On September 30, 2011, Criseldas, Inc. received from Ambo P550,000 representing franchise fee. Franchise services were immediately started by Criseldas and these completed on October 31, 2011 at cost amounting to P330,000. The franchise fee revenue to be reported by Criseldas in its October 31, 2011 income statements is:

a. P 0 c. P220,000

b. P137,500 d. P550,000

Your client furnished you with the following data:

Merchandise inventory, Jan. 1 P 60,000

Purchases, Jan. 1 to Oct. 31 415,000

Purchases returns and allowances 5,000

Transportation In 10,000

Sales, Jan. 1 to Oct. 31, at 35% above cost 540,000

Merchandise not damaged by fire on Oct. 31 42,000

Using the gross profit test, what was the estimated loss in inventory due to the fire?

a. P38,000 c. P80,000

b. P60,000 d. None of the choices

You were engaged to audit the books of accounts of A. Bonifacio Contractors which had a 3-year construction contract in 2006 for P900,000. A. Bonifacio uses the percentage-of-cost-completion method for financial statement purposes. Income to be recognized each year is based on the ratio of cost incurred to total estimated cost to complete the contract. Data on this contract follows:

Accounts receivables construction contract billings P30,000

Construction in progress P93,750

Less: Amount billed 84,375

10% retention 9,375

Net income recognized in 2006 (before tax) 15,000

Bonifacio Contractors maintains a separate bank account for each construction contract. Bank deposits to this contract amounted to P50,000.

How much cash collected on the contract was not yet deposited as at December 31, 2006?

a. P4,375 c. P19,375

b. P13,750 d. P28,750

On an audit engagement for 2006 you handled the audit of fixed assets of A. Luna Copper Mines. This company bought the exploration rights of Maharishi Mineral Exploration on June 30,2006 for P7,290,000. Of this purchase price, P4,860,000 was allocated to copper ore which had remaining reserves estimated at P1,620,000 tons. A. Luna Copper Mines expects to extract 15,000 tons of ore a month with an estimated selling price of P50/ton. Production started immediately after some new machineries costing P600,000 were bought on June 30, 2006. These new machineries had an estimated useful life of 5 yrs with a scrap value of 10% of cost after the ore estimate has been extracted from the property, at which time the machineries will already be useless. Among the operating expenses of A. Luna Copper Mines at Dec. 31, 2006 were:

Depletion expense P 405,000

Depreciation, Machineries 40,000

Recorded depletion expense was:

a. Overstated by P90,000 c. overstated by P135,000

b. Understated by P90,000 d. understated by P135,000

As to source, the Tax Code classifies income into:

a. Income which is derived in full from sources within the Philippines.

b. Income which is derived in full from sources outside the Philippines.

c. Income which is derived partly from sources outside the Philippines.

d. None of the choices.