Professional Documents
Culture Documents
Charlie obtained a short-term bank loan for P1M at an annual interest of 12%. As a condition of
the loan, the company is required to maintain a compensating balance of P200,000 in its
savings account which earns interest at an annual rate of 6%. The company would otherwise
maintain only P100,000 on the savings account for transactional purposes. The effective cost of
the loan is? Answer: 12.67%
Belle Corporation is planning to change its credit policy. The proposed change is expected to:
If projected sales for the coming year is P50M, what is the peso impact on the average accounts
receivable balance of the proposed change in credit policy? (Use 360 days in a year)
Anne Company’s average monthly cash receipts is P1,500,000. Its average collection period is
10 days. A collection agency has offered to be the company’s collector and shorten collection
period to 4 days for a monthly fee of P2,500. The company can invest its excess funds in money
market placements at a rate of 8%. If the collection agency’s offer is accepted, Anne Company’s
net annual benefit (loss) is Answer: (P6,000)
Daisy Animators, Inc. currently makes all sales on credit and offers no cash discount. The firm
is considering a 3% cash discount for payment within 10 days. The firm’s current average
collection period us 90 days, sales are 400 films per year, selling P25,000 per film, variable cost
per film is P18,750, and the average cost per film is P21,000. The firm expects that the change
in credit terms will result in a minor increase in sales of 10 films per year, that 75% of the sales
will take the discount, and the average collection period will drop to 30 days. The firm’s bad
debts expense is expected to become negligible under the proposed plan. The bad debt expense
is currently 0.5 percent of sales. The firm’s required return on equal-risk investments is 20%.
What is the net result of granting the cash discount? Answer: +128,750
B Company had the following data from its records for the year ended December 31, 2013:
Compute the average number of days in B’s operating cash conversion cycle, using a 360-day
year. Answer: 54 days
The Good Company plans to have P4M in steady cash outlay for next year. The company
believes that it will face an opportunity interest rate of 10% and will incur a cost of P40 each
time it borrows. The ECQ is P56, 570. What is the total cost for one year of holding the optimal
cash balance. Answer: P5,669
Martin Company sells on terms of 5/10, net 20 days. Gross sales for the year are P2.4M and
one-third avail the discount. What is the average collection period?
Answer: 17 days
The sum of appraisal and internal failure costs is: P32,800 pero P46,300 sa answer key
G Company provided the ff data for the preparation of the statement of cash flows for the
current year:
How much should be reported as net cash flow from operating activities? Answer: (P53,000)
Which of the following costs would be classified as an external failure cost on a quality report?
When measuring fair value, which level has the highest priority for valuation inputs?
Non-adjusting events after reporting period which require disclosure include all of the ff, except:
Sun Company acquired 100% of Shine Company prior to 2013. During 2013, the individual
entities included in their FS the ff:
Sun Shine
Officers’ salaries P7,500,000 P5,000,000
Officers’ expenses 2,000,000 1,000,000
Loans to officers 12,500,000 5,000,000
Intercompany sales 1,500,000
What total amount should be reported as related party disclosures in the notes to Sun’s 2013
consolidated FS? Answer: P30M
Early Inc. is a calendar-year corporation whose FS for 2013 and 2014 included errors as follows:
Black Company is a calendar-year company. Its FS for 2013 and 2014 contained errors as
follows:
Sandy Corporation operates 2 stores: J and K. The following information relates to store J:
Trisha has sales of P200,000, contribution margin ratio of 20%, margin of safety of P80,000.
How much is the fixed cost? Answer: P24,000
The ff are the selected item for B Corp for the year ended December 31, 2013:
The ff are the selected item for A Corp for the year ended December 31, 2013:
Given:
Break-even sales P780,000 Variable expense 60% of sales
Margin of safety 130,000
Capital Budgeting
Heavy Investment Co. is considering an investment in a labor-saving machine. Information on
this machine follows:
What is the IRR on this project (round to the nearest ½%)? Answer: 10.5%
Dude Co. is involved in the evaluation of a new computer-integrated manufacturing system. The
system has a projected initial cost of P1M. It has an expected life of 6 years, with no salvage
value, and is expected to generate annual cost savings of P250,000. Based on Dude Co.’s
analysis, the project has a net present value of P57,625.
Given:
Given:
Revenue P40,000
Opportunity cost (18,000)
Depreciation (10,000)
Contribution net income P12,000
Quantitative Techniques
When using PERT, the expected time for an activity when given an optimistic time (a),
pessimistic time (b) and most likely time (m) is calculated be which one of the ff formulas?
a. 4amb/6 c. (b-a)/6
b. (a+4m+b)/6 d. (b-a)/2
a. The measure of the difference between the best possible outcome and the outcome of the
original decision
b. The standard deviation divided by the coefficient of variation
c. The arithmetic mean using the probabilities as weights
d. The standard deviation of the probability weights
The modeling technique used to situations involving sequence of events with several possible
outcomes associated with each event is
Which of the ff can be used to make predictions or estimates of the values of the dependent
variable from given independent variable?
Green Company uses the ff model to determine its product mix for metal (M) and scrap metal
(S): Max. Z = P30M and P70S
Orange Distributors of compact disc is developing its budgeted cost of goods sold for 2013. The
distributor has developed the ff range of sales estimates and associated probabilities for the
year.
Orange Distributors’ cost of goods sold averages 75% of sales. What is the expected value of
Orange Distributors’ cost of goods sold in 2013? Answer: P70,500
A wine maker must decide whether to harvest grapes now or in 4 weeks. Harvesting now will
yield 100,000 bottles of wine netting him P2.00 per bottle. If the wine maker waits and the
weather is cold at probability of 20%, the yield will be cut in half but net P3.00 per bottle. If the
weather does not turn cold, the yield will depend on rain. With rain at probability of 50%, a full
yield netting P4.00 per bottle will result. Without rain, there will still be a full 100,000 bottle
yield but the net is P3.00 per bottle. What is the optimal expected value?
Answer: P310,000
A company made the first of a new product in 100 hours. At an 80% learning rate, the total time
for the first four batches is Answer: 256 hours
Mandarin Company makes only two products with the ff constraints representing 2 machines
and their maximum availability: 2x + 3y ≤ 18 and 2x + y ≤ 10
If the profit equation is Z = 4x + 2y, then what is the maximum possible profit?
Answer: P20
Norlene Company has excess capacity on two machines, 24 hours on machine 105 and 16 hours
on machine 107. To utilize this excess capacity, the company has two products, known as
Product D and Product F, that must use both machines in manufacturing. Both have excess
product demand, and the company can sell as many units as it can manufacture. The company’s
objective is to maximize profits. Product D has an incremental profit of P6 per unit, and each
unit utilizes 2 hours of time on Machine 105 and then 2 hours of time on Machine 107. Product
F has an incremental profit of P7 per unit, and each unit utilizes 3 hours of time on Machine 105
and then 1 hour of time on Machine 107. Let D be the number of units for Product D, F be the
number of units for product F, and P be the company’s profit. A feasible solution for Norlene
Company is where Answer: D=6 and F=4
The company manufactures 2 lines of machines, Regular and Deluxe. The contribution margin
of a Regular model is P110 and a Deluxe model P175. The co. has 2 departments, assembly and
testing. The Regular model requires 3 hours to assemble, while a Deluxe model requires 4
hours. The total time available in assembly is 12,000 hours. In the testing department, it
requires 2.5 hours to test a Regular model and 1.5 hours to test a Deluxe model. A total of 6,000
hours of testing time is available. To maximize profit, the co. should manufacture:
Answer: 3,000 Deluxe model
An activity in a PERT network is expected to require 27 days to complete. This estimate was
calculated using the PERT formula based on an optimistic completion time of 24 days and a
most likely completion time of 25 days. What estimate was used for the pessimistic completion
time? Answer: 38 days
Given:
S1 S2 S3
D1 P24 P14 (P6)
D2 20 10 5
D3 (20) 8 15
Probability 10% 50% 40%
He is considering selling peanuts at football games. The peanuts costs P0.50 per bag and could
be sold for P1.50 per bag. No other costs would be incurred to sell the peanuts. All unsold bags
can be returned to the supplier for p0.30 each. He estimated the demand for peanuts at each
game and constructed the payoff table that follows.
Maximum that he should pay for perfect information so that he could always stock the correct
number of bags of peanuts Answer: P2.60
P1030-680= P350
4. P40
5. Slack time = 3 days
ECONOMICS
Theories
Problem
Joe has an income of P3,000 and spends P2,500. His income increases to P3,500 and
spends P2,800. What is the marginal propensity to save? Answer: 0.40
Statement of FS
1. Prac1 2010 edition p.13 P1-13 4. Prac1 2010 edition p. 136 P8-12
2. Prac1 2010 edition p. 114 P7-1
3. Prac1 2010 edition p. 130 P8-5 5. Prac1 2010 edition p. 139 P8-15
Yellow Company had a balance of P700,000 on its retained earnings at January 1, 2013. During
the year ended December 31, 2013, the company
In accordance with PAS 1, what is the closing balance on retained earnings in Yellow’s statement
of changes in equity for the year ended December 31, 2013.
Answer: P850,000
On July 1, 2013, Earl Co. has a building with a cost of P4M and accumulated depreciation of
P1.6M. On the same date, Earl Co. commits to a plan to sell the building by February 1, 2014.
The building has a fair value of P2M and it is estimated that the selling cost of the building will
be P150,000. As of July 1, 2013, the building has a remaining useful life of 15 years. What is the
amount of loss to be recognized by Earl Co. in its statement of comprehensive income as a result
of reclassification?
Answer: P550,000
During the year ended December 31, 2013, Tara Corp. undertook the ff transaction:
What total amounts in respect of the above will appear in cash flows from investing activities
and cash flows from financing activities in the statement of cash flows of Tara Corp. for 2013 in
accordance with PAS 7? Answer: Cash inflow(outflow) investing activities (P99,000) ;
financing activities P95,000
Valerie Company acquired a machine on January 1, 2007 for P70,000. On January 1, 2010,
when the carrying amount of the machine was P40,000, the machine was classified as held for
sale. Its fair value was estimated at P30,000 and costs to sell at P500. The asset was sold on
June 30, 201for P32,000. In accordance with PFRS5, what amount will be recognized in respect
of this asset in Valerie Company’s income statement for the year ended December 31, 2010?
Given:
Given:
The periodic decrease in the value of a fixed asset due to wear and tear, obsolescence or
inadequacy
The following conditions shall be observed when there is a net capital loss carry over:
a. The loss carried over is for a holding period not exceeding 12 months
b. The amount of the loss should not exceed the income before exemptions in the year when the
loss was sustained
c. The taxpayer should not be a corporation
d. All of the above
Tino is engaged in buying and selling of fresh fruits at the Q-Mart and Aranque Markets. He is
also exporting canned and preserved fruits to Japan. In 2004, he made a gross sales of
P2,000,000. He is liable for VAT registration fee of :
A tax imposed at every stage of distribution process on the sale, barter or exchange of goods
and services and transactions deemed sale, as well as importation of goods
andservices.
F o r t a x p u r p o s e s , i n c o m e i s s y n o n y m o u s
t o :
a . C a p i t a l b . R e c e i p t s c.Realized profit d.None
T h e f o l l o w i n g c a n a v a i l o f t h e I n p u t T a x
C r e d i t , e x c e p t :
Educational services rendered by private educational institutions are exempt from VAT if duly
accredited by the following, except:
A seller of goods is not VAT-registered. His annual gross sales amount to P1,919,500. To what
business tax is he liable?
a. 3% tax on VAT-exempt persons c. 3% common carrier’s tax
b. 12% VAT d. Not subject to any percentage tax
The operator of one of the following places is not subject to amusement tax:
a. Cockpits c. Bowling alleys
b. Racetracks d. KTV karaoke joints
Payments made by government to business shall be subject to the VAT in the manner of
government will withhold an amount of 5% of the gross selling price.
The VSM is engaged in buying sugar cane from sugar cane planters in the provinces of CamSur
and Albay and produce them into sugar. During the month, VSM was able to purchase P1M
worth of sugar cane. Of the total production during the month, white sugar composes 60%; 35%
of raw sugar while the remaining 5% is consist of bagasse. The total sales (exclusive of tax)
based on the production amounted to P2,000,000 while the input tax on purchases of other
materials and supplies amount to P35,000.
How much is the VAT payable of VSM? Answer: P179,000
How much is the presumptive input tax? Answer: P26,000
A carrier, common carrier by land, provides the following average gross annual receipts:
Transport of passenger P10M; transport of goods and cargoes P8M; sale of goods during travels
P600,000. How much is the estimated percentage tax on the 4th quarter?
Answer: P75,000
Dugong Trans, is a common carrier by land. During a particular quarter its receipts consist of
the following: (Figures are net of any business taxes)
Transport of passenger P4M; transport of goods P5M; transport of cargoes P6M. How much is
the total business tax payable? Answer: P1,440,000
Saulog is a common carrier with passenger buses and cargo trucks. For the month of June 2015,
it had the following data on revenues and receipts, taxes not included:
For transporting cargoes, gross revenues of P220,000, of which P200,000 was received.
For renting out to the MMDA its towing trucks, gross receipts of P50,000, representing P10,000
from gross revenue of the quarter ending March 31 and P40,000 for the month of June. The
total percentage tax is: Answer: P9,900
Selling price of goods imported for sale within the same taxable period of importation, VAT
included, was P6,720,000.
The VAT payable on the sale is: Answer: P128, 640 pero sa answer key P99,072
The record of a closely held corporation, registered with BIR, reveals the following:
How much is the tax on the improper accumulated income in 2011? Answer: P207,000
Mayaman Co. owns a fleet of motor vehicles. In 2010, one of the cars which was acquired at a
cost of P400,000 was allowed as service vehicle by one of its officials. During the year, its book
value amounted to P375,000. How much was the fringe benefit tax due thereon?
Answer: P18,823
How much is the creditable input tax on sale to private entities? Answer: P96,000
A domestic bank had the following data in a month:
Rentals from safety deposit boxes and real property acquired through
mortgage foreclosures P300,000
service fees 200,000
dividends and equity shares in the net income of subsidiaries 500,000
amounts received from lending activities on instruments with maturities of:
5 years and less 800,000
More than 5 years 900,000
How much is the percentage tax for the month? Answer: P84,000
If the taxpayer is a domestic corporation, availed of the OSD, what amount would be
reported as taxable income? Answer: P542,520
For the year ended December 31, 2014, J Corp had net income per books of P300,000 before
taxes. Included in the net income were the ff items:
Bad debts expense (represents the increase in allowance for doubtful accounts) 80,000
What was J taxable income for the year ended December 31, 2014? Answer: P330,000
ABC operates a variety of stores that is not registered under the VAT system. His annual gross
sales during the year amounted to P1.6M, net of any tax, 60% of which is on account. Business
tax due assuming his operations resulted to net loss is Answer: P48,000
A client maintains perpetual inventory records in both quantities and pesos. IF the assessed
level of control risk is high, an auditor would probably
An auditor concluded that no excessive costs for idle plant were charged to inventory. This
conclusion most likely related to the auditors objective to obtain evidence about the FS
assertions regarding inventory
An auditor selected items for test counts while observing a client’s physical count of inventory.
The auditor then traced the test counts to the client’s inventory listing. This procedure most
likely obtained evidence concerning management assertion of
An audit procedure that provides evidence about proper valuation of marketable securities
arising from a short-term investment of excess cash is
a. Comparison of carrying value with current market quotations.
b. Confirmation of securities held by broker.
c. Recalculation of investment carrying value by applying the equity method.
d. Calculation of premium or discount amortization.
In auditing intangible assets, an auditor most likely would review or computed amortization and
determine whether the amortization period is reasonable in support of management’s FS
assertion of
a. Valuation c. completeness
b. existence d. Rights and obligations
When considering the use of management’s written representations as audit evidence about the
completeness assertion, an auditor should understand that such representations complement,
but do not replace, substantive tests designed to support the assertion.
A company holds bearer bonds as short-term investments. Responsibility for the custody of
these bonds and for the submission of coupons for periodic interest collections probably should
be delegated to the
A company had temporarily excess funds to invest. The board of directors decided to purchase
marketable securities, and it assigned the future purchase and sale decisions to responsible
financial executive. The best person to make periodic reviews of the investment activity would
be the
If an auditor is unable to inspect and count a client’s investment securities until after the
balance sheet date, the bank in which the securities are held in a safe deposit box should be
asked to confirm that there has been no access to the box between the balance sheet
date and the security count date.
An auditor who physically examines securities should insist that the client representative be
present in order to acknowledge the receipt of securities returned.
When an auditor concludes that there is substantial doubt about a continuing audit client’s
ability to continue as a going concern for a reasonable period of time, the auditor responsibility
is to consider the adequacy of disclosure about the client’s possible inability to
continue as a going concern.
What type of opinion should be expressed if the client’s management refuses to provide a
representation that the auditor considers necessary?
The primary reason an auditor requests that letters of inquiry be sent to a client’s attorneys is to
provide the auditor with corroboration of the information furnished by management
about litigation, claims and assessments.
Management’s refusal to give the auditor permission to communicate with the entity’s legal
counsel is most likely to lead to
a. an adverse opinion
b. Qualified opinion or an adverse opinion
c. unqualified opinion
d. Qualified opinion or a disclaimer of opinion
FS Analysis
Given:
Sales 50M Net income 2M
Average assets 20M cost of capital 8%
Based on the data presented below, what is MM Corporation’s net sales for the year?
a. increase the current ratio, but the quick ratio would not be affected.
b. increase the quick ratio, but the current ratio would not be affected.
c. Increase both the current and quick ratios
d. decrease both the current and quick ratios
To determine the operating cycle for a retail department store, which one of the ff pairs of items
is needed?
Pink is considering the acquisition of a P217,750 machine that is expected to produce annual
savings in cash operating costs of P50,000 over the next 6 years. If Pink uses the IRR to
evaluate investments and the firm has a hurdle rate of 12%, which of the ff statements is correct?
a. The machine’s IRR is less than 4%, and the machine should not be acquired.
b. The machine’s IRR is approximately 10%, and the machine should not be
acquired.
c. The machine’s IRR is approximately 10%, and the machine should be acquired.
d. The machine’s IRR is approximately 12%, and the machine should be acquired.
A company that is using the IRR to evaluate projects should accept a project if the IRR
CIS
Regardless of the nature of an entity’s environment, the auditor must consider internal control.
In a CIS environment, the auditor must, at a minimum, have a sufficient knowledge of the
computer information system.
Who is ultimately responsible for the design and the implementation of cost-effective controls in
a CIS environment? The entity’s management.
Misstatements in a batch computer system caused by incorrect programs or data may not be
detected immediately because there are time delays in processing transactions in a
batch system.
The computer process whereby data processing is performed concurrently with a particular
activity and the results are available soon enough to influence the course of action being taken or
the decision being matched is called on line, real time system.
The characteristic that distinguishes EDI from other forms of electronic commerce is that EDI
transactions are formatted using the standards that are uniform worldwide.
In traditional information systems, computer operators are generally responsible for backing up
software and data files on a regular basis. In distributed or cooperative systems, ensuring that
adequate backups are taken is the responsibility of user management.
A company is concerned that a power outage or disaster could impair the computer hardware’s
ability to function as designed. The company desires off-site backup hardware facilities that are
fully configured and ready to operate within several hours. The company most likely should
consider a hot site.
The collection of like transactions that are sorted and processed sequentially
against a master file is not a characteristic of a batch processed computer system.