Cpa Aditional Corlyn - Documents

7/25/2016
CpaAditionalCorlynDocuments
PRACTICALACCOUNTINGPROBLEMSIISetA38.PersonCompanyacquired80percentoftheoutstanding
commonstockOfsonar,Inc,byissuing20,0000ofitsP10parvalueshareswhicharesellingat16,Feespaid
toconsultantsandattorneysinconnectionwiththeexchangeofsharesamountedtoP30,000.Immediately
priortotheacquisition,.Thetrialbalancesofthetwocompanieswereasfollows:CurrentassetsPARSON
BOOKVALUESONARPlantassetsP1,800,000P975,000FAIRVALUEInvestmentinmarketable3,000,000
1,300,000P1,025,000Securities(1,100,000)300,0001,400,000Currentliabilities(600.000)(800,000)
280,000Noncurrentliabilities(400,000)(400,000)800,000Commonstock(800,000)(200,000)530,000
Additionalpaidincapital(1,900,000)(775,000)RetainedearningsOntheconsolidatedbalancesheetafter
acquisition,howmuchwillbetheadditionalpaidincapitalofthecontrollinginterest,assumingthatallthe
requirementsforpoolingofinterest,havebeenmet?A.P1,000,000B.P1,200,000C.P1,160,000D.P
800,00039.ThefollowinginformationpertainstoarivercontrolprojectorRathausKonstruktInc.InTabuk,
Kalingawhichwascommentedin19X3andcompletedthefollowingyear:CostincurredtodateAtJune30,
19X3P9,750,000AtJune30,19X415,750,000EstimatedtotalcostAtcompletionAtJune30,19X3
19,500,000AtJune30,19X420,250,000TheprojectisaP22,500fixedpriceconstructioncontractand
Rathaususesthepercentageofcompletionmethodofaccounting.WhatistheincomereportedbyRathauson
itsKalingaprojectonJune30,19X4?A.P750,000b.P1,500,000C.P1,750,000D.P250,00040.Ovid
companymakesuseofthetwowayanalysisofoverheadvariances.Ovidsbudgetedfactoryoverheadfor
fixedcostsisp1,200,000permonth,plusavariablefactoryoverheadrateofP96foreverydirectlaborhour.
ThestandarddirectlaborhoursallowedforMay,19X6productionsare432,000hours.Ananalysisofthe
factoryoverheadshowedthat,inMay,Ovidhadanunfavourablebudget(controllable)varianceofP24,000and
afavorablevolumebalnceofP12,000.WhatistheappliedfactoryoverheadinMay?A.P5,371,200B.P5,
359,200C.P5,335,200D.P5,347,20041.ParadimCo.recentlypaidP5,000,000cashforthenetassetsof
SupremeCo.whichhadabookvalueofP5,000,000ofP4,000,000.Thebookvaluesoftheassetsand
liabilitiesapproximatetheirfairvaluesexceptasnotedbelow.BOOKVALUEFAIRVALUE
Inventory..............................P400,000P450,000Land......................................300,000500,000Buildingand
equipment,net...............1,400,0001,550,00068.Whichofthetwomethods(thepresentoftheautomatedhas
higherincomeatthelevelofsalesof26,000units?a.Present,P60,000b.AutomatedP60,000c.Present,P
240,000d.Automated,P240,00069.Afirahasthefollowingcapitalstructures:70debtand320equityinterest
rateondebtis12andoncommonstockis14iftheweightedaveragecostofthecapitalis9.66thenwhatisthe
marginaltaxrate?a.350b.400c600d.65070.SamanthaManufacturingrecentlycompletedandsoldan
orderof50unitsthathadthefollowingcosts:DirectmaterialsP1,500Directlabor8,500Variableoverhead
4,000Fixedoverhead1,400TOTALP15,400Appliedonthebasisofdirectlaborhours.Appliedattherateof
10ofvariablecost.Thecompanyhasnowbeenrequestedtoprepareabidorderforanothersetof50unitsof
thesameproduct.Ifan80learningcurvewereapplied,Samanthastotalcostonthisorderwouldbeestimated
ata.P6,400b.P8,600c.P9,900d.P15,40047.TimepiecesCompanymanufacturesandsellswatchesthat
carrya2yearunconditionalwarrantyagainstproductfailure.Basedonareliablestatistical,timepiecesknows
thatbetweenthesaleandthelapseoftheproductwarranty10%ofunitssoldwillrequireanaveragecostofP
250perunitforrepairs.Thefollowingdatareflecttherecentexperienceofthecompanyforthepast3years.
Numberofunitssold200820092010Numberofunitsrepaired:6,0008,50010,0002008801502002009
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201025035040048.MillenniumCompanyprovidedthefollowinginformationfor2010.NetIncome2,
5000,000TotalAssets5,600,000ShareCapital1,000,000SharePremium800,000Treasurysharesatcost
200,000Dividendsdeclared1,500,000400,000Priorperiodadjustmentforoverstatementof2009ending
inventoryThedebttoequityratio40%(totalliabilitiesdividedbytotalshareholdersequity)atDecember
31,2010.WhatwastheretainedearningsbalanceonJanuary1,2010?a.1,000,000b.1,800,000c.1,
6000,000d.1,4000,00049.OnJuly1,2010,DakotaCorporationIssuedofficespacefor5yearsatamonthly
rentalofP75,000.Onthatdate,DakotapaidthelessorP950,000whichincludedthefollowing:Rentdeposit
300,000Firstmonthsdeposit75,000Lastmonthsdeposit75,000Installationofnewwallsandoffices500,000
TheentireamountofP950,000waschargedtorentexpensein2010.Monthlyrentalswerepaidasscheduled
fromAugusttoDecember31,2010undertheoperatinglease?a.530,000b.500,000c.125,000d.450,000
50.Brisbanecompanyreportedthefollowinginformationfor2010SalesrevenueofP2,800,000costofgoods
soldofP1,000,000,distributioncostsofP400,000,administrativeexpensesofP350,000,depreciationofP
250,000,interestexpenseofP80,000andincometaxexpenseofP280,000.Allsalesweremadeforcashand
allexpensesotherthandepreciationandbondpremiumamortizationofP20,000werepaidincash.Allcurrent
assetsandcurrentliabilitiesremainedunchanged.Whatisthenetcashprovidedbyoperatingactivitiesduring
2010?a.440,000b.690,000c.670,000d.710.000PRACTICALACCOUNTINGPROBLEMSANSWERS1.
Understatementof2009warrantycost600,000A2.Cumulativeadditionaldepreciation(1M/10X6)600,000
Depreciationoncarryingamount(2.5M)/5)500,0002010Depreciation1,100,000B3.PerpetualPeriodic
Unadjustedbalances3,600,0003,450,000Unrecordedsales(200,000)GoodssoldFOBSP(500,000)
(500,000)GoodssoldFOBdestination(150,000)(150,000)GoodsheldonconsignmentGoodspurchased
FOBDest(arrived)400,000(,100,000)Obsoleteinventory(150,000)Adjustedinventory300,0003,360.000
3,300,000D4.Fairvalueofsharealternative60,000X35)2,100,000Less.Fairvalueofcashalternative
(30,000X50)1,500,000Grantdatefairvalueofequitycomponent600,0002009FVofequitycomponent
(60,000//3)200,000FVofliabilitycomponent(30,000X60/3)600,000Compensationexpense800,0002010
FVequitycomponent(60,000/3)200,000Fairvalueofliabilitycomponent(30,000X75)/3X2)600,000
900,000Compensationsexpense1,100,000C5.Lobstar(10,000)X150)1,5000,000Shrimp(50,000X.80)
4,000,000Salmon(30,000X200)400,000payment5,600,000Netunrealizedgain3,100,000B6.net
investmen4,204,000Less:PVofGRV(500,000x.58)280,000NetInvestmenttoberecoveredfromrentals
3,924,000Rentals(3,924,000/4.36)900,000Grossinvestment(900,000x6)+500,000residualvalue5,900,000
Less:NetInvestment4,204,000Financialrevenue1,696,000B7.Averageearnings(4M500,000)/5700,000
Capitalizationrate10%Netassetswithgoodwill7,000,000Less:Fairvaluewithoutgoodwill5,500,000Goodwill
1,500,000C8.Totalmarketvalue(exceptStellarCompanytreasuryshare)10,600,000Less:Totalcost
10,300,000Unrealizedgainontradingsecurities300,0009.Accruedpensioncost1/1(6,500,0005,000,000)
(1,500,000)Pensionexpense(1,000,000)Contributions1,200,000Accruedpensioncost12/31(1,300,000)D
10.AccountingProfit1,200,000Finesandpenalties500,000Cashdividendsreceived(800,000)Accounting
profitsubjecttotax900,000Unrealizedgainontradingsecurities(taxable)(200,000)Reversalofdeductible
temporarydifference(600,000)Reversaloftaxabletemporarydifference350,000Taxableprofit450,000B11.
Grossprofitfrominstalmentaccountsreceivable(120,000/30%)400,000Instalmentaccountsreceivable
(400,000/40%)1,000,000C12.averagegeneralpriceindexnumber(150+300)/2225Cash300,000AR
800,000Inventory(1,200,000x300/225)1,600,000PPE(2,000,000x300/125)4,800,000Totalassets
7,500,000Accountspayable400,000Bondspayable700,000Totalliabilities1,100,000Contributedcapital(1.2
Mx300/100)3,000,000RE(SQUEEZE)3,550,000BLessTreasuryshares(350,000x300/140)750,000SHE
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(7,500,0001,100,000)6,400,00013.Replacementcost9,000,000Less:Accumolateddepreciation(9Mx25%)
2,250,000SoundValue6,750,000Less:Carryingamount5,250,000Revaluationsurplusgross6/30/10
1,500,000Less:Deferredtaxlability(1.5Mx30%)450,000Revaluationsurplusnet6/30/101,050,000Less
Realization(1,050,000/5x6/12)105,000Revaluationsurplusnet12/31/10945,000APercentageof
accumulateddepreciation(1,750/7,000)25%14.Paymentforoperatingexpenses(1,00012030+400
550+100150)650,000B15.cost3,500,000Less:Accumulateddepreciation(3Mx10%x3)900,000Carrying
amount1/1/102,600,0002010Depreciation(2.6M500)x7/28)(7yearsremaining)525,000D16.PBO(5M
+600+(12%x5M)900100)5,200,000B17.10dairycattle3yearsold580,0002hogs4yearsold600,000
15horses2yearold1,350,0008Carabaos3.5yearsold290,0004dairycattle1.5yearsold200,0006
carabaos1yrold140,000Carryingamounton12/31/103,160,000A18.FVoflandandbuilding(lowerthanPV
ofminimumleasepayments)5,950,000B19.Net.Incometoordinaryshareholders(900,000x15)13,500,000
Dividendsonpreferenceshares500,000Totalnetincome14,000,000Divideby:(900,000plus(400,0000)
1,200,000DilutedEPS11.67C20.Deficiteliminated(1M+200+400+300)1,900,000A21.Totalshareholders
10,400,000Less:PSHE(1.25M+250)+(1.25Mx10%x4years)2,000,000Ordinaryshareholdersequity
8,400,000Divideby(230,000treasury)210,000Bookvalueperordinaryshare4000A22.Increasein
contributedcapital(8.5M5M)3,500,000Stockdividend(4Mx25%)(1,000,000)Donatedcapital(800,000)
Proceedsfromshareissuance1,700,000Accumulatedprofitsbeg1,500,000Stockdividends(4Mx25%)
(1,000,000)Cashdividendsdeclaredduringtheyear(SQUEEZE)(800,000)Netincome2,500,000
Accumulatedprofitsend2,200,000Barrowingpaid(1,500,000)Proceedsfromsharesissued1,700,000
Dividendspaid(800,000+500,000beginningdividendspayable)(1,300,000)Netcashusedinfinancing
activities(1,100,000)B23.totalcashdividends(500+300)800,000Fairvalueofpropertydividendatdateof
paymenton5/1/20101,400,000Fairvalueofsharedividendatdateofdeclaration(10%x200,000x15)
300,000DecreaseinRE2,500,000C24.Royaltyincomeforfirsthalfoftheyear800,000Royaltyincomefor
secondhalfoftheyear(10Mx10%)1,000,0002011RoyaltyIncome1,800,000A25.Accountreceivable
4,000,000Less:Requiredallowance300,000NRV.3,700,000A26.Proceeds3,000,000CashSurrenderValue
(145,000)UnexpiredInsurancepremium(90,000/12x2)(15,000)Gain2,840,000B27.Accruedliabilityon
Dec.31,20101,200,000C28.profit(900,000/30%)3,000,000B29.2010compensationexpensemarket
valueon12/31/20102,100,000B30.balanceperbankstatement1,250,000Depositintransit200,000
Outstandingchecks(80,000)Bankservicecharges25,000Interestincome(75,000)Errorinrecordingcheck
(73,00037,000)(36,000)31Adjustedaccountspayable(2.5M+150T300T)1,284,00032.Accumulated
depreciation12/31/093,000,000Impairmentloss2,000,000Depreciationexpensein2010(4M/4years)
1,000,000Total6,000,00033.optionprice(50,000x100)6,000,000Shareoptionsoutstanding2,000,000Total
8,000,000Less:Parvalueofsharesissued(50,000x100)5,000,000Sharepremium3,000,000B34.
Paymentforrealproperty2,000,000SaleofAFS(500+100)600,000PurchaseofH&E(800,000)Advances
toothercompanies(2,000,000)Costofpatent(150,000)Netcashused4,350,000B35.Cost5,000,000Less:
2006and2009amortization(5M/5x2)(Leaseterm)2,000,000Carryingamount12/31/093,000,000Less:
2010amortization(3M/4years)(remaininglifeofasset)750,000CA12/31/10depreciation2,250,000A36.
AdjustedRE1/1/10(3M400,000x70%)3,220,000A37.Collections5,000,000Rentreceivableand400,000
Whiteoff50,000Total5,450,000Less:Rentreceivablebeginning700,000Rentalrevenueaccrual4,750,000B
38.Accruedliability12/31/2010(25x50,000)1,250,000Less:Accruedliabilityor12/31/2009(17x50,000)
850,0002010compensationexpense400,000B39.B=552,25010B1,108=550,000Bonus=(550.000/1.10)
500,000B40.Preferencedividendin2009(10Mx12%)1,200,000Preferencedividendin2010(10Mx24%)
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2,400,000Ordinarydividends(130,00030,000)x121,200,000Totaldividenddeclaration2,800,000A2010
ordinarydividendrate(12.00dividedby50.00)24%41.BI500,000Netpurchases5,300,000TGAS5,800,000
Less:AdjustedEI(600,000+80,000)680,000COS5,120,000A42.10%preferencesharesissued(4M3M
equals1M/100par10,000Subscriptionprice(300,000/25%)1,200,000Less:Parvalue500,000Increasein
sharepremiumfromsubscription700,000Increaseinsharepremium10%PS(1,500,000300)1,200,000
Increaseinsharepremiumfromsubscription(700,000)Sharepremiumfromissuance500,000Proceedsfrom
sharesissued(1Mpar+500Tsharepremium)1,500,000Dividebysharesissued10,000Averageissueprice
150B43.FairvalueonDec.31,20105,600,000Less:AmortizedcostonDec31,20105,248,700Unrealized
gainonavailableforsalesecurities251,300A44.carryingamountoftheliabilityextinguished(5M+1.2M)
6,200,000Carryingamountofinventory(2,500,000)Fairvalueofshares(40,000x60)(2,400,000)Gainon
extinguishment1,300,000B45.Issuedprice(6Mx110%)6,600,000Less:FVofbondsexwarrants5,600,000
Equitycomponent1,000,000Excessoverparfromissuanceofshares(150100)x(6,000x20)6,000,000
Totalsharepremium7,000,000A46.PCF(18,000+5,000)23,000C47.2009Warrantyexpense(850x250)
212,500Less:2009Warrantyservicesfrom20009sales(250x250)62,50012/31/09warrantyliability150,000
2010Warrantyexpense(1,000x250)250,000Total400,000Less:2010Warrantyservicesfrom2009and
2010sales(750x250)167,50012/31/10Warrantyliability212,500D48.Totalshareholdersequity(5.6
M/140%)4,000,000Contributedcapital(1M+800,000)(1,800,000Treasuryshares200,000Retainedearnings
12/312,400,000RetainedearningsonJan.1(SQUEEZE)1,600,000BNetincome2,500,000Dividend
declared(1,500,000)Error(400,000)RetainedearningsDec.312,400,00049.RentalexpensefromJuly1to
December(75,000x8)450,000Amortizationofimprovements(500,000/5x6/12)50,000Totalexpenserelated
tooperatinglease500,000B50.Netcashprovidedbyoperatingactivities(2,8001,000400350100280)
670,000CInterestpaid(80,000+20,000)100,000BPROBLEMIThefollowinginformationwasobtainedinthe
auditofthecashaccountofCHELSEECOMPANYasofDecember31,2010.AssumethattheCPAsatisfied
himselfastotheproprietyofthecashbookthebankstatementsandthereturnedchecks,exceptasnoted:1.
ThebookkeepersbankrecondilationatNovember30,2010BalanceperbankstatementP194,000Add:
Depositintransit11,000TotalP205,000Less:OutstandingchecksNo.1434P1,40015627,50015715,800
15848,000159130023,000BalanceperbooksP182,0002.AsummaryofthebankstatementforDecember
2010.BalancebroughtforwardP194,000Deposits1,487,000TotalP1,681,000Charges(1,325,000)Balance,
December31,2010P356,0003.IncludedwithcancelledchecksreturnedwiththeDecemberbankstatement
werethecheckslistedbelow4.TheChelseeCompanydiscountedits.Own60daynoteforP90,000withthe
bankonDecember1,2010.Thediscountratewas6percent.Theaccountantrecordedtheproceedsasacash
receiptatthefacevalueofthenote.5.Theaccountantrecordscustomersdishonouredchecksasareduction
ofcashreceipts.Whenthedishonouredchecksareredpositedtheyarerecordedasregularcashreceipt.Two
NSFchecksforP1,800andP2,200werereturnedbythebankduringDecember.Bothcheckswereredeposit
andwererecordedbytheaccountant.6.CancellationsofChelseeCompanychecksarerecordedbya
reductionofcashdisbursement7.DecemberbankchargeswereP200inaddition,aP100servicechargewas
madeinDecemberforthecollectionofanotereceivableinNovember.Thesechargeswerenotrecordedon
thebooks.8.Checkno.1434listedintheNovemberoutstandingcheckswasdrawnin2008.Sincethepayee
cannotbelocated,thepresidentofChelseeCompanyagreedtotheCPAssuggestionthatthecheckbe
writtenbackintotheaccountsbyajournalentry.9.OutstandingchecksatDecember31,2010,totalledP49,400
includingchecks1432and158410.Thecutoffbankstatementdisclosedthatthebankhadrecordedadeposit
ofP24,000onJanuary2,2011.TheaccountanthadrecordedthisdepositonthebooksofDecember31,2010
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andthenmailedthedeposittothebank.CancelledchecksreturnedwiththeDecemberBankstatement
NumberDateofcheckAmountofcheckComments156211/28/10750Thischeckwasinpaymentofinvoice
for57,500andwasrecordedinthecashbookasP7,500157111/28/105800Thischeckwasinthepayment
ofaninvoiceforP5,800andwasrecordedinthecashbookasP5,800158312/04/101,500Examinationof
thischeckrevealedthatitwasunsignedAdiscussionwiththeclientdisclosedthatithadbeenmailed
inadvertentlybeforeitwassigned.Thecheckwasendorsedanddepositedbythepayeeandprocessesbythe
bankeventhoughitwasalegalnullity.Thecheckwasrecordedinthecashdisbursementsjournal.1588
12/12/108,000Thischeckreplaces1584.Whichwasreturnedbythepayeebecauseitwasmutilated?Check
1584wasnotcancelledonthebooks12/19/102,000Thiswascountercheckdrawnatthebankbythe
presidentofthecompanyasacashadvancefortravelexpense.Thepresidentoverlookinformingthe
bookkeeperaboutthecheck12/20/103,000ThedrawerofthischeckwastheCelseaCompany159512/20/10
3,500ThischeckhadbeenNSFandreturnedtothepayeebecausethebankhaderroneouslybelievedthatthe
checkwasdrawnbytheChelseencompany.Subsequently,thepayeewasadvisedtoredepositthecheck1599
01/05/11100,000ThischeckgiventothepayeeonDecember30,2010asapostdatedcheckwiththe
understandingthatitwouldnotbedepositeduntilJanuary5.Thecheckwasnotrecordedonthebooksin
December.1.WhatisthecorrectamountofoutstandingchecksonDecember31?a.P41,400b.P33,250c.
P48,000d.P40,0002.WhatisamountofcashreceiptsperbookinDecember?a.P1,496,900b.P1,504,900c.
P1,495,100d.P1,487,0003.WhatisamountofcashdisbursementperbookinDecember?a.P1,254,850b.
P1,252,850c.P1,256,850d.P1,248,8504.WhatisthecashinbankbalanceperbookasofDecember31?a.
P426,050b.P428,250c.P430,050d.P343,0505.WhatistheadjustedcashbalanceasofDecember31?a.
P343.000b.P340,200c.P347,000d.P344,200PROBLEMNO.2CALACHUCHICORP.ACCOUNTBALANCE
INVOICECUSTOMERDEC31,2010DATEAMOUNTAruy,Inc.P35,18012/06/1011/29/1014,60021,180
NakuCo.20,92009/27/1008/20/102,0008,920SyakCorp.30,60012/08/1010/25/1020,00010,600TripCo
45,14011/17/1010/09/1023,14022,000UyCo.31,60012/12/1012/02/1019,20012,400XakCo.17,400
09/12/1017,400TheestimatedbaddebtratesbelowarebasedonCalachuchicropsreceivablecollection
experience.AgeofAccountsRate030days1%3160days1.5%6190days3%91120days10%Over120
days50%TheallowanceforbaddebtsaccounthadadebitbalanceofP5,500onDecember31,2010before
adjustment.6.Thecompanysaccountsreceivableunder6190dayscategoryshouldbea.P32,600b.
P44,320c.P44,600d.P42,0007.Thecompanysaccountsreceivableunder91120categoryshouldbea.P
38,320b.P40,000c.P29,400d.P12,0008.Theallowanceforbaddebtstobereportedonthestatementon
financialpositionatDecember31,2010isa.P9,699b.P15,199c.P4,199d.P5,5009.Whatentryshouldbe
madeonDecember31,2010,toadjusttheallowanceforbaddebtsaccount?a.Baddebtexpense15,199
Allowanceforbaddebts15,199b.Baddebtexpense4,199Allowanceforbaddebts4,199c.Allowanceforbad
debts5,500Baddebtsexpense5,500d.Baddebtexpense9,699Allowanceforbaddebts9,699PROBLEM
NO.3TheMALAWICOMPANYisanimporterandwholesaler.Itsmerchandiseispurchasedfromanumberof
suppliersandiswarehouseduntilsoldtoconsumers.InconductinghisauditfortheyearendedDecember
31,2010,thecompanyCPAdeterminedthatthesystemofinternalcontrolwasgood.Accordingly,heobserved
thephysical.Inventoryataninterimdate,November30,2010,insteadofatyearend.Thefollowing
informationwasobtainedfromthegeneralledger.Inventory,January1,2010P90,000Inventory,November
30,2010225,000SalesforelevenmonthsendedNovember30,2010800,000SalesforyearendedDecember
31,2010950,000PurchasesforelevenmonthsendedNovember30,2010(beforeauditadjustments)720,000
PurchasesforyearendedDecember31,2010(beforeauditadjustment)810,000AdditionalInformationisas
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follow:a.GoodsreceivedonNovember28butrecordedaspurchasesinDecember10,000b.Depositsmadein
October2010forpurchasestobemadein2011butchargeTopurchase14,000c.Defectivemerchandise
returnedtosuppliers:TotalatNovember30,20105,000TotalatDecember31,2010,excludingNovember
items7,000d.GoodsshippedinNovemberunderFOBdestinationandreceivedinDecemberwererecorded
aspurchaseinNovember18,500e.Throughthecarelessnessoftheclientwarehouseman,certaingoodsWere
damagedinDecemberandsoldinthesamemonthatitscost.20,000f.AuditoftheclientsNovemberinventory
summaryrevealedthefollowing:Itemsduplicated3,000PurchasesintransitUnderFOBshippingpoint12,000
UnderFOBdestination18,500Itemscountedbutnotincludedintheinventorysummary7,000Errorsin
extensionthatovervaluedtheitems4,00011.Whatisthecorrectamountofnetpurchasesforthemonthof
December2010?a.P83,000b.P91,500c.P82,500d.P101,50012.ThecorrectinventoryonNovember30,
2010isa.P206,500b.P214,500c.P237,000d.P218,50013.Whatisthegrossprofitforelevenmonthsended
November30,2010?a.P234,000b.P217,000c.P224,000d.P237,50014.Whatisthecostofsalesratiofor
elevenmonthsendedNovember30,2010?a.73%b.70%c.28%d.72%15.Whatistheestimatedinventory
onDecember31,2010?a.P183,100b.P175,900c.P184,400d.P190,000PROBLEMNO.4Youhavebeen
askedbytheproprietoroftheSOMALIACO.toverifytheaccountabilityofthecashierbookkeeper,whowas
allowedtotakeavacationleaveafewdaysagoA.Thebankreconciliationstatementspreparedbythecashier
bookkeeperarepresentedbelow:November30,2010BalanceperbankstatementP21,500Cashonhand500
Total22,000Outstandingchecks:No.2520P2,00025211,40025221,900(3,300)Erroneousbankcharge
2,000Erroneousbankcredit(500)BookbalanceP20,200December31,2010BalanceperbankstatementP
135,000Cashonhand6,300Total141,300OutstandingchecksNo.2674P31,000267510,30026765,000
(41,300)Erroneousbankcharge3,000Erroneousbankcredit(600)BookbalanceP102,400B.Thecashin
BankaccountinthegeneralledgershowsthefollowingdebitsandcreditsduringDecemberCashinbankDec.
1balanceP20,2002Receivedfromcustomers4,5007Receivedfromcustomers5,00012Receivedfrom
customers20,00017Receivedfromcustomers30,00023Receivedfromcustomers9,00027Receivedfrom
customers70,00031Receivedfromcustomers48,500TotalP198,200Dec.1ChecksIssuedP2,0005Checks
Issued5,20014ChecksIssued31,00024ChecksIssued46,00028ChecksIssued7,60031balaced102,400
TotalP198,200C.thefollowingsummarizedtransactionsweretakenfromthebankstatementsforthemonths
ofDecember2010.Balance,December1,2010TotaldepositsThetotaldepositsperbankstatementinclude:a.
CollectionofnotesreceivableP5,000b.CorrectionofNovembererroneousbankcharge2,000c.December
10depositofLava,Inc.CreditedinerrortoSomalia600TotalP3,500D.cashonhandpercountinthe
morningofJanuary2,2011amountedtoP6,300E.beforeleavinghiscompanyforaoneweekvacation,the
proprietorhadleftseveralsignedblankchecksthatthecashierbookkeeperhadcashedforhispersonaluse.
16.WhatistheadjustedcashbalanceonNovember30,2010?a.P16,500b.P13,200c.P20,200d.P14,500
17.TheamountofuncountedinDecemberisa.P11,000b.P13,200c.P9,000d.P15,10018.Theamountof
unrecorded/unsupporteddisbursementsinDecemberisa.P15,100b.P10,900c.P7,000d.P5,00019.Whatis
thetotalcashshortageasofDecember31,2010?a.P26,000b.P15,100c.P33,000d.P7,00020.Whatisthe
adjustedcashbalanceonDecember31,2010a.P102,400b.P125,000c.P87,400d.P111,400Indicatorsthat
theassetsoftheunitwereimpaired.ThecarryingamountsoftheassetsandliabilitiesoftheunitatDecember
31,2010were:BuildingsP4,200,000Accumulateddepreciationbuildings(1,800,000)Factorymachinery
2,200,000Accumulateddepreciationmachinery(400,000)Goodwill150,000Inventory800,000Receivables
400,000Allowancefordoubtfulaccounts(50,000)Cash200,000Accountspayable300,000Loans200,000
DepreciatedatP600,000perannumDepreciatedatP450,000perannumPOTPOT:determinedthevalue
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useoftheunittobeP5,350,000.Thereceivableswereconsideredtobecollectible,exceptthoseconsidered
doubtful.Duringtheyear2011,POTPOTincreasedthedepreciationchargeonbuildingtoP650,00perannum,
andtoP500,000perannumforfactorymachinery.TheinventoryonhandatJanuary1,2011wassoldbythe
endoftheyear,atDecember31,2011,POTPOTCompany,duetoaretuminthemarkettouseofthe
traditionalbarrelsforwinesandanincreaseinwineproduction,assessedtherecoverableamountofthecash
generatingunittobeP300,000greaterthanthecarryingamountoftheunit.Asaresult,POTPOTrecognizeda
reversaloftheimpairmentloss.21.WhatamountofimpairmentlossonDecember31,2010shouldbe
allocatedtoinventory?a.P56,000b.P28,829c.P32,000d.P022.WhatisthefactoryMachinerynetcarrying
amount(afterallocationofimpairmentkiss)onDecember31,2010?a.P1,735,135b.P1,674,000c.P
1,800,000d.P1,728,00023.Whatamountorreversalofimpairmentlossshouldberecognizedon
December31,2011?a.P300,000b.P268,000c.P168,000d.P200,00024.Assumethattherecoverable
amountatDecember31,2011wasP200,000greaterthanthecarryingamountofthecashgeneratingunit.
Whatisthenetcarryingamountofthebuildingsafterrecognitionoftheimpairmentrecovery?a.P1,313,219
b.P1,768,781c.P1,800,000d.P1,750,00025.AssumethattherecoverableamountatDecember31,
2011wasP200,000greaterthanthecarryingamountofthecastgeneratingunitandthattherecoverable
amountoftheBuildingswasP1,750,000.Whatisthenextcarryingamountofthefactorymachineryafterthe
recognitionoftheimpairmentrecovery?a.P1,332,000b.P1,313,219c.P1,228,000d.P1,324,000Goding,
Inc.preference60,0001,200,0001,290,000tradingSonataCo.ordinary(30%ownership)600,00034,200,000
33,900,000investmentinAssociateJordanCo.ordinary750,0002,025,0001,500,000availableforsale
BORDOCOMPANYSinvestmenthadthefollowingmarketvaluesatDecember31,2010OmarCo.ordinaryP
3,060,000Goding,Inc.preference1,290,000SonataCo.ordinary33,450,000JordanCo.ordinary1,700,000
Assumethatalloftheabovesecuritieswereacquiredin2009andnoneoftheindicateddeclinesinmarket
valueareconsideredotherthantemporary.26.WhichofthefollowingshouldbereportedinBordos2009
incomestatement?a.UnrealizedlossofP60,000b.UnrealizedlossofP585,000c.UnrealizedlossofP200,
000d.UnrealizedlossofP150,00027.Whatamountoflossintheabovesecuritiesshouldbeincludedin
BordosstatementofcomprehensiveincomefortheyearendedDecember31,2009ascomponentofother
comprehensiveincome?a.P675,000b.P465,000c.P585,000d.P525,00028.AssumethatJordanCo.s
ordinarysharesmarketdeclineisotherthantemporary.Whatvaluationentryisrequiredforthisinvestmentat
December31,2009underthischangeinassumption?a.Impairmentloss525,000InvestmentinAFSsecurities
525,000b.UnrealizedlossonAFSsecurities525,000InvestmentinAFSsecurities525,000c.Impairmentloss
525,000UnrealizedlossonAFSsecurities525,000d.Novaluationentryisnecessary525,000Assumethatthe
investmentcategoriesremainthesameandthatalldeclinesin2009and2010aretemporaryexceptforthe
2009declineinJordanCo.sordinaryshares29.Inits2009incomestatement,Bordoshouldreporta.
UnrealizedgainofP150,000b.UnrealizedgainofP410,000c.GainonimpairmentrecoveryofP200,000d.
UnrealizedgainofP210,00030.WhatamountofgainshouldbeincludedinBordosstatementof
comprehensiveincomefortheyearendedDecember31,2010ascomponentofothercomprehensiveincome?
a.P0b.P200,000c.P325,000d.P525,0002008P127,0002009150,0002010128,500Youareperforming
theauditfortheyearendedDecember31,2010.Duringyourexaminationyoudiscoverthefollowingerrorsa.
Asaresultoferrorsinthephysicalcount,endinginventoriesweremisstateasfollows:December31,2009P14,
000overstatedDecember31,2010P23,000understatedb.OnDecember29,2010.Dominicarecordedasa
purchase,merchandiseintransitwhichcostP15,000.ThemerchandisewasshippedFOBDestinationandhad
notarrivedbyDecember31.Themerchandisewasnotincludedintheendinginventory.c.Dominicarecords
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salesontheaccrualbasisbutfailedtorecordsalesonaccountmadetheendofeachyearasfollows2008P4,
00020095,00020103,500d.ThecompanyfailedtorecordaccruedofficesalariesasfollowsDecember31,
2008P10,000December31,200914,000e.OnMarch1,2009,a10%stockdividendwasdeclaredand
distributed.Theparvalueofthesharesamountedto10,000andmarketvaluewasP13,000.Thestock
dividendwasrecordedasfollowsMiscellaneousexpense13,000Ordinarysharecapital10,000Retained
earnings3,000f.OnJuly2009,Dominicaacquiredathreeyearinsurancepolicy.Thethreeyearpremiumof
P6,000waspaidonthatdate,andentirepremiumwasrecordedasinsuranceexpense.g.OnJanuary1,2010
DominicaretiredbondswithabookvalueofP120,000forP106,000thegainwasincorrectlydeferredandis
beingamortizedover10yearsasareductionofinterestexpenseonotheroutstandingobligations.31.Whatis
theadjustednetincomefortheyearendedDecember31,2008?a.P133,000b.P117,000c.P121,000d.P
113,00032.WhatistheadjustednetincomefortheyearendedDecember31,2009/a.P151,000b.P187,
000c.P104,400d.P203,60033.WhatistheadjustednetincomefortheyearendedDecember31,2010?a.
P129,600b.P131,000c.P104,400d.P203,60034.WhatadjustingentryshouldbemadeonDecember31,
2010,tocorrecttheerrordescribeinitemB?a.Purchases15,000Accountspayable15,000b.Accounts
payable15,000Purchases15,000c.Accountspayable15,000Cash15,000d.Noadjustingjournalentryis
necessary35.TheadjustingentryonDecember31,2009,tocorrecttheerrordescribedinitemEshould
includeadebittoa.RetainedearningsofP16,000b.OrdinarysharecapitalofP10,000c.Sharepremiumof
P3,000d.MiscellaneousexpensesofP3,000PROBLEMNO.8InmakingthefirstadultoftheDelivery
EquipmentaccountofDELTACORPORATIONasofDecember31,2010,youencounterthefollowingfacts.
DATEPARTICULARSDEBITCREDIT1/1/08Tracks1,2,3,and4P3,200,0003/15/09ReplacementofTruck3
tires25,0007/01/09Truck5800,0007/10/09Reconditioningoftruck4,whichwasdamagedinacollision
35,0009/1/09Insurancerecoveryontruck4accidentP33,00010/01/09Saleoftruck2600,0004/01/10Truck
61,000,000150,0005/2/10Repaintingoftruck127,0006/30/10Truck7720,00012/1/10Cashreceivedon
leaseoftruck722,000AccumulatedDepreciationDATEPARTICULARSDEBITCREDIT12/31/08Depreciation
expenseP300,00012/31/09Depreciationexpense300,00012/31/10Depreciationexpense300,000Additional
information:1.OnJuly1,2009,Truck3wastradedinforanewtruck,truck5costingP850,000theselling
partyallowedaP50,000tradeinvaluefortheoldtruck2.OnApril1,2010,truck6waspurchasedforP
1,000,000truck1andcashofp850,000beinggivenforthenewtruck3.Youareinstructedbytheseniorin
chargeoftheaudittoacceptthedepreciationrateof20%byunitbasis4.Unitcostoftrucks1to4isatP
800,000each36.Thenetincrease(decrease)inretainedearningsshouldbea.(P1,102,000)b.(P545,000)c.
P80,000d.(P1,022,000)37.WhatisthelossontradeinofTruckNo.3?a.P430,000b.P510,000c.P560,000
d.P038.WhatisthegainonsaleofTruckno.2?a.P120,000b.P200,000c.P80,000d.P039.Whatisthe
lossontradeinofTruckNo.1?a.P290,000b.P170,000c.P150,000d.P040.Whatisthecorrectcostoftruck
No.5?a.P850,000b.P800,000c.P900,000d.P560,00041.WhatisthecorrectcostoftruckNo.6?a.
P440,000b.P305,000c.P800,000d.P1,000,00042.Whatisthecorrectdepreciationexpensefor2009?a.
P725,000b.P305,000c.P605,000d.P600,00043.Theentrycorrectdepreciationexpensefor2010?a.
P552,000b.P592,000c.P712,000d.P300,00044.Theentrycorrectthedepreciatinchargesfortheyears
2008/through2010shouldincludeacredittoaccumulateddepreciationofa.P645,000b.P937,000c.
P900,000d.P292,00045.ThebalanceoftheDeliveryEquipmentaccountsatDecember31,2010shouldbe.
a.P5,770,000b.P3,320,000c.P4,170,000d.P3,370,000PROBLEMNO.9TheGUNDINGCo.isoncalendar
yearbasts.Thefollowingdatawerefoundduringyouraudit.a.GoodsintransitshippedFOBshippingpointon
December28byasupplierintheamountofP100,000hadbeenexcludedfromtheinventoryandfurther
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testingrevealedthatthepurchasehadbeenrecorded.b.GoodscostingP30,000hadbeenreceived,included
ininventory,andrecordedasapurchase.However,uponyourinspectionthegoodswerefoundtobedefective
andwouldbeimmediatelyreturned.c.MaterialscostingP170,000andbilledonDecember30atasellingprice
ofP264,000hadbeensegregatedinthewarehouseofshipmenttoacustomer.Thematerialshadbeen
excludedfrominventoryasasignedpurchaseorderhadbeenreceivedfromthecustomer.TermsFOB
destination.d.GoodscostingP70,000wasoutonconsignmentwithGundaraInc.sincethemonthlystatement
fromGundaralistedthosematerialsasonhand,theitemshadbeenexcludedfromthefinalinventoryand
invoicedonDecember31atP80,000.e.ThesaleofP150,000worthofmaterialsandcostingp120,000had
beenshippedFOBpointofshipmentonDecember31.However,thisinventorywasfoundtobeincludedinthe
finalinventory.f.GoodscostingP100,000andsellingforP140,000hadbeensegregated,butnotshippedat
December31,andwerenotincludedintheinventory.Areviewofthecustomerspurchaseordersetforth
termsasFOBdestination.Thesalehadnotbeenrecorded.g.Yourclienthasaninvoicefromasupplier,terms
FOBshippingpoint,butthegoodshadnotarrivedasyet.However,thesematerialscostingP134,000hadbeen
includedintheinventorycount,nutnoentryhadbeenmadefortheirpurchase.h.Merchandisecostingp
200,000hadbeenrecordedasapurchasebutnotincludedinInventory.TermsofsaleareFOBshippingpoint
accordingthesupplierwarehousewhichhadarrivedbyDecember31.FurtherInspectionoftheclientsrecords
revealedthefollowingDecember31balances:Inventory,P1,350,000Accountsreceivable,P630,000
accountspayable,P690,000salesP6,032,000Purchases,P3,150,000NetIncome,P727,000.Basedon
theprecedinginformation,determinetheadjustedbalancesofthefollowing:46.Inventorya.P700,000b.
P934,000c.P1,900,000d.P1,840,00047.Accountsreceivablea.P286,000b.P380,000c.P146,000d.
P405,00048.Purchasesa.P3,354,000b.P3,150,000c.P3,254,000d.P3,120,00049.Salesa.P5,848,000b.
P6,376,000c.P5,683,000d.P5,768,00050.NetIncomea.P769,000b.P569,000c.P829,000d.P709,000
PROBLEM10:PresentedbelowareCOMBANTRINCOMPANYScomparativestatementsoffinancialposition
andincomestatementsCOMBANTRINCOMPANYCOMPARATIVESTATEMENTSOFFINANCIALPOSITION
December31,2010and2009Assets20102009CurrentassetsCashP119,000P98,000Accountsreceivable
312,000254,000Inventory278,000239,000Prepaidexpenses35,00021,000Totalcurrentassets744,000
612,000Availableforsalesecurities59,000Property,plantandequipment536,000409,000Accumulated
depreciation(76,0000)(53,000)Totalnoncurrentassets519,000356,000TotalassetsP1,263,000P968,000
LiabilitiesandshareholdersequityCurrentassetsAccountspayableP212,000P198,000Accruedexpenses
98,00076,000Dividendspayable10,000_________Totalcurrentliabilities350,000274,000Notespayable
due2012125,000__________Totalliabilities475,000274,000Shareholderequity:Ordinarysharecapital
600,000550,000Retainedearnings188,000144,000Totalshareholdersequity788,000694,000Total
liabilitiesandshareholdersequityP1,263,000P968,000COMBANTRINCOMPANYCONDENSED
COMPARATIVEINCOMESTATEMENTSFortheYearsEndedDecember31,2010and2009Netsales2010
2009CostofgoodssoldP3,561,000P3,254,000Grossincome2,789,0002,568,000Expenses772,000
686,000Netincome521,000486,000P251,000P200,000AdditionalinformationforCOMBANTRINCOMPANY
a.Allaccountsreceivableandaccountspayablerelatetotrademerchandiseb.Theproceedsfromthenotes
payablewereusedtofinanceplantexpansionc.Ordinarysharesweresoldtoprovideadditionalworkingcapital
Computethefollowingfor2010.46.Cashcollectedfromaccountsreceivable(assumeallsalesareonaccount)
a.P3,619,000b.P3,503,000c.P3,561,000d.P3,249,00047.Totalpurchases(assumeallpurchasesof
inventoryareonaccount)a.P2,828,000b.P2,789,000c.P2,550,000d.P2,750,00048.Cashpaymentsmade
onaccountspayabletosuppliersa.P2,630,000b.P2,842,000c.P2,828,000d.P2,814,00049.Netcash
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providedbyoperationsa.P689,000b.P191,000c.P222,000d.P199,00050.Cashreceiptsnotprovidedby
operationsa.P175,000b.P177,000c.P50,000d.P125,000SETA1.A,BandCarepartnersinauniversal
partnershipofprofitsengagedinoperationoftaxis.Thepartnerscontributed:A100ToyotaViosB3,000aqm
landCFuelandoilsWhichofthefollowingiscorrect?a.Incaseoflossduetofortuitousevent,thepartnership
bearsthelossb.Thepartnershipbecomestheownerofthethingscontributedtothepartnershipc.The
partnersretainedtheownershipoverthethingstheycontributedhencetheywillbeartheriskofloss.d.The
partnershipbeginsfromthemomentoftheexecutionofthecontract,exceptifstipulatedotherwise2.Whichof
thefollowingstatementsisnotcorrect?a.Thecreditoracquiresrealrighttothefruitsofthethingfromthetime
theyhavebeendeliveredb.Anoralsaleoflandmadebyitsownerinunenforceablec.Thebuyeracquiresreal
righttothefruitsofthethingfromtheperfectionofthesaled.Asaleoflandmadebyanagentwithoutawritten
authorityfromtheownerisvoid3.A16yearsoldsoldhispropertytoB,whodidnotnoticethatAisaminor.
OneyearlaterBsoldthepropertytoCwhoknewthatAisaminor.CanAaskforannulmentofthesale?a.Yes,
becauseCisinbadfaithb.No,becauseBisingoodfaithc.No,becauseBisnotcapableofreturningthe
propertyd.Yes,whetherCisingoodfaithorinbadfaithbecausethetitleofBisvoidable4.Apromissorynote
readsIPromisetopayA,B,CandDP24,000Sgd.E,FandG.BcancollectfromEa.P24,000b.P8,000c.P
6,000d.P2,0005.Today,SsoldtoBinSisnamethelandofO,withoutauthorityfromO,Bboughtthelandin
goodfaith.Thecontractprovidesthatthedeliverywillbe30daysfromtoday.Thecontractisa.ValidifSowns
thelandonthedayofdeliveryb.Void,becauseSwasnottheownerofthelandwhenthecontractwas
perfectedc.Unenforceable,becauseShadnoauthoritytosellthelandd.Voidable,becauseSisguiltyoffraud
6.A,BandCaresolidarydebtorsofDforP90,000wheretheduedateisonApril1,2011.OnJanuary1,2011,
ApaidDP90,000.LaterAdemandedreimbursementfromB.ifBeffectsreimbursementtoAonJuly1,2011.
Whichofthefollowingiscorrect?a.BpaysAP60,000plusinterestfromJanuary1,2011toJuly1,2011b.B
paysAP30,000plusinterestfromJanuary1,2011toJuly1,2011c.BpaysAP30,000plusinterestfromApril
1,2011toJuly1,2011d.BpaysAP45,000plusinterestfromApril1,2011toJuly1,20117.Ssoldhis
agriculturallandtoBforP1M.TheFMVisP1.5M.B.paidsincounterfeitpesobills.Thesaleisa.Void,
becausethecauseisillegalb.Valid,becausethecauseisthesellingpriceofPIMc.Rescissible,becauseof
lesionwhichismorethanofthevalueofthepropertyd.Voidable,becauseofthefraudcommittedbyB.8.
Asregardcashdividend,whichofthefollowingiscorrect/a.Declaredbytheboardofmajorityvoteandratified
bythestockholdersbythemajorityvote.b.Declaredbytheboardofmajorityvoteandratifiedbythe
stockholdersbyvoteoftheoutstandingcapitalstockc.Declaredbytheboardofmajorityvoteandneednot
beratifiedbythestockholdersd.Declaredbytheboardby3/2voteandneednotberatifiedbythestockholders
9.AbarrowedfromBP2MandthesecureitspaymentAorallyagreedtodeliverhis8hectareagriculturalland
bywayofantichresisandtopay12%interestperannura.Whichiscorrect?a.Thecontractsofloanand
antichresisarebothvalidb.Thecontractsofloanisvalidbutantichresisisvoidc.Thecontractsofantichresisis
validbutloanisvoidd.Bothcontractsofloanandantichresisarevoid10.Elementsofcontractsofpledgeand
mortgage,except.a.Botharenecessarycontractsb.Botharerealcontractsc.Bothcannotexistwithouta
validobligationd.Incaseofdefault,thecreditorscannotappropriatethethingspledgedormortgaged11.
Whichofthefollowingstatementsisnotcorrecta.Anagreementtoconstituteacommodatumisbindingandis
perfectedfromthemomentthereismeetingofmindsb.Fixed,savingsandcurrentdepositsofmoneyinbanks
andsimilarinstitutionsshallbegovernedbytheprovisionsconcerningmuthiumc.Precariumisakindof
commodatumwherethebailormaydemandthethingloanedatwilld.Incaseofextraordinaryexpenses,the
debtorinmutuumwillshoulder50%ifheisinactualuseofthethingbarrowed12.AcontributedPIM,B
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contributedPIMandCcontributedservices.theyagreedtodividetheprofitsandlossesequality.incaseof
lossofP3Mforhowmuch,ifany,isCliable?a.Nothingbecauseanindustrialpartnerisexemptfromlossesb.
PIMbutwithreimbursementfromAandBequalityc.AandBshallshoulderthelossequalityatP1.5Meachd.
PIM,asstipulated13.Asregardsthecorporatebylaws,whichofthefollowingistrue?a.Toadopt,amendor
repeal3/2oftheoutstandingcapitalstockisneededb.Todelegatetotheboardofdirectorsthepowerto
amend,repealoradoptnewbylaws,majorityoftheoutstandingcapitalstockc.Torevokethepowerdelegated
totheboardtoamend,repealoradoptnewbylaws3/2oftheoutstandingcapitalstockd.Toamend,repealor
adoptnewbylaws,majorityoftheoutstandingcapitalstock.14.Acontractofantichresisisa.Acontractof
mortgagewherebypossessionofthemortgagedpropertyisgiventothecreditorb.Acontractofloansecured
byarealproperty,wherepossessionisretainedbythedebtorc.Acontractofloanwithoutsecurityd.A
consensualcontractasitisperfectedbymereconsent15.Asubscribedto1,000votingsharesofstockofX
Corporation.Shepaid25%ofthesaidsubscriptionduringthestockholdersmeetingcanAvoteallher
subscribedshares/a.No,becausethesubscriptionhasnotyetbeenfullypaidb.No,becauseAsshareshave
becomedelinguentwhichcannotbevotedc.Yes,astothepaidpercentageofsubscriptiond.Yes,because
unpaidsharesnotdelinquentcanbevoted16.Todefraudhiscreditor,AsoldhispropertytoB(whowasin
goodfaith).LaterBsoldthepropertytoC,whowasinbadfaith.Maythecreditorrescindthesale?a.Yes,
becauseC,isbadfaithb.No,becauseBisingoodfaithc.No,becauseBisnotcapableofreturningthe
propertyd.Yes,becausethecontractisrescissible17.AwashavinghishouserepairedbyB,whoneeded
constructionmaterials,soAorallytoldthesellerC,giveBthematerials,Ishallberesponsible.Ishallpayin30
days.CdeliveredthematerialsAsaresult,a.ThecontractisunenforceablebecauseAmadeanoral
agreementtoanswerforthedebtofBb.ThecontractisenforceablebecauseAdidnotmakeaspecialpromise
toanswerforthedefaultofanotherpersonc.ThecontractshallbeenforceableifthereisratificationbyAd.
ThecontractshallbeunenforceableifthevalueisatleastP500.0018.Underthenegotiableinstrumentslawto
beaholderinduecourse,theholdermusthaveacquiredtheinstrumentbeforeitisoverdue.doesthisapply
tothepayeetowhomthemakerissuedanoverduenote?a.Yes,becausethepayeeisstillconsideredaholder
b.Yes,becauseissuancetothepayeeisnotconsideredanegotiationc.No,becausethelawdoesnot
distinguishbetweenpayeeandsubsequentholderd.No,becausethepayeeisprivytothecontractbetween
himselfandthemaker19.Inwhichofthefollowingisdemandnecessarytomakethedebtorindelayinthe
performanceofhisobligation?a.Whenthetimeofperformanceisoftheessenceb.Whenthetimeof
performancehasbeenstipulatedc.Whenthelawsoprovidesd.Whendemandwouldbeuseless20.With
writtenauthorityfromhisprincipal,theagentsoldorallythelandoftheprincipal.Thesaleisa.Rescissibleb.
Voidablec.Uncoforceabled.Void21.WithoutauthorityfromB,AorallysoldBshouseinBsname.Thesale
isa.Rescissibleb.Voidablec.Uncoforceabled.Void22.SsoldBhislandonSeptember19,2010.On
September25,anabsolutedeedofsalewasexecutedandnotarizedonSeptember30,thesalewasregistered
withtheRegistryofDeeds,OnOctober5,Btookactualpossessionofthelandbybuildingafencethereon.
WhendidBacquireownershipoftheland?a.OnSeptember19b.OnSeptember25c.OnSeptember30d.
OnOctober523.SsoldtoBhiscaronSeptember19,2010.OnSeptember25,anabsolutedeedofsalewas
executedandnotarized.onSeptember30,thesalewasregisteredwiththeLTO.OnOctober5,Btookactual
possessionofthecar.WhendidBacquiretitletothecar?a.OnSeptember19b.OnSeptember25c.On
September30d.OnOctober524.AandBarecoownersofaperceloflandAdonatedhissharetoCcanB
redeemthesaidsharefromC?a.Yes,becausethelawlookswithdisfavouratcoownershipb.No,because
legalredemptionappliesonlyincaseofoneroustransfersc.No,unlessheenforcehisrightthroughcount
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actiond.Yes,butinproportiontohisinterestinthelandascoowner25.DowesCasumofmoneywithMas
mortgagorofhislandtosecuretheloan.Isthemortgagevalidevenifthemortgagorisnotthedebtor?a.Yes,
providedMistheabsoluteownerofthepropertymortgagedb.Yes,provideditisinwritingandregisteredc.
No,themortgagormustbethedebtorhimselfd.No,unlessthemortgagorisacodebtor26.Inthreeofthe
followingcases,theagencycannotberevokedwithoutajustcauseexcept:a.Itismeansoffulfillingan
obligationalreadyexistingb.Abilateralcontractdependsuponitc.Itiscoupledwithinterestcommontothe
greatandprincipald.Partnerisappointedmanagerinthearticlesofpartnership27.PappointsAasguarantee
commissionagenttosellhisproductsAsoldthemtoBwhofailedtopaydespitethediligenteffortsofAin
collectingisAstillliableforthepurchaseprice?a.Yes,becauseoftheguaranteecommissiongiventohimb.
No,becausehewasnotatfaultinthecollectionc.No,ifherreturnstoguaranteecommissiond.Yes,butheis
notentitledanymoretothecommissions28.PappointedA1andA2ashisagentsforacommontransaction
andtheyagreedthattheyshallbesolidarityliableforPfordamagesincaseofviolationsoftheirobligationsas
such.Whatistheagentatfaulttheonlyoneliablefordamagesevenifsolidarityhasbeenstipulated?a.Ifthe
otheragentisnotatfaultb.Bothofthemshallbeliablealwayssincesolidaritywasagreeduponc.Iftheoneat
faultshallanswerforallthedamagesd.Iftheoneatfaultactedinexcessofauthority29.A,B,andCentered
intoanoralcontractofpartnershipeachcontributingP2Meachofthecommonfundbutfailedtoregisterthe
partnershipwiththeSEC.Inthepartnershipvalid/a.No,becauseeverycontractofpartnershiphavingacapital
ofthreethousandpesosormoreinmoneyorpropertymustbeinpublicinstrumentandregisteredwiththeSEC
b.Yes,becausepublicinstrumentisnecessaryiscaseofcontributionsofimmovablesc.Yes,becausea
partnershipcontractdoesnotrequireaspecificformtobevalidd.No,becauseregistrationwiththeSECis
essentialforapartnershiptobevalidandacquirejudicialpersonality30.AandBarecoownersofaparcelof
landfromwheretheysharetheprofitsequallyascoheirsininheritance.Isthereapartnershipa.Thereisa
primafaciepresumptionofpartnershipbecauseoftheequalsharingofprofitsb.Thereisnopartnership
becausecoownershipbyitselfdoesnotestablishapartnershipdespitethesharingofprofitsc.Thereisno
partnershipsinceinpartnership,divisionofprofitsisnotalwaysnecessaryamongpartnersd.Thereisaprima
faciepresumptionofpartnershiptheybeingcoownersandcopossessors31.AandBarepartnersinAB
partnership.WhileAwasperforminghisdutiesasapartnerinthecourseofbusiness,henegligentlycause
damagetoXandthirdperson.WhoshallbeliabletoXanduptowhatextent?a.Onlythepartnershipisstill
liableitbeingajuridicalpersonseparateanddistinctfromthepartnersb.OnlyAshallbeliableforheistheonly
oneatfaultc.BothAandBshallbeliablesolidaritytoXd.A,BandthepartnershipareallliablesolidaritytoX
32.A,B,andCaspartnersinapartnershipstipulatedthatAshallnotshareintheprofitsandlosses.Isthe
agreementvalid?a.Yes,amongthepartnersbutnotvalidtothirdpersonsb.Yes,validaslongasthirdpersons
arenotprejudicedc.Notvalidstipulationsexemptingapartnerfromsharingintheprofitsandlossesd.Not
validasagainstthirdpersonsorpartnershipcreditors33.Inthematterofmanagementofthecorporationthisis
supremea.Presidentb.ChairmanoftheBoardofDirectorsc.Stockholdersd.BoardofDirectors3437A
promissorynotereadsIpromisetopayPororderPhp100,000.Sgd.M,Thepromissorynotewasissuedby
MtoPinpaymentofmerchandisepurchasedfromP.However,PdeliveredonlyPhp60,000.LaterP.madea
qualifiedendorsementtoA,whowasnotawareofthepartialabsenceofconsideration.Thereafter,Amadea
specialendorsementtoB,thenBmadeablankendorsementtoCbothBandCareawareofthepartial
absenceofconsideration.34.InthehandsofA,AcancollectfromMa.Php100,000b.Php60,000c.Php
40,000d.P035.InthehandsofB,BcancollectfromMa.Php100,000b.Php60,000c.Php40,000d.P0
36.Usingtheprecedingnumber,ifMdishonoursthenota,BcancollectfromPa.Php100,000b.Php60,000
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c.Php40,000d.P037.InthehandsofC,CcancollectfromMa.Php100,000b.Php60,000c.Php40,000d.
P038.Whichofthefollowingisnotnegotiable?a.IpromisetopayPororderPhp100,000,30daysafterdate
SgdMb.IpromisetopayPorbearerPhp100,000SgdMc.PaytoPororderPhp100,000onDec.25,2010
SgdMd.PaytoPorbearerPhp100,000andchargethenameagainstmydepositwithyouSgdMtoY3940
39.MmaleanegotiablepromissorynotepayabletotheorderofP.latermadeaspecialendorsementtoA.
ThenBstolethenotefromAandindorsedittoCwhoreceivedthenoteingoodfaith.LaterCindorsedthenote
toD.whichofthefollowingiscorrect?a.DcancollectfromMbutnotfromAb.IfMwillnotpay,Dcancollect
fromPc.CcancollectfromendorsersPandB40.Usingtheprecedingnumber,ifMpaysDingoodfaith,
whichofthefollowingisincorrect?a.TheobligationofMisextinguishedb.AcancollectfromMc.The
obligationofPisextinguishedd.AshouldcollectfromB,thethief41.Whenapropertyistransferredduring
lifetimetorelievethetransferorfromtheburdenofthemanagementofsuchproperty,andthetransferofits
subjecttotax,thebasisofthetaxisa.TheFMVatthetimeofdonationb.TheFMVatthetimeofdeathofthe
donorc.TheFMVatthetimethedonorrequiredthepropertyd.Thecostofthepropertyinthehandsofthe
donor42.WhichofthefollowingtaxeshadbeenreplacedbytheVAT?a.Percentagetaxoninternationalair
andshippingcarriersdoingbusinessinthePhilippinesb.Taxonlifeinsurancepremiumsc.Catererataxon
operatorsofrestaurantandeatingplacesd.Taxonagentsofforeigninsurancecompanies43.TheDOC
RESTAURANT,aVATregisteredtaxpayer,issuedthefollowingofficialreceiptdatedSeptember18,2010.2
piecesofcrispychickenP200.00Siomaispecial45.00Sagogulaman85.00Mushroomandchickensoup
100.00Braisedbeefwithcauliflower240.00Cokelightincan(2xP40)80.00P750.00Locattax15.00Service
charge60.00TotalP825.00Theoutputvatonthesaleisa.P99.00b.P88.39c.P80.36d.P90.0044.Mr.And
Mrs.Adonatedaconjugalagriculturallandtotheirsonwhoisgettingmarriedwithten(10)monthsafterthe
dateofdonation.ThefairmarketvalueatthetimeofmarriagewasP800,000,butitsfairmarketvalueatthe
timeofdonationwasP600,000.ThedonatedpropertywassubjecttoP100,000mortgagewhichwasassumed
bythedonors.ThetaxablenetgiftofMr.Aisa.P240,000b.P290,000c.P390,000d.P340,00045.An
individualtaxpayerisqualifiedtosubstitutedfilingofincometaxreturnifhemeetsthefollowingrequisiteexcept:
a.Purecompensationincomeonlyb.Oneemployerduringthecalendaryearc.Creditablewithholdingtaxis
correctd.Shouldbeaminimumwageearner46.AtaxpayerreceivedasassessmentnoticeonFebruary14,
2010.HefiledamotionforconsiderationwiththeBIRonFebruary22,2010.Thesubmissionofnecessary
documentstosupporthismotionforconsiderationisa.March14,2010b.April23,2010c.April15,2010d.
March22,201047.Underabsolutecommunityofproperty,whichofthefollowingisacommunityproperty?a.
Propertyinheritedbythesurvivingspouseduringthemarriageb.Propertyboughtduringthemarriageusing
themoneyinheritedofthedecedentbeforemarriagec.Personalbelongings(e.g.clothes,shoes,etc.)bought
duringthemarriagefortheexclusiveuseofthedecedentd.Jewelryinheritedbythedecedentduringthe
marriage48.Whichofthefollowingpropertiesownedbyanonresidentaliendecedentisnotsubjecttotherule
ofreciprocity?a.SharesofstockinaPhilippinedomesticcorporationb.InvestmentinstockinaUScorporation
80%ofthebusinessofwhichisinthePhilippinesc.InvestmentinbondsinaUScorporationthathaveacquired
businesssuitsinthePhilippinesd.40%shareinaPhilippinespartnership49.Whichofthefollowingshallnotbe
exemptfromvalueaddedtax?a.SalesbytheagriculturalcooperativesdulyregisteredwiththeCooperative
DevelopmentAuthoritytotheirmembersaswellassaleoftheirproducts,whetherinitsoriginalstateor
processesformtononmembersb.Grossreceiptsfromthelendingactivitiesbycreditofmultipurpose
cooperativesdulyregisteredwiththeCooperativeDevelopmentAuthoritywhoselendingoperationislimitedto
theirmembersc.Salesofnonagricultural,nonelectricandnoncreditcooperativesdulyregisteredwith
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CooperativeDevelopmentauthorityifthecapitalcontributionofeachmemberdoesnotexceedsP15,000d.
SalesofelectriccooperativesdulyregisteredwithCooperativeDevelopmentAuthorityrelativetothegeneration
anddistributionofelectricity50.Acommoncarrierbylandisengagedinthetransportofpassenger,goodsand
cargoes.AsgrossreceiptsamountedtoP3M,50%ofwhichcamefromtransportofpassengers.Heisnot
VATregistered,whatbusinesstaxeswillApay?a.12%valueaddedtaxb.3%commoncarriertaxc.3%taxon
VATexemptpersonsongrossreceiptsfromtransportofgoodsandcargoesand3commoncarriertaxon
grossreceiptsfromtransportofpassengersd.12%VATongrossreceiptsfromtransportofgoodsandcargoes
and3%commoncarrierstaxongrossreceiptsfromtransportofpassengers.51.Akeeperofgaragewhose
grossreceiptsfortheyearexceedP1,500,000issubjectto:a.Valueaddedtaxb.Commoncarriertaxc.
Excisetaxd.Franchisetax52.ThefollowingarerelatedtothetaxassessmentofataxpayerAssessment
receivedJanuary1,2010PetitionforreconsiderationfiledwithBIRFebruary1,2010Documentssupportingthe
petitionfiledwithBIRFebruary7,2010DecisionofBIRdenyingthepetitionreceivedbythetaxpayerMarch22,
2010SecondrequestforreconsiderationfiledwithBIRMarch30,2010Decisionofdenialofsecondrequestfor
reconsiderationwasreceivedApril12,2010LastdaytoappealtotheCourtofTaxAppealsa.May12,2010b.
July4,2010c.May4,2010d.June4,201053.Whichoftheinherentpowersmaybeexercisedevenbypublic
servicecorporationsandpublicutilities?a.Poweroftaxationb.Powerofeminentdomainc.Policepowerd.A
andB54.AlawwaspassedbyCongresswhichgrantedtaxamnestytothosewhohavenotpaidincometaxes
foracertainyearwithoutatthesametimeprovidingfortherefundoftaxestothosewhohavealreadypaid
them.thelawis:a.ValidbecauseCongressprovidedforavalidclassificationb.Notvalidbecausethosewho
didnotpaytheirtaxesarefavouredoverthosehavepaidtheirtaxesc.ValidbecauseCongresshasthesole
discretionofdeterminingwhomtotaxd.Notvalidbecauseonlythegrantamnestyisthesoleprerogativeofthe
precedent55.Howlongmustthebooksofaccountsbekept?a.Foraperiodbeginningtoprecedingtaxable
yearuntilthelastdayofthecurrenttaxableyearb.Foraperiodbeginningthecurrenttaxableuntilthelastday
ofthefollowingtaxableyearc.Foraperiodbeginningfromthelastentryineachbookuntilthelastday
prescribedwithinwhichtheCommissionerisallowedtomakeanassessmentd.Foraperiodof3years
beginningfromthecurrenttaxableyearuntilthelastdayofthethirdtaxableyear56.Duetofinancialdifficulties
,ABCCorprequestedtahtits2009incometaxliabilityofP400,000bepaidinfour(4)equalmonthlyinstalments
,startingApril15,2010.ItsrequestforinstalmentpaymentwasapprovedonApril8,2010.ThetaxdueonMay
15,2010is.a.P100,000b.P101,667c.P105,000d.P106,66757.Whichofthefollowingisnotcorrect?a.
AtaxcreditcertificatevalidityissuedbytheBIRmaybeusedascreditagainstinternalrevenuetaxesexcept
againstwithholdingtaxb.AlltaxesimposedandcollectedbytheBIRareinternalrevenuetaxesc.Public
Officialswhoacquireinformationonviolationofinternalrevenuelawsintheperformanceoftheirdutiesduring
theirincumbencyareentitledtoinformerreward.d.TheproceedingsontheprotestintheBIRisan
administrativeproceedings58.OnMarch31,2010,Areceived100sharesofstockwithafairmarketvalueP
120/shareasofMarch31,2010.ThesharesofstockwereintendedtopaytheservicesrenderedbyAon
November20,2009,atwhichtimethefairmarketvaluewasP100/share.ThepervaluepershareifP50.The
incomeAisa.P12,000b.P10,000c.P5,000d.P7,00059.Whichofthefollowingstatementsisnotcorrect?a.
Anarticlesubjecttoexcisetaxmaybeexemptfromvatb.Anarticlesubjecttoexcisetaxmaybesubjecttovat
c.Ataxpayermaybehavetwobusinesswhereoneassubjecttovatandtheotherissubjecttopercentagetax
d.Manufacturersandimportersofgoodsaresubjecttoexcisetax60.Mr.Arakianonresidentalien
stockholders,receivedadividendincomeofP300,000in2010fromadomesticcorporationwhosegross
incomefromwithinandwithoutthePhilippinesforthreeyearspreceding2010show:Sourceofincome2007
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20082009FromwithinthePhilippinesP16,000,000P12,000,000P24,000,000FromwithoutthePhilippines
18,000,00014,000,00016,000,000HowmuchoftheindividualincomereceivedbyMr.Arakiconsidered
incomefromsourceswithinthePhilippines?a.Zerob.P156,000c.P300,000d.P144,00061.Whichofthe
followingisnotaconditionimposedbytheconstitutionfortheexerciseofthepowerofeminentdomain?a.The
consentoftheowneroftheprivatepropertytosellthesametothegovernmentb.Thepaymentofjust
compensationc.Theobservanceofdueprocessinmakingofprivatepropertyd.Theexistenceofpublicuseof
thetakingofaprivateproperty62.Mr.Bagongbahayacquiredhisoldprincipalresidencein1990atacostof
P4M.hesoldthesaidpropertyonJanuary1,2010forP16M,althoughtheFMVonthatdatewasP20M.within
thereglementaryperiod,BagongbahayacquiredhisnewprincipalresidenceforP12M.Whichofthefollowing
isincorrect?a.BagongbahayhastopaycapitalgainstaxofP300,000b.Thecostbasisforthenewprincipal
residenceisP3.2Mc.TheutilizedamountofthegrosssellingpriceisP12Md.Iftheproceedswerenotused
tobuyanewprincipalresidence,thecapitalgains6364ForthemonthofAugustandSeptember2010,ABC
Bankhasthefollowingincome/lossInterestincomewithmaturityAugustSeptemberOflessthan5years
P800,000P1MOfmorethan5years800,0001Mrentals400,000800,000Nettradinggain(Loss)(100,000)
200,00063.ThegrossreceiptstaxofABCBankforAugustisa.P76,000b.P68,000c.P69,000d.P63,00064.
ThegrossreceiptstaxofABCBankforSeptemberisa.P125,000b.P130,000c.P116,000d.P123,00065.
Whichofthefollowingisnotsubjecttovat?a.Nonlifeinsurancepremiumsb.Nonlifereinsurancec.Nonlife
insurancecommissionsd.Nonlifereinsurancecommissions66.Itisaspectoftaxationthatadministrativein
characterandthepowertoexerciseitisvestedontheDepartmentofFinancea.Levyingb.Collectionc.
Impositiond.Legislation67.Fordonortaxpurposesthisisastrangertothedonora.Daughtersofabrotherb.
Sonofanunclec.Grandsonofsonsgranddaughterd.Granddaughterofmotherssister68.68.70.A,
caregiver,isunderthreeyearemploymentcontractwithahospitalinUSA.Hiswire,Bandaminorchildlivein
thePhilippines.HeearnsP70,000(converted)amonthfortheannualincomeofP840,000,Ashallpayincome
taxa.FortheentireamountitbeingtaxableinthePhilippinesb.OfnothingbecauseasOFW,heisconsidered
anonresidentcitizenc.Forhalfthefullamountbecausetheotherhalfpertainstohiswifed.Fortheshare
ofhiswifebecausethewifeisaresidentcitizen69.Usingtheabovedata,ifAputs30%ofhisearningsina
dollardepositaccountwithalocal,interestincomethereina.Istaxableforthefullamountat7.5%final
withholdingtaxb.OfP126,000shallbetaxedat7.5%finalwithholdingtaxc.Maybeexemptfromincometax
providedhepresentsproofofnonresidencytothebankd.OfP840,000shallbetaxedat7.5%final
withholdingtax70.Ifthedollardepositsaccountaboveisjoint(withB)withthesamepercentageofearning
invested,interestincomeinthataccounta.Iscapableforthefullamountat7.5%finalwithholdingtaxb.Of
P126,000shallbetaxedat7.5%finalwithholdingtaxc.Maybeexemptfromtheincometaxprovidedhe
presentsproofofnonresidencytothebankd.OfP840,000shallbetaxedat7.5%finalwithholdingtax71.A
filedhisincometaxreturnforthecalendaryear2007onMarch20,2008.WhenisthelastdayfortheBIRto
collectassumingAdidnotpaythetaxdueuponfiling?a.March20,2011b.April15,2011c.April15,2013d.
March20,201372.Usingtheabovedata,assumingAfiledhisincometaxreturnonApril20,2008andthe
returnisnotfraudulent,whenisthelastdayfortheBIRtomakeanassessment?a.April20,2011b.April15,
2011c.April20,2013d.April15,201373.Usingtheabovedata,iftheBIRissuedadeficiencyincometax
assessmentonMarch10,2010,whenisthelastdayfortheBIRtocollect?a.March10,2013b.April15,2013
c.March10,2015d.April15,201574.AfiledhisITRfor2008onApril15,2009andwillpayhistaxliabilityin
instalment.ThereturnshownanincometaxdueofP100,000andincometaxwithheldofP60,000.IfApaysthe
2ndinstalmentonlyonOctober15,2009,theamounttobepaid(excludingcompromisepenalty)isa.P26,000
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b.P35,000c.P55,000d.P37,50075.OnApril15,2010,Afiledhisincometaxreturnforhis2009incomeand
paidthetaxduethereon.In2011.Adiscoveredthathemadeanoverpaymentinhisincometaxreturn.Hefiled
awrittenclaimforrefundoftaxerroneouslycollectedwiththeCIRonOctober1,2011.OnApril14,2012,
withoutreceivingadecisiononhisclaimforrefund,AfiledintheCTAapetitionforreviewonhisclaimforrefund
oftaxerroneouslycollected.Whichofthefollowingisincorrect?a.TheCTAdidnotacquirejurisdictionoverthe
petitionforreviewbecausetheappealispremature,therebeingnodecisionyetonsaidclaimforrefundb.The
CTAjurisdictionistoreviewbyappealdecisionsoftheBIRCommissionersoifthereisnodecisionthereis
nothingtoreviewc.TheCTAacquiredjurisdictionoverthepetitionsinceitistherightofataxpayertogotothe
CTAwithorwithoutdecisionrenderedbytheBIRCommissionerd.TheCTAacquiredjurisdictionoverthe
petitionastheperemptoryperiodof2yearswithinwhichaclaimforrefundisabouttoexpireandthefailureof
theCIRtoactontheclaimistantamounttodenialoftheclaim76.OneofthefollowingisnotexemptfromVAT
a.LeaseoftheresidentialunitswithamonthlyrentalnotexceedingP10,000b.Servicessubjecttopercentage
taxc.Servicesrenderedbyindividualspursuanttoemployeremployeerelationshipd.Exportsalesbypersons
whoarevatregistered77.Asoldapersonalpropertyheldascapitalassetbeacquired9yearsagowithan
acquisitioncostP50,000forP270,000.Thepaymentshallbemadeofthefollowingterms.Cashdownpayment
ofP40,000andadditionalP10,000attheendoftheyearsale.ThepropertysoldhasbeenmortgagedforP
160,000whichassumedbythebuyerissuedanotepayableforthebalancewhichistobepaidequallyintwo
yearsfollowingtheyearofsale.Thecontractpriceis.a.P270,000b.P110,000c.P120,000d.P130,00078.
Thetaxableprofitforthefirstyearisa.P120,000b.P60,000c.P30,000d.P15,00079.XYZfileditsincometax
returnandpaidthetaxdueforcalendaryear2008showingataxliabilityofP175,000.However,uponaudit,it
wasdiscoveredthatitsincometaxreturnwasfalseorfraudulentbecauseitdidnotreportothertaxableincome.
PerinvestigationthecorrectincometaxdueisP350,000.Thecorporationwasdulyinformedofthisfinding
throughapreliminaryassessmentnotice.Failingtoprotectontimeagainstthepreliminaryassessmentnotice,
aformalletterofdemandandassessmentnoticewasissuedonMay31,2010callingforpaymentofdeficiency
incometaxonorbeforeJuly15,2010.TheamountdueonJuly15,2010isa.P306,250b.P437,500c.P240,
625d.P612,50080.Wherenonoticeorauditorinvestigationoftaxreturn,statementordeclarationhasbeen
actuallyserveduponthetaxpayer,thetaxreturnmaybemodified,changedoramendedbythetaxpayer,from
thedateofsuchfiling,within.a.30daysb.180daysc.3yearsd.5yearsSETA1.Incomparingmanagement
accounting,whichofthefollowingstatementsistrue?a.Botharehistoricalcostastheirprimaryunitof
measurementb.Bothdependonthedoubleentrysystemofaccountingc.BothrequireadherencetoPFRSd.
Financialaccountingreportsaremoreobjectives,whereasmanagementaccountingreportsaremore
subjective2.Managementaccountingandfinancialaccountingaresimilarinwhichofthefollowingrespects?a.
Bothusethesenseunitofmeasurementb.Bothrelyheavilyonthedoubleentrysystemsc.Bothproduce
almostalloftheirrespectiveinformationalreportsonaroutinemonthlybasisd.Bothproviderelevantand
usefulinformationtomanagement3.Firmswithahighdegreeofoperatingleveragea.Willhaveamore
significantshiftinincomeassalesvolumechangesb.Havelowerfixedcostsc.Havelowcontributionmargin
ratiosd.Arelessdependentvolumetoaddprofits4.Thetreasurerfunctionincludesa.Taxadministrationb.
Evaluatingandconsultingc.Investorrelationsd.Economicappraisal5.Theuseofinformationsystemsfacilities
onfocusonthecollection,organization,integrationandlongtermstorageofentitywidedataisknownasa.
Dataindependenceb.Dataminingc.Dataredundancyd.Datawarehousing6.Whichofthefollowing
technologieswouldanorganizationusetopreventaccesstoitsprivatenetwork?a.Digitalsignatureb.Firewall
c.Webassuranceserviced.Encryption7.Whichofthefollowingsystemsisonewherethetransactionsare
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postedandthemasterandopenfilesareupdated,immediately?a.Microcomputersystemb.Mainframe
computersystemc.Batchsystemd.Realtimessystem8.Whichofthefollowingcontrolsmostlikelywould
assurethatanorganizationcanreconstructitsfiles?a.Hardwarecontrolsthatarebuiltintothecomputerbythe
computermanufacturerb.Backupcopiesofthedataandprogramfilesthatarestoredawayfromoriginalsc.
Personnel,whoareindependentofdatainput,performparallelsimulationsd.Systemflowchartsthatprovide
accuratedescriptionsofinputandoutputoperations9.Whichofthefollowingstatementsaboutthevisualfir
methodis(are)true?I.ThemethodresultsinthecreationofascatterdiagramII.Themethodisnottotally
objectivebecauseofthemannerinwhichthecostlineisdeterminedIII.Themethodisespeciallyhelpfulinthe
determinationofoutliersa.IIonlyb.IandIIc.IandIIId.I,IIandIII10.Aflatterslopeisthevariablecostline
indicatesaa.Highvariablecostperunitb.Highinfluenceofactivityontotalvariablecostc.Lowinfluenceof
activityontotalvariablecostsd.Largeamountoffixedcosts11.CielosHotdogStandsellshotdogsforP25
each.ThevariablecostsperhotdogareP10.CielosfixedcostsarecurrentlyP8,000permonth.Cielois
consideringexpendingherbusinesstothreehotdogstandswhichwillincreasefixedcostspermonthbyP
12,000.IfCielosdoesexpandherbusinesstothreestands,howmanyadditionalhotdogswillneedtobesold
peryearinordertobreakeven?a.800b.600c.9600d.720012.DoDanteCorporationiscontemplatingto
methodanewproductthatrequiresanincreasesinfixedcostsbyP1,400,000forproductionof50,000unitsor
lessandP1,800,000formorethan50,000units.Thevariablecostsratiois60percentofsales.Theproductis
expectedtosellforP80perunit.HowanyunitsmustDonDanteselljustbreakeven?a.43,750b.56,250c.
50,000d.Either43,750or56,25013.Inmostcompanies,machinesbreakdownoccasionallyandemployees
areoftenlessthanperfectwhichtypeofstandardacknowledgesthesecharacteristicswhendeterminingthe
standardcostofaproduct?a.Efficiencystandardb.Idealstandardc.Practicalstandardd.Budgetedstandard
Questionnumber14and15arebasedonthefollowingMoonProductsappliesfixedoverheadatarateofP3
perdirectlaborhour.Eachunitproducedisexpectedtotake2directlaborhours.Moonexpectedproductionin
thecurrentyeartobe10,000unitsbut9,000unitswereactuallyproduced.Actualdirectlaborhourswere
19,000andactualfixedoverheadcostswereP62,00014.Moonsfixedoverheadspendingvarianceis:a.P
8,00Fb.P8,000Uc.P2,000Fd.P2,000U15.Moonsfixedoverheadvolumevarianceis:a.P2,000b.P
6,000c.P8,000d.P016.Whichofthefollowingstatementsiscorrectregardingbudgeting?a.Isaprimary
focusedonpastperformanceb.Isprimarilybookkeepingtaskc.Itshouldbebuildfromthegroundupeach
yeard.Itinvolvesinputfromabroadrangeofmanagers17.Itismostbudgetinthemasterbudgetislikelythe
a.Cashbudgetb.Capitalbudgetc.Personnelbudgetd.Purchasesbudget18.Whichofthefollowingisnota
typicalcashoutflowassociatedwithacapitalinvestment?a.Repairsandmaintenanceneededforpurchased
equipmentb.Additionaloperatingcostsresultingfromthecapitalinvestmentc.Salvagevaluereceivedwhen
thenewlypurchasedequipmentissoldd.Purchasepriceofanewequipment19.Depreciationcharges
indirectlyaffecttheaftertaxflowbecausethecompanya.Candeductdepreciationexpensesontheirfinancial
statements,reducingreportedincomebeforetaxb.Candeductdepreciationexpensesontheirfinancial
statements,increasingcashinflowsc.Candeductdepreciationexpensesontheirincometaxreturns,reducing
cashoutflowfortaxesd.Cannotdeductdepreciationexpensesontheirincometaxreturns20.Thecalculation
oftheprofitabilityindex(PI)ismosthelpfulforwhichtypeofdecisions?a.Screeningb.Preferencec.Qualitative
d.Shortterm21.OMaiMaiCompanypurchasedanassetcostingP90,000.Annualoperatingcashinflowsare
expectedtobeP20,000eachyearforsixyears.Nosalvagevalueisexpectedattheendoftheassetlife.The
companyappliesa16percentminimumacceptablerateofreturnforthiskindofinvestment.thedetailsofthe
presentvaluesat16%sexperiodsandPresentvalueofordinaryannuityof13.6847Presentvalueofannuity
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dueof14.2743AssumingOmaimaicostofcapitalis16percent,whatistheassetnetpresentvalue?(ignore
incometaxes)a.P16,306b.P30,000c.P4,514d.P4,80022.Pacam,Inc.Requiresallitscapitalinvestmentto
generateaninternalrateofreturnof14percentthecompanyisconsideringaninvestmentcostingP80,000that
isexpectedtogenerateequalannualcashinflowsfor5years.Thepresentvalueof1.endof5yearsis
0.51937andthepresentvalueinequityof1is3.4331basedon14percentrequiredrateofreturn.Tomeetthe
14%minimumacceptableratereturn,theestimatedannualcashinflow(ignoringincometaxes)is:a.P23,803
b.P51,550c.P274,648d.P154,033QuestionNos.23through25arebasedonthefollowingLakewood
CompanyisconsideringthepurchasesofapurposebottlingmachineforP280,000.Itisexpectedtohavea
usefullifeof7yearswithazeroterminaldisposalprice.Theplantmanagerestimatesthefollowingsavingsin
cashoperatingcostsYEARANNUALCASHSAVINGS1P140,0002110,000380,000460,000540,0006
30,000730,000Lakewoodusesrequiredrateofreturnof12%initscapitalbudgetingdecisions.remittaltax
rateof40%.Thecompanyusesstraightlinedepreciation.Thepresentvalueofannuityof1at12%foryears
4,56376.ThedetailsofthepresentvalueYEARANNUALCASHSAVINGS10.8928620.7971930.711784
0.6355250.5674360.5066370.4523523.Thenumberofyearstorecovertheamountinvestmentisa.4.83
yearsb.3.63yearsc.2.38yearsd.4.00years24.Whatisthenetpresentvalueofthisinvestment?a.P4,723
b.P8,559c.P(2.159)d.P025.Whatistheaccountingrateofreturnbasedoninitialinvestmenta.6.43%b.
12.86%c.20.71%d.41.42%26.EscapeCompanyregularlypaysitsaccountspayableonthetenthdayand
enjoysthe2percentcashdiscount,term:net30.Becauseofanoversight,onesupplierinvoiceisnotpaid
withinthediscountperiodbutpaid10daysafter.Whatistheannualcostofthatincidentofpayinganinvoiceon
the20thdayinsteadofthetenthday?Use360daysayeara.73.44%b.36.73%c.30.02%d.2.04%27.
P18,591,650at8personsonaoneyeardiscountedloan,whatistheeffectiveinterestrate?a.8.00percentb.
8.70percentc.9.07percentd.7.41percent28.Toledo,Inc.Hasrecentlycalculatedtheinventoryturnoverfor
currentyeartobe30.inprioryears,thesameratiowasalwayslower.Whichofthefollowingstatementswould
bethebestinterpretationforthereasonfortheratioschange?a.Thecompanyhadlesssalesinthecurrent
yeartheninprioryearsb.Thecompanypurchasedlessinventoryinthecurrentyearthaninprioryearsc.The
companytookfewerdaystosellitsinventoryinthecurrentyearthaninprioryearsd.Thecompanytookmore
daystosellitsinventoryinthecurrentyearthaninprioryears29.Whichofthefollowingstatementsistrue
regardingacompanyssegmentmargin?a.Itisprimarilyusedtomakeshorttermdecisionssuchascost
volumeprofit(CVP)analysisandspecialorderdecisionsb.Itignoresallfixedcostsc.Itisprimarilyameasure
oflongtermprofitabilityd.Itshouldnotbeusedtomakedecisionsonwhetherornottodropaproductline30.
Whichofthefollowingstatementsaboutthebalancedscorecardapproachisfalse?a.Itrequiresmanagersto
focusonfinancialmeasuresmorethannonfinancialmeasuresb.Itlooksatperformancefromthefollowing
perspectives,financial,customer,internalbusinessandlearningandgrowthc.Ithelpsbalanceshortterm
operatingperformancewithlongtermstrategiesd.Itrecognizesthattraditionalmeasuresofperformanceare
oftennotadequatetofullyassesscompanysperformance31.Determiningthemarketshareforacompanys
productwouldbeameasureofperformance,whichperspectiveofthebalancedscorecard?a.Internal
businessb.Customerc.Financiald.Learningandgrowth32.Whichofthefollowingstatementaboutquality
costsistrue?a.Evenintheory,externalfailurecostscanneverbereducedtozerob.Thelessofcompanys
spreadsonpreventioncosts,thelesstheywillhavetospendoninternalfailurecostsinthefuturec.Ifa
companyproducesandsellsadefectiveproduct,externalfailurecostarelikelytoexceedalltheothertypesof
qualitycostsd.Lowlevelofinternalfailurecostsusuallyindicatorsthatmoreattentionneedstobepaidto
preventionandappraisalcosts33.HNWLtd.Manufacturesandsellsfoodprocessors.Apopularconsumer
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magazinehasrecentlyevaluatedfoodprocessorsandhasrankedHNWsprocessorsasbeingofpoor
quality.AsaresultHNWsmanagementteamhasbeguntoanalyzeallcostsassociatedwiththeirfood
processorsinmoredetailandthefollowingdatahasbeencompiled:ScrapcostsP80,000Qualitytraining
75,000Warrantyclaims100,000Reworkcosts50,000Inspectionofincomingmaterials30,000Productquality
audits60,000Statisticalprocesscontrol40,000WhatareHNWstotalinternalfailurecosts?a.P50,000b.
P130,000c.P230,000d.P170,00034.Whichofthefollowingitemsusedtomeasurecustomerresponsetime
wouldnotbeusedtomeasuremanufacturingcycletime?a.Timeittakestoprocessrawmaterialsintoa
completedproductb.Timespentwaitingforamachinesavailabilityc.Timespentinspectingthematerialsfor
qualitycontrold.TimespentdeliveringtheproducttothecustomerQuestionNos.35and36arebasedonthe
followinginformationPolkaDevicesnormallyproducesandsells62,000unitsCK6eachmonth.CK6isa
smallelectricalrelayusedintheautomotiveindustryasacomponentpartinvariousproducts.Thesellingprice
isP46perunit,variablecostsareP42perunit,fixedmanufacturingoverheadexpensestotalP280,000per
month,andfixedsellingexpensestotalP88,000permonth.Strikesinthecompaniesthatpurchasethebulkof
theCK6unitshavecausedPolksDevicessalestotemporarilydroptoonly26,000unitspermonth.Polka
devicesestimatesthatthestrikeswilllastforabouttwomonths,afterwhichsalesofCK6shouldreturnto
normal.Duetothecurrentlowlevelofsales,however,PolicaDevicesisthinkingaboutclosingdownitsown
plantduringthestrikes.IfPolksDevicesdoesclosedownitsplant,itisestimatedthatfixedmanufacturing
overheadexpensescanbereducedtoP210,000permonthandthatfixedsellingexpensescanbereducedby
10%.startupexpensesattheendoftwomonthsshutdownperiodwouldtotalP4,000.SincePolicaDevices
usesjustintimeproductionmethods,noinventoriesareonhand.35.Assumingthatthestrikescontinuefortwo
monthsasestimated,howmuchwouldtheadvantageordisadvantageofclosingtheplant?a.P54,400
disadvantageb.P58,400disadvantagec.P50,400disadvantaged.P29,200disadvantage36.Atwhatlevelof
sales(inunits)fortwomonthperiodshouldPolicaDevicesbeindifferentbetweenclosingtheplantorkeepingit
open?a.38,400unitsb.39,400unitsc.39,000unitsd.38,000units37.VeraCruzCompanyhasprojected
costofgoodssoldP2millionincludingfixedcostsofP100,000andvariablecostsareexpectedtobe75
percentofnetsales.Whatwillbetheprojectednetsales/a.P2,133,333b.P2,400,000c.P2,666,667d.
P3,200,00038.GiboZamorasellsheliumballoonsinLunetaParkonSaturdaysasameansonmakingsome
extraspendingmoney.HebuysballoonsfromapartystoreatP12eachandsellsthematapriceofP30.00
each.Demandoftheballoonsrangesbetween35and45perday.Gibonormallypurchases40balloons.The
heliumloscaitsresilenceinacoupleofdays,soballoonsnotsoldcannotbesavedforthefollowingSaturday.
Gibousuallyjustreleasestheballoonsthatdonotsell.Ashewatchedthemostrecentbatchofthefiveballoons
floatingintospace,hethoughtsurely,theremustbesomewaytovoidthiswaste.Whatistheestimatedon
Giboprofitiftheheliumcanisterisrentedassumingthereare5balloonsbeingunsold?a.Noeffectb.Increase
theprofitbyP150c.IncreasetheprofitbyP90d.DecreasetheprofitbyP80UsethefollowingdataforUlap
Companyinansweringnumbers39and4020102009NetsalesP5,520,000P4,000,000Costofgoodssold
3,795,0003,000,000GrossprofitP1,725,000P1,000,00039.Assumethatthesellingpriceincreasedby20
percenteffectiveJanuary1,2010.Whatistheamountofincreaseinsalesduetochangeinsellingpriceand
unitssold,respectively?a.b.P920,000andP600,000c.P1,104,000andP416,000d.P720,000and
P800,000e.P(1,380,000)andP2,900,00040.41.Independentofquestionnumber39,assumingthatthecost
priceperunitdecreasedby4percenteffectiveJanuary1,2010.Howmuchwerethechangeinsalesdueto
changeinquantitysoldandchangeincostofgoodssoldduetochangeinunitcost?Changeinsaleschangeto
costofGoodsSoldDueChangeinQuantitytochangeinunitcosta.P1,270,800increaseP158,125decrease
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b.P249,200increaseP953,125decreasec.P1,262,400increaseP151,800decreased.P1,262,400increase
P953,125decrease42.Theprimarypurposeofmanagementadvisoryserviceisa.Toconductspecialstudies,
preparationofrecommendations,developmentofplansandprovisionofadviceandassistanceintheir
implementationb.Toprovideservicesortofulfilsomesocialneedc.Toimprovetheclientsuseofits
capabilitiesandresourcestoachievetheobjectivesoftheorganizationd.Toearnthebestrateofreturnon
resourcesentrustedtoitscarewithsafetyofinvestmentbeingtakenintoaccountandconsistentwiththefirms
socialandlegalresponsibilities43.Thefixedoverheadapplicationrateisafunctionofapredeterminesnormal
activitylevel.Ifstandardhoursallowedforgoodoutputequalpredeterminedactivitylevelforagivenperiodthe
volumevariancewillbea.b.Zeroc.Favorabled.Unfavourablee.Alloftheabove44.45.TheAMViansis
planningitsannualBlastExtravaganza.Theextravaganzacommitteehasassembledthefollowingexpected
costsfortheevent:DinnerperpersonP70Programsandsouvenierperperson30Orchestra15,000Tickets
andadvertising7,000Auditoriumrental48,000Floorshowandstrollingentertainment10,000Thecommittee
memberswouldliketochargeP300perpersonfortheeveningactivitiesAssumingthatonly250personsare
expectedtoattendtheextravaganza,whatticketpricemustbechargedtobreakeven?a.b.P420c.P350d.
P320e.P39046.47.GabgalangCompanyusesamonthlycostformulaforoverheadofP50,000+30,000for
eachdirectlaborhourworked.Forthecomingyear,gabgalangplanstomanufacture200,000units.Eachunit
requiresfiveminutesofdirectlabor.Gabgalangtotalbudgetedoverheadforthecomingyearisa.b.P550,000
c.P1,200,000d.P1,100,000e.P650,00048.49.Howwillafavorablevolumevarianceaffectnetincomeunder
eachfollowingmethods?ABSORPTIONVARIABLEa.Reducenoeffectb.Reduceincreasec.Increaseno
effectd.Increasereduce50.ThefollowinginformationhasbeenextractedfromBautista&Magsombol
Companysfinancialrecordsforitsfirstyearofoperations?Unitsproduced10,000Unitssold7,000Variable
costsperunitDirectmaterialsP8Directlabor9Factoryoverhead3Selling4Fixedcosts:Manufacturing
overheadP70,000Selling30,000Basedonabsorptioncosting,Bautista&Magsombolsincomeinitsfirstyear
ofoperationswillbea.P21,000higherthanitwouldbeundervariablecostingb.P70,000higherthanitwould
beundervariablecostingc.P30,000higherthanitwouldbeundervariablecostingd.Higherthanitwouldbe
undervariablecosting,butheexactdifferencecannotbedeterminablefromthisinformation51.Balara
CompanyhasintracompanyservicetransfersfromInternalDivision,acostcenter,toWorldDivision,aprofit
center.Understableeconomicconditions,whichofthefollowingtransferpricesislikelytobemostconductive
toevaluatingwhetherbothdivisionshavemettheirresponsibilities?a.b.Actualcostc.Marketpriced.Standard
variablecoste.Negotiatedprice52.53.DeChavezCompanyisconsideringaninvestmentinanewcasting
machinetoreplaceitsexistingone.Informationontheexistingmachineandthereplacementmachinefollows:
CostofnewmachineP40,000Netannualsavingsinoperatingcosts9,000Salvagevaluenowoftheold
machine6,000Salvagevalueoftheoldmachinein8years0Salvagevalueofthenewmachinein8years
5,000Estimated8yearsWhatistheexpectedpaybackperiodforthenewmachine?a.4.44yearsb.3.22years
c.4.00yearsd.3.78years54.KielDimayagaCompanyhasatotalassetsturnoverofa0.30andaprofit
marginof10percentPatrick.ThePresident,isunhappywiththecurrentreturnonassetsandbethinksitcould
bedoubled.Thiscouldbeaccomplished(1)byincreasingtheprofitmarginto12percent,and(2)byincreasing
thetotalassetsturnover.Whatnewassetturnoverratio,alongwiththe12percentprofitmargin,isrequiredto
doublethereturnonassets?a.25%b.50%c.36%d.60%55.Theexamplesofactivatingattheproductlevel
includea.Scheduling,settingupandmovingb.Designingchangingandadvertisingc.Beating,lightingand
securityd.Cutting,paintingandpackaging56.Asystematizedapproachknowsasacrobasedbudgetinga.
Presentstheplanforonlyonelevelofactivityanddoesnotadjusttochangesinthelevelofactivityb.Presents
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astatementofexpectationsforaperiodoftimebutdoesnotpresentafirmcommitmentc.Dividestheactivities
ofindividualresponsibilitycentersintoaseriesofpackageswhicharerankedordinallyd.Classifiesbudget
requestsbyactivityandestimatesthebenefitsarisingfromeachactivity57.TheCEOofarapidlygrowinghigh
technologyfirmhasexercisedcentralizedauthorityoverallcorporatefunctions.Becausethecompanynow
operatesinfourgeographicallydispersedlocations.TheCEOisconsideringtheadvisabilityofdecentralizing
operationcontroloverproductionandsales.Whichofthefollowingconditionsprobablywouldresultfromand
beavalidreasonfordecentralizing?a.Greaterlocalcontrolovercompliancewithgovernmentregulationsb.
Moreefficientuseofheadquartersstaffofficialsandspecialistsc.Quickerandbetteroperatingdecisionsd.
Greatereconomiesinpurchasing58.Thefollowingaredetailsofthemonthlyunitcosttomanufactureandsell
aparticularproductforGraceCompany:Manufacturingcost:DirectmaterialsP3.00Directlabor4.00Variable
indirect2.00Fixedindirect1.50Marketingcosts:Variable2.00Fixed1.00Gracemustdecidetocontinue
makingtheproductorbuyitfromoutsidesupplier.Thesupplierhasofferedtomaketheproductatthesame
levelofqualitythatthecompanycanmakeit.Fixedmarketingcostswouldbeunaffected,butvariable
marketingcostswouldbereducedby25%ifthecompanyweretoaccepttheproposal.Whatistheminimum
amountperunitthatGracecanpaythesupplierswithoutdecreasingitsoperatingincome?a.P9.50b.P10.50
c.P11.50d.P12.5059.TheSalinasDivisionofSorianoCompanyexpectsthefollowingresultfor2011.Unit
sales70,000UnitsellingpriceP10UnitvariablecostP4TotalfixedcostTotalfixedcostsP300,000Total
investmentP500,000TheminimumrequiredRO1is15percent,anddivisionsareevaluatedonresidual
income.AforeigncustomerhasapproachedSalinasmanagerwithanoffertobuy10,000unitsatP7each.If
Salinasacceptstheorder,itwouldnotloseanyofthe70,000unitsattheregularprice.Acceptingtheorder
wouldincreasefixedcostsbyP10,000andinvestmentbyP40,000WhatistheminimumpricethatSalinascould
fortheorderandstillmaintainitsexpectedresidualincome?a.P5.00b.P4.75c.P5.60d.P9.0060.MorrCo.
hasatotalannualcashrequirementofP9,075,000whicharebepaiduniformly.Morrhastheopportunityto
investthemoneyat24%perannum.Thecompanyspends,ontheaverageP40foreverycashconversionto
markeablesecurities.Whatistheoptimumaveragecashbalance?a.P60,000b.P45,000c.P55,000d.
P27,50061.ThedividendsandstockpriceofFeudoCompanyareexpectedtogrowat7percentperyearby
theendofthisyear.FeudoscommonstocksellsforP25pershare,itlastdividendwasP2.50andthecompany
willpayP2,675attheendofthecurrentyear.FeudoshouldpayP2.50flotationcost.Whataretheexpected
returnsonretainedearningsforFeudoCompany?a.17.7percentb.18.45percentc.18.89percentd.19.72
percent62.BaguioCompanysaccountsreceivablewereP600,000atthebeginningoftheyearandP
800,000theendoftheyear.CashsalesfortheyearwereP300,000.Theaccountsreceivableturnoverforthe
yearwas5times.BaguioCompanystotalsalesfortheyearwerea.P800,000b.P3,300,000c.P1,300,000
d.P3,800,00063.TheBaraguioCorporationpurchases60,000headbandsperyear.Theaveragepurchase
leadtimeis20workingdays.Maximumleadtimeis27workingdays.Thecorporationworks240daysperyear.
TheappropriatesafetystocklevelandtherecorderpointforthecompanyareSafetyStockRecorderPointa.
1,7506,750b.1,7505,250c.1,1676,750d.1,1675,25064.AlmiresBuildingcompanyusesthecriticalpath
methodtomonitorconstructionjobs.Thecompanysiscurrently2weeksbehindscheduleonJobWW.Which
subjecttoaP10,500perweekcompletionpenalty.PathABCFGHIhasanormalcompletiontimeof20
weeksandcriticalpathADEFGHIhasanormalcompletiontimeof22weeks.Thefollowingactivitiescan
becrashed.Activitiescosttocrash1weekcosttocrash2weeksBCP8,000P15,000DE10,00019,600EF
8,80019,500AlmiresdesirestoreducethenormalcompletiontimeofjobWWandatthesametime,reportthe
highestpossibleincomeforthisyear.Almiresshouldcrasha.ActivityBC1weekandActivityEF1weekb.
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ActivityBC2weeksc.ActivityDE1weekandactivityBC1weekd.ActivityDE1weekandactivityEF1
week65.Thecapitalassetpricingmodel(CAPM)computestheexpectedreturnonasecuritybyaddingtherisk
ratereturntotheincrementalyieldoftheexpectedmarketreturnwhichisadjustedbythecompanysbeta.
WhatisMNOsexpectedrateofreturniftheequitymarketisexpectedtoearn12percentthetreasurybonds
arecurrentlyyielding5percent.ThebetacoefficientforMNOisestimatedtobe0.60.MNOissubjecttoan
effectivecorporateincometaxrateof40%.a.12.00percentb.9.20percentc.12.20percentd.7.20percent
66.Tradingontheequityreferstothea.Amountorworkingcapitalb.Amountofcapitalprovidedbyownersc.
Useofbarrowedmoneytoincreasethereturntoownersd.Numberoftimesinterestincaned67.Demandfora
producttendstobepriceinelasticifa.Theproductisconsideredahourlyitemb.Fewgoodscomplementsfor
theproductareavailablec.Thepopulationinthemarketareaislarged.Peoplespendalargeshareoftheir
incomeontheproduct68.Becauseoftheexistenceofeconomiesofscale,businessfinesmayfindthata.
Eachadditionalunitoflaborislessefficientthanthepreviousunitb.Asmorelaborisaddedtoafactory,
increasesinoutputwilldiminishintheshortrunc.Increasingthesizeofafactorywillresultinloweraverage
costd.Increasingthesizeofafactorywillresultinlowertotalcosts69.Foragivenleveloftaxcollections,
pricesandinterestrates,adecreaseingovernmentalpurchaseswillresultina(an)a.Increaseaggregate
demandb.Decreaseinaggregatedemandc.Increaseinaggregatesupplyd.Decreaseinaggregatesupply
70.Themosteffectivefiscalpolityprogramtohelpreducedemandpullinflationwouldbetoa.Decreasethe
rateofgrowthofthemoneysupplyb.Increasebothtaxesandgovernmentspendingc.Decreasetaxesand
increasegovernmentspendingd.IncreasetaxesanddecreasegovernmentspendingCABRALindustries
receivedanorderforapieceofspecialmachineryfromTigokCompany.JustasCABRALcompletedthe
machine,Tigokdeclaredbankruptcy,defaultedontheorder,andforfetedthe10percentdepositpaidonthese
sellingpriceP72,500CABRALsmanufacturingmanageridentifiedthecostalreadyincurredintheproduction
ofthespecialmachineryforTigokasfollowsDirectmaterialP16,600Directlabor21,400Manufacturing
overheadVariableP10,700Fixed5,35016,050Fixedsellingandadministrativecosts5,405TotalP59,455
Anothercompany,kayCorporation,willbuythespecialmachineryifitisreworkedtoKaysspecification.
CABRALofferedtosellthereworkedmachinerytoKayasaspecialorderforP68,400Kayagreedtopaythe
pricewhenittakesdeliveryintwomonths.TheadditionalidentifiablecoststoreworkthemachinerytoKay
specificationsareasfollows.DirectmaterialsP6,200Directlabor4,200_____TotalP10,400Asecond
alternativeavailabletoCABRAListoconvertthespecialmachinerytothestandardmodel.whichsellsfor
P62,500.Theadditionalidentifiablecostsforthisconversionareasfollows.DirectmaterialsP2,850Directlabor
3,300TotalP6,150ThethirdalternativeforCABRAListosellthemachineasisforapriceP52,000,However,
thepotentialbuyeroftheunmodifiedmachinedoesnotwantitfor60days.ThisbuyerhasofferedaP7,000
downpayment,withthereminderupondelivery.Thefollowingadditionalinformationisavailableregarding
CABRALsoperations:1.Thesalescommissionrateonsalesofstandardmodelsis2percent,whiletherate
onspecialordersis3percent2.Normalcredittermsforsalesofstandardmodelsare2/10,net/30.Thismeans
thatthecustomerreceivesa2percentdiscountifpaymentismadewithin10days,andpaymentisduenolater
than30daysafterbilling.Mostcustomerstakethe2percentdiscount.Credittermsforaspecialorderare
negotiatedwiththecustomer.3.Theallocationratesformanufacturingoverheadandfixedsellingand
administrativecostsareasfollowsManufacturingcosts:Variable50%ofdirectlaborcostsFixed25%direct
laborcostsFixedsellingandadministrativecosts10%ofthetotalmanufacturingcosts4.Normaltimerequired
forreworkisonemonth66.HowmuchpesocontributionwouldthesaletoKayCorporationaddtoCABRAL
beforetaxprofit?a.P53,848b.P55,948c.P55,900d.P9,30067.Howmuchpesocontributionwouldthe
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alternativeofconvertingthespecialmachinerytostandardmodeladdtoCABRALsbeforetaxprofit?a.
P52,200b.P54,475c.P52,825d.P7,65068.IfKaymakesCABRALacounteroffer,whatisthelowestprice
CABRALshouldacceptfotthereworkedmachineryfromKay?a.P10,400b.P12,500c.P10,722d.P12,887
69.Howmuchwouldthealternativeofsellingunmodifiedmachinerytothepotentialbuyercontributeto
CABRALsbeforetaxprofit?a.P50,440b.P1,740c.P49,920d.P49,40070.Aconstructioncompanyhasjust
completedtwobridgesovertheVisayanarea.Thefirstbridgethecompanyeverbuiltrequired100weeksto
complete.Nowhavinghiredabridgeconstructioncrowwithsomeexperience,thecompanywouldliketo
continuebuildingbridges.Becauseoftheinvestmentinheavymachineryneededcontinuouslybythiscrew,the
companybelievesitwoundhavetobringtheaverageconstructiontimelessthanayear(52weeks)perbridge
toearnasufficientreturnoninvestment.Theaverageconstructiontimewillfollowan80%learningcurve.To
bringtheaverageconstructiontime(overallbridgesconstructed)belowoneyearperbridge,thecrewwould
havetobuildapproximatelya.6additionalbridgesb.7additionalbridgesc.3additionalbridgesd.8additional
bridges
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