EASY QUESTIONS following information on spot rate (P/SF) are provided:

1. Which of the following individuals shall not be subject to

the income tax under Section 24 (A)? BUYING SELLING
a. Individual citizen of the Philippines residing therein; June 15,2015 P24.13 P24.15
b. Individual citizen of the Philippines who residing outside the Philippines including overseas
July 15,2015 P24.10contract workers;P24.22
c. Individual alien who is a resident of the Philippines;
d. Individual alien who is not a resident of the Philippines. How much did ABC pay the Swiss supplier on July 15,2015?
a. P2,415,015
2. Which of the following income is not from a related trade, b. P2,422,000
business or activity of a domestic proprietary educational c. P2,434,110
institution? d. P2,427,075
a. Income from rent of available office spaces in one of the school buildings
b. Income from the hospital where medical graduates are trained 2. for residencyI- Gift is perfected from the moment the donor
Statement
c. Income from the canteen situated within the school campus effects the delivery either actual or constructively of the
d. Income from bookstore situated within the school campus property donated.
Statement II- Donors tax is a property tax imposed on the
3. The confirmation of accounts receivable is most closely property transferred by way of gift inter-vivos
associated with a. True, True b. True, False
a. business risk c. False, True d. False, False
b. detection risk
c. inherent risk 3. A negotiable instrument that is not dated will be
d. relative risk considered dated as at the time of
a. Acceptance c. Last endorsement
4. On April 1,2015, ABC Co. discounted its “own” P60,000, b. First endorsement d. Issuance
one year note, with XYZ Bank at 14%. The entry to record
the discounting on April 1, 2015 would include 4. ABC Inc. is a calendar year corporation. Its financial
a. Debit to Cash of P60,000 statements for the years 2008 and 2007 contained errors
b. Credit to Notes Payable of P60,000 as follows:
c. Credit to Notes Receivable of P60,000
d. Credit to discount on Notes Receivable of P8,400 2008 2007
Ending Inventory P1,000 P3,000
5. A company’s receivable collection period is 40 days while understated overstated
the age of payables is 25 days. If the company’s cash Depreciation P800 understated P2,500
conversion cycle is 75 days out of 360-day year, then how Expense overstated
many times is the inventory turnover?
a. 4 times Assume that the proper correcting entries were made at
b. 6 times December 31,2007. By how much will 2008 income before
c. 18 times income taxes be overstated or understated?
d. 36 times a. P1,000 overstated
b. P500 overstated
6. ABC Co. uses the direct labor cost method for applying c. P200 understated
factory overhead to production. The budgeted direct labor d. P3,200 understated
cost and factory overhead for the previous fiscal year were e. No overstatement or understatement
P1,000,000 and P800,000, respectively. Actual direct labor
cost and factory overhead were P1,100,000 and P825,000, 5. ABC Corporation produces custom-designed safety gear for
respectively. police vehicles. During April, the company incurred the
a. P25,000 overapplied following costs of quality:
b. P55,000 overapplied Product testing costs P 11,200
c. P80,000 overapplied Product warranty claims 13,000
d. P50,000 overapplied Scrap and rework cost 10,500
Product engineering design costs 18,900
7. In establishing the existence and ownership of a long-term Employee training costs 10,100
investment in the form of publicly traded shares , an Product Simulation costs 16,400
auditor should inspect the securities or Total quality costs of conformance for April were
a. Inspect the audited financial statements of the a. P80,100
investee company b. P56,600
b. Confirm the number of shares owned that are c. P42,400
held by an independent custodian d. P40,200
c. Determine that the investment is carried at the
lower of cost or market 6. The inventory and warehousing cycle can be thought of as
d. Correspond with the investee company to verify comprising two separate but closely related systems, one
the number of shares owned involving the actual physical flow of goods, and the other
the
AVERAGE QUESTIONS 1. internal control over those goods
1. On June 15, 2015, ABC Co. purchased merchandise 2. related costs
inventory worth 100,000 Swiss francs from its Swiss 3. storing of the goods
supplier payable within 30 days under an open account 4. prevention of wastes, obsolenscence, and theft
arrangement. ABC issued a 30-day 6% note payable in
Swiss francs. On July 15,2015, ABC paid the note in full. The
 7. The Whitianga Company commenced the construction of a
new packaging plant on 1 February 20X7. The cost of
PHP1,800,000 was funded from existing borrowings. The
construction was completed on 30 September 20X7.
Whitianga's borrowings during 20X7 comprised:
Loan from Largo Bank: PHP800,000 at 6% per annum;
Loan from Andante Bank: PHP1 million at 6.6% per annum;
and
Loan from Allegro Bank: PHP3 million at 7% per annum.
In accordance with IAS23 Borrowing costs, the amount of
borrowing costs to be capitalized in relation to the
packaging plant is
A0
B PHP121,500
C PHP81,000
D PHP91,125
DIFFICULT QUESTIONS
1. ABC Publishers Inc. is considering replacing an old press that
costs P800,000 six years ago with a new one that would cost
P2,250,000. Shipping and installation would cost an additional
P200,000. The old press has a book value of P150,000 and could
be sold currently for P50,000. The increased production would
increase inventories by P40,000, accounts receivable by
P160,000 accounts payable by P140,000. ABC’s net initial
investment for analyzing the acquisition of the new press
assuming 35% income tax would be? P2,425,000
2. A VAT subject real estate dealer sold a residential lot on January
15, 2007. The following information was made available on the
terms of the sale:
Gross selling price P
3,000,000
Initial payments on January 15, 2007 750,000
Balance to be paid in equal installment,
installments starting February 15, 2007 2,250,000
The zonal value of the residual lot was P3,500,000.
How much was the output tax on January 15, 2007 using 12%
VAT rate? P105,000
3. A gets a loan of P 1,000,000 from B which becomes due on
October 1, 2008 and mortgaged his house as security for the
debt. On June 30, 2008, the mortgaged house completely
destroyed the fire through the fault of C. A week later, B
demanded payment from A. Is B’s demand valid?
a. No, the destruction of the house was not thru the fault of
A.
b. No, the obligation is one with a definite period which is
deemed intended for the benefit of both the debtor and
creditor
c. Yes, the debt becomes demandable unless A can give
another security equally satisfactory
d. Yes, the debt becomes demandable even if A can give
another security equally satisfactory

4. Balance sheet information for Sphinx Company at January 1, 2005, is summarized as follows:

Current assets P 230,000 Liabilities P 300,000

Plant assets 450,000 Capital stock P10 par 200,000
Retained earnings 180,000
P 680,000 P 680,000

Sphinx’s assets and liabilities are fairly valued except for plant assets that are undervalued by P50,000. On January 2, 2005,
Pyramid Corporation issues 20,000 shares of its P10 par value common stock for all of Sphinx’s net assets and Sphinx is
dissolved. Market quotations for the two stocks on this date are:

Pyramid common: P28.00

Sphinx common: P19.50

Butler pays the following fees and costs in connection with the combination:

Finder’s fee P10,000

Legal and accounting fees 6,000

How much Goodwill should be recognized? P146,000

5. The Polyphony Company had 100,000 equity shares in issue on 1 January 20X7. On 1 July 20X7 it issued 20,000 new shares by way of a 1
for 5 bonus. On 1 October 20X7 it issued 28,000 new shares for cash at full market price. When calculating basic earnings per share, how
many shares should be divided into the profit after tax, according to IAS33 Earnings per share? 127,000

6. Based on a consideration of internal control completed at an interim date, the auditor assessed control risk at a low level and performed
interim substantive tests. The records and procedures would most likely be tested again at year-end if
a. Tests of controls were not performed by the internal auditor during the remaining period.
b. Internal control provides a basis for limiting the extent of substantive testing.
c. The auditor used nonstatistical sampling during the interim period testing of controls.
d. Inquiries and observations lead the auditor to believe that conditions have changed.

7. On January 1, 20X7 The ABC Company borrowed PHP6 million at an annual interest rate of 10% to finance the costs of building an
electricity generating plant. Construction commenced on January 1, 20X7 and cost PHP6 million. Not all the cash borrowed was used
immediately, so interest income of PHP80,000 was generated by temporarily investing some of the borrowed funds prior to use. The
project was completed on November 30, 20X7. What is the carrying amount of the plant at November 30, 20X7? P6,470,000