1.

Limitations of the income statement include all of the following, except

- Only actual amounts are reported in determining net income.
2. The REFINANCING (rolling over) of a currently maturing long-term debt on a long-term
basis completed on or before the balance sheet date requires that such debt be
classified as a
- Non-current liability
3. Gains are
- Increases in equity from peripheral transactions
4. All of the following components of Other Comprehensive Income are reclassified to
retained earnings, except
- Unrealized gain or loss on available for sale investment
5. Disclosure of information about judgments, apart from those involving estimations, that
management has made in the process of applying the accounting policies and have the
most significant effect on the amounts recognized in the financial statements is
- Mandatory
6. What is the purpose of information presented in notes to the financial statements?
- To provide disclosures required by generally accepted accounting principles
7. In the statement of changes in equity, the effect of the retrospective application of a
change in accounting policy is presented
- Separately for each component of equity
8. IFRS requires that a single amount should be disclosed within the income statement for
-
The post-tax profit or loss on discontinued operation and the post-tax gain or loss on
the disposal of discontinued operation assets
9. Under PAS 1, which of the following does not describe a current liability?
- The entity has an unconditional right to defer settlement of the liability for atlast
twelve months after the balance sheet date.
10. Which of the following statements regarding discontinued operations is true?
I. An adjustment in a subsequent period to the selling price of a component of an entity
sold must be reported as a retroactive adjustment in the prior-period financial
statements of the entity in which the discontinued operation was reported.
II. The gain or losses on disposal of a component of an entity classified as a discontinued
operation is not required to be disclosed separately from the loss of operations of the
discontinued segment.
- Neither I nor II
11. The presentation of the notes to financial statements in a systematic manner is
- Mandatory, as far as applicable
12. What is the approach prescribed by PFRS in identifying an operating segment?
- Management approach
13. Which of the following is true regarding the qualitative characteristic of
understandability in relation to information in financial statements?
- Users should be willing to study the information with reasonable diligence
14. If the fair value less cost to sell is lower than carrying amount of a non current asset
held for sale, the difference is
- Accounted for as an impairment loss
15. Which statement is not true with respect to a chief operating decision maker?
- The chief internal auditor who reports to the board of directors usually plays a very
important role and would generally qualify as chief operating decision maker
16. An entity shall disclose in the summary of significant accounting policies
- The measurement basis and the accounting policies used in preparing the financial
statements
17. Entity wide disclosures include disclosures about
I. Geographic areas
II. Allocated costs
- I only
18. A required format for the presentation of the Statement of Financial Position is
- Not prescribed but guidance is provided in the standard for a suitable format
19. The discontinued component's operating loss of the current period should be included
in the
- Income statement as part of the loss on disposal of the discontinued component
20. Which of the following illustrates the expense recognition principle of systematic and
rational allocation?
- Depreciation of property
21. If a financial report contains both the consolidated financial statements of a parent and
the parent's separate financial statements, segment information is required in
- The consolidated financial statements only
22. A noncurrent asset that ceases to be classified as held for sale shall be measured at
- Lower between the carrying amount before the asset was classified as held for sale
adjusted for depreciation that would have been recognized if the asset had not been
classified as held for sale and the recoverable amount at the date of the subsequent
decision not to sell
23. A statement of changes in equity shows all of the following, except
 - Effects of changes in accounting estimates
24. Which is NOT included in the 'accounting policies' section of the notes to the FS?
- The supporting computation for items aggregated on the face of the FS
25. Which of the following information shall be disclosed in the summary of significant
accounting policies?
- Criteria for determining which investments are treated as cash equivalents
26. At the beginning of the current year, an entity agreed to sell a business in the same year.
The gain on the disposal should be
- Netted with the loss from operations of the component as a part of discontinued
operations
27. Which of the following would appear first in a statement of retained earnings?
- Prior period errors
28. When the classification of items in the financial statements is changed, the entity
- Must reclassify the comparative amounts, unless it is impracticable to do so.
29. Kingdra Company accounts for noncurrent assets using the cost model. On December
31, 2020, the entity classified a noncurrent asset as held for sale.
At that date, the carrying amount was P2,200,000, the fair value was estimated at
P2,300,000 and the cost of disposal at P300,000. The asset was sold for P1,900,000.
At what amount should the asset be measured on December 31, 2020?
2,300,000- 300,000 = P2,000,000
30. The cross-referenced between each line item in the financial statements and any related
information disclosed in the notes to financial statements
- Is mandatory
31. On January 1, 2020, Wes Company had a machine with a cost of P6,000,000 and
accumulated depreciation of P4,500,000.
On January 1, 2020, the entity classified the machine as held for sale and decided to sell the
machine within one year. The fair value of the machine on the same date was P1,600,000 with a
cost of disposal of P150,000.
On December 31, 2020, the fair value less cost of disposal of the machine is P1,200,000.
What is the impairment loss to be recognized on December 31, 2020?
CARRYING AMOUNT 1,500,000
 FA-DISPOSAL 1,450,000
IMPAIRMENT LOSS-JANUARY 50,000

1,450,000 – 1,200,000 = P 250,000 gain

32. Hans Company reported the following unadjusted accounts at year-end:

Inventories 800,000
Ordinary share capital 2,400,000
Share premium 1,200,000
Accounts receivable 600,000
Retained earnings 1,500,000
Investments in trading equity securities (including P500,000 cost of Robb Company
1,750,000
Shares)

At what amount should the total shareholders' equity be reported at year-end?

Ordinary share capital 2,400,000

Share premium 1,200,000
Retained earnings 1,500,000
TOTAL 5,100,000

IF KASAMA YUNG INVESTMENTS TREASURY SHARES LESS 500,000 ANG MAGIGING SAGOT IS
4,600,000
33. In the income statement for the year ended December 31, 2020, Kate Company
reported revenue P46,000,000, including intersegment sales P8,000,000, expenses
P40,000,000 and net income P4,000,000.
In the financial statement, the entity should disclose major customer data if sales to any
single customer amount to at least?
REVENUE 46,000,000
LESS: INTERSEGMENT 8,000,000
TOTAL 38,000,000 X 10% = P 3,800,000 MAJOR CUSTOMER(10%)
 34. In the income statement for the year ended December 31, 2019, KAYE Company
reported revenue P46,000,000, excluding intersegment sales P8,000,000, expenses
P40,000,000 and net income P4,000,000.
External revenue of reportable operating segments must be what amount?
REVENUE 46,000,000
MULTIPLY BY 75%
TOTAL P 34,500,000

35. Laurel Company accounts for noncurrent assets using the cost model. The entity
purchased equipment for P5,000,000 on January 1, 2020, with an estimated useful life of
10 years.
Laurel Company classified the equipment as held for sale on June 30, 2021, with a fair
value of P4,500,000 and cost of disposal of P300,000.
On December 31, 2021, the fair value less cost of disposal of the equipment is
P4,400,000.
How much is the gain/loss to be recognized on December 31, 2021?
- GAIN OF P50,000

36. In the income statement for the current year, Asher Company reported revenue
P80,000,000, excluding intersegment sales P15,000,000, expenses P63,000,000 and net
income P17,000,000.
The combined identifiable assets of all operating segments at year-end totaled
P55,000,000.
External revenue of reportable segments must be what amount? P. 122 practical
REVENUE 80,000,000
MULTIPLY BY 75 PERCENT (EXTERNAL)
TOTAL P 60,000,000

37. Tywin Company reported the following information for the current year:

Sales 9,000,000
Cost of goods sold 3,600,000
Administrative expenses 500,000
Loss on sale of equipment 200,000
Commissions to salespersons 300,000
Interest revenue 100,000
Freight out 150,000
Loss on disposal of a major division 800,000
Doubtful accounts 50,000

What is the income from continuing operations before tax?

Sales 9,000,000
Cost of goods sold 3,600,000
GROSS PROFIT 5,400,000
LESS: Administrative expenses 500,000
Loss on sale of equipment 200,000
Commissions to salespersons 300,000
Interest revenue 100,000
Freight out 150,000
Doubtful accounts 50,000
TOTAL P 4,300,000

38. Josh Company maintains a markup of 25% based on cost. The entity's selling and
administrative expense is 15% of sales. Sales amounted to P4,800,000 for the current
year.
What is the net income for the current year?
SALES 4,800,000
Divided by 125%
Cost 3,840,000

SALES 4,800,000
Cost (3,840,000)
960,000
 LESS: 15% OF SALES 720,000
NET INCOME P 240,000
39. Kingdra Company accounts for noncurrent assets using the cost model. On December
31, 2020, the entity classified a noncurrent asset as held for sale.
At that date, the carrying amount was P2,200,000, the fair value was estimated at
P2,300,000 and the cost of disposal at P300,000. The asset was sold for P1,900,000.
(gain or loss of the asset)
At what amount should the asset be measured on December 31, 2020?
- 2,000,000

40. The December 31, 2020, balance sheet of Hannah Inc., reported total assets of
P1,050,000 and total liabilities of P680,000. The following information relates to the year
2021:

Hannah Inc. issued an additional 5,000 shares of common stock at P25 per share on July 1,
•
2021.

• Hannah Inc. paid dividends totaling P80,000.

• Net income for 2021 was P110,000.

• No other changes occurred in stockholders' equity during 2021.

The stockholders' equity section of the December 31, 2021, balance sheet would report
a balance of?
41. On December 31, 2019, Jasmine Company committed to a plan to discontinue the
operations of Aladdin Division.
The fair value of the facilities was P2,000,000 less than carrying amount on December
31. 2019.
The division was actually sold for P750,000 less than carrying amount in 2020.
The division's operating loss for 2019 was P1,500,000. The entity estimated that the
division's operating loss for 2020 would be P1,200,000.
 What amount should be reported as pretax loss from discontinued operations in 2019?
- P 3,500,000

42. On August 31, 2020, when the carrying amount of the net assets of a business segment
was P120,000,000, Gabriel Company signed a legally binding contract to sell the business
segment.
The sale is expected to be completed by January 31, 2021, at a sale price of
P109,000,000.
In addition, prior to January 31, 2021, the sale contract obliged Gabriel Company to
terminate the employment of certain employees of the business segment incurring an
expected termination cost of P4,000,000 to be paid on June 30, 2021.
The segment revenue and expenses for 2020 were P80,000,000 and 87,500,000
respectively.
What amount should be reported as pretax loss from discontinued operation for 2020?
(P.86)
- 22,500,000
Carrying Amount 120,000,000
Selling price 109,000,000
Impairment loss 110,000,000
Less: Expense 87,500,000
PRETAX LOSS 22,500,000

43. Timmy Company provided the following information pertaining to revenue earned by
operating segments for the current year:

Sales to unaffiliated
Segment Intersegment sales Total revenue
customers
1 6,000 3,000 9,000
2 8,000 4,000 12,000
3 4,000 - 4,000
4 43,000 16,000 59,000

In conformity with the revenue test, what is the total revenue of the reportable
segments? (P.121)
 - P 80,000 (9,000 + 12,000+59,000)

44. Arwin Company reported the following current assets at year-end:

Accounts receivable 600,000

Claim against the shipper for goods lost in transit 300,000
Financial asset at fair value through other comprehensive income 700,000
Cash and cash equivalents 500,000
Allowance for doubtful accounts 100,000
Advances to affiliates 200,000
Dividends receivable 400,000
Inventory 900,000

At what amount should the total current assets be reported at year-end?

- P 2,600,000

45. Daenerys Company provided the following information at year-end:

Share premium 2,500,000

Treasury shares, at cost 1,700,000
Retained earnings 3,500,000
Cumulative translation adjustment - debit 800,000
Share capital 7,000,000
Cumulative unrealized gain on option contract designated as cash
500,000
flow hedge

What is the shareholders' equity at year-end? P. 1-17

- 11,000,000
Share premium 2,500,000
Share capital 7,000,000
Retained earnings 3,500,000
Cumulative unrealized gain on option contract designated as cash
500,000
flow hedge
TOTAL P 13,500,000
Less: Treasury shares, at cost 1,700,000
Cumulative translation adjustment - debit 800,000
SHAREHOLDERS’ EQUITY – DECEMBER 31 P 11,000,000

46. Monde Company and its divisions are engaged solely in manufacturing operations.
The following data pertain to the industries in which operations were conducted for the
current year:

Industry Revenue Profit Assets

A 10,000,000 1,750,000 20,000,000
B 8,000,000 1,400,000 17,500,000
C 6,000,000 1,200,000 12,500,000
D 3,000,000 550,000 7,500,000
E 4,250,000 675,000 7,000,000
F 1,500,000 225,000 3,000,000

How many reportable segments does Monde have? P. 11-2

47. Ezra Inc. reported the following items on its December 31, 2020, trial balance:

Accounts Payable P108,900

Advances to Employees 4,500

Unearned Rent Revenue 28,800

Estimated Liability Under Warranties 25,800

Cash Surrender Value of Officers' Life Insurance 7,500

Bonds Payable 555,000

Discount on Bonds Payable 22,500

Trademarks 3,900

The amount that should be recorded on Ezra's balance sheet as total liabilities is?
- P 696,000

48. The following expenses were recognized by Candy Company, a retailer, during 2019:

Interest expense P120,000

Telephone expense 95,000

Loss on sale of store equipment 47,000

Legal fees 74,000

Officers' salaries 115,000

What should Candy report as general and administrative expenses for 2019?
- P 284,000

49. Pancho company accounted for noncurrent assets using the revaluation model. On
October 1, 2019, the entity classified a land as held for sale. At that date, the carrying
amount of the land was P5,000,000 and the balance in the revaluation surplus was
P1,500,000. At same date, the fair value of the land was estimated at P5,500,000 and
the cost of disposal at P100,000.
On December 31, 2019, the fair value less cost of disposal of the land did not change.
The land was sold on January 31, 2020 for P6,000,000.

What is the impairment loss in 2019? P. 76

 CARRYING AMOUNT P 5,000,000
FAIRVALUE LESS COST OF DISPOSAL( 5M-100K) 4,900,000
IMPAIRMENT LOSS P 100,000

50. An entity reported the following data for the current year:

Net sales 9,500,000

Cost of goods sold 4,000,000
Selling expenses 1,000,000
Administrative expenses 1,200,000
Interest expense 700,000
Gain from expropriation of land 500,000
Income tax 800,000
Income from discontinued operations 600,000
Unrealized gain equity investment at FVOCI 900,000
Unrealized loss on futures contract designated as cash flow hedge 400,000
Decrease in projected benefit obligation due to actuarial assumptions 300,000
Foreign translation adjustment - credit 100,000
Revaluation surplus 2,500,000

What net amount should be recognized in other comprehensive income?

- P2,600,000

51. An entity provided the following trial balance on June 30, 2020:

Cash overdraft (200,000)

Accounts receivable, net 700,000
Inventory 1,200,000
Prepaid expenses 200,000
Land held for resale 2,000,000
Property, plant and equipment, net 1,900,000
Accounts payable and accrued expenses 700,000
Share capital 3,000,000
Share premium 500,000
Retained earnings 1,600,000

Checks amounting to P600,000 were written to vendors and recorded on June 30 resulting in
cash overdraft of P200,000. The checks were mailed on July 9. Land held for resale was sold for
cash on July 15, The financial statements were issued on July 31.

What total amount should be reported as current liabilities? P. 24 practical

Accounts payable and accrued expenses 700,000

Checks 600,000
Liabilities P 1,300,000