DMCCF JPIA REVIEW CLASS

PRACTICAL ACCOUNTING PROBLEMS 1

STATEMENT OF FINANCIAL POSITION AND COMPREHENSIVE INCOME
1. Kirk Company provided the following information for 2011:
Accounting and legal fees
120,000
Advertising
150,000
Freight out
80,000
Interest expense
70,000
Loss on sale of investment
30,000
Officers salaries
225,000
Rent for office space
220,000
Sales salaries and commissions
140,000
One half of the rented promises are occupied by the sales department. What should be
reported as distribution costs for 2011?
a. 480,000
b. 400,000
c. 370,000
d. 360,000
2. During 2011, Myrlyn Company decided to change from FIFO method inventory valuation to
weighted average method. Inventory balances under each method were:
FIFO
WEIGHTED AVE.
12/31/09
9,000,000
8,500,000
12/31/10
8,000,000
8,300,000
12/31/11
7,000,000
6,400,000
Ignoring income tax in its 2011 statement of retained earnings, what amount should Myrlyn
report as the effect of this accounting change?
a. 200,000 decrease
b. 200,000 increase
c. 300,000 decrease
d. 300,000
increase
3. On January 1, 2008, Reena Company purchased a machine for P 5,280,000 and
depreciated it by the straight-line method using an estimated useful life of eight years with
no residual value. On January 1, 2011, Reena determined that the machine had a useful
life of six years from the date of acquisition and will have a residual value of P 480,000. An
accounting change was made in 2011 to reflect these additional data. What is the
accumulated depreciation for this machine on December 31, 2011?
a. 2, 920,000
b. 3,080,000
c. 3,200,000
d. 3,520,000
4. On January 1, 2009, Stephen Company purchased for P 6,000,000 a machine with useful
life of 5 years and residual value of 600,000. The machine was depreciated by the double
declining balance method and the accumulated depreciation of the machine was
3,840,000 on December 31, 2010. Stephen changed to the straight line method on
January 1, 2011 and the residual value did not change. In its 2011 income statement, what
amount should be reported as depreciation for this machine?
a. 720,000
b. 520,000
c. 432,000
d. 312,000
5. Albert Co. provided the following data for 2011:
Sales
575,000
Cost of goods sold
240,000
Interest revenue
25,000
Administrative expenses
70,000
Sales commissions
50,000
Freight out
15,000
Loss on sale of equipment
10,000
Loss on extinguishment of debt
20,000
Uncollectible accounts expense
15,000
The finished goods inventory is 400,000 on January 1, 2011 and 360,000 on December 31,
2011. The income tax is 30%. What amount should be reported as income from continuing
operations?
a. 126,000
b. 180,000
c. 140,000
d. 147,000
6. Adrian Company provided the following data for the current year:
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Income from continuing operations
Income from discontinued operations
Unrealized gain on available for sale securities
Unrealized gain futures contract designated as a cash flow hedge
Actuarial loss during the year fully recognized
Foreign translation adjustment debit
Revaluation surplus during the year
How much is the comprehensive income for the current year?
a. 5,600,000
b. 3,400,000
c. 6,500,000

5,000,000
600,000
900,000
400,000
300,000
100,000
2,500,000
d. 9,000,000

7. Karen Co. reported net income of 741,000 for 2011 which included the following items:
Unrealized loss on available for sale securities, net of tax
(54,000)
Gain on extinguishment of bonds payable, net of tax
220,000
Adjustment of profits of prior years, net of tax
(75,000)
Loss from fire, net of tax
(140,000)
What should be reported as net income for 2011?
a. 650,000
b. 661,000
c. 816,000
d. 870,000
8. While preparing its 2011 financial statements, Leizel Co. discovered errors in its 2010 and
2009 depreciation. These errors resulted in overstatement of each years net income by
200,000 net of tax. The following amounts were reported in 2010 and 2009:
2010
2009
Retained earnings - January 1
5,500,000
3,500,000
Net income
1,500,000
2,000,000
Retained earnings December 31
7,000,000
5,500,000
The net income for 2011 was 3,000,000. On December 31, 2011 Leizel declared dividends
of 2,000,000. What is the balance of retained earnings on December 31, 2011?
a. 7,600,000
b. 8,000,000
c. 8,400,000
d. 7,800,000
9. Manuel Company reported the following current assets on December 31, 2012:
Cash (includes P 300,000 customers postdated check and P 1,000,000 sinking fund)
4,000,000
Accounts receivable
7,500,000
Inventory
4,500,000
Prepaid expenses
500,000
Deferred tax asset
2,500,000
Noncurrent asset classified as held for sale
3,000,000
Total current assets
22,000,000
Customers debit balances, net of customers credit balances of P600,000
5,000,000
Allowance for doubtful accounts
(500,000)
Selling price of Manuel Companys unsold goods sent out on consignment
At 125% of cost excluded from ending inventory
3,000,000
7,500,000
On December 31, 2012, what amount should be reported as total current assets?
a. 18,500,000
b. 18,200,000
c. 18,350,000
d. 18,050,000
10.Siegfred Co.s December 31, 2011 statement of financial position reported the following
current assets:
Cash
4,000,000
Accounts receivable
7,500,000
Inventory
4,500,000
Prepaid expenses
500,000
Deferred tax asset
2,500,000
Noncurrent asset classified as held for sale
3,000,000
22,000,000
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Cash on hand, including customers credit balances of 200,000
And employee IOU of 100,000
1,000,000
Cash in bank per bank statement (outstanding checks on December
31, 2011 P 300,000)
3,000,000
Total cash
4,000,000
Customers debit balances, net of customers credit balances of 400,000
5,000,000
Allowance for doubtful accounts
(500,000)
Selling price of unsold goods sent out on consignment at 150% of cost
And excluded from ending inventory
3,000,000
7,500,000
On December 31, 2011 what should be reported as total current asset?
a. 18,600,000
b. 18,200,000
c. 18,300,000
d.
17,800,000
11.The following trial balance of Alvin Co. on December 31, 2011 has been adjusted except
for income tax expense:
Cash
5,000,000
Accounts receivable
14,000,000
Inventory
10,000,000
Property, plant and equipment
25,000,000
Accounts payable
9,000,000
Income tax payable
6,000,000
Deferred tax liability
3,000,000
Ordinary share capital
15,000,000
Share premium
4,000,000
Retained earnings January 1
8,000,000
Net sales and other revenue
80,000,000
Cost and expenses
60,000,000
Income tax expense
11,000,000
125,000,000
125,000,000
During the year estimated tax payments of 5,000,000 were charged to income tax
expense. The tax rate is 30%. Deferred tax liability will reverse in 2012. What amount
should be reported as total current liabilities on December 31, 2011?
a. 15,000,000
b. 10,000,000
c. 13,000,000
d.
18,000,000
12.The trial balance of Solida Co. on December 31, 2011 is a follows:
Cash
4,000,000
Accounts receivable, net
8,000,000
Cost in excess of billings on long-term contracts
5,000,000
Billings in excess of cost on long-term contracts
1,500,000
Prepaid taxes
8,000,000
Property, plant and equipment, net
20,000,000
Note payable-noncurrent
3,000,000
Share capital
10,000,000
Share premium
2,500,000
Retained earnings unappropriated
5,000,000
Retained earnings restricted for note payable
3,000,000
Earnings from long-term contracts
55,000,000
Cost and expenses
35,000,000
80,000,000
80,000,000
Solida uses the percentage of completion method to account for long-term construction
contracts for financial statement and income tax purposes. All receivables on these
contracts are considered to be collectible within 12months. During 2011, estimated tax
payments of 8,000,000 were charged to prepaid taxes. Solida has not recorded income tax
expenses. There were no temporary or permanent differences. The tax rate is 30%. What
should be reported as total current assets on December 31, 2011?
a. 17,000,000
b. 19,000,000
c. 25,000,000
d.
14,000,000
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13.The following trial balance of Lean Co. on December 31, 2011 has been adjusted except
for income tax expense.
Cash
550,000
Accounts receivable, net
1,650,000
Prepaid taxes
300,000
Accounts payable
120,000
Share capital
500,000
Share premium
680,000
Retained earnings
630,000
Foreign currency translation adjustment
430,000
Revenue
3,600,000
Expenses
2,600,000
________
5,530,000
5,530,000
During 2011, estimated tax payments of 300,000 were charged to prepaid taxes. The
entity has not yet recorded income tax expense. There were no differences between
financial statement and income tax income, and the tax rate is 30%. Included in accounts
receivable is 500,000 due from a customer special terms granted to his customer require
payment in equal annual semi-annual installments of 125,000 every April 1 and October 1.

On December 31, 2011, what amount should be reported as total current assets?
a. 1,950,000
b. 2,500,000
c. 2,200,000
d. 2,250,000

On December 31, 2011, what amount should be reported as total retained earnings?
a. 1,029,000
b. 1,200,000
c. 1,330,000
d. 1,630,000

JAY EMMERSON N. DIMASUHID, CPA