MA CUP Questions (Practice)

EASY

1. When property other than cash is invested in a partnership, at what amount should the non-cash
property be credited to the contributing partner’s capital account?

A. Fair value at the date of contribution.

B. Contributing partner’s original cost.

C. Assessed valuation for property tax purposes.

D. Contributing partner’s tax basis.

2. The carrying amount of property, plant and equipment shall be derecognized

A. On disposal

B. When no future economic benefits are expected from the use of the asset

C. On acquisition

D. On disposal and when no future economic benefits are expected from the use of the asset.

3. It is an arrangement whereby one party sells a property to another party and then immediately leases
the property back from the new owner.

A. Sale

B. Leaseback

C. Sale and leaseback

D. Operating lease

4. In a partnership liquidation, the final cash distribution to the partners should be made in accordance
with the

A. Partners’ profit and loss sharing ratio.

B. Balances of the partners’ capital accounts.

C. Ratio of capital contributions made by the partners.

D. Ratio of capital contributions less withdrawals made by the partners.

5. Total shareholders’ equity represents

A. A claim against specific assets contributed by the owners.

B. The maximum amount that can be borrowed by the entity.

C. A claim against a portion of the total assets of an entity.

D. Only the amount of retained earnings.

6. All except one are the advantages of a CPA over management consultants of other professions.

A. The CPA is a specialist in accounting and taxes.

B. The CPA is known to the client and enjoys his confidence.

C. The CPA is already familiar with the client’s business.

D. The CPA is a member of a profession with recognized standing.

7. The salaries you could be earning by working rather than attending college is an example of

A. Outlay costs

B. Misplaced costs

C. Opportunity costs

D. Sunk costs

8. In analyzing whether to build another regional service office, the salary of the Chief Executive
Officer (CEO) at the corporate headquarters is

A. Relevant because salaries are always relevant.

B. Relevant because this will probably change if the regional service office is built.

C. Irrelevant because it is future cost that will not differ between the alternatives under
consideration.

D. Irrelevant since other imputed costs for the same will be considered.

9. Contribution margin is the excess of revenues over

A. Direct cost

B. Manufacturing cost

C. Cost of goods sold

D. All variable costs

10. The primary reason for adopting total quality management is to achieve

A. Greater customer satisfaction

B. Reduced delivery time

C. Reduced delivery charges

D. Greater employee participation

AVERAGE

1. Assume that C has a P50,000 equity in the partnership of “A, B, and C.” Partner C arranges to sell
his entire interest to D for P80,000 Cash. Partners A and B agree to the admission of D.

At what amount will the equity of the incoming partner, D, be shown in the balance sheet?

A. at P50,000.

B. at P50,000 and the P30,000 will be divided equally among the original partners.

C. at P80,000

D. at P80,000 and the P30,000 will represent Goodwill which will be apportioned between the existing
equities of A and B.

2. Energy Company offered a cash rebate of P20 on each P150 package of batteries sold during the
current year. Historically, 10% of customers mail in the rebate form.

During the year, 600,000 packages of batteries are sold, and 25,000 P20 rebates are mailed to
customers. What amount of rebate expense should be reported for the current year? _______________

Answer: P1,200,000

Rebate expense (10% x 600,000 x 20) 1,200,000

3. Appropriation of retained earnings should be reported as

A. Component of equity as part of share premium

B. Component of equity as part as total retained earnings

C. Component of total liabilities as current liability

D. Component of total liabilities as non-current liability

4. Management scrutinizes variances because

A. Management desires to detect such variances to be able to plan for promotions.

B. Management needs to determine the benefits forgone by such variances.

C. It is desirable under conventional knowledge on good management.

D. Management recognizes the need to know why variances happen to be able to make corrective
actions and fairly reward good performers.

5. Shure Company reported the following assets at year-end:

Financial asset held for trading 1,000,000

Goodwill 1,500,000
 Prepaid insurance 50,000

Patent 2,500,000

Customer list 500,000

Deposit with advertising agency used to promote goodwill 400,000

What amount should be reported as total intangible assets at year-end? __________________

Answer: P4,500,000

Goodwill 1,500,000

Patent 2,500,000

Customer list 500,000

Total intangible assets 4,500,000

6. Which of the following objectives is not a primary purpose of preparing a budget?

A. To provide a basis for comparison of actual performance.

B. To communicate the company’s plans throughout the entire business organizations.

C. To control income and expenditures in a given period.

D. To make sure the company expands its operations.

7. Partnership capital and drawing accounts are similar to the corporate

A. Paid-in capital, retained earnings, and dividend accounts.

B. Retained earnings account.

C. Paid-in capital and retained earnings accounts.

D. Preferred and common stock accounts.

8. A company produced 500 units of a product and incurred the following costs: Direct materials,
P8,000; direct labor, P10,000; overhead (20% fixed), P45,000. If the sales value of 500 units is
P102,000, what is the contribution margin percentage? ______________

Answer: 47%

Sales P102,000

Variable costs (8,000 + 10,000 + 36,000) 54,000

Contribution margin P 48,000 49,000/102,000 = 47%

9. Under a standard cost system, the materials efficiency variance are the responsibility of

A. Production and industrial engineering. C. Purchasing and sales.

B. Purchasing and industrial engineering. D. Sales and industrial engineering.

10. Country Road Corporation has these selected data:

Sales P1,000,000

Variable costs 600,000

Traceable fixed costs 100,000

Average invested capital 200,000

Imputed interest rate 15%

How much is the residual income? ____________

Answer: P270,000

Operating profit (P1,000,000 - 600,000 - 100,000) P 300,000

- Minimum income (200,000 x 15%) 30,000

Residual income P 270,000

DIFFICULT

1. Mat Company estimates its material handling costs at two activity levels as follows:

Kilos handled Cost

80,000 P160,000

60,000 132,000

Required: Determine the fixed cost. ____________

Answer: P48,000

Variable cost rate = in Costs / in Units

= (P160,000 - P132,000) / (80,000 - 60,000)

= P1.40 kg

Given the variable cost rate, the fixed cost is calculated as:

80,000 kgs. 60,000 kgs.

Total costs P160,000 P132,000

- Variable costs (80,000xP1,40) 112,000 84,000 (60,000xP1.40)

Fixed costs P48,000 P48,000

2. At the beginning of the current year, Ash Company was organized with authorized capital of
100,000 shares of P200 par value.

January 10 Issued 25,000 shares at P220 a share

March 25 Issued 1,000 shares for legal services when the fair value was P240 a share

September 30 Issued 5,000 shares for a tract of land when the fair value was P260 a share

What amount should be reported for share premium? __________

Answer: P840,000

January 10 (25,000 x 20) 500,000

March 25 (1000 x 40) 40,000

September 30 (5,000 x 60) 300,000

Total share premium 840,000

3. ABC Company manufactures and sells a single product. Budgeted and actual unit sales are indicated
below.

Data Budget Actual Variance

Unit sales 10,000 11,000 1,000 F

Sales P200,000 P209,000 P9,000 F

Variable costs 120,000 137,500 17,500 U

Contribution margin P80,000 P71,500 P8,500 U

Required: Calculate the sales price variance and indicate if it is favorable or unfavorable. ___________

Answer: P11,000 U

Sales price variance = (Actual price - Standard price) x Actual quantity

=( 19 - 20 ) x 11,000

= 11,000

4. Due to erratic sales of its sole product a high capacity battery for laptop computers, Salcedo
Company has been experiencing difficulty for some time. The company’s income statement for the
most recent month is given below:

Sales (18,500 units @ 300) P5,550,000

Less: Variable expenses 3,885,000

Contribution margin P1,665,000

Less: Fixed expenses 1,755,000

Net loss ( P90,000)

The break-even unit sales for Salcedo Company is: _____________

Answer: 19,500 units

Fixed cost / CM unit = BE in units x Selling price = BE in peso sales

1,755,000 / 90 = 19,500 units x 300 = P5,850,000

5. On January 1, 2016, Intelligent Company received a grant of P10,000,000 from the Australian
government for the construction of a laboratory and research facility with an estimated cost of
P15,000,000 and useful life of 5 years. The laboratory and research facility was completed and ready
for the intended use on January 1, 2017.

What amount of grant income should be included in the income statement for 2017? ___________

Answer: P2,000,000

Grant income (10,000,000 / 5 years) 2,000,000

PAS 20, paragraph 17, provides that “grants related to depreciable assets are usually recognized as
income over the periods and in proportion to the depreciation of the related assets.”

6. The XYZ partnership provides a 10% bonus to Partner Y that is based upon partnership income,
after deduction of the bonus. If the partnership's income is P121,000, how much is Partner Y's bonus
allocation? __________________

Answer: P11,000

B = .1x(P121,000 - B)

B = P12,100 - .1B

1.1B = P12,100

B = P11,000

7. Information concerning product X of Paradise Corporation for the year ended 2012 is as follows:

Sales P1,850,000

Margin 10%

Return on investment 20%

Minimum required rate of return on investment 15%

The residual income for product X is ____________.

Answer: P46,250

8. Earl Corporation, which manufactures a product that gives rise to a by-product called “Zafa”. The
only costs associated with Zafa are selling costs of P1 for each unit sold. Earl accounts for Zafa sales
first by deducting its separable costs from such sales, and then by deducting this net amount from cost
of sales of the major product. This year, 1000 unit of Zafa were sold at P4 each.

If Earl changes its method of accounting for Zafa sales by showing the net amount as additional sales
revenue, Earl’s gross margin would __________________.

A. Be unaffected

B. Increase by P3,000

C. Decrease by P3,000

D. Increase by P4,000
Answer: A. Be unaffected

The gross margin equals sales minus cost of sales. Before the change, the net amount was deducted
from cost of sales. After the change, the net amount is added to regular sales with no additional
increase in cost of goods sold. Hence, the gross margin will be the same.

9. Flor Company consumed P450,000 worth of direct materials during May, 2018. At the end of the
month, the direct materials inventory of Flor was P25,000 lower than the May 1 inventory level. How
much was the direct materials procured during May 2018? ___________

Answer: P425,000

Direct materials used P450,000

Less: Decrease in inventory 25,000

Direct materials purchased P425,000

Or, alternatively:

Direct materials, May 1 P 25,000

Add: Direct materials purchases 425,000

Direct materials available for use P450,000

Less: Direct materials, May 31 0

Direct materials used P450,000

10. At year-end, Thor Company reported cash and cash equivalents which comprised the following:

Cash on hand 500,000

Demand deposit 4,000,000

Certificate of deposit 2,000,000

Postdated customer check 300,000

Petty cash fund 50,000

Traveler’s check 200,000

Manager’s check 100,000

Money order 150,000

What total amount should be reported as “cash” at year-end? _________________

Answer: 5,000,000

Cash on hand 500,000

Demand deposit 4,000,000

Petty cash fund 50,000

Traveler’s check 200,000

Manager’s check 100,000

Money order 150,000

Total cash 5,000,000

The certificate of deposit is a cash equivalent.

The postdated customer check is reverted to accounts receivable.