Accountancy Quiz Bowl Competition-Difficult Round

Camote Corp. is experiencing financial difficulty and about to liquidate. The following data were available:

Book value of assets:

Cash 150,000

Inventories 200,000

Land 800,000

Stockholders’ equity:

Ordinary shares 500,000

Retained earnings (deficit) (325,000)

Book value of the liabilities of Camote Corp. consists of accounts payable, salaries payable, loan payable, and mortgage payable. The loan payable in the amount of P300,000 is secured by the inventories. The mortgage payable in the amount of P450,000 is secured by the land with an estimated market value of P400,000. Total liabilities with priority was P200,000 (including P30,000 estimated liquidation expenses and salaries to employees). The holder of the mortgage payable received P440,000 at the end of liquidation.

What is the estimated deficiency?

• 21,000

• 25,000

• 10,000

• 5,000

The following accounts appear in the ledger of Inununan Inc. as of the close of the year:

Cash P30,000

Other assets 800,000

Other liabilities 150,000

Common stock, P100 par 300,000

6% Preferred stock, P100 par 200,000

8% Preferred stock, P100 par 100,000

Retained earnings 80,000

The 6 % stock is cumulative; the 8% stock is non-cumulative; and both participate equally in the remaining profits by being entitled to an extra dividend equal to the excess of any common dividend rate over and above 6% per annum. The dividends unpaid are for 2 years.

The book value per share of the 6% preferred stock is:

• P 113

• P 117

• P 226

• P 234

^{Extreme Company is a dealer in equipment. Extreme leased equipment to Elorde Company on January 1, 2020, for an eight-year period expiring January 1, 2028. Equal annual payments under the lease are due at the end of each year beginning December 31, 2020. The lease agreement includes a guaranteed residual value of P200,000, an interest rate of 10% and that the asset will revert back to Extreme on January 1, 2028. It was determined that the fair value of the asset is P3,000,000, its carrying amount is P2,500,000 and that the present value of the lease payment at the 10% interest rate is P2,759,000. Round present value factors to 2 decimals.}

^{What is the periodic rental that Extreme should charge Elorde?}

• 517,636

• 562,852

• 500,000

• 545,216

In reference to Question 3, what amount of gross profit should Extreme recognize?

• 500,000

• 259,000

• 406,000

• 165,000

An entity leased a new machine having an expected useful life of 12 years. The noncancelable lease term is 10 years. The entity is certain exercise a purchase option at the end of the noncancelable term. The machine should be capitalized by the entity and depreciated over______.

• 9 years

• 12 years

• 10 years

• 10 or 12 years at entity’s option

Which of the following is not a component of employee benefit expense?

• Interest expense

• Interest income

• Benefit paid to retirees

• Past service cost

According to the FASB's conceptual framework, earnings

• is the same as comprehensive income.

• excludes certain gains and losses that are included in comprehensive income.

• includes certain gains and losses that are excluded from comprehensive income.

• includes certain losses that are excluded from comprehensive income.

Which of the following is a required disclosure in the income statement when reporting the disposal of a component of the business?

• The gain or loss on disposal should be reported as an extraordinary item.

• Results of operations of a discontinued component should be disclosed immediately below extraordinary items.

• Earnings per share from both continuing operations and net income should be disclosed on the face of the income statement.

• The gain or loss on disposal should not be segregated, but should be reported together with the results of continuing operations.

Which one of the following types of losses is excluded from the determination of net income in income statements?

• Material losses resulting from transactions in the company's investments account.

• Material losses resulting from unusual sales of assets not acquired for resale.

• Material losses resulting from the write-off of intangibles

• Material losses resulting from correction of errors related to prior periods.

On October 1, 2020, the Muntinlupa Main Office established a sales agency in Marikina.

· The main office sent samples of its merchandise amounting to P8,400 and a working fund amounting to P72,000 to be maintained on the imprest basis.

· The samples sent were intended to last until June 1, 2021. During the first two months of operations, the agency transmitted to the home office sale of goods amounting to P364,500, but the home office were not able to fill-up 25% of the said transmitted sales orders.

· Collections from customers amounted to P73,941, net of 2% sales discount.

· Payments made by the agency during October and November were as follows: annual rent of P57,600, transportation expense worth P5,600 and utilities amounting to P7,200.

· It also purchased an equipment worth P9,000 which will be depreciated at 20% per annum.

· The gross profit rate on sales agency order is 20% of gross sales.

What is the net income of the agency for the two months ended November 30, 2020?

• 17,431

• 28,366

• 29,875

• 26.866