1.

A corporations accounting records provided the following information:

12/31/06 12/31/07
Current assets 240,000 ?
Noncurrent assets 1,600,000 1,500,000
Current liabilities ? 130,000
Noncurrent Liabilities 580,000 ?
All assets and liabilities of the company are reported in the schedule above. Working capital of P92,000 remained
unchanged from 2006 to 2007. Net income in 2007 was P88,000. No dividends were declared during 2007 and there
were no other changes in equity. Total noncurrent liabilities at December 31, 2007 would be
a. 616,000
b. 392,000
c. 568,000
d. 480,000

2. When preparing a draft of its December 31, 2005 balance sheet, DI, Inc. reported net assets totaling P
8,750,000. Included in the asset section of the balance sheet were the following:
Treasury stock of Darryl at cost, which approximates
market value on December 31,2005…..………… P250,000
Idle machinery…………………………………………… 100,000
Cash surrender value of life insurance on corporate
executives………………………………………. 150,000
Allowance for unrealized loss on non-current
investments in equity securities………………… 50,000
At what amount should Darryl the Invisible boy’s net assets be reported in the December 31,2005, balance
sheet?
a. P 8,500,000
b. 9,000,000
c. 8,450,000
d. 8,350,000

3. BoyD has an 8% Notes Receivable dated June 30, 2004, in the total amount of P150,000. Each note of
P50,000, plus accrued interest matures each year every July 1, starting 2005. What amount of Interest
Receivable should be reported as current assets in its June 30, 2006 Fiscal year Balance Sheet?
a. 12,000 b. 8,000 c. 4,000 d. none

4. The following are balances of selected accounts of Matt Corp:

* Accounts Receivable arising from sale of inventory P 950,000
* Allowance for doubtful account based on A/R balance 9,500
* Claims against shipper for merchandise damaged in transit 5,000
* Customer’s Credit balance, for over collection 4,500
* Deposit Refundable at end of term of lease 20,000
* Accounts Payable to Supplier, debit balance 10,000
How much is its Current Receivables?
a. 971,000 b. 965,000 c. 955,500 d. 945,000

5. At December 31, 2002, Reed Corporation owed note payable of P1,000,000 with a maturity date of April
30, 2003. This note did not arise from transactions in the normal course of business. On February 1, 2003,
Reed issued P3,000,000 of ten-year bonds with the intention of using part of the bond proceeds to
liquidate the P1,000,000 of note payable maturing in April. On March 1, 2003, Reed did in fact liquidate
the P1,000,000 of note payable using proceeds from the bond issue. Reed’s December 31, 2002, financial
statement were issued on March 29, 2003.
 How much of the P1,000,000 note payable should be classified as noncurrent in Reed’s balance sheet at
December 31, 2002?
a. 0
b. 100,000
c. 900,000
d. 1,000,000?

6. BC’s trial balance reported among others the following:

Accounts receivable, net P480,000
Equipment, P540,000
Accumulated depreciation, equipment P450,000
Short-term investment, P150,000
Prepaid insurance, P30,000
Cash, P330,000
Inventory, P900,000
Patent, P120,000
Land, held for indefinite purpose, P750,000
Customers’ refundable deposit, P10,000
How much total current assets should be reported in the balance sheet?
a. P1,890,000 b. P1,900,000 c. P2,010,000 d. P2,640,000

7. HC reported the following items on December 31, 2005 trial balance:

Accounts payable, P1,089,000
Advances to employees, 45,000
Unearned Rent Income, P288,000
Estimated liabilities on promised warranties, P258,000
Bonds payable, P5,550,000
Discount on bonds payable, (debit) , P225,000
How much should HC report as total liabilities?
a. 6,960,000 b. 7,005,000 c. 7,185,000 d. 7,410,000

8. AC is preparing its December 31, 2005 balance sheet. The following items may either be reported as
current or long term liabilities:
 On December 31, 2005, AC declared a cash dividend of P2.50 per share to stockholders of records
December 31. 2005. The dividend is payable on January 15, 2006. AC has issued 1,000,000 shares of
common stock, of which 50,000 are held in treasury.
 At December 31, bonds payable of P100,000,000 are outstanding. The bonds pay 12% interest every
September 30, and mature in installment of P25,000,000 beginning 2006.
 At December 31, 2004, customer advances were P12,000,000. During 2003, AC collected P30,000,000
of customer advances, and advances of P25,000,000 were earned.
 At December 31, 2005, retained earnings appropriated for future inventory losses is P15,000,000.
What amount should AC report as liabilities?
Current Liability Long-term Liability
a. P2,735,000 P100,000,000
b. P17,000,000 P2,375,000
c. P28,000,000 P100,000,000
d. P47,375,000 P75,000,000

9. The following are selected accounts of Cordillera Corp.

Prepaid expenses P50,000
Investments in associate 1,500,000
Held to maturity debt securities 500,000
 Petty cash fund 10,000
Held for trading securities 200,000
Accounts receivable 300,000
Inventories 150,000
Cash on hand 75,000
Bank overdraft (15,000)
The total current assets to be reported in the balance sheet is
a. 770,000 b. 775,000 c. 785,000 d. 800,000

10. The following are selected accounts of Highland:

Accounts receivable, net of P10,000 allowance for bad debts P90,000
Cash in bank, net of P5,000 overdraft 30,000
Petty cash, including paid but un-replenished voucher of P1,000 10,000
Unused supplies before adjustment of P5,000 consumed portion 9,000
Unconsumed raw materials 10,000
Unsold finished goods 50,000
Work in process inventory, 10% completed 40,000
The total current assets is
a. 248,000 b. 239,000 c. 238,000 d. 222,000

11. The following are selected accounts of Upland:

Accounts payable 40,000
Accrued interest receivable 1,500
Accounts receivable 120,000
Accumulated depreciation, bldg 120,000
Additional paid capital 200,000
Allowance for bad debts 2,400
Building 1,200,000
Cash 90,900
Capital stock 1,000,000
Held for trading securities 300,000
Long term advances to officers 10,000
Prepaid insurance 5,000
Retained earnings, net of P50,000 appropriated 250,000
Stock Dividend payable 100,000
Unearned revenue 25,000
Unsold merchandise 60,000
Which of the following is correct?
ASSETS LIABILITIES EQUITY
a. 1,665,000 165,000 1,500,000
b. 1,665,000 65,000 1,600,000
c. 1,655,000 55,000 1,600,000
d. 1,665,000 40,000 1,625,000

12. The account and balances shown below were taken from Basic Company’s trial balance on December
31,2003. All adjusting entries have been made.
Wages Payable, P250,000; Cash, P175,000; Bonds Payable, P600,000; Dividends Payable, P140,000;
Prepaid Rent, P136,000; Inventory, P820,000; Sinking Fund Assets, P525,000; Short-term Investments,
P153,000; Premium on Bonds Payable, P48,000; Stock Investment in Subsidiary, P1,020,000; Taxes
Payable, P228,000; Accounts Payable, P248,000; Accounts Receivable, P366,000; Property, Plant &
Equipment, P1,200,000; Patents – net, P150,000; Accumulated Depreciation – PPE, P400,000; Land
held for future business site, P900,000.
 1) How much should be reported in Basic’s December 31,2003 balance sheet as current and non-current
assets, respectively?
a. 1,650,000 and 2,375,000
b. 1,650,000 and 3,395,000
c. 1,800,000 and 2,225,000
d. 1,800,000 and 3,795,000

2) How much should be reported in Basic’s December 31,2003 balance sheet as current and non-current
liabilities, respectively?
a. 776,000 and 552,000
b. 866,000 and 648,000
c. 916,000 and 640,000
d. 916,000 and 648,000

13. Beloved Corporation’s trial balance contained the following account balances at December 31,2003:
Accumulated depreciation – Equipment P450,000
Short-term investments 150,000
Prepaid insurance 30,000
Cash 330,000
Inventory 900,000
Equipment and furniture 540,000
Patent 120,000
Accounts receivable (net) 480,000
Land (held for future business site) 750,000
How much is the total current assets in Beloved’s December 31,2003 balance sheet?
a. 1,890,000
b. 2,010,000
c. 2,190,000
d. 2,430,000

14. Halo, Inc. reported the following items on its December 31,2003 trial balance:
Accounts Payable P1,089,000
Advances to Employees 45,000
Unearned Rent Revenue 288,000
Estimated Liability Under Warranties 258,000
Cash Surrender Value of Officers’ Life Insurance 75,000
Bonds Payable 5,550,000
Discounts on Bonds Payable 225,000
Trademarks 39,000
How much should Halo report as total liabilities in its December 31,2003 balance sheet?
a. 6,960,000
b. 7,005,000
c. 7,035,000
d. 7,410,000

15. Head Company prepared a draft of its 2003 balance sheet. The draft statement reported current liabilities
totaling P2,000,000. However, none of the following items were included in this preliminary total at
December 31,2003.
Accounts payable P300,000
Bonds payable, due 2004 500,000
Discounts on Bonds payable, due 2004 60,000
 Dividends payable-January 31,2004 160,000
Notes payable, due 2005 400,000
Bond issue costs 20,000
At which amount should Head’s current liabilities be correctly reported in the December 31,2003 balance
sheet?
a. 2,880,000
b. 2,900,000
c. 2,960,000
d. 3,020,000

16. Pilot Company had the following items at December 31,2003:

Accounts payable P330,000
Unsecured notes, 9%, due July 1,2004 800,000
Accrued expenses 210,000
Contingent liability 2,700,000
Deferred income tax liability 150,000
Senior bonds, 5%due March 31,2004 6,000,000
The contingent liability is an accrual for possible losses on a P6,000,000 lawsuit filed against Pilot
Company. Pilot’s legal counsel expects the suit to be settled in 2005.The counsel has estimated that Pilot
will be liable for damages in the range P2,700,000 to 4,500,000.

The deferred income tax liability is not related to an asset for financial reporting and is expected to reverse
in 2005.

What is the amount of current liabilities that Pilot should report in its December 31,2003 balance sheet?
a. 6,690,000
b. 7,340,000
c. 9,390,000
d. 11,960,000

17. As of December 31,2003 , the current liabilities of Maze Company totaled P1,500,000 before any year-end
adjustment relating to the following:
 On December 19,2003, a supplier authorized Maze Company to return, for full credit, goods shipped
and billed at P45,000 on December 9.2003. The returned credit memo was received and recorded by
Maze Corporation on January 4,2004.
 During December 2003, Maze received P75,000 from a customer as an advance payment for a
merchandise which Maze will make according to the customers’ specifications. For this transaction,
Maze has a P75,000 credit balance in its accounts receivable from the said customer on December
31,2003.
 On December 28,2003, the company wrote and recorded checks to creditors totaling P400,000 which
would cause an overdraft of P100,000in the company’s bank account on December 31,2003. The
checks were mailed on January 9,2004.
What amount should Maze Company report as total current liabilities in its December 31,2003 balance
sheet?
a. 1,555,000
b. 1,630,000
c. 1,855,000
d. 1,930,000

18. Allison Corporation is preparing its December 31,2003 balance sheet. The following items may be reported
as either a current or long-term liability:
  On December 31,2003, Allison declared a cash dividend of P2.50 per share to stockholders of record
December 31. The dividend is payable on January 15,2004. Allison has issued 1,000,000 shares of
common stock, of which 50,000 shares are held in treasury.
 At December 31, bonds payable of P100,000 are outstanding. The bonds pay 12% interest every
September 30 and mature in installments of P25,000,000 every September 30,000 beginning
September 30,2004.
 At December 31,2002, customer advances were P12,000,000.During 2003, Allison collected
P30,000,000 of customer advances, and advances of P25,000,000 were earned.
 At December 31,2003, retained earnings appropriated for future inventory losses is P15,000,000.
What amount should Allison report as current liability and as long-term liability in its December 31,2003
balance sheet?
a. P2,735,000 P100,000,000
b. P17,000,000 P2,375,000
c. P28,000,000 P100,000,000
d. P47,375,000 P75,000,000

19. Bride Company began operations on January 1,2003 with P1,000,000 from the issuance of stock and
borrowed funds of P450,000. Net income for 2003 was P300,000 and Bride paid a P225,000 cash dividend
on December 19. No. additional transactions affected owners’ equity in 2003. At December 31,2003,
liabilities of the company had increased to P597,000. In Bride’s December 31,2003 balance sheet, how
much should be reported as its total assets?
a. 1,525,000
b. 1,672,000
c. 1,750,000
d. 1,760,000

20. A draft of Bald Company’s 2003 balance sheet reported total assets of P1,093,750 of which the following
items were included:
Treasury stock of Bald Company at cost, which approximates P30,000
market value on December 31
Unamortized patents 14,000
Cash surrender value of life insurance on corporate executives 17,125
Translation adjustment - Debit 10,500
At what amount should Bald’s total assets be correctly in its December 31,2003 balance sheet?
a. 1,052,125
b. 1,053,250
c. 1,062,625
d. 1,063,750

21. Party Company reported total assets of P1,050,000 and total liabilities of P680,000 in its December
31,2002 balance sheet. The following transactions occurred during 2003:
 On August 1, Party Company issued an additional 5,000 shares of common stock at P25 per share.
 The company paid dividends totaling P80,000.
 Net income during the year was P110,000.
 Reacquired treasury shares of 2,000 at P30; Subsequently, reissued 1,000 for P39,000 per share.
 No other changes occurred in Stockholders’ equity during the year.
What is the balance of Party’s stockholders’ equity section in its December 31,2003 balance sheet?
a. 400,000
b. 504,000
c. 525,000
d. 685,000
22. Help Company’s adjusted trial balance at December 31,2003 includes the following accounts balances:
 Common stock, P3par P3,000,000
 Subscription Receivable due 2004 300,000
 Additional paid in capital 4,000,000
 Treasury stock at lost 250,000
 Net realizable holding loss on available for sale securities 100,000
 Retained earnings appropriated for uninsured earthquake losses 750,000
 Retained earnings unappropriated 1,000,000
 Subscribed common stock 500,000
What amount should Help report as total owners’ equity in its December 31,2003 balance sheet?
a. 8,400,000
b. 8,600,000
c. 8,900,000
d. 9,200,000
23. Luv U Company provided the following account balances on December 31,2003:
Accounts payable, P125,000; Accrued taxes, P50,000; Cash surrender value, P30,000; Common stock,
P1,000,000; Dividends – Preferred, P150,000; Mortgage payable(P200,000due in six months),
P1,200,000; Notes payable – 20%, due on January 1,2004, P1,500,000; Additional paid in capital,
P250,000; Preferred stock, P450,000; Additional paid in capital, P250,000; Preferred stock, P450,000;
Income summary – credit balance, P500,000; Retained earnings – December 31,2003, P550,000;
Unearned rent income, P25,00; Dividends – common, P100,000.
How much should Luv U Company report as Stockholders’ equity on December 31,2003?
a. 1,450,000
b. 1,650,000
c. 2,250,000
d. 2,500,000

24. Below is the trial balance as of December 31,2003 of Clamp Company which has already been adjusted
except for income tax expense:
Debit Credit
Cash P550,000
Accounts receivable, net 1,650,000
Prepaid income taxes 320,000
Accounts payable P140,000
Common stock 500,000
Additional paid in capital 680,000
Retained earnings 630,000
Foreign currency translation adjustment 430,000
Revenue 3,600,000
Expenses 2,600,000
 During 2003, estimated tax payments of P320,000 were charged to prepaid taxes. The company has
not yet recorded income tax expense. There were not differences between financial statement and
income tax expense. Clamp Company’s tax rate is 32%.
 Included in accounts receivable is P500,000 due from a client. Special terms granted to this client
require payment in equal semi-annual installments of P125,000 every May and November 1.
1) What amount should be reported as tool current assets in Clamp Company’s December 31,2003
balance sheet?
a. 1,950,000
b. 2,200,000
c. 2,250,000
d. 2,500,000
 2) What amount should be reported as total retained earnings in Clamp Company’s December 31,2003
balance sheet?
a. 1,029,000
b. 1,200,000
c. 1,310,000
d. 1,330,000

25. The trial balance of Glasses Corporation at December 31,2003 has been adjusted except for income tax
expense:
Glasses Corporation
TRIAL BALANCE
December 31,2003
Debit Credit
Cash P600,000
Accounts receivable, net 3,500,000
Cost in excess of billings on long term 1,600,000
contracts
Billings in excess of costs on long term 700,000
contracts
Prepaid incometaxes 480,000
Property, plant & equipment, net 1,480,000
Note payable, noncurrent 1,650,000
Common stock 750,000
Additional paid in capital 2,000,000
Retained earnings-unappropriated 900,000
Retained earnings, appropriated for notes 160,000
payable
Income from long term contracts 6,680,000
Costs and expenses 5,180,000  
Totals 12,840,000 12,480,000
Additional information for the year ended December 31,2003 follows:
 The company uses the percentage-of-completion method to account for long term construction
contracts for financial statement and income tax purposes. All receivables on these contracts are
considered to be collectible within one year.
 During 2003, estimated income tax payments of P480,000 were changed to prepaid income taxes. The
company has not recorded income tax expense. There were no temporary or permanent differences,
and the company’s tax rate is 32%.
1) What amount should Glasses report as current assets in its December 31,2003 balance sheet?
a. 5,000,000
b. 5,450,000
c. 5,700,000
d. 6,150,000

2) What amount should Glasses report as noncurrent liabilities in its December 31,2003 balance sheet?
a. 1,650,000
b. 1,780,000
c. 2,320,000
d. 2,480,000
26. The following is Recall Corporation’s June 30,2003 trial balance:
Debit Credit
Cash overdraft P77,000
Accounts receivable,net 77,000
Inventory 127,600
Prepaid expenses 26,400
Land held for resale 220,000
Property, plant & equipment, net 209,000
Accounts payable and accrued expenses 70,400
Common stock 55,000
Additional paid in capital 330,000
Retained earnings 182,600
Additional Information:

 Checks totaling P66,000 were written to vendors and recorded on June 29,000. This related to a cash
overdraft of P22,0000. The checks were mailed only on July 9, 2003.
 Land held for resale was disposed for cash on July 14,2003.
 Recall issued its financial statements on July 31,2003.
What amount should be reported by Recall Corporation as total current assets in its June 30,2003 balance
sheet?
a. 275,000
b. 429,000
c. 451,000
d. 495,000

27. Presented below are current balances and related information on December 31,2003 for Galaxy
Corporation:
Cash on hand and in banks P248,000
Accounts receivable 80,000
Allowance for bad debts (15000)
Inventories 120,000
Prepaid insurance 25,000
Total current assets P458,000
Related information are as follows:
 The cash balance consists of the following:
Cash in bank, net on of bank overdraft of P2,000
maintained in a separate bank P40,000
Cash set aside by the board of directors for the
purchase of a plant site 150,000
Petty cash (unreplenished expenses are P500,000) 4,000
Cash withheld from wages for income tax of
employees 2,000
General cash 52,000
Total 248,000
 The accounts receivable includes past due accounts in the amount of P5,000 on which a loss of P50% is
anticipated; hence it should be written off.
 The merchandise inventory includes goods held on consignment amounting to P4,000 and goods of
P8,000 received on December 31,2003. Neither of these items have been recorded as a purchase.
 The prepaid insurance includes cash surrender value of life insurance in the amount of P5,000.
How much is the total current assets that should be shown in the balance sheet at December 31,2003?
 a. 300,500
b. 303,500
c. 458,000
d. 460,000

28. The following Balance sheet is submitted to you for inspection and review.
Apparition Company
Balance Sheet
December 31,2003
Assets
Cash P45,050
Accounts receivable 112,500
Inventories 204,000
Prepaid insurance 8,800
Property, plant and equipment 376,800
747,150

Liabilities and Owners' Equity

Miscellaneous liabilities P3,600
Loan payable 76,200
Accounts payable 75,250
Capital Stock 134,000
Paid-in capital 458,100
747,150

In the course of the review, you find the following data:

 The possibility of uncollectible accounts on accounts receivable has not been considered. It is
estimated that uncollectible accounts will total P4,800.
 P45,000 represents the cost of a large-scale newspaper advertising campaign completed in 2003 has
been added to the inventories, because it is believed that this campaign will benefit sales of 2004. It is
also found that inventories include merchandise of P16,250 received on December 31 that has not yet
been recorded as a purchase.
 The books show that property, plant and equipment have a cost of P556,800 with depreciation of
P180,000 recognized in prior years. However, these balances include fully depreciated equipment of
P85,000 that has been scrapped and is no longer on hand.
 Miscellaneous liabilities of P3,600 represent salaries payable of P9,500, less noncurrent advances of
P5,900 made to company officials.
 Loan payable represents a loan from the bank that is payable in regular quarterly installments of
P6,250.
 Tax liabilities not shown are P18,250.
 Deferred income tax liability arising from temporary differences totals P44,550. This liability was not
included in the balance sheet.
 Capital stock consists of P6,250 shares of preferred 6% stock, par P20, and 9,000 shares of common
stock, stated value P1.
 Capital stock had been issued for a total consideration of P283,600; the amount received in excess of
the par and stated values of the stock has been reported as paid-in capital.
 Net income and dividends were recorded in Paid-in Capital.
What is the correct amount of current assets and current liabilities?
a. 320,550 and 144,250
b. 354,100 and 160,950
 c. 365,550 and 144,250
d. 370,350 and 155,050

29. The following balance sheet accounts and their respective unadjusted balances of Prince Company was
made available on December 31,2003:

Cash P1,250,000 Other noncurrent P1,360,000

assets

Investment securities 800 Accounts payable 340,000

Accounts receivable,
net 2,135,000 Other current 200,000
liabilities

Inventory 3,100,000 Long-term 3,275,000

liabilities

Other current assets 1,420,000 Treasury stock 450,000

Property,plant & 6,480,000

equipment, net
The following information relate to the December 31,2003 balance sheet:
 Cash includes P400,000 that has been restricted for the purchase of manufacturing equipment.
 Investment securities include P275,000 of stock that was purchased in order to give the company
significant ownership and a set on the board of directors of a major supplier.
 Other current assets include P400,000 advance to the President of the company, no due date has been
set.
 long-term liabilities include bonds payable of P1,000,000, of this amount P250,000 represents bonds
scheduled to be redeemed in 2004.
 long-term liabilities also include P700,000 bank loan. On May 15,2004, the loan will become due on
demand.
 Cash in the amount of P1,900,000 has been placed in a restricted fund for the redemption of the
preferred stock. In 2004, both the cash and the preferred stock have been removed from the balance
sheet.
 Property, plant and equipment includes land costing P800,00 that is being held for investment
purposes and that is scheduled to be sold in 2004.
1) How much should be the current assets?
a. 8,030,000
b. 8,305,000
c. 8,430,000
d. 8,705,000

2) How much should be the non current assets?

a. 7,840,000
b. 8,515,000
c. 8,915,000
d. 10,015,000

3) How much should be the current liabilities?

a. 540,000
b. 790,000
c. 950,000
d. 1,490,000
 4) How much should be the non current liabilities?
a. 2,325,000
b. 2,575,000
c. 3,025,000
d. 3,275,000

30. Below is the balance sheet prepared by the bookkeeper for Jack & Jill Company as of December 31,2003:
Jack&Jill Company
Balance sheet
As of December 31,2003

Cash P800,000 Accounts payable P750,000

Accounts receivable, net 522,000 Long-term 1,000,000
Inventories 570,000 liabilities 2,185,000
Investments 763,000
Equipment (Net) 960,000
Patents 320,000
P3,935,000 P3,935,000
Additional Information:
 Cash includes the cash surrender value of a life insurance policy for P94,000, and bank overdraft of
P25,000 has been deducted.
 The net receivable balance includes:
o Accounts receivable – debit balances P600,000;
o Accounts receivable – credit balances P40,000; and
o Allowances for doubtful accounts P38,000
 Inventories do not include goods costing P30,000 shipped out on consignment. Receivables of P30,000
were recorded on these goods.
 Investments include investments in common stock, trading P190,000 and available-for-sale P483,000,
and organization costs of P90,000.
 Equipment costing P50,000 with accumulated depreciation P40,000 is no longer used and is held for
sale. Accumulated depreciation on the other equipments is P400,000. The equipment was sold at book
value prior to the issuance of financial statements.
1) How much should be the current assets?
a. 1, 863,000
b. 1,873,000
c. 2,053,000
d. 2,063,000

2) How much should be the total noncurrent assets?

a. 1,433,000
b. 1,753,000
c. 1,847,000
d. 1,937,000

3) How much should be the total current liabilities?

a. 750,000
b. 775,000
c. 815,000
d. 1,815,000
31. The following trial balance of Food Corporation at December 31,2003 has been properly adjusted except
for the income tax expense adjustment:
32. Food Corporation

Trial Balance

December 31,2003

Debit Credit

Cash P775,000

Accounts receivable (net) 2,695,000

Inventory 2,085,000

Property, plant and equipment(net) 7,366,000

Accounts payable & accrued liabilities P1,701,000

Income taxes payable 697,600

Deferred income tax liability 85,000

Common stock 2,350,000

Additional Paid in Capital 3,680,000

Retained earnings, 01.01.03 3,450,000

Net sales & other revenues 13,360,000

Costs & expenses 11,180,000

Income tax expenses 1,222,600

P25,323,600 P25,323,600

Other financial data for the year ended December 31,2003 are as follows:
 Included in accounts receivable is P1,200,000 due from a customer and payable in quarterly
installments of P150,000. The last payment is due December 29,2005.
 The balance in the Deferred Income Tax Liability account pertains to a temporary difference that arose
in a prior year, of which P20,000 is classified as current liability.
 During the year, estimated tax payments of P525,000 were charged to income tax expense. The
current and future tax rate on all types of income is 32%.
In Food Corporation’s December 31,2003 balance sheet:
1) How much should be the total current assets?
a. 4,955,000
b. 5,405,000
c. 5,555,000
d. 6,080,000

2) How much should be the total current liabilities?

a. 1,893,600
b. 1,915,000
c. 2,375,000
 d. 2,440,000

3) The retained earnings balance shall be

a. 4,536,000
b. 4,905,000
c. 4,932,400
d. 4,976,000

33. The following accounts were taken from the unadjusted trial balance of Granny Company on December
31,2003:
Accounts payable P877,000
Accounts receivable 808,000
Accrued expenses 340,000
Accrued interest payable 30,000
Allowance for doubtful accounts 15,000
Cash and cash equivalents 209,000
Dividends payable 25,000
Income tax payable 52,000
Marketable securities, at cost 143,000
Notes receivable 100,000
Merchandise inventory 796,000
Bonds payable, 6% P50,000 due Sept. 30 annually 500,000
Prepaid expenses 10,000
Retained earnings 40,000
Contingent liabilities 527,000
Additional information: The accounts receivable balance is net of customers’ deposit of P40,000. The
market value of the marketable securities is P150,000. The balance of notes receivable includes P80,000 of
note discounted for which the company is contingently liable. In 2003, the company began using the
average cost method of valuing the inventory. Prior to 2003, the FIFO method was used. The value of the
inventory if the FIFO method was used would be P815,000.
How much should Granny Company report as current assets on December 31,2003?
a. 1,930,000
b. 1,931,000
c. 1,971,000
d. 2,011,000

34. The following accounts and their balances appear in an unadjusted trial balance of Goodbye Company as
of December 31, 2003:
 Cash, P400,000; Accounts receivable, P2,000,000; Inventory, P500,000; Accounts payable, P300,000;
Notes payable, P200,000.
 The cash account includes collection in January 2004 of P200,000 account from customer who was
given a cash discount of P10,000.
 It also includes a January 2004 cash sale of P50,000. Gross profit on the sale was 40%.
 From the amount collected, the company fully paid a bank loan of P100,000 with interest of P20,000
accruing January 2004.
What is the correct amount of working capital on December 31,2003?
a. 2,380,000
b. 2,390,000
c. 2,240,000
d. 2,410,000
35. On January 1,2003, Glow Company leased a building to Blow Corporation for a ten-year team at an annual
rental of P75,000. At inception of the lease, Glow received P300,000 covering the first two years’ rent of
P150,000 and a deposit of P150,000. This deposit will not be returned to Blow upon expiration of the lease
but will be applied to payment of rent for the last two years of the lease.

What portion of the P300,000 should be shown as a current and long-term liability in Glow’s December
31,2003 balance sheet?
Current Liability Long-term liability
a. 0 300,000
b. 75,000 150,000
c. 150,000 75,000
d. 150,000 150,000

36. Green Company had 60,000 shares of P100 par,5% cumulative preferred stock outstanding as at December
31,2003. There were no dividends in arrears as of December 31,2001. The company did not declare
dividends during 2002. During 2003, Green paid cash dividends of P200,000 on its preferred stock. How
should Green present the dividends in arrears in its 2003 financial statements?
a. Accrued liability of P300,000
b. Disclosure of P300,000
c. Accrued liability of P400,000
d. Disclosure of P400,000

37. In an audit in which you are engaged you find that the accounts receivable and accounts payable are kept
in one controlling account which shows a debit balance of P150,000 . An analysis of the details reveals the
following:
 Accounts receivable, customers P400,000
 Accounts receivable, officer 50,000
 Debit balance, creditors 30,000
 Fire insurance premiums, paid a day prior to audit 12,500
 Capital stock subscriptions receivable next month 100,000
 Accounts payable, creditors (P350,000)
 Unpaid officers’ salaries ( 75,000)
 Credit balance, customers ( 10,250)
 Payments received in advance for item not yet produced ( 7,250)
 Controlling Account balance, debit of P150,000.
The total current assets and total current liabilities should be appropriately reported as:
a. P 492,500; P442,000
b. P 462,500: P432,500
c. P P550,000; P432,500
d. P592,500; P 442,500

38. HI reported the following items on its December 31, 2005 trial balance:
 Accounts Payable, P1,089,000
 Advances to officers and employees, P45,000
 Unearned Income, P288,000
 Outstanding gift certificates issued, redeemable with merchandise, P258,000
 Cash surrender value of life insurance, P75,000
 Bonds payable, face value, P5,550,000
 Discounts on bond payable, P225,000
 Accrued interest receivable, P39,000
How much should be reported in the December 31, 2005 balance sheet as total liabilities?
 a. 7,210,000 b. 7,005,000 c. 6,960,000 d. 6,672,000

39. On December 31, 2003, The bookkeeper of G provided the following information:
 Accounts payable, including deposits from customers of P500,000, P2,500,000
 Notes payable, including notes payable to bank due on December 31, 2005 for P1,000,000, P3,000,000
 Stock dividend payable, 800,000
 Credit balance in customers’ accounts, P400,000
 Serial bonds, payable in semi-annual installments of P1,000,000, P10,000,000
 Accrued interest on bonds payable, P300,000
 Contested BIR tax assessment, P600,000
 Unearned rent income, P100,000
In December 31, 2003 balance sheet, how much current liabilities should be reported?
a. 6,800,000 b. 7,300,000 c. 7,900,000 d. 8,700,000

40. On December 31,2003, the bookkeeper of Galant Company provided the following information:
Accounts payable, including deposits and advances
From customers of P500,000 P2,500,000
Note payable, including note payable to bank due on
December 31,2005 for P1,000,000 3,000,000
Stock dividends payable 800,000
Credit balance in customer’s accounts 400,000
Serial bonds, payable in semiannual installments
Of P1,000,000 10,000,000
Accrued interest on bonds payable 300,000
Contested BIR tax assessment 600,000
Unearned rent income 100,000
In the December 31,2003 balance sheet, how much current liabilities should be reported?
a. 6,800,000
b. 7,300,000
c. 7,900,000
d. 8,700,000

41. An analysis of Cool Company’s liabilities disclosed the following:

Accounts payable, after deducting debit balances in
Suppliers’ accounts amounting to p22,500
(accounts payable included nontrade liabilities
of P32,500) P105,000
Accrued expenses 15,000
Credit balances of customers’ accounts 13,500
Stock dividends payable70,000
Claims for increase in wages and allowances by
Employees of the company, covered in a pending lawsuit 125,000
Estimated liabilities for premiums 60,000
How much should be presented as total liabilities in the balance sheet/
a. 6,000
b. 168,500
c. 183,500
d. 216,000

42. The financial statements for year 200a and 200b contained errors as follows:
200a 200b
Ending Inventory P6,000 Understated P10,000 Overstated
 Depreciation Expense 11,000 Overstated 7,000 overstated
Assumed that none of the errors in 200a and 200b were detected/corrected, by what amount would the
200b Retained Earnings be overstated, understated?
a. understated by P8,000
b. overstated by P10,000
c. understated by P17,000
d. Understated by P23,000

43. Epson Company’s accounts payable at December 31, 2005, totaled P800,000 before any necessary year-
end adjustments relating to the following transactions:
 On December 27, 2005, Epson wrote and recorded checks to creditors totaling P350,000 causing an
overdraft of P100,000 in Epson’s bank account at December 31, 2005. The checks were mailed out on
January 10, 2006.
 On December 28, 2005, Epson purchased and received goods for P150,000, terms 2/10, n/30. Epson
records purchases and accounts payable at net amounts. The invoice was recorded and paid January 3,
2006.
 Goods shipped F.O.B destination on December 20, 2005 from a vendor to Epson was received January
2, 2006. The invoice cost was P65,000.
What amount should Epson report as total accounts payable at December 31, 2005?
e. 1,297,000

44. Following selected account balances and supplemental information were taken from the accounting
records of Internet Company as of December 31, 2005:
Sales P9,675,000
Mortgage Note Payable 1,300,000
Bank Notes Payable 300,000
Accounts Payable 270,000
Stock Dividends Payable 200,000
Withholding Tax Payable 120,000
Supplemental information:
 Mortgage note was refinanced on its due date, February 15, 2006 with a new 5-year mortgage note
after paying P300,000 cash on the pijncipal balance. The refinancing scheme was planned long before
its due date. There was no unpaid interest as of December 31, 2005.
 The bank notes are payable in semi-annual installments of P50,000 on February 1 and August 1 of each
year. Unpaid interest for 2005 of P7,500 has not been taken up. This was paid on January 5, 2006.
 On August 1, 2005, a suit was filed by a dismissed employee against the company asking for P100,000
damages. The company’s lawyer believes it is probable that the suit will result in a loss to the
company, but the amount could not be reasonably estimated as of December 31, 2005.
 The sales account included the 10% VAT corresponding to the last quarter sales of P2,640,000
(inclusive of VAT). This was remitted to the BIR on January 20, 2006.
 Total income tax due for 2005 amounted to P865,000. Quarterly remittances to BIR during the year for
income tax totaled to P550,000. The balance due as of December 32, 2005 has not been taken up in
the books.
Compute the total current liabilities presented on the December 31, 2005 balance sheet.
a. P2,352,500

45. R Company had the following liabilities at December 31, 2004:

 Accounts payable, P200,000
 Unsecured Notes Payable, due July 1, 2005, P500,000
 Accrued Operating Expenses, P100,000
 Contingent Liabilities, P500,000
 Deferred Tax Liability, P 300,000
  Bonds Payable, due March 31, 2005, P2,000,000
 The contingent Liability is an accrual for possible loss on a P1,000,000 lawsuit filed against R Company.
The legal counsel of R estimated that R will be liable for damages in the range of P500,000 to
P1,000,000, upon settlement of the suit which is probable to be finalized 3 months from balance sheet.
What is the correct amount of R’s Currnet Liabilities?
a. 800,000 b. 2,800,000 c. 3,300,000 d. 3,600,000

46. The L Company’s December 31, 2004 Balance Sheet reported the following:
Cash and Cash Equivalents, P1,400,000
Accounts Receivable, 2,400,000
An analysis of the Accounts Receivable disclosed that this is comprised of the following:
Trade Receivables, Net of P40,000 allowance for Bad Debts, P1,880,000
Unsold goods sent to consignee. The amount is 130% of cost and these items are excluded from L
Company’s ending Inventory, P520,000.
At December 31, 2004, the total of L Company’s current Assets should be correctly reported as:
a. 4,480,000 b. 4,600,000 c. 4,880,000 d. 4,600,000