An entity maintains a checking account at metro bank.

The bank provides a bank statement along

with canceled checks on the last day of each month. The October bank statement included the
following information:
Balance, October 1 3,200,000
Deposits 8,600,000
Checks processed 7,500,000
Service charges 50,000
NSF checks 150,000
Monthly loan payment deducted directly by bank 500,000
from account including P50,000 in interest
Deposits outstanding totaled P400,000 and all checks written by the entity were processed by the
bank except for those totaling P500,000. In addition, a check for P200,000 was incorrectly recorded
by the entity as a P300,000 disbursements. The bank correctly processed the check during October.
1. What amount should be reported as cash in bank October 31?
a. 3,500,000 c. 3,700,000
b. 3,600,000 d. 3,400,000
2. What is the cash in bank balance per ledger on October 31?
a. 4,100,000 c. 4,150,000
b. 4,300,000 d. 4,000,000
An entity provided the following information at year end:
2020 2019
Accounts receivable 880,000 800,000
Allowance for doubtful accounts (10,000) (15,000)
Allowance for products returns (20,000) (25,000)
Net realizable value 850,000 760,000
The entity reported debt expense in 2020 of P30,000 and had products returned for credits totaling
P15,000 at sales price. Gross sales for 2020 amounted to P6,150,000.
3. What amount of account receivable was written during 2020?
a. 35,000 c. 15,000
b. 30,000 d. 10,000
4. What amount was collected from customers during 2020?
a. 6,035,000 c. 6,020,000
b. 6,070,000 d. 6,100,000
5. What amount was reported as net sales for 2020?
a. 6,150,000 c. 6,100,000
b. 6,140,000 d. 6,135,000
On December 1 2019, an entity sold 8,000 units at P500 per unit. The entity granted the customers a
right of return within 45 days if not satisfied. The customers shall receive either a full refund if cash
was already paid or a full credit for the amount owed.
Based on past experienced, it is estimated that 5% of the units sold will be returned within 45 day
period. The cost per unit is P200. The entity used the perpetual system.
6. What amount should be reported as sales revenue for December?
a. 4,000,000
b. 3,800,000
c. 3,500,000
d. 0
7. What amount should be recognized as refund liability for the goods sold in December?
a. 200,000
b. 400,000
c. 250,000
d. 0
8. What amount should be reported as cost of goods sold for December?
a. 1,520,000
b. 1,600,000
c. 1,680,000
d. 0

On January 1 2019, F bank loaned P3,000,000 to a borrower. The contract specified that the loan has
a 6year term and a 9% interest rate. Interest is payable annually every December 31 and the
principal amount will be collected on December 31 2024.
On December 31 2019, based on relevant information, the bank determined that the loan has a 12
month probability of default of 10% and that it expected to collect only 90% of the loan. Interest is
collected for 2019.
On December 31 2020, the bank determined that there is a significant increase in the credit risk of the
loan but no objective evidence of impairment.
Based on relevant information in 2020, the bank concluded that there is a 30% probability of default
over the remaining term of the loan and it is expected that only 60% of the loan will be collected.
Interest is collected for 2020.
On December 31 2021, the borrower is considered under financial difficulty and the loan is impaired
because there is an objective evidence of impairment. The bank agreed that only 40% of the principal
will be collected on due date. Interest is collected for 2021.
The present value of 1 at 9% is 0.65 for 5 periods, 0.71 for 4 periods and 0.77 for 3 periods.
9. What amount of impairment loss is recognized for 2019?
a. 1,755,000
b. 1,245,000
c. 300,000
d. 124,500
10. What amount of impairment loss is recognized for 2020?
a. 1,722,000
b. 1,200,000
c. 516,600
d. 392,100
11. What amount of impairment loss is recognized for 2021?
a. 2,076,000
b. 1,800,000
c. 1,559,400
d. 240,600
12. What is the interest income for 2022?
a. 108,000
b. 270,000
c. 83,160
d. 90,644
13. What is the carrying amount of the loan receivable on December 31 2022?
a. 1,007,160
b. 1,200,000
c. 924,000
d. 840,840
Situation 1- During a move to a new location, the inventory records of E company were misplaced.
The bookkeeper has been able to gather some data for the July purchases.
Units Unit Cost Total Cost
July 5 10,000 65 650,000
10 12,000 70 840,000
15 15,000 60 900,000
25 14,000 55 770,000
On July 31 17,000 units were on hand. The sales for July amounted to P6,000,000 or 60,000 units at
P100 per unit. The entity has always used a perpetual FIFO inventory costing system. Gross profit on
sales for July was P2,400,000.
Situation 2- W company recorded purchases at gross amount but decided to change to recording
purchases at net amount. Discounts available on purchases recorded from October 1 2019 to
September 30 2020 totaled P20,000. Of this amount, P2,000 is still available in the accounts payable.
The balances on September 30 2020 before conversion are purchases P1,000,000, purchase discounts
taken P8,000 and accounts payable P300,000.
14. What was the cost of inventory of E company on July 1?
a. 1,390,000 c. 950,000
b. 2,400,000 d. 760,000
15. What amount should W company report as accounts payable on September 30 2020?
a. 298,000
b. 292,000
c. 288,000
d. 282,000
Situation 1- G company reported the December 31 2019 year end inventory balance at P2,500,000.
The following transactions are provided to determine if they have been correctly recorded:
 Goods shipped to the entity FOB destination on December 26 2019 were received on January 2
2020. The invoice cost of P300,000 is included in the preliminary inventory balance.
 At year end, the entity held P250,000 of merchandise on consignment from another entity.
This merchandise is included in the preliminary inventory balance.
  On December 29 2019 merchandise costing P100,000 was shipped to a customer FOB shipping
point and arrived at the customer’s location on January 3 2020. The merchandise is not
included in the preliminary inventory balance.
 At year end, the entity had merchandise costing P150,000 on consignment with the another
entity. The merchandise is not included in the preliminary inventory balance.

Situation 2- Y company reported accounts payable on December 31 2019 at P900,000 before any
necessary year end adjustments relating to the following:
 Goods were in transit from a vendor on December 31 2019. The invoice cost was P50,000, and
the goods were shipped FOB shipping point on December 29 2019. The goods were received on
January 4 2020.
 Goods shipped FOB shipping point on December 20 2019 from a vendor were lost in transit.
The invoice cost was P25,000. On January 5 2020, the entity filed a P25,000 claim against the
common carrier.
 Goods shipped FOB destination on December 21 2019 from a vendor were received on January
6 2020. The invoice cost was P15,000.
16. What amount should G company report as inventory on December 31, 2019?
a. 2,100,000
b. 2,200,000
c. 2,400,000
d. 2,500,000
17. What amount should Y company report as accounts payable on December 31 2019?
a. 925,000
b. 940,000
c. 950,000
d. 975,000

M company engaged in the following investment transactions during the current year.
February 1 Purchased 5,000 ordinary shares of Medical company for P200 per share plus a
brokerage commission of P50,000
April 1 Bought 30,000 of the 100,000 outstanding shares of Olde company for P3,000,000.
Goodwill of P800,000 was included in the price.
June 25 Received P120 per share dividend on medical company shares.
June 30 Olde company reported second quarter net income of P1,500,000
Oct 1 Purchased 20,000 shares of Alpha company for P150 per share plus brokerage fee of
P100,000. These shares are designated at FVOCI
Dec 31 received P50 per share dividend on alpha company shares.
31 Medical company shares are selling for P250 and Alpha shares are selling for P180
31 Olde company reported net income of P4,000,000 for the last two quarters of the year
and paid cash dividend of P1,500,000.
18. What amount of dividend income should be reported for the current year?
a. 1,600,000
b. 1,000,000
c. 2,050,000
d. 1,050,000
19. What total amount of income should be reported for the current year?
a. 2,500,000
b. 3,500,000
c. 3,000,000
d. 4,000,000

An entity acquired 40% of another entity’s shares on January 1 2019 for P15,000,000. The investee’s
assets and liabilities at that date were:
Carrying amount Fair value
Cash 1,000,000 1,000,000
Accounts receivable 4,000,000 4,000,000
Inventory-FIFO 8,000,000 9,000,000
Land 5,500,000 7,000,000
 Plant and equipment-net 14,000,000 22,000,000
liabilities 7,000,000 7,000,000
The plant and equipment have a 10 year remaining useful life. The inventory was all sold in 2019. The
entity sold the land in 2020 for P8,000,000 and reported a gain of P2,500,000.
The investee reported net income of P3,000,000 for 2019 and P5,000,000 for 2020. The investee paid
P1,000,000 cash dividend on December 31 2019 and P2,000,000 on December 31 2020.
20. What is the investment income for 2019?
a. 880,000
b. 480,000
c. 400,000
d. 580,000
21. What is the investment income for 2020?
a. 1,080,000
b. 2,280,000
c. 1,680,000
d. 2,880,000

R company purchased several investment securities during 2020. The entity provided the following
information pertaining to these securities.
Fair value Fair value Amortized cost Amortized cost
12/31/2019 12/21/2020 12/31/2019 12/31/2020
ABC bonds at 375,000 400,000 367,500 360,000
amortized cost
Trading securities Fair value Fair value cost
12/31/2019 12/31/2020
DEF shares 48,000 59,500 66,000
GEF shares 47,000 77,000 39,000
IJK shares 44,000 38,500 32,900
Equity securities at Fair value Fair value cost
FVOCI 12/31/2019 12/31/2020
LMN shares 130,500 150,400 140,000
22. What total carrying amount should be reported for the investment securities December 31 2020?
a. 637,000
b. 685,000
c. 725,400
d. 325,400
23. What would be the balance of other comprehensive income with respect to these investments on
December 31 2020?
a. 55,100
b. 26,500
c. 10,400
d. 19,900
On January 1 2019, an entity purchased 9% bonds in the face amount of P6,000,000. The bonds
mature on January 1 2024 and were purchased for P5,550,000 to yield 11%. The entity classified the
bonds as held for trading and interest is payable annually every December 31.
Fair value Effective rate
December 31 2019 5,450,000 12%
December 31 20220 6,150,000 8%
On December 31 2020, the entity changed the business model for the investment from held for
trading to held for collection of contractual cash flows. On January 1 2021, the fair value of the bonds
did not change.
24. What amount of unrealized gain should be recognized in profit or loss for 2020?
a. 150,000
b. 600,000
c. 700,000
d. 0

25. What is the interest income for 2021?

a. 492,000
b. 540,000
c. 480,000
d. 676,500
26. What is the carrying amount of the bond investment on December 31 2021?
a. 6,150,000
 b. 6,090,000
c. 6,000,000
d. 6,102,000

Situation 1- on September 30 2019, S company acquired all of the outstanding ordinary shares of an
acquiree for P50,000,000. In addition to tangible assets, the entity recorded the following assets as a
result of the acquisition:
Patent 6,000,000
Developed technology 3,000,000
In process research and development 2,000,000
goodwill 7,000,000
The policy is to amortize intangible assets using the straight line method with no residual value and at
6-year useful life.
Situation 2-N company commenced operations at the beginning of current year. A number of
expenditures were debited to one account called intangible assets.
State incorporation fees and legal costs related to organizing the corporation 100,000
Fire insurance premium for three-year period 60,000
Purchased of a copyright 200,000
Research and development costs 400,000
Legal fees for filing a patent on a new product resulting from an R & D project 50,000
Legal fees for successful defense of the patent developed from the project 10,000
Entered into a 10year franchise agreement with a franchisor 500,000
Advertising cost 150,000
Purchase of all of the outstanding ordinary shares of an acquiree with total
assets of P6,000,000 and total liabilities of P2,200,000 at fair value 5,000,000
Situation 3- During the current year, Z company began work on a research and development project.
The project was completed and commercial production of the developed product began in December.
All of the following expenditures were included in the R & D expense account:
Salaries and wages for laboratory research 1,000,000
Design of preproduction prototype 200,000
Construction of preproduction prototype 150,000
Quality control during commercial production 100,000
Materials and supplies consumed for laboratory research 400,000
Purchase of equipment used solely for the project-useful life 5 years 600,000
Patent filing and legal fees for completed project 50,000
Payments to others for research 300,000
27. What amount of amortization of intangible assets was reported by S company for 2019?
a. 250,000
b. 125,000
c. 375,000
d. 625,000
28. What total amount should N company report as intangible asset?
a. 1,950,000
b. 1,960,000
c. 2,050,000
d. 2,350,000
29. What amount should Z company report as research and development expense for the current
year?
a. 2,650,000
b. 2,170,000
c. 2,050,000
d. 2,350,000

An entity paid P20,000,000 for the right to explore and extract rare metals in Mindoro. To obtain the
right, the entity agreed to restore the land to a suitable condition for other uses after exploration and
extraction activities. The entity incurred exploration and development costs of P6,000,000 on the
project. The entity has a credit adjusted risk free interest rate of 7%. The present value of 1 at 7% for
three periods at 0.82. the probable cash flows for restoring the land three years after extraction
activities begin are 60% probability P1,000,000 and 40% probability P3,000,000.
30. What is the estimated liability for restoration cost at the beginning of the extraction activities?
 a. 4,000,000
b. 1,476,000
c. 1,800,000
d. 3,000,000
31. What amount should be reported as interest expense for the current year?
a. 103,320
b. 280,000
c. 140,000
d. 0
32. What is the estimated liability for restoration cost one year after the extraction activities begin?
a. 1,579,320
b. 1,476,000
c. 1,570,000
d. 1,926,000

An entity purchased land as factory site and contracted with a contractor to construct a factory. The
entity made the following expenditures related to the acquisition of the land, building and machinery:
Purchased price of the land 1,200,000
Demolition and removal of old building 80,000
Clearing and grading the land before construction 150,000
Various closing costs in connection with acquiring the land 40,000
Architect fee for the plans for the new building 50,000
Payment to contractor for building construction 3,250,000
Machinery purchased 850,000
Freight charge on machinery 30,000
Trees, plants and other landscaping 45,000
Installation od sprinkler system for the landscaping 5,000
Cost to build special platform and install wiring for the machinery 10,000
Cost of trial runs to ensure proper installation of the machinery 20,000
Fire and theft insurance on the factory for the first year of use 60,000
33. What is the cost of the land?
a. 1,390,000
b. 1,470,000
c. 1,440,000
d. 1,550,000
34. What is the cost of the building?
a. 3,300,000
b. 3,380,000
c. 3,450,000
d. 3,530,000
35. What is the cost of machinery?
a. 970,000
b. 900,000
c. 910,000
d. 960,000
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