CRA CCE The Professional CPA Review School ‘Main: 3F C. Villaroman Bldg. 873 P. Campa St. cor Espana, Sampaloc, Manila SF (02) 735 8901 / 735 9031 Branch: Rudel Bldg. V, Lower Mabini cor Dlego Slang, Bagulo City Mt (074) 442-1440 3/F GCAM Bldg. Monteverde St. Davao City (082)285-890S / 0925-7272223 MAY 2018 BATCH 130 - 1:00 PM. FINANCIAL ACCOUNTING & REPORTING FIRST PRE-BOARD EXAMINATION 3 EDOE® AQ January 30, 2018; INSTRUCTIONS: | Select the cotrect answer for each of the following questichs. Mark only one answer for each item by Shading the corresponding letter of your choice on the answer sheet provided. STRICTLY NO ERASURES ALLOWED, Use Pencil No. 2 only. Use the following information for items 1-3 Aziz Company's Cash in bank items as of December 31, 2018 included the following items: Cash in Bank — BDO checking account P 2,400,000 Cash in Bank ~ BPI.checking account 1,600,000 Additional information in relation to the above-mentioned components is as follows: * The following items were noted in relation to the BPI checking account: Check No. 11115 written on December 29, 2018 in the amount of P120,000, which was picked up by the payee on December 30, 2018 was dated January 2, 2019. Check No, 11121 written and dated on December 30, 2018 in the amount of P210,000 which was picked up on December 31, 2018 remained outstanding at present ‘* The following information is in relation to Aziz Company's BDO checking accounts: BDO checking account #10001 P 2,850,000 BDO checking account #10002 « (450,000) . ‘The overdraft in BDO checking account #10002 was due to a check for P600,000 dated January 2, 2019 which was claimed by the payee on December 29, 2018. ‘The BDO checking account #10001 includes a P200,000 compensating balance in relation to a . ‘long-term loan which was legally restricted as to withdrawal 1, The correct amount to be included as Cash in Bank ~ BDG checking account is a. 2,650,000 b. 2,800,000 3,000,000 4. 3,250,000 2. The corsect amount to be included as Cash in Bank — BPI checking account is a. 1,510,000 b. 1,720,000 ©. 1,810,000" 4. 1,930,000, Use the following information for items 3- 4 Brisa Company had the following information relating to its accounts receivable.at December 31, 2017 and for the year ended, December 31, 2018 ‘Accounts receivable, December 31, 2017 490,000 ‘Allowance for doubtful accounts, December 31, 2017 45,000 Credit sales for 2018 . 2,255,000 Discounts granted to ctedit customers 70,000 Sales returns on credit sales 6 25,000 Cash collections from credit customers for 2018, including P12,000 from previously written-off accounts 2,115,000 42,000 «Accounts written-off in October 2018 Interim bad debts were recorded at 1% of net credit sales during the period. The amount estimated to be uncollectible at yearend was P50,000. 3. The yearend adjustment to the allowance account is a 0 b. 12,450 «13,400 4. 35,000 4. The receivable amount to be reported in the 2018 statement of financial position is ~ a. 431,000 b. 443,000 <. 455,000 4. 525,000 Use the following for items 5 - 6 On January 1, 2018, Carys Company sold a custom made product to David Company and received noninterest bearing note with a face amount of P1,200,000. The note requires six equal annual installments to start on December 31, 2018. The prevailing rate of interest for this type of note at date of issuance was 12%. Carys Company uses the calendar year for reporting purposes Present value factors @ 12% are provided as follows: S periods 6 periods . ii 0.56743 0.50663 PVF fot Pl at 12% 3.60478 4.1141 PVF of an ordinary annuity at 12%CRC-ACE/FAR: First Pre-Board Examinations (MAY 2018 batch) PAGE 2 PVF of an annuity in advance at 12% 4.03735 4.60478 5. The initial measurement of the note is a. 607,956 b. 720,955 < 822,282 a. 920,955 6. The interest income to be reported in the 2019 comprehensive income statement is a. 72,896 b. 81,709 86,515 4. 99,776 Use the following for items 7 - 8 es Records of the Esme Company shows the following relative to product “Emersld” Beginning January 3,000 units @ P 300 Purchases March 2,500 units @ P 320 Sale. February 1,600 units June 11500 units @ P 350 April 2,000 units July '500 units @ P 420 ‘August "400 units : ‘October 1,000 units @ P 380 September 600 units _ November 1,200 units @ P 360 December 1,800 units 7. ‘The inventory’balance under average — perpetual =. 996,000 be 1,108,075 ©. 1,165,000 4. 1,232,000 8 The gross profit under PIO — periodic as compared to the gross profit under the average-periodic is a. Higher by 67,100 b. Lower by 67,100 © Higher by 127,325 Lower by 127,325 Use the following for items 9 - 10 The following transactions of Heodor Company during October were as follows: + On October 1, Feodor Company discounted at the bank a customer's P800,000, 9-month, 12% note receivable dated May'1, 2018. The bank discounted the note at 15%, On October 15, Feodor Company factors P600,000 of its receivables to Gian Company on a without recourse basis. ‘The agreement includes factoring fee of 6% and a 12% holdback both based on the factored accounts. * On October 30, 2018, Feodor Com; 9. pany assigned P500,000 to Hadiyyah Finance Company, receiving an. advance of 85% less a service charge of P8,500. The note carries an interest rate of 8% ‘The net cash proceeds from the transactions during October is a. 1,668,500 b. 1,722,400 ©. 1,736,900 4. 1,808,900 10. The loss arising from the derecognition of the receivables is . a. $6,100 b. 47,600 < 16,100 d. 7,600 Use the following information for numbers 11 - 12 Jonna Company reports the following data for the month of April Cost Retail Inventory, beginning 628,500 1,200,000 Purchases 3,018,000 4,850,000 Purchase returns 84,000 120,000 Purchase discounts 156,500 Transfer in costs 987,900 1,850,000 . ‘Transfer out costs C 426,400 575,000 Freight-in 95,000 Freight - out 60,000 Mark ups - 1,275,000 Mark up cancelations - 355,000 Markdowns 2,255,000 Markdown cancelations : 380,000 Sales 4,985,000 Sales returns - 750,000 Sales discounts 215,000 Employee discounts 775,000 Losses due to shrinkage 265,000 11, Estimated inventory ~ cost under the,average retail method a. 663,000 b. 633,750 . 507,000 d. 487,500 12. Cost of sales under the FIFO retail method a. 2,771,000 b. 3,399,500 c. 3,428,750 a. 3,575,0005 CRC-ACE/ FAR: First Pre Poard F asmcnatona (MAY 20! 8 taech} Ne Lee the fadineing eee fom manhers 13. 14 On Newemntrer 2), 2018 jacob Comamont ecopared 27.780 of Kechene Comenan's P10 pac rakes ontonary theres alee revere (ose of BIZ per ehere Keach Company hee 200000 shares oursrenteng Coat incurred i elven we scanner arormunted tor PUI AO The secuncns se chaww ender metrument measured at FV through Prof ‘Son. 7 ot On December 23, 2018, Kednic Company declared « cash dersternt of Pi 40 per share to holders on record a of Jaruary 19, 2019 te be deethasted br Jaenssey 31, 2119 On December 31, 278, Kedine Company hares were quoted at Pi6 SO per share Eanmated cost to depose the eecurmes amounted to P1290 13. The wunal measurement of the Investment in Keddie Compact ot a 277,800 b. 289,100 ee a M4460 14. The unrealized gain (low) reported an the Profit Tose section of the 2018 comprehenarre income statement a 61,525 b 8.028 < 1ms75 124875 Use the following informanon for numbers 15-17 yar value ordinary On November 30, 2017, Lora Company sequired 15.090 of Machven Company's PS shares at its quoted price of P40 per share ae well e¢ 6,100 of Medren Company's P20 pat value Cumulative, nonparicspanng preference shares at rts quoted pace of P22. Instal direct cost if acquiring Madysen Company's ordinary and preference shares were P5,000 and 4,500 respecurvely, Madysen Company fae 100,000 erdsrary and 12,500 preference shares outitanding, The secunues were dengnated under instroments measured at FV through OCT Oa December 31, 2017, Madseen Company's ordinary shares were quoved at P1030, while the preference 78 Lakewtse, estimated disporal costs were P5,200 and P4,750 respectively. tadveen Company's ordinary shares were quoted at P1165, while the preference 440, Likewwse, exumated disposal cnats were 25,700 and P5,250 respectively Madysen Company's ordinary shares 1s 146,000 shares were quoted at P2! 15. The snutial measurement of the investments in 182,000 b. 136.500 c. 141,000 16. The warealed gquun/loss included in the OCI section for the period ending 2018, in relanon to the investment in Madrten Company preference shares 8 a. 9.90) b 9,400 < $,400 4 4,650 17. The net unrealized gain/loss included in the equity secaon for the period ending 2018, m gelabon to the snvestment in Madysen Company's ordinary shares 18 a 23,080 b. 28,050 28,750 do 33,750 Use the following information for numbers 18 - 19 june on a deferred payment basis. A down On January 1, 2018, Natassia Company purchased a new mac! payment of P500,000 was made and 4 annual mstalments of P550,000 are to be made begsnning on January 1, 3019. The cash price of the machine was P2,560,000. Due to an employee strike, Natassia Company could not install the machine immediately, and incurred 24000 of storage costs. Installanon and testing were completed by Apal 1, 2018. Total installanon cost (excluding storage costs) amounted to P57,000 Newssin Company estimates the useful hfe of the machine to be 8 years with a residual value of P25,000. Natassia Company uses the straight-line method to record depreciauon. 18. The initial measurement of the machine 1s 2,617,000 b. 2,641,000 cc. 2,757,000 4. 2,781,000 19, The depreciation expense to be included in the 2018 comprehensive income statement is a. 243,000 b. 245,250 324,000 “a 327,000 bers 20 - 21 Use the following information for num! (On December 31, 2018, « recoverability tests was conducted by Ossie Company on its machine due to evidences thet it may be impaired that occurred during the year. The machine whose estimated useful life was Ti years was acquired 6 years ago for P2,800,000. Ossie Company uses the sum-of-the-years digits in recording depreciation. The estimated salvage value of the machine was P28,000. The net selling price of the machine was P585,000 while its identified value in use was P518,000. Furthermore, Ossie Company expects the asset to be useful for an additional four years with no residual value, 20. The impairment loss included in the 2018 income statement is 2. 45,000 b. 73,000 < 112,000 140,000 21. The depreciation expense to be included In the 2049 mcome statement fs a. 129,250 b. 146,250 207,000 d. 234,000