END Game: Empowering Notions and Dauntlessness towards Accounting

September 27, 2019

EASY ROUND
QUESTION 1 – CFAS
Cash is measured at__________.
A. Amortized cost
B. Face value
C. Realizable value
D. Historical cost
CORRECT ANSWER: B
QUESTION 2 – CA
In a normal cost system, a debit to Work in Process Inventory would not be made for
A. Actual direct materials
B. Applied overhead
C. Actual direct labor
D. Actual overhead
CORRECT ANSWER: D
QUESTION 3 – IA
Items needing fermentation process after harvest shall be dealt with by what accounting
standard?
A. PAS 41
B. PAS 16
C. PAS 40
D. PAS 2
CORRECT ANSWER: D (After harvest are dealt with by PAS 2 – Inventories)
QUESTION 4 – CFAS
In the conceptual framework for financial reporting, what provides "the why"--the purpose of
accounting?
A. Recognition, measurement, and disclosure concepts such as assumptions, principles, and
constraints
B. Qualitative characteristics of accounting information
C. Elements of financial statements
D. Objective of financial reporting
CORRECT ANSWER: D
QUESTION 5 – CA
How are abnormal spoilages accounted for?
A. Period Cost
B. Capitalized
C. Product Cost
D. Ignored
Correct Answer: A (Abnormal spoilages are expensed as incurred)
QUESTION 6 – CFAS
Impairments are
A. based on discounted cash flows for securities.
B. recognized as a realized loss if the impairment is judged to be temporary.
C. based on fair value for available-for-sale investments and on negotiated values for held-to-
maturity investments.
D. evaluated at each reporting date for every investment.
CORRECT ANSWER: D
QUESTION 7 – CFAS
Investments in debt securities are generally recorded at
A. cost including accrued interest.
B. maturity value.
C. cost including brokerage and other fees.
D. maturity value with a separate discount or premium account.
CORRECT ANSWER: C
QUESTION 8 - IA
Continuing Franchise Fee per month, as stated by the contract, should be capitalized and
increase the amount of the Intangible Asset – Franchise account.
TRUE OR FALSE?
CORRECT ANSWER: FALSE (Charged as expense)
QUESTION 9 – CA
When is Finished Goods debited and Cost of Goods Sold credited?
A. Sale of a customer order
B. Return of goods purchased
C. Return of goods by the customer
D. Return of materials to the supplier
Correct Answer: C
QUESTION 10 – CFAS
The objective of general-purpose financial reporting is?
A. to provide financial information about the reporting entity that is useful to present and
potential equity investors, lenders, and other creditors in making decisions in their capacity as
capital providers
B. to provide companies with the option to select information that favors one set of interested
parties over another
C. to provide users with financial information that implies total freedom from error.
D. to provide a metric for financial information used to determine when the boundary between
two or more entities should be disregarded and the entities considered to be a licensing
arrangement.
CORRECT ANSWER: A

AVERAGE ROUND
QUESTION 1 – CFAS
Coco Company purchased $300,000 of bonds for $315,000. If the company intends to hold the
securities to maturity, the entry to record the investment includes
A. a debit to Held-to-Maturity Securities at $300,000.
B. a credit to Premium on Investments of $15,000.
C. a debit to Held-to-Maturity Securities at $315,000.
D. None of these answers are correct.
CORRECT ANSWER: C
QUESTION – 2 CFAS
Which of the following is not correct in regard to trading securities?
A. They are held with the intention of selling them in a short period of time.
B. Unrealized holding gains and losses are reported as part of net income.
C. Any discount or premium is not amortized.
D. All of these are correct.
CORRECT ANSWER: D
QUESTION 3 – IA
An entity acquired a property which includes a Land and an old Building in the current reporting
period, with the intention of demolishing the old building and replacing it with a new building.
The entity will not use the old building prior to its demolition. How should the entity account for
the carrying value of the old building?
A. Absorbed by the new building
B. Transferred to Retained Earnings
C. Derecognized and charged as expense
D. Charged fully to Land
CORRECT ANSWER: C (PIC Interpretation Q&A 2012-2)
QUESTION 4 – CA
When indirect labor is recorded for a job in process, the Work in Process account is debited.
TRUE OR FALSE?
CORRECT ANSWER: FALSE (When indirect labor is applied, only then the WIP account is debited.)
QUESTION 5 – CFAS
When an investor's accounting period ends on a date that does not coincide with an interest
receipt date for bonds held as an investment, the investor must
A. make an adjusting entry to debit Interest Receivable and to credit Interest Revenue for the
amount of interest accrued since the last interest receipt date.
B. notify the issuer and request that a special payment be made for the appropriate portion of
the interest period.
C. make an adjusting entry to debit Interest Receivable and to credit Interest Revenue for the
total amount of interest to be received at the next interest receipt date.
D. do nothing special and ignore the fact that the accounting period does not coincide with the
bond's interest period.
CORRECT ANSWER: A
QUESTION 6 – IA
In cases where the fair value of an investment property is not reliably determinable on a continuing
basis, PAS 40 Investment Property, mandates that the entity shall measure the investment
property using the cost model until the fair value becomes reliably determinable in subsequent
periods.
TRUE OR FALSE?
CORRECT ANSWER: FALSE (Cost model until disposal)
QUESTION 7 – CFAS
Under the equity method of accounting for investments, an investor recognizes its share of the
earnings in the period in which the
A. investor sells the investment.
B. investee declares a dividend.
C. investee pays a dividend.
D. earnings are reported by the investee in its financial statements.
CORRECT ANSWER: D
QUESTION 8 – CA
In a normal job-order costing system, factory overhead is applied using predetermined rates
times standard input.
TRUE OR FALSE?
CORRECT ANSWER: FALSE (Factory overhead is applied using predetermined rates times actual
input.)
QUESTION 9 – IA
On year-end, the ending inventory of the company was overstated because some goods were
counted erroneously counted twice, but all purchases during the year was recorded correctly. How
would this error affect the company’s income statement for the current year?
A. Profit is overstated because Cost of Sales is understated
B. Profit is understated because Cost of Sales is understated
C. Profit is overstated because Cost of Sales is overstated
D. Profit is understated because Cost of Sales is overstated
CORRECT ANSWER: A
QUESTION 10 – CFAS
The fair value option allows a company to
A. value its own liabilities at fair value.
B. record income when the fair value of its bonds increases.
C. report most financial instruments at fair value at any point of time.
D. All of the above are true of the fair value option.
CORRECT ANSWER: A

DIFFICULT ROUND
(Intermediate and Cost Accounting)
QUESTION 1
Last year, Monique Company incurred ₱174,000 in actual manufacturing overhead cost. The
manufacturing overhead account showed that overhead was underapplied by ₱18,000. If the
predetermined overhead rate is ₱6.00 per direct labor hour and provided that the company uses
a predetermined overhead rate based on direct labor hours to apply overhead to production, how
many hours did the company work during the year?
CORRECT ANSWER: 26,000 hours

Solution
Actual manufacturing overhead ₱174,000
Less: Underapplied overhead ₱18,000
Manufacturing overhead applied ₱156,000/6
Direct labor hours 26,000 hours

QUESTION 2
On January 1, 2019, D Company acquired a tract of land with an old building which was razed
immediately after acquisition. The costs incurred in connection with the acquisition were:
Purchase Price ----------------------------------------------------------------₱7,000,000
Agent’s commission---------------------------------------------------------₱200,000
Fees paid for purchase contract------------------------------------------₱ 100,000
Guarantee Insurance--------------------------------------------------------₱ 15,000
Cost of relocating squatters-----------------------------------------------₱ 20,000
 Cost of razing old building-------------------------------------------------₱ 550,000
Salvage value of old building materials---------------------------------₱ 50,000
Property taxes for 2018 and 2019---------------------------------------₱ 100,000
Option paid for an alternative land, not acquired-------------------₱25,000
What is the cost of land?
CORRECT ANSWER: ₱7,885,000

Solution:
Purchase Price P7,000,000
Agent’s commission P 200,000
Fees paid for purchase contract P 100,000
Guarantee Insurance P 15,000
Cost of relocating squatters P 20,000
Cost of razing old building P 550,000
Less Salvage value of old building materials (P 50,000)
Property taxes for 2019 P 50,000
Land ₱ 7,885,000

QUESTION 3
Shayla Company allocates overhead to jobs in process using direct labor costs, raw material costs,
and machine hours. The overhead application rates for the current year are:
100% of direct labor
20% of raw materials
₱117 per machine hour.
A particular production incurred the following costs:
Direct Labor, ₱8,000
Raw Materials, ₱2,000
A total of 140 machine hours were incurred for the production run
Compute for the total cost that would be charged to production run.
CORRECT ANSWER: ₱34,780
Solution 100% x ₱8,000 of direct labor = ₱8,000
Total cost = Raw Materials + Direct Labor + Overhead Applied 20% x ₱2,000 of raw materials = ₱400

= ₱2,000 + ₱8,000 + ₱24,780 ₱117 x 140 machine hours = ₱16,380

Total cost = ₱ 34,780 Overhead Applied ₱24,780

QUESTION 4
A Company reported the following information for the current year:
Beginning Inventory ₱1,500,000
Purchases ₱1,000,000
Freight in ₱250,000
Net Sales ₱5,000,000
Gross Sales ₱7,000,000
Sales Returns ₱1,500,000
Sales Discount/Allowances ₱500,000
The entity has a gross profit rate of 25% on sales, what is the estimated cost of goods sold for the
year?
CORRECT ANSWER: ₱4,125,000

Solution:
Beginning Inventory ₱3,500,000 Gross Sales ₱ 7,000,000
Purchases ₱2,000,000 Sales Returns (₱1,500,000)
Freight in ₱250,000
Cost of goods available for sale ₱5,750,000 Net Sale on GP Method ₱5,500,000
Estimated COGS (5,500,000 x 75%) (₱4,125,000) *net sale on GPM is only gross less returns

Estimated Ending Inventory ₱1,625,000

 QUESTION 5
During the month of September, Patricia Company incurred 160 hours of labor at ₱250 per direct
labor hour. The Company applies manufacturing overhead at a predetermined rate of 75% of
direct labor cost. In addition, Patricia Company made a purchase amounting to ₱25,000 of raw
materials. The work in process inventory has a beginning balance of ₱35,000. Consider that during
the month, the raw materials, work in process inventory and finished goods inventory decreased
by ₱4,000, ₱3,000 and ₱2,000 respectively.
Compute for the total manufacturing cost used for the computation of cost of goods
manufactured for the month of September.

CORRECT ANSWER: ₱99,000

Solution
Raw Materials used (₱25,000 + ₱4,000 - ₱0) = ₱29,000
Direct Labor Cost (₱250 x 160) = ₱40,000
Overhead Applied (₱40,000 x 75%) = ₱30,000
Total Manufacturing Cost ₱99,000

QUESTION 6
C Company is planning to sell the business to new interests. The cumulative earnings for the past
5 years, adjusted, amounted to ₱4,130,000, included within are casualty losses of ₱370,000. The
fair value of the net assets of the entity at current year-end was ₱3,000,000. What is the amount
of goodwill if annual average earnings are capitalized at 20%?
CORRECT ANSWER: ₱1,130,000

Solution
Adjusted cumulative earnings ₱ 4,130,000 (*₱370,000 losses already included)
÷ 5 years
Annual Average Earnings ₱ 826,000
Capitalization Rate ÷ 20%
Net assets including goodwill ₱ 4,130,000
Net assets excluding goodwill ₱ (3,000,000)
Goodwill ₱ 1,130,000
 QUESTION 7
Isay Company makes bicycles. It produces 450 bicycles a month. It buys the tires for bicycles from
Ethan Company, a supplier, at a cost of ₱20 per tire. The company’s inventory carrying cost is
estimated to be 15% of the tire’s value. It costs approximately ₱50 to place an order.
Compute for the total cost. Provided that: Total cost = (Average annual ordering cost) + (average
annual carrying cost)
CORRECT ANSWER: ₱1,800

Solution:

S = (2 tires per bicycle) x (450 bicycles per month) x (12 months in a year) = 10,800 tires per year
H = (15%) x (₱20 per unit) = ₱3.00 per unit
EOQ = √2SO/C
= √2 (10,800)(₱50)/ ₱3

EOQ = 600 tires

Annual Ordering Cost = (S/Q)*O Annual Carrying Cost = (Q/2)*C Total cost = AOC + AHC
= (10,800/600)*₱50 = (600/2)*₱3 = (₱900) + (₱900)
AOC= ₱900 AHC= ₱900 Total Cost = ₱1,800

QUESTION 8
B Company purchased a machine on January 1, 2020 for ₱10,000,000. The machine has an
estimated useful life of 15 years with a residual value of ₱250,000. The entity uses SYD method
in depreciating its PPE.
What is the accumulated depreciation for the year ended December 31, 2027?
CORRECT ANSWER: ₱7,475,000

Solution:
Depreciable Amount (10,000,000 – 250,000) 9,750,000
Sum of the Years’ Digits Rate x (92/120)
Accumulated Depreciation 7,475,000

Sum of the Years’ Digit Rate 2020 – 2027 = 8 years lapse

15(15+1) = 120 15+14+13+12+11+10+9+8 = 92
2
QUESTION 9
Ardy and Sophia Company has provided the following data pertaining to certain costs that cannot
be easily identified as either fixed or variable. The company has decided to use the high-low
method to measure its cost function.

COST HOURS
₱24,000 5,500
₱36,400 7,500
₱24,900 5,250
₱45,000 9,500
₱44,160 9,750

What is the estimated total cost at an operating level of 10,000 hours?

CORRECT ANSWER: ₱45,230

Solution
Variable Cost = Cost of Highest Unit - Cost of Lowest Unit/Highest Unit – Lowest Unit
= (₱44,160 - ₱24,900)/(9,750 hours – 5,250 hours)
= ₱19,260/4,500 hours
Variable Cost = ₱4.28
Fixed Cost = Cost of Highest or Lowest Unit – (Highest or Lowest Unit x Variable Cost)
= ₱44,160 – (9,750 x ₱4.28)
Fixed Cost = ₱2,430
Total Cost = Fixed cost + Variable Cost*X
= ₱2,430 + (₱4.28 x 10,000)
Total Cost = ₱45,230
QUESTION 10
E Company acquired an equipment on January 1, 2020. The equipment had an estimated useful
life of 15 years and an estimated residual value of ₱75,000. On 2026, the depreciation expense
recorded by the entity on the equipment was ₱154,875, computed using SYD method.
What is the acquisition cost of the equipment?

CORRECT ANSWER: ₱2,140,000

Solution:
9
154,875 = (𝐶 − 75,000) × 15(15+1)
2

2,065,000 = 𝐶 − 75,000
𝟐, 𝟏𝟒𝟎, 𝟎𝟎𝟎 = 𝑪