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Posted: PRTC P 1 October 2015 First Preboard (5 0 ) PRTC P 1 May 2015 First & Final Preboard (1 00 ) PRTC P 1 May 2012 Preweek Drill (4 7 )Accounting Process Lakers Company received P12,000 from a tenant on December 1 for four months' rent of an office. This rent was for December, January, Febru...

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PROFESSIONAL REVIEW & TRAINING CENTER

PRACTICAL ACCOUNTING 1

Posted: PRTC P1 October 2015 First Preboard (50) PRTC P1 May 2015 First & Final Preboard (100) PRTC P1 May 2012 Preweek Drill (47) Accounting Process 1 . Lakers Company received P12,000 from a tenant on December 1 for four months' rent of an office. This rent was for December, January, February, and March. If Lakers debited Cash and credited Unearned Rental Income for P12,000 on December 1, the necessary adjustment December 31 would include A. A debit to Rental Income of P3,000 B. A credit to Rental Income of P3,000 C. A debit to Unearned Rental Income of P9,000 D. A credit to Unearned Rental Income of P9,000 PRTC 0515 2

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Presented below is the December 31 trial balance of Corinthians Company. Corinthians Company Trial Balance December 31, 2012 Debit Credit Cash P 14,800 Accounts Receivable 33,600 Allow. For Doubtful Accounts P2,160 Inventory, January 1 62,400 Furniture and Equipment 67,200 Accumulated Depreciation, January 1 26,880 Prepaid Insurance 4,080 Notes Payable 22,400 Owner, Capital 72,000 Sales 480,000 Purchases 320,000 Sales Salaries Expense 40,000 Advertising Expense 5,360 Administrative Salaries Expense 52,000 Office Expense 4,000 . 603,440 603,440 Information necessary for the preparation of adjusting journal entries: a) Adjust the Allowance for Doubtful Accounts to 8 percent of the accounts receivable.

May 2015, Final Preboard

b) Furniture and equipment is depreciated at 20 percent per year. c) Insurance expired during the year, P2,040. d) Interest accrued on notes payable, P2,688. e) Sales salaries incurred but not paid, PI,920. f) Advertising paid in advance, P560. g) Office supplies on hand, P1,200, charged to Office Expense when purchased. h) Inventory on December 31, P64,000. Disregarding income taxes, the adjusted profit is A. P39,224 C. P41,912 B. P41,384 D. P44,072 PRTC 0512 Statement of Financial Position 1. A chain of bicycle shops holds bicycles for short-term hire and for sale. The bicycles available for hire are used for two or three years and then sold by the shops as second-hand models. All shops sell both new and second-hand bicycles. The entity sold a new bicycles for P500,000 (cost P400,000) and a second-hand bicycles for P100,000 (carrying amount P50,000). Which statement is correct? A. The bicycles for hire are reported in the statement of financial position as property, plant and equipment. B. The entity shall reclassify the bicycles for hire as non-current assets held for sale when they cease to be rented and become held for sale. C. The difference between the net disposal proceeds and the carrying amount of the second-hand bicycles is recognized as other income in profit or loss. D. All of the above. PRTC 1015 3

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A corporation's accounting records provided the following information: 12/31/11 12/31/12 Current assets P240,000 P? Noncurrent assets 1,600,000 1,500,000 Current liabilities ? 130,000 Noncurrent liabilities 580,000 ? All assets and liabilities of the company are reported in the schedule above. Working capital of P92,000 remained unchanged from 2011 to 2012. Net income in 2012 was P88,000. No dividends were declared during 2012 and there were no other changes in equity. Total noncurrent liabilities at December 31, 2012 would be A. P392,000 C. P568,000 B. P480,000 D. P616,000 CPAR 0512 Page 1 of 56

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PRACTICAL ACCOUNTING 1 Leased assets Other loans Patents Plant and equipment Prepayments Provision for employment benefits Provision for restructuring Provision for warranty Raw materials Retained earnings Share capital Sundry creditors and accruals Sundry debtors Trade creditors Trade debtors Work in progress

Ottawa Electronics Inc. reported the following items on its December 31, 2015, trial balance: Accounts Payable P108,900 Advances to Employees 4,500 Unearned Rent Revenue 28,800 Estimated Liability Under Warranties 25,800 Cash Surrender Value of Officers' Life Insurance 7,500 Bonds Payable 555,000 Discount on Bonds Payable 22,500 Trademarks 3,900 The amount that should be recorded on Ottawa's statement of financial position as total liabilities is A. P696,000 C. P703,500 B. P700,500 D. P741,000 PRTC 1015

Use the following information for the next two questions: PRTC 0515 The general ledger summarized trial balance of Heat Corporation, a manufacturing company, includes the following accounts at December 31, 2015: Debit Credit Accumulated depreciation – buildings P120,000 Accumulated depreciation – leased assets 310,000 Accumulated depreciation – plant and equipment 3,726,000 Allowance for doubtful debts 80,000 Bank loans 2,215,000 Bank overdrafts 350,000 Buildings, at cost P1,030,000 Cash 175,000 Current tax payable 152,000 Debentures 675,000 Deferred tax 420,000 Deposits, at call 36,000 Finished goods 1,042,000 Goodwill 2,530,000 Investments in listed companies (AFS) 52,000 Investments revaluation reserve 25,000 Land, at valuation 250,000 Land revaluation reserve 81,000 Lease liabilities 350,000 May 2015, Final Preboard

775,000 575,000 110,000 8,275,000 141,000 275,000 412,000 42,000 490,000 1,481,000 3,500,000 715,000 320,000 1,617,000 1,744,000 151,000 P17,121,000

. P17,121,000

Additional information: a) Bank loans and other loans are all repayable beyond one year. b) P300,000 of the debentures is repayable within one year. c) Lease liabilities include P125,000 repayable within one year. d) Provision for employment benefits includes P192,000 payable within one year. e) The planned restructuring is intended to be completed within one year, f) Provision for warranty includes P20,000 estimated to be incurred beyond one year. 4

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Total noncurrent assets is A. P8,814,000 B. P8,839,000

C. P8,866,000 D. P8,891,000

Total current liabilities is A. P3,693,000 B. P3,883,000

C. P3,885,000 D. P3,921,000

Use the following information for the next five questions. PRTC 0515 The following is a post-closing trial balance for June 30, 2015, East Company, an SME: Account Title Debits Credits Cash P830,000 Short-term investments 650,000 Page 2 of 56

PROFESSIONAL REVIEW & TRAINING CENTER Accounts receivable Prepaid expenses Land Buildings Accumulated dep. – buildings Equipment Accumulated dep. - equipment Accounts payable Accrued expenses Notes payable Mortgage payable Ordinary shares Retained earnings Total

PRACTICAL ACCOUNTING 1 A. P3,590,000 B. P3,630,000

2,800,000 320,000 750,000 3,200,000

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The total noncurrent assets of East Company as of June 30, 2015 is A. P 900,000 C. P4,400,000 D. P4,450,000 B. P3,550,000

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The total current liabilities of East Company as of June 30, 2015 is C. P2,780,000 A. P2,280,000 B. P2,680,000 D. P2,880,000

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The total noncurrent liabilities of East Company as of June 30, 2015 is A. P 500,000 C. P2,900,000 B. P2,400,000 D. P5,680,000

2,650,000

. P11,200,000

Additional Information: 1. The short-term investments account includes P180,000 in treasury bills purchased in May. The bills mature in July. 2. The accounts receivable account, consists of the following: a. Amounts owed by customers P2,250,000 b. Allowance for uncollectible accounts trade customers (150,000) c. Nontrade note receivable (due in three years) 650,000 d. interest receivable on note (due in four months) 50,000 Total P2,800,000 3. The notes payable accounts consists of two notes of P500,000 each. One note is due on September 30, 2015, and the other is due on November 30, 2016. 4. The mortgage payable is payable in semiannual installment of P50,000 each plus interest. The next payment is due on October 31, 2015. Interest has been properly accrued and is included in accrued expenses. 5. Five hundred thousand shares of no par ordinary shares are authorized, of which 200,000 shares have been issued and are outstanding. 6. The land account includes P500,000 representing the cost of the land on which the company's office building resides. The remaining P250,000 is the cost of land that the company is holding for investment purposes. The fair values of land cannot be determined reliably without undue cost or effort on an ongoing basis. QUESTIONS: 6 . The total current assets of East Company as of June 30, 2015 is May 2015, Final Preboard

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P1,600,000 1,200,000 1,730,000 450,000 1,000,000 2,500,000 1,000,000 1,720,000 P11,200,000

C. P3,900,000 D. P3,950,000

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The total shareholders' equity as of June 30, 2015 is A. P1,000,000 C. P2,270,000 B. P1,720,000 D. P2,720,000

Statement of Comprehensive Income 11 What amount of comprehensive income should Searles Corporation report on its statement of profit or loss and other comprehensive income given the following net of tax figures that represent changes during a period? Remeasurement loss on defined benefit obligation (P3,000) Unrealized gain on available-for-sale securities 15,000 Reclassification adjustment, for securities gain included in net income (2,500) Share warrants outstanding 4,000 Net income 77,000 A. P86,500 C. P89,500 B. P89,000 D. P90,500 PRTC 0515 12

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The following information for 2015 is provided by Rockets Company: Sales Cost of goods sold Selling expenses General and administrative expenses Interest expense Gain on early extinguishment of long-term debt

P20,000,000 12,000,000 1,200,000 1,800,000 1,500,000 500,000 Page 3 of 56

PROFESSIONAL REVIEW & TRAINING CENTER Correction of inventory error, net of income tax - credit Investment income - equity method Gain on sale of investment Income tax expense Dividends declared What was the 2015 income from continuing operations? A. P4,500,000 C. P6,600,000 B. P4,900,000 D. P7,000,000 3.

PRACTICAL ACCOUNTING 1 800,000 600,000 2,000,000 2,100,000 2,500,000

PRTC 0515

The general ledger trial balance of Kimberly Limited includes the following accounts at December 31, 2015: Sales revenue P975,000 Interest income 20,000 Share of profit of associates 15,000 Other income 8,000 Decrease in inventories of finished goods 25,000 Raw materials and consumables used 350,000 Employee benefit expenses 150,000 Loss on translation of foreign operations 30,000 Depreciation of property and equipment 45,000 Impairment of property 80,000 Finance costs 35,000 Other expenses 45,000 Income tax expense 75,000 How much should be reported as profit for the year ended December 31, 2015? A. P183,000 C. P263,000 B. P213,000 D. P288,000 PRTC 1015

Use the following information for the next five questions. PRTC 0515 Selected pre-adjustment account balances and adjusting information of Lakers Inc. for the year ended December 31, 2015, are as follows: Retained earnings, January 1, 2015 P440,670 Sales salaries and commissions 25,000 Advertising expense 16,090 Legal services 2,225 Insurance and licenses 7,680 Travel expense - sales representatives 4,560 Depreciation - sales/delivery equipment 6,100 May 2015, Final Preboard

Depreciation - office equipment Interest income Utilities Telephone and postage Supplies inventory Miscellaneous selling expenses Dividends paid Dividends received Interest expense Allowance for doubtful accounts Officers' salaries Sales Sales returns and allowances Sales discounts Gain on sale of assets Inventory, January 1 Inventory, December 31 Purchases Freight in Accounts receivable, December 31 Gain from discontinued operations (before income taxes) Loss on sale of equipment

4,200 550 6,400 1,475 2,180 2,740 33,000 5,150 4,520 160 36,600 451,000 3,900 880 7,820 89,700 20,550 141,600 5,525 261,000 40,000 72,600

Adjusting information: a) Goods amounting to P18,600 in the possession of consignees as of December 31,2015 was not included in the ending inventory balance. b) After preparing an analysis of aged accounts receivable, a decision was made to increase the allowance for doubtful accounts to 2% of the ending accounts receivable balance. c) Purchase returns and allowances were unrecorded. They are computed as 6% of purchases (not including freight in). d) Sales commissions for the last day of 2015 had not been accrued. Total sales for that day amounted to P3,050. Average sales commissions is 3% of sales. e) No accrual had been made for a P570 freight bill received on January 3, 2016, for goods received on December 29, 2015. f) An advertising campaign was initiated on November 1, 2015. P1,818 was recorded as "prepaid advertising" and should be amortized over a six-month period. No amortization was recorded. g) Freight charges of P3,500 paid during 2015 on sold merchandise were netted against sales. Page 4 of 56

PROFESSIONAL REVIEW & TRAINING CENTER

PRACTICAL ACCOUNTING 1 Correction of inventory error, net of income tax - credit Investment income - equity method Gain on sale of investment Income tax expense Dividends declared What was the 2012 income from continuing operations? A. P4,500,000 C. P6,600,000 B. P4,900,000 D. P7,000,000

h) P560 interest earned at the end of 2015 was not accrued. i) A forklift with a useful life of 10 years was purchased on March 1, 2015 for P7,800. Depreciation had not been recognized, j) Supplies on hand amounted to P1,225 at December 31, 2015. A "real" account is debited upon receipt of supplies. k) Income tax rate on all items is 30%. QUESTIONS: Compute for the following for the year ended December 31, 2015: 19 13

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Net sales A. P447,500 B. P449,720

C. P451,000 D. P454,500

Cost of goods sold A. P189,749 B. P208,399

C. P208,449 D. P210,149

Selling expenses A. P55,838 B. P58,596

C. P58,688 D. P59,338

General and administrative expenses A. P64,595 B. P64,915

C. P66,140 D. P68,095

Income from continuing operations A. P50,707 B. P51,099

C. P79,099 D. P95,227

Income Statement 18 . The following information for 2012 is provided by Matthew Company: Sales P20,000,000 Cost of goods sold 12,000,000 Selling expenses 1,200,000 General and administrative expenses 1,800,000 Interest expense 1,500,000 Gain on early extinguishment of long-term debt 500,000 May 2015, Final Preboard

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800,000 600,000 2,000,000 2,100,000 2,500,000

CPAR 0512

Below are selected account balance of the Petronius Company with additional information as of December 31, 2012: Retained earnings, January 1 P 540,000 Sales (net) 8,375,000 Dividends received 15,000 Dividends paid 140,000 Loss on sale of marketable securities 40,000 Loss from write-down of obsolete inventory 115,000 Merchandise inventory, January 1 1,040,000 Purchase (net) 4,720,400 Salaries 1,540,000 Contribution to employees' pension fund 280,000 Delivery expenses 205,000 Miscellaneous expense 125,000 Doubtful accounts expense 12,000 Depreciation expense - fixed assets 86,000 Income tax expense 120,000 Inventory at December 31, 2012 was valued at P760,000 (P875,000 less P115,000 writedown of obsolete inventory). How much should be reported as profit for the year ended December 31, 2012? A. P841,600 C. P981,600 B. P866,600 D. P986,600 CPAR 0512

Cash Flow Statement 20 . Ryan Company's income statement for the year ended December 31, 2015, reported net income of P360,000. The financial statements also disclosed the following information: Amortization P 20,000 Depreciation 60,000 Increase in accounts receivable 140,000 Page 5 of 56

PROFESSIONAL REVIEW & TRAINING CENTER Increase in inventory Decrease in accounts payable Increase in salaries payable Dividends paid Purchase of equipment Increase in long-term note payable Net cash provided by operating activities for 2015 should be reported as A. P 84,000 C. P234,000 B. P204,000 D. P324,000 21

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PRACTICAL ACCOUNTING 1

PRTC 0515

The following information is available from the financial statements of Hornets Corporation for the year ended December 31, 2015: Net income P396,000 Depreciation expense 102,000 Decrease in accounts receivable 126,000 Increase in inventories 90,000 Increase in accounts payable 24,000 Payment of dividends 54,000 Purchase of available-for-sale securities 22,000 Decrease in income taxes payable 16,000 What is Hornets Corporation's net cash flow from operating activities? A. P440,000 C. P520,000 D. P542,000 PRTC 0515 B. P466,000 Sales, P102,000; Cost of goods sold, P40,000; Wages, P31,800; Purchase of land, P8,000; Increase in accounts receivable, P3,600; Depreciation expense, P4,000; Gain on sale of equipment, PI,400; Issuance of bonds, P16,000 at face value; Increase in accounts payable, P5,200; Patent amortization expense, P2,600; Decrease in inventory, P2,000; Loss on sale of tand PI,000; Decrease in wages payable, P600; Declaration and payment of dividend, P6,800. Net cash flows from operating activities is A. P22,800 C. P36,800 B. P33,200 D. P38,000 PRTC 0515 Luke Company began the current year with the following: Accounts receivable Allowance for doubtful accounts Net account receivable

May 2015, Final Preboard

During the current year, the following events occurred: Accounts written off P 12,000 Sales on account 300,000 Bad debt expense recognized 20,000 At the end of the current year, the company showed a balance in gross accounts receivable (before the allowance for doubtful accounts) of P168,000. What amount would be shown as an operating cash inflow in the statement of cash flows under the direct method? A. P210,000 C. P282,000 B. P220,000 D. P300,000 CPAR 0512

48,000 76,000 28,000 120,000 150,000 300,000

P100,000 (8,000) 92,000

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At balance sheet date, Dim Limited had the following net balance from cash flows: • Operating activities, P53,440; • Investing activities, P45,230; • Financing activities, P(47,860). If the company had an ending balance of cash amounting to P107,310, what was the comparative ending balance of cash for the previous year? A. P(39,220) C. P158,120 B. P56,500 D. P163,380 CPAR 0512

Notes to Financial Statements Operating Segments 25 . The following segments were identified for Oklahoma Corporation: Segment Operating Profit (Loss) #1 P1,000,000 #2 200,000 #3 (500,000) #4 (100,000) Which of the four segments is a reportable segment? A. 1 and 2 only C. 1, 2, and 3 only B. 1 and 3 only D. all four PRTC 0512, 0515 26

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Hyde Corp. has three manufacturing divisions, each of which has been determined to be a reportable operating segment. In the year just ended, Clay division had sales of P3,000,000, which was 25% of Hyde's total sales, and had traceable operating costs of PI,900,000. Hyde incurred operating costs of P500,000 that were not directly traceable to any of the divisions. In addition, Hyde incurred interest expense of P300,000. The calculation of the measure of segment profit or loss reviewed by Hyde's chief operating decision maker does not include an Page 6 of 56

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PRACTICAL ACCOUNTING 1

allocation of interest expense incurred by Hyde. However, it does include traceable costs. It also includes nontraceable operating costs allocated based on the ratio of divisional sales to aggregate sales. In reporting segment information, what amount should be shown as Clay's profit for the year? A. P875,000 C. P 975,000 B. P900,000 D. P1,100,000 CPAR 0512

Discontinued operations & assets held for sale . Byron Inc. decided on August 1, 2012, to dispose of a segment of its business'. The segment w...