Father Saturnino Urios University

Accountancy Program
AIR PRE QUALIFYING EXAM- Cluster 1 (Level 1) VMBM, CPA

Set B
MULTIPLE CHOICE
Instructions: Read each item carefully. On the answer sheet given, shade the letter of your choice. NO
ERASURES ALLOWED.
1. Will Company factored P600,000 of accounts receivable on October 1 2014. Control was surrendered by Del. The
factor accepted the accounts receivable subject to recourse for nonpayment. The factor assessed a fee of 3% and
retains a holdback equal to 5% of the accounts receivable. In addition, the factor charged 15% interest computed
on a weighted-average time to maturity of fifty-four days. The fair value of the recourse obligation is P9,000.
What amount of cash was initially received?
a. 529,685 b. 538,685 c. 547,685 d. 556,685

2. Which of the following attributes would not be used to measure inventory?

a. historical cost c. net realizable value
b. replacement cost d. present value of future cash flows

3. She Department Store used the conservative retail method and reported the following data for the current year:
Sales 13,000,000 Markdown 1,200,000
Sales allowance 600,000 Markdown cancelation 200,000
Sales returns 500,000 Freight on purchases 200,000
Employee discounts 400,000 Purchases at cost 9,400,000
Normal shrinkage 300,000 Purchases returns at cost 480,000
Initial markup on 5,400,000 Purchase returns at sales 700,000
purchases price
Additional markup 500,000 Beginning inventory at 880,000
cost
Markup cancelations 200,000 Beginning inventory at 1,600,000
sales price
What is the estimated cost of ending inventory?
a. 1,500,000 b. 1,200,000 c. 1,600,000 d. 1,125,000

4. Fely Company recorded the following data pertaining to raw material Z during January of the current year.

Units
Date Received Cost Issued On hand
1/1 Inventory 200 8,000
1/8 Issue 4,000 4,000
1/20 Purchase 12,000 240 16,000
What is the moving average unit cost of the inventory on Jan 31?
a. 220 b. 224 c. 230 d. 240

5. Which of the following is an incorrect combination?

Biological asset Agricultural Produce Product after harvest
a. trees felled trees logs, lumber
b. dairy cattle cheese milk
c. pigs carcass sausage
d. vines grapes wine

6. Jon Company provided the following information on Dec 31 2014:

Trading Non trading
Aggregate cost 3,600,000 5,500,000
Aggregate market value 3,200,000 4,500,000
Aggregate lower of cost or market 3,040,000 4,200,000
applied individually
The costs of disposal are estimated at P100,000 for trading securities and P150,000 for nontrading securities.
The nontrading securities are designated as measured at FVTOCI. What total amount should be reported as
unrealized loss in the 2014 income statement?
a. 1,400,000 b. 560,000 c. 400,000 d. 500,000

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Father Saturnino Urios University
Accountancy Program
AIR PRE QUALIFYING EXAM- Cluster 1 (Level 1) VMBM, CPA

7. Moi Company bought 40% of an investee on Jan 1 2014 for P400,000. The carrying amount of the investee’s net
assets at the purchase date totaled P900,000. Fair values and carrying amounts were the same for all items
except for plant and inventory, for which fair values exceeded their carrying amounts by P90,000 and P10,000,
respectively. The plant has an eighteen-year life. All inventory was sold during 2014. During 2014, the investee
reported net income of P120,000 and paid a P20,000 cash dividend. What amount should be reported as income
from the investment in associate for 2014?
a. 42,000 b. 48,000 c. 36,000 d. 32,000

8. During 2013, Noi Company held 30,000 shares of Brock Company’s 100,000 outstanding shares and 6,000 shares
of Amal Company’s 300,000 outstanding shares. During the year, Noi received P300,000 cash dividend from
Brock, P15,000 cash dividend and 3% stock dividend from Amal. The closing price of Amal share is P150. What
amount should be reported as dividend revenue for 2013?
a. 15,000 b. 342,000 c. 315,000 d. 442,000

9. When an entity hold between 20-50% of the voting power of an investee, which of the following statements is
true?
a. the investor must use equity method
b. the investor should use the equity method unless circumstances indicate that the investor is unable to
exercise significant influence over the investee
c. the investor must use the fair value method unless it can be clearly demonstrated that the investor has
significant influence over the investee
d. the investor must use the fair value method

10. On July 1 2014, Bell Company purchased P1,000,000 face value of 8% bonds for P950,000 including accrued
interest to yield 10%. The bonds mature on Jan 1, 2021, pay interest annually on Dec 31, and are classified as
trading securities. On Dec 31 2014, the bonds had a market value of P960,000. On Feb 13 2015, the entity sold
the bonds for P980,000. What total amount of income should be recognized for the year ended Dec 31 2014?
a. 130,000 b. 95,500 c. 90,000 d. 50,000

11. Sharm Company had the following capital structure during 2013 and 2014:
Preference share capital, P!0 par, 4% cumulative, 250,000 shares 2,500,000
Ordinary share capital, P50 par, 200,000 shares 10,000,000

The entity reported net income of P5,000,000 for the year ended Dec 31 2014. The entity paid no
preference dividends during 2013 and paid P160,000 in preference dividends during 2014. What amount should be
reported as basic earnings per share?
a. 24.20 b. 24.50 c. 24.00 d. 25.00

12. Jane Company had 1,200,000 ordinary shares outstanding on Jan 1 and Dec 31 2014. In connection with the
acquisition of a subsidiary in June 2013, the entity is required to issue 50,000 additional ordinary shares on July 1
2015 to the former owners of the subsidiary. The entity paid P200,000 preference dividend in 2014 and reported
net income of P3,400,000 for the year. What amount should be reported as diluted earnings per share for the
current year?
a. 2.83 b. 2.72 c. 2.67 d. 2.56

13. On Dec 31, 2014, Trixie Company sold a machine to another entity and simultaneously leased it back for one year.
Pertinent information at this date follows:
Sales price 3,600,000
Carrying amount 3,300,000
Present value of reasonable lease rentals (P30,000 for 12 mos @ 12%) 341,000
Estimated remaining useful life of machine 12 years
What amount of revenue from the sale of the machine should be reported in 2014?
a. 341,000 b. 300,000 c. 41,000 d. 0

14. Sloth Company has an overdue 8% note payable to Rich Bank at P4,000,000 and accrued interest of P320,000. As
a result of restructuring agreement on Jan 1 2014, Rich Bank agreed to the following provisions: Principal
obligation is reduced to P3,500,000, the accrued interest is forgiven, the maturity date is extended to Dec 31
2017, and the new interest rate increased to 12% to be paid every Dec 31. The PV of 1 for 4 periods is .74 at 8%
and .64 at 12%. The PV of an ordinary annuity of 1 at 4 periods is 3.31 at 8% and 3.04 at 12%. What is the gain on
extinguishment to be recognized for 2014?
a. 339,800 b. 500,000 c. 820,000 d.0
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Father Saturnino Urios University
Accountancy Program
AIR PRE QUALIFYING EXAM- Cluster 1 (Level 1) VMBM, CPA

15. If a company constructs a laboratory building to be used as a research and development facility, the cost of the
laboratory building is matched against earnings as

a. research and development expense in the period(s) of construction

b. depreciation deducted as part of research and development costs
c. depreciation or immediate write-off depending on company policy
d. an expense at such time as productive research and development has been obtained from the facility

16. On Jan 1 2014, Erik Company purchased a machine for P264,000 and depreciated it by the straight line method
using an estimated useful life of eight years with no residual value. On Jan 1 2017, the entity determined that the
machine had a useful life of six years from the date of acquisition with residual value of P24,000. What is the
accumulated depreciation on Dec 31 2017?
a. 176,000 b. 160,000 c. 154,000 d. 146,000

17. During 2014, Red Company constructed asset costing P8,400,000. The weighted average expenditures during
2014 amounted to P7,800,000. The entity borrowed P4,000,000 at 7.5% on Jan 1 2014. Funds not needed for
construction were temporarily invested in short term securities and earned P120,000 in interest revenue. In
addition to the construction loan, the entity had two other notes outstanding during the year, a P3,000,000, 10-
year, 10% note payable dated Oct 1 2012, and a P2,000,000, 8% 5-year note payable dated Nov 1, 2013. What
amount of interest should be capitalized during 2014?
a. 647,600 b. 593,000 c. 544,000 d. 529,600

18. In 2012, New Company paid P5,000,000 to purchase land containing total estimated 800,000 tons of extractable
mineral deposit. The estimated value of the property after the mineral has been removed is P1,000,000.
Extraction activities began in 2013, and by the end of the year, 100,000 tons had been recovered and sold. In
2014, geological studies indicated that the total amount of mineral deposit had been underestimated by 125,000
tons. During 2014, 150,000 tons were extracted and 140,000 tons were sold. What is the depletion rate per ton in
2014?
a. 4.24 b. 4.32 c. 4.85 d. 5.19

19. Famine Company purchased equipment for P15,000,000 on Jan 1 2014. The entity received a government grant
of P5,000,000 in respect of this asset and treated the grant as a deduction from the cost of the asset. The
equipment has a useful life of 5 years and the double declining method of depreciation is used. On Jan 1 2016,
the entity violated some conditions and returned the grant. What is the depreciation for 2016?
a. 2,160,000 b. 6,000,000 c. 5,360,000 d. 1,440,000

20. Bee Company incurred the following costs during the current year:
Acquisition of R and D equipment with a useful life
of 4 years in R and D projects 1,200,000
Start up costs incurred when opening a new plant 280,000
Advertising expense to introduce a new product 1,400,000
Engineering costs incurred to advance a product
to full production stage but economic viability
not yet achieved 800,000
What amount should be recorded as research development expense for the current year?
a. 1,100,000 b. 1,480,000 c. 2,000,000 d. 2,280,000

21. Del Company provided the following information on Jan 1 2014 relating to PPE.
Land 30,000,000
Building 300,000,000
Accumulated depreciation-building 37,500,000

There were no additions or disposal during 2014. Depreciation is computed using the straight line over
20 years for building. On June 30 2014, all of the property, plant and equipment were revalued as
follows:
Replacement cost Sound value
Land 40,000,000 40,000,000
Building 500,000,000 425,000,000

Ignoring income tax, what is the revaluation surplus on Dec 31 2014?

a. 160,000,000 b. 170,000,000 c. 180,000,000 d. 175,000,000
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Father Saturnino Urios University
Accountancy Program
AIR PRE QUALIFYING EXAM- Cluster 1 (Level 1) VMBM, CPA

22. On Nov 1 2014, Jim Company issued P8,000,000 ten-year, 8% term bonds dated Oct 1 2014. The bonds were sold
to yield 10% with total proceeds of P7,000,000 plus accrued interest. Interest is paid every April 1 and Oct 1.
What amount should be reported as accrued interest payable on Dec 31 2014?
a. 200,000 b. 160,000 c. 140,000 d. 175,000

23. During the current year, Glen company incurred costs to develop and produce a routine, low-risk computer
software product as follows:

Completion of detailed program design or working model 1,300,000

Cost incurred for coding and testing to establish
technological feasibility 1,000,000
Other coding costs after establishment of
technological feasibility 2,400,000
Other testing costs after establishment of
technological feasibility 2,000,000
Costs of producing product master for training materials 1,500,000
Duplication of computer software and training materials
From product master 2,500,000
Packaging product 900,000

What amount should be capitalized initially as software cost?

a. 5,400,000 b. 3,700,000 c. 5,900,000 d. 6,900,000

24. On Jan 1 2014, Jones Company issued P8,000,000 of 10% bonds at 105 which are due on Dec 31 2019. Each
P1,000 bond was issued with 20 non detachable share warrants, each of which entitled the shareholder to
purchase one share of Jones for P45 with a par value of P20 per share. On Jan 1 2014, the market value of each
warrant is P4 while the bonds ex-warrant were selling at par. During 2015, the bondholders exercised all of the
warrants. What is the net increase in equity as a result of the exercise of the warrants in 2015?
a. 4,400,000 b. 4,000,000 c. 7,200,000 d. 3,200,000

25. Jerome company leased equipment for the entire nine-year useful life, agreeing to pay P1,000,000 at the start of
the lease term on Jan 1 2014 and P1,000,000 annually on each Jan 1 for the next eight years. The present value
on Jan 1 2014 of the nine lease payments over the lease term using the implicit in the lease which the lessor
knows to be 10% was P6,330,000. The Jan 1 2014 present value of the lease payments using the incremental
borrowing rate of 12% was P5,970,000. The entity made a timely second lease payment. What amount should be
reported as finance lease liability on Dec 31 2015?
a. 5,330,000 b. 4,863,000 c. 4,970,000 d. 4,467,000

26. Francis Company leased equipment to an unrelated party on July 1 2014 for an eight year period expiring June 30
2022. Equal payments under the lease are P600,000 and are due on July 1 of each year. The first payment was
made on July 1 2014. The implicit rate of interest contemplated is 10%. The cash selling price of the equipment is
P3,500,000 and the carrying amount is P2,800,000. The lease is appropriately recorded as sales type lease. What
amount of profit in sale and interest revenue should be recorded, respectively, for the year ended Dec 31 2014?
a. 350,000 and 350,000 c. 700,000 and 290,000
b. 350,000 and 175,000 d. 700,000 and 145,000

27. Ramon company reported that in the first year of operations the pretax financial income was P6,000,000. In
addition, the following differences existed
Tax return Accounting record
Uncollectible accounts expense 200,000 250,000
Depreciation expense 800,000 500,000
Tax exempt interest revenue - 150,000
The current year tax rate is 30% and the enacted rate for future year is 40%. What amount should be
reported as total tax expense in the income statement for the year?
a. 1,755,000 b. 1,680,000 c. 1,800,000 d. 1,780,000

28. Val Company provided the following information for the current year:
Current service cost 500,000
Interest in PBO 600,000

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Father Saturnino Urios University
Accountancy Program
AIR PRE QUALIFYING EXAM- Cluster 1 (Level 1) VMBM, CPA

Interest income on plan assets 350,000

Loss on plan assets 250,000
Past service cost during the year 300,000
Actual return on plan assets 850,000
Actuarial loss during the year 200,000
Contribution to the plan 1,500,000
What is the employee benefit expense?
a. 1,300,000 b. 1,050,000 c. 1,500,000 d. 1,100,000

29. San Pedro Company has outstanding 60,000 shares of 5% preference shares with a P50 par value and 300,000
shares of P30 par ordinary shares. During the current year, the company declared and paid total cash dividend of
P900,000
Compute the total dividends to be received by each class of stock
Assume the preference share is cumulative and participating with two years dividends in arrears
Preference Ordinary
a. P450,000 P450,000
b. P300,000 P450,000
c. P450,000 P675,000
d. P300,000 P675,000

30. Cory Company granted 30,000 share appreciation rights that enabled key employees to receive cash equal to the
difference between P50 and the market price of the share on the date each right is exercised. The service period
is 2014 through 2016, and the rights are exercisable in 2017. The market price of the share was P60 and P80 on
Dec 31 2014 and 2015, respectively. What amount should be reported as accrued liability on Dec 31 2015?
a. 600,000 b. 500,000 c. 100,000 d. 450,000

31. Company A is a financial service entity that is involved in real estate development. Company A has purchased
land in Quezon City through the exercise of a purchase option that had been acquired some years ago. The
purchase price was P20,000,000 and the land’s fair value as determined by an independent value is P46,400,000
on Dec 31 2014. Company A is undecided about whether to develop the land for sale to a third party or sell it, but
will determine a use within the next accounting period. On Dec 31 2014, Company A should report the property
as
a. investment property at its original cost of P20,000,000
b. investment property at its fair value of P46,400,000
c. inventory at its original cost of P20,000,000
d. inventory at its fair value of P46,400,000

32. On Jan 1 2011, Chivas Company purchase a P4,000,000 ordinary life insurance policy on its president

Additional data for the year 2014 are: Cash surrender value, Jan 1, P200,000; Cash surrender value, Dec 31,
P220,000; Annual insurance premium paid on Jan 1,2014, P80,000; Dividend received on August 1, P10,000.
Chivas Company is the beneficiary under the life insurance policy. Chivas should report life insurance expense
for 2014 of
a. P50,000 b. P60,000 c. P70,000 d. P80,000

33. Gil Company is a golf course developer that constructs approximately 5 courses each year. On Jan 1 2013, Gil
Company has agreed to buy 5,000 trees on Jan 31 2014 to be planted in the courses it intends to build. In recent
years, the price of trees has fluctuated wildly. On Jan 1 2013, Gil Company entered into a forward contract with a
reputable bank. The price is set at P500 per tree.

The derivative forward contract provides that if the market price on Jan 31 2014 is more than P500, the
difference is paid by the bank to Gil. On the other hand, if the market price is less than P500, Gil will pay the
difference to the bank. This derivative forward contract was designated as a cash flow hedge. The market
price on Dec 31 2013 and Jan 31 2014 is P800. The appropriate discount rate is 8% and the present value of 1
at 8% for one period is .926.

On Dec 31 2013, what amount should be recognized as derivative asset or liability?

a. 1,500,000 asset c. 1,389,000 liability
b. 1,500,000 liability d. 1,389,000 asset

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Father Saturnino Urios University
Accountancy Program
AIR PRE QUALIFYING EXAM- Cluster 1 (Level 1) VMBM, CPA

34. Charles Company entered into a contract to acquire a new machine for the factory. The machine which had a
cash price of P2,000,000 was paid as follows:
Downpayment 400,000
Note payable in 3 equal annual installments 1,200,000
20,000 ordinary shares with a par value of P25 and
A fair value of P40 per share 800,000

Prior to the machine use, installation cost of P50,000 was incurred. The machine has an estimated
residual value of P100,000. What is the initial cost of the machine?
a. 2,000,000 b. 2,400,000 c. 2,050,000 d. 2,450,000

35. On Dec 1 2014, Xavier Company purchased a P400,000 tract of land as an investment property. The entity razed
an old building on the property and sold the materials it salvaged from the demolition. The entity incurred
additional costs and realized salvage proceeds as follows:
Demolition of old building 50,000
Legal fees for purchase contract and recording ownership 10,000
Title guarantee insurance 12,000
Proceeds from sale of salvaged materials 8,000
Cost of razing 300,000

On Dec 31 2014, what is the carrying amount of the land?

a. 464,000 b. 460,000 c. 764,000 d. 760,000

36. Chris Company reported rental revenue of P2,210,000 in the cash basis income tax return for the year ended
November 30 2014. Additional information is as follows:
Rent Receivable- Nov 30 2014 1,060,000
Rent Receivable- Nov 30 2013 800,000
Uncollectible rent written off during the fiscal year 30,000

Under accrual basis, what amount should be reported as rental revenue?

a. 1,920,000 b. 1,980,000 c. 2,440,000 d. 2,500,000

37. Shareena Company purchased a machine for P1,150,000 on Jan 1 2014, the entity’s first day of operation. At the
end of the year, the current cost of the machine was P1,250,000. The machine has no residual value, has a five-
year life, and is depreciated by the straight line method. What is the amount of depreciation that should be
reported in the current cost income statement for 2014?
a. 140,000 b. 230,000 c. 240,000 d. 250,000

38. Mary Company reported net income of P7,500,000 for the current year:

Investment in shares stock carried on the equity basis 550,000 increase

Accumulated depreciation, caused by major repair to equipment 210,000 decrease
Premium on bonds payable 140,000 decrease
Deferred tax liability 180,000 increase

What is the net cash provided by operating activities?

a. 7,540,000 b. 7,270,000 c. 6,990,000 d. 6,780,000

39. Monster Company had the following transactions during the 2 nd quarter of 2014:
Loss from typhoon 200,000
Repairs and maintenance cost incurred during April 48,000
Loss on temporary inventory decline 40,000
Unrealized loss from trading securities 100,000
Annual bonuses paid in June 500,000

What total amount of expenses should be included in the statement of comprehensive income for the quarter
ended June 30 2014?
a. 888,000 b. 513,000 c. 388,000 d. 638,000

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Father Saturnino Urios University
Accountancy Program
AIR PRE QUALIFYING EXAM- Cluster 1 (Level 1) VMBM, CPA

40. Lokito Company and its divisions are engaged solely in manufacturing. The following data pertain to the
industries in which operations were conducted for the current year:
Segment Intersegment sales External revenue
A 1,000,000 5,000,000
B 1,500,000 3,000,000
C 4,000,000 8,000,000
D 500,000 1,300,000
E 2,000,000 2,800,000
F 200,000 900,000
What is the minimum amount of revenue to be considered a major customer?
a. 3,020,000 b. 2,100,000 c. 1,180,000 d. 920,000

41. In 2014, Jess Company decided to discontinue the Electronics Division, a separately identifiable component of
business. On Dec 31 2015, the division has not been completely sold. However, negotiations for the final and
complete sale are progressing in a positive manner and it is probable that the disposal will be completed within a
year. Analysis of the records for the year disclosed the following relative to the Electronics division:
Operating loss for the year 8,000,000
Loss on disposal of some Electronics Division assets during 2014 500,000
Expected operating loss in 2015 preceding final disposal 1,000,000
Expected gain in 2015 on disposal of division 2,000,000

What amount should be reported as pretax loss from discontinued operation in 2014?
a. 8,500,000 b. 8,000,000 c. 9,500,000 d. 7,500,000

42. Rey Company provide the following net of tax figures for the current year:
Net remeasurement loss on defined benefit plan 300,000
Unrealized gain on available for sale securities 1,500,000
Reclassification adjustment for gain on sale of available for sale securities 250,000
Included in net income
Share warrants outstanding 400,000
Net income 7,700,000

What is the comprehensive income for the current year?

a. 8,650,000 b. 8,900,000 c. 8,950,000 d. 9,050,000

43. Dwane Company disclosed supplemental information on the effects of changing prices. The entity computed the
increase in current cost of inventory as follows:
Increase in current cost (nominal peso) 1,500,000
Increase in current cost (constant peso) 1,200,000

What amount should be disclosed as the inflation component of the increase in current cost?
a. 2,700,000 b. 1,500,000 c. 1,200,000 d. 300,000

44. On Jan 1 2014, SME acquired 25% of the equity of each of the entities A and B for P1,000,000 and P3,000,000
respectively. Transaction costs of 10% of the purchase price of the shares were incurred by SME. On Jan 2 2014,
entity A declared and paid dividend of P800,000. For the year ended Dec 31 2014, entity A recognized profit of
P1,000,000. However, entity B recognized a loss of P2,000,000 for that year. Published price quotations do not
exist for the shares of entities A and B. Using appropriate valuation techniques SME determined the fair value of
the instruments in entities A and B on Dec 31 2014 at P1,500,000 and P2,000,000 respectively. Costs of disposal
are estimated at 10% of the fair value of the investments.

Under cost model, what is the carrying amount of the investment in associates on Dec 31 2014?
a. 2,900,000 b. 4,400,000 c. 4,000,000 d. 2,800,000

45. What is the accounting for research and development costs incurred by an SME?
a. all research and development costs are capitalized
b. all research and development costs are expensed when incurred

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Father Saturnino Urios University
Accountancy Program
AIR PRE QUALIFYING EXAM- Cluster 1 (Level 1) VMBM, CPA

c. all research costs are expensed when incurred and all development costs are capitalized when certain
criteria are met
d. all research costs are capitalized when certain criteria are met and all developmental costs are
expensed when incurred.

46. Katherine Company provided the following information on Dec 31 2014:

Preference share capital, P100 par, 8% 500,000
Ordinary share capital, P100 par 1,100,000
Retained earnings 460,000
Treasury ordinary shares- 1,000 shares at cost 150,000
The preference shares are cumulative and dividends are in arrears for two years. What is the book value per
ordinary share?
a. 125 b. 191 c. 133 d. 141

47. Delsie Company reported the checkbook balance on Dec 31 2014 at P8,000,000. In addition, the entity held the
following items in the safe on that date:
Check payable to Delsie, dated Jan 2 2015 in payment 1,000,000
of a sale, not included in Dec 31 checkbook balance
Check payable to Delsie, deposited Dec 15 and 3,000,000
included in Dec 31 checkbook balance, but returned
by bank on Dec 30 stamped “NSF”. The check was
redeposited on Jan 2 2015 and cleared on Jan 5 2015
Check drawn on Delsie account, dated and recorded 2,500,000
on Dec 31 2014 but not mailed until Jan 15 2015
Three- month money market instruments 1,500,000
Coins and currencies on hand 800,000
What is the correct amount of cash on Dec 31 2014?
a. 7,500,000 b. 9,300,000 c. 8,300,000 d. 9,800,000

48. Hanie Company had the following bank reconciliation on June 30, 2011:
Balance per bank statement, June 30 3,000,000
Deposit transit 400,000
Total 3,400,000
Outstanding checks (900,000)
Balance per book, June 30 2,500,000

The bank statement for the month of July showed the following:
Deposits (including P200,000 note collected for Hanie) 9,000,000
Disbursements (including P140,000 NSF check and P10,000 service charge) 7,000,000
All reconciling items on June 30 cleared through the bank in July. The outstanding checks totaled P600,000 and
the deposit in transit amounted to P1,000,000 on July 31. What is the cash receipts per book on July?
a. 9,400,000 b. 5,350,000 c.5,550,000 d. 9,600,000

49. From the inception of operations, Jenica Company provided for uncollectible accounts expense under the
allowance method and provisions were made monthly at 2% of credit sales. No year-end adjustments to the
allowance account were made. The balance in the allowance for doubtful accounts was P1,000,000 on Jan 1
2014. During 2014, credit sales totaled P20,000,000, interim provisions for doubtful accounts were made at 2% of
credit sales, P200,000 of bad debts were written off, and recoveries of accounts previously written off amounted
to P50,000. An aging of accounts receivable was made for the first time on Dec 31 2014 as follows:
Classification Balance Uncollectible
November-December 6,000,000 10%
July- October 2,000,000 20%
January- June 1,500,000 30%
Prior to January 1 2014 500,000 50%
Based on the review of collectibility of the account balances in the “prior to January 1 2014” category,
additional accounts totaling P100,000 are to be written off on Dec 31, 2014. Effective Dec 31 2014, the entity
adopted the aging method for estimating the allowance for doubtful accounts. What is the year-end
adjustment to the allowance for doubtful accounts on Dec 31 2014?
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Father Saturnino Urios University
Accountancy Program
AIR PRE QUALIFYING EXAM- Cluster 1 (Level 1) VMBM, CPA

a. 900,000 debit b. 500,000 credit c. 500,000 debit d. 0

50. Monster Company sold an equipment with a carrying value of P800,000, receiving a non interest bearing note
due in three years with a face amount of P1,000,000. There is no established market value for the equipment.
The interest rate on similar obligations is estimated at 12%. The present value of 1 at 12% for three periods is
0.712. What amount should be reported as gain or loss on the sale and interest income for the first year?
Gain (Loss) Interest income
a. 200,000 288,000
b. 200,000 96,000
c. (88,000) 85,440
d. (88,000) 120,000

End of Exam 

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