COLLEGE OF ACCOUNTANCY

FINAL EXAMINATION
ACCTG 206A
INSTRUCTIONs:
Make a summary of answer and show your solutions on a separate sheet of paper
no solution no points; and
send to my messenger account the picture of the summary of answers and solutions.
Multiple Choice
1) ABC Corporation was organized on January 3, 2007, with authorized capital of 100,000 shares
of P10 par common stock. During 2007, ABC had the following transactions affecting
stockholders’ equity:
 January 7--Issued 40,000 shares at P12 per share
 December 2--Purchased 6,000 shares of treasury stock at P13 per share
The cost method was used to record the treasury stock transaction. ABC’s net income for 2007
is P300,000. What is the amount of stockholders’ equity at December 31, 2007?
a. P640,000
b. P702,000
c. P708,000
d. P720,000

2) PC issued all its outstanding common shares for P390 in 2006. On January 5, 2007, PC
acquired 200,000 shares of its stock at P360/share and retired them. PC’s equity accounts as at
December 31, 2006 follow:
 Retained earnings, P75,000,000
 Share premium, 162,000,000
 Common stock, P300 par, 2,000,000 shares, authorized, 1,800,000 shares issued and
outstanding, P540,000,000.
Compute for the balance of share premium account immediately after the retirement of the
shares?
a. 168,000,000
b. 156,000,000
c. 150,000,000
d. 144,000,000
3) ABC issued 200,000 shares of common stock when it began operations in 2003 and issued an
additional 100,000 shares in 2004. ABC also issued preferred stock convertible to 100,000
shares of common stock. In 2004, ABC purchased 75,000 shares of its common stock and held
it in treasury. At December 31, 2004, how many shares of ABC common stock were
outstanding?
a. 225,000
b. 200,000
c. 220,000
d. 175,000
4) In 200A, Y Company issued 5,000 shares of P10 par value common stock for P100 per share. In
200D, Y reacquired 2,000 of its shares at P150 per share from the estate of one of its deceased
officers and immediately cancelled these 2,000 shares. Y uses the cost method in accounting for
its treasury stock transactions. In connection with the retirement of these 2,000 shares, Y
should debit
Additional paid-in Retained
capital earnings
a. P 20,000 P280,000
b. P100,000 P180,000
c. P180,000 P100,000
d. P280,000 P - 0 -
5) Dess Corporation holds 10,000 shares of its 10 par value common stock as treasury stock
reacquired in 200A for P120,000. On December 12, 200C, Dess issued all 10,000 shares for
P190,000. Under the cost method of accounting for treasury stock, the re-issuance would
increase the stockholders’ equity of Dess by
a. P70,000.
b. P120,000.
c. P190,000.
d. P310,000.
6) Prior to subscription of Color, the accounting equation of Rado’s corporation is:
Asset = Liabilities + Equity
P1,000,000 P 250,000 P 750,000
Color subscribed 2,500 shares at P100 par that will be due and collectible 18 months from
December 31, 200B, the balance sheet date of Rado. After subscription of Color, the accounting
equation of Rado would be
Total Assets Total Liabilities Stockholders equity
a. P1,250,000 P250,000 P1,000,000
b. P1,250,000 P500,000 P 750,000
c. P1,000,000 P250,000 P 750,000
d. P1,000,000 P500,000 P 750000
7) The accounts shown below appear in the December 31, 2003 trial of ABC Corporation:
Preferred stock, authorized P0 par P10,000,000
Unissued preferred stock 3,600,000
Common stock, authorized P20 par 4,000,000
Unissued common stock 2,000,000
Subscription receivable, preferred stock 380,000
Subscription receivable, common stock 360,000
Subscribed preferred stock 600,000
Subscribed common stock 440,000
Treasury stock, preferred, at cost 1,360,000
Additional paid-in capital 1,700,000
Retained earnings 2,000,000
All subscription receivables are due in year 2004. How much is the total stockholder’s equity of
ABC Corporation?
a. 11,040,000
b. 11,780,000
c. 12,400,000
d. 13,760,000
8) ABC Company issued 15,000 shares of its P100 par common stock in acquiring a land that was
recently appraised at P1,700,00. The common stock is actively selling at P120 per share. What
is the amount of additional paid in capital to be credited on the issuance of shares?
a. 200,000
b. 300,000
c. 500,000
d. 600,000
9) On July 1, 2006 VC issued rights to stockholders to subscribe to additional shares of its
common stocks. One right was issued for each share owned. A stockholder could purchase one
additional share for P10 rights plus P35 cash. Commons stocks par value is P25, and there are
40,000 shares issued and outstanding. On July 1, 2006, the market price of one right was P2,
and the common stock was P40, rights on. On July 1, 2006, the stock rights would
a. increases the total stockholders’ equity
b. increase the retained earnings
c. decrease the retained earnings
d. no effect on the assets and on the total stockholders’ equity
10) SC was incorporated on January 2, 2006. The following information pertains to common stock
transactions:
January 2, Number of shares issued, 80,000
July 1, number of shares reacquired as treasury stocks, 10,000
December 1, declared 2 for 1 stock split
How many shares of common stock outstanding as of December 31, 2006?
a. 139,667
b. 140,000
c. 150,000
d. 160,000
11) On January 1, 2006, ABC had 100,000 common shares outstanding. During 2006, ABC issued
rights to acquire one common share at P10 in the ratio of one for every 5 shares outstanding.
The rights are exercised on October 1, 2006. The market value of the common share immediately
prior to October 1. 2006 was P16. The net income for 2006 was P5,500,000. ABC would report
earnings per share for 2006 at
a. 45,83
b. 50
c. 52.38
d. 55
On March 1, 2008, Hopeful Company bought an equipment costing P1,200,000. Hopeful’s
depreciation policy is to depreciate long-lived assets using the double-declining balance method.
The equipment has an estimated useful life of 10 years with a minimum amount of salvage value at
the end of its useful life.
12) What is the carrying value of the assets as of December 31, 2010?
a. P480,000 c. P614,000
b. P640,000 d. P768,000
On January 2, 2011, Silent Corporation has an investment property that was carried at fair value
with a carrying amount of P2,500,000 (historical cost, P2,400,000). As of December 31, 2011, the
fair market value of the property is p2,600,000. On December 31, 2012, the fair market value of the
property was P2,800,000. On this date, Silent Corporation decided to reclassify/ transfer the
property to inventory.
13) On the date of transfer, what amount should the inventory be valued?
a. P2,400,000 c. P2,500,000
b. P2,600,000 d. P2,800,000
On August 1, 2006, ABC purchased a new machine on a deferred payment basis. A down payment
of P100,000 was made and the balance is payable in P100,000 annually for 4 years. The current
interest is 12%.The present value of an annuity at 12% for 4 years is 3.04 and the present value of
an amount at the end of 5th year at 12% is .064. The same machine could be acquired on cash
basis at P400,000.
14) ABC should record the machine at
a. 500,000
b. 400,000
c. 403,735
d. 303,735
The inventory records of TC show the following purchases:
Month Units Cost
January 15,000 190,500
February 20,000 240,000
March 12,500 165,00
15) A physical count on March 31 shows 22,500 units on hand. What amount of inventory should
be reported as of March 31, using FIFO method of costing?
a. 120,000
b. 225,000
c. 280,500
d. 285,000
16) Halo, Inc. reported the following items on its December 31,2003 trial balance:
Accounts Payable P1,089,000
Advances to Employees 45,000
Unearned Rent Revenue 288,000
Estimated Liability Under Warranties 258,000
Cash Surrender Value of Officers’ Life 75,000
Insurance
Bonds Payable 5,550,000
Discounts on Bonds Payable 225,000
Trademarks 39,000
How much should Halo report as total liabilities in its December 31,2003 balance sheet?
a. 6,960,000 c. 7,035,000
b. 7,005,000 d. 7,410,000
17) Head Company prepared a draft of its 2003 balance sheet. The draft statement reported current
liabilities totaling P2,000,000. However, none of the following items were included in this
preliminary total at December 31,2003.
Accounts payable P300,000
Bonds payable, due 2004 500,000
Discounts on Bonds payable, due 2004 60,000
Dividends payable-January 31,2004 160,000
Notes payable, due 2005 400,000
Bond issue costs 20,000
At which amount should Head’s current liabilities be correctly reported in the December
31,2003 balance sheet?
a. 2,880,000
b. 2,900,000
c. 2,960,000
d. 3,020,000
18) The following are selected accounts of Highland:
Accounts receivable, net of P10,000 allowance for bad debts P90,000
Cash in bank, net of P5,000 overdraft 30,000
Petty cash, including paid but un-replenished voucher of P1,000 10,000
Unused supplies before adjustment of P5,000 consumed portion 9,000
Unconsumed raw materials 10,000
Unsold finished goods 50,000
Work in process inventory, 10% completed 40,000
The total current assets is
a. 248,000 b. 239,000 c. 238,000 d. 222,000
The ABC Corporation was organized on January 1, 2004. On December 31, 2005, the corporation
lost most of its inventory in a warehouse fire just before the year-end count of inventory was to take
place. Data from the records disclosed the following:
2004 2005
Beginning inventory, January 1 P 0 P1,020,000
Purchases 4,300,000 3,460,000
Purchases returns and allowances 230,600 323,000
Sales 3,940,000 4,180,000
Sales returns and allowances 80,000 100,000
On January 1, 2005, the Corporation’s pricing policy was changed so that the gross profit rate
would be three percentage points higher than the one earned in 2004.
Salvaged undamaged merchandise was marked to sell at P120,000 while damaged merchandise
was marked to sell at P80,000 had an estimated realizable value of P18,000
19) How much is the inventory loss due to fire?
a. P918,200 c. P856,200
b. P947,000 d. P824,600
20) ABC discounted with recourse its P500,000 notes receivable, 10%, one-year note dated January
1, 2005. The note was discounted July 1, 2005 at discount rate of 12%. At maturity date,
P50,000 of the discounted note was dishonored, and additional charge of P3,000 was collected
by the bank. How much should be debited to Accounts Receivable for the dishonored note?
a. P50,000
b. P53,000
c. P55,000
d. P58,000
On January 1, 2011, ABC Co. purchased 20,000 shares of the 100,000 total outstanding shares of
P Inc for P4,000 000.
P’s assets and liabilities approximate their fair values. In 2011 , P Inc. reported profit of
P12,000,000 and declared and paid cash dividends of P800,000.
In 2012, P reported loss of P8,000,000, declared and issued 10% stock dividends, and reported gain
on property revaluation of P2,000,000 and loss on exchange differences on translation of foreign
operations of P400,000.
21) How much is the share in profit or loss of the associate in 2011?
a. 2,240,000 c. 160,000
b. 2,400,000 d. 0
22) How much is the carrying amount of the investment as of December 31, 2011?
a. 4,000,000 c. 6,400,000
b. 6,240,000 d. 6,560,000
23) How much is the investment income (loss on investment) to be recognized in profit or loss in
2012?
a. (1,280,000) c. (1,600,000)
b. 400,000 d. 320,000
24) How much is the net share in the other comprehensive income of the associate in 20x2?
a. 320,000
b. (1,280,000)
c. 1,280,000
d. 0
25) How much is the carrying amount of the investment as of December 31, 20x2?
a. 4,960,000
b. 4,640,000
c. 4,000,000
d. 0
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