USC PART 2020 (FAR)- RETAKE

1. All of the following entities are publicly accountable, except

a. An entity Holds assets in a fiduciary capacity for a broad group of outsiders as one
of its primary businesses.
b. An entity whose shares are traded in a public market.
c. An entity whose debt instrument, but not the shares, are traded in a public market
d. An entity that is not in the process of issuing shares and debt instruments for trading
in a public market.
2. A complete set of financial statements for SMEs
a. Contains only a statement of financial position and an income statement.
b. Is similar to that provided for by full IFRS.
c. Is similar to that provided for by full IFRS except notes including accounting
policies.
d. Contains a statement of financial position, a single statement of comprehensive
income, a statement of changes in equity and a statement of cash flows only
3. These are transactions in which the entity receives goods or services as consideration for
equity instruments
a. Cash settled share-based transactions
b. Cash payment transactions
c. Equity payment transactions
d. Equity settled share-based payment transactions
4. If share-based payment transaction provides that the employees have the right to choose
the settlement whether in cash or shares, the entity is deemed to have issued
a. Compound financial instrument
b. Either an equity instrument or a liability instrument but not both
c. A liability instrument
d. An equity instrument
5. Which of the following statements is incorrect?
a. Temporary difference may arise from either taxable temporary differences or
deductible temporary differences.
b. The total tax expense is comprised of the current tax expense.
c. Current tax is the amount of income taxes payable in respect of the taxable profit
for a period.
d. Amounts that may be recoverable in future periods in respect of the carryforward
of unused tax credits is recognized as a deferred tax asset
6. The following are considered characteristics a component of an entity that is considered am
operating segment, except;
a. It represents a separate major line of business or geographical area of operations
b. There is a discrete financial information available.
c. Engages in business activities from which it may earn revenue and incur expenses.
d. Its performance is regularly reviewed by someone in the entity who is in charge of
the allocation of resources of the entity.
7. Conceptually, interim financial statements can be described as emphasizing
a. Timeliness over reliability c. Relevance over comparability
b. Reliability over relevance d. Comparability over neutrality.
8. Chungcook Corp. has a product warranty liability amounting to P10,000. The product
warranty costs are not tax deductible until paid out to customers. The company tax rate is
30%. The company has
a. An assessable temporary difference of P10,000
b. A deductible temporary difference of P10,000
c. A deductible temporary difference of P3,000
d. An assessable temporary difference of P3,000
9. On January 1, 2020 LISA, Inc. established a share appreciation rights plan for its executives
conditional upon the executives’ remaining in the entity’s employ for four years. It entitled
them to receive cash at any time after four years for the difference between the market price
of its ordinary share and a pre-established price of P20 on 100,000 SARs (Share
Appreciation Rights). Current market prices of the share as follows:

January 1, 2020 P25 per share

December 31, 2020 38 per share

December 31, 2021 30 per share

December 31, 2022 33 per share

What amount of compensation expense should LISA recognize for the year ended
December 31, 2022?

a. P475,000
b. P150,000
c. P975,000
d. P550,000
Cyberpunk 2077 had a defined benefit plan for the employees. On January 1, 2018, the entity
provided the following balances related to this plan:

Fair value of the plan assets P2,700,000

Projected benefit obligation P3,400,000

During 2018, the actuary provided the following information:

Service cost 450,000

Actual return on plan assets 270,000

Benefits paid to retirees 410,000

Discount rate 7%

Contribution to the plan ?

10. What amount of employee benefit expense should be reported for 2018?
a. P418,000 c. P450,000
b. P499,000 d. P459,000
11. What is the cash contribution to the plan asset for 2018?
a. P232,000 c. P650,000
b. P418,000 d. P731,000
12. A director of BeTeaEs Company shall receive a retirement benefit of 20% of final salary
per annum for a contractual period of three years. The anticipated salary is P1,000,000 for
2020, P1,200,000 for 2021 and P1,500,000 for 2022. The discount rate is 10% Under the
projected unit credit method, what is the estimated pension liability on December 31, 2021?
(ROUND OFF THE PRESENT VALUE FACTOR TO 3 DECIMAL POINTS)
a. P900,000
b. P545,280
c. P600,000
d. P520,500
 13. RushB Company purchased a machine on January 1, 2013 for P3,000,000. At the date of
acquisition, the machine had a life of six years with no residual value. The machine is being
depreciated on a straight line basis. On January 1, 2016, the entity determined that the
machine had a useful life of five years from the date of acquisition with residual value of
P100,000.
What is the depreciation for 2016?
a. P750,000 c. P600,000
b. P700,000 d. P500,000
14. The income statement of SAMAHANGFOREVERALONESA CHRISTMAS
ANSWERMOUG”A” Company shows a corrected/adjusted net income of P175,000 for
the year ended December 31, 2012. Adjustments were made for the following errors:
• December 31, 2011, inventory overstated by P 22,500
• December 31, 2012, inventory understated by P37,500
• A P 10,000 customer’s deposit received in December 2012, was credited to sales in
2012. The goods were actually shipped in January 2013.
What is the unadjusted net income of Sir IDOL Company for the year ended December 31,
2012?
a. P234,000 c. P200,000
b. P125,000 d. P170,000

At the beginning of current year, Baby Yoda Corp. was authorized to issue share capital of 100,000
shares with P30 par value. The entity had the following share capital transactions during the year:

Jan. 1 Issued 80,000 shares at P70 per share.

May 1 Reacquired 4,000 treasure shares at P65 per share.
July 1 Approved a share split of 5 for 1.
October 31 Issued a 10% share dividend when the market value of a share is P25
December 31 Reissued all the treasury shares at P35
December 31 Net income for the year was P4,500,000
15. What amount should be reported as share capital at year-end?
a. P2,940,000 c. P3,428,000
b. P3,2000,000 d. P2,628,000
 16. What total amount should be reported as share premium at year-end?
a. 3,200,000 c. 3,640,000
b. 4,362,000 d. 3,922,000
17. What amount of retained earnings should be reported at year-end?
a. 2,950,000 c. 4,500,000
b. 3,550,000 d. 3,430,000
18. Stock dividends payable should be classified
a. On the income statement as an expense
b. On the balance sheet as a liability
c. On the balance sheet as an item of shareholder’s equity
d. On the balance sheet as an asset
19. Which of the following requires a prospective application?
a. Change in valuation of inventory from FIFO to Weighted Average
b. Changing of depreciation method from double-declining to straight-line method.
c. Overcharging of depreciation in the prior year.
d. All of the choices requires retrospective application
20. The following information has been taken from the ledger accounts of
PINAMANMANSTYLE MD3 Corporation:

Total net income since incorporation P10,000,000

Total cash dividends paid P1,000,000
Carrying value of the company’s investment in Yogi
P1,000,000
Company declared as property dividend
Proceeds from sale of donated shares P1,000,000
Total value of stock dividends distributed P1,000,000
Gains on treasury share transactions P1,000,000
Unamortized premium on bonds payable P1,000,000
Appropriated for contingencies P1,000,000
The current balance of unappropriated retained earnings is

a. P6,000,000 c. P4,000,000
b. P5,000,000 d. P7,000,000
21. PAGPUYOMOSBALAYPLIZPARAMAHUMANNANGPANDEMICPARAMAKAGA
WASNATAG TANANBALIK Company declared a 5% stock dividend on its 100,000
issued and outstanding shares of P20 par value, which had a fair value of P50 per share
before the stock dividend was declared. This stock dividend was distributed 60 days after
the declaration date. What is the increase in current liabilities as a result of the stock
dividend declaration?
a. 150,000 c. 100,000
b. 0 d. 250,000
22. DILI”C”ANGANSWER Company had 10,000 shares issued and outstanding on January
1, 2020. During 2020, the company took the following actions
• March 15. Declared a 2-for-1 share split, when the fair value of the share was P80
per share
• December 15. Declared a P5 per share cash dividend
In the statement of changes in equity for 2020, what amount should be reported as
dividends?
a. P100,000 c. P950,000
b. P850,000 d. P50,000
23. In an effort to increase sales, PESTOPES Company (razor blades manufacturer)
inaugurated a sales promotion campaign on June 30, 2020, whereby PESTOPES placed a
coupon in each package of razor blades sold, the coupons being redeemable for a premium.
Each premium costs PESTOPES P0.50, and five coupons must be presented by a customer
to receive a premium. PESTOPES estimated that only 60% of the coupons issued will be
redeemed. For the six months ended December 310, 2020, the following information is
available:

Packages of razor blades sold 400,000

Premiums purchased 30,000
Coupons redeemed 100,000
What is the estimated liability for premium claims outstanding at December 31, 2020?

a. P14,000 c. P18,000
b. P24,000 d. P10,000
24. On January 2, 2020, YOUCANDOTHISFUTURECPAS! Company introduced a new line
of products that carry a three-year warranty against factory defects. Estimated warranty
costs related to peso sales are as follows: 1% of sales in the year of sale, 2% in the year
after sales and 3% in the second year after sale.
Sales and actual warranty expenditures for the period 2011 to 2013 were as follows:

Sales Actual Warranty Expenditures

2020 P200,000 P1,500
2021 P500,000 P7,500
2022 P700,000 P22,500
Total P1,400,000 P31,500
What amount should YOUCANDOTHISFUTURECPAS! Company report as warranty
expense in 2022?
a. P52,500 c. P23,000
b. P22,500 d. P42,000
25. OPERATIONBROKENFANG Company, a grocery retailer, operates a customer loyalty
program. The entity grants program members loyalty points when they spend a specified
amount on groceries. Program members can redeem the points for further groceries. The
points have no expiry date. During 2020, the entity granted 10,000 points. Management
expects that 8,000 of these points will be redeemed. The fair value of each loyalty point is
estimated at P100. The sales during 2020 amounted to P8,000,000 including the loyalty
points. On December 31, 2020, 4,000 points have been redeemed in exchange for groceries.
In 2021, the management revised its expectations and now expects 9,000 points to be
redeemed. During 2021, the entity redeemed 4,100 points. What is the revenue earned from
loyalty points for the year ended December 31, 2021?
a. 80,000
b. 100,000
c. 500,000
d. 400,000

26. RAINRAINGOAWAYKAYAMONGINTERNETMAPUTOL Company sells washing

machines that carry a three-year warranty against manufacturer’s defects. Based on the
entity’s experience, warranty costs are estimated at P300 per machine. During the current
 year, RAINRAINGOAWAYKAYAMONGINTERNETMAPUTOL Company sold 2,400
washing machines and paid warranty costs of P170,000. In its income statement for the
current year, what amount should RAINRAINGOAWAY KAYAMONGINTERNET
MAPUTOL Company report as warranty expense?
a. P720,000 c. P240,000
b. P170,000 d. P550,000
27. AYAWANABADI Company estimates its annual warranty expense at 2% of annual net
sales. The net sales for 2020 amounted to P4,000,000. On January 1, 2020, the warranty
liability is P60,000 and the warranty payments during 2020 totaled P50,000. What is the
warranty liability on December 31, 2020?
Group of answer choices
a. P10,000 c. P90,000
b. P80,000 d. P70,000
28. TIKTOKERIST Company provides a warranty to its products. It estimated that 5% of the
products sold will have a normal defect. During the same year, TIKTOKERIST revised its
estimate by increasing it to 10%. What standard shall be used with regard to this change?
a. PFRS 17 c. PAS 37
b. PFRS 15 d. PAS 8
29. The following may be reclassified into a different category, except
a. Debt investment at FVOCI
b. Debt investment held for trading
c. Debt investment at amortized cost
d. Debt Investment at FVPL under the Fair Value option
30. Which of the following statement is (are) correct?
I. The lease liability of the lessee for a finance lease would be periodically reduced by lease
payment less the portion allocable to interest
II. In a sales type lease, gross investment is equal to the present value of the gross rentals
plus the absolute amount of the residual value, whether guaranteed or unguaranteed.
III. In determining the cost of goods sold under a sales type lease, the present value of the
unguaranteed residual value is deducted from the cost of the underlying asset sold plus the
initial direct cost paid by the lessor
a. All of the statements are correct
b. I and III only
c. I only
d. I and II only
31. On January 1, 2020 Delaware Company sold a building and immediately leased it back.
The following data pertain to the sale and leaseback transaction

Sales price at above fair value P11,250,000

Fair value of building 10,000,000
Carrying amount of building 9,000,000
Annual rental payable at the end of each year 750,000
Remaining life of the building 20 years
Lease term 4 years
Implicit interest rate 12%
What is the cost of the right of use asset? (Round off PV Factor to 3 decimal places).
a. 513,875 c. 2,049,975
b. 1,027,750 d. 924,975
32. An entity issued a 10-year bonds payable with face amount of P4,000,000 on January 1,
2018. The interest is payable annually on December 31 at the 6% stated interest rate. The
bonds were issued to yield 9%. What is the market price of the bonds on January 1, 2018?
(Round off the PV Factor to 2 decimal places)
a. P3,220,80 c. P4,000,000
b. P1,680,000 d. P3,991,200
On January 1, 2018, Kobiachi Company issued P3,000,000, 11% bonds for P3,195,000. The
market rate of interest for these bonds is 10% and mature on January 1, 2029. Interest is payable
annually on December 31. Kobiachi used the effective ineterst method of amortization. On
December 31, 2019, Kobiachi was under financial difficulty and therefore entered into a debt
restructuring agreement with the creditor. In the agreement, Kobiachi will issue 20,000 shares with
P100 par value on December 31, 2019 to settle the bonds. On such date, the shares do not have a
fair value but the bonds are quoted at 104. Kobiachi was unable to pay the required interest on
Decemer 31, 2019. Interest was accrued on such date.

33. What is the carrying amount of the bonds payable on December 31, 2019 before accrued
interest?
a. 3,195,000 c. 3,000,000
b. 3,172,950 d. 3,184,500
34. What amount of gain on extinguishment should be recognized for 2019?
a. 52,950 c. 120,000
b. 382,95 d. 307,950
35. What is the law regulating the practice of accountancy in the Philippines?
a. R.A. No. 9298 c. R.A. No. 9892
b. R.A. No. 9928 d. R.A. No. 9198
36. Which statement is incorrect in relation to the practice of public accounting?
a. The Securities and Exchange Commission can register any corporation organized
for the practice of public accounting.
b. Partners pf partnership formed for the practice of public accounting shall be
registered CPAs in the Philippines.
c. The Professional Regulation Commission upon favorable recommendation of the
Board of Accountancy shall issue certification of accreditation to CPAs in public
practice provided the registrant has acquired a minimum of three years of
meaningful experience in public practice.
d. Single practitioners for the practice of public accounting shall be registered CPAs
in the Philippines
37. All of the following are represented in FRSC, except
a. Commission on Audit
b. Securities and Exchange Commission
c. Department of Finance
d. Board of Accountancy
38. The Continuing Professional Development is required for
a. Nether renewal of CPA license nor accreditation to practice the accountancy
profession
b. Accreditation to practice the accountancy profession
c. Renewal of CPA license
d. Both renewal of CPA license and accreditation to practice the accountancy
profession
39. Which is the accounting standard setting body in the Philippines at the present time?
a. Auditing and Assurance Standards Council
b. Philippine Accounting Standards Board
c. Accounting Standard Council
d. Financial Reporting Standards Council
40. IFRIC Interpretations issued by IASB
a. Cover issues with conflicting interpretations
b. All of these are true about IFRIC Interpretations
c. Are considered authoritative and must be followed
d. Cover newly identified financial reporting issues not specifically addressed
41. Once an accounting standard has been established
a. The task of reviewing the standard is given to a national organization of CPAs
b. The standard is not reviewed
c. The standard is continually reviewed to see if modification is necessary
d. No revision should be made to the standards
42. It is the area of accountancy profession that encompasses the process of analyzing,
classifying, summarizing and communicating all transactions involving the receipt and
disposition of government funds and property and interpreting the results thereof
a. Private Accounting c. Internal Auditing
b. Government Accounting d. External Auditing
43. Which of the following is the foundation of Conceptual Framework?
a. The elements of financial statements
b. The financial statements and the reporting entity
c. The objective of financial reporting
d. The qualitative characteristics of useful financial information
44. Which of the following is not an enhancing characteristics?
a. Verifiability c. Usefulness
b. Timeliness d. Comparability
45. Which statement is TRUE concerning the financial Statements?
a. Financial statements do not provide all the information that users may need to make
economies decisions since these largely portray the financial the financial effects
of past events and do not necessarily provide nonfinancial information.
b. All of these statements are true concerning financial statements.
c. The primary responsibility for the preparation and presentation of the financial
statements of an entity is reposed in the management of the entity.
d. Financial statements show the results of the stewardship of management or the
accountability of management for the resources entrusted to it.
46. EPS disclosure are required for
a. All entities
b. Entities that are in the process of issuing ordinary shares in the public market
c. Entities whose ordinary shares and potential ordinary shares are publicly traded
d. Entities whose ordinary shares and potential ordinary shares are publicly traded and
entities that are in the process of issuing ordinary shares in public market.
 47. In its financial statements, NAVARO Co. discloses supplemental information on the
effects of changing prices. NAVARO computed the increase in current cost of inventory
as follows:
Increase in current cost (nominal pesos) P15,000
Increase in current cost (constant pesos) P12,000
What amount should NAVARO disclose as the inflation component of the increase in
current cost of inventories?
a. P15,000 c. P12,000
b. P3,000 d. P27,000

An entity reported the following information on January 1, 2019:

Ordinary share capital, P10 par, 800,000 share 8,000,000

Preference share capital, P50 par, 50,000 share 2,500,000

12% Bonds payable 5,000,000

The preference share capital is 10% cumulative and convertible into 100,000 ordinary shares.
Dividends on preference shares are in arrears for two years.

The 12% bonds are convertible into 80 ordinary shares for each P1,000 bond.

Unexercised share options to purchase 90,000 ordinary shares at P20 per share were outstanding
at the beginning and ending of 2019. The average market price on December 31, 2019 was P40
per share.

May 1 Issued 60,000 ordinary shares at P25 per share.

July 1 Purchased 100,000 ordinary shares at P15 to be held as treasury.

Oct. 1 Converted bonds with face amount of P2,000,000.

Dec. 31 The net income for 2019 was P2,000,000. The tax rate is 30%

48. What is the amount of basic earnings per share?

a. P1.81 c. P1.74
b. P2.03 d. P2.11
49. What is the amount of diluted earnings per share?
 a. P1.74 c. P2.11
b. P2.03 d. P1.81
50. Kathrine Co. began operation on January 1, 2020, with P1,500,000 from the issuance of
share capital and borrowed funds of P300,000. Net income for 2020 was P100,000 and
Kathrine paid a P50,000 cash dividend on December 15. No additional activities affected
owners’ equity in 2016. At December 31, 2020, Kathrine’s liabilities had increased to
P550,000. In Kathrine’s December 31, 2020, statement of financial position, total assets
should be reported at
a. P1,550,000 c. P2,400,000
b. P1,850,000 d. P2,100,000
51. A compensating balance
a. Which is legally restricted and related to a long-term loan is classified as current
asset
b. Which is legally restricted and related to a short-term loan is classified separately
as current assets
c. Which is not legally restricted as to withdrawal is classified separately as current
asset
d. Must be included in cash and cash equivalent
52. Financial instrument is any contract that gives rise to
a. A financial asset of one entity and a financial liability of another entity
b. A financial liability
c. A financial asset of one entity and a financial liability or equity instrument of
another entity
d. A financial asset
53. Logan Bruno Company has just received the August 31, 2019, bank statement, which is
summarized below:

CITIBANK Disbursements Receipts Balance

Balance, August 1 P 9,369
Deposits during August P32,200 41,569

Note Collected for depositor, including

P40 interest 1,040 42,609
Checks cleared during August P34,500 8,109
Bank service charges 20 8,089
Balance, August 31 8,089
The general ledger Cash Account contained the following entries for the month of August.

Cash
Balance, August 1. 10,050 Disbursements in August 34,903
Receipts during August. 35,000
Deposits in transit at August 31 are P3,800, and checks outstanding at August 31 total
P1,050. Cash on hand at August 31 is P310. The bookkeeper improperly entered one check
in the books at P146.50 which was written for P164.50 for supplies (expense); it cleared
the bank during the month of August. The Correct Cash Balance is

a. Some other Answer c. P11,149

b. P10,649 d. P10,147
54. HAGO co. sold P P1,550,000 of accounts receivable for P1,340,000. The receivable had a
carrying amount of P1,470,000 and were sold outright on a nonrecourse basis. The entry
to record the sale of accounts receivable would include
a. A credit to accounts receivable of P1,470,000
b. A credit to notes payable of P1,550,000
c. A debit to Allowance for doubtful accounts of P80,000
d. A debit to Finance Charge of P210,000
BPI granted a loan to a borrower in the amount of P5,000,000 on January 1,2019. The interest rate
on the loan is 10% payable annually starting December 31, 2019. The loan matures in five years
on December 31,2023. BPI incurs P39,400 of direct loan origination cost. BPI charges the
borrower an 8% nonrefundable loan origination fee.

55. The carrying amount of the loan as of December 31, 2019 is. (round off to four decimal
places)
a. P4,696,128 c. P5,000,000
b. P5,033,261 d. P4,704,538
56. The effective interest rate of the loan is
a. 10% c. 9.80%
b. 11% d. 12%
57. PASKO Manufacturing Company sells its products, offering 30 days credit to its
customers. Uncollectible amounts are estimated by accruing monthly charge to bad debt
expense equal to 2% of credit sales. At the end of the year, the allowance for uncollectible
accounts is adjusted based on aging of accounts receivable. The company started the
current year with the following balances in its accounts:
Accounts receivable P305,000
Allowance for doubtful accounts 25,500

During the year, sales on credit were P1,300,000, cash collections from customers were
P1,250,000, and actual write-offs of accounts were P25,000. An aging of accounts
receivable at the end of the year indicates a required allowance of P30,000
Based on the foregoing, which statement is true?
a. The balance of accounts receivable at the end of the year is P300,000
b. The adjusting entry for doubtful accounts at year-end includes a credit to allowance
for doubtful accounts of P3,500
c. The doubtful accounts expense for the year is P26,000
d. None of the above
Rainy Day Company, a wholesaler, uses the aging method to estimate bad debt losses. The
following schedule of aged accounts receivable was prepared at December 31, 2019.

Age of Accounts Amount

0-30 days P 478,600
31-60 days 172,300
61-90 days 79,200
91-120 days 21,300
Over 120 days 8,300
P759,700
The following schedule shows the year-end receivables balances and uncollectible accounts
experience for the previous five years.

Year-End 91-120 Over 120

Year 0-30 Days 31-60 Days 61-90 Days
Receivables Days Days

2018 P 780,700 0.3% 0.9% 8.7% 52.1% 84.1%

2017 750,400 0.5% 0.8% 9.0% 49.2% 80.3%

2016 681,400 0.4% 1.1% 9.5% 53.7% 82.0%

2015 698,200 0.4% 1.0% 9.9% 51.3% 78.5%

2014 723,600 0.2% 1.1% 8.9% 49.9% 85.2%

The unadjusted Allowance for Bad Debts balance on December 31, 2019, is P 25,124.

58. A debit of Bad Debt expense will amount to:

a. P3,296 c. P2,596
b. P2,300 d. None
59. The Adjusted Allowance for Doubtful Accounts should be
a. P27,424 c. P29,050
b. P27,720 d. P28,420
60. Information regarding GREEN ARROW Bank’s portfolio of equity securities to profit or
loss is as follows:
Aggregate Cost, December 31, 2020 P 3,000,000
Unrealized gains, December 31, 2020 90,000
Unrealized losses, December 31, 2020 (300,000)
Net realized gains during 2020 350,000
If the company has an accounting policy of offsetting unrealized gains and losses with
realized gains and losses on their investment amount of net realized gain should the
company report in their statement of comprehensive income?
a. P90,000 c. P350,000
b. P140,000 d. P440,000
61. Inventories shall be measured at
a. Cost
b. Higher of cost and net realizable value
c. Net realizable value
d. Lower of cost and net realizable value
62. Biological asset
a. Must be measured at cost
b. Do not generally have future economic benefit
c. Are living animals or living plants and must disclosed as separate line item in the
statement of financial position
d. Are found in Biotech entities
63. If the qualifying asset is financed by general borrowing, the capitalizable borrowing cost
is equal to
a. Average expenditures on the asset multiplied by a capitalization rate or actual
borrowing cost incurred, whichever is higher.
b. Actual borrowing cost incurred.
c. Average expenditures on the asset multiplied by a capitalization rate or actual
borrowing cost incurred, whichever is lower.
d. Total expenditures on the asset multiplied by a capitalization rate.
 64. Exploration and evaluation expenditures are incurred
a. In extracting mineral resource and processing the resource to make it marketable or
transportable.
b. When searching for an area that may warrant detailed exploration even though the
entity has not yet obtained the legal rights to explore a specific area.
c. When a specific are is being developed and preparations for commercial extraction
are being made.
d. When the legal rights to explore a specific area have been obtained but the technical
feasibility and commercial viability of extracting a mineral resource are not yet
demonstrable.

The following information relate to an entity’s non-financial assets as of December 31, 2019:

Inventory

The following figures relate to inventory of materials:

Item X Item Y
Cost P200,000 P400,000
Replacement cost 180,000 370,000

Estimated cost to convert materials into finish goods 100,000 200,000

Estimated selling price of finish goods 320,000 610,000

Estimated costs to sell 10,000 15,000
Property, Plant and equipment

The entity purchased a machine for P100,000 on January 1, 2016, with the following additional
items paid or incurred

Separation pay for laborer laid off upon Acquisition of new machine P1,200

Loss on sale of machine replaced 1,300

Transportation in 1,000

Installation cost 4,000

The new machine is estimated to have a useful life of 10 years and a residual value of P4,000. On
January 1, 2019, new parts which cost P12,600 were added to the machine so as to reduce its fuel
consumption, but with no change in its estimated life or residual value.

Investment Property

The entity has an office building used for administrative purposes with a depreciated historical
cost of P5,000,000. At 1 January 2019 it had a remaining life of 20 years. After a re-organization
on 1 July 2019, the property was leased to a third party and reclassified as an investment property
applying the entity’s policy of the fair value model. An independent valuer assessed the property
to have a fair value of P4.8 million at 1 July 2019, which had risen to P4.95 million at 31 December
2019.

Intangible asset

On January 2, 2018, the entity purchased a patent with a cost P940,000 a useful life of 4 years. At
December 31, 2018, and December 31, 2019, the company determines that impairment indicators
are present. The following information is available for impairment testing at each year end:

12/31/2018 12/31/2019

Fair value less costs of disposal P690,000 P420,000

Value-in-use P720,000 P445,000

No changes were made in the asset’s estimated useful life.

65. The entity should recognize loss on writ-down of inventory of materials of
a. P5,000 c. None
b. P50,000 d. P30,000
66. The depreciation charge on the machine for 2019 is
a. P12,150 c. P11,900
b. P11,360 d. P12,000
67. The net amount to be recognized in 2019 profit or loss in relation to the building is
a. P150,000 c. P25,000
b. P(50,000) d. P(100,000)
68. The total expense to be recognized in 2019 profit or loss in relation to the patent is
a. P285,000 c. P260,000
b. P270,000 d. P235,000
69. USC Company uses the average cost retail method to estimate its inventory. Data relating
to the inventory at December 31, 2019 are:
Cost Retail
Inventory, January 1 P2,000,000 P3,000,000
Purchases 10,600,000 14,000,000
Net markups 1,600,000
Net markdowns 600,000
Sales 12,000,000
Estimated normal shoplifting losses 400,000
Estimated normal shrinkage is 5% of sales

USC’s cost of goods sold for the year ended December 31, 2019 is.
a. P9,100,000
b. P7,700,000
c. P8,400,000
d. P8,680,000
70. APO Corporation’s inventory at December 31, 2019, was P325,000 based on a physical
count priced at cost, and before any necessary adjustment for the following:
• Merchandise costing P30,000, shipped F.O.B. shipping point from a vendor on
December 30, 2019, was received on January 5, 2020.
• Merchandise costing P22,000, shipped F.O.B. Destination from a vendor on
December 28, 2019, was received on January 5, 2020.
• Merchandise costing P38,000 was shipped to a customer F.O.B. destination on
December 28, arrived at the customer’s location on January 6, 2020.
• Merchandise costing P12,000 was being held on consignment by club company.

What amount should APO Corporation report as inventory in its December 31, 2019,
Statement of financial position?
a. P325,000 c. P427,0000
b. P405,000 d. P367,000
Additional Question (Retake)

1. In computing basic earnings per share, if the preference shares are cumulative, the amount
that should be deducted as an adjustment to the numerator is the
a. Preference dividends in arrears
b. Annual Ordinary dividend
c. Preference dividends paid during the year
d. Annual preference dividend
2. Where in the financial statements should basic and diluted EPS be reported?
a. In the accompanying notes
b. In management discussion and analysis
c. In the income statement
d. In the statement of cash flows
3. EPS disclosure are
a. Required for all public and nonpublic options
b. Encouraged for public entites and prepared required
c. Encourage for all entity.
d. Required for public entities and encourage for nonpublic entites.
4. The cost of inventory is the sum of
a. Cost of conversion and othe cost incurred in bringing the inventory to the present
location and condition
b. Direct cost, indirect cost and other cost
c. Cost of purchase and cost of conversion
d. Cost of purchases, cost of conversion and other cost incurred in bringing the
inventory to the present location and condition.
5. For share appreciation rights, the measurement date for computing compensation is the
a. Date the rights mature
b. Date of grant
c. Date of exercise
d. Date the shares reaches a predetermined amount
6. The components of defined benefit cost include all, except
a. Service Cost c. Contribution to the plan
b. Remeasurements d. Net interest
7. Bonds that mature on a single date are called
a. Callable bonds c. Debenture bonds
b. Term bonds d. Serial bonds
8. What standard governs impairment of fixed assets?
a. PAS 36
b. New Conceptual Framework
c. PAS 16
d. PAS 1
9. Which of the following is not used in the determination of the cost of inventories
a. Weighted average
b. LIFO
c. All methods are allowed by PAS 2
d. FIFO
10. Which of the following statements is (are) not correct?
I. The carrying amount of the right of use asset from the capitalization of a lease would be
periodically reduced by portion of the lease payment allocable to reduction of the lease
liability.
II. Initial direct cost incurred by the lessee in a finance lease shall be added to the carrying
amount of the right of use asset and lease liability.
III. If there is no transfer of ownership to the lessee or if the purchase option is not
reasonably certain to be exercised, the lessee shall depreciate the right of use asset over the
shorter between the useful life of the asset and the lease term.
a. II and III only
b. I and II only
c. I only
d. I and III only
11. GOFUTURECPAS Company's allowance for doubtful accounts was P1,000,000 at the end
of 2011 and P900,000 at the end of 2010. For the year ended December 31, 2011,
GOFUTURECPAS reported doubtful accounts expense of P160,000 in its income
statement. What amount did Mill debit to the appropriate account in 2011 to write off
uncollectible account?
a. 260,000 c. 100,000
b. 60,000 d. 160,000
12. At the beginning of the current year, EZPZLEMENSQUEEZY Company declared a 1 for
5 reverse share split, when the market value of share was P100. Prior to the split,
EZPZLEMENSQUEEZY Company had 100,000 shares of P10 par value issued and
outstanding. After the split, what is the par value of the share?
a. 20 c. 10
b. 2 d. 50
13. COMEONGUYSYOUCANDOTHIS! Company sells washing machines that carry a three-
year warranty against manufacturer's defects. Based on the entity's experience, warranty
costs are estimated at P300 per machine. During the current year,
COMEONGUYSYOUCANDOTHIS! Company sold 4,200 washing machines and paid
warranty costs of P170,000. In its income statement for the current year, what amount
should COMEONGUYSYOUCANDOTHIS! Company report as warranty expense?
a. 720,000 c. 170,000
b. 240,000 d. 550,000