PRACTICALACCOUNTING1

FIRSTPREBOARDEXAMINATION

Writeyourfinalanswersintheanswersheet
providedfor.

1. On January 1, 2012, the balance of accounts

receivable of Chans Company was P5,000,000
and the allowance for bad debts on same date
wasP800,000.Thefollowingdataweregathered:

CreditsalesWriteoffs Recoveries
200910,000,000250,00020,000
201014,000,000400,00030,000
201116,000,000650,00050,000
201225,000,0001,100,000145,000

Bad debts are provided for as percentage of

credit sales. The accountant calculates the
percentage annually by using the experience of
the three years prior to the current year. How
muchisthebaddebtsexpensefor2012?750,000

2. Chayze Company uses the balance sheet

approach in estimating bad debts expense. The
company prepares an adjusting entry to
recognizethisexpenseattheendofeachmonth.
DuringthemonthofJuly,thecompanywroteoff
a P1,000 receivable and recovered P200 of
previouswriteoffs.Followingtheadjustingentry
for July, the credit balance in the allowance for
baddebtsaccountwasP2,500largerthanitwas
onJuly1.Whatamountofuncollectibleaccounts
expensewasrecordedinJuly?3,300

3. Chlenz Company has a note receivable of

P200,000fromHyuenCompanythatitiscarrying
at face value and is due on December 31, 2013.
Interest on the note payable at 9% each
December31.HyuenCompanypaidtheinterest
dueonDecember31,2009,butinformedChlenz
that it would probably miss the next two years
interest payments because of its financial
difficulties. After that, it expected to resume its
annualinterestpayments,butitwouldmakethe
principal payment one year late, with interest
paid for that additional year at the time of the
principalpayment.
How much should be recognized as loss on
impairment in 2009? (Round off present value
factorsto4decimalplaces)31,671

4. SydneyCompanyreportedthefollowingbalances
(afteradjustment)attheENDof2012and2011.

2012 2011
TotalAccountsreceivable 105,00096,000
NetAccountsreceivable 102,00094,500

During 2012, Sydney wroteoff P3,200 and

recovered P800 on accounts previously written
offinpreviousyears.Howmuchisthedoubtful
accountsexpensefortheyear2012?3,900

5. Jaylen Company obtained a one year loan of

P5,000,000 from a bank on April 1, 2012. The
loanwasdiscountedat12%.Thecompanysigned
a note and pledged its accounts receivable of
P5,000,000 as collateral for the loan. In relation
to the loan, what is the carrying value of the
notes payable on December 31, 2012? (use
straightlineamortization).4,850,000

6. On November 30, 2012, accounts receivable in

the amount of P900,000 were assigned by Huie
companytoaFinancecompanyasasecurityfora
loanofP750,000.Financecompanychargeda3%
commission.Theinterestrateonthenoteis12%.
During December, Huie collected P350,000 on
assigned accounts after deducting P560 of
discounts. Huie wrote off P530 assigned
accounts. On December 31, Huie remitted the
amount collected to Finance company plus one
monthinterestonthenote.HowmuchisHuies
EQUITYintheassignedaccountsreceivableasof
December31,2012?149,470

7. Hyuan company factored P600,000 of accounts

receivabletoafinancingcompanyonOctober1,
2012. The control of these receivables were
surrendered to the finance company.
Commission is 3% and hold back is 5% of the
accounts receivable. In addition, the financing
company charged 15% interest computed on a
weighted average time to maturity of the
receivables of 54 days. The fair value of the
recourse obligation is P9,000. How much will
Hyuan received (cash) from this factoring?
538,685

8. On May 17, Hyuen company accepted a P6,500,

8%, 90day note from a customer. On June 11,
the not e was discounted at 10%. At maturity
date, the note was dishonored and the bank
charged a P25 protest fee. The amount the
HyuencompanywoulddebittoNotesreceivable
dishonored(accountsreceivable)is?6,655

9. OnOctober1,2012,Cloycecompanydiscounted
with recourse at 12% a one year noninterest
bearing note of P5,000,000 maturing on January
1, 2013. What amount of contingent liability for
this note must Cloyce disclose in its 2012
financialstatement?5,000,000

10. At December 31, 2012, the balance of the

inventory account was P502,000, and the
allowanceforinventorywritedownwasP33,000.
The inventory cost and other data at December
31,2012areasfollows:(amountsinthousands).

ItemCostReplace.CostSalesP.NRV
A89869187
B94929385
C125135129111
D194114205197

What is the gain on reversal of inventory

writedown?8,000

11to12
The following information for the month of
Augustisgivenbelow:

Date
Units
unitCost

1
2,000
36

Beg.
7
3,000
37.2
Pur
12
3,600

Sale
21
4,800
38

Pur
22
3,800

Sale
29
1,600
38.60
Pur

Howmuchisthecostofendinginventoryusing:
FIFOperpetual?152,960
Weightedaverageperiodic?150,080

13to16
A physical inventory taken on December 31,
2012 resulted in an ending inventory of P1,440,000.
The company suspects some inventory may have
been taken by employees. To estimate the cost of

missing inventory, the following information were

gathered:

InventoryDec31,2011

1,280,000
Purchasesduring2012

5,640,000
Cashsalesduring2012

1,400,000
Shipmentreceivedon26December
2012,includedininventorybutnot
recordedaspurchases

40,000
Depositsmadewithsuppliers,entered
aspurchases.Goodswerenotreceived
in2012

80,000
Collectionsonaccountsreceivable
in2012

7,200,000
AccountsreceivableBeg2012
1,000,000
AccountsreceivableEnd2012
1,200,000
Grossprofitpercentageonsales
40%

OnDecember31,2012,whatare:
Totalcreditsales?7,400,000
Totalcostofgoodsavailableforsale?6,880,000
Costofgoodssold?5,280,000
Estimatedcostofmissinginventory?160,000

17to19
Chans uses the retail inventory method. The
following information is available for the current
year:

Cost
Retail
Beg.Inv.

1,300,000
2,600,000
Purchases

18,000,000
29,200,000
Freightin

400,000
Purchasereturns
600,000
1,000,000
Purchaseallowance
300,000
DepartmentalT.in
400,000
600,000
Netmarkups

600,000
Netmarkdowns

2,000,000
Sales

24,700,000
Salesreturns

350,000
Salesdiscount

200,000
Employeediscounts

600,000
Lossfrombreakage

50,000

Whatistheestimatedcostofendinginventory:
Conventionalapproach?3,000,000
Averageapproach?3,200,000
FIFOapproach?3,250,000

20.OnJanuary1,ChayzesassetstotaledP210,000,
and its liabilities amounted to P120,000. During the
year, owner investments amounted to P72,000, and

owner withdrawals totaled P75,000. At year end,

assets totaled P270,000, and liabilities amounted to
P171,000. The amount of net income for the year
was?12,000

21. Chlenz Company sells goods with a cost of

P100,000 for P140,000 and a credit period of 6
months. Chlenz normal cash price would have been
P125,000withacreditperiodofonemonthorwitha
P5,000cashdiscountforcashondelivery.Howmuch
shouldChlenzrecognizeasrevenue?120,000

22. The following data pertain to Sydney on

December31,2012:

CurrentaccountatMetrobank
1,800,000
CurrentaccountatAlliedbank
(100,000)
Payrollaccount

500,000
Foreignbankacct.(inpesovalue)
800,000
Savingsdepositinclosedbank
150,000
Postagestamps

1,000
Employeespostdatedchecks
4,000
IOUfromemployees

10,000
Creditmemofromavendor

20,000
Travelerscheck

50,000
Moneyorder

30,000
Pettycashfund(P4,000incurrency
andexpensereceiptsforP6,000)
10,000
Pensionfund

2,000,000
DAIFcheckofcustomer

15,000
Customercheckdated1/1/13
80,000
Timedeposit30days

200,000
Moneymarketplacementsdue6/30/13500,000
Treasurybilldue3/31/2013(purchased
on12/31/2012)

200,000
Treasurybilldue1/31/2013(purchased
on1/1/2012)

300,000

Whatistheamounttoberecordedascashandcash
equivalentsasof31December2012?3,584,000

23. Jaylen Company had the following account

balancesat31December2012:

Cashonhandandinbank

P2,500,000
Cashrestrictedforbondspayable
dueonJune30,2013

1,000,000
Timedeposit

3,000,000
Savingdepositsetasidefordividends
payableonJune30,2013

500,000

InthecurrentsectionofJaylensDecember31,2012
balance sheet, what is the total amount of cash and
cashequivalents?7,000,000

24. Huie company has the following data in its

accountingrecords:

1/1

12/31
Cash

47,000
?
Inventory

101,000
93,000
Accountsreceivable 82,000
116,000
Accountspayable
68,000
63,000
Sales

1,150,000
Costofgoodssold

900,000
Operatingexpenses

200,000

Whatistheexpectedcashbalanceon12/31?66,000

25. The information below is from the books of

HyuancompanyonJune30,2012.

Balanceperbankstatement
11,164
Receiptsrecordedbutnotyet
depositedinthebank

1,340
Bankchargesnotrecorded

16
Notecollectedbybankandnot
recordedonbooks

1,120
Outstandingchecks

1,100
NSFchecksnotrecordedonbooks
160

Assuming no errors were made, compute the cash

balance per book on June 30 before any
reconciliationadjustments.10,460

26to29
The following bank reconciliation is presented for
HyuencompanyforthemonthofNovember2012:

Balanceperbankstatement(11/30) 3,600,000
Depositintransit

800,000

4,400,000
Outstandingchecks

(1,200,000)
Bankcreditrecordedinerror
(200,000)
Balanceperbook,(11/30)

3,000,000

DataperbankstatementforthemonthofDecember
follow:
Decemberdeposits(includingnote
collectedofP1,000,000forHyuen) 5,500,000
Decemberdisbursements(including
NSF,P350,000,andservicecharge
P50,000)

4,400,000

All items that were outstanding on November 30

clearedthroughthebankinDecember,includingthe
bank credit. In addition, checks amounting to
P500,000wereoutstandinganddepositsofP700,000
wereintransitonDecember31,2012.

WhatisthecashbalanceperbookonDecember31?
4,300,000
What is the cash balance per bank statement on
December31?4,700,000
How much is the cash receipts per book in
December?4,400,000
How much is the cash disbursement per book in
December?3,100,000

30.TheunadjustedtrialbalanceofCloyceCompany
as at December 31, 2012 showed Accounts
receivabletrade with a balance of P693,000.
Investigation revealed that it included amounts due
from officers P75,000; claim pending against freight
company P9,000; and refund on insurance policy
P4,500. According to the subsidiary ledger which
have been thoroughly checked and rechecked, the
trade accounts receivable totaled P600,000
(composed of current accounts P375,000; two
monthsaccountP120,000;andthreemonthsormore
P105,000). Responsible officials have acknowledged
definiteuncollectibilityofthreemonthsaccountwith
balancetotalingP22,500;theyhaveexpresseddoubt
with respect to an additional P24,000 worth of
accountsinthesamecategory,andtheyconsiderall
other accounts collectible. At what net realizable
valueshouldtheaccountsreceivabletradebecarried
in the balance sheet as of December 31, 2012?
553,500

31. On June 9, 2012, Trey Company sold

merchandisewithalistpriceofP5,000toacustomer.
Trey allowed a trade discounts of 30% and 20%.
Credittermswere2/15,n/40andthesalewasmade
FOB shipping point. Trey prepaid P200 of delivery
costasanaccommodation.OnJune25,Treyreceived
aremittanceinfullpaymentintheamountof?3,000

32. Chans company purchased the following

portfolio of trading securities during 2012 and
reported the following balances at December 31,
2012.Nosalesoccurredduring2012.

Security

Cost
FMV(12/31)
A

240,000
255,000
B

420,000
390,000
C

296,000
290,000

On January 6, 2013, all the securities were sold at

P1,100,000 net of P20,000 transaction cost. What is
the amount of realized gain or loss on this sale?
185,000

33. On September 31, 2012, Chayze company

exchanged its equipment for 2,500 shares of Hyuan
ordinary shares. On that date, the equipment had a
carrying value of P300,000 and its fair value was
P260,000.ThebookvalueofHyuansordinaryshares
was P96 per share. On December 31, 2012, Hyuan
had 25,000 number of ordinary shares outstanding
but its market value was not clearly determinable.
WhatamountshouldChayzereportascarryingvalue
oftheinvestment?260,000

34. Chlenz company acquired 50,000 shares of

Hyuen Company on September 30, 2012 for
P8,250,000.OnOctober30,theshareweresplitinto
a 2 for 1 basis. Then on November 30, 2012,
received 10% share dividends. On December 31,
2012, Chlenz sold 10,000 shares for P1,200,000.
Using the average method, how much is the gain to
berecognized?450,000

35.Sydneypurchased50,000shares(5%ownership)
of Cloyce company on January 15, 2012. Sydney
received a share dividends of 15% on March 31,
2012. On November 30, Sydney paid P20 per share
special assessment on the shares. On December 15,
2012, Sydney received a cash dividends of P8 per
share.WhatamountshouldSydneyreportasincome
inthesetransactions?460,000

36. On July 1, 2012, Trey Company purchased as

tradinginvestmentaP2,000,000facevalue10%bond
for P2,100,000 plus accrued interest and transaction
costs of P100,000. The bond pays interest annually
on January 1. On December 31, 2012, the bond
investment has a market value of P1,800,000. On
February 15, 2013, Trey Company sold the bond
investment for P1,900,000. In its 2012 income
statement, what amount should Trey report as
unrealizedloss?300,000

37. On January 1, 2012, Chans Company paid

P8,640,000 for 10% bonds with a face amount of
P8,000,000.InterestispaidonDecember31andthe
bond matures on January 1, 2017. The bonds were
purchased to yield 8%. Chans uses the effective
interest method to recognized interest income from
this investment. What should be reported as the
carrying amount of the bonds in the December 31,
2012balancesheet?8,531,200

38.OnJuly1,2012,Chayzepurchasedasalongterm
investment P5,000,000 face value 8% bonds for
P4,615,000 to yield 10% per year. The bonds pay
inters semiannually on January 1, and July 1. In its
December 31, 2012 balance sheet, Chayze Company
should report accrued interest receivable at what
amount?200,000

39. On December 31, 2012, Chlenz Company

purchased as a longterm investment P10,000,000
face amount, 10% bonds of Hyuen Corporation to
yield 8% per year. The bonds mature on December
31, 2013 and pay interest semiannually on June 30
andDecember31.Therelevantpresentvaluefactors
areasfollows:

Presentvalueof1at4%for10periods .6756
Presentvalueofanordinaryannuityat
4%for10periods

8.11
Presentvalueof1at5%for10periods .6139
Presentvalueofanordinaryannuityat
5%for10periods

7.72

What is the purchase price of the bonds on

December31,2012?10,811,000

40. On January 1, 2012, Chans Company purchased

20% of Huie Companys ordinary shares outstanding
for P6,000,000. The acquisition cost is equal to the
book value of the net assets acquired. During 2012,
Huie Company reported a net income of P7,000,000
and paid cash dividend of P4,000,000. What is the
balance in the investment in Huie Company on
December31,2012?6,600,000

41. On January 1, 2012, Chlenz Company acquired

20% of the outstanding ordinary shares of Hyuen
Company for P8,000,000. The book value of the
acquired shares was P6,000,000. The excess of cost
overbookvaluewasattributedtoadepreciableasset
which was undervalued on Hyuens statement of
financial position and which had a remaining useful

life of ten years. For the year ended December 31,

2012,HyuenreportednetincomeofP1,800,000and
paid cash dividends of P400,000 and thereafter
issued 5% stock dividend. What is the carrying
amount of the investment in Hyuen Company on
December31,2012?8,080,000

42.OnJuly1,2012,SydneyCompanypurchased10%
ofCloyceCompanysoutstandingordinarysharesfor
P4,000,000. Sydney is the largest single shareholder
in Cloyce and Sydneys officers are a majority of
Cloyces board of directors. Cloyce reported net
incomeofP5,000,000for2012andpaiddividendsof
P1,500,000. On December 31, 2012, what is the
amount to be reported as investment in Cloyce?
3,900,000

43.During2011,JaylenCompanyboughttheshares
ofTreyCompanyasfollows:

June1

20,000shares@P100
December1
30,000shares@P120

Thetransactionsfor2012are:

January10receivedcashdividendsatP10pershare
January20received20%stockdividend
December10 sold30,000sharesatP125pershare

IftheFIFOapproachisused,whatisthegainonthe
saleoftheshares?1,150,000

44. Information pertaining to dividends from Wray

Companys share investments for the year ended
December31,2010follows:

On September 1, Wray received a P500,000 cash

dividend from Seco Company in which Wray owns a
30%interest.AmajorityofWraysdirectorsarealso
directorsofSeco.
On October 1, Wray received a P60,000 liquidating
dividendfromKingCompany.Wrayowns5%interest
inKingCompany
Wray owns a 2% interest in Bow Company, which
declared a P2,000,000 cash dividend on November
15,2010,toshareholdersofrecordonDecember15,
2010,payableonJanuary15,2011

WhatamountshouldWrayreportasdividendincome
initsincomestatementfortheyearendedDecember
31,2010?40,000

45. On March 1, 2012, Chlenz Company purchased

10,000ordinarysharesofHyuenatP80pershare.On
September 30, 2012, Chlenz received 10,000 stock
rights to purchase additional 10,000 shares at P90
pershare.Thestockrightshadanexpirationdateon
February 1, 2013. On September 30, 2012, Hyuens
share had amarket value ofP95 and the stock right
had a market value of P5. What amount should
ChlenzreportinitsSeptember30,2012statementof
financial position for investment in stock rights?
50,000

46. Chans Company owns 30,000 ordinary share of

ChayzeCompanyacquiredonJuly31,2010,atatotal
cost of P1,100,000. On December 1, 2010 Chans
received30,000stockrightsfromChayze. Eachright
entitles the holder to acquire one share at P45. The
marketpriceofChayzesshareonthisdatewasP50
and the market price of each right was P10. Chans
sold its rights on December 31, 2010 for P450,000
lessaP10,000commission.Whatisthegainfromthe
saleofstockrights?150,000

47. The following information relates to a bond

sinking fund that Chans Company placed in trust as
requiredbytheunderwriterofitsbonds:

Additionalinvestmentin2011
700,000
Dividendsoninvestments

150,000
Interestincome

300,000
Administrationexpenses

40,000
Carryingamountofbondspayable
7,000,000
Bondsinkingfund,January1,2011
8,200,000

Whatisthecarryingamountofthebondsinkingfund
onDecember31,2011?9,310,000

48. Chayze Company adopted a plan to accumulate

P14,000,000after4years.Chayzeplanstomakefour
equalannualdeposittoafundthatwillearninterest
at10%compoundedannually.Chayzemadethefirst
deposit at the beginning of the year. Future value
factorsareasfollows:

Futurevalueof1at10%for4periods
1.46
Futurevalueofanordinaryannuityof
1at10%for4periods

4.64
Futurevalueofanannuityof1inadvance
at10%for4periods

5.11

Whatistheannualdeposittothefund?2,739,726

49. Chlenz Company purchased an investment

property on January 1, 2009 for P2,200,000. The
property had a useful life of 40 years and on
December 31, 2011 had a fair value of P3,000,000.
On January 1, 2012, the property was sold for net
proceeds of P2,900,000. Chlenz Company uses the
cost model to account for the investment property.
Whatisthegainorlosstoberecognizedfortheyear
ended December 31, 2012 regarding the disposal of
theproperty?865,000

50.TreyCompanyacquiredamachineryonAugust1,
2012. The cost of the machinery is P1,200,000 with
an estimated residual value of P120,000 and an
estimatedusefullifeof8years.

Using the Sum of years digits method, what is the

depreciation expense for the year ended 31
December2013?227,500.

END

ANSWERSHEET
FIRSTPREBOARDEXAMINIATION
PRACTICALACCOUNTING1

NAME:
DATE:

1. _____________
2. _____________
3. _____________
4. _____________
5. _____________
6. _____________
7. _____________
8. _____________
9. _____________
10._____________
11._____________
12._____________
13._____________
14._____________
15._____________
16._____________
17._____________
18._____________
19._____________
20._____________
21._____________
22._____________
23._____________
24._____________
25._____________

26._____________
27._____________
28._____________
29._____________
30._____________
31._____________
32._____________
33._____________
34._____________
35._____________
36._____________
37._____________
38._____________
39._____________
40._____________
41._____________
42._____________
43._____________
44._____________
45._____________
46._____________
47._____________
48._____________
49._____________
50._____________