PROBLEM 1

The equity section of Lavary Corporation’s statement of financial position as of December 31, 2022 is
as follows:
Shareholders’ Equity
Share capital, P5 par value; authorized,
2,000,000 shares; issued, 400,000 shares P2,000,000
Share premium 850,000
Retained earnings 3,000,000
P5,850,000
The following events occurred during 2023:

Jan. 5 10,000 shares were sold for P9 per share.

Jan.16 Declared a cash dividend of P0.40 per share, payable February 15 to shareholders
of record on February 5.
Feb. 10 40,000 shares were sold for P11 per share.
Mar. 1 A 40% share dividend was declared and issued. Market value per share is
currently P15.
April 1 A two-for-one split was carried out. The par vale of the share was to be reduced
to P2.50 per share. Market value on March 31 was P18 per share.
July 1 A 10% share dividend was declared and issued. Market value is currently P10
per share.
Aug. 1 A cash dividend of P0.40 per share was declared, payable September 1 to
shareholders of record on August 21.
Dec. 31 Profit for 2023 was P1,880,000.

Questions:
Based on the above and the result of your audit, answer the following:
1. The number of shares issued and outstanding as of December 31, 2023 is
a. P2,079,000 b. P1,386,000 c. P1,188,000 d. P346,500

2. The balance of share capital as of December 31, 2023 is

a. P3,465,000 b. P3,780,000 c. P3,228,750 d. P3,622,500

3. The balance of share premium as of December 31, 2023 is

a. P2,075,000 b. P2,547,500 c. P1,760,000 d. P3,695,000

4. The balance of retained earnings as of December 31, 2023 is

a. P381,600 b. P3,362,400 c. P1,094,400 d. P2,001,600

PROBLEM 2
In its financial statements for the year ended December 31, 2022 ABRI-CARI SEA AIR COMPANY
reported P73,500 revenue, P53,500 cost of goods sold, P6,000 income tax expense, P20,000 retained
earnings at January 1, 2022 and P34,000 retained earnings at December 31, 2022.
In 2023, after the 2022 financial statements were approved for issue, ABRI-CARI SEA AIR COMPANY
discovered that some products sold in 2022 were incorrectly included in inventories at 31 December
2022 at their cost—P6,500.

In 2023, ABRI-CARI SEA AIR COMPANY changed its accounting policy for the measurement of
Investment property after initial recognition from the cost model to the fair value model. It acquired its
only investment for P3,000 many years ago. The fair value of the investment was determined to be
P25,000 at December 31, 2023 (2022: P20,000 and 2021: P18,000).

At 31 December 2023, as a result of the invent tion of improved lubricants, ABRI-CARI SEA AIR
COMPANY reassessed the useful life of Machine A from four years to seven years. Machine A is
depreciated on the straight-line method with no residual value. It was acquired for P6,000 on January 1,
2021. Inventories of the type manufactured by Machine A were immaterial at the end of each reporting
period.

ABRI-CARI SEA AIR COMPANY’s accounting records for the year ended 31 December 2023, before
accounting for the change in accounting policy and before accounting for the change in accounting
estimate, record P104,000 revenue, P86,500 cost of goods sold and P5,250 income tax expense.

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ABRI-CARI SEA AIR COMPANY presents financial statements with one year of comparative
information.

For simplicity the tax effect of all items of income and expenses should be assumed to be 30%.

5. The correct cost of goods sold in 2022 is:

a. P 53,500 c. P 58,050
b. P 60,000 d. P 47,000

6. The correct cost of goods sold in 2023 is:

a. P 79,100 c. P 80,900
b. P 78,500 d. P 86,500

7. The correct retained earnings at December 31, 2023 is:

a. P 41,350 c. P 30,500
b. P 46,250 d. P 20,000

8. The correct retained earnings at December 31, 2023 is:

a. P 62,280 c. P 34,000
b. P 57,730 d. P 75,350

PROBLEM 3
Bernabres Corp. organized on June 1, 2022, was authorized to issue shares as follows:
 9% 800,000, P100 par, convertible preference shares
 2,500,000, P2.50 par value, ordinary shares

During the remainder of the fiscal year ended May 31, 2023, the following transactions were completed
in the order given:
1) 300,000 preference shares were subscribed for at P105, and 900,000 ordinary shares were
subscribed for at P26. Both subscriptions were payable 30% upon subscription, the balance in
one payment.
2) The second subscription payment was received, except one subscriber for 60,000 ordinary
shares defaulted on payment. The full amount paid by this subscriber was returned, and all of
the fully paid shares were issued.
3) 150,000 ordinary shares were reacquired by purchase at P28.
4) Each preference share was converted into four ordinary shares.

5) The treasury shares were exchanged for machinery with a fair market value of P4,300,000.

6) There was a 2-for-1 share split, and the par value of the new ordinary shares is P1.25.

7) Profit was P830,000.

Questions:
Based on the above and the result of your audit, determined the following as of May 31, 2023:
9. Ordinary share capital
a. P2,550,000 c. P2,100,000
b. P5,100,000 d. P4,200,000

10. Total share premium

a. P50,890,000 c. P48,808,000
b. P48,340,000 d. P48,240,000

11. Total contributed capital

a. P53,908,000 c. P55,990,000
b. P53,440,000 d. P53,340,000

PROBLEM 4
On January 1, 2023, Proctor & Gamble, Corp. issued P 100,000, 10% 10 year bonds when the market
rate of interest was 8%. Interest is payable on June 30 and December 31. The following financial
information is available
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 Sales P 300,000
Cost of sales 180,000
Gross profit 120,000
Interest expense ?
Depreciation expense (14,500)
Other expenses (82,000)
Net income ?

December 31, 2023 January 1, 2023

Accounts receivable P 55,000 P 48,000
Inventory 87,000 93,000
Accounts payable 60,000 58,000

All purchases of inventory are on account. Other expenses are paid for in cash.
12. What is the carrying value of the bonds on December 31, 2023
a. P 100,000 b. P 112,233 c. P 112,661 d. P 113,592

13. How much was paid for inventory purchases

a. P 172,000 b. P 174,000 c. P 184,000 d. P 186,000

14. What is Proctor & Gamble net income for 2023

a. P 13,500 b. P 14,431 c. P 14,859 d. P 23,000

15. How much was received from customers in 2023

a. P 245,000 b. P 283,000 c. P 293,000 d. P 307,000

PROBLEM 5
Coughlin, Inc. a nonpublic enterprise, is negotiating a loan for expansion purposes and the bank
requires audited financial statements. Before closing the accounting records for the year ended
December 31, 2023, Coughlin’s controller prepared the following comparative financial statements for
2019 and 2018:

COUGHLIN, INC.
Statements of Financial Position
December 31, 2023 and 2022

Assets 2023 2022

Cash P 275, 000 P 150,000
FA-Fair Value Through P/L 78,000 78,000
Accounts receivable 487,000 392,000
Allowance for doubtful accounts (50,000) (32,000)
Inventories 425,000 307,000
Property and equipment 310,000 217,000
Accumulated depreciation (150,000) (121,000)
Total Assets P1,375,000 P 991,000

Liabilities and Equity

Accounts payable and accrued P 420,000 P 347,000
Estimated liability from lawsuit 100,000
Share capital, P10 par 260,000 260,000
Share premium 130,000 130,000
Retained earnings 465,000 254,000
Total liabilities and equity P 1,375,000 P 991,000

COUGHLIN, INC.
Income Statements
For the Years Ended December 31, 2023 and 2022

2023 2022
Net Sales P 1,580,000 P 1,250,000

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 Operating expenses:
Cost of sales P 755,000 P 690,000
Selling and administrative 485,000 365,000
Depreciation 29,000 18,000
Estimated loss from lawsuit 100,000 -
P 1,369,000 P 1,073,000
Profit P 211,000 P 177,000

During the course of the audit, the following additional information was obtained:
I.The trading securities (FA-FVTPL) were acquired on December 31, 2022. The securities have a fair
value of P67,000 at December 31, 2023.

II.In discussion with the company officials, it was determined that the doubtful accounts expense rate
based on net sales should be reduced to 2% from 3%, effective January 1, 2023.

III.As a result of errors in the physical count, inventories were overstated by P12,000 at December 31,
2022 and by P17,500 at December 31, 2023.

IV.On January 1, 2022, the cost of equipment purchased for P30,000 was debited to repairs and
maintenance. Coughlin depreciates machines of this type by the straight-line method over a
five-year life with no residual value.

V.On July 1, 2023, fully depreciated equipment purchased for P21,000 was sold as scrap for P2,500.
The only entry Coughlin made was to debit cash and credit property and equipment for the
scrap proceeds. The property and equipment (net) had a current cost of P250,000 at December
31, 2023.

VI.Advertising and promotion expense for the year ended December 31, 2022 includes the P25,000
cost of printing sales catalogs for a special promotional campaign held in January 2023.

VII.Coughlin was named as a defendant in a lawsuit in October 2019. Coughlin counsel is of the
opinion that Coughlin has a good defense, and does not anticipate any impairment of Coughlin’s
assets or that, any significant liability will be incurred. Nevertheless, Coughlin management
wished to be conservative and, therefore, established a loss contingency of P100,000 at
December 31, 2019.

Based on the above and the result of your audit, compute for the following: (Disregard income taxes)

16. Adjusted retained earnings as of January 1, 2023

a. P 266,000 b. P 291,000 c. P285,000 d. P297,000

17. Adjusted profit for the year ended December 31, 2023
a. P181,800 b. P287,800 c. P281,800 d. P306,800

18. Adjusted current assets as of December 31, 2023

a. P 1,154,900 b. P1,190,300 c. P1,202,300 d. P1,226,760

19. Adjusted carrying amount of property and equipment as of December 31, 2023
a. P168,500 b. P178,000 c. P180,500 d. P192,500

20. Adjusted shareholders’ equity as of December 31, 2023

a. P862,800 b. P950,800 c. P 962,800 c. P974,800

PROBLEM 6
During your audit of ANTONIO Holdings, you established the following data concerning the cash
position as of December 31, 2023:

Cash and cash equivalents per ledger P 8,425

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 Cash on hand per count 2,032
Unrecorded Credit memo from bank 100
Unrecorded Debit Memo from bank 5
Cash balance, per bank statement 4,750
30-day time deposit 2,000
Total outstanding checks 817

The cashier prepared the following reconciliation:

Balance per bank statements P 6,750
Add: Unrecorded Credit Memo P 100
Cash per count 2,032 2,132
P 8,882
Less Outstanding checks 457
Cash per ledger, December 31, 2023 P 8,425

Required:
21. In preparing your own reconciliation, the adjusted cash and cash equivalents should be
a. P4,833 b. P 5,933 c. P6,393 d. P7,965

22. From your investigation, the cash shortage (if any) is

a. P 0 b. P105 c. P360 c. P555

PROBLEM 7
Your audit of MUSIKEROS Restaurant which was established on July 1, 2022, disclosed that the owner
started with an investment totalling P6 million, composed of P4 million in cash from his personal funds
and P2 million worth of equipment. On August 1, MUSIKEROS Restaurant borrowed P5 million from
Import Bank. The loan is due in 5 equal monthly instalment beginning September 1. Interest of
P100,000 applicable to this loan was deducted in advance from the principal amount.

During the year, MUSIKEROS collected P19 million from its customers. Amount still due from corporate
customers amounted to P2 million. Purchases for kitchen supplies inventory amounted to P18.5
million,
P2.3 million of this amount was paid by Becky in January 2023. The restaurant operations were made
at 50% above cost. The owner purchased a new equipment on October 1, 2022. Depreciation of
P80,000
was recorded for this equipment during the year.

Equipment is depreciated using the straight-line method over a five-year life taking into account a
residual
value equal to 20% of the cost. In 2022, MUSIKEROS Restaurant reported a profit of P1.2 million.

Ignoring income tax, compute for the following:

23. Acquisition cost of the new equipment

a. P1,000,000 b. P2,000,000 c. P1,600,000 d. P800,000

24. Payment of operating expenses during 2022

a. P5,220,000 b. P5,560,000 c. P5,540,000 d. P5,460,000

25. Cash balance as of December 31, 2022

a. P240,000 b. P880,000 c. P1,440,000 d. P140,000

26. Inventory as of December 31, 2022

a. P9,250,000 b. P8,100,000 c. P2,200,000 d. P4,500,000

27. Total assets as of December 31, 2022

a. P11,500,000 b. P11,400,000 c. P10,500,000 d. P10,400,000

PROBLEM 8
During your audit of the records of the VOICE Corporation for the year ended December 31, 2023, the
following facts were disclosed:

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 Raw materials inventory, 1/1/2023 P 720,200
Raw materials purchases 5,232,800
Direct labor 6,300,000
Manufacturing overhead applied (150% of direct 9,450,000
labor)
Finished goods inventory, 1/1/2023 1,240,000
Selling expenses 8,112,800
Administrative expenses 7,377,200

Your examination disclosed the following additional information:

a. Purchases of raw materials
Month Units Unit Price Amount
January – February 55,000 P17.76 P 976,800
March – April 45,000 20.00 900,000
May – June 25,000 19.60 490,000

July – August 35,000 20.00 700,000

September – October 45,000 20.40 918,000
November – December 60,000 20.80 1,248,000
265,000 P5,232,800

b. Data with respect to quantities are as follows:

Units
Explanation 1/1/23 12/31/23
Raw materials 35,000 ?
Work in process (80% completed) 0 25,000
Finished goods 15,000 40,000
Sales, 205,000 units

c. Raw materials are issued at the beginning of the manufacturing process. During the year, no
returns, spoilage, or wastage occurred. Each unit of finished goods contains one unit of raw
materials.

d. Inventories are stated at cost as follows:

 Raw materials – according to the FIFO method
 Direct labor – at an average rate determined by correlating total direct labor cost with effective
production during the period
 Manufacturing overhead – at an applied rate of 150% of direct labor cost

Based on the above and the result of your audit, answer the following:
28. The raw materials inventory as of December 31, 2023 is
a. P1,976,000 b. P1,352,000 c. P936,000 d. P897,800

29. The work in process inventory as of December 31, 2023 is

a. P1,780,000 b. P1,751,294 c. P1,885,565 d. P1,776,000

30. The finished goods inventory as of December 31, 2023 is

a. P3,352,000 b. P3,334,000 c. P3,553,130 d. P3,284,588

31. The cost of goods sold for the year ended December 31, 2023 is
a. P16,897,000 b. P16,568,304 c. P15,857,000 d. P16,875,000

32. To ascertain whether inventories included in the balance sheet physically exist, a CPA will
ordinarily:
a. Test client’s shipping cutoff procedures.
b. Obtain confirmation of pledged inventories.
c. Observe physical inventory counts.
d. Perform an analytic review of the relationship of the inventory balance to recent sales.

PROBLEM 9
On January 10, 2023, you started the audit of the financial records of KOKOI Company for the year
ended December 31, 2022. From your investigation, you discovered the following:

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1. The bookkeeper acts also as the cashier. Her December 31, 2022 year-end cash reconciliation
contained the following:
Cash per ledger, 12/31/2022 P 161,400
Cash per Bank, 12/31/2022 164,850
Checks outstanding 15,850
ABC Company check charged by bank in error
12/30/2022; corrected by bank on 01/04/2023 750
Deposit in transit, credited by bank on 01/03/2023 7,200

2. The cash account balances per ledger as of 12/31/2022 were:

Cash P 161,400
Petty Cash 1,500

3. The count of the cash on hand at the close of business on January 10, 2023, including the petty
cash, was as follows:
Currencies and coins 9,850
Expense Vouchers 800
Employee’s IOUs dated 01/05/23 300
Customers’ checks in payment of account 900
11,850

4. From January 2, 2023 to January 10, 2023, the date of your cash count, total cash receipts
appearing in the cash records were P38,600. According to the bank statements for the period from
January 2, 2023 to January 10, 2023, total deposits were P32,400.

5. On January 5, 2022, cash of P1,600 was received from a customer in settlement of his account.
This was booked by a debit to Allowance for Doubtful Accounts and a credit to Accounts
Receivable.

6. On December 5, 2022, cash of P2,900 was received from a customer in settlement of his account.
KOKOI debited Inventory and credited Accounts Receivable.

7. Cash of P1,800 received during 2022 was not recorded.

8. Checks received from customers from January 2, 2023 to January 10, 2023, totaling P4,200, were
not recorded but were deposited in the bank.

9. On July 1, 2022, the bank refunded interest of P200 because a note of KOKOI Company was paid
before maturity. No entry had been made for the refund.

10. In the cashier’s petty cash, there were receipts for collections from customers on January 9, 2023,
totaling P1,250; these were unrecorded and undeposited.

11. In the outstanding checks, there is one for P750 made payable to a trade creditor, investigation
shows that this check had been returned by the creditor on June 14, 2022, and a new check for
P1,250 was issued in its place; the original check for P750 was made in error as to amount.

Based on the above and the result of your audit, answer the following:
33. The adjusted bank balance as of December 31, 2022 is:
a. 156,950 b. 157,700 c. 150,700 d. 158,450

34. The correct cash balance, per ledger as of December 31, 2022 is:
a. 169,700 b. 167,700 c. 168,650 d. 167,900

35. The amount of cash shortage as of December 31, 2022 is:

a. 16,500 b. 10,950 c. 10,200 d. 11,250

36. The amount of cash shortage for the period from January 1, 2023 to January 10, 2023 is:
a. 4,300 b. 8,500 c. 15,700 d. 7,000

37. Which of the following controls could have possibly prevented this irregularity involving cash
account?
a. Requiring the cashier to report directly to the controller.
b. Segregating the functions of recordkeeping and handling of cash.
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 c. Requiring dual signatures on checks.
d. Pre-numbering of checks

PROBLEM 10
You have been asked to audit the records of Sarah Manufacturing Company, a small manufacturer of
precision tools and machines, for the year-ended December 31, 2023. Your examination of sales
transactions revealed among others the following:
I. Some machines have been shipped on consignment to Sarah’s regular dealers. These
transactions have been recorded as ordinary sales and billed as such. As of December 31,
2023 the machines billed and in the hands of consignees amounted to P130,000. Sales price
was determined by adding 30% to cost.

II. On December 30, 2023, two machines were shipped to a customer on FOB shipping point
basis. The sale was entered in the records on January 5, 2024 when cash was received in the
amount of P13,000.

III. The inventory as of December 31, 2023 included goods sold during November, 2023 for P6,500
but returned on December 15, 2023. No entry has been made to adjust the customer’s account
88

38. ;As a result of the above errors to net income for the year ended December 31, 2023 was:
A. Overstated by P21,500
B. Overstated by P25,000
C. Overstated by P35,000
D. Overstated by P40,000

39. A compound correcting entry will require:

a. Debit: Sales P136,500
b. Credit: Inventory P98,500
c. Debit: Retained earnings P25,000
d. Credit: Accounts receivable P123,500

PROBLEM 11
The capital structure of Buenos Amigos Corporation on December 31, 2022 follows:

Preference 12% Share, P200 par, 30,000 shares

issued and outstanding P 6,000,000
Ordinary share, P50 par, 100,000 shares issued
and outstanding 5,000,000
Share premium – Preference 1,800,000
Share premium – Ordinary 1,500,000
Retained earnings 2,200,000

During 2023, the following selected transactions occurred:

a. Purchased and retired 4,000 preference shares at P280 per share.

b. Purchased 8,000 shares of its own ordinary shares at P75 per share when each share is selling in
the
market at P78 each.
c. A two-for-one share split on the ordinary share was approved by the shareholders, thereby reducing
the par value to P25.
d. Reissued 6,000 treasury shares at P45 each.
e. Shareholders donated 4,000 ordinary shares when the market price was P46 per share. The
company recorded the donated shares as a memorandum in the treasury stock ledger.
f. Two thousand of the donated shares were issued for P48 per share.
g. The profit for 2023 was P1,650,000. No dividends were declared.

40. The balance of Preference Share at December 31, 2023 statement of financial position is:
a. P5,200,000 b. P6,000,000 c. P6,080,000 d. P6,800,000

41. The balance of Ordinary Share at December 31, 2023 statement of financial position is:
a. P4,650,000 b. P4,625,000 c. P5,000,000 d. P10,000,000

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42. Total Additional Paid in Capital is:
a. P3,076,000 b. P3,201,000 c. P3,316,000 d. P3,340,000

43. The total number of ordinary shares outstanding at December 31, 2023 is:
a. 200,000 b. 190,000 c. 188,000 d. 178,000

44. Retained earnings at December 31, 2023 is:

a. P2,200,000 b. P3,730,000 c. P3,970,000 d. P4,050,000

PROBLEM 12
The following summarizes the result of cut-off procedures your staff auditor conducted in line with Leah
Corp’s financial statements audit for the period ended December 31, 2014:

a. Collections for January 2022 of P654,600 were recorded in the December 2021 cash records.
The receipts of P360,100 represents cash sales with the balance representing collections from
customers who paid within the 5% cash discount period.
b. Accounts payable of P372,400 was paid in January 2022. The payments on which a P12,400
cash discount has been taken were included in the December 31, 2021 check register.
c. Merchandise inventory as stated in the trial balance represented the result of the count
conducted on December 30, 2021 on inventories on hand. All sales were made at 40% gross
profit on sales. The following information were found to be relevant in your audit of inventories:
 Goods costing P275,000 are on consignment with a customer and were not included in the
physical count.
 Goods costing P217,500 were received from a vendor on January 4, 2022. The related
invoice was received and recorded on January 6, 2022. These goods were shipped by the
vendor on December 31, 2021 under an FOB shipping point terms.
 Goods invoiced at P1,062,500 were shipped on December 31, 2021, and were received by
the customer on January 2, 2022. The terms of the invoice were FOB shipping point. The
sales has been appropriately recorded in 2021.
 A shipment of goods invoiced at P225,000 to a customer on December 29, terms FOB
destination was recorded in 2022. The goods were received by the customer on January 4,
2022.
 The invoice for goods costing P175,000 was received and recorded as purchase on
December 31, 2021. The related goods, shipped FOB Destination were received on
January 4, 2022.
 Goods valued at P612,800 are on consignment from a vendor. These goods were included
from the physical count.
d. The following accounts were extracted from the unadjusted trial balance of Leah Corp. as of
December 31, 2014:
Cash 963,200
Accounts receivables 2,254,000
Merchandise inventory 6,662,800
Accounts payable 4,201,000
Accrued expenses 17,900

Requirements: Based on the result of your audit ascertain the following:

45. Adjusted balance of Cash:

a. P963,200 b. P693,400 c. P681,000 d. P668,600

46. Adjusted balance of Accounts receivable:

a. P2,254,000 b. P2,548,500 c. P2,564,000 d. P2,908,600

47. Correct Inventory ending balance:

a. P5,010,000 b. P5,860,000 c. P6,040,000 d. P6,080,000

48. Net adjustment to cost of sales:

a. debit by P57,500 c. credit by P580,000
b. credit by P232,500 d. debit by P665,300

49. Correct working capital ratio:

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 a. 2.2 b. 2.0 c. 1.85 d. 1.80

PROBLEM 13
On Janua4y 1, 2022, Cas Uy Company granted to a key employee the right to choose either:
 60,000 shares
 Cash payment equal to market value of 50,000 phantom shares.

The grant is conditional upon the completion of three years of service.

If the employee chooses the share alternative, the shares must be held for two years, after the vesting
date. The par value of the share is P150 and at January 1, 2022 (the date of grant), the share price is
P168.

The share prices for the three-year vesting period are:

December 31, 2022 P 174.00
December 31, 2023 184.50
December 31, 2024 186.00

After taking into account the effects of post-vesting restrictions, the company has estimated that the fair
value of the share or equity alternative is P160.50 per share.

50. What amount shall be assigned to the equity component?

a. Zero b. 1,230,000 c. 8,400,000 d. 9,630,000

51. What is the compensation expense for 2022?

a. 2,900,000 b. 3,310,000 c. 3,560,000 d. 3,660,000

52. What is the compensation expense for 2023?

a. 3,250,000 b. 3,310,000 c. 3,560,000 d. 3,660,000

53. What is the compensation expense for 2024?

a. 3,150,000 b. 3,310,000 c. 3,560,000 d. 3,660,000

54. What is the share premium if the employee has chosen the share alternative?
a. Zero b. 1,230,000 c. 1,530,000 d. 10,530000

55. What is the share premium if the employee has chosen the cash alternative?
a. Zero b. 1,230,000 c. 1,530,000 d. 10,530,000

PROBLEM 14
The following accounts were included in the unadjusted trial balance of BUNCHING COMPANY as of
December 31, 2022:

Cash ………………………………………………………………………… P963,200

Accounts receivable ……………………………………………………….. 2,254,000

Inventory ………………………………………………………………………. 6,050,000

Accounts payable …………………………………………………………… 4,201,000

Accrued expenses …………………………………………………………… 431, 000

During your audit, you noted that Bunching Company held its cash books open after year-end. In
addition, your audit revealed the following:

1. Receipts for January 2023 of P654,600 were recorded in the December 2022 cash receipts
book. The receipts of P360,100 represent cash sales and P294,500 represent collections from
customers, net of 5% cash discounts.

2. Accounts payable of P372,400 was paid in January 2023. The payments, on which discounts of
P12,400 were taken, were included in the December 2022 check register.

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 3. Merchandise inventory is valued at P6,050,000 prior to any adjustments. The following
information has been found relating to certain inventory transactions:
a. The invoice for goods costing P175,000 was received and recorded as a purchase on
December 31, 2022. The related goods, shipped FOB destination, were received on
January 4, 2023, and thus were not included in the physical inventory.

b. A P182,000 shipment of goods to a customer on December 30, 2022, terms FOB

destination are not included in the year-end inventory. The goods cost P130,000 and were
delivered to the customer on January 3, 2023. The sale was properly recorded in 2023.

c. Goods costing P637,500 were shipped on December 31, 2022, and were delivered to the
customer on January 3, 2023. The terms of the invoice were FOB shipping point. The goods
were included in the 2022 ending inventory even though the sale was recorded in 2022.

d. Goods costing P217,500 were received from a vendor on January 4, 2023. The related
invoice was received and recorded in January 6, 2023. The goods were shipped on
December 31, 2022, terms FOB shipping point.

e. Goods value at P275,000 are on consignment with a customer. These goods are not
included in the inventory figure.

f. Goods valued at P612,800 are on consignment from a vendor. These goods are not
included in the physical inventory.

Based on the above and the result of your audit, determine the adjusted balances of the following as of
December 31, 2016:

56. Cash
a. P963,200 b. P681,000 c. P668,600 d. P693,400

57. Accounts receivable

a. P2,908,600 b. P2,564,000 c. P2,254,000 d. P2,548,500

58. Inventory
a. P6,035,000 b. P6,080,000 c. P5,860,000 d. P5,010,000

59. Accounts payable

a. P4,790,000 b. P4,615,900 c. P4,573,000 d. P4,603,500

60. Current ratio

a. 2.00 B. 1.83 c. 1.84 d. 2.01

PROBLEM 15
The TOY COMPANY completed the following transactions during 2023:

Mar. 1 Purchased real property for P8,297,000, including a charge for P297,000 representing
property tax for March 1 – June 30 which was prepaid by the vendor. Of the purchase
price, 25% is deemed applicable to land and the remaining 75% to buildings. The Toy
Company assumed a mortgage of P4,600,000 on the purchase and paid cash for the
balance.

30 The building acquired necessitates current reconditioning at a cost of P342,000 because

previous owners had failed to take care of normal maintenance and repair requirements
on it.

May 15 Garages in the rear of the building were demolished. The Toy Company recovered
P66,000 on the lumber salvage. It then proceeded to construct a warehouse at
P1,013,000, which was almost exactly the same as bids made by construction
companies. Upon completion of construction city inspectors ordered extensive
modifications to the warehouse as a result of failure on the part of the company to

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 comply with building safety code. Such modifications, which could have been avoided,
cost P124,000.

June 1 The company exchanged its own ordinary share capital with a market value of P640,000
(par, P40,000) for a patent and new toy-making machine. The machine has a market
value of P310,000.

July 1 The new machinery for the new building arrived. In addition to the machinery a new
franchise was acquired from the manufacturer of the machinery to produce toy robots.
Payment was made by issuing the company’s own ordinary shares (par. P1,000,000).
The value of the franchise is set at P500,000, while the machine’s fair value is P610,000.

Nov. 20 The company constructed for parking lots and landscaping at a cost of P420,000 and
P89,000, respectively. The work was completed and paid for on November 20.

Dec. 31 The business was closed to permit taking the year-end inventory. During this time,
required redecorating and repairs were completed at a cost of P64,000.

After considering the preceding transactions, compute the year-end balances of the following:

61. Buildings
a. P7,289,000 b. P7,511,750 c. P7,413,000 d. P7,635,750

62. Land
a. P2,074,250 b. P2,000,000 c. P2,583,250 d. P2,509,000

63. Machinery
a. P1,070,000 b. 920,000 c. P770,000 d. P931,000

64. Share premium

a. P10,000 b. P500,000 c. P710,000 d. P600,000

65. Intangibles
a. P830,000 b. P500,000 c. P330,000 d. P840,000

PROBLEM 16
At the beginning of the year, the PWCD Company had 200,000 shares outstanding. The following
Transactions affected the shareholders’ equity of the company during 2023:

January 31 40,000 ordinary shares were sold on the stock exchange

April 1 Purchased 10,000 ordinary shares to be held as treasury.
July 1 Issued P1,000,000, 5-year, 12% convertible bonds at face value. Each
P1,000 bond is convertible into 100 ordinary shares.
July 1 70,000 ordinary shares were sold.
October 31 A 5% bonus issue was declared and issued.

Profit for 2023 is P2, 120,000. The income tax rate is at 30%.

66. What is the number of shares to be used in the calculation of basic earnings per share?
a. 140,875 b. 277,375 c. 315,000 d. 330,750

67. What is the number of shares to be used in the calculation of diluted earnings per share?
a. 193,375 b. 329,875 c. 367,500 d. 383,250

68. How much is the basic earnings per share?

a. P5.53 b. P5.77 c. P7.64 d. P10.97

69. How much is the diluted earnings per share?

a. P6.55 b. P6.61 c. P6.68 d. P6.79

PROBLEM 17
Mary Company had 200,000 ordinary shares outstanding on January 1, 2023. On March 1, 2023, the

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Company issued 5,000 convertible, cumulative 6% preference shares with P100 par. These preference
shares were converted on October 1, 2023. Each preference share was converted into five ordinary
shares.

The preference dividends were paid in full before the conversion. The company has no other potentially
dilutive securities. Profit for 2023 was P1,500,000. The income tax rate is 30%.

70. What amount should be reported as basic earnings per share?

a. P6.66 b.. P6.79 c. P7.13 d. P7.27

SMILE END OF EXAMINATION SMILE

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