STATEMENT OF FINANCIAL POSITION

1. The following trial balance of Robertson Co. at December 31, 20x20 has been adjusted except for income tax
expense.
Debit Credit
Cash P825,000
Accounts receivable 2,475,000
Prepaid taxes 525,000
Accounts payable P180,000
Share capital 750,000
Share premium 450,000
Retained earnings 945,000
Revenues 5,400,000
Expenses 3,900,000
P7,725,000 P7,725,000

During 20x20, estimated tax payments of P525,000 were charged to prepaid taxes. Robertson had not yet
recorded income tax expenses. There were no differences between financial statement and income tax income,
and Robertson’s tax rate is 35%. Included in accounts receivable is P750,000 due from a customer. Special
terms granted to this customer require payment and in equal semi-annual installments of P187,500 every April
1 and October 1.

In Robertson’s December 31, 20x20 statement of financial position, what amount should be reported as total
current assets?
A. P3,750,000 B. P3,375,000 C. P2,925,000 D. P3,300,000

C ash 825,000
Accounts receivable - current:
Total accounts receivable 2,475,000
Less: Accounts receivable - noncurrrent
(187,500 + 187,500) 375,000 2,100,000
Total current assets - 12/31/20x20 2,925,000

2. The following data were compiled prior to preparing Longfellow Company’s statement of financial position at
December 31, 20x20:
Cash in BPI (current account), including a compensating balance of P50,000 which is not P160,000
legally restricted
Cash in Metro Bank (savings account) set aside for building construction to start next 200,000
year
Cash surrender value of life insurance policy 80,000
Investment in shares of associate 250,000
Investment in shares held for trading 42,000
Investment in shares held indefinitely 24,000
Merchandise inventory (of which P100,000 is pledged as security as security for a bank 400,000
loan)
Notes receivable, all due within one year, including a P30,000 note discounted 120,000
Prepaid items, including deferred bond issue costs of P20,000 34,000
Reserve for anticipated inventory market price declines 40,000
Unearned finance charges on installment accounts receivable 30,000
Undeposited collections, including P2,000 customer’s check returned, marked DAIF 12,000
Trade installment accounts receivable, including amount of P100,000 due after one year 300,000

Determine the total amount of current assets to be reported in Longfellow’s statement of financial position at
December 31, 20x20?
A. P988,000 B. P986,000 C. P888,000 D. P848,000
C ash in BPI (current account), including a compensating balance 160,000
(not legally restricted)
Investment in shares held for trading 42,000
Merchandise inventory, excluding those that are pledged as
security for a bank loan (400,000 - 100,000) 300,000
Notes receivable, net of discounted note (120,000 - 30,000) 90,000
Prepaid items, excluding deferred bond issue costs
(34,000 - 20,000) 14,000
Reserve for anticipated inventory market price declines 40,000
Unearned finance charges on installment accounts receivable 30,000
Undeposited collections, including customer's check returned 12,000
Trade installment accounts receivable, including the amounts
that are due after one year 300,000
Total amount of current assets - 12/31/20x20 988,000

Use the following for the next two (2) questions:

AAA Manufacturing Company has the following account balances at year end:
Supplies P40,000
Accounts receivable 480,000
Provision for uncollectible 30,000
Raw materials 270,000
Work in process 590,000
Finished goods 720,000
Prepaid insurance 60,000
Prepaid rent (P120,000 per year for the next 3 years) 360,000
Note receivable at face (maturity date 5 years) 550,000
Deferred origination cost, on note receivable 50,000
Deferred origination fee, on note receivable 150,000
Advances to officer – definite collectible 100,000
Advances to employee – indefinite collectible 300,000

3. What amount should AAA report as inventories in its statement of financial position?
A. P720,000 B. P760,000 C. P1,580,000 D. P1,620,000

4. What amount should AAA report as current assets in its statement of financial position?
A. P2,350,000 B. P2,450,000 C. P2,550,000 D. P2,650,000
 Prepaid rent (P120,000 per year for the next 3 years) 360,000 120,000 240,000

5. What amount should AAA report as non-current assets in its statement of financial position?
A. P890,000 B. P990,000 C. P995,000 D. P998,000
Raw materials 270,000
Work in process 590,000
Finished goods 720,000
Inventories - AAA Maunfacturing Company 1,580,000

Supplies 40,000
Accounts receivable 480,000
Less: Provisions for uncollectible 30,000
Inventories 1,580,000
Prepaid insurance 60,000
Prepaid rent (360,000 / 3 x 1) 120,000
Advances to offices - definite collectible 100,000
Current assets - AAA Manufacturing Company 2,350,000

Note receivable at face (maturity date 5 years) 550,000

Deferred origination cost, on note receivable 50,000
Less: Deferred origination fee, on note receivable 150,000
Advances to employee - indefinite collectible 300,000
Prepaid rent (360,000 / 3 x 2) 240,000
Non-current assets - AAA Manufacturing Company 990,000
6. An entity reported the following current assets on December 31, 20x20:
Cash in bank P4,000,000
Accounts receivable (Note 1) 7,000,000
Notes receivable 2,500,000
Notes receivable discounted (400,000)
Inventory 4,500,000
Financial asset – FVPL 1,000,000
Financial asset – FVOCI 1,500,000
Prepaid expenses 200,000
Deferred tax asset 2,500,000
Equipment classified as held for sale 2,000,000
Land held for future business site 1,000,000
Deferred gain 100,000
Total P25,900,000

Note 1
Customers’ account P5,000,000
Allowance for doubtful accounts (500,000)
Sale price of unsold goods out on consignment at 125% of cost and excluded from 2,500,000
ending inventory
Net accounts receivable P7,000,000

What amount should be reported as total current assets on December 31, 20x20?
A. P18,300,000 B. P22,800,000 C. P20,800,000 D. P20,300,000

C ash in bank 4,000,000

Accounts receivable (7,000,000 - 2,500,000) 4,500,000
Note receivable, net of discounted note (2,500,000 - 400,000) 2,100,000
Inventory (4,500,000 + 2,500,000) 7,000,000
Financial asset - FVPL 1,000,000
Financial asset - FVOC I 1,500,000
Prepaid expenses 200,000
Total current assets - 12/31/20x20 20,300,000
7. An entity was incorporated on January 1, 20x20 with proceeds from the issuance of P5,000,000 in shares and
borrowed funds of P1,000,000. During the first year of operations, revenue from sales amounted to P8,000,000
and operating costs and expenses totaled P6,000,000. On December 15, the entity declared a P500,000 cash
dividend, payable to shareholders on January 15, 20x21. No additional activities affected owners’ equity in
20x20. The liabilities increased to P1,800,000 by December 31, 20x20. What amount should be reported as
total assets on December 31, 20x20?
A. P8,300,000 B. P8,800,000 C. P7,000,000 D. P6,800,000

Liabilities 1,800,000
Add: Shareholder's equity:
Share capital 5,000,000
Add: Retained earnings
Sales revenue 8,000,000
Less: Operating costs and expenses 6,000,000
Net Income 2,000,000
Less: C ash dividend 500,000 1,500,000 6,500,000
Total liabilities and shareholder's equity - 12/31/20x20 8,300,000

Total assets = Total liabilities and shareholder's equity 8,300,000

Use the following for the next two (2) questions:

As of December 31, 20x18, Freon Company has a legal right to set off cash flows due to Ice Cream Company against
amount due from Ice Cream Company and has the intention to settle net or simultaneously. The following are the
payables of Freon Company to Ice Cream Company: P2,000,000 on March 31, 20x19; P6,000,000 on June 30, 20x19
and P5,000,000 on October 31, 20x19. Freon Company has the following receivables from Ice Cream Company:
P1,000,000 on January 15, 20x19

8. What amount of financial asset should Freon Company report in its December 31, 20x18 statement of financial
position?
A. None B. P5,000,000 C. P8,000,000 D. P11,000,000

9. What amount of financial liability should Freon Company report in its December 31, 20x18 statement of financial
position?
A. None B. P5,000,000 C. P7,000,000 D. P13,000,000

Use the following for the next two (2) questions:

An entity reported the following data on December 31, 20x20:

Cash in bank, net of bank overdraft of P100,000 P1,200,000
Petty cash, including unreplenished petty cash expenses P10,000 50,000
Accounts receivable, net customers’ accounts with credit balances of P200,000 2,000,000
Inventory, excluding unrecorded purchase of P300,000 on account in transit shipped 2,500,000
FOB shipping point on December 31, 20x20
Deferred charges 150,000
Accounts payable, net of suppliers’ accounts with debit balances of P400,000 3,000,000
Note payable, with annual installment of P500,000 payable every December 31 2,000,000
Accrued expenses 300,000

10. What amount should be reported as total current assets on December 31, 20x20?
A. P6,740,000 B. P6,750,000 C. P6,890,000 D. P6,440,000

11. What amount should be reported as total current liabilities on December 31, 20x20?
A. P4,800,000 B. P6,300,000 C. P4,200,000 D. P4,500,000
C ash in bank, including bank overdraft (1,200,000 + 100,000) 1,300,000
Petty cash, excluding unreplenished petty cash expenses (50,000 - 10,000) 40,000
Accounts receivable, including customers' accounts with credit balances
(2,000,000 + 200,000) 2,200,000
Inventory, including unrecorded purchase on account in transit shipped FOB
shipping point on 12/31/20x20 (2,500,000 + 300,000) 2,800,000
Suppliers' accounts with debit balances 400,000
Total current assets - 12/31/20x20 6,740,000

Bank overdraft 100,000

C ustomers' accounts with credit balances 200,000
Accounts payable, including suppliers' accounts with debit balances
(3,000,000 + 400,000 + 300,000) 3,700,000
Note payable - current portion 500,000
Accrued expenses 300,000
Total current liabilities - 12/31/20x20 4,800,000

12. An entity provided the following information on December 31, 20x20:

Accounts payable P2,000,000
Accrued expenses 800,000
Bonds payable due December 31, 20x21 2,500,000
Premium on bonds payable 300,000
Deferred tax liability 500,000
Income tax payable 1,100,000
Cash dividend payable 600,000
Share dividend payable 400,000
 Note payable – 6% due March 1, 20x21 1,500,000
Note payable – 8% due October 1, 20x21 1,000,000
Provision for warranties 100,000
Provision for uncollectible accounts 50,000
Fair value adjustment on equity investment (credit balance) 100,000
Advances to employees 300,000

The financial statements for 20x20 were issued on March 31, 20x21. On March 1, 20x21, the 6% note payable
was refinanced on a long-term basis. Under the loan agreement for the 8% note payable, the entity has the
discretion to refinance the obligation for at least twelve months after December 31, 20x20. What amount
should be reported as total current liabilities?
A. P8,600,000 B. P9,900,000 C. P8,900,000 D. P9,300,000

Accounts payable 2,000,000

Accrued expenses 800,000
Bonds payable due 12/31/20x21 - current portion 2,500,000
Premium on bonds payable 300,000
Income tax payable 1,100,000
C ash dividend payable 600,000
Note payable - 6% due March 1, 20x21 1,500,000
Provision for warranties 100,000
Total current liabilities 8,900,000

13. An entity provided the following information on December 31, 20x20:

 Accounts payable amounted P1,500,000.
 On December 15, 20x20, the entity declared a cash dividend of P20 per share on 100,000 outstanding
shares, payable on January 15, 20x21.
 On July 1, 20x20, the entity issued P5,000,000, 8% bonds for P4,400,000 to yield 10%. The bonds
mature on June 30, 20x25 and pay interest annually every June 30.
 The pretax financial income was P8,500,000 and taxable income was P6,000,000. The difference is
due to P1,000,000 permanent difference and P1,500,000 taxable temporary difference to reverse
20x21. The income tax rate is 30%. The entity made estimated income tax payments during the
current year of P1,000,000.
What amount should be reported as total current liabilities on December 31, 20x20?
A. P3,700,000 B. P5,500,000 C. P4,700,000 D. P4,500,000
Accounts payable 1,500,000
Dividends payable (100,000 x 20) 2,000,000
Accrued interest payable (5,000,000 x 8% = 400,000 x 6 / 12) 200,000
Income tax payable:
C urrent tax expense (6,000,000 x 30%) 1,800,000
Less: Estimated tax payment 1,000,000 800,000
Total current liabilites - 12/31/20x20 4,500,000

14. On January 1, 20x18, Glow Company leased a building to Blow Corporation for a ten-year term at an annual
rental of P75,000. At inception of the lease, Glow received P300,000 covering the first two years’ rent of
P150,000 and a deposit of P150,000. This deposit will not be returned to Blow upon expiration of the lease but
will be applied to payment of rent for the last two years of the lease. What portion of the P300,000 should be
shown as current and long-term liability in Glow’s December 31, 20x18 statement of financial position?
Current liability Long-term liability
A. P0 P300,000
B. P75,000 P150,000
C. P150,000 P75,000
D. P150,000 P150,000

Current liability - Glow's 12/31/20x18 SFP = Unearned rent income

(150,000 - 75,000 = 150,000 / 2) 75,000

Long-term liability - Glow's 12/31/20x18 SFP = Unearned rent deposit 150,000

15. Lever Company prepared a draft of its 20x19 balance sheet. The draft statement reported current liabilities
totaling P2,000,000. However, none of the following items were included in this preliminary total at December
31, 20x19.

Accounts payable-trade P300,000; bonds payable due in 20x20 P500,000; discount on bonds payable P60,000;
dividends payable due 20x20, P166,000; bond issue cost, P20,000; deferred tax liability , P60,000 and notes
payable P100,000 (The note payable is and issued debt instrument that the entity intends to repurchase in the
near term to make a gain from short-term investments in interest rates and has a current fair value of P120,000)
and P300,000 liability arising from a short sale.

The deferred tax liability in excess tax depreciation over financial that are expected to reverse in the next three
years. At what amount should Lever Current liabilities correctly reported in the December 31, 20x19 statement
of financial position?
 A. P2,880,000 B. P2,900,000 C. P3,000,000 D. P3,300,000

Accounts payable - draft statement 2,000,000

Accounts payable - trade 300,000
Bonds payable due in 20x20 500,000
Less: Discount on bonds payable 60,000
Bonds issue cost 20,000
Dividends payable (160,000 / 2) 80,000
Deferred tax liability 60,000
Notes payable 100,000
Liabilty arising from a short sale 300,000
Lever current liability - 12/31/20x19 3,300,000

16. An entity provided the following information at year-end:

Preference share capital, at par P2,000,000
Ordinary share capital, at par 3,000,000
Share premium 1,000,000
Sales 10,000,000
Total expenses 7,800,000
Treasury shares at cost – ordinary 500,000
Dividends 700,000
Retained earnings – beginning 1,000,000
What total shareholders’ equity should be reported at year-end?
A. P8,000,000 B. P8,500,000 C. P5,800,000 D. P8,700,000

Preference share capital 2,000,000

Ordinary share capital 3,000,000
Share premium 1,000,000
Less: Treasury shares at cost - ordinary 500,000
Retained earnings - ending
Retained earnings - beginning 1,000,000
Add: Net Income:
Sales 10,000,000
Less: Total expenses 7,800,000 2,200,000
Less: Dividends 700,000 2,500,000
Total shareholders' equity 8,000,000
17. The December 31, 20x18 balance sheet of Queen Company reported a total shareholders’ equity of P1,850,00.
The following information relates to 20x19:
 Queen Company issued an additional 5,000 shares of P100 par ordinary stock at P125 per share on July
1, 20x19.
 Reacquired 2,000 treasury shares at P120 per share and later reissued 1,000 shares for P130 per share.
Remaining treasury shares were retired at the end of the accounting year.
 The company realized a net income of P550,000 in 20x19.
 Cash dividends declared and paid in 20x19 was P400,000.
 Queen Company declared its real property as dividend having a carrying value of P600,000 but with a
market value of P700,000.
 Share dividend declared in 20x19 has a total par of P800,000 but with a market value of P1,000,000
on declaration date while its year-end value was P1,200,000. The share dividend represents 10% of
the shares outstanding.
 Queen Company issued on December 31, 20x19 an 8%, 5-year P5,000,000 convertible bond for a total
proceeds of P5,100,000 but with a fair value of P4,750,000 at the time of issue.

The shareholders’ equity section on December 31, 20x19, statement of financial position would report a balance
of
A. P1,195,000 B. P1,915,000 C. P2,165,000 D. P2,515,000

Total shareholder's equity - 12/31/20x18 1,850,000

Issuance of additional ordinary shares (5,000 x 125) 625,000
Repurchase of treasury shares (2,000 x 120) 240,000
Reissue of treasury shares (1,000 x 120) 120,000
Net income 550,000
C ash dividend paid 400,000
Real property dividend 700,000
Share dividend (1,200,000 x 10%) 120,000
Total shareholder's equity - 12/31/20x19 2,165,000
18. The Mahiwaga Ilaw Corporation was incorporated on January 1, 20x18, with following authorized capitalization:
 40,000 ordinary shares, no par value, stated value P40 per share
 10,000 shares of 5% cumulative preference share, par value P10 per share

During 20x18, Mahiwaga Ilaw issued 24,000 ordinary shares for a total of P1,200,000 and 6,000 preference
share at P16 per share. In addition, on December 19, 20x18, subscriptions for 2,000 preference shares were
taken at a purchase price of P17. These subscribed shares were paid for on January 2, 20x19. What should
Mahiwaga Ilaw report as total contributed capital in its December 31, 20x18 balance sheet?
A. P1,040,000 B. P1,262,000 C. P1,294,000 D. P1,330,000

Ordinary share capital 1,200,000

Preference share capital (6,000 x 16) 96,000
Subscribed preference share capital (2,000 x 17) 34,000
Total contributed capital - Mahiwaga Ilaw's 12/31/20x18 Balance sheet 1,330,000

19. The following capital accounts are shown in the balance sheet of Masaya Corporation:
Ordinary share, 10,000 shares, par value P100 P1,000,000
Premium on ordinary shares 20,000
Share premium – treasury share 30,000
Accumulated profits and losses 750,000
Treasury share, 2,000 shares at cost 250,000
The entire 2,000 treasury shares were sold for P200,000

What would be the balance of the accumulated profits and losses account after this sale?
A. P250,000 B. P700,000 C. P730,000 D. P750,000

Accumulated profits and losses 750,000

Less: Accumulated profits and losses for the sale of the treasury share
Treasury share (250,000 - 200,000) 50,000
Less: Share premium - treasury share 30,000 20,000
Balance of the accumulated profits and losses account after the sale 730,000

20. Effective January 1, 2023, IAS 1 requires disclosure of

A. Significant accounting policies
B. Material accounting policies
C. Immaterial accounting policies
D. A and B
 STATEMENT OF COMPREHENSIVE INCOME

Use the following for the next two (2) questions:

An entity reported the following data for the current year:

Legal and audit fees P1,700,000
Rent for office space 2,400,000
Advertising 500,000
Interest on inventory loan 2,100,000
Loss on abandoned data processing equipment 350,000
Freight in 1,750,000
Freight out 1,600,000
Officers’ salaries 1,500,000
Insurance 850,000
Sales representative salaries 2,150,000
Research and development expense 1,000,000

The office space is used equally by the sales and accounting departments.

1. What amount should be classified as general and administrative expenses?

A. P5,250,000 B. P6,450,000 C. P5,600,000 D.
P6,250,000

2. What amount should be reported as selling expenses?

A. P5,450,000 B. P4,250,000 C. P6,300,000 D.
P6,450,000

Legal and audit fees 1,700,000

Rent for office space (2,400,000 / 2) 1,200,000
Officers' salaries 1,500,000
Insurance 850,000
General and administrative expenses 5,250,000

Rent for office space (2,400,000 / 2) 1,200,000

Advertising 500,000
Freight out 1,600,000
Sales representative salaries 2,150,000
Selling expenses 5,450,000

Use the following for the next two (2) questions:

Grante Company had the following account balances: Sales revenue, P1,200,000; Cost of goods sold, P600,000;
Salaries and wages expense, P100,000; Depreciation expense, P200,000; Dividend revenue, P40,000; Utilities
expense, P80,000; Rent revenue, P250,000; Interest expense, P120,000; Sales return, P110,000 and Advertising
expense, P130,000.

3. What amount would Grante Company report as other income and expense in its income statement?
A. P290,000 B. P250,000 C. P170,000 D.
P130,000

4. What amount would Grante Company report as income from operations in its income statement?
A. P220,000 B. P240,000 C. P250,000 D.
P270,000
Dividend revenue 40,000
Rent revenue 250,000
Other income - Grante Company's Income statement 290,000

Sales revenue 1,200,000

Less: Sales return 110,000
Net sales 1,090,000
Less: C ost of goods sold 600,000
Gross income 490,000
Add: Other income 290,000
Less: Operating expenses:
Salaries and wages expense 100,000
Depreciation expense 200,000
Utilities expense 80,000
Advertising expense 130,000 510,000
Income from operations - Grante Company 270,000

Use the following for the next four (4) questions:

The following information pertains to Maximum Company for the year 20x18:
Service revenue P1,600,000
Income from continuing operations 200,000
Net income 180,000
Income from operations 440,000
Selling and administrative expenses 1,000,000
 Income before income tax 400,000

5. What is the amount of other expense and cost of service?

A. P20,000 B. P40,000 C. P160,000 D.
P200,000

6. What is the amount of finance cost?

A. P20,000 B. P40,000 C. P160,000 D.
P200,000

7. What is the amount of income tax?

A. P20,000 B. P40,000 C. P160,000 D.
P200,000

8. What is the amount reported in the income statement related to discontinued operation?
A. P20,000 B. P40,000 C. P50,000 D.
P60,000

Service revenue 1,600,000

Less: Selling and administrative expenses 1,000,000
Gross income 600,000
Less: Other expenses and cost of service (600,000 - 440,000) 160,000
Income from operations 440,000

Income from operations 440,000

Less: Finane cost (440,000 - 400,000) 40,000
Income before income tax 400,000

Income before income tax 400,000

Less: Income tax expense (400,000 - 200,000) 200,000
Income from continuing operations 200,000

Income from continuing operations 200,000

Less: Income from discontiued operations (200,000 - 180,000) 20,000
Net income 180,000
9. Manning Company has the following items: write-down of inventories, P240,000; loss on disposal of part of
Sports Division, P370,000; and loss on restructurings, P226,000. Ignoring income taxes, what total amount
should Manning Company report as non-operating expenses related to continuing?
A. P370,000 B. P466,000 C. P596,000 D.
P836,000

Write-down of inventories 240,000

Loss on restructurings 226,000
Continuing non-operating expenses 466,000

10. The following information pertains to Surety Company’s 20x19 cost of sales: Inventory, January 1, P4,000,000;
Inventory, December 31, P3,000,000; Net purchases, P9,740,000 and cost of obsolete inventory, P500,000. If
the company’s policy is to include decline write-off in the value of inventory in the cost of sales, what amount
should the company report as cost of sales?
A. P10,240,000 B. P10,740,000 C. P11,200,000 D.
P12,800,000

Inventory - 1/1 4,000,000

Add: Net purchases 9,740,000
Goods available for sale 13,740,000
Less: Inventory - 12/31 3,000,000
Cost of sales - Surety Company 10,740,000

Use the following for the next two (2) questions:

Luigi Corporation trial balance of income statement accounts for the year ended December 31, 20x19 included the
following:
Debit Credit
Sales revenue P1,400,000
Cost of sales P600,000
Administrative expense 250,000
Loss on sale of equipment 90,000
Commission to salespersons 80,000
Interest revenue 50,000
Freight out 30,000
Loss on disposition of wholesale 170,000
division
Bad debt expense 30,000

Other information:
 Luigi’s income tax rate is 30%. Merchandise inventory:
 January 1, 20x19 P800,000; December 31, 20x19 P700,000

11. On Luigi’s income statement for 20x19, merchandise purchases are

A. P500,000 B. P530,000 C. P700,000 D. P730,000

12. On Luigi’s income statement for 20x19, income from continuing operations is
A. P252,000 B. P259,000 C. P370,000 D. P540,000

Merchandise inventory - 1/1/20x19 800,000

Add: Merchandise purchases (1,300,000 - 800,000) 500,000
Goods available for sale (600,000 + 700,000) SQUEEZE/WORKBACK 1,300,000
Less: Merchandise inventory - 12/31/20x19 700,000
C ost of sales - 20x19 Luigi's income statement 600,000

Sales revenue 1,400,000

Less: C ost of sales 600,000
Gross income 800,000
Less: Operating expenses:
Administrative expense 250,000
C ommissions to salespersons 80,000
Freight out 30,000
Bad debts expense 30,000 390,000
Income from operations 410,000
Add: Interest revenue 50,000
Less: Loss on sale of equipment 90,000
Income before income tax 370,000
Less: Income tax expense (410,000 x 30%) 111,000
Income from continuing operations - Luigi's 20x19 income statement 259,000
13. An entity provided the following information for the current year:
Increase in raw material inventory P150,000
Decrease in goods in process inventory 200,000
Decrease in finished goods inventory 350,000
Raw materials purchased 4,300,000
Direct labor payroll 2,000,000
Factory overhead 3,000,000
Freight out 450,000
Freight in 250,000

What is the cost of goods sold for the current year?

A, P9,950,000 B. P9,550,000 C. P9,250,000 D.
P9,150,000

Raw materials purchased 4,300,000

Add: Freight in 250,000
Less: Increase in raw materials inventory 150,000
Raw materials used 4,400,000
Direct labor payroll 2,000,000
Factory overhead 3,000,000
Total Manufacturing cost 9,400,000
Add: Decrease in goods in process inventory 200,000
C ost of goods manufactured 9,600,000
Add: Decrease in finished goods inventory 350,000
Cost of goods sold 9,950,000
14. Carla Company reported the following total debits and total credits in selected accounts after closing entries
were posted:
Debits Credits
Materials P600,000 P200,000
Goods in process 500,000 300,000
Material purchases 2,500,000 2,500,000
Purchase discount 100,000 100,000
Transportation in 200,000 200,000
Direct labor 3,000,000 3,000,000
Manufacturing overhead 1,500,000 1,500,000
Finished goods 700,000 400,000
What is the cost of goods sold for the year?
A. P6,900,000 B. P7,000,000 C. P7,100,000 D.
P7,400,000

Answer is (C).
Beginning materials 200,000
Net purchases (2,500,000 – 100,000 + 200,000) 2,600,000
Ending raw materials (600,000 – 200,000) (400,000)
Raw materials used 2,400,000
Direct labor 3,000,000
Manufacturing overhead 1,500,000
Total manufacturing cost 6,900,000
Beginning goods in process 300,000
Ending work in process (500,000 – 300,000) (200,000)
Cost of goods manufactured 7,000,000
Beginning finished goods 400,000
Ending finished goods (700,000 – 400,000) (300,000)
Cost of goods sold 7,100,000
Materials, beginning 200,000
Add: Net cost of purchases
Materials purchases 2,500,000
Add: Transportation in 200,000
Less: Purchase discount 100,000 2,600,000
Less: Materials, ending (600,000 - 200,000) 400,000
Raw materials used 2,400,000
Direct labor 3,000,000
Manufacturing overhead 1,500,000
Total manufacturing cost 6,900,000
Add: Goods in process, beginning 300,000
Goods placed in process 7,200,000
Less: Goods in process, ending (500,000 - 300,000) 200,000
C ost of goods manufactured 7,000,000
Add: Finished goods, beginning 400,000
Goods available for sale 7,400,000
Less: Finished goods, ending (700,000 - 400,000) 300,000
Cost of goods sold - Carla Company 7,100,000

Use the following for the next two (2) questions:

An entity reported operating expenses other than interest expense for the year at 40% of cost of goods sold but only
20% of sales. Interest expense is 5% of sales. The amount of purchases is 120% of cost of goods sold. Ending
inventory is twice as much as the beginning inventory. The net income for the year is P2,100,000. The income tax
rate is 30%.

15. What is the amount of sales for the year?

A. P10,000,000 B. P15,000,000 C. P18,000,000 D.
P12,000,000

16. What is the amount of purchases for the year?

A. P6,000,000 B. P7,200,000 C. P3,000,000 D.
P3,600,000

Sales 100%
C ost of Goods sold (20% / 40%) 50%
Operating expenses 20%
Interest expense 5%
Income before incamoe tax 25%

Income before income tax (2,100,000 / 70%) 3,000,000

Sales (3,000,000 / 25%) 12,000,000

C ost of goods sold (12,000,000 x 50%) 6,000,000

Purchases (6,000,000 x 120%) 7,200,000

Use the following for the next two (2) questions:

An entity provided the following information for the current year:

Income from continuing operations P4,000,000
Income from discontinued operation 500,000
Unrealized gain on financial asset – FVTPL 800,000
 Unrealized loss on equity instrument – FVOCI (1,000,000)
Unrealized gain on debt instrument – FVOCI 1,200,000
Unrealized gain on future contract designated as a cash flow hedge 400,000
Translation loss on foreign operation (200,000)
Net “remeasurement” gain on defined benefit plan during the year 600,000
Loss on credit risk of a financial liability designated at FVTPL 300,000
Revaluation surplus during the year 2,500,000

17. What net amount should be reported as other comprehensive income for the current year?
A. P4,000,000 B. P3,500,000 C. P3,200,000 D.
P7,000,000

18. What amount should be reported as comprehensive income for the current year?
A. P5,200,000 B. P7,700,000 C. P8,500,000 D.
P7,200,000

Unrealized loss on equity instrument - FVOC I 1,000,000

Unrealized gain on debt instrument - FVOC I 1,200,000
Unrealized gain on future contract designated as a cash flow hedge 400,000
Translation loss on foreign operation 200,000
Net “remeasurement” gain on defined benefit plan during the year 600,000
Loss on credit risk of a financial liability designated at FVTPL 300,000
Revaluation surplus during the year 2,500,000
Net amount of other comprehensive income 3,200,000

Income from continuing operations 4,000,000

Income from discontinued operation 500,000
Net income 4,500,000
Other comprehensive income 3,200,000
Comprehensive income 7,700,000
19. An entity reported net income of P7,400,000 for the current year. The auditor raised questions about the
following amounts that had been included in net income:
Equity in earnings of an associate – 25% interest P1,500,
Dividend received from the associate 400,
Unrealized loss on equity investment at FVOCI (550,0
Gain on early retirement of bonds payable 2,200,
Adjustment of profit of prior year for error in depreciation, net of tax effect (750,0
Loss from fire (1,400,0
Gain from change in fair value of financial liability designated at FVPL 500,

What amount should be reported as adjusted net income?

A. P8,300,000 B. P7,800,000 C. P9,500,000 D.
P8,800,000

Reported net income 7,400,000

Add: Unrealized loss on equity investment at FVOC I 550,000
Adjustment of profit of prior year for error in depreciation, net of tax effect 750,000
Less: Dividend received from the associate (400,000)
Adjusted net income 8,300,000

Use the following for the next two (2) questions:

An investment entity provided the following data for the current year:
Dividend income from investments P10,000,000
Distribution income from trusts 500,000
Interest income on deposits 700,000
Income from bank treasury bills 100,000
Income from dealing in securities held for trading 600,000
Writedown on securities held for trading 150,000
Other income 250,000
Finance cost 300,000
Administrative staff costs 3,800,000
Sundry administrative cost 1,400,000
Income tax expense 2,000,000

20. What is the total income before tax?

A. P12,000,000 B. P12,150,000 C. P11,750,000 D.
P11,550,000

21. What is the net income for the year?

A. P6,500,000 B. P4,500,000 C. P4,650,000 D.
P4,250,000
Dividend income from investments 10,000,000
Distribution income from trusts 500,000
Interest income on deposits 700,000
Income from bank treasury bills 100,000
Income from dealing in securities held for trading 600,000
Writedown on securities held for trading 150,000
Other income 250,000
Total income before tax 12,000,000

Total income before tax 12,000,000

Less: Total expenses:
Finance cost 300,000
Administrative staff costs 3,800,000
Sundry administrative cost 1,400,000 5,500,000
Income before income tax 6,500,000
Less: Income tax expense 2,000,000
Net income 4,500,000

22. An entity had the following events and transactions during 20x20:
 Depreciation for 20x19 was understated by P500,000
 A litigation settlement resulted in a loss of P2,000,000
 The inventory on December 31, 20x18 was overstated by P800,000
 The entity disposed of a recreational division at a loss P1,500,000
  The income tax rate is 30%.

What total amount of loss should be included in income from continuing operations for 20x20?
A. P2,000,000 B. P1,400,000 C. P3,500,000 D.
P2,450,000

After-tax effect of litigation loss (2,000,000 x 70%) 1,400,000

23. During 20x20, an entity decided to change from FIFO method of inventory valuation to the weighted average
method. Inventory balances under each method were:
FIFO Weighted Average
December 31, 20x17 P4,500,000 P5,400,000
December 31, 20x18 7,800,000 7,100,000
December 31, 20x19 8,300,000 7,800,000

The income tax rate is 30%. What amount should be reported as the effect of this accounting change in the
statement of retained earnings for 20x20?
A. P350,000 decrease B. P350,000 increase C. P490,000 decrease D.
P490,000 increase

Inventory, December 31, 20x19

Weighted average method 7,800,000
Less: FIFO method 8,300,000
Decrease in inventory 500,000
Multiply by: (100% - 30%) 70%
Effect in Retaiend earnings - 20x20 350,000

24. On January 1, 20x18, an entity purchased a machine for P7,200,000 and depreciated it by the straight line
method using an estimated useful life of eight years with no residual value. On January 1, 20x20, the entity
determined that the machine had a useful life of six years from the date of acquisition with a residual value of
P600,000. What is the accumulated depreciation on December 31, 20x20?
A. P4,200,000 B. P3,600,000 C. P3,000,000 D.
 P4,600,000

Acquisition cost - 1/1/20x18 7,200,000

Less: Accumulated depreciation (7,200,000 / 8 x 2) 1,800,000
C arrying amount - 1/1/20x20 5,400,000

Accumulated depreciation - 1/1/20x20 1,800,000

Depreciation for 20x20 (5,400,000 - 600,000 = 4,800,000 / 4 = 6 - 2 years) 1,200,000
Accumulated depreciation - 12/31/20x20 3,000,000

25. On January 1, 20x18, an entity purchased for P5,000,000 a machine with useful life of ten years and residual
value of P200,000. The machine was depreciated by the double declining balance method. The entity changed
to the straight line method on January 1, 20x20 and the residual value did not change. What is the carrying
amount of the asset on December 31, 20x20?
A. P2,825,000 B. P2,800,000 C. P2,625,000 D.
P3,200,000

Straight line rate (100% /10) 10%

Double declining rate (10% x 2) 20%

Acquisition cost - 1/1/20x18 5,000,000

Less: Accumulated depreciation - 1/1/20x20
20x18 (5,000,000 x 20%) 1,000,000
20x19 (5,000,000 - 1,000,000 = 4,000,000 x 20%) 800,000 1,800,000
C arrying amount - 1/1/20x20 3,200,000
Less: Depreciation for 20x20:
C arrying amount - 1/1/20x20 3,200,000
Less: Residual value 200,000
Depreciable amount 3,000,000
Divided by: Remaining years (10 - 2 years) 8 375,000
Carrying amount - 12/31/20x20 2,825,000