648 PART 2— FOUNDATIONS OF MANAGEMENT ACCOU MULTIPLE CHOICE: 1.. In financial statements analysis, expressing all financial s items as a percentage of base year amounts is called a. trend analysis. C.. horizontal common-size; b. variance analysis. d.- vertical common-size ar 2, In financial. statements analysis, expressing figures for year as @ percentage of a base amount on the financial statement) is called @. trend analysis, - c,_horizontal common-size b, variarice analysis. _ d. vertical common-size ai _ 3. Which of the following statements is correct? oe Liquidity refers to the firm’s ability to pay all its obli and to continue operations, 3 b. ‘Solvency refers to a firm's ability to survive in the long: by paying its short-term obligations. 4 ©. Trading on the equity refers to a firm's sale of its own st in the stock exchange. d. Ratio analysis addresses such issues'as the firm’s liquid use of leverage, management of assets, cost co itr growth, and valuation. i 4. Solvency is a firm’s ability to survive in the long-term by paying long-term obligations. Its key ingredients are capital structure a earning power. Capital structure consists of a. the capital stocks of the firm. ‘b. the firm's total assets. i ¢. the firm’s sources of financing, whether long-term or term, of its assets. d, the stockholders! ‘equity accounts. 5. Financial leverage or trading ‘on equity is advantageous when a. all of the Corporation's pattioned apital stocks have al ‘been issued. | * b. a firm has an available credit | line with its dépository bar ©. earnings from borrowed funds exceed borrowing costs. da firm is in financial distress,14 2. UNDERSTAN@BIARS With THE CLIENT A writte®r oral und conetFning the nature, scope, ta be performed, 3. Cuenr serie ~ The MAS practitioner should Péssible: Betefits the client wishes to achieve fen engagement before beginning the work. The practitioner should OLA’ his client of any reservations he realization of the anticipated benefits, 4. COMMUNICATION OF ResuLTS ‘The MAS practitioner should communica cate othe ent his prin fisitgs,conchisons reommendaors, oy oer make oe ae | enesgement incacing major facts and sarptons vse tatodons reservations, or other qualifications, ‘STAGES IN MAS ENGAGEMENTS: ‘Negotiating the engagement Preparing for and starting the engagement Conducting the engagement Preparing and presenti nting the reports and recommendations Implementing the recommendations Evaluating the engagement Post engagement iollow-up These tages cote he pect athe involved the MA engagement cle which in peneral ems are be lowe Pre-engagement considerations Engagement planing zngagentent management and execution Engagement conclusion PART 1 ~ OVERVIEW OF THE MAS PRACTICE BY CPAS Correa Banjo Coneidecatiens UF HHAS: stancling should be feached with the client ani limitations of the engagement obtain an understanding of the may have concerning the 1S MULTIPLE CHOICE: 1, It Is the practice of helping organizations to improve their performance, primariy through the analysis of existing ‘organizational problems and development of plans for improvement. ‘a. Accounting Total Quality Management 'b. Management Consulting 4. Auditing 2. Aperson who is qualified by education, experience, technical ability, and temperament to advise or assist businessmen on a professional basis in’ identifying, defining, and solving specific management problems involving the organization, planning, direction, control, and ‘operation ofa firm is called a ’a. Management Accountant. c. Accounting Technician. b. Certified Public Accountant... Management Consultant. 3, These are professional services that employ the practitioner's technical skils, education, observations, experience, and knowledge of the accounting process, ‘a. Professional services _c,__ Technical services d. Consulting services b. Analytical process 4, Consulting services differ fundamentally from the CPA's function of attesting to the assertions of other parties. In a consulting service, ‘a. the practitioner expresses a conclusion about the reliabilty of ‘a written assértion that is the responsibility of another party, the assertor. b. the work is generally performed only for the use and benefit of the client, & the clent- develops the findings, conclusions, and recommendations. 4d. the nature and scope of work is determined solely by the ‘consulting services practitioner. 5. Management consuting (or management constancy) ‘2.5 limited to CPAS. is ot limited to CPAs, ©, may be practiced by anybody since itis not limited to CPAS| (Giaprer 1 - Basic Considerations in MAS oa | 9. Consulting Services, or professional services that employ the practitioner's skills, education, experience, observations, and knowledge of the consulting process includes Product Services. Examples of product services are the following, except: a. sale and delivery of packaged training programs b. providing computer system installation and support c._ sale and implementation of computer software d. sale and installation of systems development methodologies Generally, the emergence and growth of management consultancy may be attributed to the following factors, except a. growth in size and complexity of business firms. b, complexity in managing and conducting a business. c. the development of techniques for the solution of management problems and the businessmen’s awareness of how to solve such problems ; need for adequate and timely information in management decision-making. Some: reasons for hiring management consultants are as follows, except a. to help define specific problems and implement solutions. b. to provide specialized skills and experience. ¢. to provide confidential service in which the identity of the client is concealed. d. to render an independent opinion. 12, Which of the following statements is correct? ja. MAS practice actually stemmed from the CPA's audit practice. b. Overt symptoms need a more detailed study and a logical extension of the CPAs’ services. c. Covert symptoms are easy to perceive, call ‘attention to, and/or remedy. Covert symptoms may simply be covered in the CPA's usual letter to management prepared at the completion of audit. ‘18 PART + - OVERVIEW OF THE MAS PRACTICE BY CPAs 13, The primary purpose of management advisory services is to achieve the objectives of the MAS firm, to help the client maximize its resources, © to improve the client's use of its capabilities and resources to achieve the objectives of such client's organization, d. to help the client identify its problems. 14, Management advisory services may be defined as @. the function of providing professional advisory services, the primary purpose of which is to improve the client's use ofits Capabilties and resources to achieve the objectives of the ‘organization. ‘ b. the function of providing quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decision, & the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and ‘events which are in part at least of a financial character, and interpreting the results thereof 4. the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of information. 15. MAS can relate to the following areas, except a, the management functions of analysis, planning, organizing, and controlling, B. the introduction of new ideas, concepts, and methods to ‘management. © the improvement of policies, procedures, systems, methods, ‘and personal relationships, 9. the application’ and use of managerial accounting, control systems, data processing, and mathematical techniques and ‘methods. 16. In providing advisory services, the CPA, or the independent accounting firm, applies an analytical approach and process, which ‘typically involves the following, except 2. ascertaining the pertinent facts and circumstances. LT a ‘Ghapren 1 ~ Basie Considerations in MAS. seeking and identifying objectives. 2 Gaping te prebiem or opportunity or imoroverent. d._ evaluating and implementing possible solutions. MAS engagement, except ‘are possible end-products of an fa arene fornaton ster b, a sales reporting system. a cost accounting system. 4. None of the above a a, except ble end-products of an MAS engagement Ferrera pan wh ater ies on spose, 'b._ blue print of a construction project. ¢._ an electron data processing system. dd sales reporting system. 19. Which ofthe folowing sa characteristic of management advisory : oS Serves rendered ar for i pats at ree © fume relations do not play vial rol i each engagement. d. It involves probiem solving. 2 Aeon . lates to the future, ema ‘of assignments are usually encountered. Ail the statements are true. Only three statements are true. ‘Only two statements are true. Only one statement is true. 21. MAS areas which are normally related to the accounting and finance functions may include ’a._ establishment of budgetary controls.20 PART 4 — OVERVIEW OF THE MAS PRACTICE BY CPAS . preparation of organization and administrative manuals. . plant layout studies. 4. development of preventive maintenance systems. 22, MAS areas which are not normally related to the accounting and finance functions may include. 2: Preparation of accounting systems and procedure manuals, b. development of management. oriented accounting and Feporting systems, cost reduction studies. 9. operations research, 23. Among the MAS areas which are not related to the accounting 2nd finance functions is marketing, which may include the following, except : 2. product profitability analysis. b. determination of pricing policy inventory management studies, 4. evaluation of salesmen's incentive compensations. 24. It is an area of management science which uses mathematical {techniques like linear programming, queuing theory and simulation ‘0 solve complicated operational problems, = Operations research [Link] engineering b. PERT/CEM d._ Sensitivity analysis 2. The fields of cost accounting and financial management are among the MAS areas that are normally related to the accounting and finance functions. Financial management cases may involve the following, except ‘ @. establishment of capital budgeting procedures, ‘study of the cost of capital and cost of debt. variance analysis, 9. establishment of operating and cash budgets, 26. MAS may be classified according to the practitioners’ abiity and/or expertise. - The services which may be offered readily by the Practitioner based on his basic training and background are called ‘Gnaprer 1 ~ Bs 27, 28. 29, 30. Considerations in MAS ‘a. usual services. b. somewhat specialized services, ._ highly specialized services. d._unusval services. ae eects ny one ete Those ses whch ste conrad extensors ofthe ta Schouring work ond vogue adtoel Uarng andor experience eae SE ier aaa Sy eesti ee ct -aconesabity and/or ta oe sence whch requ spesl sl aptide Steaming which CPAs donot normally possess ae called eee Dsamewat spacaled services, c. highly specialized services. ea | services cde advisory services classified ag usual ea ging adie on Gvidendpolcy and ln or expesion. BL ena of hance and operating sateen for management Stockolers bani, and other. €. advshg on accountng and tax raters rete to esate ring in cooperation ts legal and insurance cours di. alelaons on government cntrads and alocaling costs in ” compliance with reporting requirement. toner may be engaged by a client to design and instal an accounting pte engogement under the practitioner's a, usual services. somewhat specialized services. highly specialized services. exclusive services.“ PART 4 ~ OVERVIEW OF THE MAS. PRACTICE BY CPAS 31. MAS classified as somewhat specialized services include @. design and installation of accounting systems, b. suggestions for improvements in internal control system, assistance in the preparation of forecasts and budgets, [Link] bankruptcy and receivership proceedings. 32. MAS classified “as highly specialized services include the following, except @. research and evaluation of alternative methods of handling a transaction for its effect on finance and tax consequence. b. auditing management policies for their effectiveness. © conducting motion studies for standard cost system. d. evaluating the desirability of a particular area for plant location, 33. MAS classified as usual services include the following, except ‘2. evaluation of form of business organization, ) b. design of filing ‘System for stoting the accounting records. ¢. establishment of control for cash, receivables, inventory, Plant, property and equipment, and other items to assist management and expedite the audit Process. d. preparing market analysis of Products and services, 34, CPAs are in a more advantageous Position than members of other -_ Professions to render MAS because @. most CPAs are highly educated, b. only CPAs may render MAS. © a CPA isa person with recognized standing. d. the CPA iis already familiar with the client and his business, and-enjoys his client's confidence, 35, In determining the scope or type of service to be rendered, the Consultant x . 8 has the responsibility to determine the scope of services he 's competent to offer, subject to the pronouncements of his : profession, i b. is expected to maintain his independence to enable him to render his professional judgment and express his opinions/ Conclusions with honesty and objectivity. billOnapreR 1 ~ Basic Considerations in MAS. a. b. Both a and b Neither a nor b the following statement(s) is(are) correct? The scope of services offered by consultants should be adequate to identify and resolve the client's basic problems ‘and not just problem symptoms. Should a consultant feel that he cannot effectively handie the proposed engagement because of limitations in skills, competence, and economic requirements, the consultant refer this to another practitioner whom he thinks can effectively do the job. It is the responsibility of a practitioner to be sure that the nature and scope of the management advisory services he elects to offer are in conformity with the Code of Professional Ethics. Each consultant has the responsibility to evaluate his ability to render MAS of a professional quality in each specific area, and refrain from representing himself as qualified and willing to accept work in areas where he does not possess the required competence. Statements 1, 2, 3, &4 c, Statements 2, 3, & 4 Statements 1, 2, & 4 d. Statements 1 & 4 37. Which of the following statements is incorrect? a. b. ACPA engaged in the practice of MAS is bound by the Cod: of Ethics for Professional Accountants. Management consulting and other advisory services are among the assurance engagements performed by professiona! accountants. Not all MAS practitioners are bound by the Code of Ethics fo Professional Accountants. It is the responsibility of a practitioner to be sure that tt nature and scope of the management advisory services elects to offer are in conformity with the Code of Ethics f Professional Accountants.Cuarres 1 ~ Basic Considerations in MAS b. ascertaining the pertinent facts and circumstances, seeki and identifying objectives, and defining the prob Opportunity for improvement. c. evaluating and determining possible solutions and presenting [Link] recommendations, d. All of the above 42, The analytical approachafid process may be summarized into three broad stages — analyéis, design, and implementati The design stage’consists of a. planninggnd scheduling actions to achieve the results, as well as advising and providing technical assistance in implementation. b. ascertaining the pertinent facts and circumstances, seeking and identifying objectives, and defining the problem or Opportunity for improvement, ©. evaluating and determining possible soluitions and presenting findings and recommendations. d. Allo the above 43. The analytical approach and process may’be summarize three broad stages — analysis, design and implementation The implementation stage consists of a. planning and scheduling actions to achieve the desir: results, as well as advising and providing technical assista in implementing. b. ascertaining the pertinent facts and circumstances, seeking and identifying objectives, and defining the probieny opportunity for improvement. ¢. evaluating’and determining possible solutions and presenting findings and recommendations. de. All of the above 44, Which of the following statements is incorrect? a. ° Full scope engagements require clie both the working and decisionEPrsultent’s role in full scope engagement should be rireret net Of. An (Objective acer; andy ie the plementation stage, his jo is merely to provice technical ying out full scope: the consultant should Ithaka cat, the plementation stage and should see ta ‘hat the client management accepts overall responsibilty for {mbleme ation ofthe chosen course of action, & Once plementation Is. concluded) the ‘consultant's arte) Person 45. In special stady engagement, 2. the consultant's ‘contribution is to give advice ‘on the overall Program and the organization and composition of the FenercatN 9OUns, to provide technical assistant Sher peel © Monitor progress and to report on ths apd acing aeesenttions from both the working and: déeon making levels are required. “any action ‘beyond the point of decision fs solely the sponsibilty of the consuttant. i advice Peyond the point of decision Is solely the ty of the consultant, © once the [plementation is concluded, the clent’s participation cay oh cre tcintl Only the consultants personnel remain py ‘arty On the solution, ‘Rs consultant need not be independent in mental attitude, hee 26 PART 1 OVERVIEW OF THE MAS PRACTICE BY opas, 47, Which of the following is incorrect? 48. Which of the following statements is incorrect’ 49. fics of "to be impartial, intellectually honest, and free of conficts (oS oe it, @ practitioner ee ee se eee r: structural or organized MAS engagements, but "informal advice.” d. Ail of the above docu leven data ae to be cana, dum fe bs. Absgniicnt mates tating to te reus ct te en "are to be communicates to the clint. is Engagements are to be adequately planned, su controlled. : ing MAS, 2 oractionr must ac with ee nto practioner t be, among ther tis cand iin te cont of Cet confide with Maturity 2. Integrity 4. Independence in ment a attitude This principle imposes the obligation on all professios Integrity TE teen ert b. 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Ibis acquired by education, self-study, attendance to professio development courses, actual experience in MS work, anc research. 71, The following characterize management advisory services, except ‘a. MAS utilizes more junior staff than senior members of the firm, b. MAS involves decision for the future. MAS is broader in scope and varied in nature. d. MAS relates to specific problems where expert hel is required. 72. The following statements relate to MAS practice standards, 1. A practitioner is to notify the client of any reservations he has regarding anticipated benefits. 2. Throughout the engagement, there ought to be a systematic critical review of accomplishments and work should be done within the framework of the Code of Ethics and other professional standards. 3, During the engagement, should there be significant changes between cost and anticipated benefits, the client should be informed, 4. Before the engagement, the practitioner must mak arrangements with, and inform the client on significant matters related to the engagement.woes 819 sf sDvepuadapyy 'e je ‘2ouepuadapu "95 JeQWEY 23 jasoud st 4 4 Se eouspuadopul Uo Sunnsuo> aug 'A “aw pun BunBie s ujsouued SUL ¥dD eK IW “BL ‘swap Bunedivo 01 <=01N185 GunjnsuoD sapinaid pue SIa\)0 Yad ¥ “DP sadi\os Buninsuca sapnoid yep ¥ “> ;puy ewes 2up oy SulBuojaq quay JayjoUe BulpseBen weySqNS UID MoU LAMA SOIEUS Yad W “9 19° ywoWUrarOB aun e1ojaq sennuaDu's ANSAPUL jofew vay squasaidas yao ¥ “e 5] SwaUuayeys Buimoyoy 243 J0 YIU. “ZL ‘py Aouelunosay 2uy Aq parepuewi se swuiensuo> inias quaWaBeueW apInaud SY “P 0S dojanap pue swajqoud aypods jo> quawia6eueU! amy Suny ssouisng “> ‘palesou0 Jap! al YD UL 20195 FeRUaPYLOD suO> Jo aonDe:d 343 WI PapNPUT “q jawabeueW Jo aomed aun ul aq oy uiaBeuew Bujuuopad sya “e 225}e} 5} waWa}EIS GUNMO}O} 249 JO YUM “OL ec SS¥W Ul suonesopIsu09 o18e8~ LwaLd¥n) Nouabeueu 2 u pononu aq 01 yet 2) sensor ‘aye Guprewepun seinaqued ayy : Feel of 09" aa D/NES UDU Poulenb Aagoneuenne 51 s30i53p aig pue yaw tu ven 4 > “SeIpms =enpeub asod Joino pue "yaw Ue 'sxbo, Swaunejeveg jens ayy apr WaIaDx® Buiney 0} poyenbo quawa6euew jo Sumuueld pue s oheIUaWE;dLu| pue uoUIdoFenap “UBisop 4 aweuldorarap jeuoner saonies 2018 AO swreuncsoe >and poyniad 30 sayAies yuslabeuey a wewia6_6u9 SvW uy SuoWEpnt food ue suossnep Buryew 40) A ‘swarsts Bunvaweidus us Anaisuod! 95 weI5 sueunsuaD 21g uo quaNP Jo an. ir Prone 01 4eIs SauaND ayy Jono OUEIES -p Ao eet swoumers 5 alQo ue AuBetuy Gin we yenus seuonized © Sy BUluneiee Ug. Peatuedio 0} fiuo aigeodde aie saipueis WewebeBue ou o} pareray sieyew ju ‘Jeuonioed © uawisb_6ue ue Busjeriopin a epuadepu aq tens jusimstion ou LOUNOS otf Uo Ke9 9 Suewa javuosied Ho eM “Pepnoues si uepmuowrdl ah coug. 2401/9 au J0 fugisuodsas O41 ©4 PIROUS worsioep Jo juod au) puofad auc 2M) 84 Pinoys uoIsi9ep 0. uy 7 7 2010HD, “SweWwaBEGue adoos uno} Jejah5 ue y se Dg Gy, S¥#O 48 301L0V¥d S¥W 3H1-40 MBIAYBAO- 1 Luvs apPART 1 ~ OVERVIEW OF THE MAS PRACTICE BY CPAS In conducting the engagement, the practitioner must allow for client participation in any phase of the engagement. Not all MS practitioners are CPAs, so not all practitioners are: Pound by the. rules of professional ethics inthe practice of | magunting. However, all MS practitioners are bound by the, MAS Standards of Practice. The statement refers to independence in mental attitude. in MAS engagements, the nature of work involved requires: highly qualified staff and a lesser need for junior assistarce Statement 2 pertains to MAS standard of Practice on “Due i Professional Care”, while statement 4 is about “Understanding with the client.” : The practitioner should maintain his independence. Audit engagement is different from MS engagements. Legal problems are better referred to law firms, not to CPAs engaged in MS practice ; MBA, PhD, etc, is not to engage in MAS practice fence, experience, technical ability, and y. GPAs in MS ‘practice should not go around. but instead, Qbservelobey the ethical constraints as mandated by the Accountancy Act. Substantial (or hould not beGuapTer 4 - Basic Considerations in MAS 4 a5 79. 80. 81 82. 83. 84. 85. D A B. Cc. The CPAJMS practitioner should maintain his indepenaericr He should not make management decisions for the client This is tantamount to clentiengagement solicitation, which is prohibited by the Code of Professional Ethics for CPAs The MS practitioner may act as independe! same client-firm or be employed in another being an MS consultant in another as long 2s independence (with respect to the MS client), a1 disclose confidential information about the client authorized or legally obligated to do so The practitioner should merely be an indeoenent Implementation and assumption of full responsibilty the client, though in the implementation of the solv practitioner could provide technical assistance and advic it is not unethical for the MAS firm to accept/perforr engagement provided there is full disclosuire of the to all parties at the outset of the engagerr written final report. M, the partner on the client boe refrain from participating in the boards dec recommendations resulting from the MAS engagement The practitioner should have competence and ex care in solving the client's problem. If the client insists 9} assignment of personnel whom the practitioner believes. ‘0 leuk the necessary technical competence, agreement should reached to provide such competence by other means, increased supervision or additional support. If this ¢ done, the practitioner should decline the engagement In this case, the practitioner is NOT required to de withdraw from a consulting engagement when the upon scope of services includes such limitations In a consulting Service, the PRACTITIONER develop findings, conclusions, and recommendations presented11 Analysis and Interpretation of Financial Statements 649 ', Thyough financial statements analysis, interested parties — such as ‘managers, investors, and creditors — can identify the company’s financial strengths and weaknesses and know about the following, except ‘8, profitability of the business firm. b. the firm’s ability to meet its obligations. ¢. safety of the investment in the business. d. composition of management running the firm. | financial statements analysis is not without problems and limitations. Among such limitations is es follows, except: a, A ratio that is acceptable to one company may not be ‘acceptable to another when some other factors are considered. b. There may be some differences in the accounting methods and estimates used by companies so that comparison of their ratios may not be advisable. c. Financial statements are based on current market value of the firm's assets, therefore they do not reflect historical costs. d. The timing of transactions and use of averages in applying the various techniques in financial statements analysis affect the results to be obtained, |. Which of the following is not a limitation of ratio analysis affecting comparability among firms? ‘a. Provision of useful information regarding the efficiency of operations and the stability of financial conditions b. Different sources of information c. Different aécounting periods d._ Different accounting policies In assessing the financial health of a firm, financial analysts use different techniques. One technique is the vertical, common-size analysis, an example of which is a. total current assets is 20% of the total assets as of a certain date. | b. total current assets as of a certain date is 20% greater compared with the previous year. . the finished goods inventory turnover is twelve times during the year. d, cash provided by operations is P100,000.Chapter 14 — Analysis and interpretation of Financial Statements 651 14, The statement of cash flows : . reports the revenues earned and expenses incurred by the firm during the period. b.. shows the company's total assets, broken down into current and non-current assets. c. shows the company’s capital structure for a period of time. G. reports the net change in cash resulting from operating, investing, and financing activities of the firm during the period. ties es and 45, In cash flow analysis, the cash flows from operating act ‘a, are the cash effects of transactions that create re expenses. b. generally relate to changes in non-current assets <. generally relate to changes in long-term liabilities and stockholders’ equity accounts. d. . are irrelevant. 46. In computing a ratio, when a balance sheet amount is related to an income statement amount, a, the income statement amount should be cofiverted to an average for the year. b. the balance sheet amount should be converted to an average for the year. ¢. both amounts should be converted to an averag d._ the amounts may be used as is to develop for the year. ingful ratio. 17. Which of the following statements is incorrect? ‘a. The ratio of sales to working capital is 4 mee and activity. b. The number of days’ sales in receivables is a measure liquidity, as well as of activity. ¢. A high sales-to-working capital ratio viould firm is not susceptible to liquidity problems: 4. The earnings per share is a profitability ratio. ire of liquidity cate that tt 18.. The following are taken from the balence sheet of Juls Comp as of December 31, 200B:652 PART 2- FOUNDATIONS OF MANAGEMENT ACCOUNTING Current assets: Cash on hand and in banks P341,600 Accounts receivable 200,000. Merchandise inventory 308,400 P 850,000 Liabilities; Current liabilities: Notes payable . 280,800 Accounts payable 781,200 1,062,500 Long term liabilities 3,000,000 What are the ‘company’s current ratio and quick (acid test) ratio? Current Ratio Quick (Acid Test) Ratio a, 0.80 0.51 b. 0,51 2 0.80 c. 0.21 1.93 d. 3.03 0.32 19. The following daté were taken from the comparative: balance sheets of Dolms: Company: Dec. 31, 200B Dec. 31, 2008 Cash P. 35,000 P 33/125 Marketable securities 16,375 15,125 Notes and accounts receivable, net 49,375, 48,000 Inventories 71,250 69,375 Prepaid expenses 2,375 5,000 Notes and accounts Payable (short-term) 31,250 35,625 “Accrued liabilities 7,500 * 10,500 Bonds payable, due 200M 100,000 100,000 The, company’s working capital increased (decreased) from 2004 te 2008 by a. P135,625. ¢. (P11,125). b. P124,500. i d. P11,125, ITEMS 20 to 25 ARE. i ! IN THE FOLLOWING INFORMATION: Following are selected financial and operating data taken from the financial statements of Antiporda Corporation:Ghapter 14-Analysis and Interpretation of Financial Statements 653 As of D€cember 31 : 2006" 200A Cash P 80,000 -P 640,000 Notes and accounts receveble, pet °° 400,000: 1,200,000 Merchandise inventory 720,000 1,200,000 Marketable securities ~ short-term 240,000 80,000 Land and buildings (net) "> * 2,720,000 2,880,000 Bonds payable ~ long-term. 2,160,000 2,240,000 Accounts payable ~ trade 560,000 880,000 Notes payable — short-term 160,000 320,000 ‘ For the Year Ended december 31 , : 2008 _ 200A Sales (20% cash, 80% : credit sales) “© pig,400,000 19,200,000 Cost of goods sold 8,000,000 11,200,000 Compute the following ratios: 20, Current ratio as of December 31, 2008: a, 05:1 cc. 2.61 b. 2.0:1 d. 1:26 21, | Quick (acid test) ratio as-of December 31, 2008: a 2,0to1 c 1tot b. 0.5toL d. 0.7 to1 22. Accounts receivable tumover for 2008: a. 23.0 times ¢. 36.8 times b. 18.4 times “d. 4.6 times 23. . Merchandise inventory tumover for 2008: a. . 13.33 times c., 10.0 times b. 11.10 times d, 8:33 times 24. Pr gest ae fe 200M a. 41.67% c. | 58.33% b. 71.43% d. 56.52%i 654 PART 2- Pe Tt os Menace coat 28. The average age of accounts receivable for 2008 (use 360 a. 19.57 days ©. 0.05 day b. 19.57 months d. 18.40 days : The following information pertains to Batalla Company for 2008: Inventory at December 31, 2008 Bi i Purchases of merchandise, all on credit Cost of goods soid 4 ih ‘The company’s merchandise inventory tumover for 200: was _ 2. 4.0 months. c. 4.0times, ; b, 10.0 times, d. 3.60 months, - The following information pertains to Cenon Co. ~ipany for 200 Accounts receivable, January 1, 2008 PB Accounts receivable, December 31, 2008 Net cash sales EP ‘Accounts receivable turnover for 2008 Stir ‘The company’s net sales for 200B was a. P47,200, c P51,200, b. P88,000. d,P48,000. Flaming, 5 order, then sells from invent wait. : Selected financial information from a recent year's fi statements is given below: : Super Flaming Sales P729,720 P1246, 760 Cost of goods sold . 565,480 959,200, Inventory, beginning 9,320 62, Inventory, ending 10,920 80,200 ‘Which company has the higher inventory tumover and by how times? (Round your answer to one digit after the decima) place)Chapter 11 ~Analysis and interpretation of Financial Statements Oov a. Super, 55.9 times c. . Super, 42.5 times b. Flaming, 13.4 times d. Flaming, 42.5 times ITEMS 29 to 31 ARE/BASED ON THE FOLLOWING INFORMATION: Following are some data from the financial records of Dave Corporation: 2008 200A Sales 500,000 P375,000 Common stock 125,000 Retained earnings 405,000 Dividend payout ratio 40% After tax profit 4% of sales \” cash 12% of sales Accounts receivable 18% of sales Inventory 30% of sales Fixed assets, net 40% of sales Accounts payable 20% of sales Accruals 5% of sales. 29, How much is the retained earnings balance as of the end of 2008? a. P120,000 c. P105,000 b, 117,000 dd. P125,000 30. How much is the company's total assets as of the end of 200B? a, P500,000 c. 242,000 b. 375,000 d. P742,000 31. How much was the companys long-term debt as of the end of 2008? a. PO c. P375,000 b. P125,000 dd. P133,000 32. For the year 200B, Lim Company's return on common stockholders’ equity was 12.5%. Its average stockholders’ equity for the same period was.P500,000, inclusive of P50,000 par value of preferred stock with a dividend rate of 8%. How much was the company’s net income for 200B? a, P60,250 cc. P58,500 b. P56,250 d. P62,500Ohapter 14 Analysis and interpretation of Financial Statements 657 17, The following information was taken from last year’s financial statements of Dianice Industries: Current liabilities P 60,000 Long-term liabilities 180,000 Preferred stock 50,000 Number of common shares outstanding 10,000 The company has a debt-to-equity ratio of 0.96 to 1 at the end of last year. What was the book value per share at the end of last year? a. P13.75 c. P25.00 b. 20.00 d. P49.00 ITEMS 38 and 39 ARE BASED ON THE FOLLOWING INFORMATION: Net sales, P1.8M; Cost of goods sold, P1.08M; Operating expenses, P315,000; Earnings before interest and tax, P405,000; Net income, P195,000; Total stockholders’ equity, P0.75M; Total assets, P1M; Cash flow from operating activities, P25,000. 38, The return on investment is a. 22.5%: 1c 19.5%, b. 26.5%. d. 40.5%, 39. The cash flow margin is a. 1.4%, c. 10.8%. b. 2.5%. d. 12.8%. 40. If a company has current assets of P200,000, including inventory of P80,000 and a quick ratio of 2:1, what is the value of the company's current liabilities? a. P100,000 c. 240,000 b. 140,000 d. P 60,000 ITEMS 41 and 42 ARE BASED ON THE FOLLOWING INFORMATION: Consider the following data about a company: Current ratio 3.5 tol Acid-test ratio 3.0to1 Current liabilities at year-end P150,000 Inventory, beginning of the year P125,000 Inventory turnover 8 times658 PART 2— FOUNDATIONS OF MANAGEMENT ACCOU! 41. What is the value of the company’s inventory at the end year? & a. P 75,000 % c. P150,000 b. P125,000 d. P525,000 42. How much is the company’s cost of goods sold during the year? a. P400,000 c. P1,600,000 b. P600,000 d. P 800,000 DM ATIENZA COMPANY Bi ‘Statements of Financial Position Gd December 31 ‘3 ‘ IN THE Current assets: Ree ease P 240 Marketable securities 160 Accounts receivable (net) 360. Inventories 480 Other current assets 120 Total current assets 1,360 Non-current assets: i Investment in securities P 200 Property, plant, and equipment, net 2,000 > Other non-current assets, net. 440 Total non-current assets 2,640 Total assets P4,000 LIABILITIES AND EQUITY abilities: Current liabllities P 680 Non-current liabilities 0 Total liabilities £880r Chapter 11 Analysis and interpretation of Financial Statements 659 43. 44. 45, 46. Equity: 5% Cumulative, non-participating Preferred stock, P10 par value 8,000 shares issued and outstanding, P 800 P 800 Common stock, P10 par 160,000 shares authorized 420,000 shares issued and outstanding 1,200 AIC - Common 600 Retained earnings 320° Total equity P3120 P3,000 Total liabilities and equity P4000 P3.620 Baged on the given statements of financial position, the comBany’s a. cutrent ratio for 200B was 2.54 to 1. b. current ratio for 200A was 2.00 to 1. c._ acid test (quick ratio) for 200B was 1.12 to 1. d. acid test (quick ratio) for 200A was 1.72 to 1. Assume that for 200B, net credit sales was P2,400,000 and the gross profit was 26.67%. What was the company’s accounts ivable turnover for the year? 8 times c. 6.67% b. 8% d, 10 times ‘Assume that the company’s net income for 2008 was’ P280,000 and there were no preferred stocks dividends in arrears, what was the company's return on common equity for such year? a. 12.39% c. 10.62% b. 7.84% d. 8.00% C. Atienza Company's equity balances as of the end of 200B are as follows: 6% Cumulative, fully participating preferred stocks, P200 par value, with liquidation value of P220 P 400,000 Common stocks, P40 par value 800,000 Retained earnings 1,024,000 No dividends were declared during the year.