FINANCIAL ACCOUNTING INCOME

STATEMENT
SELF-TESTING ACTIVITY
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Questions 1, 2 and 3 are based on the following information.

On December 31, 2003, the following accounts appear in the trial

balance of Jovy Manufacturing Company:

Inventories on January 1, 2003:

Raw materials
35,800
Goods in process 40,000
Finished goods
31,900
Purchases of raw materials
420,000
Purchase returns and allowances
12,000
Freight-in 8,000
Direct labor
142,000
Indirect labor
90,000
Realty tax – factory building
15,000
Realty tax – salesroom and office
12,000
Depreciation – factory building
9,000
Depreciation – salesroom and office
5,000
Light and power 100,000

Additional information:

- Of the light and power, 60% was consumed in the factory, 25% in the
office, and 15% in the salesroom.

- Inventories on December 31, 2003:

Raw materials 38,700
Goods in process 50,000
Finished goods 25,000

FINANCIAL STATEMENTS INCOME STATEMENT

1. The cost of materials used is

a. P 405,100 b. P 413,100 c. P 417,100 d. P

425,100

2. The total cost of goods manufactured is

a. P 759,100 b. P 729,100 c. P 726,000 d. P

719,100

3. The cost of goods sold is

a. P 718,000 b. P 719,500 c. P 726,000 d. P

738,000

Questions 4, 5 and 6 are based on the following information.

Mark Corporation’s trial balance of income statement accounts for the

year ended December 31, 2003 included the following:

Sales 150,000
Cost of sales 60,000
Administrative expenses 15,000
Loss on sale of equipment 9,000
Commissions to salespersons 10,000
Interest revenue 5,000
Freight-out 3,000
Loss on early retirement of long-term debt 10,000
Bad debts expense 3,000
______
110,000 155,000

The finished goods inventory on January 1, 2003 was P100,000 and

P90,000 on December 31, 2003. Effective income tax rate for 2003 is
30%.

4. On Mark’s income statement for 2003, the cost of goods manufactured in

sold is:

a. P 73,000 b. P 70,000 c. P 53,000 d. P

50,000

5. On Mark’s income statement for 2003, the income before extraordinary

items is:

FINANCIAL STATEMENTS INCOME STATEMENT

 a. P 55,000 b. P 45,000 c. P 38,500 d. P
31,500

6. On Mark’s income statement for 2003, extraordinary loss is:

a. P 7,000 b. P 10,000 c. P 13,000

d. P 19,000

Questions 7, 8 and 9 are based on the following information.

The following account balances appear in the trial balance of Ruther

Company as of December 31, 2003:

Raw materials inventory, January 1

115,000
Raw materials inventory, December 31
160,000
Direct labor
180,000
Light and power 30,000
Freight in and handling
15,000
Factory supplies used
25,000
Insurance – factory
8,000
Goods in process inventory, January 1
140,000
Goods in process inventory, December 31
132,000
Fuel, oil and lubricants
23,000
Taxes and licenses - factory
11,000
Repairs and maintenance – factory
7,000
Depreciation – plant and equipment
35,000
Depreciation – office equipment
9,000
Finished goods inventory, January 1
137,000
Finished goods inventory, December 31
110,000
Sales 933,000
Selling expenses 105,000

FINANCIAL STATEMENTS INCOME STATEMENT

 Administrative expenses
50,000
Sales returns and allowances
7,000
Indirect labor
60,000
Interest expense 18,000
Purchases of raw materials
500,000
Purchase returns and allowances
10,000
SSS and Medicate premiums – factory
22,000
Retained earnings, January 1
135,000

7. Raw materials used is:

a. P 445,000 b. P 460,000 c. P 470,000 d. P
480,000

8. Cost of goods sold is:

a. P 801,000 b. P 861,000 c. P 869,000 d. P

896,000

9. Net income (loss) is:

a. P (134,000) b. P 134,000 c. P (152,000) d. P

152,000

Questions 10 and 11 are based on the following information.

Jasper Company presented to you some of its accounts with balances at

December 31, 2003, in alphabetical order:

Administrative expenses
70,000
Customer discounts and allowances
8,000
Depreciation – plant and equipment
60,000
Depreciation – selling and administrative
6,000
Direct labor
150,000

FINANCIAL STATEMENTS INCOME STATEMENT

 Factory supplies used
15,000
Finished goods inventory, January 1
100,000
Finished goods inventory, December 31
80,000
Freight-in 2,000
Gain on sale of machinery
4,000
Indirect labor
70,000
Insurance – factory
5,000
Interest expense 120,000
Power and lighting – factory
20,000
Provision for income tax
4,000
Purchases 900,000
Raw materials inventory, January
200,000
Raw materials inventory, December 31
240,000
SSS premiums – factory
30,000
Sales 1,500,000
Selling expenses 80,000
Taxes – factory
12,000
Work in process inventory, January 1
40,000
Work in process inventory, December 31
35,000

10. Cost of goods sold is:

a. P 1,229,000 b. P 1,247,000 c. P 1,249,000

d. P 1,277,000

11. Given a retained earnings balance of P35,000 on January 1, 2003, the

retained earnings balance at December 1, 2003 is:

a. P 2,000 deficit b. P 2,000 c. P 6,000 d. P 4,000

Questions 12 and 13 are based on the following information.

FINANCIAL STATEMENTS INCOME STATEMENT

 Below are selected account balances of the Michael Company with
additional information as of December 31, 2003:

Retained earnings 540,000

Sales (net) 8,375,000
Dividend income 15,000
Dividends 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
Purchases (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 of 2003 115,000

Inventory at December 31, 2003 is valued at P740,000 (P875,000 less

P115,000 write-down of obsolete inventory).

12. Income before tax for the year ended December 31, 2003 is:

a. P 846,600 b. P 966,600 c. P 1,101,600 d. P

1,126,600

13. What is the balance of the retained earnings account at December 31,
2003 is?

a. P 1,271,600 b. P 1,386,600 c. P 1,501,600

d. P 1,666,600
Questions 14 and 15 are based on the following information.

These are some of the account balances of Jerald Company on December

31, 2003 as well as some additional information:

Gross sales 756,000

Gross purchases 485,000
Inventory, January 1 225,000
Retained earnings, January 1 202,500
Income from sale of fixed assets 24,000
Dividends 40,000

FINANCIAL STATEMENTS INCOME STATEMENT

 Dividend income 18,000
Sales returns and allowances 16,000
Purchase returns and allowances 15,000
Salaries and wages 76,000
SSS, Medicare contributions 12,000
Travel and transportation 14,000
Miscellaneous expenses 8,000
Bad debts written-off 2,000
Deprecation of fixed assets 20,000
Loss on sale of securities 10,000
Income tax 32,700

Inventory on December 31, 2003 was valued at a net amount of P195,000

(P220,000 less P25,000 write-down of unsaleable and obsolete inventory).

14. Income before tax for the year ended December 31, 2003 is:

a. P 140,000 b. P 122,000 c. P 115,000 d. P

107,300

15. Balance of the retained earnings account on December 1, 2003 is:

a. P 309,800 b. P 269,800 c. P 251,800 d. P

244,800

Questions 16, 17 and 18 are based on the following information.

The following accounts and their balances are among those in the trial
balance of Em-em Company on December 31, 2003:

Sales 2,000,000
Inventory, January 1 365,000
Purchases 1,555,000
Purchases returns and allowances 15,000
Salaries 120,000
Delivery expenses 22,000
Retained earnings, January 1 325,000
Dividend income 18,000
Gain on sale of fixed asset 7,000
Light and power 80,000
Travel and transportation 18,000
Interest and bank charges 35,000
Miscellaneous operating expenses 6,000
Bad debts written off 4,000
Depreciation 15,000
Income tax 39,950

FINANCIAL STATEMENTS INCOME STATEMENT

 Dividends declared and paid 85,000
Inventory, December 31 325,000

16. The operating income is:

a. P 159,000 b. P 155,000 c. P 145,000 d. P

120,000

17. The income before income tax is:

a. P 180,000 b. P 155,000 c. P 145,000 d. P
105,050

18. The retained earnings on December 31, 2003 is:

a. P 430,050 b. P 385,000 c. P 363,050 d. P

345,050

19. On January 2, 2003, Osborn Company assigned its patent to Leciram

for royalties of 10% of patent related sales. On the same date, Tarafa
received a P40,000 advance to be applied against royalties for 2003
sales. Royalties are payable every six months, Leciram reported the
following sales:

Six months ended Amount

June 30, 2003 ………………………………………….. P 150,000
December 31, 2003 ………………………………. 200,000

How much royalty revenue should Tarafa report in its 2003 income
statement?

a. P75,000 b. P60,000 c. P40,000 d. P35,000

20. Eagle Corporation’s trademark was licensed to Hawk Company for

royalties of 15% of sales of the trademarked items. Royalties are payable
semiannually on March 15 for sales in July through December of the
prior year, and on September 15 for sales in January through June of the
same year. Eagle received the following royalties from Hawk:

March 15 September 15
2002 P 5,000 P 7,500
2003 6,000 8,500

Hawk estimated that sales of the trademarked items would total P30,000
for July through December 2003. In Eagle’s 2003 income statement, the
royalty revenue should be

FINANCIAL STATEMENTS INCOME STATEMENT

 a. P13,000 b. P14,000 c. P19,000 d. P20,000

21. Ashary Company assigns some of its patents to other enterprise under
a variety of licensing agreements. In some instances, advance royalties
are received when the agreements are signed and, in others, royalties
are remitted within 60 days after each license year end. The following
data are included in Ashary’s December 31 balance sheets:

_ 2002 _ __2003__
Royalties receivable P 90,000 P 85,000
Unearned royalties 60,000 40,000

During 2003, Ashary received royalty remittances of P200,000. In its

income statement for the year ended December 31, 2003, Ashary should
report royalty revenue of

a. P225,000 b. P215,000 c. P205,000

d. P195,000

22. On January 1, 2003, Dirk Company acquired the copyright to a book

owned by Taz for royalties of 15% of future book sales. Royalties are
payable on September 30 for sales in January through June of the same
year, and on March 31 for sales in July through December of the
preceding year. During 2002 and 2003, Dirk remitted royalty checks to
Taz as follows:

March 31 September 30
2002 P - P 25,000
2003 22,000 40,000

Dirk’s sales of the Taz book totaled P300,000 for the last half of 2003. In
its 2003 income statement, Dirk should report royalty expense of

a. P85,000 b. P67,000 c. P62,000 d. P45,000

Numbers 23, 24 and 25 are based on the following information:

Sea Corporation’s accounting records showed the following investments

at January 1, 2003:

Common stock:
Rack Corporation (1,000 shares) P 10,000
Lab Corporation (5,000 shares) 100,000

Real Estate:
Parking lot (leased to Dhong Company) 300,000

FINANCIAL STATEMENTS INCOME STATEMENT

 Other:
Trademark (at cost, less accumulated amortization)
25,000

Total investments P435,000

Sea owns 1% of Rack and 30% of Lab. Sea’s directors constitute a

majority of Lab’s directors. The Dhong lease, which commenced on
January 1, 2001, is for ten years at an annual rental of P48,000. In
addition, on January 1, 2001, Dhong paid a nonrefundable deposit of
P50,000, as well as a security deposit of P8.000 to be refunded upon
expiration of the lease. The trademark was licensed to Rabb COmpany for
royalties of 10% of sales of the trademarked items. Royalties are payable
semiannually on March 1 (for sales in July through December of the prior
year), and on September 1 (for sales in January through June of the same
year).

During the year ended December 31, 2003, Sea received cash dividends
of P1,000 from Rack, and P15,000 from Lab, whose 2003 net incomes
were P75,000 and P150,000, respectively. Sea also received P48,000 rent
from Dhong in 2003, and the following royalties from Rabb:

March 1 September 1
2002 P 3,000 P 5,000
2003 4,000 7,000

Rabb estimated that sales of the trademarked items would total P20,000
for the last half of 2003.

23. In Sea’s 2003 income statement, how much should be reported as

dividends revenue?

a. P16,000 b. P2,400 c. P1,000 d. P150

24. In Sea’s 2003 income statement, how much should be reported as

royalty revenue?

a. P14,000 b. 13,000 c. P11,000 d. P9,000

25. In Lake’s 2003 income statement, how much should be reported as

rental revenue?

a. P43,000 b. P48,000 c. P53,000 d. P53,800

FINANCIAL STATEMENTS INCOME STATEMENT

26. Michael Company’s usual sales terms are net 60 days, FOB shipping
point. Sales, net of returns and allowances, totaled P2,300,000 for the
year ended December 31, 2002, before year-end adjustments. Additional
data are as follows;
 On December 27, 2002, Michael authorized a customer to return for
full credit, goods shipped and billed at P50,000 on December 5, 2002.
The returned gooks were received by Michael on January 4, 2003, and
a P50,000 credit memo was recorded on the same date.
 Goods with an invoice amount of P80,000 were billed and recorded on
January 3, 2003. The goods were shipped on December 30, 2002.
 Goods with an invoice amount of P100,000 were billed and recorded
on December 30, 2002. The goods were shipped on January 3, 2002.

Michael’s adjusted net sales for 2002 should be

a. P2,330,000 b. P2,280,000 c. P2,250,000

d. P2,230,000

27. Edward Company’s usual sales terms are net 60 days, FOB shipping
point. Sales, net of returns and allowances, totaled P2,300,000 for the
year ended December 31, 2003, before year-end adjustment. Additional
data are as follows
 On December 27, 2003, Edward authorized a customer to return for
full credit, goods shipped and billed at P50,000 on December 15,
2003. The returned goods were received by Edward on January 4,
2004, and a P50,000 credit memo was issued on the same date.
 Goods with an invoice amount of P80,000 were billed to a customer on
January 3, 2004, a customer notified Edward that goods billed and
shipped on December 23, 2003 were lost in transit. The invoice
amount was P100,000

Edward’s adjusted net sales for 2003 should be

a. P2,330,000 b. P2,280,000 c. P2,250,000

d. P2,230,000

28. The following information was taken from the books of Pampanga
Company for 2002:

Gross sales P 2,400,000

Inventory, December 31, 2002 180,000
Purchases 1,800,000
Freight-in 6,000
Sales returns and allowances 72,000
Purchase discounts 22,000
Operating expenses 545,000

FINANCIAL STATEMENTS INCOME STATEMENT

 Gross margin sales 30%

The cost of goods available for sale during 2002 was

a. P1,800,000 b. P1,809,000 c. P2,328,000

d. None of these

29. The following information is available for Hollowman Corporation for

2003

Sales P 100,000
Beginning inventory 36,000
Ending inventory 19,000
Freight out 9,000
Purchases 43,000

Hollowman’s cost of gooks sold for 2003 is

a. P52,000 b. P60,000 c. P69,000 d. P88,000

30. The following information is available from Belle COmpany’s 2003

accounting records:

Purchases P 530,000
Purchase discounts 10,000
Beginning inventory 160,000
Ending inventory 215,000
Freight out 40,000

Belle’s cost of goods sold is

a. P465,000 b. P475,000 c. P505,000

d. P585,000

31. The following data were available from Nathaniel COmpany’s records
on December 31, 2003:

Finished goods inventory, 1/1/02 P 120,000

Finished goods inventory, 12/31/02 110,000
Cost of goods manufactured 520,000
Loss on sale of plant equipment 50,000

The cost of gooks sold for 2002 was

a. P510,000 b. P520,000 c. P530,000

d. P580,000

FINANCIAL STATEMENTS INCOME STATEMENT

32. Noriepaul Company had inventories at the beginning and end of 2002
as follows:

1/1/02 12/31/02
Raw materials 55,000 65,000
Work in process 96,000 80,000
Finished goods 50,000 85,000

During 2002, the following costs were incurred:

Raw materials purchased 400,000
Direct labor payroll 220,000
Factory overhead 330,000

Noriepaul’s cost of goods sold for 2002 was

a. P921,000 b. P956,000 c. P966,000

d. P979,000

33. The following information was taken from Kai kai Company’s
accounting records for the year ended December 31, 2003

Increase in raw materials inventory P 15,000

Decrease in finished goods inventory 35,000
Raw materials purchased 430,000
Direct labor payroll 200,000
Factory overhead 300,000
Freight out 45,000

There was no work in process inventory at the beginning or end of the

year. Kai kai’s 2003 cost of goods sold is

a. P950,000 b. P965,000 c. P975,000

d. P995,000

34. The following information was taken from Jodi’s accounting records
for the year ended December 31, 2002:

Decrease in raw materials inventory P 15,000

Increase in finished goods inventory 35,000
Raw materials purchased 430,000
Direct labor payroll 200,000
Factory overhead 300,000
Freight out 45,000

FINANCIAL STATEMENTS INCOME STATEMENT

 There was no work in process inventory at the beginning or end of the
year. Jodi’s 2002 cost of goods sold is

a. P895,000 b. P910,000 c. P950,000

d. P955,000

35. Zoren Company incurred the following costs and expenses during the
year:

Raw material purchases

280,000
Direct labor cost 120,000
Indirect labor – factory
75,000
Factory repairs and maintenance
15,000
Taxes on factory building
20,000
Depreciation – factory building
18,000
Taxes on salesroom and general offices
12,000
Depreciation – sales equipment
10,000
Advertising 30,000
Sales salaries
45,000
Office salaries
28,000
Utilities (60% applicable to factory, 25% to salesroom, and 15% to
office) 40,000

Inventories were:
Beginning Ending
Raw materials 25,000 30,000
Work in process 35,000 42,000
Finished goods 18,000 22,000

The cost of goods sold for the year was

a. P547,000 b. P540,000 c. P536,000

d. None of these

36. The following data appeared in the accounting records of a retail

store for the year ended December 31, 2003:

FINANCIAL STATEMENTS INCOME STATEMENT

 Sales 150,000
Purchases 70,000
Inventories
January 35,000
December 31 50,000
Sales commissions 5,000

How much was the gross margin?

a. P65,000 b. P75,000 c. P90,000 d. P95,000

37. The following expense were recognized by Albert Company, a retailer,
during 2003:

Accounting and legal fees 240,000

Loss on sale of long-term investment 110,000
Property taxes and insurance 150,000
Interest 90,000

How much of these expenses should be included in Albert’s general and

administrative expenses for 2003?

a. P390,000 b. P440,000 c. P480,000

d. P500,000

38. The following expense were among those incurred by MIC Company
during 2003:

Accounting and legal fees 160,000

Interest 60,000
Loss on sale of office equipment 25,000
Rent for office space 200,000

One-quarter of the rented premises is occupied by the sales department.

How much of the expense listed above should be included in MIC’s
general and administrative expense for 2003?

a. P310,000 b. P335,000 c. P360,000

d. P370,000

Items 39 and 40 are based on the following information:

PANDA Corporation reports operating expenses n two categories: (1)

selling and (2) general and administrative. The adjusted trial balance at
December 31, 2003 included the following expense accounts:

Accounting and legal fees 175,000

FINANCIAL STATEMENTS INCOME STATEMENT

 Advertising 150,000
Freight out 75,000
Interest 60,000
Loss on sale of long-term investment 30,000
Officers’ salaries 225,000
Rent for Office space 180,000
Sales salaries and commissions 140,000

One-half of the rented premises is occupied by the sales department.

39. How much of the expenses listed above should be included in PANDA’s
selling expenses for 2003?
a. P290,000 b. P365,000 c. P380,000
d. P455,000

40. How much of the expense listed above should be included in PANDA’s
general and administrative expenses for 2003?
a. P490,000 b. P520,000 c. P550,000
d. P580,000
41. Legume Company’s adjusted trial balance at December 31, 2002
included the following expense accounts:

Advertising P 250,000
Freight out 75,000
Rent for office space 180,000

Sales salaries and commissions 200,000

One-half of the office space is occupied by the sales department. What

total amount of the expenses listed above should be included in
Legume’s selling and delivery expense for 2002?

a. P450,000 c. P540,000
b. P525,000 d. P615,000

42. The following items were among those that were reported on SJM
Company’s income statement for the year ended December 31, 2003?

Legal and audit fees P

170,000
Rent for office space
240,000
Interest on inventory floorplan
210,000
Loss on abandoned data processing equipment used in operations
35,000

FINANCIAL STATEMENTS INCOME STATEMENT

 The office space is used equally by SJM’s sales and accounting
departments. What amount of the above- listed items should be classified
as general and administrative expenses in SJM’s multiple- step income
statement?

a. P290,000 c. P410,000
b. P325,000 d. P500,000

43. San Chai Corporation reports operating expenses in two categories:

(1) selling and (2) general and administrative. The adjusted trial balance
at December 31, 2002 included the following expense and loss accounts:

Accounting and legal fees P 120,000

Advertising 150,000
Freight out 80,000
Interest 70,000
Loss on sale of long- term investment 30,000
Officer’s salaries 225,000
Rent for office space 220,000
Sales salaries and commissions 140,000

One- half of the rented premises is occupied by the sales department.

San Chai’s total selling expenses for 2003 are

a. P480,000 c. P410,000
b. P400,000 d. P500,000

44. On January 2, 2002, SARJANE Company purchased as long- term

investment 10,000 shares of LONE Corporation common stock for P70
per share, which represents a 1% interest. On December 31, 2002 the
market price of the stock was P75 per share. On December 20, 2002,
SARJANE needed additional cash for operations and sold all 10,000
shares of LONE’s stock for P100 per share. SARJANE’s income tax rate
was 30% for 2002. for the year statement a gain on disposal of

a. P300,000 c. P210,000
b. P250,000 d. P175,000

45. During 2003, WATSI LI Company sold a parcel of land used as a plant
site. The amount WATSI LI received was P100,000 in excess of the land’s
carrying amount. WATSI LI’s income tax rate for 2002 was 30%. In its
2002 income statement, WATSI LI should report a gain on the sale of
land of

a. P 0 c. P 70,000

FINANCIAL STATEMENTS INCOME STATEMENT

 b. P30,000 d. P100,000

46. Certain account balances for 2002 of NEC Corporation are presented
below:

Assets P1,234,000
Liabilities 576,000
Capital stock 345,000
Additional paid- in capital 234,000
Dividends 71,000

What is the net income for 2002?

a. P111,000 c. P163,000

b. P150,000 d. none of these

47. THAO MING SI Company is preparing its December 31, 2002 financial
statements and must determine the proper accounting treatment for the
following situations:

* On December 30, 2002, THAO MING SI received a P200,000 offer for

its Rogo patent. THAO MING SI’s management is considering
whether or not to sell the patent. The offer expires on February 28,
2002. the patent has carrying amount of P130,000 at December 31,
2002.

* On December 31, 2002, THAO MING SI, as lessee under an operating

lease, sublet a building for three years at P150,000 annual rental.
THAO MING SI’s annual rental expense for the same period will
be P110,000.

Assume an income tax rate of 40%. In its 2002 income statement, THAO
MING SI should recognize an increase in net income of

a. P 0 c. P70,000
b. P66,000 d. P72,000
Problems 48 to 49 are based on the following information:

XIMEN Corporation’s trial balance of income statement accounts for the

year ended December 31, 2002 was as follows
Debit Credit ___
Net sales P1,600,000
Cost of goods sold P 960,000
Selling expenses 235,000
Administrative expenses 150,000

FINANCIAL STATEMENTS INCOME STATEMENT

 Interest expense 25,000
Adjustment due to accounting change in
Depreciation method 40,000
Gain on debt extinguishment __________ ___ 10,000
Totals P 1,410,000 P1,610,000

XIMEN’s income tax rate is 30%. XIMEN prepares a multi-step income

statement for 2002.

48. Income before income tax is

a. P190,000 c. P230,000
b. P200,000 d. P240,000

49. Net income is

a. P140,000 c. P168,000
b. P161,000 d. P200,000

Problems 50 to 52 are based on the following information:

Data from the income statement of MIZO Store during 2002 are
presented below:

Sales P 77,000
Sales return 2,000
Merchandise inventory, beginning 12%
Merchandise inventory, end 11%
Selling expenses 5%
General and administrative expenses 10%
Gross profit 30%

All percentages (%) given pertain to net sales.

50. What is the 2002 gross profit?

a. P20,500 c. P23,100
b. P22,500 d. P24,500

51. What is the 2002 income after income tax of 30%?

a. P3,250 c. P 7,875
b. P3,375 d. P11,000

FINANCIAL STATEMENTS INCOME STATEMENT

52. What is the % of net income to net sales for 2002?

a. 10.5% c. 15.0%
b. 14.6% d. 16.0%

53.In January 2003, Marjorey Corporation paid property taxes of P20,000

covering the calendar year 2003. Also in January 2003, Marjorey
estimated that its year-end bonuses to factory workers would amount to
P80,000 for 2003. In Marjorey;s quarterly income statement for the
three months ended March 31, 2003, what is the total amount of expense
relating to these two items that should be reported?

a. P 25,000 b. P 20,000 c. P 5,000 d. P 0

54.On March 15, 2003, Darlyn Company paid property taxes of P180,000 on
its factory building for calendar year 2003. On April 1, 2003, Darlyn
made P300,000 in unanticipated repairs to its plant equipment. The
repairs will benefit operations for the remainder of the calendar year.
What total amount of these expenses should be included in Darlyn’s
quarterly income statement for the three months ended June 30, 2003?

a. P 75,000 b. P 145,000 c. P 195,000 d. P

345,000

55.Gigi Corporation has estimated that total depreciation expense for the
year ending December 31, 2003 will amount to P60,000 and that 2003
year-end bonuses to employees will total P120,000. In Gigi’s interim
income statement for the six months ended June 30, 2003, what is the
total amount of expense relating to these two items that should be
reported?

a. P 0 b. P 30,000 c. P 90,000 d. P
180,000

56.On January 1, 2003, Leyte Company sold to Mark Corporation P400,000

of its 10% bonds for P354,118 to yield 12%. Interest is payable
semiannual on January 1 and July 1. What amount should Leyte report
as interest expense for the six months ended June 30, 2003?

a. P 17,706 b. P 20,000 c. P 21,247 d. P

24,000

57.An inventory loss from market decline of P900,000 occurred in May

2003. Norie Company reported this loss in May 2003 after its March 31,
2003 quarterly income statement was issued. None of this loss was
recovered by the end of 2003. How much of the inventory loss should be

FINANCIAL STATEMENTS INCOME STATEMENT

 recognized in Norie’s quarterly income statement for the three months
ended December 31, 2003?

a. P 0 b. P 225,000 c. P 300,000 d. P
900,000

58.On July 1, 2003, Noel Corporation incurred an extraordinary loss of

P300,000, net of income tax savings. Noel’s operating income for the
full year ending December 31, 2003 was expected to be P500,000. In
Noel’s income statement for the quarter ended September 30, 2003, how
much of this extraordinary loss should be disclosed separately?

a. P 300,000 b. P 150,000 c. P 75,000 d. P

0

59.Maricel Corporation had the following transactions during the quarter

ended March 31, 2003:

Loss on early extinguishment of debt

70,000
Payment of fire insurance premium for calendar year 2003
100,000

What amount should be included in Maricel’s income statement for the

quarter ended March 31, 2003?

Extraordinary loss Insurance expense

a. P 70,000 P 100,000
b. P 70,000 P 25,000
c. P 17,500 P 25,000
d. P 0 P 100,000

60.During the second quarter of 2003, Jeff Company sold a piece of

equipment at a P12,000 gain. What portion of the gain should Jeff report
in its income statement for the second quarter of 2003?

a. P 12,000 b. P 6,000 c. P 4,000 d. P 0

61.Nelson Corporation’s sales to unaffiliated customers for the year ended

December 31, 2003 were P3,000,000. In addition, there were P400,000
of intersegment sales and transfers among Nelson’s four manufacturing
divisions operating in different industries. Nelson’s reportable industry
segments are those divisions with revenues of at least

a. P 40,000 b. P 100,000 c. P 300,000 d. P

340,000

FINANCIAL STATEMENTS INCOME STATEMENT

62.Neil Corporation’s revenues for the year ended December 31, 2003 were
as follows:

Consolidated revenue per income statement

1,200,000
Intersegment sales 180,000
Intersegment transfers 60,000
Combined revenues of all industry segments
1,440,000

Neil Corporation has a reportable segment if that segment’s revenues

exceed

a. P 6,000 b. P 24,000 c. P 120,000

d. P 144,000

63.The following information pertains to John Royce Corporation and its

divisions for the year ended December 31, 2003:

Sales to unaffiliated customers

1,000,000
Intersegment sales of products similar to those sold to
Unaffiliated customers 300,000
Interest earned on loans to other industry segments
20,000

John Royce and all of its divisions are engaged solely in manufacturing
operations. John Royce has a reportable segment if that segment’s
revenue exceeds

a. P 100,000 b. P 102,000 c. P 130,000 d. P

132,000

64.Nap Corporation and its divisions are engaged solely in manufacturing

operations. The following data (consistent with prior years’ data)
pertain to the industries in which operations were conducted for the year
ended December 31, 2003:

Industry Total Revenue Operating profit Identifiable

assets at 12/31/03
A P 10,000,000 P 1,750,000 P
20,000,000
B 8,000,000 1,400,000
17,500,000

FINANCIAL STATEMENTS INCOME STATEMENT

 C 6,000,000 1,200,000
12,500,000
D 3,000,000 550,000
7,500,000
E 4,250,000 675,000
7,000,000
F 1,500,000 225,000
3,000,000
P 32,750,000 P 5,800,000 P
67,500,000

In its segment information for 2003, how many reportable segments does
Nap have?

a. Three b. Four c. P Five d. P Six

65.

FINANCIAL STATEMENTS INCOME STATEMENT