‌
1. The‌‌ledger‌‌of‌‌LEEWAY‌‌TOLERANCE‌‌Co.‌‌as‌‌of‌‌December‌‌31,‌‌20x1‌‌includes‌‌the‌‌following:‌  ‌
Assets‌  ‌  ‌ 
Petty‌‌cash‌‌fund‌  ‌ 14,000‌ 
Cash‌‌in‌‌bank‌‌    ‌ 40,000‌ 
Accounts‌‌receivable‌‌(including‌‌₱3‌ 0,000‌‌pledged‌‌accounts)‌  ‌ 70,000‌ 
Accounts‌‌receivable‌‌–‌‌assigned‌  ‌ 50,000‌ 
Equity‌‌in‌‌assigned‌‌receivables‌  ‌ 20,000‌ 
Notes‌‌receivable‌‌(including‌₱ ‌ 4‌ 0,000‌‌notes‌‌receivable‌‌ 
discounted)‌  ‌ 90,000‌ 
Notes‌‌receivable‌‌discounted‌  ‌ 40,000‌ 
Advances‌‌to‌‌subsidiary‌  ‌ 64,000‌ 
Held‌‌for‌‌trading‌‌securities‌‌
   ‌ 40,000‌ 
124,00‌
Inventory‌‌    ‌ 0‌ 
Deferred‌‌charges‌  ‌ 36,000‌ 
Cash‌‌surrender‌‌value‌  ‌ 12,000‌ 
200,00‌
Bond‌‌sinking‌‌fund‌  ‌ 0‌ 
800,00‌
Total‌‌assets‌  ‌ 0‌ 
 ‌
Liabilities‌  ‌  ‌ 
Accounts‌‌payable‌  ‌ ‌80,000‌‌   
 
Estimated‌‌warranty‌‌liability‌  ‌ 28,000‌  
Loans‌‌payable‌‌related‌‌to‌‌assigned‌‌receivables‌‌(due‌‌in‌‌12‌‌   
months)‌  ‌ 30,000‌  
 
Accrued‌‌expenses‌  ‌ 26,000‌  
200,00‌
Bonds‌‌payable‌‌(due‌‌on‌‌December‌‌31,‌‌20x2)‌  ‌ 0‌‌   
 
Premium‌‌on‌‌bonds‌‌payable‌  ‌ 16,000‌  
380,00‌
Total‌‌liabilities‌  ‌ 0‌‌   
 ‌
Additional‌‌information:‌  ‌
- Petty‌‌cash‌‌fund‌‌includes‌‌IOU’s‌‌from‌‌employees‌‌amounting‌‌to‌₱ ‌ 4‌ ,000.‌‌The‌‌remaining‌‌balance‌‌of‌‌ 
₱‌10,000‌‌represents‌‌bills‌‌and‌‌coins.‌  ‌
- The‌‌cash‌‌in‌‌bank‌‌balance‌‌represents‌‌the‌‌balance‌‌per‌‌bank‌‌statement.‌‌As‌‌of‌‌December‌‌31,‌‌20x1,‌‌ 
deposits‌‌in‌‌transit‌‌amounted‌‌to‌₱ ‌ 2‌ 0,000‌‌while‌‌outstanding‌‌checks‌‌amounted‌‌to‌₱ ‌ 3‌ ,000.‌‌Included‌‌  
in‌‌the‌‌bank‌‌statement‌‌as‌‌of‌‌December‌‌31,‌‌20x1‌‌is‌‌an‌‌NSF‌‌check‌‌amounting‌‌to‌₱ ‌ 1‌ 6,000.‌  ‌
- Accounts‌‌receivable‌‌(unassigned)‌‌includes‌‌uncollectible‌‌past‌‌due‌‌accounts‌‌of‌₱ ‌ 8‌ ,000‌‌which‌‌need‌‌ 
to‌‌be‌‌written-off.‌‌   ‌
- Also‌i‌ ncluded‌‌in‌‌accounts‌‌receivable‌‌(unassigned)‌‌is‌‌a‌₱ ‌ 1‌ 0,000‌‌receivable‌‌from‌‌a‌‌customer‌‌which‌‌ 
was‌‌given‌‌a‌‌special‌‌credit‌‌term.‌‌Under‌‌the‌‌special‌‌credit‌‌term,‌‌the‌‌customer‌‌shall‌‌pay‌‌the‌₱ ‌ 1‌ 0,000‌‌
 
 receivable‌‌in‌‌equal‌‌quarterly‌‌installments‌‌of‌₱ ‌ 1‌ ,250.‌‌The‌‌last‌‌payment‌‌is‌‌due‌‌on‌‌December‌‌31,‌ 
20x3.‌‌    ‌
- The‌‌held‌‌for‌‌trading‌‌securities‌‌include‌‌the‌‌reacquisition‌‌cost‌‌of‌‌LEEWAY‌‌Co.’s‌‌shares‌‌amounting‌‌ 
to‌₱
‌ 8‌ ,000.‌‌   ‌
- Inventory‌‌includes‌₱ ‌ 6‌ 0,000‌‌goods‌‌in‌‌transit‌‌purchased‌‌FOB‌‌Destination‌‌but‌‌excludes‌₱ ‌ 2‌ 4,000‌‌ 
goods‌‌in‌‌transit‌‌purchased‌‌FOB‌‌Shipping‌‌point.‌  ‌
 ‌
How‌‌much‌‌is‌‌the‌‌working‌‌capital?‌  ‌
a. 204,000‌  ‌
b. 224,000‌  ‌
c. 246,000‌  ‌
d. 254,000‌  ‌
 ‌
A‌‌   ‌
Solution:‌  ‌
Current‌‌assets‌  ‌  
Petty‌‌cash‌‌fund‌(‌P14,000‌‌–‌‌P4,000‌‌IOU's)‌  ‌ 10,000‌ 
Cash‌‌in‌‌bank‌(‌40,000‌‌+‌‌20,000‌‌DIT‌‌-‌‌3,000‌O
‌ C)‌  ‌ 57,000‌ 
Advances‌‌to‌‌employees‌(‌representing‌‌the‌‌IOU's)‌  ‌ 4,000‌ 
Accounts‌‌receivable*‌  ‌ 57,000‌ 
Accounts‌‌receivable‌‌–‌‌assigned‌  ‌ 50,000‌ 
Notes‌‌receivable‌‌   ‌ 90,000‌ 
Notes‌‌receivable‌‌discounted‌  ‌ (40,000)‌ 
Held‌‌for‌‌trading‌‌securities‌(‌P40,000‌‌–‌‌P8,000‌‌Treasury‌‌shares)‌  ‌ 32,000‌ 
Inventory‌(‌P112,000‌‌–‌‌P60,000‌‌FOB‌‌Dest.‌‌+‌‌P24,000‌‌FOB‌‌SP)‌  ‌ 88,000‌ 
Bond‌‌sinking‌‌fund‌  ‌ 200,000‌ 
Total‌‌current‌‌assets‌  ‌ 548,000‌ 
 ‌  
Current‌‌liabilities‌  ‌  
Accounts‌‌payable‌(‌80,000‌‌-‌‌60,000‌‌FOB‌‌Dest.‌‌+‌‌24,000‌‌FOB‌‌SP)‌  ‌ 44,000‌ 
Estimated‌‌warranty‌‌liability‌  ‌ 28,000‌ 
Loans‌‌payable‌‌related‌‌to‌‌assigned‌‌receivables‌(‌due‌‌in‌‌12‌‌mos.)‌  ‌ 30,000‌ 
Accrued‌‌expenses‌  ‌ 26,000‌ 
Bonds‌‌payable‌(‌due‌‌on‌‌December‌‌31,‌‌20x2)‌  ‌ 200,000‌ 
Premium‌‌on‌‌bonds‌‌payable‌  ‌ 16,000‌ 
Total‌‌current‌‌liabilities‌  ‌ 344,000‌ 
 ‌  
Working‌‌capital‌‌   ‌ 204,000‌ 
 ‌
*The‌‌adjusted‌‌accounts‌‌receivable‌‌is‌‌computed‌‌as‌‌follows:‌  ‌
Accounts‌‌receivable‌ ‌70,000‌  ‌
Uncollectible‌‌accounts‌‌written-off‌   ‌ (‌ ‌8,000)‌  ‌
Accounts‌‌with‌‌special‌‌credit‌‌term‌‌–‌‌noncurrent‌‌portion‌‌    ‌
‌(P1,250‌‌quarterly‌‌installment‌‌x‌‌4‌‌installments‌‌in‌‌20x3)‌ ‌(‌ ‌5,000‌) ‌ ‌
Adjusted‌‌accounts‌‌receivable‌(‌ unassigned)‌ ‌‌57,000‌‌
   ‌
 ‌
 ‌
2. The‌  ‌following‌  ‌statements‌  ‌relate‌  ‌to‌  ‌PAS1‌  ‌Presentation‌  ‌of‌‌   Financial‌‌   Statements.‌‌   ‌Choose‌‌   the‌‌  correct‌‌ 
statement.‌  ‌
a. Many‌  ‌entities‌  ‌also‌‌   present,‌‌   outside‌‌   the‌‌
  financial‌‌   statements,‌‌   reports‌‌   and‌‌  statements‌‌   such‌‌   as‌‌ 
environmental‌  ‌reports‌  ‌and‌  ‌value‌  ‌added‌  ‌statements,‌  ‌particularly‌  ‌in‌  ‌industries‌  ‌in‌  ‌which‌‌  
environmental‌‌ factors‌‌  are‌‌  significant‌‌  and‌‌  when‌‌  employees‌‌  are‌‌  regarded‌‌ as‌‌  an‌‌ important‌‌ user‌‌ 
group.‌  ‌Reports‌  ‌and‌  ‌statements‌‌   presented‌‌   outside‌‌   financial‌‌   statements‌‌   should‌‌   be‌‌  accounted‌‌ 
for‌‌using‌‌applicable‌‌PFRSs.‌‌   ‌
b. Applying‌‌   a ‌‌requirement‌‌   is‌‌  impracticable‌‌   when‌‌   the‌‌   entity‌‌ cannot‌‌  apply‌‌ it‌‌
 after‌‌  making‌‌ every‌‌ 
reasonable‌‌effort‌‌to‌‌do‌‌so.‌‌   ‌
c. An‌‌   entity‌‌  whose‌‌   financial‌‌   statements‌‌   do‌‌  not‌‌
  comply‌‌   with‌‌
  PFRSs‌‌   shall‌‌
  make‌‌   an‌‌  explicit‌‌   and‌‌ 
unreserved‌‌   statement‌‌   of‌‌
  such‌‌   noncompliance‌‌   in‌‌ the‌‌ notes.‌‌ If‌‌  the‌‌  entity’s‌‌  financial‌‌ statements‌‌  
do‌  ‌comply‌  ‌with‌  ‌PFRSs,‌  ‌there‌  ‌is‌  ‌no‌  ‌need‌  ‌to‌  ‌make‌  ‌an‌  ‌explicit‌  ‌and‌  ‌unreserved‌  ‌statement‌‌   of‌‌
 
such‌‌compliance‌‌in‌‌the‌‌notes.‌  ‌
d. Financial‌  ‌statements‌  ‌shall‌  ‌not‌  ‌be‌  ‌described‌  ‌as‌  ‌complying‌  ‌with‌  ‌PFRSs‌  ‌unless‌  ‌they‌  ‌comply‌‌ 
with‌‌most‌‌of‌‌the‌‌requirements‌‌of‌‌PFRSs.‌‌    ‌
 ‌
3. Which‌‌   of‌‌
  the‌‌
  following‌‌   financial‌‌   statements‌‌   would‌‌   not‌‌   be‌‌
  dated‌‌   as‌‌
  covering‌‌   a ‌‌certain‌‌   reporting‌ 
period?‌  ‌
a. Statement‌‌of‌‌financial‌‌position‌  ‌
b. Statement‌‌of‌‌profit‌‌or‌‌loss‌‌and‌‌other‌‌comprehensive‌‌income‌  ‌
c. Statement‌‌of‌‌cash‌‌flows‌  ‌
d. Statement‌‌of‌‌changes‌‌in‌‌equity‌  ‌
 ‌
Use‌‌the‌‌following‌‌information‌‌for‌‌the‌‌next‌‌two‌‌questions:‌  ‌
The‌‌records‌‌of‌‌HACK‌‌TO‌‌CHOP‌‌Co.‌‌on‌‌December‌‌31,‌‌20x1‌‌showed‌‌the‌‌following‌‌information:‌  ‌
Sales‌  ‌ 2,000,000‌ 
Sales‌‌discounts‌  ‌ 20,000‌ 
Cost‌‌of‌‌sales‌  ‌ 800,000‌ 
Distribution‌‌costs‌  ‌ 96,000‌ 
Administrative‌‌costs‌  ‌ 240,000‌ 
Casualty‌‌loss‌‌on‌‌typhoon‌  ‌ 40,000‌ 
Dividends‌‌received‌‌from‌‌investments‌‌in‌‌FVPL‌  ‌ 24,000‌ 
Dividends‌‌received‌‌from‌‌investment‌‌in‌‌associate‌  ‌ 48,000‌ 
Share‌‌in‌‌the‌‌profit‌‌of‌‌an‌‌associate‌  ‌ 72,000‌ 
Dividends‌‌declared‌‌and‌‌paid‌  ‌ 28,000‌ 
Interest‌‌expense‌  44,000‌ 
Unrealized‌‌gain‌‌on‌‌investments‌‌in‌‌FVPL‌  ‌ 30,000‌ 
Unrealized‌‌gain‌‌on‌‌investments‌‌in‌‌FVOCI‌  ‌ 38,000‌ 
Income‌‌tax‌‌expense‌  ‌ 300,000‌ 
Loss‌‌on‌‌revaluation‌  ‌ 26,000‌ 
Remeasurements‌‌of‌‌the‌‌net‌‌defined‌‌benefit‌‌liability‌‌(asset)‌‌-‌‌gain‌  ‌ 22,000‌ 
Correction‌‌of‌‌understatement‌‌in‌‌depreciation‌‌in‌‌prior‌‌year‌  ‌ 32,000‌ 
Translation‌‌adjustment‌‌of‌‌foreign‌‌operation‌‌–‌‌loss‌  ‌ 8,000‌ 
 ‌
4. How‌‌much‌‌is‌‌the‌‌other‌‌comprehensive‌‌income?‌  ‌
a. 42,000‌  ‌
b. 36,000‌  ‌
 c. 34,000‌  ‌
d. 26,000‌  ‌
 ‌
5. How‌‌much‌‌is‌‌the‌‌total‌‌comprehensive‌‌income?‌  ‌
a. 612,000‌  ‌
b. 627,000‌  ‌
c. 516,000‌  ‌
d. 584,000‌  ‌
 ‌
Solution:‌  ‌
HACK‌‌TO‌‌CHOP‌‌Co.‌  ‌
Statement‌‌of‌‌profit‌‌or‌‌loss‌‌and‌‌other‌‌comprehensive‌‌income‌  ‌
For‌‌the‌‌year‌‌ended‌‌December‌‌31,‌‌20x1‌  ‌
 ‌  ‌
Sales‌  ‌ ‌2,000,000‌  
Sales‌‌discounts‌  ‌ ‌(20,000)‌  ‌
Net‌‌sales‌  ‌ 1‌ ,980,000‌  
Cost‌‌of‌‌sales‌  ‌ ‌(800,000)‌  ‌
Gross‌‌profit‌  ‌ ‌1,180,000‌  
Distribution‌‌costs‌  ‌ ‌(96,000)‌  ‌
Administrative‌‌costs‌  ‌ ‌(240,000)‌  ‌
Dividends‌‌received‌‌from‌‌investments‌‌in‌‌FVPL‌  ‌ ‌24,000‌  
Share‌‌in‌‌the‌‌profit‌‌of‌‌an‌‌associate‌  ‌ ‌72,000‌  
Unrealized‌‌gain‌‌on‌‌investments‌‌in‌‌FVPL‌  ‌ ‌30,000‌  
Casualty‌‌loss‌‌on‌‌typhoon‌  ‌ ‌(40,000)‌  ‌
Interest‌‌expense‌  ‌ ‌(44,000)‌  ‌
Profit‌‌before‌‌tax‌  ‌ ‌886,000‌  
Income‌‌tax‌‌expense‌  ‌ ‌(300,000)‌  ‌
Profit‌‌for‌‌the‌‌year‌  ‌ ‌586,000‌  
Other‌‌comprehensive‌‌income:‌  ‌  ‌  ‌
Items‌‌that‌‌will‌‌not‌‌be‌‌reclassified‌‌subsequently‌‌to‌‌profit‌‌or‌‌loss:‌  ‌  ‌  ‌
Loss‌‌on‌‌revaluation‌  ‌ ‌(26,000)‌  ‌
Unrealized‌‌gain‌‌on‌‌investments‌‌in‌‌FVOCI‌  ‌ ‌38,000‌   ‌
Remeasurements‌‌of‌‌defined‌‌benefit‌‌pension‌‌plans‌  ‌ ‌22,000‌  
 ‌ ‌34,000‌  
Items‌‌that‌‌may‌‌be‌‌reclassified‌‌subsequently‌‌to‌‌profit‌‌or‌‌loss:‌  ‌  ‌  ‌
Loss‌‌on‌‌translation‌‌of‌‌foreign‌‌operation‌  ‌ ‌(8,000)‌  ‌
Other‌‌comprehensive‌‌income‌‌for‌‌the‌‌year‌  ‌ ‌26,000‌  
TOTAL‌‌COMPREHENSIVE‌‌INCOME‌‌FOR‌‌THE‌‌YEAR‌  ‌ ‌612,000‌  
 ‌  ‌
 ‌
6. Comprehensive‌‌income‌‌(or‌‌total‌‌comprehensive‌‌income)‌‌includes‌‌   ‌
a. Profit‌‌or‌‌loss‌‌   ‌
b. Other‌‌comprehensive‌‌income‌‌    ‌
c. Transactions‌‌with‌‌owners‌  ‌
d. a‌‌and‌‌b ‌ ‌
e. All‌‌of‌‌these‌  ‌
 ‌
7. What‌‌is‌‌the‌‌purpose‌‌of‌‌reporting‌‌comprehensive‌‌income?‌  ‌
a. To‌‌report‌‌changes‌‌in‌‌equity‌‌due‌‌to‌‌transactions‌‌with‌‌owners.‌  ‌
 b. To‌‌report‌‌a‌‌measure‌‌of‌‌overall‌‌performance‌‌of‌‌an‌‌entity.‌  ‌
c. To‌‌replace‌‌profit‌‌with‌‌a‌‌better‌‌measure.‌  ‌
d. To‌‌combine‌i‌ ncome‌‌from‌‌continuing‌‌operations‌‌with‌‌income‌‌from‌‌discontinued‌‌operations‌‌ 
and‌‌extraordinary‌‌items.‌  ‌
 ‌
8. PFRS‌‌15‌‌applies‌‌to‌‌    ‌
a. contracts‌‌with‌‌customers.‌  ‌
b. contracts‌‌with‌‌sellers.‌  ‌
c. all‌‌contracts‌‌entered‌‌into‌‌by‌‌an‌‌entity‌‌in‌‌the‌‌ordinary‌‌course‌‌of‌‌its‌‌business.‌  ‌
d. a‌‌and‌‌b ‌ ‌
 ‌
9. ABC‌‌Co.,‌‌a‌‌dealer‌‌of‌‌medical‌‌machines,‌‌enters‌‌into‌‌the‌‌following‌‌contracts:‌‌    ‌
I. ABC‌  ‌Co.‌  ‌transfers‌  ‌a ‌ ‌machine‌  ‌to‌  ‌X ‌ ‌Hospital‌‌   at‌‌
  contract‌‌   inception‌‌   but‌‌  ABC‌‌   Co.‌‌   retains‌‌   legal‌‌  
title‌‌until‌‌the‌‌full‌‌payment‌‌of‌‌the‌‌consideration.‌‌   ‌
II. ABC‌‌   Co.‌‌   transfers‌‌   a ‌‌machine‌‌   to‌‌  Y ‌‌Medical‌‌   Clinic‌‌   at‌‌
  contract‌‌   inception.‌‌   The‌‌   consideration‌‌   is‌‌ 
due‌  ‌after‌  ‌two‌  ‌years.‌‌   At‌‌   contract‌‌   inception,‌‌   Y ‌‌is‌‌
  undergoing‌‌   financial‌‌   difficulties.‌‌   This‌‌   raises‌‌  
significant‌  ‌doubt‌  ‌in‌  ‌Y’s‌  ‌ability‌  ‌and‌  ‌intention‌  ‌of‌  ‌paying‌  ‌the‌  ‌consideration.‌  ‌ABC‌  ‌Co.‌‌   cannot‌‌ 
reliably‌‌estimate‌‌the‌‌outcome‌‌of‌‌the‌‌contract.‌  ‌
III. ABC‌  ‌Co.‌  ‌transfers‌  ‌a ‌ ‌machine‌  ‌to‌  ‌Z ‌ ‌Co.‌  ‌under‌  ‌a ‌ ‌lease‌  ‌contract.‌  ‌The‌  ‌contractual‌  ‌period‌  ‌is‌  ‌5 ‌‌
years,‌‌   which‌‌   is‌‌
  equal‌‌   to‌‌
  the‌‌
  machine’s‌‌   estimated‌‌   useful‌‌   life.‌‌  At‌‌ the‌‌  end‌‌ of‌‌ the‌‌ contract,‌‌  Z ‌‌Co.‌‌ 
is‌‌
  given‌‌   the‌‌  option‌‌   of‌‌  purchasing‌‌   the‌‌   machine.‌‌   ABC’s‌‌   past‌‌   experience‌‌   shows‌‌   that‌‌   almost‌‌  all‌‌
 
customers‌‌avail‌‌of‌‌the‌‌purchase‌‌option.‌‌    ‌
 ‌
Identify‌‌the‌‌contracts‌‌to‌‌which‌‌PFRS‌‌15‌‌may‌‌be‌‌applied.‌  ‌
a. Contract‌‌1‌ c.‌‌Contracts‌‌1‌‌and‌‌3 ‌ ‌
b. Contract‌‌2‌ d.‌‌None‌‌of‌‌these‌  ‌
 ‌
10. The‌‌   consideration‌‌   received‌‌   from‌‌ a ‌‌contract‌‌  with‌‌ a ‌‌customer‌‌ that‌‌  does‌‌  not‌‌ meet‌‌  the‌‌  criteria‌‌ under‌‌  
‘Step‌‌1’‌o
‌ f‌‌PFRS‌‌15‌‌is‌‌   ‌
a. recognized‌‌as‌‌liability.‌  ‌
b. recorded‌‌through‌‌memo‌‌entry‌‌only.‌  ‌
c. disclosed‌‌only.‌  ‌
d. b‌‌and‌‌c ‌ ‌
 ‌
11. A‌‌good‌‌or‌‌service‌‌that‌‌is‌‌not‌‌distinct‌‌(choose‌‌the‌‌incorrect‌‌statement)‌  ‌
a. shall‌‌be‌‌combined‌‌with‌‌the‌‌other‌‌promises‌‌in‌‌the‌‌contract.‌  ‌
b. may‌  ‌be‌  ‌treated,‌  ‌together‌  ‌with‌  ‌other‌  ‌promises‌  ‌in‌  ‌the‌  ‌contract,‌  ‌as‌  ‌a ‌ ‌single‌  ‌performance‌‌  
obligation.‌  ‌
c. may‌‌   be‌‌
  identified‌‌   as‌‌  a ‌‌part‌‌  of‌‌  a ‌‌bundle‌‌   of‌‌  goods‌‌   or‌‌  services‌‌   or‌‌  a ‌‌part‌‌  of‌‌  a ‌‌series‌‌  of‌‌ goods‌‌ or‌‌ 
services‌‌to‌‌be‌‌transferred‌‌to‌‌the‌‌customer.‌  ‌
d. shall‌‌   be‌‌
  ignored.‌‌   The‌‌   entity‌‌   allocates‌‌   the‌‌   transaction‌‌   price‌‌   only‌‌   to‌‌
  the‌‌  other‌‌   promises‌‌   in‌‌  the‌‌ 
contract‌‌that‌‌are‌‌distinct.‌  ‌
 ‌
12. According‌  ‌to‌  ‌PFRS‌  ‌15,‌  ‌revenue‌‌   from‌‌   a ‌‌performance‌‌   obligation‌‌   that‌‌   is‌‌
  not‌‌  satisfied‌‌   over‌‌   time‌‌   is‌‌ 
recognized‌‌    ‌
a. over‌‌time‌‌as‌‌the‌‌entity‌‌progresses‌‌towards‌‌the‌‌complete‌‌satisfaction‌‌of‌‌the‌‌obligation.‌  ‌
b. at‌‌a‌‌point‌‌in‌‌time‌‌when‌‌the‌‌performance‌‌obligation‌‌is‌‌satisfied.‌‌    ‌
 c. when‌‌the‌‌contract‌‌ceases‌‌to‌‌be‌‌enforceable.‌  ‌
d. a‌‌or‌‌b ‌ ‌
 ‌
13. Arrange‌‌the‌‌following‌‌steps‌‌of‌‌revenue‌‌recognition‌‌in‌‌accordance‌‌with‌‌PFRS‌‌15.‌  ‌
I. Identify‌‌the‌‌performance‌‌obligations‌‌in‌‌the‌‌contract‌  ‌
II. Recognize‌‌revenue‌‌when‌‌(or‌‌as)‌‌the‌‌entity‌‌satisfies‌‌a‌‌performance‌‌obligation‌  ‌
III. Determine‌‌the‌‌transaction‌‌price‌  ‌
IV. Identify‌‌the‌‌contract‌‌with‌‌the‌‌customer‌  ‌
V. Allocate‌‌the‌‌transaction‌‌price‌‌to‌‌the‌‌performance‌‌obligations‌‌in‌‌the‌‌contract‌  ‌
a. IV,‌‌I,‌‌V,‌‌III,‌‌II‌ c‌.‌‌IV,‌‌I,‌‌III,‌‌V,‌‌II‌  ‌
b. III,‌‌IV,‌‌I,‌‌V,‌‌II‌‌
  d.‌‌IV,‌‌III,‌‌I,‌‌V,‌‌II‌  ‌
 ‌
14. Which‌  ‌of‌  ‌the‌  ‌following‌  ‌must‌  ‌be‌  ‌met‌  ‌before‌  ‌a ‌‌contract‌‌   with‌‌   a ‌‌customer‌‌   is‌‌  accounted‌‌   for‌‌
  under‌‌ 
PFRS‌‌15?‌  ‌
a. The‌‌collection‌‌of‌‌the‌‌consideration‌‌must‌‌be‌‌certain.‌  ‌
b. The‌‌   contract‌‌   must‌‌   be‌‌  in‌‌
  writing‌‌   so‌‌  that‌‌   there‌‌   will‌‌   be‌‌   no‌‌  doubt‌‌   in‌‌  the‌‌   customer’s‌‌   ability‌‌   and‌‌ 
intention‌‌to‌‌pay‌‌the‌‌consideration.‌  ‌
c. The‌‌promised‌‌goods‌‌or‌‌services‌‌must‌‌have‌‌already‌‌been‌‌transferred‌‌to‌‌the‌‌customer.‌  ‌
d. Both‌  ‌contracting‌  ‌parties‌  ‌must‌  ‌acknowledge,‌‌   whether‌‌   explicitly‌‌   or‌‌   implicitly,‌‌   the‌‌   rights‌‌   and‌‌ 
obligations‌‌created‌‌under‌‌the‌‌contract.‌‌    ‌
   ‌
15. Which‌  ‌of‌  ‌the‌  ‌following‌  ‌may‌  ‌be‌  ‌treated‌  ‌as‌  ‌a ‌ ‌performance‌  ‌obligation‌  ‌to‌  ‌be‌  ‌accounted‌  ‌for‌‌ 
separately?‌  ‌
I. A‌‌promise‌‌to‌‌transfer‌‌a‌‌distinct‌‌good‌‌or‌‌service‌  ‌
II. A‌‌promise‌‌to‌‌transfer‌‌a‌‌distinct‌‌bundle‌‌of‌‌goods‌‌or‌‌services‌  ‌
III. A‌‌
 promise‌‌  to‌‌ transfer‌‌ a ‌‌series‌‌ of‌‌  distinct‌‌ goods‌‌  or‌‌
 services‌‌  that‌‌  are‌‌ substantially‌‌  the‌‌  same‌‌ and‌‌ 
have‌‌the‌‌same‌‌pattern‌‌of‌‌transfer‌‌to‌‌the‌‌customer‌‌    ‌
IV. A‌  ‌promise‌  ‌that‌  ‌is‌  ‌implied‌  ‌by‌  ‌the‌  ‌entity’s‌  ‌customary‌  ‌business‌  ‌practices‌  ‌which,‌  ‌at‌  ‌contract‌‌  
inception,‌  ‌creates‌‌   a ‌‌valid‌‌   expectation‌‌   on‌‌  the‌‌   part‌‌   of‌‌   the‌‌  customer‌‌   that‌‌   the‌‌   entity‌‌  will‌‌  satisfy‌‌ 
the‌‌promise‌  ‌
a. I‌‌only‌ c.‌‌I,‌‌II‌‌and‌‌III‌   ‌
b. I‌‌and‌‌II‌ d.‌‌all‌‌of‌‌these‌  ‌
 ‌
16. A‌‌good‌‌or‌‌service‌‌is‌‌distinct‌‌if:‌‌   ‌
I. The‌  ‌customer‌  ‌can‌‌   benefit‌‌   from‌‌   the‌‌   good‌‌   or‌‌
  service‌‌   either‌‌   on‌‌
  its‌‌  own‌‌   or‌‌   together‌‌   with‌‌   other‌‌ 
resources‌‌that‌‌are‌‌readily‌‌available‌‌to‌‌the‌‌customer.‌  ‌
II. The‌‌   promise‌‌   to‌‌
  transfer‌‌   the‌‌   good‌‌   or‌‌  service‌‌   is‌‌  separately‌‌ identifiable‌‌ from‌‌  other‌‌ promises‌‌  in‌‌ 
the‌‌contract.‌  ‌
a. I‌‌only‌ c.‌‌I‌‌and‌‌II‌  ‌
b. II‌‌only‌ d.‌‌none‌‌of‌‌these‌  ‌
 ‌
17. Revenue‌  ‌is‌  ‌recognized‌  ‌when‌  ‌(or‌  ‌as)‌‌   the‌‌   entity‌‌   satisfies‌‌   a ‌‌performance‌‌   obligation.‌‌   According‌‌   to‌‌
 
PFRS‌‌15,‌‌‌revenue‌‌is‌‌measured‌‌at‌  ‌
a. the‌‌fair‌‌value‌‌of‌‌the‌‌consideration‌‌received‌‌or‌‌receivable.‌  ‌
b. the‌‌transaction‌‌price.‌  ‌
c. the‌‌stand-alone‌‌selling‌‌price‌‌of‌‌the‌‌good‌‌or‌‌services‌‌transferred.‌  ‌
d. the‌‌amount‌‌of‌‌the‌‌transaction‌‌price‌‌allocated‌‌to‌‌the‌‌performance‌‌obligation‌‌satisfied.‌  ‌
 ‌
18. According‌  ‌to‌  ‌PFRS‌  ‌15,‌  ‌the‌  ‌transaction‌  ‌price‌  ‌is‌  ‌allocated‌  ‌to‌  ‌each‌  ‌performance‌  ‌obligation‌‌ 
identified‌‌in‌‌a‌‌contract‌‌based‌‌on‌‌the‌‌    ‌
a. relative‌‌stand-alone‌‌prices‌‌of‌‌the‌‌distinct‌‌goods‌‌or‌‌services‌‌promised‌‌to‌‌be‌‌transferred.‌  ‌
b. contractual‌‌agreement‌‌with‌‌the‌‌customer.‌  ‌
c. expected‌‌costs‌‌of‌‌satisfying‌‌the‌‌performance‌‌obligations.‌  ‌
d. a‌‌or‌‌b ‌ ‌
 ‌
19. According‌  ‌to‌  ‌PFRS‌  ‌15,‌  ‌revenue‌  ‌from‌  ‌a ‌ ‌performance‌  ‌obligation‌  ‌that‌  ‌is‌  ‌satisfied‌  ‌over‌  ‌time‌  ‌is‌‌ 
recognized‌‌    ‌
a. over‌‌time‌‌as‌‌the‌‌entity‌‌progresses‌‌towards‌‌the‌‌complete‌‌satisfaction‌‌of‌‌the‌‌obligation.‌  ‌
b. at‌‌a‌‌point‌‌in‌‌time‌‌when‌‌the‌‌performance‌‌obligation‌‌is‌‌satisfied.‌‌    ‌
c. when‌‌the‌‌contract‌‌ceases‌‌to‌‌be‌‌enforceable.‌  ‌
d. a‌‌or‌‌b ‌ ‌
 ‌
20. ABC‌‌   Co.‌‌
  enters‌‌   into‌‌   a ‌‌contract‌‌ with‌‌  XYZ,‌‌ Inc.‌‌ to‌‌  deliver‌‌ 2 ‌‌apples,‌‌
 3 ‌‌mangoes‌‌ and‌‌  5 ‌‌potatoes‌‌ for‌‌
 a ‌‌
total‌‌  consideration‌‌   of‌‌
 ‌₱1‌ 00.‌‌ In‌‌ accounting‌‌  for‌‌ the‌‌  contract,‌‌  which‌‌ of‌‌
 the‌‌ following‌‌ is‌‌  probably‌‌ not‌‌ 
true?‌  ‌
a. ABC‌‌Co.‌‌identifies‌‌three‌‌performance‌‌obligations‌‌in‌‌the‌‌contract.‌  ‌
b. ABC‌  ‌Co.‌  ‌allocates‌  ‌the‌  ‌₱1‌ 00‌  ‌transaction‌  ‌price‌  ‌over‌  ‌the‌  ‌promises‌  ‌to‌  ‌deliver‌  ‌the‌  ‌apples,‌‌ 
mangoes‌‌and‌‌potatoes‌‌on‌‌the‌‌basis‌‌of‌‌relative‌‌stand-alone‌‌selling‌‌prices‌‌of‌‌those‌‌goods.‌‌    ‌
c. The‌‌allocation‌‌of‌‌the‌‌transaction‌‌price‌‌may‌‌result‌‌to‌‌the‌‌identification‌‌of‌‌a‌‌discount.‌  ‌
d. No‌  ‌revenue‌  ‌is‌  ‌recognized‌  ‌until‌  ‌all‌‌   of‌‌
  the‌‌   2 ‌‌apples,‌‌
  3 ‌‌mangoes‌‌   and‌‌  5 ‌‌potatoes‌‌   are‌‌
  delivered‌‌  
even‌‌though‌‌the‌‌2‌‌apples‌‌were‌‌delivered‌‌first‌‌before‌‌the‌‌mangoes‌‌and‌‌potatoes.‌  ‌
 ‌
21. Non-current‌‌assets‌‌are‌‌presented‌‌as‌‌current‌‌assets‌‌in‌‌the‌‌statement‌‌of‌‌financial‌‌position‌‌    ‌
a. only‌‌when‌‌they‌‌are‌‌expected‌‌to‌‌be‌‌sold‌‌within‌‌12‌‌months‌‌from‌‌the‌‌end‌‌of‌‌reporting‌‌period.‌  ‌
b. only‌‌ if‌‌ they‌‌  are‌‌  actually‌‌ sold‌‌  after‌‌ the‌‌ reporting‌‌ period‌‌  but‌‌
 before‌‌ the‌‌ date‌‌ of‌‌ authorization‌‌ of‌‌ 
the‌‌financial‌‌statements‌‌for‌‌issue.‌  ‌
c. only‌‌when‌‌they‌‌qualify‌‌as‌‌held‌‌for‌‌sale‌‌assets‌‌under‌‌PFRS‌‌5.‌  ‌
d. never‌‌presented‌‌as‌‌current‌‌items.‌  ‌
 ‌
22. The‌‌  qualification‌‌   of‌‌
  an‌‌   asset‌‌  to‌‌
  be‌‌
  classified‌‌   as‌‌  held‌‌ for‌‌
 sale‌‌ after‌‌
 the‌‌ reporting‌‌ period‌‌ but‌‌ before‌‌  
the‌‌financial‌‌statements‌‌are‌‌authorized‌‌for‌‌issue‌‌   ‌
a. is‌‌a‌‌non-adjusting‌‌event‌‌after‌‌the‌‌reporting‌‌period.‌  ‌
b. is‌‌an‌‌adjusting‌‌event‌‌after‌‌the‌‌reporting‌‌period.‌  ‌
c. is‌‌an‌‌extraordinary‌‌item.‌  ‌
d. a‌‌or‌‌b ‌ ‌
 ‌
23. A‌‌
  noncurrent‌‌   asset‌‌   classified‌‌   as‌‌  held‌‌ for‌‌
 sale‌‌  in‌‌ accordance‌‌ with‌‌  PFRS‌‌  5 ‌‌has‌‌
 not‌‌
 been‌‌ sold‌‌ after‌‌ a ‌‌
year.‌‌The‌‌asset‌‌shall‌‌continue‌‌to‌‌be‌‌presented‌‌as‌‌held‌‌for‌‌sale‌‌under‌‌PFRS‌‌5‌‌if‌  ‌
a. the‌‌delay‌‌is‌‌due‌‌to‌‌events‌‌beyond‌‌the‌‌entity’s‌‌control.‌‌    ‌
b. the‌‌entity‌‌remains‌‌committed‌‌to‌‌its‌‌plan‌‌to‌‌sell‌‌the‌‌asset.‌‌   ‌
c. the‌  ‌noncurrent‌  ‌asset‌  ‌is‌  ‌actually‌  ‌sold‌  ‌after‌  ‌the‌  ‌reporting‌  ‌period‌  ‌but‌  ‌before‌  ‌the‌  ‌financial‌‌  
statements‌‌were‌‌authorized‌‌for‌‌issue.‌  ‌
d. a‌‌and‌‌b ‌ ‌
 ‌
24. According‌‌to‌‌PFRS‌‌5,‌‌gain‌‌on‌‌impairment‌‌reversal‌‌on‌‌an‌‌asset‌‌held‌‌for‌‌sale‌‌is‌‌   ‌
a. recognized‌‌for‌‌the‌‌fair‌‌value‌‌change‌‌during‌‌the‌‌period.‌  ‌
b. recognized‌‌in‌‌other‌‌comprehensive‌‌income.‌  ‌
c. recognized‌‌only‌‌to‌‌the‌‌extent‌‌of‌‌cumulative‌‌impairment‌‌losses‌‌previously‌‌recognized‌. ‌ ‌
d. not‌‌recognized.‌  ‌
 ‌
25. The‌‌   results‌‌  of‌‌
  discontinued‌‌   operations‌‌   are‌‌  presented‌‌   separately‌‌ in‌‌ the‌‌ statement‌‌  of‌‌ profit‌‌
 or‌‌ loss‌‌ 
and‌‌other‌‌comprehensive‌‌income‌‌   ‌
a. as‌‌a‌‌single‌‌amount‌‌gross‌‌of‌‌tax.‌  ‌
b. as‌‌a‌‌single‌‌amount‌‌net‌‌of‌‌tax.‌  ‌
c. as‌‌part‌‌of‌‌the‌‌regular‌‌line‌‌items.‌  ‌
d. a‌‌or‌‌b ‌ ‌
 ‌
26. According‌‌to‌‌PFRS‌‌5,‌‌held‌‌for‌‌sale‌‌classification‌‌is‌‌permitted‌‌when‌‌   ‌
a. the‌  ‌noncurrent‌  ‌asset‌  ‌or‌  ‌disposal‌  ‌group‌  ‌is‌  ‌available‌  ‌for‌  ‌immediate‌  ‌sale‌  ‌in‌  ‌its‌  ‌present‌‌ 
condition.‌‌   ‌
b. the‌‌sale‌‌is‌‌highly‌‌probable.‌  ‌
c. a‌‌and‌‌b ‌ ‌
d. the‌‌   sale‌‌
  actually‌‌  occurred‌‌  after‌‌  the‌‌  reporting‌‌ period‌‌ but‌‌  before‌‌ the‌‌
 financial‌‌  statements‌‌ were‌‌ 
authorized‌‌for‌‌issue.‌  ‌
 ‌
27. According‌‌to‌‌PFRS‌‌5,‌‌assets‌‌held‌‌for‌‌sale‌‌are‌‌measured‌‌at‌‌    ‌
a.‌‌fair‌‌value.‌‌  c.‌‌carrying‌‌amount.‌  ‌
b.‌‌fair‌‌value‌‌less‌‌costs‌‌to‌‌sell.‌ d.‌‌lower‌‌of‌‌b‌‌and‌‌c ‌ ‌
 ‌
28. According‌‌to‌‌PFRS‌‌5,‌‌a‌‌disposal‌‌group‌‌may‌‌qualify‌‌as‌‌discontinued‌‌operation‌‌if‌‌   ‌
a. it‌‌is‌‌a‌‌component‌‌of‌‌an‌‌entity.‌‌   ‌
b. it‌‌meets‌‌the‌‌held‌‌for‌‌sale‌‌classification‌‌criteria.‌  ‌
c. a‌‌and‌‌b ‌ ‌
d. none‌‌of‌‌these‌  ‌
 ‌
29. The‌‌results‌‌of‌‌a‌‌discontinued‌‌operations‌‌are‌‌presented‌‌in‌‌the‌‌statement‌‌of‌‌profit‌‌or‌‌loss‌‌    ‌
a. before‌‌the‌‌profit‌‌or‌‌loss‌‌from‌‌continuing‌‌operations‌‌but‌‌after‌‌the‌‌profit‌‌for‌‌the‌‌year.‌  ‌
b. after‌‌the‌‌profit‌‌or‌‌loss‌‌from‌‌continuing‌‌operations‌‌but‌‌before‌‌the‌‌profit‌‌for‌‌the‌‌year‌. ‌ ‌
c. separately‌‌   from‌‌
  the‌‌
  profit‌‌
  or‌‌
  loss‌‌  from‌‌  continuing‌‌ operations‌‌ and‌‌  it‌‌ does‌‌
 not‌‌ affect‌‌ the‌‌ profit‌‌ 
for‌‌the‌‌year.‌  ‌
d. as‌‌an‌a‌ djustment‌‌to‌‌the‌‌beginning‌‌balance‌‌of‌‌the‌‌retained‌‌earnings.‌  ‌
 ‌
30. Which‌‌of‌‌the‌‌following‌‌is‌‌included‌‌in‌‌profit‌‌from‌‌continuing‌‌operations?‌  ‌
a. extraordinary‌‌items‌‌  ‌c.‌‌other‌‌comprehensive‌‌income‌ 
b. discontinued‌‌operations‌ ‌d.‌‌‌income‌‌tax‌‌expense‌  ‌
 ‌
31. Entity‌  ‌A’s‌  ‌total‌  ‌shareholders’‌  ‌equity‌  ‌on‌  ‌January‌  ‌1,‌  ‌20x1‌  ‌was‌  ‌₱1‌ 80,000.‌‌   The‌‌
  following‌‌   were‌‌   the‌‌ 
transactions‌‌during‌‌the‌‌year:‌  ‌
● Entity‌‌A‌‌issued‌‌additional‌‌share‌‌capital‌‌amounting‌‌to‌₱ ‌ 3‌ 60,000.‌‌
   ‌
● Total‌‌income‌‌earned‌‌amounted‌‌to‌₱ ‌ 1‌ ,000,000.‌  ‌
● Total‌‌expenses‌‌incurred‌‌amounted‌‌to‌₱ ‌ 5‌ 60,000.‌  ‌
 ● Entity‌‌A‌‌declared‌‌dividends‌‌of‌₱
‌ 1‌ 40,000.‌  ‌
 ‌
How‌‌much‌‌is‌‌the‌‌total‌‌shareholders’‌‌equity‌‌on‌‌December‌‌31,‌‌20x1?‌  ‌
a. 840,000‌  ‌
b. 700,000‌  ‌
c. 640,000‌  ‌
d. 540,000‌  ‌
 ‌
A‌‌180K‌‌+‌‌360K‌‌+‌‌1M‌‌–‌‌560K‌‌–‌‌140K‌‌=‌8‌ 40K‌  ‌
 ‌
32. Entity‌‌  A ‌‌reported‌‌   profit‌‌ of‌‌
 ‌₱3‌ 40,000‌‌ for‌‌
 the‌‌
 year‌‌ ended‌‌ December‌‌  31,‌‌
 20x1.‌‌
 Depreciation‌‌ expense‌‌ 
for‌‌
  the‌‌  year‌‌
  was‌‌
  ‌₱1‌ 00,000.‌‌  The‌‌   following‌‌  are‌‌ the‌‌ changes‌‌ in‌‌
 the‌‌
 operating‌‌ assets‌‌ and‌‌ liabilities‌‌ of‌‌ 
Entity‌‌A‌‌during‌‌20x1:‌  ‌
 ‌
 ‌ 20x1‌  ‌ 20x0‌  ‌
Accounts‌‌receivable‌‌   ‌ 560,000‌  ‌ 300,000‌  ‌
Accounts‌‌payable‌‌   ‌ 240,000‌  ‌ 120,000‌  ‌
 ‌
How‌‌much‌‌is‌‌the‌‌net‌‌cash‌‌from‌‌operating‌‌activities?‌  ‌
a. 820,000‌  ‌
b. 580,000‌  ‌
c. 300,000‌  ‌
d. 100,000‌  ‌
 
C‌‌340K‌‌profit‌‌+‌‌100K‌‌depreciation‌‌–‌‌260K‌‌inc.‌‌in‌‌A/R‌‌+‌‌120K‌‌inc.‌‌in‌‌A/P‌‌=‌3‌ 00K‌  ‌
 ‌
Use‌‌the‌‌following‌‌information‌‌for‌‌the‌‌next‌‌two‌‌questions:‌  ‌
The‌‌following‌‌were‌‌the‌‌cash‌‌transactions‌‌of‌‌Entity‌‌A‌‌during‌‌the‌‌period:‌  ‌
 ‌
Cash‌‌receipts‌‌from‌‌sale‌‌of‌‌goods‌‌    ‌ 650,000‌  ‌
Cash‌‌paid‌‌for‌‌purchases‌‌of‌‌inventory‌‌   ‌ 340,000‌  ‌
Cash‌‌receipts‌‌on‌‌loans‌‌taken‌‌from‌‌a‌‌bank‌  ‌ 200,000‌  ‌
Cash‌‌paid‌‌for‌‌interest‌‌expense‌‌   ‌ ‌20,000‌  ‌
Cash‌‌payment‌‌for‌‌the‌‌acquisition‌‌of‌‌property,‌‌plant‌‌and‌‌  
equipment‌  ‌ 180,000‌  ‌
 ‌
33. How‌‌much‌‌is‌‌the‌‌net‌‌cash‌‌from‌‌(used‌‌in)‌‌operating‌‌activities?‌  ‌
a. 155,000‌  ‌
b. (155,000)‌  ‌
c. 290,000‌  ‌
d. (290,000)‌  ‌
 ‌
C‌‌650K‌‌sale‌‌–‌‌340K‌‌purchases‌‌–‌‌20K‌ ‌interest‌‌=‌2‌ 90K‌  ‌
 ‌
34. How‌‌much‌‌is‌‌the‌‌net‌‌cash‌‌from‌‌(used‌‌in)‌‌investing‌‌activities?‌  ‌
a. 180,000‌  ‌
b. (180,000)‌  ‌
 c. 20,000‌  ‌
d. 0‌  ‌
 ‌
B‌‌acquisition‌‌of‌‌PPE‌  ‌
 ‌
Use‌‌the‌‌following‌‌information‌‌for‌‌the‌‌next‌‌three‌‌questions:‌  ‌
The‌‌  comparative‌‌   statement‌‌
  of‌‌
  financial‌‌ position‌‌ and‌‌ statement‌‌
 of‌‌
 comprehensive‌‌ income‌‌ of‌‌ Entity‌‌ A ‌‌
on‌‌December‌‌31,‌‌20x1‌‌are‌‌shown‌‌below:‌  ‌
 ‌
Entity‌‌A ‌ ‌
Statement‌‌of‌‌Financial‌‌Position‌  ‌
As‌‌of‌‌December‌‌31,‌‌20x1‌  ‌
 ‌  ‌  ‌
ASSETS‌  ‌ ‌20x1‌   ‌ ‌20x0‌   ‌
Cash‌‌and‌‌cash‌‌equivalents‌  ‌ 440,000‌  ‌ 200,000‌  ‌
Trade‌‌and‌‌other‌‌receivables‌  ‌ 130,000‌  ‌ 120,000‌  ‌
Inventory‌  ‌ 120,000‌  ‌ 480,000‌  ‌
Prepaid‌‌assets‌  ‌ 40,000‌  ‌ 160,000‌  ‌
Total‌‌current‌‌assets‌  ‌ 730,000‌  ‌ 960,000‌  ‌
 ‌  ‌  ‌
Property,‌‌plant‌‌&‌‌equipment‌  ‌ 760,000‌  ‌ 440,000‌  ‌
Total‌‌noncurrent‌‌assets‌  ‌ 760,000‌  ‌ 440,000‌  ‌
 ‌  ‌  ‌
1,490,00‌ 1,400,00‌
TOTAL‌‌ASSETS‌  ‌ 0‌  0‌ 
 ‌  ‌  ‌
LIABILITIES‌  ‌  ‌  ‌
Trade‌‌and‌‌other‌‌payables‌  ‌ 620,000‌  ‌ 560,000‌  ‌
 ‌  ‌  ‌
EQUITY‌  ‌  ‌  ‌
Owner’s‌‌capital‌  ‌ 870,000‌  ‌ 840,000‌  ‌
 ‌  ‌  ‌
TOTAL‌  ‌LIABILITIES‌  ‌& ‌‌ 1,490,00‌ 1,400,00‌
EQUITY‌  ‌ 0‌  0‌ 
 ‌  ‌  ‌  ‌  ‌
 ‌
Entity‌‌A  ‌‌ ‌
Statement‌‌of‌‌Comprehensive‌‌Income‌  ‌
‌For‌‌the‌‌year‌‌ended‌‌December‌‌31,‌‌20x1‌‌
   ‌
 ‌  ‌
1,000,00‌
Sales‌  ‌
0‌  ‌
 (600,000‌
Cost‌‌of‌‌sales‌  ‌
)‌  ‌
GROSS‌‌PROFIT‌  ‌ 400,000‌  ‌
Rent‌‌income‌  ‌ 150,000‌  ‌
(240,000‌
Depreciation‌‌expense‌  ‌
)‌  ‌
(120,000‌
Insurance‌‌expense‌  ‌
)‌  ‌
Bad‌‌debts‌‌expense‌  ‌ (30,000)‌  ‌
Loss‌‌on‌‌sale‌‌of‌‌equipment‌  ‌ (40,000)‌  ‌
PROFIT‌‌FOR‌‌THE‌‌YEAR‌  ‌ 120,000‌  ‌
Other‌‌comprehensive‌‌income‌  ‌ -‌  ‌
COMPREHENSIVE‌  ‌INCOME‌  ‌FOR‌  ‌THE‌‌
 
120,000‌  ‌
YR.‌  ‌
 ‌  ‌
 ‌
Additional‌‌information:‌  ‌
● Equipment‌‌   with‌‌
  carrying‌‌  amount‌‌   of‌‌
  ‌₱2‌ 40,000‌‌
  was‌‌   sold‌‌
  for‌‌
  ‌₱2‌ 00,000‌‌ resulting‌‌
 to‌‌
 a ‌‌loss‌‌
 on‌‌ sale‌‌
 of‌‌ 
₱‌40,000.‌  ‌
● Acquisition‌‌of‌‌equipment‌‌for‌‌cash‌‌amounted‌‌to‌₱ ‌ 8‌ 00,000.‌  ‌
● Owner‌‌drawings‌‌totalled‌₱ ‌ 9‌ 0,000.‌  ‌
 ‌
35. How‌‌much‌‌is‌‌the‌‌cash‌‌flows‌‌from‌‌(used‌‌in)‌‌operating‌‌activities?‌  ‌
a. 930,000‌  ‌
b. (930,000)‌  ‌
c. 400,000‌  ‌
d. (400,000)‌  ‌
 ‌
36. How‌‌much‌‌is‌‌the‌‌cash‌‌flows‌‌from‌‌(used‌‌in)‌‌investing‌‌activities?‌  ‌
a. 600,000‌  ‌
b. (600,000)‌  ‌
c. 400,000‌  ‌
d. (400,000)‌  ‌
 ‌
37. How‌‌much‌‌is‌‌the‌‌cash‌‌flows‌‌from‌‌(used‌‌in)‌‌financing‌‌activities?‌  ‌
a. 440,000‌  ‌
b. (440,000)‌  ‌
c. 90,000‌  ‌
d. (90,000)‌  ‌
 ‌
Solution:‌  ‌
Entity‌‌A ‌ ‌
Statement‌‌of‌‌cash‌‌flows‌  ‌
For‌‌the‌‌year‌‌ended‌‌December‌‌31,‌‌20x1‌  ‌
 ‌  ‌  ‌  ‌
Cash‌‌flows‌‌from‌‌operating‌‌activities‌  ‌  ‌  ‌
 Profit‌‌before‌‌tax‌  ‌ ‌120,000‌‌
  
Depreciation‌‌expense‌  ‌ ‌240,000‌‌
  
Loss‌‌on‌‌sale‌‌of‌‌equipment‌  ‌ ‌40,000‌‌
  
Increase‌‌in‌‌trade‌‌and‌‌other‌‌receivable,‌‌net‌  ‌ ‌(10,000)‌  ‌
Decrease‌‌in‌‌inventory‌  ‌ ‌360,000‌‌
  
Decrease‌‌in‌‌prepaid‌‌insurance‌  ‌ ‌120,000‌‌
  
Increase‌‌in‌‌trade‌‌and‌‌other‌‌payables‌  ‌ ‌60,000‌‌
  
Net‌‌cash‌‌from‌‌operating‌‌activities‌  ‌ ‌930,000‌‌
  
 ‌  ‌  ‌  ‌
Cash‌‌flows‌‌from‌‌investing‌‌activities‌  ‌  ‌  ‌
Cash‌‌receipt‌‌from‌‌sale‌‌of‌‌equipment‌  ‌ ‌200,000‌‌
  
Cash‌‌payment‌‌for‌‌acquisition‌‌of‌‌equipment‌  ‌ ‌(800,000)‌  ‌
Net‌‌cash‌‌used‌‌in‌‌investing‌‌activities‌  ‌ ‌(600,000)‌  ‌
 ‌  ‌  ‌  ‌
Cash‌‌flows‌‌from‌‌financing‌‌activities‌  ‌  ‌  ‌
Owner's‌‌drawings‌  ‌ ‌(90,000)‌  ‌
Net‌‌cash‌‌from‌‌financing‌‌activities‌  ‌ ‌(90,000)‌  ‌
 ‌  ‌  ‌  ‌
Net‌‌increase‌‌in‌‌cash‌‌and‌‌cash‌‌equivalents‌  ‌ ‌240,000‌‌
   ‌
Cash‌‌and‌‌cash‌‌equivalents,‌‌beginning‌  ‌ ‌200,000‌‌
   ‌
Cash‌‌and‌‌cash‌‌equivalents,‌‌end‌  ‌ ‌440,000‌‌
   ‌
 ‌  ‌  ‌  ‌
 ‌
 ‌
38. Year-end‌‌   net‌‌  assets‌‌  would‌‌   be‌‌
  overstated‌‌   and‌‌
  current‌‌   expenses‌‌   would‌‌   be‌‌ understated‌‌  as‌‌
 a ‌‌result‌‌
 
of‌‌failure‌‌to‌‌record‌‌which‌‌of‌‌the‌‌following‌‌adjusting‌‌entries?‌  ‌
a. Expiration‌‌of‌‌prepaid‌‌insurance‌  ‌
b. Depreciation‌‌of‌‌fixed‌‌assets‌  ‌
c. Accrued‌‌wages‌‌payable‌  ‌
d. All‌‌of‌‌these‌  ‌
 ‌
39. Dane‌  ‌Co.‌  ‌received‌  ‌merchandise‌  ‌on‌  ‌consignment.‌  ‌As‌  ‌of‌  ‌March‌  ‌31,‌  ‌Dane‌  ‌had‌  ‌recorded‌  ‌the‌‌ 
transaction‌  ‌as‌  ‌a ‌ ‌purchase‌  ‌and‌  ‌included‌  ‌the‌  ‌goods‌  ‌in‌  ‌the‌  ‌physical‌  ‌count‌  ‌of‌  ‌ending‌  ‌inventory.‌‌ 
Dane‌  ‌uses‌  ‌the‌  ‌periodic‌  ‌inventory‌  ‌system.‌‌   None‌‌   of‌‌
  the‌‌
  consigned‌‌   goods‌‌   have‌‌  been‌‌
  sold‌‌  during‌‌ 
the‌‌period.‌‌The‌‌effect‌‌of‌‌this‌‌on‌‌its‌‌financial‌‌statements‌‌for‌‌March‌‌31‌‌would‌‌be‌  ‌
a. no‌‌effect.‌  ‌
b. profit‌‌is‌‌correct‌‌but‌‌current‌‌assets‌‌and‌‌current‌‌liabilities‌‌are‌‌overstated.‌  ‌
c. profit,‌‌current‌‌assets‌‌and‌‌current‌‌liabilities‌‌are‌‌overstated.‌  ‌
d. profit‌‌and‌‌current‌‌liabilities‌‌are‌‌overstated.‌  ‌
 ‌
40. If‌  ‌the‌  ‌cost‌  ‌of‌  ‌ordinary‌  ‌repairs‌  ‌is‌  ‌capitalized‌  ‌as‌  ‌an‌  ‌addition‌  ‌to‌‌
  the‌‌
  building‌‌   account‌‌  during‌‌   the‌‌
 
current‌‌year,‌  ‌
a. net‌‌income‌‌for‌‌the‌‌current‌‌year‌‌will‌‌be‌‌understated.‌  ‌
b. stockholders'‌‌equity‌‌at‌‌the‌‌end‌‌of‌‌the‌‌current‌‌year‌‌will‌‌be‌‌understated.‌  ‌
c. total‌‌assets‌‌at‌‌the‌‌end‌‌of‌‌the‌‌current‌‌year‌‌will‌‌not‌‌be‌‌affected.‌  ‌
 d. total‌‌liabilities‌‌at‌‌the‌‌end‌‌of‌‌the‌‌current‌‌year‌‌will‌‌not‌‌be‌‌affected‌. ‌ ‌
 ‌
41. ABC‌‌   Co.‌‌  completes‌‌   the‌‌   draft‌‌   of‌‌   its‌‌  December‌‌   31,‌‌  20x1‌‌   year-end‌‌   financial‌‌   statements‌‌   on‌‌ January‌‌ 
31,‌  ‌20x2.‌  ‌On‌  ‌February‌  ‌5,‌  ‌20x2,‌  ‌the‌  ‌board‌  ‌of‌  ‌directors‌  ‌reviews‌  ‌the‌  ‌financial‌  ‌statements‌  ‌and‌‌ 
authorizes‌  ‌them‌  ‌for‌  ‌issue.‌  ‌The‌  ‌entity‌  ‌announces‌  ‌its‌  ‌profit‌  ‌and‌  ‌selected‌  ‌other‌  ‌financial‌‌ 
information‌  ‌on‌  ‌February‌  ‌23,‌  ‌20x2.‌  ‌The‌  ‌financial‌‌   statements‌‌   are‌‌
  made‌‌   available‌‌   to‌‌  shareholders‌‌  
and‌‌   others‌‌   on‌‌   March‌‌   1,‌‌  20x2.‌‌   The‌‌   shareholders‌‌   approve‌‌   the‌‌  financial‌‌   statements‌‌   at‌‌  their‌‌  annual‌‌  
meeting‌  ‌on‌  ‌March‌  ‌18,‌  ‌20x2‌  ‌and‌  ‌the‌  ‌approved‌  ‌financial‌  ‌statements‌  ‌are‌  ‌then‌  ‌filed‌  ‌with‌  ‌a ‌‌
regulatory‌‌body‌‌on‌‌April‌‌1,‌‌20x2.‌‌Events‌‌after‌‌the‌‌reporting‌‌period‌‌are‌‌those‌‌occurring‌  ‌
a. from‌‌December‌‌31,‌‌20x1‌‌to‌‌February‌‌5,‌‌20x2.‌  ‌
b. from‌‌January‌‌1,‌‌20x2‌‌to‌‌February‌‌5,‌‌20x2‌. ‌ ‌
c. from‌‌January‌‌1,‌‌20x2‌‌to‌‌February‌‌23,‌‌20x2.‌  ‌
d. from‌‌January‌‌1,‌‌20x2‌‌to‌‌March‌‌18,‌‌20x2.‌  ‌
 ‌
42. These‌‌are‌‌events‌‌that‌‌are‌‌indicative‌‌of‌‌conditions‌‌that‌‌arose‌‌after‌‌the‌‌reporting‌‌period.‌  ‌
a. Events‌‌after‌‌the‌‌reporting‌‌period‌ c.‌‌Adjusting‌‌events‌  ‌
b. Non-adjusting‌‌events‌ d.‌‌all‌‌of‌‌these‌  ‌
 ‌
43. Entity‌‌   A ‌‌recognized‌‌   a ‌‌provision‌‌   for‌‌   a ‌‌pending‌‌   litigation‌‌   amounting‌‌   to‌‌  ‌₱5‌ 0,000‌‌   on‌‌  December‌‌ 31,‌‌ 
20x1‌  ‌(end‌‌   of‌‌  current‌‌   reporting‌‌   period).‌‌   This‌‌   amount‌‌   is‌‌  reflected‌‌   in‌‌
  Entity‌‌   A’s‌‌  reported‌‌   profit‌‌
  of‌‌ 
₱‌600,000‌  ‌for‌  ‌the‌  ‌year‌‌   20x1.‌‌   Shortly‌‌   after‌‌   December‌‌   31,‌‌   20x1,‌‌   but‌‌  before‌‌   the‌‌   financial‌‌   statements‌‌  
were‌‌authorized‌‌for‌‌issue,‌‌the‌‌litigation‌‌is‌‌settled‌‌for‌₱ ‌ 4‌ 0,000.‌‌The‌‌correct‌‌profit‌‌in‌‌20x1‌‌is‌  ‌
a. 600,000‌.‌ c.‌‌640,000.‌ 
b. 610,000‌.‌ d.‌‌590,000‌  ‌
 ‌
44. Which‌‌of‌‌the‌‌following‌‌is‌‌an‌‌example‌‌of‌‌an‌‌adjusting‌‌event?‌  ‌
a. Major‌‌business‌‌combination‌‌after‌‌the‌‌reporting‌‌period.‌  ‌
b. A‌‌building‌‌is‌‌totally‌‌razed‌‌by‌‌fire‌‌after‌‌the‌‌reporting‌‌period.‌  ‌
c. Sale‌‌   of‌‌  inventories‌‌   after‌‌   the‌‌   reporting‌‌   period‌‌   that‌‌ gives‌‌  evidence‌‌  to‌‌ their‌‌  net‌‌ realizable‌‌ value‌ 
at‌‌the‌‌end‌‌of‌‌reporting‌‌period.‌  ‌
d. Issuance‌‌of‌‌shares‌‌of‌‌stocks‌‌after‌‌the‌‌reporting‌‌period.‌  ‌
 ‌
45. Which‌‌of‌‌the‌‌following‌‌is‌‌an‌‌example‌‌of‌‌a‌‌non-adjusting‌‌event?‌  ‌
a. Bankruptcy‌‌   of‌‌
  a ‌‌customer‌‌   after‌‌   the‌‌   reporting‌‌   period‌‌   that‌‌   indicates‌‌   that‌‌  the‌‌ carrying‌‌  amount‌‌ 
of‌‌a‌‌trade‌‌receivable‌‌at‌‌the‌‌end‌‌of‌‌reporting‌‌period‌‌is‌‌impaired.‌  ‌
b. Evidence‌‌indicating‌‌that‌‌an‌‌asset‌‌is‌‌impaired‌‌as‌‌at‌‌the‌‌end‌‌of‌‌the‌‌reporting‌‌period.‌  ‌
c. Legal‌‌   proceedings‌‌   after‌‌   the‌‌   reporting‌‌   period‌‌   for‌‌
  an‌‌   incident‌‌   that‌‌  occurred‌‌   before‌‌   the‌‌  end‌‌ of‌‌ 
the‌‌reporting‌‌period.‌  ‌
d. Significant‌  ‌decline‌  ‌in‌‌   foreign‌‌   exchange‌‌   rates‌‌   after‌‌   the‌‌   reporting‌‌   period‌‌   resulting‌‌   to‌‌
  massive‌‌ 
losses‌‌on‌‌recognized‌‌foreign‌‌currency‌‌denominated‌‌financial‌‌instruments‌. ‌ ‌
 ‌
46. According‌  ‌to‌  ‌PAS‌  ‌8,‌  ‌in‌  ‌the‌  ‌absence‌  ‌of‌  ‌a ‌ ‌PFRS‌  ‌that‌  ‌specifically‌  ‌deals‌  ‌with‌  ‌a ‌ ‌transaction,‌‌  
management‌‌shall‌   ‌
a. refer‌‌to‌‌the‌‌concepts‌‌under‌‌the‌C ‌ onceptual‌‌Framework‌. ‌ ‌
b. adopt‌‌the‌‌provisions‌‌of‌‌the‌‌US‌‌GAAP.‌  ‌
c. use‌‌  its‌‌ judgment‌‌ in‌‌ developing‌‌  and‌‌ applying‌‌  an‌‌ accounting‌‌  policy‌‌  that‌‌  results‌‌  in‌‌  information‌‌  
that‌‌is‌‌relevant‌‌and‌‌reliable‌. ‌ ‌
 d. consider‌‌the‌‌applicability‌‌of‌‌relevant‌‌accounting‌‌literature.‌  ‌
 ‌
47. According‌‌to‌‌PAS‌‌8,‌‌a‌‌change‌‌in‌‌accounting‌‌policy‌‌is‌‌accounted‌‌for‌  ‌
a. using‌‌a‌‌transitional‌‌provision,‌‌if‌‌any.‌  ‌
b. retrospectively.‌‌   ‌
c. prospectively,‌‌if‌‌retrospective‌‌application‌‌is‌‌impracticable.‌  ‌
d. a,‌‌b‌‌or‌‌c,‌‌whichever‌‌is‌‌most‌‌appropriate‌  ‌
 ‌
48. This‌‌
  refers‌‌  to‌‌  applying‌‌   a ‌‌new‌‌ accounting‌‌  policy‌‌
 to‌‌ transactions,‌‌ other‌‌
 events‌‌ and‌‌ conditions‌‌ as‌‌ if‌‌ 
that‌‌policy‌‌had‌‌always‌‌been‌‌applied.‌‌    ‌
a. Retrospective‌‌application‌‌ ‌c.‌‌Prospective‌‌application‌  ‌
b. Retrospective‌‌restatement‌ ‌d.‌‌Impracticable‌‌application‌  ‌
 ‌
49. According‌‌to‌‌PAS‌‌8,‌‌a‌‌change‌‌in‌‌accounting‌‌estimate‌‌is‌‌accounted‌‌for‌  ‌
a. using‌‌a‌‌transitional‌‌provision,‌‌if‌‌any.‌  ‌
b. retrospectively.‌‌   ‌
c. prospectively‌. ‌ ‌
d. a,‌‌b‌‌or‌‌c,‌‌whichever‌‌is‌‌most‌‌appropriate‌  ‌
 ‌
50. Entity‌‌  A ‌‌changes‌‌   its‌‌
  inventory‌‌   cost‌‌
  formula‌‌
  from‌‌  FIFO‌‌ to‌‌
 weighted‌‌ average.‌‌  How‌‌
 should‌‌ Entity‌‌ 
A‌‌account‌‌for‌‌this‌‌change?‌  ‌
a. by‌‌retrospective‌‌restatement,‌‌as‌‌a‌‌change‌‌in‌‌accounting‌‌policy‌  ‌
b. by‌‌prospective‌‌application,‌‌as‌‌a‌‌change‌‌in‌‌accounting‌‌estimate‌  ‌
c. by‌‌retrospective‌‌application,‌‌as‌‌a‌‌change‌‌in‌‌accounting‌‌policy‌  ‌
d. as‌‌a‌‌correction‌‌of‌‌prior‌‌period‌‌error‌  ‌
 ‌
51. According‌‌to‌‌PAS‌‌24,‌‌related‌‌party‌‌disclosures‌‌are‌‌necessary‌‌    ‌
a. because‌  ‌related‌  ‌party‌  ‌transactions‌  ‌may‌  ‌have‌  ‌resulted‌  ‌to‌  ‌assets‌  ‌and‌  ‌liabilities‌  ‌that‌  ‌were‌‌  
recognized‌‌in‌‌the‌‌financial‌‌statements‌‌of‌‌the‌‌reporting‌‌entity.‌  ‌
b. to‌‌   notify‌‌   users‌‌   of‌‌ financial‌‌  statements‌‌  of‌‌
 the‌‌
 fact‌‌ that‌‌
 related‌‌ party‌‌
 transactions‌‌  may‌‌ not‌‌ have‌‌ 
been‌‌made‌‌on‌‌arm’s‌‌length‌‌basis.‌  ‌
c. to‌  ‌indicate‌  ‌the‌  ‌possibility‌  ‌that‌  ‌an‌  ‌entity’s‌  ‌financial‌  ‌position‌  ‌and‌  ‌performance‌  ‌might‌  ‌have‌‌ 
been‌‌affected‌‌by‌‌the‌‌existence‌‌of‌‌such‌‌relationship‌. ‌ ‌
d. in‌  ‌order‌  ‌to‌  ‌eliminate‌  ‌or‌  ‌minimize‌  ‌the‌  ‌effects‌  ‌of‌  ‌related‌  ‌party‌  ‌transactions‌  ‌on‌  ‌the‌  ‌financial‌‌
 
statements‌‌of‌‌the‌‌reporting‌‌entity.‌  ‌
 ‌
52. What‌‌is‌‌overriding‌‌consideration‌‌when‌‌determining‌‌the‌‌existence‌‌of‌‌a‌‌related‌‌party‌‌relationship?‌  ‌
a. The‌  ‌ability‌  ‌of‌  ‌one‌  ‌party‌  ‌to‌  ‌affect‌  ‌decisions‌  ‌of‌  ‌another‌  ‌party‌  ‌regarding‌  ‌relevant‌  ‌activities‌‌ 
through‌‌the‌‌existence‌‌of‌‌control,‌‌joint‌‌control‌‌or‌‌significant‌‌influence‌. ‌ ‌
b. The‌‌presence‌‌of‌‌relationship‌‌either‌‌by‌‌consanguinity‌‌or‌‌affinity.‌  ‌
c. The‌‌presence‌‌of‌‌a‌‌significant‌‌interest‌‌by‌‌one‌‌party‌‌over‌‌the‌‌other.‌  ‌
d. The‌  ‌presence‌  ‌of‌  ‌significant‌  ‌business‌  ‌transactions‌  ‌and‌  ‌economic‌  ‌dependence‌  ‌between‌  ‌the‌‌  
parties.‌  ‌
 ‌
53. Mr.‌  ‌Y ‌ ‌and‌  ‌Ms.‌  ‌Z ‌ ‌share‌  ‌joint‌  ‌control‌  ‌over‌  ‌Ventures,‌  ‌Inc.‌  ‌Which‌  ‌of‌  ‌the‌  ‌following‌  ‌are‌  ‌related‌‌ 
parties?‌  ‌
a. Mr.‌‌Y‌‌and‌‌Ms.‌‌Z‌   ‌ c.‌‌Ventures,‌‌Inc.‌‌and‌‌PAS‌‌24‌  ‌
 b. Ventures,‌‌Inc.‌‌and‌‌Mr.‌‌Y ‌ ‌ d.‌‌none‌‌of‌‌these‌  ‌
 ‌
54. Entity‌‌   A ‌‌is‌‌   the‌‌
  parent‌‌  company‌‌   of‌‌
 Entity‌‌ B.‌‌ Which‌‌ of‌‌ the‌‌ following‌‌ is‌‌  required‌‌ to‌‌  be‌‌ disclosed‌‌  in‌‌ 
the‌‌group’s‌‌(Entity‌‌A‌‌and‌‌B’s)‌‌consolidated‌‌financial‌‌statements?‌  ‌
a. the‌‌related‌‌party‌‌relationship‌‌between‌‌Entity‌‌A‌‌and‌‌Entity‌‌B ‌
b. the‌‌related‌‌party‌‌transactions‌‌during‌‌the‌‌period‌  ‌
c. the‌‌outstanding‌‌balances‌‌in‌‌(c)‌  ‌
d. all‌‌of‌‌these‌  ‌
 ‌
55. Catalyst‌  ‌Co.‌  ‌is‌  ‌engaged‌  ‌in‌  ‌business‌  ‌process‌  ‌outsourcing.‌  ‌Catalyst‌  ‌subcategorizes‌  ‌its‌  ‌main‌‌ 
services‌  ‌into‌  ‌four:‌  ‌Information‌  ‌Technology,‌  ‌After-sales‌  ‌Support,‌  ‌Accounting,‌  ‌and‌  ‌Offsite‌  ‌Data‌‌ 
Management.‌‌ Catalyst‌‌  operates‌‌ in‌‌ five‌‌  major‌‌  geographical‌‌ areas:‌‌ Southeast‌‌ Asia,‌‌ North‌‌  America,‌‌  
South‌  ‌America,‌  ‌Australia‌  ‌and‌  ‌Europe.‌  ‌Internal‌  ‌reports‌  ‌are‌  ‌based‌  ‌on‌  ‌these‌  ‌five‌  ‌geographical‌‌ 
areas.‌‌What‌‌is‌‌the‌‌most‌‌appropriate‌‌basis‌‌of‌‌segment‌‌reporting‌‌for‌‌Catalyst?‌  ‌
a. On‌‌the‌‌basis‌‌of‌‌the‌‌main‌‌services‌‌provided.‌  ‌
b. On‌‌the‌‌basis‌‌of‌‌the‌‌geographical‌‌areas‌‌of‌‌operations.‌  ‌
c. On‌‌the‌‌basis‌‌of‌‌the‌‌domicile‌‌country‌‌of‌‌Catalyst‌‌and‌‌the‌‌rest‌‌of‌‌the‌‌world.‌  ‌
d. Any‌‌of‌‌these.‌  ‌
 ‌
56. Segment‌  ‌A ‌ ‌qualifies‌‌   under‌‌   the‌‌
  10%‌‌   test‌‌
  of‌‌
  total‌‌  revenues‌‌   but‌‌
  not‌‌
  on‌‌
  the‌‌  profit‌‌  or‌‌  loss‌‌
  and‌‌
  total‌‌ 
assets‌‌tests.‌‌Segment‌‌A  ‌‌ ‌
a. is‌‌not‌‌a‌‌reportable‌‌segment.‌  ‌
b. is‌‌nonetheless‌‌included‌‌in‌‌the‌‌“all‌‌others”‌‌segment.‌  ‌
c. may‌‌be‌‌reported‌‌as‌‌a‌‌separate‌‌segment‌. ‌ ‌
d. all‌‌of‌‌these‌   ‌
 ‌
57. Information‌‌on‌‌an‌‌entity’s‌‌operating‌‌segments‌‌is‌‌shown‌‌below:‌  ‌
 ‌
Operating‌‌segments‌  ‌ Total‌‌revenue‌  ‌ Profit‌  ‌ ‌Identifiable‌‌assets‌‌    ‌
‌A  ‌‌ ‌ ‌1,000,000‌  ‌ 200,000‌  ‌ 4,000,000‌  ‌
‌B  ‌‌ ‌ 500,000‌  ‌ 120,000‌  ‌ 1,000,000‌  ‌
‌C  ‌‌ ‌ 300,000‌  ‌ ‌30,000‌  ‌ ‌800,000‌  ‌
‌D  ‌‌ ‌ 500,000‌  ‌ ‌50,000‌  ‌ 1,700,000‌  ‌
‌E  ‌‌ ‌ 200,000‌  ‌ ‌60,000‌  ‌ ‌800,000‌  ‌
‌F  ‌‌ ‌ 900,000‌  ‌ 400,000‌  ‌ 1,000,000‌  ‌
‌Totals‌‌    ‌ ‌3,400,000‌  ‌ 860,000‌  ‌ 9,300,000‌  ‌
 ‌
The‌‌reportable‌‌segments‌‌are‌  ‌
a. A,‌‌B‌‌and‌‌F‌ c.‌‌A,‌‌B,‌‌C,‌‌D‌‌and‌‌F ‌ ‌
b. A,‌‌B,‌‌D‌‌and‌‌F‌ d.‌‌All‌‌segments‌‌    ‌
 ‌
58. Entity‌‌   A ‌‌wants‌‌   to‌‌
  publish‌‌   quarterly‌‌   interim‌‌   financial‌‌   reports.‌‌   Which‌‌  of‌‌
  the‌‌  following‌‌  standards‌‌ 
may‌‌Entity‌‌A‌‌apply‌‌in‌‌preparing‌‌and‌‌presenting‌‌its‌‌interim‌‌financial‌‌reports?‌  ‌
a. PAS‌‌1‌ c.‌‌PFRS‌‌1 ‌ ‌
b. PAS‌‌34‌ d.‌‌a‌‌or‌‌b ‌ ‌
 ‌
59. If‌‌an‌‌entity‌‌does‌‌not‌‌prepare‌‌interim‌‌financial‌‌reports,‌‌    ‌
 a. its‌a‌ nnual‌‌financial‌‌statements‌‌would‌‌not‌‌conform‌‌to‌‌the‌‌PFRSs.‌  ‌
b. its‌‌
  annual‌‌  financial‌‌
  statements‌‌
  should‌‌
  not‌‌
  be‌‌
 described‌‌
 to‌‌ have‌‌ been‌‌
 prepared‌‌ in‌‌ accordance‌‌ 
with‌‌PFRSs‌  ‌
c. the‌‌conformance‌‌of‌‌its‌‌annual‌‌financial‌‌statements‌‌with‌‌the‌‌PFRSs‌‌is‌‌not‌‌affected‌. ‌ ‌
d. a‌‌and‌‌b ‌ ‌
 ‌
60. Which‌‌of‌‌the‌‌following‌‌is‌‌correct‌‌regarding‌‌the‌‌provisions‌‌of‌‌PAS‌‌34?‌  ‌
a. All‌‌entities‌‌should‌‌publish‌‌quarterly‌‌interim‌‌reports.‌  ‌
b. All‌‌publicly-listed‌‌entities‌‌should‌‌publish‌‌quarterly‌‌interim‌‌reports.‌  ‌
c. All‌‌publicly-listed‌‌entities‌‌should‌‌publish‌‌semi-annual‌‌interim‌‌reports.‌  ‌
d. PAS‌‌34‌‌does‌‌not‌‌require‌‌any‌‌entity‌‌to‌‌publish‌‌interim‌‌reports,‌‌and‌‌how‌‌often‌.  ‌‌ ‌
 ‌
61. Interim‌‌financial‌‌reports‌‌prepared‌‌in‌‌accordance‌‌with‌‌PAS‌‌34‌‌shall,‌‌at‌‌a‌‌minimum,‌‌include‌  ‌
a. semi-annual‌‌interim‌‌financial‌‌statements.‌  ‌
b. complete‌‌set‌‌of‌‌financial‌‌statements.‌  ‌
c. condensed‌‌set‌‌of‌‌financial‌‌statements‌. ‌ ‌
d. a‌‌statement‌‌of‌‌financial‌‌position‌‌and‌‌an‌‌income‌‌statement.‌‌    ‌
 ‌
62. Entity‌  ‌A ‌ ‌publishes‌  ‌quarterly‌‌   interim‌‌   financial‌‌   reports.‌‌  Entity‌‌   A’s‌‌
  annual‌‌   depreciation‌‌   for‌‌   items‌‌ 
of‌‌
  PPE‌‌   is‌‌
  ‌₱1‌ 20,000.‌‌   At‌‌  the‌‌
  end‌‌   of‌‌
  the‌‌   first‌‌
  quarter,‌‌   Entity‌‌   A’s‌‌
  inventories‌‌   have‌‌   a ‌‌cost‌‌ of‌‌ ‌₱6‌ 00,000‌‌ 
and‌  ‌a ‌ ‌net‌  ‌realizable‌  ‌value‌  ‌of‌  ‌₱5‌ 10,000.‌  ‌Entity‌  ‌A ‌ ‌expects‌  ‌that‌  ‌the‌  ‌total‌  ‌employee‌  ‌bonuses‌  ‌(13‌th‌ ‌
month‌‌   pay)‌‌   that‌‌  will‌‌   be‌‌
  paid‌‌   at‌‌  year-end‌‌   will‌‌  amount‌‌  to‌‌
 ‌₱6‌ 0,000.‌‌ How‌‌ much‌‌ is‌‌  the‌‌ total‌‌  amount‌‌ 
of‌‌
  expense‌‌   to‌‌
  be‌‌
  recognized‌‌   from‌‌   the‌‌   items‌‌   described‌‌ above‌‌ in‌‌ Entity‌‌  A’s‌‌ first‌‌ quarter‌‌ statement‌‌  
of‌‌profit‌‌or‌‌loss?‌  ‌
a. 120,000‌ c.‌‌30,000‌‌   
b. 135,000‌ d.‌‌270,000‌  ‌
 ‌
63. Under‌‌the‌‌cash‌‌basis‌‌of‌‌accounting,‌‌revenues‌‌are‌‌recorded‌  ‌
a. when‌‌they‌‌are‌‌earned‌‌and‌‌realized.‌  ‌
b. when‌‌they‌‌are‌‌earned‌‌and‌‌realizable.‌  ‌
c. when‌‌they‌‌are‌‌earned.‌  ‌
d. when‌‌they‌‌are‌‌collected‌. ‌ ‌
 ‌
64. White‌‌   Co.‌‌   wants‌‌   to‌‌
  convert‌‌   its‌‌   2003‌‌   financial‌‌   statements‌‌   from‌‌   the‌‌
  accrual‌‌   basis‌‌  of‌‌
 accounting‌‌ to‌‌ 
the‌‌  cash‌‌   basis.‌‌   Both‌‌   supplies‌‌   inventory‌‌   and‌‌  office‌‌   salaries‌‌   payable‌‌   increased‌‌  between‌‌ January‌‌  1,‌‌ 
2003‌  ‌and‌  ‌December‌  ‌31,‌  ‌2003.‌  ‌To‌  ‌obtain‌  ‌the‌  ‌2003‌  ‌cash‌  ‌basis‌  ‌net‌  ‌income,‌  ‌how‌  ‌should‌  ‌these‌‌  
increases‌‌be‌‌added‌‌to‌‌or‌‌deducted‌‌from‌‌accrual-basis‌‌net‌‌income?‌  ‌
Supplies‌‌inventory‌ ‌Office‌‌salaries‌‌payable‌  ‌
a.‌‌Deducted‌‌   Deducted‌  ‌
b.‌‌Deducted‌ ‌Added‌  ‌
c.‌‌Added‌‌  Deducted‌  ‌
d.‌‌Added‌‌  ‌Added‌  ‌
 ‌
65. Insurance‌‌payments‌‌  P150,000‌  ‌
Prepaid‌‌insurance,‌‌Jan.‌‌1‌ ‌65,000‌  ‌
Prepaid‌‌insurance,‌‌Dec.‌‌31‌  ‌ ‌85,000‌  ‌
Accrued‌‌insurance‌‌payable‌‌decreased‌‌by‌ ‌35,000‌  ‌
 ‌
How‌‌much‌‌is‌‌the‌‌insurance‌‌expense‌‌under‌‌accrual‌‌basis‌‌accounting?‌‌
   ‌
a. 205,000‌  ‌
b. ‌65,000‌  ‌
c. 130,000‌  ‌
d. ‌95,000‌  ‌
 ‌
D‌S‌ olution:‌  ‌
Prepaid,‌‌beg.‌  ‌ 65,000‌  ‌ 35,000‌  ‌ Accrued‌‌payable,‌‌beg.‌  ‌
Payments‌  ‌ 150,000‌  ‌ 95,000‌  ‌ Insurance‌‌expense‌‌(squeeze)‌  ‌
Accrued‌‌payable,‌‌end.‌  ‌ -‌  ‌ 85,000‌  ‌ Prepaid,‌‌end.‌  ‌
 
 ‌
66. Unearned‌‌rent,‌‌Jan.‌‌1‌ P170,000‌  ‌
Unearned‌‌rent,‌‌Dec.‌‌31‌ ‌85,000‌  ‌
Accrued‌‌rent‌‌income,‌‌Jan.‌‌1‌ ‌180,000‌  ‌
Accrued‌‌rent‌‌income,‌‌Dec.‌‌31‌ ‌200,000‌  ‌
Rental‌‌payments‌‌received‌ ‌560,000‌  ‌
 ‌
How‌‌much‌‌is‌‌the‌‌Rent‌‌income‌‌under‌‌the‌‌accrual‌‌basis‌‌accounting?‌‌   ‌
a. 455,000‌  ‌
b. 625,000‌  ‌
c. 665,000‌  ‌
d. 645,000‌  ‌
 ‌
C‌  ‌
Solution:‌  ‌
Accrued,‌‌beg.‌  ‌ 180,000‌  ‌ 170,000‌  ‌ Unearned,‌‌beg.‌  ‌
Rent‌‌income‌‌(squeeze)‌  ‌ 665,000‌   ‌ 560,000‌  ‌ Payments‌‌received‌  ‌
Unearned,‌‌end.‌  ‌ 85,000‌
  ‌ 200,000‌  ‌ Accrued,‌‌end.‌  ‌
 ‌
67. Payments‌‌made‌‌for‌‌income‌‌taxes‌ P760,000‌  ‌
Income‌‌tax‌‌payable‌‌increased‌‌by‌   ‌200,000‌  ‌
Deferred‌‌tax‌‌liability,‌‌Jan.‌‌1‌ ‌360,000‌  ‌
Deferred‌‌tax‌‌liability,‌‌Dec.‌‌31‌ ‌470,000‌  ‌
Deferred‌‌tax‌‌asset,‌‌Jan.‌‌1‌ ‌85,000‌  ‌
Deferred‌‌tax‌‌asset,‌‌Dec.‌‌31‌ ‌65,000‌  ‌
 ‌
Income‌‌tax‌‌expense‌‌under‌‌accrual‌‌basis‌‌accounting‌‌is‌  ‌
a. 1,090,000‌  ‌
b. 960,000‌  ‌
c. 850,000‌  ‌
d. 830,000‌  ‌
 ‌
A‌  ‌
Solution:‌  ‌
  ‌ Income‌‌tax‌‌payable‌  ‌  ‌
 ‌  ‌ -‌  ‌ beg.‌  ‌
Tax‌‌payments‌  ‌ 760,000‌  ‌ 960,000‌  ‌ Current‌‌tax‌‌expense‌‌(squeeze)‌  ‌
end.‌  ‌ 200,000‌  ‌  ‌  ‌
 
Income‌‌tax‌‌expense‌‌(squeeze)‌  ‌ 1,090,000‌  ‌
Less:‌‌Increase‌‌in‌‌DTL‌  ‌ (110,000)‌  ‌
Less:‌‌Decrease‌‌in‌‌DTA‌  ‌ (20,000)‌  ‌
Current‌‌tax‌‌expense‌  ‌ 960,000‌  ‌
 ‌
 ‌
 ‌
 ‌
68. All‌‌of‌‌the‌‌following‌‌may‌‌not‌‌qualify‌‌as‌‌“small‌‌and‌‌medium-sized‌‌entity”‌‌(SME)‌‌except‌  ‌
a.‌‌banks‌ c.‌‌investment‌‌house‌   ‌ ‌
b.‌‌insurance‌‌company‌  ‌ d.‌‌cooperative‌  ‌
 ‌
69. Which‌  ‌of‌  ‌the‌  ‌following‌  ‌most‌  ‌likely‌  ‌would‌  ‌not‌  ‌qualify‌  ‌as‌  ‌a ‌ ‌“small‌  ‌and‌  ‌medium-sized‌  ‌entity”‌‌  
(SME)?‌  ‌
a. A‌‌cooperative‌‌with‌‌total‌‌assets‌‌of‌₱ ‌ 3‌ M‌‌and‌‌liabilities‌‌of‌₱‌ 2‌ M.‌  ‌
b. A‌‌real‌‌estate‌‌company‌‌with‌‌total‌‌assets‌‌of‌₱ ‌ 3‌ 50M‌‌and‌‌liabilities‌‌of‌₱ ‌ 2‌ 50M.‌  ‌
c. A‌‌finance‌‌corporation‌‌with‌‌total‌‌assets‌‌of‌₱ ‌ 2‌ M‌‌and‌‌liabilities‌‌of‌₱ ‌ 1‌ M‌. ‌ ‌
d. All‌‌of‌‌these‌‌entities‌‌qualify‌‌as‌‌SMEs.‌‌    ‌
 ‌
70. Generally,‌‌non-financial‌‌liabilities‌‌of‌‌SMEs‌‌are‌‌measured‌‌at‌  ‌
a. the‌‌present‌‌value‌‌of‌‌future‌‌cash‌‌flows‌‌on‌‌the‌‌obligation‌  ‌
b. the‌‌best‌‌estimate‌‌of‌‌the‌‌amount‌‌that‌‌would‌‌be‌‌required‌‌to‌‌settle‌‌the‌‌obligation‌‌at‌‌the‌‌ 
reporting‌‌date‌  ‌
c. the‌‌mid-point‌‌value‌‌of‌‌the‌‌obligation‌  ‌
d. fair‌‌value‌  ‌
 ‌
71. Which‌‌   of‌‌
  the‌‌
  following‌‌
  is‌‌
  incorrect‌‌  regarding‌‌   the‌‌
  application‌‌   and‌‌
  compliance‌‌  with‌‌
 the‌‌
 PFRS‌‌
 for‌‌
 
SMEs?‌  ‌
a. The‌‌application‌‌of‌‌the‌‌PFRS‌‌for‌‌SMEs,‌‌with‌‌additional‌‌disclosure‌‌when‌‌necessary,‌‌is‌‌  
presumed‌‌to‌‌result‌‌in‌‌financial‌‌statements‌‌that‌‌achieve‌‌a‌‌fair‌‌presentation‌‌of‌‌the‌‌financial‌‌  
position,‌‌financial‌‌performance‌‌and‌‌cash‌‌flows‌‌of‌‌SMEs.‌  ‌
b. The‌‌application‌‌of‌‌the‌‌PFRS‌‌for‌‌SME‌‌by‌‌an‌‌entity‌‌with‌‌public‌‌accountability‌‌does‌‌not‌‌result‌‌ 
in‌‌a‌‌fair‌‌presentation‌‌even‌‌when‌‌a‌‌local‌‌legislation‌‌permits‌‌entities‌‌with‌‌public‌‌accountability‌‌ 
to‌‌use‌‌the‌‌PFRS‌‌for‌‌SMEs.‌  ‌
c. An‌‌entity‌‌whose‌‌financial‌‌statements‌‌comply‌‌with‌‌the‌‌PFRS‌‌for‌‌SMEs‌‌shall‌‌make‌‌an‌‌explicit‌‌  
and‌‌unreserved‌‌statement‌‌of‌‌such‌‌compliance‌‌in‌‌the‌‌notes‌‌and‌‌on‌‌the‌‌face‌‌of‌‌each‌‌  
component‌‌of‌‌a‌‌complete‌‌set‌‌of‌‌financial‌‌statements‌‌as‌‌provided‌‌under‌‌the‌‌PFRS‌‌for‌‌SME‌. ‌ ‌
d. Financial‌‌statements‌‌shall‌‌not‌‌be‌‌described‌‌as‌‌complying‌‌with‌‌the‌‌PFRS‌‌for‌‌SMEs‌‌unless‌‌they‌‌ 
comply‌‌with‌‌all‌‌the‌‌requirements‌‌of‌‌the‌‌PFRS‌‌for‌‌SMEs.‌  ‌
 ‌
72. According‌  ‌to‌  ‌the‌  ‌PFRS‌  ‌for‌  ‌SMEs,‌  ‌in‌  ‌assessing‌  ‌whether‌  ‌the‌  ‌going‌  ‌concern‌  ‌assumption‌  ‌is‌‌ 
appropriate,‌‌   management‌‌   takes‌‌
  into‌‌
  account‌‌   all‌‌
  available‌‌ information‌‌ about‌‌  the‌‌  future,‌‌ which‌‌  is‌‌ 
at‌‌least,‌‌but‌‌is‌‌not‌‌limited‌‌to,‌‌   ‌
a. 12‌‌months‌‌from‌‌the‌‌reporting‌‌date‌.‌   ‌
b. two‌‌years‌‌from‌‌the‌‌reporting‌‌date.‌  ‌
c. 3‌‌months‌‌from‌‌the‌‌reporting‌‌date‌  ‌
d. it‌‌depends‌‌on‌‌professional‌‌judgment‌  ‌
 ‌
73. Under‌‌   the‌‌   PFRS‌‌ for‌‌ SMEs,‌‌  investments‌‌ in‌‌  equity‌‌ instruments‌‌  that‌‌ are‌‌ not‌‌ publicly‌‌ traded‌‌  and‌‌ do‌‌ 
not‌  ‌give‌  ‌the‌  ‌entity‌  ‌significant‌  ‌influence,‌  ‌control,‌  ‌or‌  ‌joint‌  ‌control‌  ‌over‌  ‌the‌  ‌investee,‌  ‌shall‌  ‌be‌‌ 
measured‌‌at‌  ‌
a. cost‌‌less‌‌impairment‌  ‌
b. amortized‌‌cost‌  ‌
c. fair‌‌value‌‌unless‌‌fair‌‌value‌‌cannot‌‌be‌‌measured‌‌reliably,‌‌in‌‌which‌‌case‌‌,‌‌at‌‌cost‌‌less‌‌  
impairment‌‌    ‌
d. fair‌‌value‌‌with‌‌changes‌‌in‌‌fair‌‌value‌‌recognized‌‌in‌‌other‌‌comprehensive‌‌income‌  ‌
 ‌
74. An‌‌SME‌‌shall‌‌measure‌‌its‌‌investment‌‌in‌‌associate‌‌using‌  ‌
a.‌‌Fair‌‌value‌‌model‌   ‌ ‌
b.‌‌Cost‌‌model‌   ‌ ‌
c.‌‌Equity‌‌method‌   ‌ ‌
d.‌a‌ ny‌‌of‌‌these‌  ‌
 ‌
75. Under‌‌the‌‌PFRS‌‌for‌‌SMEs,‌‌relationships‌‌between‌‌a‌‌parent‌‌and‌‌its‌‌subsidiaries‌‌shall‌‌be‌‌disclosed‌‌    ‌
a. only‌‌when‌‌there‌‌have‌‌been‌‌related‌‌party‌‌transactions.‌   ‌
b. irrespective‌‌of‌‌whether‌‌there‌‌have‌‌been‌‌related‌‌party‌‌transactions.‌  ‌
c. even‌‌when‌‌control‌‌is‌‌lost‌  ‌
d. any‌‌of‌‌these‌  ‌
 ‌
76. The‌‌ceiling‌‌of‌‌the‌‌threshold‌‌for‌‌total‌‌assets‌‌of‌‌an‌‌SME‌‌qualifier‌‌is‌  ‌
a.‌‌400M‌ b.‌‌3M‌ ‌c.‌‌350M‌ d.‌‌250M‌  ‌
 ‌
77. (Use‌  ‌the‌  ‌PFRS‌  ‌for‌  ‌SMEs)‌  ‌On‌  ‌15‌  ‌March‌  ‌20X1‌  ‌the‌‌   entity‌‌   authorized‌‌   for‌‌
  issue‌‌  its‌‌
  annual‌‌   financial‌‌  
statements‌  ‌for‌  ‌the‌  ‌year‌  ‌ended‌  ‌31‌  ‌December‌  ‌20X0.‌  ‌On‌  ‌10‌  ‌March‌  ‌20X1‌  ‌the‌  ‌entity’s‌  ‌factory‌  ‌and‌‌ 
several‌‌items‌‌of‌‌equipment‌‌were‌‌damaged‌‌in‌‌an‌‌earthquake.‌‌The‌‌event‌‌(quake‌‌damage):‌  ‌
a. is‌‌an‌‌adjusting‌‌event‌‌after‌‌the‌‌end‌‌of‌‌the‌‌31‌‌December‌‌20X0‌‌reporting‌‌period.‌ 
b. is‌‌a‌‌non-adjusting‌‌event‌‌after‌‌the‌‌end‌‌of‌‌the‌‌31‌‌December‌‌20X0‌‌reporting‌‌period‌. ‌ ‌
c. is‌  ‌neither‌  ‌an‌  ‌adjusting‌  ‌event‌  ‌after‌‌   the‌‌
  end‌‌  of‌‌  the‌‌  31‌‌
  December‌‌   20X0‌‌   reporting‌‌   period‌‌   nor‌‌   a ‌‌
non-adjusting‌‌event‌‌after‌‌the‌‌end‌‌of‌‌the‌‌31‌‌December‌‌20X0‌‌reporting‌‌period.‌  ‌
d. None‌‌of‌‌these‌  ‌
 ‌
78. (Use‌  ‌the‌  ‌PFRS‌  ‌for‌  ‌SMEs)‌  ‌Which‌  ‌of‌  ‌the‌  ‌following‌  ‌is‌  ‌a ‌ ‌non-adjusting‌  ‌event‌  ‌after‌  ‌the‌  ‌end‌  ‌of‌  ‌the‌‌  
reporting‌‌   period‌‌   that‌‌  an‌‌
  entity‌‌
  should‌‌   disclose‌‌  in‌‌  its‌‌
  financial‌‌ statements‌‌  for‌‌
 20X5?‌‌  In‌‌
 each‌‌ case,‌‌ 
the‌‌financial‌‌statements‌‌for‌‌20X5‌‌have‌‌not‌‌yet‌‌been‌‌authorized‌‌for‌‌issue.‌  ‌
a. An‌  ‌entity‌  ‌has‌  ‌a ‌ ‌portfolio‌  ‌of‌  ‌shares‌  ‌with‌  ‌quoted‌  ‌market‌  ‌prices.‌  ‌These‌  ‌are‌  ‌measured‌‌   at‌‌
  fair‌‌ 
value‌  ‌through‌  ‌profit‌  ‌or‌  ‌loss‌  ‌in‌  ‌accordance‌  ‌with‌‌   Section‌‌   11‌‌
  of‌‌
  the‌‌
  PFRS‌‌   for‌‌  SMEs.‌‌   After‌‌   the‌‌  
 end‌  ‌of‌  ‌the‌  ‌reporting‌  ‌period,‌  ‌there‌  ‌was‌  ‌a ‌ ‌substantial‌  ‌decline‌  ‌in‌  ‌the‌  ‌stock‌  ‌market.‌  ‌The‌  ‌fair‌‌
 
value‌‌of‌‌the‌‌entity’s‌‌portfolio‌‌of‌‌shares‌‌declined‌‌significantly.‌  ‌
b. At‌‌
  31‌‌
  December‌‌   20X5‌‌
  one‌‌
  individual‌‌   owned‌‌   100‌‌
  per‌‌
  cent‌‌
  of‌‌
  the‌‌  entity’s‌‌  outstanding‌‌ shares.‌‌ 
In‌‌February‌‌20X6‌‌that‌‌individual‌‌sold‌‌80‌‌per‌‌cent‌‌of‌‌her‌‌holding‌‌to‌‌another‌‌party.‌  ‌
c. All‌‌of‌‌the‌‌above‌. ‌ ‌
d. None‌‌of‌‌these‌  ‌
 ‌
79. (Use‌  ‌the‌  ‌PFRS‌  ‌for‌  ‌SMEs)‌  ‌The‌  ‌goods‌  ‌or‌  ‌services‌  ‌received‌‌   or‌‌
  acquired‌‌  in‌‌
  a ‌‌share-based‌‌   payment‌‌ 
transaction‌‌are‌‌recognized‌‌as‌‌    ‌
a.‌‌assets‌  ‌
b.‌‌expenses‌  ‌
c.‌‌income‌   ‌
d.‌‌a‌‌or‌‌b ‌ ‌
 ‌
80. (Use‌‌the‌‌PFRS‌‌for‌‌SMEs)‌N ‌ otes‌‌to‌‌the‌‌financial‌‌statements:‌  ‌
a. contain‌  ‌only‌  ‌information‌  ‌required‌  ‌to‌  ‌be‌  ‌disclosed‌  ‌by‌  ‌the‌  ‌PFRS‌  ‌for‌  ‌SMEs‌  ‌that‌  ‌was‌  ‌not‌‌ 
presented‌  ‌in‌  ‌the‌  ‌statement‌  ‌of‌  ‌financial‌  ‌position,‌  ‌statement‌  ‌of‌  ‌comprehensive‌  ‌income,‌‌ 
statement‌‌of‌‌changes‌‌in‌‌equity‌‌or‌‌cash‌‌flow‌‌statement.‌  ‌
b. contain‌  ‌information‌  ‌required‌  ‌by‌  ‌Section‌  ‌8 ‌ ‌Notes‌  ‌to‌  ‌the‌  ‌Financial‌  ‌Statements‌  ‌without‌‌ 
reference‌‌to‌‌the‌‌other‌‌sections‌‌of‌‌the‌‌PFRS‌‌for‌‌SMEs.‌  ‌
c. contain‌  ‌the‌  ‌information‌  ‌required‌  ‌to‌  ‌be‌  ‌disclosed‌  ‌by‌  ‌the‌  ‌PFRS‌  ‌for‌  ‌SMEs‌  ‌that‌  ‌was‌  ‌not‌‌  
presented‌  ‌in‌  ‌the‌  ‌statement‌  ‌of‌  ‌financial‌  ‌position,‌  ‌statement‌  ‌of‌  ‌comprehensive‌  ‌income,‌‌ 
statement‌  ‌of‌  ‌changes‌  ‌in‌  ‌equity‌  ‌or‌  ‌statement‌  ‌of‌  ‌cash‌  ‌flows‌  ‌and‌  ‌additional‌  ‌information‌‌ 
relevant‌‌to‌‌an‌‌understanding‌‌of‌‌the‌‌financial‌‌statements.‌  ‌
d. None,‌‌an‌‌SME‌‌is‌‌not‌‌required‌‌to‌‌present‌‌notes.‌  ‌
 ‌
81. (Use‌  ‌the‌  ‌PFRS‌  ‌for‌  ‌SMEs)‌  ‌The‌  ‌cross-reference‌‌   between‌‌  each‌‌  line‌‌
  item‌‌
  in‌‌
  the‌‌   financial‌‌
  statements‌‌
 
and‌‌any‌‌related‌‌information‌‌disclosed‌‌in‌‌the‌‌notes‌‌to‌‌the‌‌financial‌‌statements:‌  ‌
a.‌‌is‌‌voluntary.‌  ‌
b.‌‌is‌‌mandatory.‌    ‌
c.‌‌depends‌‌on‌‌the‌‌industry.‌  ‌
d.‌‌any‌‌of‌‌these‌  ‌
 ‌
82. (Use‌‌   the‌‌
  PFRS‌‌
  for‌‌
  SMEs)‌‌  ‌The‌‌
  presentation‌‌   of‌‌
  the‌‌
  notes‌‌
  to‌‌
 the‌‌ financial‌‌ statements‌‌ in‌‌  a ‌‌systematic‌‌ 
manner:‌  ‌
a.‌‌is‌‌voluntary.‌  ‌  ‌
b.‌‌is‌‌mandatory.‌‌   ‌
c.‌‌is‌‌mandatory,‌‌as‌‌far‌‌as‌‌is‌‌practicable‌  ‌
d.‌‌any‌‌of‌‌these‌  ‌
 ‌
83. (Use‌‌the‌‌PFRS‌‌for‌‌SMEs)‌A ‌ n‌‌entity‌‌normally‌‌presents‌‌the‌‌notes‌‌in‌‌the‌‌following‌‌order:‌  ‌
a. First,‌‌a‌‌statement‌‌that‌‌the‌‌financial‌‌statements‌‌have‌‌been‌‌prepared‌‌in‌‌compliance‌‌with‌‌the‌‌  
PFRS‌‌for‌‌SMEs.‌‌Second,‌‌a‌‌summary‌‌of‌‌significant‌‌accounting‌‌policies‌‌applied.‌‌Third,‌‌  
supporting‌‌information‌‌for‌‌items‌‌presented‌‌in‌‌the‌‌financial‌‌statements,‌‌in‌‌the‌‌sequence‌‌in‌‌ 
which‌‌each‌‌statement‌‌and‌‌each‌‌line‌‌item‌‌is‌‌presented.‌‌Last,‌‌any‌‌other‌‌disclosures.‌  ‌
b. First,‌‌supporting‌‌information‌‌for‌‌items‌‌presented‌‌in‌‌the‌‌financial‌‌statements,‌‌in‌‌the‌‌sequence‌‌ 
in‌‌which‌‌each‌‌statement‌‌and‌‌each‌‌line‌‌item‌‌is‌‌presented.‌‌Second,‌‌a‌‌statement‌‌that‌‌the‌‌  
 financial‌‌statements‌‌have‌‌been‌‌prepared‌‌in‌‌compliance‌‌with‌‌the‌‌PFRS‌‌for‌‌SMEs.‌‌Third,‌‌a ‌‌
summary‌‌of‌‌significant‌‌accounting‌‌policies‌‌applied.‌‌Last,‌‌any‌‌other‌‌disclosures.‌  ‌
c. First,‌‌supporting‌‌information‌‌for‌‌items‌‌presented‌‌in‌‌the‌‌financial‌‌statements,‌‌in‌‌the‌‌sequence‌‌ 
in‌‌which‌‌each‌‌statement‌‌and‌‌each‌‌line‌‌item‌‌is‌‌presented.‌‌Second,‌‌a‌‌summary‌‌of‌‌significant‌‌
 
accounting‌‌policies‌‌applied.‌‌Third,‌‌a‌‌statement‌‌that‌‌the‌‌financial‌‌statements‌‌have‌‌been‌‌ 
prepared‌‌in‌‌compliance‌‌with‌‌the‌‌PFRS‌‌for‌‌SMEs.‌‌Last,‌‌any‌‌other‌‌disclosures.‌  ‌
 ‌
84. (Use‌  ‌the‌  ‌PFRS‌  ‌for‌  ‌SMEs)‌  ‌An‌  ‌entity‌  ‌shall‌  ‌disclose‌  ‌in‌  ‌the‌  ‌summary‌  ‌of‌  ‌significant‌  ‌accounting‌‌  
policies:‌  ‌
a. the‌‌measurement‌‌basis‌‌(or‌‌bases)‌‌used‌‌in‌‌preparing‌‌the‌‌financial‌‌statements.‌  ‌
b. all‌‌the‌‌measurement‌‌bases‌‌specified‌‌in‌‌the‌‌PFRS‌‌for‌‌SMEs‌‌irrespective‌‌of‌‌whether‌‌they‌‌were‌‌  
used‌‌by‌‌the‌‌entity‌‌in‌‌preparing‌‌its‌‌financial‌‌statements.‌  ‌
c. the‌‌measurement‌‌basis‌‌(or‌‌bases)‌‌used‌‌in‌‌preparing‌‌the‌‌financial‌‌statements‌‌and‌‌the‌‌  
accounting‌‌policies‌‌used‌‌that‌‌are‌‌relevant‌‌to‌‌an‌‌understanding‌‌of‌‌the‌‌financial‌‌statements.‌  ‌
d. all‌‌of‌‌the‌‌measurement‌‌bases‌‌and‌‌the‌‌accounting‌‌policy‌‌choices‌‌available‌‌to‌‌the‌‌entity‌‌(i.e.,‌‌  
specified‌‌in‌‌the‌‌PFRS‌‌for‌‌SMEs)‌‌irrespective‌‌of‌‌whether‌‌they‌‌were‌‌used‌‌by‌‌the‌‌entity‌‌in‌‌ 
preparing‌‌its‌‌financial‌‌statements.‌  ‌
 ‌
85. (Use‌‌the‌‌PFRS‌‌for‌‌SMEs)‌D ‌ isclosure‌‌of‌‌information‌‌about‌‌key‌‌sources‌‌of‌‌estimation‌‌uncertainty:‌  ‌
a.‌‌is‌‌voluntary.‌  ‌
b.‌‌is‌‌mandatory.‌  ‌
c.‌‌is‌‌not‌‌required.‌  ‌
d.‌‌a‌‌and‌‌c ‌ ‌
 ‌
86. (Use‌‌   the‌‌  PFRS‌‌
  for‌‌   SMEs)‌‌   ‌Disclosure‌‌
  of‌‌
  information‌‌   about‌‌  judgments,‌‌   apart‌‌  from‌‌  those‌‌  involving‌‌ 
estimations,‌  ‌that‌  ‌management‌  ‌has‌  ‌made‌  ‌in‌  ‌the‌  ‌process‌  ‌of‌  ‌applying‌  ‌the‌  ‌entity’s‌  ‌accounting‌‌ 
policies‌  ‌and‌  ‌that‌  ‌have‌  ‌the‌  ‌most‌  ‌significant‌  ‌effect‌  ‌on‌  ‌the‌  ‌amounts‌  ‌recognized‌  ‌in‌  ‌the‌  ‌financial‌‌ 
statements:‌  ‌
a.‌‌is‌‌voluntary.‌  ‌
b.‌‌is‌‌mandatory.‌  ‌
c.‌‌is‌‌not‌‌required.‌  ‌
d.‌‌a‌‌and‌‌c ‌ ‌
 ‌
87. (Use‌  ‌the‌  ‌PFRS‌  ‌for‌  ‌SMEs)‌  ‌On‌  ‌1 ‌ ‌January‌  ‌20X1‌  ‌an‌  ‌entity‌  ‌acquired‌  ‌goods‌  ‌for‌  ‌sale‌  ‌in‌‌   the‌‌  ordinary‌‌ 
course‌  ‌of‌  ‌business‌  ‌for‌  ‌₱1‌ 00,000,‌  ‌including‌  ‌₱5‌ ,000‌  ‌refundable‌  ‌purchase‌  ‌taxes.‌  ‌The‌  ‌supplier‌‌  
usually‌  ‌sells‌  ‌goods‌  ‌on‌  ‌30‌  ‌days’‌  ‌interest-free‌  ‌credit.‌  ‌However,‌  ‌as‌  ‌a ‌ ‌special‌  ‌promotion,‌  ‌the‌‌ 
purchase‌  ‌agreement‌  ‌for‌  ‌these‌  ‌goods‌  ‌provided‌‌   for‌‌  payment‌‌   to‌‌
  be‌‌
  made‌‌   in‌‌
  full‌‌
  on‌‌  31‌‌
  December‌‌ 
20X1.‌  ‌In‌  ‌acquiring‌  ‌the‌  ‌goods‌  ‌transport‌  ‌charges‌  ‌of‌  ‌₱2‌ ,000‌  ‌were‌  ‌incurred:‌  ‌these‌  ‌were‌  ‌due‌  ‌on‌  ‌1 ‌‌
January‌‌   20X1.‌‌
  An‌‌   appropriate‌‌   discount‌‌   rate‌‌
  is‌‌
  10‌‌  per‌‌
  cent‌‌ per‌‌
 year.‌‌ The‌‌  entity‌‌ shall‌‌  measure‌‌ the‌‌ 
cost‌‌of‌‌inventories‌‌at:‌  ‌
a.‌‌₱1‌ 02,000‌ b.‌₱
‌ 9‌ 7,000‌ c.‌₱
‌ 8‌ 8,364‌ d.‌₱ ‌ 1‌ 07,000‌  ‌
 ‌
C‌  ‌
Solution:‌  ‌
₱‌95,000‌  ‌(₱ ‌ 1‌ 00,000‌  ‌excluding‌  ‌refundable‌  ‌tax‌  ‌of‌  ‌₱5‌ ,000)‌  ‌multiplied‌  ‌by‌  ‌PV‌  ‌of‌  ‌₱1‌  ‌‌@10%,‌‌   n=1‌‌   (or‌‌
  simply‌‌ 
divide‌‌by‌‌1.1)‌p‌ lus‌₱ ‌ 2‌ ,000‌‌transport‌‌costs‌‌=‌₱ ‌ 8‌ 8,364‌. ‌ ‌
 
88.   ‌(Use‌  ‌the‌  ‌PFRS‌  ‌for‌  ‌SMEs)‌  ‌On‌  ‌31‌  ‌December‌  ‌20X1‌  ‌entity‌  ‌A ‌ ‌acquired‌  ‌30‌‌   per‌‌   cent‌‌   of‌‌
  the‌‌
  ordinary‌‌ 
shares‌  ‌that‌  ‌carry‌  ‌voting‌  ‌rights‌  ‌of‌  ‌entity‌  ‌B ‌ ‌for‌  ‌₱1‌ 00,000.‌  ‌Entity‌  ‌A ‌ ‌incurred‌  ‌transaction‌  ‌costs‌  ‌of‌‌ 
₱‌1,000‌  ‌in‌  ‌acquiring‌  ‌these‌  ‌shares.‌‌   Entity‌‌   A ‌‌has‌‌   significant‌‌   influence‌‌   over‌‌   entity‌‌   B.‌‌
  Entity‌‌   A ‌‌uses‌‌ 
the‌‌   cost‌‌   model‌‌   to‌‌ account‌‌  for‌‌ its‌‌ investments‌‌  in‌‌  associates.‌‌ In‌‌ January‌‌ 20X2‌‌ entity‌‌  B ‌‌declared‌‌ and‌‌  
paid‌  ‌a ‌ ‌dividend‌  ‌of‌  ‌₱2‌ 0,000‌  ‌out‌  ‌of‌  ‌profits‌  ‌earned‌  ‌in‌  ‌20X1.‌  ‌No‌  ‌further‌  ‌dividends‌  ‌were‌  ‌paid‌  ‌in‌‌ 
20X2,‌  ‌20X3‌  ‌or‌  ‌20X4.‌  ‌A ‌ ‌published‌  ‌price‌  ‌quotation‌  ‌does‌  ‌not‌  ‌exist‌  ‌for‌  ‌entity‌  ‌B.‌  ‌At‌  ‌31‌  ‌December‌‌ 
20X1,‌‌  20X2‌‌  and‌‌  20X3,‌‌  in‌‌ accordance‌‌  with‌‌ Section‌‌ 27‌‌  Impairment‌‌  of‌‌ Assets,‌‌  management‌‌  assessed‌‌ 
the‌‌   fair‌‌   values‌‌   of‌‌  its‌‌
  investment‌‌   in‌‌   entity‌‌   B ‌‌as‌‌  ‌₱1‌ 02,000,‌‌  ‌₱1‌ 10,000‌‌  and‌‌ ‌₱9‌ 0,000‌‌ respectively.‌‌ Costs‌‌  
to‌  ‌sell‌  ‌are‌  ‌estimated‌  ‌at‌  ‌₱4‌ ,000‌  ‌throughout.‌  ‌Entity‌  ‌A ‌ ‌measures‌  ‌its‌  ‌investment‌  ‌in‌‌   entity‌‌  B ‌‌on‌‌
  31‌‌
 
December‌‌20X1,‌‌20X2‌‌and‌‌20X3‌‌respectively‌‌at:‌  ‌
a.‌‌₱1‌ 00,000,‌‌₱1‌ 00,000,‌‌₱1‌ 00,000.‌   ‌ ‌
b.‌₱‌ 9‌ 5,000,‌‌₱9‌ 5,000,‌‌₱8‌ 6,000.‌    ‌
c.‌₱
‌ 9‌ 8,000,‌‌₱1‌ 06,000,‌‌₱8‌ 6,000.‌   ‌ ‌
d.‌₱‌ 9‌ 8,000,‌‌₱1‌ 01,000,‌‌₱8‌ 6,000.‌  ‌
e.‌₱
‌ 1‌ 02,000,‌‌₱1‌ 10,000,‌‌₱9‌ 0,000.‌  ‌
 ‌
D‌  ‌
Solution:‌  ‌
20x1:‌  ‌Fair‌  ‌value‌  ‌less‌  ‌cost‌  ‌to‌  ‌sell‌  ‌(102K‌  ‌– ‌ ‌4K)‌  ‌= ‌ ‌₱9‌ 8,000‌  ‌lower‌  ‌than‌  ‌cost‌  ‌of‌  ‌₱1‌ 01K‌  ‌(cost‌  ‌of‌  ‌100K‌  ‌+ ‌‌
transaction‌‌cost‌‌of‌‌1K).‌  ‌
20x2:‌‌Cost‌‌of‌₱ ‌ 1‌ 01,000‌‌‌=‌‌previous‌‌carrying‌‌amount‌‌of‌‌98K‌‌+‌‌3K‌‌reversal‌‌of‌‌impairment‌‌loss.‌  ‌
20x3:‌‌Fair‌‌value‌‌less‌‌cost‌‌to‌‌sell‌‌(90K‌‌–‌‌4K)‌‌=‌₱ ‌ 8‌ 6,000‌‌‌lower‌t‌ han‌‌previous‌‌carrying‌‌amount‌‌of‌₱ ‌ 1‌ 01K.‌  ‌
 ‌
89. (Use‌  ‌the‌  ‌PFRS‌  ‌for‌  ‌SMEs)‌  ‌The‌  ‌facts‌  ‌are‌  ‌the‌  ‌same‌  ‌as‌  ‌in‌  ‌the‌  ‌immediately‌  ‌preceding‌  ‌question.‌‌  
However,‌‌   in‌‌
  this‌‌   example,‌‌   a ‌‌published‌‌   price‌‌   quotation‌‌   exists‌‌   for‌‌   entity‌‌  B.‌‌  Entity‌‌   A ‌‌measures‌‌ its‌‌  
investment‌‌in‌‌entity‌‌B‌‌on‌‌31‌‌December‌‌20X1,‌‌20X2‌‌and‌‌20X3‌‌respectively‌‌at:‌  ‌
a.‌‌₱1‌ 00,000,‌‌₱1‌ 00,000,‌‌₱1‌ 00,000.‌   ‌ ‌
b.‌₱‌ 9‌ 5,000,‌‌₱9‌ 5,000,‌‌₱8‌ 6,000.‌    ‌ ‌
c.‌₱
‌ 9‌ 8,000,‌‌₱1‌ 06,000,‌‌₱8‌ 6,000.‌   ‌ ‌
d.‌₱‌ 9‌ 8,000,‌‌₱1‌ 01,000,‌‌₱8‌ 6,000.‌  ‌
e.‌₱
‌ 1‌ 02,000,‌‌₱1‌ 10,000,‌‌₱9‌ 0,000‌. ‌ ‌
 ‌
E‌  ‌
Solution:‌  ‌
₱‌102,000,‌₱ ‌ 1‌ 10,000,‌‌and‌₱ ‌ 9‌ 0,000‌p ‌ ublished‌‌price‌‌quotations‌w ‌ ithout‌d ‌ eduction‌‌for‌‌costs‌‌to‌‌sell.‌  ‌
 ‌
90. (Use‌‌   the‌‌   PFRS‌‌   for‌‌  SMEs)‌‌   ‌On‌‌   1 ‌‌January‌‌   20X1‌‌   an‌‌   entity‌‌   acquired‌‌   a ‌‌building‌‌   for‌‌
 ‌₱9‌ 5,000,‌‌  including‌‌ 
₱‌5,000‌  ‌non-refundable‌  ‌purchase‌  ‌taxes.‌  ‌The‌  ‌purchase‌  ‌agreement‌  ‌provided‌  ‌for‌  ‌payment‌  ‌to‌  ‌be‌‌ 
made‌‌   in‌‌  full‌‌   on‌‌   31‌‌  December‌‌   20X1.‌‌   Legal‌‌   fees‌‌   of‌‌  ‌₱2‌ ,000‌‌   were‌‌   incurred‌‌ in‌‌  acquiring‌‌  the‌‌
 building‌‌  
and‌  ‌paid‌  ‌on‌  ‌1 ‌ ‌January‌  ‌20X1.‌  ‌The‌  ‌building‌  ‌is‌  ‌held‌  ‌to‌  ‌earn‌  ‌lease‌  ‌rentals‌  ‌and‌  ‌for‌  ‌capital‌‌ 
appreciation.‌‌   An‌‌   appropriate‌‌   discount‌‌   rate‌‌   is‌‌  10‌‌   per‌‌   cent‌‌   per‌‌  year.‌‌   The‌‌  entity‌‌   shall‌‌   measure‌‌ the‌‌ 
initial‌‌cost‌‌of‌‌the‌‌building‌‌at:‌  ‌
a.‌‌₱8‌ 8,364‌  ‌
b.‌₱‌ 9‌ 7,000‌   ‌
c.‌₱
‌ 1‌ 02,000‌   ‌
d.‌₱‌ 1‌ 07,000‌  ‌
 ‌
A‌  ‌
Solution:‌  ‌
₱‌95,000‌‌   including‌‌   ‌non-refundable‌‌   ‌tax‌‌  ‌multiplied‌‌   by‌‌  ‌PV‌‌  of‌‌  ‌₱1‌  ‌‌@10%,‌‌  n=1‌‌  (or‌‌  simply‌‌  divide‌‌  by‌‌  1.1)‌‌ ‌plus‌‌ 
₱‌2,000‌‌legal‌‌fees‌‌=‌₱ ‌ 8‌ 8,364‌. ‌ ‌
 ‌
91. (Use‌‌   the‌‌   PFRS‌‌   for‌‌   SMEs)‌‌   ‌A ‌‌manufacturer‌‌   gives‌‌   warranties‌‌   at‌‌   the‌‌   time‌‌   of‌‌   sale‌‌  to‌‌  purchasers‌‌ of‌‌  its‌‌ 
product.‌‌   Under‌‌   the‌‌   terms‌‌   of‌‌  the‌‌   contract‌‌  for‌‌ sale‌‌ the‌‌  manufacturer‌‌ undertakes‌‌ to‌‌ make‌‌  good,‌‌ by‌‌ 
repair‌  ‌or‌  ‌replacement,‌  ‌manufacturing‌  ‌defects‌  ‌that‌  ‌become‌  ‌apparent‌  ‌within‌  ‌one‌  ‌year‌  ‌from‌  ‌the‌‌ 
date‌‌   of‌‌  sale.‌‌ On‌‌  the‌‌  basis‌‌ of‌‌ experience,‌‌  it‌‌ is‌‌ probable‌‌ (i.e.,‌‌ more‌‌  likely‌‌ than‌‌  not)‌‌  that‌‌ there‌‌  will‌‌ be‌‌ 
some‌‌  claims‌‌  under‌‌ the‌‌ warranties.‌‌ Sales‌‌  of‌‌  ‌₱1‌ 0‌‌  million‌‌ were‌‌ made‌‌  evenly‌‌ throughout‌‌  20X1.‌‌ At‌‌ 31‌‌ 
December‌‌   20X1‌‌   the‌‌   expenditures‌‌   for‌‌   warranty‌‌   repairs‌‌   and‌‌   replacements‌‌   for‌‌   the‌‌   product‌‌ sold‌‌  in‌‌
 
20X1‌‌   are‌‌   expected‌‌   to‌‌  be‌‌ made‌‌ 50‌‌ per‌‌ cent‌‌  in‌‌  20X1‌‌  and‌‌  50‌‌ per‌‌  cent‌‌ in‌‌  20X2.‌‌ Assume‌‌  for‌‌ simplicity‌‌ 
that‌‌   all‌‌  the‌‌   20X2‌‌   outflows‌‌   of‌‌   economic‌‌  benefits‌‌  related‌‌  to‌‌ the‌‌  warranty‌‌  repairs‌‌  and‌‌ replacements‌‌  
take‌  ‌place‌  ‌on‌  ‌30‌  ‌June‌  ‌20X2.‌  ‌Experience‌  ‌indicates‌  ‌that‌  ‌95‌  ‌per‌  ‌cent‌  ‌of‌  ‌products‌  ‌sold‌  ‌require‌‌   no‌‌ 
warranty‌‌   repairs;‌‌   3 ‌‌per‌‌ cent‌‌ of‌‌  products‌‌  sold‌‌ require‌‌  minor‌‌  repairs‌‌ costing‌‌  10‌‌ per‌‌ cent‌‌ of‌‌ the‌‌ sale‌‌ 
price;‌‌   and‌‌   2 ‌‌per‌‌   cent‌‌ of‌‌ products‌‌ sold‌‌ require‌‌  major‌‌  repairs‌‌ or‌‌ replacement‌‌  costing‌‌  90‌‌ per‌‌  cent‌‌ of‌‌  
sale‌  ‌price.‌  ‌The‌  ‌entity‌  ‌has‌  ‌no‌‌   reason‌‌   to‌‌  believe‌‌   future‌‌   warranty‌‌   claims‌‌   will‌‌   be‌‌   different‌‌   from‌‌   its‌‌
 
experience.‌  ‌At‌  ‌31‌  ‌December‌  ‌20X1‌  ‌the‌  ‌appropriate‌  ‌discount‌  ‌factor‌  ‌for‌  ‌cash‌  ‌flows‌  ‌expected‌  ‌to‌‌ 
occur‌  ‌on‌  ‌30‌  ‌June‌  ‌20X2‌  ‌is‌‌   0.95238.‌‌   Furthermore,‌‌   an‌‌  appropriate‌‌   risk‌‌   adjustment‌‌   factor‌‌   to‌‌  reflect‌‌ 
the‌  ‌uncertainties‌  ‌in‌  ‌the‌  ‌cash‌  ‌flow‌  ‌estimates‌  ‌is‌  ‌an‌  ‌increment‌  ‌of‌  ‌6 ‌ ‌per‌  ‌cent‌  ‌to‌  ‌the‌‌  
probability-weighted‌‌  expected‌‌  cash‌‌  flows.‌‌ At‌‌  31‌‌  December‌‌ 20X1‌‌ the‌‌ entity‌‌  recognizes‌‌  a ‌‌warranty‌‌ 
provision‌‌measured‌‌at:‌  ‌
a.‌‌₱0‌ .‌    ‌ ‌
b.‌₱‌ 2‌ 10,000.‌   ‌ ‌
c.‌₱
‌ 2‌ 22,600.‌   ‌ ‌
d.‌₱‌ 1‌ 13,300.‌   ‌ ‌
e.‌₱
‌ 1‌ 06,000‌. ‌ ‌
 ‌
E‌  ‌
Solution:‌  ‌
10M‌‌x‌‌3%‌‌x‌‌10%‌ ‌30,000‌  ‌
10M‌‌x‌‌2%‌‌x‌‌90%‌   ‌ ‌180,000‌  ‌
Total‌   ‌210,000‌  ‌
Multiply‌‌by:‌‌Discount‌‌rate‌(‌ given)‌‌    ‌   ‌ ‌0.95238‌  ‌
Total‌   ‌200,000‌ 
Multiply‌‌by:‌‌Risk‌‌adjustment‌ (100%‌+‌ ‌‌6%‌)‌ ‌ ‌106%‌  ‌
Total‌‌    ‌ ‌212,000‌  ‌
Multiply‌‌by:‌A ‌ mount‌‌to‌‌be‌‌settled‌‌in‌‌20x2‌  ‌ ‌ ‌50%‌  ‌
Warranty‌‌provision‌‌–‌‌Dec.‌‌31,‌‌20x1‌  ‌ ‌106,000‌  ‌
 
92. (Use‌‌   the‌‌   PFRS‌‌   for‌‌   SMEs)‌‌   ‌An‌‌   entity‌‌ is‌‌ the‌‌  defendant‌‌  in‌‌ a ‌‌patent‌‌ infringement‌‌  lawsuit.‌‌ The‌‌ entity’s‌‌ 
lawyers‌  ‌believe‌  ‌there‌  ‌is‌  ‌a ‌‌30‌‌   per‌‌   cent‌‌   chance‌‌   that‌‌   the‌‌   court‌‌   will‌‌   dismiss‌‌   the‌‌   case‌‌   and‌‌   the‌‌   entity‌‌  
will‌‌   incur‌‌   no‌‌   outflow‌‌   of‌‌
  economic‌‌   benefits.‌‌   However,‌‌   if‌‌
  the‌‌   court‌‌   rules‌‌   in‌‌  favor‌‌   of‌‌ the‌‌  claimant,‌‌  
the‌  ‌lawyers‌  ‌believe‌  ‌that‌  ‌there‌  ‌is‌  ‌a ‌ ‌20‌  ‌per‌  ‌cent‌  ‌chance‌  ‌that‌  ‌the‌  ‌entity‌  ‌will‌  ‌be‌  ‌required‌  ‌to‌  ‌pay‌‌ 
damages‌  ‌of‌  ‌₱2‌ 00,000‌  ‌(the‌  ‌amount‌  ‌sought‌  ‌by‌  ‌the‌  ‌claimant)‌  ‌and‌  ‌an‌  ‌80‌  ‌per‌  ‌cent‌‌   chance‌‌   that‌‌   the‌‌ 
entity‌  ‌will‌  ‌be‌  ‌required‌  ‌to‌  ‌pay‌  ‌damages‌  ‌of‌‌   ‌₱1‌ 00,000‌‌   (the‌‌   amount‌‌   that‌‌   was‌‌   recently‌‌   awarded‌‌   by‌‌ 
the‌  ‌same‌‌   judge‌‌   in‌‌   a ‌‌similar‌‌   case).‌‌   Other‌‌   outcomes‌‌   are‌‌   unlikely.‌‌   The‌‌   court‌‌   is‌‌
  expected‌‌   to‌‌  rule‌‌   in‌‌ 
 late‌‌  December‌‌   20X2.‌‌
  There‌‌   is‌‌
  no‌‌
  indication‌‌
  that‌‌ the‌‌
 claimant‌‌
 will‌‌
 settle‌‌
 out‌‌ of‌‌
 court.‌‌ A ‌‌7 ‌‌per‌‌ cent‌‌ 
risk‌‌   adjustment‌‌   factor‌‌ to‌‌ the‌‌ probability-weighted‌‌ expected‌‌ cash‌‌  flows‌‌ is‌‌
 considered‌‌ appropriate‌‌ 
to‌‌
  reflect‌‌
  the‌‌  uncertainties‌‌   in‌‌  the‌‌
 cash‌‌ flow‌‌
 estimates.‌‌  An‌‌
 appropriate‌‌  discount‌‌  rate‌‌
 is‌‌ 10‌‌
 per‌‌ cent‌‌ 
per‌‌year.‌‌At‌‌31‌‌December‌‌20X1‌‌the‌‌entity‌‌recognizes‌‌a‌‌provision‌‌for‌‌the‌‌lawsuit‌‌measured‌‌at:‌  ‌
a.‌‌₱0‌ .‌  ‌
b.‌₱‌ 1‌ 00,000.‌  ‌
c.‌₱
‌ 8‌ 9,880.‌   ‌
d.‌₱‌ 8‌ 1,709.‌  ‌
 ‌
D‌  ‌
Solution:‌  ‌
200K‌‌x‌‌20%‌‌   ‌40,000‌  ‌
100K‌‌x‌‌80%‌‌     ‌ ‌ ‌80,000‌  ‌
Total‌   ‌ ‌120,000‌  ‌
Multiply‌‌by:‌‌PV‌‌of‌₱ ‌ 1‌ ‌‌@10%,‌‌n=1‌‌    ‌ ‌ ‌0.90909‌  ‌
Total‌    ‌ ‌109,090‌  ‌
Multiply‌‌by:‌‌Risk‌‌adjustment‌ (100%‌+‌ ‌‌7%‌)‌ ‌ ‌107%‌  ‌
Total‌‌    ‌ ‌116,727‌ 
Multiply‌‌by:‌P ‌ robability‌‌of‌‌settlement‌‌(100%‌-‌ ‌‌30%‌)‌ ‌ ‌70%‌  ‌
Provision‌‌for‌‌lawsuit‌‌–‌‌Dec.‌‌31,‌‌20x1‌  ‌ ‌ ‌81,709‌  ‌
 ‌
93. (Use‌‌   the‌‌
  PFRS‌‌   for‌‌  SMEs)‌‌   ‌An‌‌   entity‌‌
  operates‌‌   in‌‌
  a ‌‌jurisdiction‌‌ where‌‌  income‌‌  taxes‌‌  are‌‌ payable‌‌ at‌‌ a ‌‌
lower‌  ‌rate‌  ‌on‌‌   undistributed‌‌   profits‌‌  (20‌‌  per‌‌   cent)‌‌   with‌‌   an‌‌
  additional‌‌   amount‌‌   (10‌‌  per‌‌
  cent)‌‌
  being‌‌  
payable‌‌   when‌‌   profits‌‌   are‌‌  distributed‌‌ (i.e.,‌‌  the‌‌ tax‌‌  rate‌‌  on‌‌ distributed‌‌ profits‌‌  is‌‌ 30‌‌
 per‌‌ cent).‌‌ On‌‌  31‌‌ 
December‌‌   20X1‌‌   the‌‌   entity‌‌ expects‌‌ to‌‌  propose‌‌  dividends‌‌  in‌‌ March‌‌ 20X2‌‌  of‌‌
 approximately‌‌  ‌₱2‌ 0,000‌‌ 
for‌  ‌the‌  ‌year‌  ‌ended‌  ‌20X1.‌  ‌The‌  ‌financial‌  ‌statements‌  ‌will‌  ‌be‌  ‌authorized‌  ‌for‌  ‌issue‌  ‌in‌  ‌April‌  ‌20X2.‌‌  
Taxable‌  ‌profit‌  ‌for‌  ‌20X1‌  ‌is‌  ‌₱1‌ 00,000.‌  ‌The‌  ‌entity‌  ‌has‌  ‌temporary‌  ‌differences‌  ‌that‌  ‌are‌  ‌expected‌  ‌to‌‌  
increase‌  ‌taxable‌  ‌profit‌  ‌in‌  ‌the‌  ‌future‌  ‌for‌  ‌the‌  ‌year‌  ‌20X1‌  ‌of‌  ‌₱3‌ 0,000.‌  ‌The‌  ‌entity‌  ‌was‌  ‌formed‌‌   on‌‌
  1 ‌‌
January‌‌20X1.‌‌On‌‌31‌‌December‌‌20X1‌‌the‌‌entity‌‌should‌‌recognize‌‌the‌‌following:‌  ‌
a. A‌‌current‌‌tax‌‌liability‌‌(and‌‌expense)‌‌of‌₱ ‌ 2‌ 0,000‌‌and‌‌a‌‌deferred‌‌tax‌‌liability‌‌(and‌‌expense)‌‌of‌‌ 
₱‌6,000.‌  ‌
b. A‌‌current‌‌tax‌‌liability‌‌(and‌‌expense)‌‌of‌₱ ‌ 2‌ 0,000‌‌and‌‌a‌‌deferred‌‌tax‌‌liability‌‌(and‌‌expense)‌‌of‌‌ 
₱‌9,000.‌  ‌
c. A‌‌current‌‌tax‌‌liability‌‌(and‌‌expense)‌‌of‌₱ ‌ 2‌ 2,000‌‌and‌‌a‌‌deferred‌‌tax‌‌liability‌‌(and‌‌expense)‌‌of‌‌ 
₱‌6,000.‌  ‌
d. A‌‌current‌‌tax‌‌liability‌‌(and‌‌expense)‌‌of‌₱ ‌ 2‌ 5,000‌‌and‌‌a‌‌deferred‌‌tax‌‌liability‌‌(and‌‌expense)‌‌of‌‌ 
₱‌7,500.‌  ‌
e. A‌‌current‌‌tax‌‌liability‌‌(and‌‌expense)‌‌of‌₱ ‌ 3‌ 0,000‌‌and‌‌a‌‌deferred‌‌tax‌‌liability‌‌(and‌‌expense)‌‌of‌‌ 
₱‌9,000.‌  ‌
 ‌
A‌  ‌
Solution:‌  ‌
Current‌‌tax‌‌expense‌‌=‌‌Taxable‌‌profit‌‌of‌₱ ‌ 1‌ 00,000‌‌x‌‌Tax‌‌rate‌‌on‌‌taxable‌‌profit‌‌of‌‌20%‌‌=‌‌₱2‌ 0,000‌  ‌
Deferred‌‌   tax‌‌  liability‌‌   = ‌‌Future‌‌   increase‌‌   in‌‌
  taxable‌‌   profit‌‌   ‌₱3‌ 0,000‌‌   x ‌‌Tax‌‌
 rate‌‌
 on‌‌ taxable‌‌  profit‌‌
 of‌‌ 20%‌‌ = ‌‌
₱‌6,000‌  ‌
 
94. The‌‌disclosure‌‌of‌‌related‌‌party‌‌relationships‌‌is‌‌addressed‌‌by‌‌this‌‌standard.‌  ‌
 a. PAS‌‌1 ‌ ‌
b. PAS‌‌8 ‌ ‌
c. PAS‌‌10‌  ‌
d. PAS‌‌24‌  ‌
 ‌
95. The‌‌preparation‌‌of‌‌a‌‌statement‌‌of‌‌cash‌‌flows‌‌is‌‌addressed‌‌by‌‌this‌‌standard.‌  ‌
a. PAS‌‌1 ‌ ‌
b. PAS‌‌7 ‌ ‌
c. PFRS‌‌6 ‌ ‌
d. a‌‌and‌‌b ‌ ‌
 ‌
96. Inventories‌‌are‌‌accounted‌‌for‌‌under‌  ‌
a. PAS‌‌1 ‌ ‌
b. PAS‌‌2 ‌ ‌
c. PFRS‌‌5 ‌ ‌
d. PAS‌‌24‌  ‌
 ‌
97. Events‌‌after‌‌the‌‌reporting‌‌period‌‌are‌‌accounted‌‌for‌‌under‌  ‌
a. PAS‌‌1 ‌ ‌
b. PAS‌‌10‌  ‌
c. PFRS‌‌1 ‌ ‌
d. PAS‌‌24‌  ‌
 ‌
98. The‌‌presentation‌‌of‌‌financial‌‌statements‌‌is‌‌addressed‌‌by‌‌this‌‌standard.‌  ‌
a. PAS‌‌1 ‌ ‌
b. PAS‌‌8 ‌ ‌
c. PFRS‌‌3 ‌ ‌
d. PAS‌‌28‌  ‌
 ‌
99. PAS‌‌34‌‌relates‌‌to‌  ‌
a. the‌‌accounting‌‌for‌‌inventories.‌  ‌
b. the‌‌identification‌‌and‌‌disclosure‌‌of‌‌related‌‌party‌‌relationships.‌  ‌
c. interim‌‌financial‌‌reporting.‌  ‌
d. the‌‌presentation‌‌of‌‌financial‌‌instruments.‌  ‌
  ‌ ‌
100. Which‌‌of‌‌the‌‌following‌‌is‌‌not‌‌one‌‌of‌‌the‌‌current‌‌PFRSs?‌  ‌
a. PAS‌‌3 ‌ ‌
b. PAS‌‌7 ‌ ‌
c. PAS‌‌8 ‌ ‌
d. PFRS‌‌5 ‌ ‌
 ‌
 ‌
“It‌‌does‌‌not‌‌matter‌‌how‌‌slowly‌‌you‌‌go‌‌as‌‌long‌‌as‌‌you‌‌do‌‌not‌‌stop.”‌-‌ ‌‌Confucius‌  ‌
 ‌
-‌‌END‌‌- ‌ ‌
 ‌