7/25/2019 PRTC_P1 08.04.13

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- ~ ~

__..) Excel Professional Services

nc

ManagementRrm of Professional Review and Training Center

{PRTC

~

1

ince

977

(Luzon) Mani a 733-9344173A-7c;()3 Calamba, Laguna (049) 5453807

(Visayas) Bacolvd Cit} 0 ~ 4 ; 4 ~ ? 4 Cebu City (032) 253-7900

l.oc.

218

~ M i n d a n a v i C a g a y : ~ o

da Ore City (088) 309-3073 Davao City lt 62) 225-0049

www prtc com ph

CP R VI W

OPEN

s t PRE BOARD EXAMINATIONS

PR CTIC L CCOUNTING

iExamCoverage l

Elements vffinanclai

i

lstatements, lnventoiies,

i I

i o l o g c a ~ assets, Pmperty.

1

I

plant

and

equipment.

I r.vcstment p:operty,

ntangible assets. Cash and

i

cash equivalents,

I

Receivables. Investments

and

.

I '

: Other topics :

___ ... - - - - - ~

E x a f l l _ C o d ~

iP1.0pen_1stPB.10_13

__

j

LQate ==JAugust 4, 2013 ______

:Time

12:00

NN to

j:QO

PM '

/_No

g_t5)uestions_

j

50 _____

- - - - - - - - = - ~ - ~ j

ISE1-

_____

~ - - - - j

7/25/2019 PRTC_P1 08.04.13

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Practical Accounting 1

SETB

INSTRUCTIONS:

Select

the best

answer for

each of the

following

questions. Mark onlv oile answer

for each

item

on the

answer

sheet provided. Strictly

NO ERASURES ALLOWt:D.

Erasures will r ~ u d e r ycur examinatior. answer sheet INVAUD.

Use

PE ';Cll NU.

2 onfy. GOODLUCK @

1. On 1 January

2013 The

Divine

Company

took

out

a

12% PlO

million loar. to finance the construction

vf

a building. The key

dates are as follow s:

1 January 2013

-

Loan interest relating to tne project starts to

- - t>e lneurred

-

- = ~ - - = , - ~ -

- -- - -

1 February 2013

-

Technical

site

p1aru1ing commences

1

March

2013

-

Expenditures on the project start to be

incurred

1

April

2013

1 Nvv. 2C13

1 Dec.

2013

- Construction work

commences

- Substantially

all of

the activities

necessary

to

prepare

the asset for its intended

usc

are

complete

-

Building

t-roug:-:t

ir.to

use

What

a m c ~ ; r . t

of i n t e r ~ s t should

Davine capitalize

for the

current year?

a. P:i

OOO OOu c. P800,00(l

b. p

900,000

d. P700,000

2.

The

carrying value of company's property a11d equipme lt was

P/.00,000 at 1

August 2012. Duril')g- ~ h e ye3r

ended 31 July

2013,

the company

sold equipment for P25,000 on whicr, it

made a ioss of PS OOO. The

depreciation

charge for the year

was

P20,000. What was the carryir1g value of property and

equipment at 31 July 2013?

a_

P150,000

b.

P155,000

Payi 2

of24

www.p&j.c_CQm.ph

c. P160,000

d.

P180,000

P ~ O p e n 1 s t P B 1 0 1 3

Practical c c o u n ~ g 1

3. B.ubolegum

Company

takes a full year's depredation

in

the

year of

an

assets acquisition,

and

no

depreciation in

the

year

o disposition.

Data

relating to

one aepredc::b e asset

, JOO

c. P659,375

b.

P703,125

d. P759,375

4_ On January 15, 2011, Mcuntain Company paid P5,400,000 for

prop-erty containing natural

resource

of

2 001J OOO

t:ons

of

ore.

ThE: entity

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3/12

SETB

5.

Booster Co

purchased a building on

1

January

2003

for

P1,250,000. At acquisition,

the

useful life of the building was

50

.

years. Depreciation

is

calculated

on the straight-line

basrs. On 1

January 2013, the

building

was

revalued

to

P ~ 6 0 0 0 0 0 .

~ C ? s t ~ r Co

has

a policy

of transferring

the

excess

depreaat1on on revc.luation

from the reva u

7/25/2019 PRTC_P1 08.04.13

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Practical Accounting 1

SETB

The ca;rying amount of Brand -

"Choochoo"' after allocating

impairment loss, if any, is

a. PSOO OOO

b. P470,000

c.

P42:::,ooo

d. PO

9.

On January 1. 2011, 6ur.ny Inc.

purchased

a Jatent with C l

cost

P1,160,000, a

useful life of

5

y e ~ r s .

The company

uses

straight-line depreciation. At December 31, 2012, the

con,pany

determines that

impai;...,.,.;:iit

indicators are present.

The fair value les::, cost to seil the patP.nt is estimated

to be

P540,000.

The pater. :'s value-in-use is estimated

to

be

P565,uOQ. : he asset's remaining

useful life i ~ _ e _ s t i m a t e d

to

b_e

_

2

years.

- - -

--

- --- -

The

company's

2013

income statement

w ll report

amortization expense for the patent

of

a. P188,333

c. P2fs2,500

0.

P232,0CO

a.

P595,000

10. On

January 2,

2012, Meadow Inc.

purchased

a patent

with

a

cost P940,000 a useful life of 4 years. At December 31,

2012, a11d December 31, 20 3, the company

determ nes

that

impairment indicators are present.

The

following informaticn

is available for impairment testing at

each

year end:

fair value

less costs

to sell

Value-in-use

12/31/2012 12/31/2013

P71.S OOC

P420,000

P750,000

P445,000

No

changes were

made

in

the

asset's estimated

useful life.

The company's 2013

income

statement will report

a. Amortization Expense

of P235,000.

b. Amortization

Expense

of P250,000 and

Loss

Impairment of

PSS,OQO.

c. Amortization Expense of P235,000 and a Loss

Impairment of P25,000.

d.

Loss

on

impairment

of P70,000.

Page 6 o

24

on

VI

www.ortc.coM.,..,

PJ OpenlstPB:Jn J3

Pr-ctical Accounting 1

. ; C I

D

- . Cash in Bank - checking accour.t of

1L

Con ;ider

the r o l l o w ~ n g ~

of

PSOO

Post-dated chaks

received

P 1 3 , 1 ~ o o p ~ ~ ~

o;.,d

~ e r t i f i c t e s

depcsit total::l9 P 1 2 4 , 0 0 0 ~

tota

.ng , ,

rted

as

cash in

the statement

o.

How much should be "epo -

financial position?

a. P131500

b. P14 GOO

c.

d.

Pl37,500

P138,00C

e c e m ~ e r 1

2013 has

2.

The

cash account

of

Target Corp._ on

L ~ . I

b

I

f

P

l 2 l

600

and it

consrsts

of the

fohowmg.

a a ance o '

PS21

780

Bills and coins

on

hand .,

,...f 1

1

000

Petty

cash

including p e ~

cash vouch

rs

'" P6:>0

Balance ir. s ~ v L l g S c>ccaunt with a bank closed by

tt:e BSP 5

2014

C

oo-omer'c

rheck

dated

Janu2;y

1

I

u::>l

- -

s returns

Credit

memo from

suppliers

for JUrcnase

Postage ::,ldmps

Jllloney order

IOU of

employee

Checking account

ba:ant:.e

in B2nk

of

P

I.

36 QOO

8,000

6,500

120

800

400

22,000

The

correct

cash

Corp.

balance Oil

Decemb

:r

3l , 20 3

ot

Target

a. P7f>,580

b.

P/6,3::::0

c. P7 5

1

130

r1

?75,930

. bank

reconoliatiun

at

the

13. Charm Cc.rpet Cleanmg ~ r ~ a r e ~ c l aof

Julv

the balance in the

end of every

month.

A t e

en

. ,

750

and the banimpany on December

31,

2013,

showed merchandise with

a

cost o P4,000,000 was c:1

hand

at that

date You nlso c 5 - : : c v ~ r ~ d the follow:ng items

were all

exciuded

from

the

count:

a. Merchandise

costing P16G,OOO,

-.vhich .vc.s

held

by Saga

on consignment.

The

consignor is

a subsidiary.

c.

A

special machir:e, fabricated to order

for a

customer

costing P400,000,

was

f inished al"'ri specificalry

segregated in i:he

back

part

of tt.e

shippi:1g room

on

December 31, 2013. The

customer

was blUed on th:Jt

d te nd the m chine e x c ~ ~ ~ = ~ ~ r o r n i n v e n ~ c ; - y ~ : ~ c ~ 9 h t

was shipped on

January 4, 2014.

c. Nerchandise costir.g P O,OOO, which was shipped by Saga

f.o.b. destination to

a

custcme,

o

uec2mber

31,

20B.

The customer expects to receive

:he

merchandise on

J a n u a ~ y 3, 2014.

d. Nerchand se costing

Pl20,000 which

was shipped by

Saga

f.o.b.

shipping

point to a customer on December 29,

2013.

age 16 of 24 PJ. :JyenJstPB10.13

I

t

Practical Accoooting 1

SETB

e.

Merchandise costing PSO,OOO >hipped by

a ve'ldor

f.o.b.

seller or. Dece:nber 28, 2013

and

received by Silga

on

Januqry

10,

2014.

The

corrected balance

of

Saga's inventory shcJ d

b::

a.

P4,530,000

c

P4,480,000

b. P4,130,000 d. P4,690,000

36. The

Yeti

Corporation's

inventory at

December

31, ~ 0 1 3 , was

P325,000 based o

a

physical

count

priced at

cost, and before

any

n e c e s ~ a r y adjustment

for

the

followineJ:

Merchandse costing P30,000,

shipped F.o.b.

~ h i p p i n ~

point from

a

vendor on December 30, 2013,

was

received

en January 5,

2014.

Merchandise costiny P/2,QOO, shipped F.o.b.

destination

from

a

vendor on December 28, 2013, was

received on

January 3, 2014.

Merchandise

costing

PJR,COO was sll ipped

to a customer

F.o.b. d e s t i ~ a t i o ' l on December

28, 2rrived

at the

customer's lccaticn or. J;:m:Ja;y 6,

2fJ14.

M ~ r c h a n d i s e

costing

Pl2,000

was

being

he:d

on

consignment by

ClutJ

Company.

What amour.t should Yeti Ccrporatior report as i:-wentcry in

its December 31. 2013, statement

of

financial position?

c. P367,000 c.

P405,000

b. P427,000

d.

P325,000

37. The Shop Compa'ly selts TVs. The perpetual mventory was

stated

as

P305,000 on the books

at

Decem9er 31, 2013.

At

the

clos.: of

the year,

a

new

approach

for compiling

inventory

was used

and

apparently

a

satisfactory

cut-off for

preparation

financial

statements was not

made. Some events that

occurrer1

are as

follows.

a) TVs shipped

to

a customer January

2,

2014, costing

PSO,OOO were included

in inventory

at December 31,

2013.

The

sale

was recorded

in 2014.

b)

TVs costing

P100,000

received

December 30,

2013,

were

recorded as

received

o January 2,

2014.

~ g e l ; o f 4

www.pnc.corn.oh

P l O p e n ~ I U 0 1 3

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10/12

Pre

. P259,0QO___

d.

P270,000

38. Cupcake

Co. started 2013

with P94,000 of merchandise

inventory

on

hand. During 2013, P400,000

in

m e r c ~ d r d 1 s e

was purchased on account with

credit

terms of 1/15, n/45.

All discounts were taken.

Purchases

" ' ' ~ r e

all made f.o.b.

s h i p ~ i n g point. Cupcake paid frE'Jght charges of P/ 500.

i-1Prchandise

with

an

invoice

amount of

P5,000 was

retumE:d

for credit.

Cost of 9oods sold

for

the year was P380,000.

C t ~ p c a \ e

u ~ e s

a

ocr;>etuat

inventcry syste111.

What is

ending

i ' lventory assuming Cupcake

uses the ~ F o s s

method

to record

purchases?

a. P112,490

b. Pl12 550

.

d.

P116,500

P120,300

3Y.

The

closing inventory

at

cost of a

company

2t

31

December

2013 zmounted

to

?284,700.

The

following

ite:ns

were

included at

cost in the tota :

400 coats, which had

cost

P80

each

and normally

sold for

PlSO

eacl1.

Owing

to

a

defect in

manufacture,

they were

a sold after

the

reporting date

at

SO of thf'>ir normal

price. Selling expenses

amounted

to 5% of thP.

P

o u . : ~ e d s .

800 skir:ts,

which had

cost

P20 each. These too were

found

to

be

defecti'Je.

Remedial work

in February 2014

cost

PS per skirt, and

seliing

expenses

for

the

bCltch

totaled

P800. i n y were

sold for P28

edch.

Page

18 c 24

w w w ~ p t c . c o m ph

Pl.()p< n1stPB10.

t

PractiC3

Accounting

1

SETB

What should

the inventory

value be according

to

PAS 2

Inventories

after considering

the

above items?

a

P281,200 c. P282,800

b.' P282,100

d. P329,200

40.

A

company has deciJed

to

switch from

using

the

FIFO

method

of

inventory

valuation

to

using the average c0st method

(AVC:O). In

the

first accounting period where the change is

mi'lde,

opening inv2ntory volueo by

the FIFO

method

was

P53,200.

Closing inventory

vaiued

by the AVLO mzthod

was

P59,800.

Total

purchases

during the

period were

P136,500.

Using the

AVCO

mEthod,

o )enir.g inver.tory

would have been

valued at

P56,200.

What

is

the cost

of goods that

income staterrot::nt

tor

th

period?

a.

PP9,900

b. P132,900

should be inclo_oded in

the

c. P135,900

d. P 40,: .00

41. On

Januar;

1 7C13, r a s ~ i l l e Cor;;.

sigr>ed a three-year

noncancelable

purchase contract, which

allows Pastille tv

purchase up to 500,00\)

units

of

a

computer

part

annuaiJy

from Pyrc:;m;d Supply Co.

at

PlO per

unit

ar.d guarantees a

rr.inimum

annual purchase of 100,000 units. During 2013,

the part unexpectec:y became obsolete. Pastille had 250,000

units of this i ~ v e n t o r y at December 31,

2013, dO d

b e l i e v e ~

these

parts can be

sold

as

scrap

for

P2

per unit. What

amount c,;

...,, u i J a b l ~ los3

rom

me purchase ccmm1tment

$houid

PastiHe report

in its

2013

prafrt cr

loss?

a.

P2,400,00Q c. P1,600,000

:>.

P2,000,CQO

d.

P

800,000

Parre 19 of

24

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Practical 1\ccountmg 1

SETS

42. P physical inventory

tal

7/25/2019 PRTC_P1 08.04.13

12/12

Practical Ac-::ounting 1

SETB

45. Wharf C::>rp. boilght a new printing machine.

The

cost of

the

rr3chme

was

PSO,OOO.

The installa :ion costs

were

PS,OOO

and the employees received training on

how

to u s ~ the

mc:chine,

ac a co::;t

of P2,000. Before

using

the machtne

to

prini:

ct.:stomers' orders,

a

test was

undertzken

and the paper

and

ink ccst Pl,OOO.

What should be

the

cost of the machine

in

the company's

statement of finanoai

oosition?

a. P80,000

b.

P85,000

c.

d.

P86 ooo

Pss or.o

-

46. A machine :--.as a

ccst

of

PGO,OOO,

ha.:; a;; anr.ual depreciation

of P12,000, and has

accurnl tated depreciation of P30.000

on

December 31, :?012. On

April 1,

2013,

whEn

the

machine hcs

a fair

value

of

P24,000,

it is

e x . . : . . t . ~ . l y ~ d

for a similar

machine

with a fair

value of P72,000

and the p:-::>oer amount of cash is

paid.

The

lose:: to

be

recognized

o'l

e ~ c h n g e

is

a.

P6,000 c.

P21,000

b. P3,000 d. P 0

4

7.

T : ~ January,

Peopermint Corpcratior. enteret:

into a

~ c n t r o c t _

t?

a c q ~ i r e a new

macloine

for

its

factory. The mc.chsne,

wh:cn

had a cash price of PJOO,UOO, was paid

for

as fol aws:

Down

payment

Note payable in 10 eq1

tal monthly installments

1,000

ordi11ary s tares of Peppermint Nith an

agreed value cf P50 per share

Total

p

30,000

240,000

_

:Jc,ooo

E J 2 _ Q Q ~ m

Prior to the machine's

use, inc;tal:ation

costs of

P8,0QO

were

incurred. The machine has an estimated useful

ife

of ten

years and an est1mateu ~ a l v a g e valuP P

10,000.

What

should

Peppermint record

uS depreciation expense for the first

year under

the straight-l ine

method?

a.

P31,800

c. P30,000

b.

P31,000 d. P29,800

Page 22

of24

PJ Open1stPB10 13

Practical Accounting 1

SETB

48. Palace Inc. purchased

land

for a

buiidlr.g site for

P32U,OOO.

On the land

was a

building with an appraised

value

o

P120,000. The

~ o m p n y c emolished

the old building

at

a cost

of P12,000,

but

was

al'lle

to sell scrap from

the building

fnr

Pl,SOO.

The cost

cf

title

insurance was P300

and

attomey

fees

for

reviewing

the

contract was PSOO.. Prcperty

taxes paid

were P3,00ll, of which P250 covered the period Sllbsequent to

:he

purchase dat. .

The

capitalized cost

ot the

le: :d

:-:::

a. P336,400

c.

P334,650

b. P336,150 d.

P201,150

49. Salty Compa_py purchased

land

for a manufacturing facil ity

for

Pl,lOO,OOO.

The company

paid P7J,OOO to tear down a

building

on the

land.

Salvage

was sold

for PlO,SOO.

Legal fees

of P6,500 were paid

for

title :nvestigaticn and making the

purchase. Architect's fees were P40,500. Title insuranc" cost

P4,500, and liability

insurance

during

construs

paid

P1,3S.7,000. A on'c: -time assessment made

by

the

city

for

sidewalks was P7,500. Salty insta led lighting and s grage at

a cost of

Pll,OOO.

The

cost of

the b : ~ i l d i n g that

should be recorded

by Salty is

a. P1,505,500

c. Pl,423,000

b. P1,432,000 d.

F

1,357,500

50. Canyon Compan):

ts

engaged

in the operation

o

public

highways and skyways in the

Philippines.

On November 2,

2012,

a

catastrophe devastated

the

some of

the company's

operated highways

and

skyways.

The corr:pany suffered

P5.6

billion

bss

due

to

catastrophe.

On

January 1,

2013,

the

Philip Jine government decided

to :ompensate

the

company

for

the incurred loss. The government loaned

PS

biilion at

5%

per

annum with

maturity

period

of 5 years. The current

market r ~ t e for similar type of

loan

after

considering

credit

risks attached was

10;:,.

The conditions

stipulated on the

loan

agreeml nt

provide

that the

proceeds

wiil

be

used fo:

r ~ c o n s ~ r u c t i o n

of

the skyways and_ highways.

Page

23

o f Z