CAT CUP 1

ELIMINATION
ROUND

EASY ROUND

E1. The relatively stable

economic, political and social
environment supports
A) Conservatism
B) Materiality
C) Timeliness
D) Going concern

D Going
Concern

E2.
These
users
require
information on risk and return on
investment.
A) Investors
B) Employees
C) Lenders
D) Customers

A
Investors

E3. It is the exercise of care and

caution
in
dealing
with
uncertainties in measurement
so as to overstate assets and
income or not to understate
liabilities and expenses.
A) Completeness
B) Prudence
C) Faithful representation
D) Neutrality

B
Prudence

E4. Adjusting entries involve

A) Only real accounts
B) Only nominal accounts
C) Only capital accounts
D) One real and one nominal
account

D One real and nominal

account

E5. The credit balance in the

income
summary
account
represents
A) Net income
B) Net loss
C) Liability
D) Capital

A Net
Income

E6. An entity initially records

prepayments in nominal accounts.
Which of the following year-end
adjusting
entries
should
be
reversed?
A) The entry to record inventory at
the year-end
B) The entry to record the portion of
rental received in advance that is
unearned at year-end
C) The entry to record doubtful
accounts
D) The entry to record amortization

B Rental received in
advance that is unearned
at year-end.

E7. Which of the following is

usually considered cash?
A) Certificate of deposit
B) Checking account
C)
Money
market
certificate
D) Postdated check

saving

B Checking
Account

AVERAGE ROUND

A1. Diane Company factored P6,000,000

of accounts receivable to a finance entity
on October 1, 2011. Control was
surrendered by Zeus Company. The factor
assessed a fee of 3% and retains and
holdback equal to 5% of the accounts
receivable. In addition, the factor charged
15% interest computed on a weighted
average time to maturity of the accounts
receivable of 54 days. What is the amount
of cash initially received by Zeus
Company from the factoring?
A) 5,296,850
B) 5,386,850
C) 5,476,850

B
5,386,850

A2. Duke Company specializes in the sale of IBM

compatibles and software packages. It had the following
transactions with one of its suppliers:
Purchases of IBM compatibles
Purchases
of
commercial
1,200,000
Returns and allowances
Purchase discount taken

1,700,000
software
packages
50,000
17,000

Purchase were made throughout the year on terms 2/10,

n/30. All returns and allowances took place within 5 days of
purchase and prior to any payments on account. How
much is the discount lost?
A) 57,000
B) 40,000
C) 17,000
D) 41,000

B
40,000

A3. The following information is available for

Tonette Company for the current year:

Net Sales
Freight In
Purchase Discounts
Ending Inventory

3,600,000
90,000
50,000
240,000

The gross margin is 40% of sales. What is the

cost of goods available for sale?
A) 1,680,000
B) 1,920,000
C) 2,400,000
D) 2,440,000

C
2,400,000

A4. On January 1, 2011, Dean Company purchased tenyear bonds with a face value of P1,000,000 and a stated
interest rate of 8% per year payable semiannually July 1
and January 1. The bonds were acquired to yield 10%.
Present value factors are as follows:
Present
Present
Present
6.145
Present
12.462

value of 1 for 10 periods at 10%

0.386
value of 1 for 20 periods at 5%
0.377
value of an annuity of 1 for 10 periods at 10%
value of an annuity of 1 for 20 periods at 5%

What is the purchase price of the bonds?

A) 1,124,620
B) 1,100,000
C) 1,075,390
D) 875,380

D
875,380

A5. Tucson Company has a single

investment property which had an original
cost of P5,800,000 on January 1, 2009. On
December 31, 2011, its fair value was
P6,000,000 and on December 31, 2012, It
had a fair value of P5,900,000. On
acquisition, the property had a useful life
of 40 years. What should be the expense
recognized in Tucsons profit or loss for
the year ended December 31, 2012 under
the fair value model and cost model
respectively?
A) 147,500 and 145,000
B) 100,000 and 145,000

B 100,000 and
145,000

A6. Poe Companys depreciation policy on

machinery is as follows:
A full years depreciation is taken in the year of
an assets acquisition.
No depreciation is taken in the year of an assets
disposition.
The estimated useful life is five years.
The straight line method is used.
On June 30, 2012, Poe sold for 2,300,000 a
machine acquired in July 31, 2009 for
P4,200,000. The estimated residual value was
P600,000. What amount of gain on the disposal
should Poe record in 2012?
A) 140,000
B) 260,000
C) 620,000

B
260,000

A7. Conrad Allan Company quarries limestone,

crushes it and sells it to be used in road building.
Conrad paid P10,000,000 for certain quarry. The
property can be sold for P3,000,000 after
production ceases.
Estimated total reserves
10,000,000
Tons quarried through December 31, 2010
4,000,000
Tons quarried in 2011
1,500,000
An engineering study performed in 2011
indicated that on January 1, 2011, P7,500,000
tons of limestone were available. What is the
depletion for 2011?
A) 1,050,000
B) 2,800,000

D
840,000

DIFFICULT ROUND

D1. Master Buten Company incurred the following costs

during the current year:
Modification to the formulation of a chemical product
135,000
Trouble-shooting in connection with breakdowns during
commercial production
150,000
Design of tools, jigs, molds and dies involving
new technology
170,000
Seasonal or other periodic design changes to existing
products
185,000
Laboratory research aimed at discovery of
new technology
215,000
In the income statement for the current year, what amount
should be reported as research and development expense?
A) 520,000
B) 470,000
C) 385,000
D) 335,000

A
520,000

D2. Which of the following is

NOT a basic characteristic of a
system of cash control?
A) Use of a voucher system
B) Combined responsibility for
handling and recording cash
C) Daily deposit of all cash
received
ID) nternal audits at irregular
intervals

B Combined responsibility
for handling and recording
cash

D3. An entity uses the allowance method

to recognize doubtful accounts expense.
What is the effect of a collection of an
account previously written off?
A) No effect on both allowance for
doubtful accounts and doubtful accounts
expense
B) No effect on allowance for doubtful
accounts and decrease in doubtful
accounts expense
C) Increase in allowance for doubtful
accounts and no effect on doubtful
accounts expense
D) Increase in allowance for doubtful
accounts expense and decrease in

C Increase in allowance
for doubtful accounts and
no
effect
on
doubtful
account expense.

D4. The following changes in Paulo Garcia

Corporations account balances occurred during
2011:
Increase
Assets
267,000
Liabilities
81,000
Owners Investment
198,000
Paulo made withdrawals of 39,000 during the year.
There were no changes in Owners Equity for 2011
except for the withdrawals and net income. What
was Paulos net income for 2011?
A) 30,000
B) 27,000
C) 24,000
D) 23,000

B 27,000

D5. The following information is available from

the records of Hiligaynon Company for the
current year:

Beginning inventory
Freight In
Purchase returns
Ending inventory
Selling expenses
Sales discount

400,000
300,000
900,000
500,000
1,250,000
250,000

The cost of goods sold is six times the selling

expense. What is the amount of gross purchases?
A) 6,500,000
B) 6,700,000
C) 8,000,000
D) 8,200,000

D
8,200,000

D6. The following information was taken from Armenia

Companys accounting records for the current year:
Decrease in raw materials inventory

500,000

Increase in goods in process inventory

800,000
Decrease in finished goods inventory
1,000,000
Raw materials purchased
20,000,000
Direct labor payroll
5,000,000
Factory overhead
4,000,000
Freight out
1,500,000
Freight in
2,300,000
What is the cost of goods sold for the current year?
A) 32,000,000
B) 33,500,000
C) 30,000,000
D) 30,600,000

A
32,000,000

D7. Star Companys bank statement for the month of

December included the following information:
Ending balance, December 31,
2,800,000
Bank service charge for December
12,000
Interest paid by bank to Star Company for December
10,000
In comparing the bank statement to its own cash records,
Star Company found the following:
Deposits made but not yet recorded by the bank
350,000
Checks written and mailed but not yet recorded by the
bank 650,000
In addition, Star Company discovered that it had drawn
and erroneously recorded a check for P46,000 that should
have been recorded for P64,000. What is the cash balance
per
ledger
on
December
31?
A) 2,500,000

B
2,520,000

CLINCHER ROUND

C1. The cost of inventories does not

include
A) Salaries of factory staff.
B) Storage costs necessary in the
production process before a further
production stage.
C) Abnormal amount of wasted
materials and distribution costs
D) Irrecoverable purchase taxes

C Abnormal amount of
wasted
materials
and
distribution costs

C2. The inventory of a service

provider
may
simply
be
described as
A) Work in process
B) Unbilled services
C) Billed services
D) Service inventory

A Work in
process

C3. An overstatement of ending

inventory in the current period
would result in income of the
next period being
A) Overstated
B) Understated
C) Correctly stated
D) Both A and B

Understated

C4. An active market is a market

where all of the following
conditions exist, except
A) Willing buyers and sellers can
normally be found at anytime.
B) Prices are available to the
public
C)
The
item
traded
are
homogeneous
D) The items traded are
heterogeneous

D The items traded are

heterogeneous