ELIMINATION ROUND

CAT CHALLENGE

LEVEL 1 (CB)

Theory

1. Which of the following statements is false regarding adjusting entries?

a. Cash is neither debited nor credited as a result of adjusting entries.
b. Each adjusting entry affects one statement of financial position account and income statement account.
c. Each adjusting entry affects one revenue account and one expense account.
d. Adjusting entries involve accruals and deferrals.

2. Which of the following statements regarding reversing entries is incorrect?

a. Deferrals are generally entered in statement of financial position accounts, thus making reversing
entries unnecessary.
b. All accruals should be reversed.
c. Adjusting entries for depreciation and bad debts are never reversed.
d. Reversing entries change amounts reported in the statement of financial position for the previous
period.

3. Deposits held as compensating balances

a. usually do not earn interest.
b. if legally restricted and held against short-term credit may be included as cash.
c. if legally restricted and held against long-term credit may be included among current assets.
d. if legally restricted and held against long-term credit may be included among noncurrent assets.

4. On Merf’s April 30, 2016 statement of financial position a note receivable was reported as a noncurrent
asset and its accrued interest for eight months was reported as a current asset. Which of the following terms
would fit Merf’s note receivable?
a. Both principal and interest amounts are payable on August 31, 2016, and August 31, 2017.
b. Principal and interest are due December 31, 2016.
c. Both principal and interest amounts are payable on December 31, 2016, and December 31, 2017.
d. Principal is due August 31, 2017, and interest is due August 31, 2016, and August 31, 2017.

5. The account deferred grant revenue is classified as

a. A separate component of shareholders’ equity.
b. A noncurrent liability.
c. Other income and expenses.
d. Revenue.

Problem

1. An analysis of Thrift Corp.’s unadjusted prepaid expense account at December 31, 2013, revealed the
following:
• An opening balance of P1,500 for Thrift’s comprehensive insurance policy. Thrift had paid an annual
premium of P3,000 on July 1, 2012.
• A P3,200 annual insurance premium payment made July 1, 2013.
 • A P2,000 advance rental payment for a warehouse Thrift leased for one year beginning January 1, 2014.
In its December 31, 2013 statement of financial position, what amount should Thrift report as prepaid
expenses?
a. P5,200
b. P3,600
c. P2,000
d. P1,600

2. Roro, Inc. paid P7,200 to renew its only insurance policy for three years on March 1, 2013, the effective
date of the policy. At March 31, 2013, Roro’s unadjusted trial balance showed a balance of P300 for prepaid
insurance and P7,200 for insurance expense. What amounts should be reported for prepaid insurance and
insurance expense in Roro’s financial statements for the three months ended March 31, 2013?
Prepaid Insurance
insurance expense
a. P7,000 P300
b. P7,000 P500
c. P7,200 P300
d. P7,300 P200

3. Decker Company assigns some of its patents to other enterprises under a variety of licensing agreements.
In some instances advance royalties are received when the agreements are signed, and in others, royalties are
remitted within sixty days after each license year-end. The following data are included in Decker’s December
31 statement of financial position:
2012 2013
Royalties receivable P90,000 P85,000
Unearned royalties 60,000 40,000

During 2013 Decker received royalty remittances of P200,000. In its income statement for the year ended
December 31, 2013, Decker should report royalty income of
a. P195,000
b. P215,000
c. P220,000
d. P225,000

4. Mirr, Inc. was incorporated on January 1, 2013, with proceeds from the issuance of P750,000 in stock and
borrowed funds of P110,000. During the first year of operations, revenues from sales and consulting
amounted to P82,000, and operating costs and expenses totalled P64,000. On December 15, Mirr declared a
P3,000 cash dividend, payable to stockholders on January 15, 2014. No additional activities affected owners’
equity in 2013. Mirr’s liabilities increased to P120,000 by December 31, 2013. On Mirr’s December 31, 2013
statement of financial position, total assets should be reported at
a. P885,000 .
b. P882,000
c. P878,000
d. P875,000

5. A company buys ten shares of securities at P2,000 each on December 31, 2011. The securities are classified
as available for sale. The fair value of the securities increases to P2,500 on December 31, 2012, and to P2,750
on December 31, 2013. On December 31, 2013, the company sells the securities. Assume no dividends are
paid and that the company has a tax rate of 30%. What is the amount of the reclassification adjustment for
other comprehensive income on December 31, 2013?
a. P 7,500
b. P (7,500)
c. P 5,250
d. P (5,250)
LEVEL 2 (RCA)

Theory

1. Which products are difficult to cost because of indivisibility

a. Both by products and joint products
b. Neither by products nor joint products
c. By products only
d. Joint products only

2. By products
a. Have relatively more sales value than joint products
b. Have relatively less sales value than scrap
c. Occur before the split off point
d. Are often subject to additional costs beyond the split off point

3. Normal spoilage is properly classified as

a. Prime cost
b. Period cost
c. Product cost
d. Deferred charge

4. If the amount of spoilage in a manufacturing process is abnormal, it should be classified as a

a. Deferred charge
b. Joint cost
c. Period cost
d. Product cost

Problem

1. Ajinomoto, Inc. is a Japanese manufacturer of television set. The following data relates to its 2008
operation:
Budgeted overhead cost P 20,000,000
Budgeted activity 20,000 machine hours
Actual overhead cost P 21,500,000
Overapplied overhead P 500,000
Determine the total machine hours worked during 2008.
a. 22,000 .
b. 20,000
c. 21,000
d. 20,500

2. Blue Enterprise operates its factory on a two-shift basis and pays a lat-shift differential of 15% above the
regular wage rate of P18 per hour. The company also pays a premium of 50 percent for overtime work. During
2008, work occurred in the following categories:
Number of hours worked during the regular shifts 10,000
Number of overtime hours for regular shifts workers 300
Number of hours worked during the last shift 6,000
Compute the amount of labor-related cost to assign to factory overhead.
a. P8,100
b. P132,200
 c. P18,900
d. P73,710

3. McBright Company produces radio for cars. The following cost information is available for the period ended
December 31, 2008:
Materials put into production: P1,200,000, P800,000 of which are direct materials.
Factory labor cost for the period: P900,000, of which P250,000 was for indirect labor
Factory overhead cost for utilities: P400,000
Selling, general and administrative expenses: P600,000
Compute the factory overhead cost.
a. P400,000
b. P1,700,000
c. P1,000,000
d. P1,050,000

4. Electricon Factory provides an incentive scheme for its factory workers which features a combined
maximum guaranteed wage and a piece rate. Each worker is paid P11.25 per piece with a minimum
guaranteed wate rate of P875 per week. Production report for the week shows:
Employee units produced Employee units produced Employee units produced
A 67 E 80 I 72
L 78 X 82 S 75
Compute the portion of the factory payroll that should be charged to factory overhead.
a. P5,325.00
b. P5,275.00
c. P5,217.50
d. P217.50

5. You find that the cost records of S-tool and D Company have been poorly maintained. Some information has
been entered, but other information is missing. Fortunately, the information given is correct.

The cost for Jobs 686, 687, and 688 are to be determined. The direct material cost is P5,280 for Job 686 and
P7,150 for Job 687. The cost of direct materials requisitioned during the month for all jobs, except job 688, is
P48,200. No jobs were in process at the beginning of the month. The total cost of direct materials
requisitioned during the month was P69,130.

Labor is paid at a uniform rate of P100 an hour. Job 686 required 82 direct labor hours, at job 688 required
43 direct labor hours. A total of 760 direct labor hours were worked during the month. The direct labor cost of
all other jobs, with the exception of the three jobs being considered, was P58,500.

Two machine hours were used for each direct labor hour. Overhead is applied at a rate of P40 per machine
hour. The actual overhead cost for the month was P63,200. Jobs 686, 687, and 688 were completed during
the month.

Determine the cost of goods manufactured during the month.

a. P44,820
b. P48,710
c. P63,190
d. P64,860

6. The following relates to Job no. 999, which is being carried out by TDR, Inc. to meet customer order.
Department I Department 2
Direct materials consumed P 10,000 P 6,000
Direct labor hours employed 800 400
Direct labor rate per hour 8 10
Production overhead per direct labor hour 8 8
Administrative and other overhead 20% of full production cost
Profit mark-up 25% of selling prices

What is the selling price for customer job order 999?

a. P45,000
b. P55,200
c. P54,000
d. P57,600

LEVEL 3 (CAT)

Theories

1. Who is not required to file the quarterly income tax return?

a. Individuals who are purely engaged in business
b. Individuals who are purely engaged in profession
c. Partnerships and corporations
d. Individuals who are purely employed

2. Withholding taxes are the primary liability of the

a. Earner or payee of income
b. Payor of income
c. Payee and payor of income
d. Collecting agency of the government

3. Which of the following is not an inherent limitation of the power to tax?

a. Tax should be levied for public purpose.
b. Taxation is limited to its territorial jurisdiction.
c. Tax laws shall be uniform and equitable.
d. Government agencies and instrumentalities are exempt from tax.

Problems

1. Hayden Co, a resident citizen, earned the following interest income gross of applicable taxes:
Interest income from PNB, a domestic bank P 40,000
Interest income from SVB, a domestic bank* 30,000
Interest income from THE, a non-resident foreign bank* 20,000
Interest income from XHE, a resident foreign bank* 10,000
*in Philippine Peso equivalent

Compute the amount of final tax.

a. P 11,000
b. P 10,250
c. P 8,000.
d. P 0

2. Ms. Conrado won a gold medal and P50,000 cash prize for chess competition in the Palarong Pambansa.
How much final tax should be withheld from the prize?
a. P 20,000
 b. P 10,000
c. P 5,000
d. P 0

3. Malena has the following items of income:

Philippines Abroad
Business income P 200,000 P 100,000
Professional fees 100,000 50,000
Compensation income 400,000 -
Rent income 300,000 200,000
Interest income-bank 30,000 40,000

Assuming Malena is a resident citizen, compute the total income subject to Philippine income tax.
a. P1,420,000
b. P1,180,000
c. P1,030,000
d. P1,390,000