MANUEL L.

QUEZON UNIVERSITY School of Accountancy and Business Arts

Integrated Review in Theory of Accounts and Practical Accounting 1 Day 1

STATEMENT OF FINANCIAL POSITION

1. The accounts and balances shown below were taken from the Basic Companys trial balance on
December 31, 2015. All adjusting entries have been made.

Wages payable, P 250,000; Cash, P 175,000; Bonds Payable, P 600,000; Dividends Payable, P
140,000; Prepaid Rent, P 136,000; Inventory, P 820,000; Investment in Sinking Fund Assets, P
525,000; Investment to profit or loss securities, P 153,000; Premium on Bonds Payable, P 48,000;
Investment in Subsidiary, P 1,020,000; Taxes Payable, P 228,000; Accounts Payable, P 248,000;
Accounts Receivable, P 366,000; Property, Plant and Equipment, P 1,200,000; Patents-net, P
150,000; Accumulated Depreciation-PPE, P 400,000; Land held for future business site, P
900,000.
How much should be reported in Basics December 31, 2015 statement of financial position as
current and non-current assets, respectively?
a. P 1,650,000 and P 2,375,000
b. P 1,650,000 and P 3,395,000
c. P 1,800,000 and P 2,225,000
d. P 1,800,000 and P 3,795,000
How much should be reported in Basics December 31, 2015 statement of financial position as
current and non-current liabilities, respectively?
a. P 776,000 and P 552,000
b. P 866,000 and P 648,000
c. P 916,000 and P 640,000
d. P 916,000 and P 648,000
2. Included in Levi Corporations liability account balances at December 31, 2014, were the
following:
14% note payable issued October 1, 2013, maturing
September 30, 2015 P 1,250,000
16% note payable issued April 1, 2009, due on April 2015 P 2,000,000
On December 31, 2014, the company expects to refinance the P 2,000,000 by the issuance of a
long-term note payable in lump sum. The refinancing of the P 2,000,000 is at the discretion of the
enterprise. Levis December 31, 2014 financial statements were issued on March 31, 2015. On
January 15, 2015, the entire P 2,000,000 balance of the 16% note was refinanced by issuance of a
long-term obligation.
On the December 31, 2014 statement of financial position, what amount of the notes payable
should Levis classify as short-term obligation?
a. None
b. P 1,250,000
c. P 3,250,000
d. P 2,000,000
3. On July 1, 2014, Mark Company acquired machinery worth P 2,500,000 from Julian Corporation.
Terms of the contract calls for a down-payment of P 500,000 and signing a 2-year 10% note
payable for the balance. Interest is payable quarterly. The existing loan agreement does not carry
a provision to refinance. During September, Mark was experiencing financial difficulty and was
unable to pay the periodic interest.
What total amount of current liability should Mark Company report in its December 31, 2014
statement of financial position assuming Julian Company agreed after the balance sheet date but
before the financial statements authorized to issue not to demand payment as a consequence of
the breach?
a. None
b. P 2,000,000
c. P 100,000
d. P 2,100,000
Assuming the lender agreed on December 31, 2014 to provide a grace period of 12 months for the
entity to rectify the breach and assured Mark Company that no demand is to be made within the
grace period, what amount of current liabilities should Mark Company report in its December 31,
2014 statement of financial position?
a. None
b. P 2,000,000
c. P 100,000
d. P 2,100,000
4. Help Companys adjusted trial balance at December 31, 2014 includes the following accounts
balances:
Ordinary share capital, P3 par P 3,000,000
Subscription Receivable due 2015 300,000
Share premium 4,000,000
Treasury shares, at cost 250,000

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MANUEL L. QUEZON UNIVERSITY School of Accountancy and Business Arts
Integrated Review in Theory of Accounts and Practical Accounting 1 Day 1

Net unrealizable loss on equity securities, net 100,000

Reserve for uninsured earthquake losses 750,000
Accumulated profits 1,000,000
Ordinary shares subscribed 500,000
Reserve for treasury share 250,000
What amount should Help Company report as total shareholders equity in its December 31, 2014
statement of financial position?
a. P 8,400,000
b. P 8,900,000
c. P 9,150,000
d. P 9,200,000

STATEMENT OF COMPREHENSIVE INCOME

5. On October 1, 2014, Echo Company sold 20,000 gallons of heating oil to Santa Company at P500
per gallon. Ten thousand gallons were delivered on December 20, 2014 and the remaining 10,000
gallons were delivered on January 10, 2015. Payment term were: 50% due on October 10, 2014;
25% due on 1st delivery and the remaining on the second delivery.
What amount of revenue should Echo recognize from this sale?
a. P 3,500,000
b. P 5,000,000
c. P 7,500,000
d. P 10,000,000
6. On December 1, 2014, Trident Company has started its operation retails store for electronic
product. It is attracting customer base by allowing the customer to have the first product free. The
customer is under no obligation to take further products. As of December 31, 2014, Trident
Company has distributed 2,000 electronic parts for free and these parts were purchased at P25
each. Also as of December 31, 2015 the company has sold 200,000 parts for P80 each.
How should the 2,000 parts distributed be shown in the December 31, 2014 profit or loss of
Trident Company?
a. As marketing cost of P 50,000
b. As cost of sales of P 50,000
c. Deferred cost of P 50,000
d. Only a disclosure is required in the notes to financial statement
7. Presented below are certain account balances of Home Products Company:
Ending Inventory 48,000
Rental Income 6,500
Interest Expense 12,700
Purchase returns and allowances 10,500
Beginning accumulated profit 114,400
Ending accumulated profits 134,000
Freight-in 10,100
Dividends income 71,000
Sales return 12,400
Sales discount 7,800
Selling expenses 99,400
Sales 390,000
Income tax 21,856
Beginning inventory 45,300
Purchases 190,000
Purchase discounts 2,500
Administrative expenses 82,500
Based on the data given above, how much would be the net income during the current year?
a. P 46,444
b. P 48,400
c. P 50,320
d. P 68,000
8. Pristine Company reported the following information for 2014:
Sales revenue P 500,000
Cost of goods sold 350,000
Operating expenses 55,000
Unrealized translation gain 20,000
Cash dividends received on the securities 2,000
Ignore income tax, for 2014, Pristine Company would report comprehensive income before tax of
a. P 117,000
b. P 115,000
c. P 97,000

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MANUEL L. QUEZON UNIVERSITY School of Accountancy and Business Arts
Integrated Review in Theory of Accounts and Practical Accounting 1 Day 1

d. P 20,000
9. For the year ended December 31, 2014, Traffic Inc. reported the following:
Net income P 180,000
Preference share dividend declared 30,000
Ordinary share dividends declared 6,000
Unrealized holding loss, net of tax 3,000
Retained earnings 240.000
Ordinary share capital 120,000
Accumulated Other Comprehensive Income,
Beginning Balance, net of tax 15,000
What would Traffic report as its ending balance of Accumulated Other Comprehensive Income?
a. P 18,000
b. P 15,000
c. P 12,000
d. P 3,000
10. Trunk Corp. reports operating expense in two categories: (1) selling; and (2) general and
administrative. The adjustment trial balance at December 31, 2014 included the following
expense and loss accounts:
Accounting and legal fees P 240,000
Advertising 300,000
Freight out 160,000
Interest 140,000
Loss on sale of long term investment 60,000
Officers salaries 450,000
Rent for office space 440,000
Sales salaries and commissions 280,000
One-half of the rented premises is occupied by the sales department.
How much is Trunks total distribution costs for 2014?
a. P 720,000
b. P 740,000
c. P 800,000
d. P 960,000
11. The following items are among those that were reported on Jealousy Companys income
statement for the year ended December 31, 2014:
Legal and audit fees P 340,000
Rent for office space 480,000
Interest expense 420,000
Loss on sale of equipment 70,000
Office staff salaries 400,000
The office space is used equally by Jealousys sales and accounting departments. What amount of
the above-listed items should be classified as general and administrative expenses in Jealousys
income statement?
a. P 980,000
b. P 1,050,000
c. P 1,000,000
d. P 1,220,000

NOTES TO FINANCIAL STATEMENTS

12. Gibson Company is part of a major industrial group and is known to accurately disclose related
party transactions in its financial statements. Remuneration and other payments made to the
entitys chief executive officer during 2014 were:
Annual salary 2,000,000
Share option and other share-based payments 1,000,000
Contribution to retirement benefit plan 500,000
Reimbursement of travel expenses for business trips 1,200,000
What total amount should be disclosed as compensation to key management personnel?
a. 3,500,000
b. 4,700,000
c. 3,000,000
d. 2,500,000
13. Dean Company acquired 100% of Money Company prior to 2014. During 2014, the individual
entities included in their financial statements the following:
Dean Morey
Key officers salaries 750,000 500,000
Officers expenses 200,000 100,000
Loan to officers 1,250,000 500,000

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MANUEL L. QUEZON UNIVERSITY School of Accountancy and Business Arts
Integrated Review in Theory of Accounts and Practical Accounting 1 Day 1

Intercompany sales 1,500,000

What total amount should be reported as related party disclosures in the notes to Dean Companys
2014 consolidated financial statement?
a. 1,500,000
b. 1,550,000
c. 1,750,000
d. 3,000,000
14. Caroline Company provide the following events that occurred after December 31, 2014:
1/15/2015 P 3,000,000 of accounts receivable was written off due to the bankruptcy of a
major customer.
2/14/2015 A shipping vessel of the entity with carrying amount of P 5,000,000 was
completely lost at sea because of a hurricane.
3/11/2015 A court case involving the entity as the defendant was settled and the entity was
obligated to pay the plaintiff for P 1,500,000. The entity previously has not
recognized a liability for the suit because management deemed it possible that the
entity would lose the case.
3/15/2015 one of entitys factories with a carrying amount of P 4,000,000 was completely
razed by forest fire that erupted in the vicinity.
The management completed the draft of the financial statements for 2014 on February 10, 2015.
On March 20, 2015, the Board of Directors authorized the financial statements for issue. The
entity announced the profit and other selected information on March 22, 2015. The financial
statements were approved by shareholders on April 2, 2015 and filed with the SEC the very next
day. What total amount should be reported as adjusting events on December 31, 2014?
a. 9,500,000
b. 8,500,000
c. 9,000,000
d. 4,500,000

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