-12- 2 for 1 share split ( market price after the share split 12,000
2020 is P7)
03-17- Sold 1,000 shares at P8 8,000
2020
10-01- Purchased 2,000 additional shares of Y Ordinary at 17,000
2020 P8 per share plus transaction costs of P0.50 per
share
11-30- Sold 1,000 shares at P8.50 8,500
2020
12-31- Adjustment to fair value (FV is P9.20 per share.) 6,700
2020

Financial Assets at Fair Value through Profit or Loss 0 B Company

Date Particulars Debit Credit

06-30- Received a dividend of 1 share of B Company 1,000
2020 ordinary for every 5 shares of Y Company Ordinary.
Market price on this date of B Company Ordinary is
P2.50. The shares have par value of P1.
09-10- Sold 500 shares for P2.80 per share 1,400
2020
12-31- Adjustment to market; fair value is P3.20 per share 2,000
2020

Additional Information:

 You traced the beginning balances to your prior year’s working paper. The Unrealized Gain or
Loss on Available for Sale Securities at January 1, 2020 had a credit balance of 6,000.

 Upon receipt of the shares as a result of the share split, the company credited Income from AFS
for 12,000.

 The company incurred and paid 500 transaction costs upon sale of 1,000 shares on March 17,
charging this amount to Selling and Administrative Expenses.

 The company credited dividend income for the shares of B Company ordinary received as
dividends. The shares were designated as FVPL.

 The company received P0.80 per share cash dividends on Y Company ordinary on October
20,2020. The shares were declared on September 20, payable to shareholders of record as of
October 10. Upon receipt of the cash dividends, the company credited dividend income.
 On December 31, 2020, the company credited the adjustments to fair value to Gain on
Investment. The total amount of 8,700 (6,700 on Y Company ordinary and 2,000 on B Company
ordinary) formed part of the balance of Other Operating Income on the company’s draft of
statement of comprehensive income.

27. What is the market value of Y Company ordinary on December 31, 2019?
a. 36,000 c. 24,000
b. 48,000 d. 12,000

28. What is the correct amount of the gain or loss on March 17 sale?
a. 5,000
b. 2,500
c. 7,500
d. 7000

29. What is the correct amount of gain or loss November 30 sale?

a. 3,500
b. 5,000
c. 8,500
d. 2,500

30. What is the total amount of dividend income on Y Company shares for the year 2020?
a. 2,500
b. 4,000
c. 6,500
d. 5,000

31. What is the unrealized gain or loss from the investments above taken as part of other
comprehensive income in the profit or loss section of the statement of comprehensive income?
a. 1,250
b. 350
c. 1,600
d. 150

32. What is the unrealized gain or loss from the investments above taken as other comprehensive
income as a result of the measurement to fair value at December 31, 2020?
a. 19,800
b. 17,000
c. 18,200
d. 15,800

33. What is the amount at which the AFS is shown on the December 31, 2020 statement of financial
position?
a. 48,000
b. 51,000
c. 55,200
d. 61,640

34. What is the amount at which the FVPL (Financial Assets at Fair Value through Profit or Loss) be
shown on the December 31, 2020 statement of financial position?
 a. 1,600
b. 1,000
c. 1,500
d. 1,250

Q. 35 - 40.
On January 2, 2020, Jerome Company purchased Angel Company, 9% bonds with a face value of
4,000,000 for 3,760,000. Jerome Company intends to collect contractual cash flows from the bonds,
and as such the instruments are designated as Held for Collection. The effective interest rate on this
investment is 10%. The bonds are dated January 1, 2020 and mature on December 31, 2029. The
bonds pay interest semi-annually on June 30 and December 31. Jerome’s accounting year is the
calendar year.

On November 30, 2022, 1,800,000 of the bonds were sold at 98 plus accrued interest. This portion sold
is considered to be more than an insignificant portion of the investment. As a result of the change in
business model, Jerome reclassified the Angel Company bonds as at fair value through profit or loss.

The market value of the bonds was 98 on December 31, 2020, 96 on December 31, 2021 and 98 ½ at
December 31, 2022.

35. What is Jerome’s interest revenue for the year ended December 31, 2020?
a. 376,400 c. 498, 920
b. 349,800 d. 374, 600

36. At what amount should this investment be presented on December 31, 2020 statement of
financial position?
a. 3, 785, 220 c. 3, 791, 200
b. 3, 776, 400 d. 3, 744, 600

37. What amount of financial asset shall be presented as part of current assets on December 31,
2021 as a result of the above investment?
a. 3, 785, 220 c. 3, 791, 200
b. 0 d. 3, 744, 600

38. What amount of gain or loss shall be recognized upon sale of the securities at November 30,
2022?
a. 48, 729 c. 47, 900
b. 47, 829 d. 34, 600

39. At what amount should the investment be shown on December 31, 2022 statement of financial
position?
a. 2, 167,000 c. 2,000,000
b. 4, 000,000 d. 2,200,000

40. How much interest revenue shall be presented on the Statement of Comprehensive Income for
the year 2022?
a. 16,500 c. 366, 879
b. 365, 218 d. 158, 808