MONDRIAAN AURA COLLEGE

Refresher 1
Practical Accounting 1
PA1 006

INVESTMENTS
Financial Asset at Fair Value

1. During 2017, Haggard Company purchased marketable equity securities for P1,850,000 to be held
as trading investments. In 2017, the entity appropriately reported an unrealized loss of P200,000
in the income statement.

There was no change during 2017 in the composition of the portfolio of trading securities. Perti-
nent data on December 31, 2018 are as follows:
Security Cost Market Value
A P 600,000.00 700,000.00
B 450,000.00 400,000.00
C 800,000.00 900,000.00
What amount of unrealized gain on these securities should be included in the 2018 income
statement?
a. P 350,000 b. P 150,000 c. P 550,000 d. P -0-

2. Judicious Company acquired an equity investment a number of years ago for P3,000,000 and
classified it as at fair value through other comprehensive income. On December 31, 2017, the
cumulative loss recognized in other comprehensive income was P400,000 and the carrying
amount of the investment was P2,600,000.

On December 31, 2018, the issuer of the equity instrument was in severe financial difficulty and
the fair value of the equity investment had fallen to P1,200,000.

What cumulative amount of unrealized loss should be reported as component of other compre-
hensive income in the statement of changes in equity for the year ended December 31, 2018?
a. P1,400,000 b. P1,800,000 c. P1,000,000 d. P -0-

3. During 2017, Knickknack Company purchased marketable equity securities to be measured at

fair value through other comprehensive income. On December 31, 2017, the balance in the
unrealized loss on these securities was P200,000.

There were no security transactions during 2018. Pertinent data on December 31, 2018 are as
follows:
Security Cost Market Value
X P 2,100,000.00 1,600,000.00
Y 1,850,000.00 2,000,000.00
Z 1,050,000.00 900,000.00
In the statement of changes in equity for 2018, what amount should be included as cumulative
 loss as component of other comprehensive income?
a. P500,000 b. P300,000 c. P200,000 d. -0-

4. At the beginning of current year, Laudable Company acquired 200,000 ordinary shares of an
investee for P9,000,000. The investment is measured at fair value through other comprehensive
income.

At the time of purchase, the investee had outstanding 800,000 shares with a carrying amount of
P36,000,000. The following events took place during the year:
* The investee reported net income pf P1,800,000.
* Laudable Company received from the investee a dividend of P0.75 per ordinary share.
* The market value of the investee's share had declined to P40 at year-end.
What is the carrying amount of the investment at year-ende?
a. P9,000,000 b. P8,000,000 c. P9,300,000 d. P9,450,000

5. At the beginning of current year, Manifold Company began operations. The following information
related to the portfolio of equity securities held for trading at year-end:
Trading Nontrading
Aggregate cost P 36,000.00 550,000.00
Aggregate fair value 320,000.00 450,000.00
Aggregate lower of cost or
market value applied to each
security in the portfolio 304,000.00 420,000.00
The nontrading investments are measured at fair value through other comprehensive income.
The fair value declines are judged to be nontemporary.

What amount should be reported as unrealized loss in the income statement for the current year?
a. P140,000 b. P186,000 c. P40,000 d. 56,000

6. Nightmare Company provided the following information on December 31, 2017 regarding the
portfolio of equity securities:
Aggregate cost P 1,700,000.00
Unrealized gains 40,000.00
Unrealizeed losses 260,000.00
Net realized gains during the current year 300,000.00
The equity investments are measured at fair value through other comprehensive income.

On January 1, 2017, the entity reported an unrealized loss of P15,000 to reduce investments to
to market on a portfolio basis.

In the December 31, 2017 statement of change in equity, what amount of unrealized loss should
be reported?
a. P260,000 b. P220,000 c. P205,000 d. -0-

Nos 7 and 8 are based on the following information:

 Inspiration Company had trading and nontrading investments held throughout 2017 and 2018.
The nontrading investments are measured at fair value through other comprehensive income.
The investments had a cost of P3,000,000 for trading and P3,000,000 for nontrading.
The investments had the following fair value at year-end:
31-Dec-17 31-Dec-18
Trading P 4,000,000.00 3,800,000.00
Nontrading 3,200,000.00 3,700,000.00

7. What amount of unrealized gain or loss should be reported in the income statement for 2018?
a. P200,000 gain b. P200,000 loss c. P300,000 gain d. P300,000 loss

8. What amount of cumulative unrealized gain or losss should be reported as component of other
comprehensive income in the statement of changes in equity on December 31,, 2018?
a. P500,000 gain b. P500,000 loss c. P700,00 gain d. P700,000 loss

9. During 2017, Opulence Company purchased marketable equity securities as short-term invest-
ment to be measured at fair vlaue through other comprehensive income. The cost and market
value on December 31, 2017 were as follows:
Security Cost Market Value
A 1,000 shares 300,000.00 350,000.00
B 10,000 shares 1,700,000.00 1,550,000.00
C 20,000 shares 3,150,000.00 2,950,000.00
The entity sold 10,000 shares of B on January 5, 2018 for P1,450,000.

What total amount should be charged to retained earnings as a result of the sale of equity
securities in 2018?
a. P200,000 b. P100,000 c. P250,000 d. P50,000

10. On Jaanuary 1, 2017, Jerome Company purchased nontrading equity investments which are
irrevocably designated at FVOCI:
Purchase Transaction Market Value
Price Cost 31-Dec-17
Security A 1,000,000.00 100,000.00 1,500,000.00
Security B 2,000,000.00 200,000.00 2,400,000.00
Security C 4,000,000.00 400,000.00 4,700,000.00
On July 1, 2018, the entity sold Security C for P5,200,000.
What amount of gain on sale should be recognized in the inocme statement for 2018?
a. P800,000 b. P500,000 c. P300,000 d. P -0-

11. Quodam Company held the following securities as trading investments on December 31, 2017:
Cost Market Value
100,000 shares of Company A nonredeemable
preference share capital, par value P75 775,000.00 825,000.00
7,000 shares of Company B preference share
capital, par value P100, subject to mandatory
 redemption by the issuer at par on December
31, 2018. 690,000.00 625,000.00
What is the carrying amount of the trading investments on December 31, 2017?
a. P1,400,000 b. P1,450,000 c. P1,465,000 d. P1,475,000

12. Lagoon Company purchased the following investments during 2017:

Market value
Classification Cost 31-Dec-17
Security A Trading 900,000.00 1,000,000.00
Security B Trading 1,000,000.00 1,600,000.00
On July 31, 2018, the entity sold all of the shares of Security B for P1,100,000.
On December 31, 2018, the shares of Security A had a market value of P600,00.
No other activity occurred during 2018 in relation to the trading security portfolio.
What total loss on the trading securities should be reported in the income statements for 2018?
a. P500,000 b. P400,000 c. P900,000 d. P100,000

Investments in Equity Securities

1. On January 1, 2017, Hostile Company purchased 40,000 shares of another entity at P100 per
share to be held for trading. Transaction costs amounted to P120,000.

A P5 dividend per share had been declared on December 15, 2016, to be paid on March 31, 2017
to shareholders of record on January 31, 2017. No other transactions occurred in 2017 affecting
the investment.

What is the initial measurement of the investment?

a. P3,920,000 b. P4,000,000 c. P4,120,000 d. P3,800,000

2. On July 1,2017, Impervious Company exchanged a land for 25,000 ordinary shares of Ace
Company.

On this date the carrying amount of the land was P2,500,000 and the fair value was
P3,000,000.

On July 1, 2017, the carrying amount of Ace Company's share was P60 and the market value
was P150.

On December 31, 2017, Ace Company had 250,000 ordinary shares and the carrying amount per
share was P80.

What amount should be reported on December 31, 2017 as investment in Ace Company?
a. P1,500,000 b. P2,500,000 c. P3,750,000 d. P3,000,000

3. Justice Company purchased 50,000 shares on January 15 representing 5% ownership interest to

be held for trading. The entity received a share dividend of 20% on March 31 when the market
 price of the share is P40. The investee paid a cash dividend of P5 per share on December 15.

What amount should be reported as dividend income for the currenty year?
a. P150,000 b. P400,000 c. P700,000 d. P300,000

4. Kinfolk Company purchased 20,000 ordinary shares on March 1, 2017, for P720,000 to be held
for trading. The entity receifed a P100,000 cash dividend on July 1, 2017. The investee declared
a 10% share dividend on December 1, 2017 to shareholders of record on December 31, 2017.
The dividend was distributed on January 31, 2018. The market price of the share was P38 on
December 1 2017, P40 on December 31, 2017 and P42 on January 31, 2018.

What amount should be recorded as dividend revenue for 2017?

a. P180,000 b. P176,000 c. P100,000 d. P184,000

5. At the beginning of current year, Lavish Company purchased 10,000 ordinary shares at P90 per
share to be held for trading. At year-end, the entity received 2,000 shares of the investee in lieu
of cash dividend of P10 per share. On this date, the investee's share has quoted market price
of P60 per share.

What amount should be reported as dividend income for the current year?
a. P120,000 b. P100,00 c. P20,000 d. P -0-

6. Maxim Company acquired 40,000 ordinary shares on October 1 for P6,600,000 to be held for
trading. On Novem 30, the investee distributed a 10% ordinary share dividend when the market
price of the share was P250. On December 31, the entity sold 4,000 shres for P1,000,000.
What amount should be reported as gain on sale of investment in the current year?
a. P340,000 b. P400,000 c. P500,000 d. P600,000

7. Presumptuous Company revealed the following information pertaining to dividends from non-
trading investments in ordinary shares during the year ended December 31, 2017:
* The entity owned a 10% interest in Beal Company, which declared a cash dividend of
P500,000 on November 30.2017 and payable on January 15, 2018.
* On October 15, 2017, the entity received a liquidating dividend of P100,000 from Clay Mining
Company. The entity owned a 5% interest in Clay Mining Company.
What amount of dividend income should be reported for the current year?
a. P500,000 b. P600,000 c. P150,000 d. P50,000

Nos 8 to 10 are based on the following information:

During 2017, Reminiscent Company bought shares of another entity to be held for trading.
June 1 20,000 shares @ P100 2,000,000
Dec. 1 30,000 shares @ P120 3,600,000
5,600,000
Transactions for 2018:
Jan. 1 Received cash dividend at P10 per share.
Jan. 20 Received 20% share dividend.
 Dec. 10 Sold 30,000 shares at P125 per share.

8. What is the gain on sale of investment using the FIFO approach?

a. P1,150,000 b. P950,000 c. P150,000 d. P550,000

9. What is the gain on sale of investment using the aver

a. P950,000 b. P750,000 c. P800,000 d. P900,000

10. What total amount should be reported as income from the investment using the FIFO approach?
a. P1,650,000 b. P1,450,000 c. P1,750,000 d. P500,000
MONDRIAAN AURA COLLEGE
Refresher 1
Practical Accounting 1
PA1 007

Biological Assets

Nos 1 and 2 are based on the following information:

Columbia Company provided the following information about assets in a forest plantation and f
farm business:
Freestanding trees P 5,000,000.00
Land under trees 900,000.00
Roads in forest 500,000.00
Animals related to recreational activities 2,000,000.00
Bearer plants 1,500,000.00
Bearer animals 1,000,000.00
Agricultural produce harvested 2,000,000.00
Agricultural produce growing on bearer plants 600,000.00

1. What total amount should be reported as biological assets?

a. P6,600,000 b. P8,500,000 c. P6,000,000 d. P8,100,000

2. What total amount should be reported as property, plant and equipment?

a. P3,400,000 b. P4,400,000 c. P1,400,000 d. P2,500,000

3. Africa Company purchased 2,000 llamas at the beginning of currenty year. These llamas will be
sheared semiannually and their wool sold to specialty clothing manufacturers. The llamas were
purchased for P5,000,000.

During the current year, the change in fair value due to growth and price changes is P350,000,
the wool harvested but not yet sold is vlaued at net realizable value of P100,000, and decrease in
fair value due to harvest is P50,000.

What is the carrying amount of the biologizal asset at year-end?

a. P5,300,000 b. P5,400,000 c. P5,400,000 d. P5,100,000

Nos 4 to 6 are based on the following information:

Legend Dairy produced milk for local ice cream producers. The entity began operations at the
beginning of current year by purchasing milking cows for P2,000,000.

The entity provided the following information at year-end relating to the milking cors:
Carrying amount- Jan. 1 P 2,000,000.00
Change in fair value due to growth and price change 400,000.00
Decrease in fair value due to harvest 50,000.00
Newborn calf at year-end at fair value 200,000.00
 Milk harvested during the year but not yet sold 250,000.00

4. What amount of net gain on biological asset should be reported in the current year?
a. P400,000 b. P350,000 c. P800,000 d. P550,000

5. What amount of gain on agricultural produce should be recognized in the current year?
a. P250,000 b. P200,000 c. P600,000 d. P650,000

6. What is the carrying amount of the biological asset at year-end?

a. P2,000,000 b. P2,400,000 c. P2,550,000 d. P2,800,000

Nos 7 and 8 are based on the following information:

Righteous Company provided the following data:
Value of biological asset at acquisition cost on
December 31, 2017 P 6,000,000.00
Fair valuation surplus on initial recognition at fair
value on December 31, 2017 500,000.00
Change in fair value on December 31, 2018 due to
growth and price fluctuation 900,000.00
Decrease in fair value due to harvest 100,000.00

7. What is the carrying amount of th ebiological asset on December 31, 2018?

a. P7,400,000 b. P7,300,000 c. P7,500,000 d. P6,500,000

8. What amount of net gain from the chane in fair value of biological asset should be reported
in 2018?
a. P1,400,000 b. P1,300,000 c. P900,000 d. P800,000

9. Jamaica Company is a producer of coffee. On December 31, 2017, the entity has harvested
coffee beans with fair value less cost of disposal of P3,500,000 at the point of harvest.

Because of long aging and maturation process after harvest, the harvested coffee beans were
still on hand on December 31, 2018. On such date, the fair value less cost of disposal is
P3,900,000 and the net realizable value is P3,200,000.

What is the measurement of the coffee beans inventory on December 31, 2018?
a. P3,000,000 b. P3,500,000 c. P3,200,000 d. P3,900,000

Nos 10 to 12 are based on the following information:

Temerity Company has different kinds of farm animals at the beginning of current year.

During the current year, several acquisition occurred related to these farm animals.

Detailed summary of transactions:

15 Horses (1 year old) P 1,000,000.00
 10 Dairy cattle (2 years old) 400,000.00
8 Carabaos (2.5 years old) 200,000.00
20 Hogs (3 years old) 500,000.00

Purchases on June 30:

4 Dairy cattle (1 year old) 150,000.00
6 Carabaos (6 months old) 100,000.00

Fair value less cost of disposal on December 31:

15 Horses (1 year old) 1,200,000.00
10 Dairy cattle (2 years old) 520,000.00
8 Carabaos (2.5 years old) 250,000.00
20 Hogs (3 years old) 550,000.00
4 Dairy cattle (1 year old) 170,000.00
6 Carabaos (6 months old) 110,000.00

Fair value less cost of disposal on December 31:

15 Horses (2 years old) 1,350,000.00
10 Dairy cattle (3 years old) 580,000.00
8 Carabaos (3.5 years old) 290,000.00
20 Hogs (4 years old) 600,000.00
4 Dairy cattle (1.5 years old) 200,000.00
6 Carabaos (1 year old) 140,000.00
There were no farm animals sold during the year and neither were there any newborn nor
deaths.

10. What is the carrying amount of the biological assets on December 31?
a. P3,160,000 b. P2,350,000 c. P2,800,000 d. P2,380,000

11. What is the gain from change in fair value attributable to price change?
a. P810,000 b. P450,000 c. P360,000 d. P -0-

12. What is the gain from change in fair value attributable to physical change?
a. P810,000 b. P450,000 c. P360,000 d. P700,000

Nos 13 to 17 are based on the following information:

Farmland Company produces milk on its farms. The entity produces 20% of the community's
milk that is consumed. Farmland Company owns 5 farms and has a stock of 2,100 cows and
1,050 heifers.

The farms produce 800,000 kilograms of milk a year and the average inventory held is 15,000
kilograms of mils. However, on December 31, 2017 the entity is currently holding 50,000 kilo-
grams of milk in powder. On December 31, 2017, the biological assets are:
Purchased on or before January 1, 2017 (3 years old) 2,100 cows
Purchased on January 1, 2017 (2 years old) 300 heifers
 Purchased on July 1, 2017 (1.5 years old) 700 heifers
No animals were born or sold during the current year. The unit fair value less cost of disposal
is as follows.
January 1, 2017:
1-year old 3,000
2-year old 4,000

July 1, 2017:
1-year old 3,000

December 31, 2017:

1-year old 3,200
2-year old 4,500
1.5-year old 3,600
3-year old 5,000
The entity has had problems during the year. Contaminated milk was sold to customers. As a
result, milk consumption has gone down. The entity's business is spread over different parts of
the country.

There are 600 cows and 200 heifers in the Batangas farm and all these animals had been
purchased on January 1, 2017.

13. What is the fair value of biological assets on January 1, 2017?

a. P9,300,000 b. P9,600,000 c. P8,400,000 d. P7,200,000

14. What is the fair value of biological assets purchased on July 1, 2017?
a. P2,250,000 b. P3,000,000 c. P3,750,000 d. P3,375,000

15. Whatis the fair value of biological assets on December 31, 2017?
a. P14,550,000 b. P15,750,000 c. P15,225,000 d. P11,850,000

16. What is the increase in fair value of biologizal assets on December 31, 2017?
a. P3,000,000 b. P5,250,000 c. P4,950,000 d. P6.150,000

17. What is the increase in fair value of biological assets due to physical change?
a. P1,260,000 b. P1,740,000 c. P3,000,000 d. P1.440,000
MONDRIAAN AURA COLLEGE
Refresher 1
Practical Accounting 1
PA1 008

1. Venice Company included the following in inventory at year-end:

Merchandise out on consignment at sale price, includi
40% markup on sale price P 1,400,000.00
Goods purchased in transit, shipped FOB shipping poi 1,200,000.00
Goods held on consignment by Venice 900,000.00
At what amount should the inventory be reduced at year-end?
a. P1,460,000 b. P3,500,000 c. P2,300,000 d. P1,740,000

2. A physical count on December 31, 2017 revealed that Joyous Company had inventory with a cost of
P4,410,000.

The following items were excluded from this amount:

* Merchandise of P610,000 is held by Joyous on consignment.
* Merchandise costing P380,000 was shipped by Joyous FOB destination to a customer on Decem-
ber 31, 2017. The customer was expected to receive the goods on January 5, 2018.
* Merchandise costing P460,000 was shipped by Joyous FOB shipping point to a customer on
December 29, 2017. The customer was expected to receive the goods on January 10, 2018.
* Merchandise costing P830,000 shipped by a vendor FOB destination on December 31, 2017 was
received by Joyous on January 15, 2018.
* Merchandise costing P510,000 purchased FOB shipping point was shipped by the supplier on
December 31, 2017 and received by Joyous on January 5, 2018.
What amount of inventory should be reported on December 31, 2017?
a. P5,300,000 b. P4,690,000 c. P3,800,000 d. P4,920,000

3. Audacity Company counted the ending inventory on December 31, 2017. The entity reported inventory
before any corrections at P2,000,000.

None of the following items were included when the total amount of the ending inventory was
computed:
* Goods located in the entity's warehouse are on consignment
from another entity P 150,000.00
* Goods sold by the entity and shipped FOB destination were in
transit on December 31, 2017 and received by the custo-
mer on January 2, 2018 200,000.00
* Goods purchased by the entity and shipped FOB shipping point
were in transit on December 31, 2017 and received by the
entity on January 2, 2018 300,000.00
* Goods sold by the entity and shipped FOB shipping point were
in transit on December 31, 2017 and received by the
customer on January 2, 2018. 400,000.00
 What amount of inventory should be reported on December 31, 2017?
a. P2,500,000 b. P2,350,000 c. P2,900,000 d. P2,750,000

4. Reverend Company conducted a physical count on December 31, 2017 which revealed merchandise
with a total cost of P5,000,000.

However, further investigation revealed that the following items were excluded from the count.
* Goods sold to a customer which are being held for the customer to call at the customer's conven-
ience with a cost of P200,000.
* A packing case containing a product costing P500,000 was standing in the shipping room when the
physical inventory was taken.
The product was not included in the inventory because it was market "hold for shipping instruct-
ions"
The investigation revealed that the customer's order was dated December 28, 2017, but that
the case was shipped and the customer billed on January 5, 2018.
* A special machine costing P250,000 fabricated to order for a customer was finished and specifi-
cally segregated at the back part of the shipping room on December 31, 2017.
The customer was billed on that date and the machine was excluded from inventory although it
was shipped on January 5, 2018.
* Goods in process costing P300,000 held by an outside processor for further processing.
* Goods costing P50,000 shipped by a vendor FOB seller on December 31, 2017 and received by
the entity on January 10, 2018.

What is the correct amount of inventory that should be reported on December 31, 2017?
a. P5,500,000 b. P5,550,000 c. P5,850,000 d. P5,800,000

5. Faith Company reported inventory on hand at year-end valued at a cost of P950,000.

The following items were not included in this inventory amount:
Item 1: Purchased goods in transit, shipped FOB destination, invoice price P30,000 which includes
freight charge of P1,500.
Item 2: Goods held on consignment by Faith Company at a sale price of P28,000 including sales
commission of 20% of the sales price.
Item 3: Goods sold to a customer, under terms FOB destination, for P18,500 which includes
P1,000 freight charge to deliver the goods. Goods are in transit. The selling price is 140%
of cost.
Item 4: Purchased goods in transit, terms FOB shipping point, invoice price P50,000, freight cost,
P2,500.
Item 5: Goods out on consignment to a consignee sale price P35,000, shipping cost of P2,000.

What is the adjusted cost of inventory at year-end?

a. P1,042,000 b. P1,043,000 c. P1,040,000 d. P1,073,500

6. Shindig Company is preparing the 2017 year-end financial statements. Prior to any adjustments, inven-
tory is valued at P7,600,000.
 * Goods costing P250,000 were received from a vendor on January 5, 2018. The related invoice
was received and recorded on January 12, 2018. The goods were shipped on December 31, 2017
FOB shipping point.
* Goods costing P850,000 were shipped on December 31, 2017 to a customer FOB shipping point.
The goods were included in ending inventory for 2017 even though the sale was recorded in 2017.
* A P350,000 shipment of goods to a customer on December 31, 2017 FOB destination was not
included in the year-end inventory. The goods cost P260,000 and were delivered to the customer
on January 15, 2018. The sale was properly recorded in 2018.
* An invoice for goods costing P350,000 was received and recorded as a purchase on December
31, 2017. The related goods shipped FAS were in transit on December 31, 2017 and received
on January 5,2018 and were not included in the physical inventory.
* A P1,050,000 shipment of goods to a customer on December 30, 2017 FOB destination was
recorded as a sale in 2017. The goods costing P840,000 and delivered to the customer on
January 5, 2018 were not included in 2017 ending inventory.

What is the correct inventory on December 31, 2017?

a. P9,300,000 b. P7,610,000 c. P8,100,000 d. P8,450,000

7. Integrity Company submitted an inventory list on December 31, 2017 which showed a total of
P5,000,000.
* Excluded from the inventory was merchandise costing P80,000 because it was transferred to the
delivery departent for packaging on December 28, 2017 and for shipping on January 5, 2018.
* The bill of lading and othr import documents on a merchandise were delivereed by the bank and
the trust receipt accepted by the entity on December 28, 2017. Taxes and duties have been paid
on this shipment but the broker did not deliver the merchandise until January 5, 2018. Delivered
cost of the shipment totaled P800,000. This shipment was not included in the inventory on
December 31, 2017.
* Supplier's invoice for P300,000 worth of merchandise dated December 28, 2017 was received
through the mail on December 30, 2017 although the goods were in transit on December 31, 2017
although the goods were in transit on December 31, 2017 and arrived only on January 5, 2018.
CIF. This item was included in the December 31, 2017 inventory by the entity.
* Goods costing P20,000 were received from a supplier on December 28, 2017 for approval. The
inventory team included this merchandise in the list but did not place any value on it. On January
5, 2018, the entity informed the supplier by long distance telephone of the acceptance of the goods
and the supplier's invoice was received on January 10, 2018.
* On December 27, 2017, an order for P25,000 worth of merchandise was placed. This was in-
cluded in the year-end inventory although it was received only on January 5, 2018. The seller
shipped the goods FOB destination.

What is the correct inventory on December 31, 2017?

a. P5,855,000 b. P5,880,000 c. P5,800,000 d. P5,775,000

8. White Company's usual sales terms are net 60 days, FOB shipping point. Sales, net of returns and
allaowances, totaled P5,000,000 for the year ended December 31,2017, before year-end adjustment.
* On December 27, 2017, White Company authorized a customer to return for full credit, goods
 shipped and billed at P50,000 on December 15, 2017. The returned goods were received by White
Company on January 5, 2018, and a P50,000 credit memo was issued on the same date.
* Goods with an invoice amount of P300,000 were billed to a customer on January 10, 2018. The
goods were shipped on December31, 2017.
* Goods with an invoice amount of P200,000 were billed and recorded on December 30, 2017. The
goods were shipped on January 5, 2018.
* On January 5, 2018, a customer notified White that goods billed at P500,000 and shipped on
December 31, 2017 were lost in transit.

What amount of net sales should be reported for the current year?
a. P5,050,000 b. P5,550,000 c. P4,550,000 d. P4,450,000

9. Purple Company had sales of P4,000,000 during December of the current year. Experience has
shown that merchandise equaling 7% of will be returned within 30 days and additional 3% will be
returned within 90 days. Returned merhandise is readily resalable.

In addition, merchandise equaling 15% of sales will be exchanged for merchandise of equal or greater
value.

What amount should be reported for net sales for the month of December?
a. P3,600,000 b. P3,400,000 c. P3,120,000 d. P3,000,000

10. Yellow Company, a distributor of machinery, bought a machine from the manufacturer in November
2017 for P500,000.

On December 30, 2017, the entity sold this machine for P750,000 under the following terms: 2%
discount if paid within 30 days, 1% discount if paid after thirty days but within 60 days, or payable in
full within ninety days if not paid within the discount periods.

However, the customer had the right to return this machine to Yellow Company if it was unable to
resell the machine before expiration of the ninety-day payment period, in which case the customer's
obligation to Yellow Company would be cancelled.

In the net sales for the year ended December 31, 2017, what amount should be included for the sale
of the machine?
a. P750,000 b. P735,000 c. P742,500 d. -0-

11. On October 1, 2017, Indomitable Company sold 100,000 gallons of heating oil at P30 per gallon. Fifty
thousand gallons were delivered on December 15, 2017, and the remaining 50,000 gallons were deli-
vered on January 15, 2018.Payment terms were: 50% due on October 1, 2017, 25% on the first deli-
very, and the remaining 25% due on the second delivery.

What amount of sales revenue should be recognized during 2017?

a. P3,000,000 b. P1,500,000 c. P2,250,000 d. P750,000
12. Confident Company had the following transactions in 2017:
* The entity sold goods to a customer for P50,000, FOB shipping point on December 30, 2017.
* The entity sold three pieces of equipment on a contract over a three-year period. The sale price
of each piece of equipemtn is P100,000. Delivery of each piece of equipment is on February 10
each year. In 2017, the customer paid a P200,000 down payment, and will pay P50,000 per year
in 2018 and 2019. Collectibility is assured.
* On June 1, 2017, the entity signed a contract for P200,000 for goods to be sold on account.
Payment is to be made in two insallments of P100,000 each on December 1, 2017. Collection is
reasonably assured, and the goods may not be returned.
* The entity sold goods to a customer on July 1, 2017 for P500,000. If the customer does not sell
the goods to retail customers by December 31, 2018, the goods can be returned. The customer
sold the goods to retail customers on October 1, 2018.

What amount of sales revenue should be reported in 2017

a. P350,000 b. P850,000 c. P450,000 d. P550,000

Nos 13 to 15 are based on the following information:

Fancy Company is a wholesale distributor of automotive replacement parts. The entity revealed the
following initial amounts on December 31, 2017:
Inventory at Dec. 31 based on physical count P 1,250,000.00
Accounts payable 1,000,000.00
Sales 9,000,000.00

Additional Information:
a. Parts held on consignment from another entity to Fancy Company, the consignee, amounting to
P165,000, were included in the physical count on December 31, 2017, and in accounts payable on
December 31, 2017.
b. P20,000 of parts which were purchased and paid for in December 2017, were sold in the last week
of 2017 and appropriately recorded as sales of P28,000.
The parts were included in the physical count on December 31, 2017, because the parts were on
the loading dock waiting to be picked up by the customers.
c. Parts in transit on December 31, 2017 to customers, shipped FOB shipping point, on December 28,
2017, amounted to P34,000
The customers received the parts on January 6, 2018. Sales of 40,000 to the customers for the
parts were recorded by Fancy Company on January 2, 2018.
d. Retailers were holding P210,000 at cost and P250,000 at retail, of goods on consignment from
Fancy Company, at their stores on December 31, 2017.
e. Goods were in transit from a vendor to Fancy Company on December 31, 2017. The cost of goods
was P25,000.
The goods were shipped FOB shipping point on December 29, 2017.

13. What is the correct amount of inventory?

a. P1,300,000 b. P1,320,000 c. P1,334,000 d. P1,090,000

14. What is the correct amount of accounts payable?

 a. P835,000 b. P960,000 c. P975,000 d. P860,000

15. What is the correct amount of sales?

a. P9,250,000 b. P9,290,000 c. P9,040,000 d. P9,000,000
MONDRIAAN AURA COLLEGE
Refresher 1
Practical Accounting 1
PA1 009

1. Damsel Company reported a checkbook balance of P4,000,000 on December 31, 2017.

* A customer check amounting to P200,000 dated December 30, 2017 was not included in the
checkbook balance.
* Another customer check for P500,000 deposited on December 22, 2017 was included in the
checkbook balance but returned by the bank for insufficiency of fund.
This check was redeposited on December 27, 2017 and December 28, 2017.
* Coins and currencies on hand amounted to P300,000.
* A P400,000 check payable to supplier dated and recorded on December 30, 2017 was mailed
on January 15, 2018.
* A petty cash fund of P50,000 with the following summary on December 31, 2017.
Coins and currency P 5,000.00
Petty cash vouchers 43,000.00
Return value of 20 cases of soft drinks 2,000.00
P 50,000.00
* A check of P43,000 was drawn on December 31, 2017 payable to Petty Cash.

What amount should be reported as "cash" on December 31, 2017?

a. P4,948,000 b. P4,548,000 c. P4,950,000 d. P4,900,000

Bank Reconciliation

2. In preparing the August 31 bank reconciliation, Adorable Company provided the following
information:
Balance per bank statement P 1,805,000.00
Deposit in transit 325,000.00
Return of customer check for insufficient fund 60,000.00
Outstanding checks 275,000.00
Bank service charge for August 10,000.00
On August 31, what is the adjusted cash in bank?
a. P1,855,000 b. P1,795,000 c. P1,785,000 d. P1,755,000

Nos 3 and 4 are based on the following information:

In preparing the bank reconciliation at the current month-end, Cardinal Company provided the
following data:
Balance per bank statement P 3,800,000.00
Deposit in transit 520,000.00
Amount erroneously credited by bank to the entity's account 40,000.00
Bank service charge for the current month 5,000.00
Outstanding checks 675,000.00
3. What is the adjusted cash in bank?
a. P3,685,000 b. P3,645,000 c. P3,600,000 d. P3,605,000

4. What is the unadjusted cash in bank balance per book?

a. P3,550,000 b. P3,660,000 c. P3,610,000 d. P3,655,000

5. Emphatic Company provided the following data at the current month-end:

Balance per book P 4,000,000.00
Bank charges 10,000.00
Outstanding checks 950,000.00
Deposit in transit 1,200,000.00
Customer note collected by bank 1,500,000.00
Interest on customer note 60,000.00
Customer check returned NSF 250,000.00
Pyment of depositor note payable charged to account 1,000,000.00
What is the adjusted cash in bank?
a. P4,300,000 b. P5,300,000 c. P4,250,000 d. P4,000,000

6. Endemic Company provided the following data for the purpose of reconciling the cash balance
per book with the cash balance per bank statement on December 31:
Balance per bank statement P 2,000,000.00
Balance per book 850,000.00
Outstanding checks, including certified check of P100,000 500,000.00
Deposit in transit 200,000.00
Dec. NSF checks, P50,000 of w/c had been redeposited
and cleared by Dec. 27 150,000.00
Erroneous credit to Endemic account, representing pro-
ceeds of loan granted to another entity 300,000.00
Proceeds of note collected by bank for Endemic, net of
service charge of P20,000 750,000.00
What is the cash in bank to be reported on December 31?
a. P1,400,000 b. P1,500,000 c. P1,450,000 d. P1,800,000

Nos 7 and 8 are based on the following information:

Adversary Company kept all cash in a checking account. An examination of the accounting
records and bank statement for the month of June revealed the following information:
* The cash balance per book on June 30 is P8,500,000.
* A deposit of P1,000,000 that was placed in the bank's night depository on June 30 does not
appear on the bank statement.
* Checks outstanding on June 30 amount to P300,000.
* Adversary Company discovered that a check written in June for P200,000 in payment of an
account payable had been recorded in the entity's records as P20,000.
* Included with the June bank statement was NSF check for P250,000 that Adversary Company
had received from a customer on June 26.
 * The bank statement shows a P20,000 service charge for June.

7. What is the cash in bank to be reported on June 30?

a. P9,180,000 b. P9,360,000 c. P9,000,000 d. P3,300,000

8. What is the net adjustment to cash in bank on June 30?

a. Net debit - P 950,000 c. Net debit - P 500,000
b. Net credit - P 450,000 d. Net debit - P 860,000

9. Laconic Company received the bank statement for the month of April which included the fol-
lowing information:
Bank service charge for April P 15,000.00
Check deposited by Laconic during April was not
collectible and has been marked "NSF" and return 40,000.00
Deposits made but not yet recorded by bank 130,000.00
Checks written and mailed but not yet recorded by
bank 100,000.00
The entity found a customer check for P35,000 payable to the entity that had not yet been depo-
sited and had not been recorded. The general ledger showed a bank account balance of P920,000.

What is the adjusted cash in bank on April 30?

a. P900,000 b. P865,000 c. P930,000 d. P965,000

10. Beacon Company provided the following inormation for the month of December:
Cash balance per bank statement P 4,000,000.00
Checks outstanding, including certified check of P100,000 500,000.00
Customer note collected by bank for Beacon 150,000.00
NSF checks of customers returned by bank 200,000.00
Bank service charge shown in December bank statement 20,000.00
Error made by Beason Company in recording a check that was drawn
in December for P100,000 but recorded at P10,000 90,000.00
Deposit in transit 1,300,000.00
What is the cash balance per ledger on December 31?
a. P4,900,000 b. P5,060,000 c. P4,880,000 d. P4,970

11. On March 31, Decent Company received a bank statement which revealed the following infor-
mation:
February 28 book balance P 1,460,000.00
Note collected by bank 100,000.00
Interest earned on note 10,000.00
NSF check of customer 130,000.00
Bank service charge on NSF check 2,000.00
Other bank service charges 3,000.00
Oustanding checks 202,000.00
Deposit of February 28 palced in night depository 85,000.00
 Outstanding checks 20,000.00
What is the cash balance per bank statement?
a. P1,435,000 b. P1,532,000 c. P1,338,000 d. P1,557,000

12. Sapphire Company provided the following information for the month of December:
Balance per bank statement Dec. 31 P 2,800,000.00
Bank service charge for December 12,000.00
Interest paid by bank to Sapphire Company for December 10,000.00
Deposits made but not yet recorded by the bank 350,000.00
Checks written but not yet recorded by the bank 650,000.00
The entity discovered that it had drawn and erroneously recorded a check for P46,000 that
should been recorded for P64,000.

What is the cash balance per ledger on December 31?

a. P2,500,000 b. P2,520,000 c. P2,540,000 d. P2,800,000

13. Gallant Company reported a cash account balance of P4,500,000 before reconciliation.

The bank statement did not include a deposit of P230,000 made on the last day of the month.

The bank statement showed a collection by the bank of P94,000 and a customer check for
P32,000 returned because it was NSF.

What is the correct balance in the cash account?

a. P4,765,000 b. P4,571,000 c. P4,819,000 d. P4,801,000

14. Esoteric Company correctly prepared the following bank reconciliation for the month of
December:
Balance per bank statement P 2,800,000.00
Deposit in transit 195,000.00
Checkbook printing charge 5,000.00
Error made by Esoteric in recording a check issued
in December 35,000.00
NSF check 110,000.00
Outstanding check (100,000.00)
Note collected by bank including P15,000 interest (215,000.00)
Balance per book P 2,830,000.00
Cash on hand at year-end P 200,000.00
What total amount of cash should be reported?
a. P2,930,000 b. P3,095,000 c. P2,895,000 d. P3,130,000

Nos 15 and 16 are based on the following information:

Timex Company provided the following data relating to the cash transactions and bank account
for the month of July:
Cash balance per ledger P ?
 Cash balance per bank statement ?
Debit memo for July service charge 5,000.00
Deposit of July 31 not recorded by bank until August 1 450,000.00
Outstanding checks, including certified check of P50,000 750,000.00
Proceeds of bank loan not recorded in ledger 500,000.00
Proceeds from customer note, face P400,000, collected by bank,
collection fee of P15,000 435,000.00
A creditor check had been entered in the book as P20,000 and was
erroneously deducted by the bank at 200,000.00
A customer check was returned by bank marked DAIF 50,000.00
Correct balance 3,000,000.00

15. What is the cash balance per ledger?

a. P2,120,000 b. P3,055,000 c. P2,555,000 d. P2,065,000

16. What is the cash balance per bank statement?

a. P3,700,000 b. P3,070,000 c. P3,050,000 d. P2,370,000
MONDRIAAN AURA COLLEGE
Refresher 1
Practical Accounting 1
PA1 010

Nos 11 to 13 are based on the following information:

On January 1, 2017, Taal Company received a 5-year variable interest rate loan of P6,000,000
with interest payment at the end of each year and the principal to be repaid on December 31,
2021

The interest rate for 2017 is 8% and the rate in each succeeding year is equal to market interest
rate on January 1 of each year.

On January 1, 2017, Taam Company entered into a "receive variable pay fixed" interest rate swap
agreement with a financial institution.

The swap payments are made at the end of the year. This interest rate swap agreement is desig-
nated as a cash flow hedge.

On January 1, 2018, the market rate of interest is 9%. The present value of an ordinary annuity
of 1 at 9% for four periods is 3.24.

On January 1, 2019, the market rate of interest is 12%. The present value of an ordinary annuity
of 1 at 12% for three periods is 2.40.

11. On December 31, 2017, what amount should be reported as interest rate swap receivable?
a. P300,000 b. P240,000 c. P194,400 d. P120,000

12. On December 31, 2018, what amount should be reported as interest rate swap receivable?
a. P720,000 b. P777,600 c. P576,000 d. P240,000

13. What is the interest expense for 2018?

a. P720,000 b. P540,000 c. P480,000 d. P240,000

Nos 14 and 15 are based on the following information:

On January 1, 2017, Camry Company received a two-year P5,000,000 loan. The loan calls for
payments to be made at the end of each year based on the prevailing market rate at January 1 of
each year based on the prevailing market rate at January 1 of each year. The interest rate at
January 1, 2017 was 10%.

Corolla Company also has a two-year P5,000,000 loan, but Cololla's loan carried a fixed interest
rate of 10%.

Camry Company does not want to bear the risk that interest rates may increase in 2018.
 Corolla Company believes that rates may decrease and it would prefer to have variable debt.

The two entities entered into an interest rate swap whereby Corolla Company agreed to make
Camry's interest payment in 2018 and Camry Company likewise agreed to make Corolla's
interest payment in 2018.

The two entities agreed to make settlement payment, for the difference only, on December 31,
2018. The interest rate is 8% on January 1, 2018.

14. What will be Camry's settlement with Corolla?

a. P100,000 payment c. P50,000 payment
b. P100,000 receipt d. P50,000 receipt

15. What amount will Camry report as fair value of the interest rate swap payable on December 31,
2017?
a. P5,000,000 b. P100,000 c. P92,600 d. P90,900

Derivatives (Forward, futures, options, foreign currency)

Nos 1 to 3 are based on the following information:

Seaside Company operates a five-star hotel. The entity makes very detailed long-term planning.
On October 1, 2017, the entity determined that it would need to purchase 8,000 kilos of Australian
lobster on January 1, 2019.

Because of the fluctuation in the price of Australian lobster, on October 1, 2017 the entity nego-
tiated a special forward contract with a bank for the entity to purchase 8,000 kilos of Australian
lobster on January 1, 2019 at a price of P9,600,000. The price of Australian lobster was P1,200
per kilo on October 1, 2017.

This forward contract was designated as a cash flow hedge. On December 31, 2017, the price
of a kilo of Australian lobster is P1,000.

The appropriate discount rate throughout this period is 10%. The present value of 1 at 10% for
one period is .91.

1. What is the notional value of the forward contract?

a. P12,000,000 b. P9,600,000 c. P7,200,000 d. P4,800,000

2. What is the derivative asset or liability on December 31, 2017?

a. P2,400,000 asset c. P2,184,000 asset
b. P2,400,000 liability d. P2,184,000 liability

3. What is the derivative asset or liability on December 31, 2018?

a. P1,600,000 asset c. P800,000 asset
 b. P1,600,000 liability d. P800,000 liability

Nos 4 to 6 are based on the following information:

Legaspi produces colorful 100% cotton shirts and the entity needsw 50,000 kilos of raw materials
in the production process.

On December 1, 2017, the entity purchsed a call option as a cash flow hedge to buy 50,000 kilos
on July 1, 2918.

The option strike price is P100 per kilo. The entity paid P50,000 for the call option.

This derivative option contract means that if the market price is higher than P100, the entity can
exercise the option and buy the asset at the strike option price of P100.

If the market price is lower than P100, the entity can throw away the option and buy the asset at
the cheaper price.

The market price per kilo os P110 on December 31, 2017?

4. What is the derivative asset on December 31, 2017?

a. P500,000 b. P450,000 c. P750,000 d. P700,000

5. What is the cash settlement from the speculator on July 1, 2018?

a. P750,000 b. P700,000 c. P500,000 d. P450,000

6. What is the cost of purchases on July 1, 2018?

a. P5,750,000 b. P5,000,000 c. P5,050,000 d. P5,300,000