1.

Which statement is incorrect regarding the Financial inventory and many accounting records stored in the
Reporting Standards Council (FRSC)? warehouse were completely destroyed. Although the
a. Established by the Board of Accountancy (BOA) to inventory was not insured, a portion could be sold for
assist the BoA in carrying out its power and scrap. Through the use of the remaining records, the
function to promulgate accounting standards in following data are assembled:
the Philippines. Inventory, January 1 P 375,000
b. Has 15 members with a Chairman Purchases, January 1-August 15 1,385,000
c. FRSC members serve for a term of three years Cash sales, January 1-August 15 225,000
renewable for another term. Collection of accounts, Jan. 1-Aug. 15 2,115,000
d. Has 6 representatives from public practice. Accounts Receivable, January 1 175,000
Accounts Receivable, August 15 265,000
2. The following were created to assist the Board of Salvage value of inventory 5,000
Accountancy in carrying out its powers and functions, Gross profit percentage on sales 32%
except
a. Financial Reporting Standards Council Compute the inventory loss as a result of the typhoon.
b. Auditing and Assurance Standards Council a. P107,600 c. P102,600
c. Education Technical Council b. P104,200 d. P255,600
d. Accredited Professional Organization Council
9. Martin Corp. values its inventory by using the retail
3. It is a “global phenomenon” intended to bring about method (FIFO basis, lower of cost or NRV). The
transparency and a higher degree of comparability in following information is available for the year just
financial reporting, both of which will benefit the ended:
investors and are essential to achieve the goal of one Cost Retail
uniform and globally accepted financial reporting Beginning inventory P 80,000 P140,000
standards. Purchases 297,000 420,000
a. Information technology c. World Trade Freight-in 4,000 -
b. Borderless accounting d. IFRS Breakage 8,000
Markups (net) 10,000

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4. The International Financial Reporting Standards Markdowns (net) 2,000

er as
Foundation is: Sales 400,000
a. A body which oversees the work of the IASB, IFRS

co
Advisory Council and IFRS Interpretations
eH w At what amount would Martin report its ending
Committee and organizes their funding. inventory?
b. A body which must approve all new accounting a. P112,000 c. P117,600

o.
standards before they are issued. b. P113,400 d. P119,000
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c. A body whose main aim is to enforce the use of
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international GAAP throughout the world. 10. Tristine Dairy produces milk to sell to local and
d. The body which funds the development of new national ice cream producers. Tristine Dairy began
IFRSs. operations on January 1, 2018 by purchasing 840 milk
cows for P1,176,000. The company controller had the
o

5. The objective of financial reporting in the Conceptual following information available at year end relating to
Framework for Financial Reporting: the cows:
aC s

a. Is the foundation for the framework Carrying value, January 1, 2018 P1,176,000
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b. Includes the qualitative characteristics that make Increase in fair value due to growth
accounting information useful. and price changes 365,000
c. Is found on the third level of the Framework. Decrease in fair value due to harvest 42,000
y

d. All of the choices are correct regarding the Milk harvested during 2018 but not yet sold 54,000
objective of financial reporting.
ed d

At December 31, 2018, what is the value of the

milking cows on Tristine Dairy’s statement of financial
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6. Which of the following is not a primary information

need for the ‘investor’ user group of financial position?
statements? a. P1,583,000 c. P1,499,000
a. Assessment of repayment ability of an entity b. P1,553,000 d. P1,445,000
b. Measuring performance, risk and return
is

c. Taking decisions regarding holding investments 11. Cavern Corporation has decided to expand its
d. Taking buy / sell decisions operations and has purchased land for construction of
Th

a new manufacturing plant. The following costs were

7. The Benson Mfg. Co. in its statement of financial incurred in purchasing the property and constructing
position as of December 31, 2018 has an inventory in the building:
the amount of P176,000 which consists of: Land purchase price P 120,000
sh

Direct materials P99,000 Payment of delinquent property taxes 35,000

Direct materials purchases in transit, Title search and insurance 6,500
FOB destination 21,600
City improvements for water and sewer 18,000
Direct materials purchases in transit,
FOB shipping point 16,200 Building permit 8,000
Prepaid insurance on inventory 3,600 Cost to destroy existing building on
Work-in-process 68,400 land (P3,000 worth of salvaged
Finished goods 81,000 material used in new building) 20,000
Goods shipped on consignment, at selling Contract cost of new building 1,650,000
price with 20% profit on sales 27,000 Land improvements-landscaping 82,000
What is the cost of inventory to be shown in the Sidewalks and parking lot 39,000
statement of financial position of Benson Mfg. Co. as Fire insurance on building - 1 year 18,000
of December 31, 2018?
a. P287,100 c. P268,200 The depreciated value of the old building on the books
b. P286,200 d. P264,600 of the company from which the land was purchased
was P26,000. The old building was never used by
8. On August 15, 2018, a typhoon damaged a warehouse Cavern. How much should be recognized as cost of
of Parlophone Merchandise Company. The entire land?
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 a. P278,500 c. P260,500 years from the date of acquisition. What amount
b. P178,500 d. P196,500 should be reported in the statement of financial
position as patent, net of accumulated amortization,
12. On June 30, 2017, Rickenbacker Equipment purchased at December 31, 2018?
a precision laser-guided steel punch that has an a. P2,618,000 c. P2,520,000
expected capacity of 300,000 units and no residual b. P2,448,000 d. P2,142,000
value. The cost of the machine was P450,000 and is
to be depreciated using the units-of-production 17. Wan acquired Yang, a small company that specializes
method. During the six months of 2017, 24,000 units in pharmaceutical drug research and development for
of product were produced. At the beginning of 2018, P35 million. The fair value of Yang’s net assets was
engineers estimated that the machine can realistically P15 million (excluding any items referred to below).
be used to produce only another 230,000 units.
Yang owns a patent for an established successful drug
During 2018, 70,000 units were produced.
that has a remaining life of 8 years. A firm of
Rickenbacker would report depreciation in 2018 of:
specialist advisors, Tantsahan, has estimated the
a. P135,230 c. P108,000
current value of this patent to be P10 million;
b. P126,000 d. P105,000
however, the company is awaiting the outcome of
clinical trials where the drug has been tested to treat
13. Rubber Soul Co. purchased equipment on 1/1/17 for
a different illness. If the trials are successful, the
P500,000, estimating a four-year useful life and no
value of the drug is then estimated to be P15 million.
residual value. In 2016 and 2017, Rubber Soul
Also included in the company’s balance sheet is P2
depreciated the asset using the sum-of-years'-digits
million for medical research that has been conducted
method. In 2018, Rubber Soul changed to straight-
on behalf of a client.
line depreciation for this equipment. What
depreciation would Rubber Soul record for the year Compute the amount of goodwill from this acquisition.
2018 on this equipment? a. P8,000,000 c. P 3,000,000
a. P 75,000 c. P150,000 b. P5,000,000 d. P20,000,000
b. P125,000 d. P175,000
18. On January 1, 2015, Sihamoni Corp. acquired a gold

m
14. The following account balances relating to property, mine property for P10,000,000. In 2015 and 2016,

er as
plant and equipment of Paperback Company appear Sihamoni spent P4,000,000 on exploration and
on the books on December 31, 2017: development. It expects to be able to mine 35,000

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Land eH w P 6,000,000 ounces of gold over the 10-year life of the mine.
Building 60,000,000 Sihamoni uses the output method to account for its
gold costs and expects to be able to sell the property

o.
Accumulated depreciation 24,000,000
to a real estate developer for P2,000,000 at the end of
rs e
Plant, property and equipment have been carried at the10 years. It mined 3,100 ounces in 2017 and
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cost since their acquisition. The land was acquired 15 2,800 in 2018. How much depletion would be
years ago while the building’s construction was recorded related to the gold in 2018?
completed on January 1, 2008. The straight line a. P 960,000 c. P1,200,000
method for depreciation is used. On January 1, 2018, b. P1,120,000 d. P1,400,000
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the company revalued property, plant and equipment.

On the same date, contracted professional appraisers
aC s

submitted the following:

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Fair value 19. Maharishi Corp. uses the cost model for intangible
Land P 8,000,000 assets. On April 10, 2017, Maharishi acquired assets
Building 48,000,000 for P100,000. On December 31, 2018, it was
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determined that the recoverable amount for these

intangible assets was P80,000.
ed d

What is the revaluation surplus on December 31,

2018? On December 31, 2018, it was determined that the
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a. P13,200,000 c. P13,800,000 intangible assets had a recoverable amount of

b. P15,000,000 d. P14,000,000 P84,000. What is the impairment gain or loss
recognized in 2017 and 2018 on the income
15. Which statement is correct regarding investment statement?
is

property in accordance with PAS 40? 2017 2018

a. Investment property includes property occupied by a. P20,000 loss P16,000 loss
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an employee paying market rent. b. P20,000 loss P0

b. Investment property does not generate cash flows c. P20,000 loss P4,000 gain
largely independently of the other assets held by d. P0 P0
an entity.
c. An entity need not disclose the fact the fair value 20. An entity is planning to dispose of a collection of
sh

of investment property is not determined on the
basis of a valuation by an independent valuer who
holds a recognized and relevant professional
qualification and has recent experience in the
location and category of the investment property
being valued.
d. An entity shall disclose the amounts recognized in
profit or loss for direct operating expenses
(including repairs and maintenance) arising from
investment property that did not generate rental
income during the period.
16. Muscat Company purchased a patent on January 1,
2015, for P3,570,000. The patent was being
amortized over its remaining legal life of 15 years.
During 2018 Muscat determined that the economic
benefits of the patent would not last longer than ten
assets. The entity designates these assets as a
disposal group. The carrying amount of these assets
immediately before classification as held for sale was
P20 million. Upon being classified as held for sale, the
assets were revalued to P18 million. The entity feels
that it would cost P1 million to sell the disposal group.
How would the reduction in the value of the assets on
classification as held for sale be treated in the
financial statements?
a. The entity recognizes a loss of P2 million
immediately before classification as held for sale
and them recognizes an impairment loss of P1
million.
b. The entity recognizes an impairment loss of P3
million.
c. The entity recognizes an impairment loss of P2
million.

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 d. The entity recognizes a loss of P3 million
immediately before classifying the disposal group
as held for sale.
21. Which statement is incorrect regarding capitalization
of borrowing costs?
a. Capitalization should commence when
expenditures are being incurred, borrowing costs
are being incurred and activities that are
necessary to prepare the asset for its intended use
or sale are in progress.
b. Capitalization should be suspended during periods
in which active development is interrupted.
c. Capitalization should cease when substantially all
of the activities necessary to prepare the asset for
its intended use or sale are complete.
d. If there are minor modifications outstanding, this
indicates that substantially all of the activities are
not yet complete.
22. Sexy Sadie Corporation had the following items listed
in its trial balance at 12/31/18:
Currency and coins
Balance in checking account
Customer checks waiting to be deposited
Treasury bills, purchased on 11/2/18,
mature on 4/30/19
Marketable equity securities
a. P 5,820 c. P31,180
b. P31,000 d. P25,000
25. During your review of the records of Maggie Mae
Corporation for the year 2018, you noted that Maggie
Mae sold a machine with a carrying amount of
P640,000 (cost is P1,600,000) on June 30, 2018.
Maggie Mae received an P800,000 non-interest
bearing note due in 3 years. There is no established
market value for the machine. The prevailing interest
rate for a note of this type is 12%. Maggie Mae
recorded the transaction by debiting Note Receivable
for P800,000 and crediting Machinery for P640,000
and Gain on sale of Machine for the difference.
Because of this, Maggie Mae’s profit for the year
ended December 31, 2018 had been overstated by
a. P196,394 c. P125,834
b. P162,227 d. P 55,274
26. Martha Company sold a tract of land to My Dear Co.
on July 1, 2017, for P8,000,000 under an installment
sale contract. My Dear Co. signed a 4-year 11% note
P 650 for P5,600,000 on July 1, 2017, in addition to the down
2,600 payment of P2,400,000. The equal annual payments
1,200 of principal and interest on the note will be P1,805,000
payable on July 1, 2018, 2019, 2020,and 2021. The
3,000 land had an established cash price of P8,000,000, and
10,200 its cost to the company was P6,000,000. The

m
Commercial paper, purchased on 11/2/18, collection of the installments on this note is

er as
mature on 1/30/19 5,000 reasonably assured.

co
What amount will Sexy Sadie include in its year-end
eH w The current portion of the installment note receivable
statement of financial position as cash and cash on December 31, 2018 is
equivalents? a. P1,805,000 c. P1,319,790

o.
a. P9,450 c. P12,450 b. P1,400,000 d. P1,189,000
rs e
b. P7,450 d. P19,650
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23. You obtained the bank statement, paid checks, and
other memoranda relating to Lucy Company’s bank
account for December 2018. In reconciling the bank
o
27. On March 1, 2018, Pyne Furniture Co. acquired
P700,000 of 10 percent bonds to yield 8 percent.
Interest is payable semiannually on February 28 and
August 31. The bonds mature in ten years. Pyne

balance at December 31, 2018, you observed the

following facts: Furniture Co. is a calendar-year corporation. If the
aC s

bonds are not held for trading, the interest income to

Balance per bank statement, 12/31/18 P1,465,800
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be recognized in 2018 is
Outstanding checks, 12/31/18 624,750 a. P52,925 c. P58,933
Receipts of 12/31/18, deposited 1/2/19 b. P53,000 d. P58,333
95,550
y

Proceeds of bank loan, 12/15/18, Use the following information for the next two questions.
discounted for 90 days at 10% per
ed d

year, omitted from records 195,000 The following data pertains to Jennah Co.'s investments in
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Deposit of 12/23/18, omitted from 53,000 marketable equity securities:

bank statement Fair Value
Check 733 of Lucky Co., charged by 82,100 Cost 12/31/18 12/31/17
the bank in error to Lucy Co. Trading P150,000 P155,000 P100,000
Proceeds of note receivable of Lucy Co. Available-for-sale 150,000 130,000 120,000
is

collected by bank, 12/10/18, not 40,300 28. What amount should Jennah report as unrealized
entered in cash records (Principal, holding gain in its 2018 profit or loss?
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P40,000; Interest, P400; Collection a. P50,000 c. P60,000

charge, P100) b. P55,000 d. P65,000
Erroneous debit memo of 12/31/18, to
charge company’s account with 29. What amount should Jennah report as net unrealized
settlement of bank loan, paid by 100,000
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loss at December 31, 2018, in accumulated other

check no. 9344 on same date
Deposit of another client on 12/6/18
credited in error to Lucy Co.
The cash balance per books of Lucy Company on
December 31, 2018 is
a. P1,491,000 c. P961,800
b. P1,146,700 d. P911,400
24. Julia Bakery estimates the allowance for uncollectible
accounts at 3% of the ending balance of accounts
receivable. During 2018, Julia's credit sales and
collections were P125,000 and P131,000, respectively.
What was the balance of accounts receivable on
January 1, 2018, if P180 in accounts receivable were
written off during 2018 and if the allowance account
had a balance of P750 on 12/31/18?
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comprehensive income in equity?
a. P0 c. P15,000
25,000 b. P10,000 d. P20,000
30. On January 1, 2018, Monique Corp. purchased 30
percent of the outstanding shares of Kris Corp. for
P1,500,000 cash. On that date, Kris' net assets
were P3,000,000. Monique has determined that
the excess of the cost of its investment in Kris
over its share of Kris' net assets is attributable to
equipment whose market value exceeds its
carrying amount by P1,000,000 and to an
operating license whose market value exceeds its
carrying amount by P1,000,000. The remaining
useful life of the equipment is ten years and the
remaining useful life of the operating license is 20
years.
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 b. Past service cost if not yet vested
Kris's profit for the year ended December 31, 2018,
c. Net interest on defined benefit asset.
was P600,000. During 2018, Monique received
d. None of the above
P50,000 cash dividends from Kris. There were no
other transactions between the two companies.
37. On June 30, 2016, John Corporation granted share
Calculate the carrying amount of the investment in options for 50,000 shares of its P20 par value ordinary
Kris Corp. as of December 31, 2018. shares to certain of its key employees. The market
a. P1,585,000 c. P1,570,000 price of the ordinary share on that date was P36 per
b. P1,630,000 d. P1,620,000 share and the option price was P30. The Black-
Scholes option pricing model determines total
31. Upon the death of an officer, Jung Co. received the compensation expense to be P600,000. The options
proceeds of a life insurance policy held by Jung on the are exercisable beginning January 1, 2019, provided
officer. The proceeds were not taxable. The policy’s those key employees are still in John’s employ at the
cash surrender value had been recorded on Jung’s time the options are exercised. The options expire on
books at the time of payment. What amount of income June 30, 2020.
should Jung report in its statements?
On January 4, 2019, when the market price of the
a. Proceeds received.
share was P42 per share, all 50,000 options were
b. Proceeds received less cash surrender value.
exercised. What should be the amount of
c. Proceeds received plus cash surrender value.
compensation expense recorded by John Corporation
d. None.
for the calendar year 2018?
a. P600,000 c. P240,000
32. The Generous Corporation’s president has a profit-
b. P200,000 d. P120,000
sharing agreement with the company. The agreement
states that the president is to receive a bonus
38. An entity that operates ten petrol stations and owns
consisting of a basic amount equivalent to 10% of the
the land and buildings for those stations chooses not
company’s net income before deduction of bonus but
to purchase fire insurance on those buildings but,
after deduction of income tax. In addition, the basic
rather, to ‘self insure’ in case of fire loss. The entity
bonus shall be increased by the company’s tax
can estimate reliably the statistical probability of the

m
savings on bonus because the total amount of bonus

er as
occurrence and amount of expected fire loss (loss of
is deductible in computing the company’s taxable
about P100,000 once every ten years). The entity
income. The company registered a net income of

co
should
P5,000,000 before deduction of the president’s bonus
eH w a. Recognize a liability of P10,000 and related
and income tax. The company is subject to corporate
expense each year for the next ten years to reflect
income tax of 30%. The total bonus due to the

o.
its expected loss.
president is
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b. Not recognize a liability and related expense each
a. P522,388 c. P339,806
year for the next ten years to reflect its expected
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b. P360,825 d. P263,158
loss.
c. Appropriate retained earnings of P100,000 for ‘self
33. On July 1, 2018, Chocolate Company purchased a
insurance’.
noncash asset with a list price of P260,000 by issuing
d. Appropriate retained earnings of P100,000 for
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a five-year noninterest-bearing note. The market or

contingencies.
"going" rate of interest for this note was 12%. The
aC s

note will; be paid in five equal annual P64,000

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39. An entity recognized a liability (provision for a lawsuit)

installments each June 30, 2019 through 2023. The
at P40,000 in its statement of financial position at 31
interest expense to be recognized by the entity for the
December 2017. At 31 December 2018, the entity
year ended December 31, 2018 is
remeasured the liability at P90,000. P3,000 of the
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a. P27,685 c. P13,842
increase in the provision is attributable to the
b. P15,600 d. Nil
ed d

unwinding of the discount (ie the increase in the

P40,000 because it is one year closer to settlement)
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34. On January 1, 2018, North Company entered into a

and the remainder of the increase is attributed to
lease agreement with West Company for a machine
better information becoming available on which to
which was carried on its accounting records at
base the estimates.
P3,000,000. Total payments under the lease
aggregate P5,000,000 of which P3,380,000 represents Which statement is correct?
is

the fair value and cost of the machine to West. a. The increase of P50,000 is recognized as an
Payments of P500,000 are due on January 1 each year expense in other comprehensive income for the
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starting January 1, 2018. The interest rate of 10%
which was stipulated in the lease is considered fair
and adequate compensation to North for the use of its
funds. West expects the machine to have a 10-year
life, no residual value and be depreciated on a straight
sh
year ended 31 December 2018.
b. The increase of P47,000 is recognized as an
adjustment to retained earnings balance as of 1
January 2018.
c. The increase of P3,000 is a finance cost.

line basis. The lease is appropriately classified as a d. All the statements are incorrect.
sales type lease by North. What should be the total
income before tax that is derived by North from this Use the following information for the next two questions.
lease for the year ended December 31, 2018?
The accounting profit before tax for the year ended
a. P668,000 c. P338,000
December 31, 2018 for Regiel Ltd amounted to P18,500
b. P288,000 d. P718,000
and included:
35. In accordance with the revised PAS 19, which of the Depreciation – motor vehicle (25%) P 4,500
following is reported in profit or loss? Depreciation - equipment (20%) 20,000
a. Actuarial loss on defined benefit obligation Rent revenue 16,000
b. Actuarial gain on plan assets Royalty revenue (exempt from tax) 5,000
c. Interest on the effect of asset ceiling Doubtful debts expense 2,300
d. Gain or loss on routine settlements Entertainment expense (non-deductible) 1,500
Proceeds on sale of equipment 19,000
36. In accordance with the revised PAS 19, which of the Carrying amount of equipment sold 18,000
following is not reported in profit or loss? Annual leave expense 5,000
a. Gain or loss on non-routine settlements

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The draft statement of financial position at December 31, 44. Christian Corp.'s current balance sheet reports the
2018 contained the following assets and liabilities: following shareholders' equity:
2018 2017 5% cumulative preference share capital,
Assets par value P100 per share; 2,500
Cash P 11,500 P 9,500 shares issued and outstanding P250,000
Receivables 12,000 14,000 Ordinary share capital, par value P3.50
Allowance for doubtful debts (3,000) (2,500) per share; 100,000 shares issued
Inventory 19,000 21,500 and outstanding 350,000
Rent receivable 2,800 2,400 Share premium – ordinary 125,000
Motor vehicle 18,000 18,000 Retained earnings 300,000
Acc. Dep. - motor vehicle (15,750) (11,250) Dividends in arrears on the preference shares amount
Equipment 100,000 130,000 to P25,000. If Christian were to be liquidated, the
Acc. Dep. - equipment (60,000) (52,000) preference shareholders would receive par value plus
Deferred tax asset ? 5,550 a premium of P50,000. The book value per share of
P135,200 ordinary share is
Liabilities a. P7.75 c. P7.25
Accounts payable 15,655 21,500 b. P7.50 d. P7.00
Provision for annual leave 4,500 6,000
Current tax liability ? 7,600 45. Presented below is the December 31 trial balance of
Deferred tax liability ? 2,745 Corinthians Company.
37,845
Corinthians Company
Additional information Trial Balance
 The company can claim a deduction of P15,000 (15%) December 31, 2018
for depreciation on equipment, but the motor vehicle Debit Credit
is fully depreciated for tax purposes. Cash P 14,800
 The equipment sold during the year had been Accounts Receivable 33,600
purchased for P30,000 two years before the date of Allow. For Doubtful

m
sale. Accounts P 2,160

er as
 The company tax rate is 30%. Inventory, January 1 62,400

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Furniture and Equipment 67,200
40. The current tax expense for 2018 is eH w Accumulated Depreciation,
a. P6,030 c. P7,500 January 1 26,880
b. P6,930 d. P8,040

o.
Prepaid Insurance 4,080
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Notes Payable 22,400
41. The deferred tax expense (benefit) for 2018 is Owner, Capital 72,000
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a. P6,570 c. (P2,430) Sales 480,000

b. (P3,270) d. (P1,080) Purchases 320,000
Sales Salaries Expense 40,000
42. The Retained Earnings account of Lester Corp. for the Advertising Expense 5,360
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year 2018 consists of the following items: Administrative Salaries

Expense 52,000
aC s

Debit Credit
Balance, January 1, 2018 P112,500 Office Expense 4,000
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Write-off of organization costs P 6,000 P603,440 P603,440

Excess of issuing price of share Information necessary for the preparation of adjusting
capital over par value 24,000
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journal entries:
Loss on the sale of equipment 2,500 a) Adjust the Allowance for Doubtful Accounts to 8
ed d

Correction of error of prior year 10,500 percent of the accounts receivable.

Gain on sale of treasury shares 3,500 b) Furniture and equipment is depreciated at 20
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Cash and share dividends 60,000 percent per year.

Net income for the year 58,500 c) Insurance expired during the year, P2,040.
Balance, December 31, 2018 119,500 . d) Interest accrued on notes payable, P2,688.
P198,500 P198,500 e) Sales salaries incurred but not paid, P1,920.
is

The correct balance of retained earnings on December f) Advertising paid in advance, P560.
31, 2018 is g) Office supplies on hand, P1,200, charged to Office
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a. P119,500 c. P94,500 Expense when purchased.

b. P100,500 d. P92,000 h) Inventory on December 31, P64,000.
Disregarding income taxes, the adjusted profit is
43. The shareholders' equity section of Brown Co.'s a. P39,224 c. P41,912
December 31, 2017 balance sheet consisted of the
sh

b. P41,384 d. P44,072
following:
Ordinary share capital, P30 par, 46. The trial balance of Snookeroo Corporation does not
10,000 shares authorized and balance.
outstanding P300,000 Debit Credit
Share premium 150,000
Retained earnings (deficit) (210,000) Cash P 5,912
Accounts Receivable 5,240
On January 2, 2018, Brown put into effect a Supplies on Hand 2,967
shareholder-approved quasi reorganization by Furniture and Equipment 6,100
reducing the par value of the shares to P5 and Accounts Payable P 7,044
eliminating the deficit against share premium. Share capital 8,000
Immediately after the quasi reorganization, what Retained Earnings 2,000
amount should Brown report as share premium? Service Revenue 5,200
a. P (60,000) c. P190,000 Office Expense 4,320 _______
b. P150,000 d. P400,000 P24,539 P22,244
An examination of the ledger shows these errors.

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 1. Cash received from a customer on account was Notes payable in annual installment at
recorded (both debit and credit) as P1,380 instead P100,000 payable every May 31 200,000
of P1,830. Accrued expenses 8,000
2. The purchase on account of a computer costing Total current liabilities P268,000
P3,200 was recorded as a debit to Office Expense
49. How much is the total current assets of COPERNICUS
and a credit to Accounts Payable.
Corp. on December 31, 2018?
3. Services were performed on account for a client,
a. P370,600 c. P365,600
P2,250, for which Accounts Receivable was
b. P375,600 d. P360,600
debited P2,250 and Service Revenue was credited
P225. 50. How much is the total current liabilities of
4. A payment of P95 for telephone charges was COPERNICUS Corp. on December 31, 2018?
entered as a debit to Office Expenses and a debit a. P178,000 c. P188,000
to Cash. b. P183,000 d. P173,000
5. The Service Revenue account was totaled at
P5,200 instead of P5,280. 51. An analyst compiled the following information for
Dominic, Inc. for the year ended December 31, 2018:
The corrected trial balance of the company should
 Net income was P1,700,000.
show total debits of
 Depreciation expense was P400,000.
a. P24,593 c. P24,444
 Interest paid was P200,000.
b. P24,539 d. P24,349
 Income taxes paid were P100,000.
 Common stock was sold for P200,000.
47. For a given year, beginning and ending total liabilities
 Preferred stock (eight percent annual dividend)
were P168,000 and P200,000, respectively. At year-
was sold at par value of P250,000.
end, owners' equity was P520,000 and total assets
 Common stock dividends of P50,000 were paid.
were P40,000 larger than at the beginning of the year.
 Preferred stock dividends of P20,000 were paid.
If new share capital issued exceeded dividends by
 Equipment with a book value of P100,000 was sold
P48,000, profit or (loss) for the year was apparently
for P200,000.
a. (P56,000) c. (P40,000)
b. P56,000 d. P 8,000 Using the indirect method, what was Dominic, Inc.'s

m
er as
net cash flow from operating activities for the year
48. Upon inspection of the records of Blue Jay Way's ended December 31, 2018?

co
Company, the following facts were discovered for the
eH w a. P1,630,000 c. P1,900,000
year ended December 31, 2018: b. P1,700,000 d. P2,000,000
 A fire premium of P4,000 was paid and charged as

o.
insurance expense in 2018. The fire insurance 52. Joshuarey Co. provided the following information on
rs e
policy covers one year from April 1, 2018. selected transactions during 2018:
Inventory on January 1, 2018 was understated by
ou urc


Purchase of land by issuing bonds P250,000
P8,000.
Proceeds from issuing bonds 500,000
 Inventory on December 31, 2018 was understated
Purchases of inventory 950,000
by P12,000.
Purchases of treasury shares 150,000
Business taxes of P5,500 for the fourth quarter of
o


Loans made to affiliated corporations 350,000
2018 were paid on January 20, 2019 and charged
Dividends paid to preference shareholders 100,000
aC s

as expense in 2019.
Proceeds from issuing preference share 400,000
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 On December 5, 2018, a cash advance of P10,000

Proceeds from sale of equipment 50,000
by a customer was received for goods to be
delivered in January 2019. The P10,000 was The net cash provided by financing activities during
credited to sales. The company's gross profit on 2018 is
y

sales is 40%. a. P550,000 c. P800,000

ed d

 The net income of Blue Jay Way's Company on the b. P650,000 d. P900,000
income statement for the year ended December
ar stu

31, 2018, before any adjustments for the above 53. Which of the following best describes the purpose of
information, is P155,000. disclosure notes in the financial statements?
a. To provide more detail for the users of accounts
What is the adjusted net income of Blue Jay Way’s
about the information in the main financial
Company for the year ended for the December 31,
is

statements.
2018?
b. To allow companies to present their financial
a. P136,500 c. P144,500
results in a more favorable way by only disclosing
Th

b. P142,500 d. P150,500
some things in the notes and not on the main
financial statements.
c. To give all the detail of all the transactions that
Use the following information for the next two questions.
occurred during the period because the main
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For the purpose of stating the working capital of financial statements only present a summary.
COPERNICUS Corporation on December 31, 2018, the d. To explain the accounting treatment adopted
following data are submitted: where management have chosen not to apply
accounting standards.
Cash on hand and in bank, net of bank of
overdraft of P5,000 P 56,000 54. If revenues from transactions with a single external
Petty cash (unreplenished petty cash customer amount to 10 per cent or more of an entity’s
expenses, P400) 1,000 revenues, the entity shall disclose
Notes receivable, including discounted notes a. The identity of a major customer.
of P25,000 75,000 b. The amount of revenues that each segment
Accounts receivable, including accounts with reports from a major customer.
credit balance of P10,000 110,000 c. Both a and b
Merchandise inventory, including goods held d. Neither a nor b
on consignment of P18,000 148,000
Prepaid expenses 9,000 55. Under PAS 24, all of the following are considered to be
Total current assets P399,000 NOT necessarily related parties of the reporting entity,
Accounts payable, including accounts with EXCEPT
debit balance of P5,000 P 60,000 a. Post-employment benefit plans
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 b. Providers of finance
c. Public utilities
d. Trade unions

56. The Karen Company's nominal peso statement of

financial position at December 31, 2018 showed the
following assets:
Cash P 58,000
Accounts receivable 116,000
Inventory 224,000
Building (net) 800,000
Machinery (net) 340,000
Total assets P1,538,000
The general price-level index at December 31, 2018 is
300. Inventory cost is computed on a FIFO basis. The
December 31, 2018 inventory was purchased over the
last six months of 2018, when the index averaged
280. Accounts receivable arose from credit sales in
the last three months of 2018 when the average index
was 290. The building was purchased for P1,000,000
on January 1, 2014 when the index was 150. The
machinery, which originally cost P500,000, was
acquired on January 1, 2016, when the index was 200.
Determine the total restated amount of assets that
will be shown on a constant peso statement of
financial position at December 31, 2018.
a. P2,528,000 c. P3,168,000

m
b. P2,524,000 d. P3,164,000

er as
co
57. A non-publicly accountable entity with total assets of
eH w
P300 million and total liabilities of P200 million should
apply what financial reporting framework?

o.
a. Full PFRS
rs e
b. PFRS for SMEs
c. Another acceptable basis of accounting
ou urc

d. Any of the above

58. An SME must measure its investment property after

initial recognition:
o

a. Either at fair value or using the cost-depreciation-

aC s

impairment model (same accounting policy for all

investment property).
vi re

b. Either at fair value or using the cost-depreciation-

impairment model (elected item by item).
c. At fair value.
y

d. At fair value, for those properties that fair value

ed d

can be measured reliably without undue cost or

effort on an ongoing basis, with all other
ar stu

investment property accounted for using the cost-

depreciation-impairment model in Section 17.

59. A small and medium-sized entity may report which of

the following assets in its statement of financial
is

position?
a. Internally generated intangible assets.
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b. Non-current assets held for sale.

c. Intangible assets at revalued amount.
d. Investment in associate at cost.
sh

60. If an SME that uses the PFRS for SMEs in a current

year breaches the floor or ceiling of the size criteria at
the end of that current year, and the event that
caused the change is considered “significant and
continuing”, the entity should
a. Transition to the applicable financial reporting
framework in the next accounting period.
b. Transition to the applicable financial reporting
framework in the current accounting period.
c. Transition to the applicable financial reporting
framework from the previous accounting period.
d. Use the same financial reporting framework.

 - end of FAR.2451 - 

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