PRACTICAL ACCOUNTING II AVERAGE QUESTIONS: 1.

Each of the Coffee Beanery Company s 21 new franchisee contracted to pay an initial franchise fee of P30,000. By December 31, 2008, each franchisee had paid a non-refundable P10,000 fee and signed a note to pay P10,000 principal plus the market rate of interest on December 31, 2010. Experience indicates that one fr4anchise will default on the additional payments. Services for the initial fee will be performed in2009. What amount of net unearned franchise fees would Coffee Beanery report at December 31, 2008? a. b. c. d. P400,000 P600,000 P610,000 P630,000

2. Pet Corporation purchased 100% of the common stock of Sol Company on January 1, 2007 for P1,000,000. On that date, the stockholders equity of Sol Company was P760,000. On the purchase date, inventory of Sol Company which was sold during 2007 was understated by P40,000. Any remaining excess of cost over book value is attributable to goodwill. The reported income and dividends paid by Sol Company were as follows: 2007 P160,000 20,000 2008 P180,000 20,000

Net Income Dividends paid

On December 31, 2007, what is the Income from Investment to be reported under the two methods of accounting for investment? Cost Method P20,000 P110,000 P20,000 P50,000 Equity Method P110,000 P110,000 P120,000 p160,000

a. b. c. d.

3. Red Corporation will issue common shares with a par value P10 for the net assets of Blue Company. Red s common stock has a current market value of P40 per share. Blue s balance sheet on the date of acquisition follow: Current assets Property and Equipment Liabilities P320,000 880,000 400,000 Common Stock, P5 par Additional paid in capital Retained Earnings P80,000 320,000 400,000

Blue s current assets are appraised at P400,000 and the property and equipment was also appraised at P1,600,000. Its liabilities are fairly valued. Accordingly, Red Corporation issued shares of its common stock with a total market value equal to that of Blue s net assets including goodwill. To recognize goodwill of P200,000, how many shares we to be issued by Red? a. b. c. d. 45,000 40,000 50,000 55,000

4. On December 31, 2008, the pre-closing trial balance of Agency YY show the following totals (In Millions): Current Assets Fixed Assets Current Liabilities Subsidy Income from NG Expenses P270 780 205 50 40

What is the Government Equity on December 31, 2008? a. b. c. d. P845,000,000 P835,000,000 P855,000,000 P895,000,000

5. PX Co. had the following transactions with two subsidiaries, S1 and S2 during 2008: y y Sales of P60,000 to S1, Inc., with P20,000 gross profit, S1 had P15,000 of this inventory on hand at year end. Purchases of raw materials totaling P240,000 from S2 Corp., a wholly-owned subsidiary. S2 s gross profit on the sale was P48,000. PX had P60,000 of this inventory remaining on December 31, 2008. Before eliminating entries, PX had combined current assets of P320,000.what amount should PX report in its December 31, 2008, consolidated balance sheet for current assets? a. b. c. d. P320,000 P317,000 P308,000 P303,000

6. The following data pertains to the shipments of merchandise from Home Office to Branch during 2008: Home office s cost of merchandise Inter-office billings Sales by branch to outsiders Merchandise inventory on December 31, 2008 P350,000 420,000 520,000 50,000

In the combined income statement of the Home Office and the Branch for the year ended December 31, 2008, what amount of the above transactions should be included as sales? a. b. c. d. P570,000 P520,000 P470,000 P350,000

7. Primo Company acquired 75% in Sofa Company which is recorded on a cost basis. For the fiscal year ended June 30, 2008, the following data were taken from their respective books. Net income of Primo Company was P250,000, while the net income of Sofa Company was P90,000. There was intercompany interest on bonds of P10,000. Sofa Company paid dividends of P18,000. What is the consolidated net income attributable to parent on June 30, 2008? a. b. c. d. P295,000 P304,000 P317,950 P326,500

8. Santa Fe Hospital, a private nonprofit hospital, had the following cash receipts for the year ended December 31, 2008: Patient service revenue Gift shop revenue Interest income restricted by donor for the Acquisition of computer equipment P300,000 25,000 50,000

As a result of these cash receipts, the hospital s statement of cash flows for the year ended December 31, 2008 would report an increase in operating activities of a. b. c. d. P325,000 P375,000 P350,000 P400,000

9. On June 1, 2008, Figaro Corporation, franchisor, receives P200,000 from Angel Sy representing down payment on the franchise agreement signed that day. Angel Sy gave Figaro a 12% interest bearing promissory note for the balance of P1,000,000 payable in four semi-annual installments. Franchise services was substantially completed by Figaro on November 15 at a cost of P900,000. On December 1, 2008, the first semi-annual installment became due and was accordingly paid by Angel Sy. Figaro appropriately uses the accrual method of recording franchise revenues. In its December 31, 2008 financial statements, how much will Figaro report as realized franchise income of the year? a. b. c. d. P112,500 P300,000 P250,000 P187,500

10. The following data were taken from the Statement of Income and Expenses and Comparative Balance Sheet of Department DD for the year ended December 31, 2007 and 2008 (In Millions):

Net income over expenses Depreciation Office Equipment Increase in accounts payable Increase in Withholding tax payable Increase in Due from NGA Increase in Supplies Inventory What is the Net Cash Provided by Operating Activities on December 31, 2008? a. b. c. d. P460,000,000 P480,000,000 P490,000,000 P465,000,000