Q1. Which of the following is not a basic characteristic of a system of cash control?

A. Use of a voucher system

B. Combined responsibility of handling and recording cash
C. Daily deposit of all cash received
D. Internal audits at irregular intervals
Q2. Which should not be considered cash for financial reporting purposes?
A. Petty cash fund
B. Money orders
C. Coin and currency
D. IOUs
Q3. The internal control feature specific to petty cash is
A. Separation of duties
B. Assignment of responsibility
C. Imprest system
D. Proper authorization
Q4. Credit balances in accounts receivables are classified as

A. Current liabilities
B. Part of accounts payable
C. Long-term liabilities
D. Deduction from accounts receivable
Q5. Which accounting principle primarily supports the use of allowance for doubtful accounts
A. Continuity principle
B. Full disclosure principle
C. Conservatism
D. Matching principle

Q6. Which method of determining bad debt expense best achieves the matching concept?
A. Percentage of sales
B. Percentage of ending accounts receivable
C. Percentage of average accounts receivable
D. Direct write-off
Q7. Investments of excess cash may be classified as the following except,
A. Cash equivalent
B. Short-term financial asset
C. Compensating balance
D. Long-term investments

Q8. A basic characteristic of all marketable securities is

A. They usually don’t earn in the form of dividends
B. They can be purchased or sold quickly
C. Their cost excludes brokerage commissions
D. They don’t incur unrealized gains and losses
Q9. Marketable securities are reported in the balance sheet at their

A. Cost excluding brokerage fee

B. Cost including brokerage fee
C. Current market value
D. Par value
Q10. The cash flows resulting from sale or purchase of marketable securities is classified as:
A. Operating cash flow
B. Investing cash flow
C. Financing cash flow
D. None of the above
Q11. Under allowance method, the correct journal entry to reinstate a previously written-off
account is:

A. Dr. Allowance for doubtful accounts; Cr. Bad debt expense

B. Dr. Accounts receivable; Cr. Allowance for doubtful accounts
C. Dr. Allowance for doubtful accounts; Cr. Accounts Receivable
D. Dr. Accounts Receivable; Cr. Sales
Q12. Which of the following statements is incorrect?
Business entities systematically record their receipts and payments in a Cash account and
balance it on a daily basis in order to:
A. Find how rich they have become
B. Continuously assess whether they have enough cash to meet their commitment
C. Maintain an accurate chronological record of transactions
D. Protect cash from being stolen.
Q13. An increase in the firm’s receivable turnover ratio means that:
A. Inventories have increased
B. Cash sales have decreased
C. It has initiated more liberal credit terms
D. It is collecting credit sales more quickly than before

Q14. Increasing the credit period from 30 to 60 days, in response to a similar action taken by all
of our competitors, would likely result in:
A. A decrease in bad debt losses.
B. An increase in the average collection period
C. An increase in sales.
D. Higher profits.

Q15. Which of the following statements is incorrect?

To keep proper control of the cash held by a business:
A. Every entry in the Cash account should be substantiated by an appropriate voucher
B. Every receipt and payment of cash should be recorded as soon as it happens
C. The Cash Book entries should be in pencil so that any mistakes can be corrected
D. The difference between amounts received and paid should agree with the amount in hand.

Q16. WALANG KAYO Company reported the following unadjusted balances at year-end:
Accounts receivable 3,000,000 (debit)
Allowance for doubtful accounts 10,000 (debit)
Net credit sales 8,000,000 (credit)
The entity estimated that 3% of the gross accounts receivable would become uncollectible.

What amount should be reported as doubtful account expense for the current year?
3,000,000 x .03 = 90,000 + 10,000 = 100,000
Q17. SINGLE KA FOREVER had the following balances on December 31, 2016:

Cash in checking account 2,000,000

Cash in money market account 1,500,000
Treasury Bill, purchased 12/1/2016 maturing 2/28/2017 4,000,000
Treasury Bond, purchased 3/1/2016 maturing 2/28/2017 1,000,000
What amount should be reported as cash and cash equivalents on December 31, 2016?
2,000,000 + 1,500,000 + 4,000,000 = 7,500,000
Q18. MAGIGING CPA KA DIN Company provided the following information for the current
year in relation to accounts receivable:

Accounts receivable, Jan. 1 1,300,000

Credit sales 5,500,000
Sales return 150,000
Accounts written off 100,000
Collections from customers 5,000,000
Estimated future sales return on Dec. 31 50,000
Estimated uncollectible accounts per aging at year end 250,000
What amount should be reported as net realizable value of accounts receivable on Dec. 31?
1,300,000 + 5,500,000 - 150,000 - 100,000 - 5,000,000 - 50,000 - 250,000 = 1,250,000

Q19. GANDA Q Company provided the following information at year-end comprising the cash
account:
Cash in Bank-Demand Deposit account 5,000,000
Cash on Hand 400,000
Postage stamp unused 5,000
Certificate of time deposit with maturity of 3 months 1,500,000
Money Order 50,000
Manager Check 100,000
Traveler Check 1,000,000
Postdated customer check 500,000
What total amount should be reported as cash at year-end?

5,000,000 + 400,000 + 50,000 + 100,000 + 1,000,000 = 6,550,000

Q20. NEVER GIVE UP Company had the following information for the current year relating to
accounts receivable:

Accounts receivable, Jan. 1 1,300,000

Credit sales 5,400,000
Collections from customers, excluding recovery 4,750,000
Accounts written off 125,000
Collection of accounts written off in prior year, customers credit was not reestablished 25,000
Estimated uncollectible receivables per aging at Dec. 31 165,000

What is the balance of accounts receivable, before allowance for doubtful accounts, on Dec. 31?
1,300,000 + 5,400,000 – 4,750,000 – 125,000 = 1,825,000
Q1. Major spare parts and standby equipment which are expected to be used over a period of
more than one year shall be classified as
A. Property, plant, and equipment
B. Inventory
C. Noncurrent investment
D. Expense
Q2. Which of the following costs should be expensed immediately?
A. Cost of opening a new facility
B. Cost of introducing a new product or service, including cost of advertising and
promotional activities
C. Cost of conducting business in a new location
D. All of these are expensed immediately
Q3. Which exchange has commercial substance
A. Exchange of assets with no difference in future cash flows
B. Exchange by entities in the same line of business
C. Exchange of assets with a difference in future cash flows.
D. Exchange of an equivalent interest in similar productive asset that causes the entities
involved to remain in essentially the same economic position.
Q4. Which of the following terms best describes the removal of an asset from the statement of
financial position?

A. Derecognition
B. Impairment
C. Writeoff
D. Depreciation
Q5. Which of the following should not be capitalized as cost of property, plant, and equipment?
A. Cost of testing whether the asset works correctly
B. Cost of excess materials from a purchasing error
C. Initial delivery and handling cost
D. Cost of preparing the site for installation

Q6. When a plant asset is acquired by issuance of ordinary shares, the cost is properly measured
at
A. Par value of the shares
B. Stated value of the shares
 C. Book value of the shares
D. Fair value of the shares

Q7. Which of the following statements best describes the term “depreciation”?
A. The systematic allocation of an asset’s cost less residual value over the useful life
B. The removal of an asset from an entity’s statement of financial position
C. The amount by which the recoverable amount of an asset exceeds carrying amount
D. The amount by which the carrying amount of an asset exceeds recoverable amount
Q8. All of the following factors are considered in determining the useful life of an asset, except

A. Expected usage of the asset

B. Expected physical wear and tear
C. Technical obsolescence
D. Residual value
Q9. The straight-line depreciation is not appropriate for
A. An entity that is neither expanding nor contracting an investment in equipment because it
is replacing equipment depreciates.
B. Equipment with useful life that is not affected by the amount of use
C. Equipment on which repairs and maintenance increase substantially with age.
D. Equipment used consistently every period
Q10. A principal objection to the straight-line method of depreciation is that it

A. Provides for the declining productivity of an aging asset

B. Ignores variation in the rate of asset use
C. Tends to result in a constant rate of return on a diminishing investment base
D. Gives smaller periodic writeoff than a decreasing charge method
Q11. In which of the following situations is the production method of depreciation most
appropriate?

A. An asset’s service potential declines with use

B. An asset’s service potential declines with the passage of time
C. An asset is subject to rapid obsolescence
D. An asset incurs increasing repairs and maintenance with use
Q12. A depreciable asset has an estimated 15% residual value. At the end of the estimated
useful life, the accumulated depreciation would equal the original cost of the asset under which
of the following depreciation methods?
A. Straight-line
B. Output method
 C. Double declining balance
D. None of these

Q13. Which depreciation method applies a uniform depreciation rate each period to the carrying
amount of an asset?
A. Straight line
B. Output method
C. Double declining balance
D. Sum of years’ digit

Q14. Economic factors that shorten the useful life of an asset include
A. Wear and tear
B. Deterioration or decay through aging or passage of time
C. Obsolescence, supersession, and inadequacy
D. Damage or destruction due to fire, flood, earthquake, and other casualties
Q15. Which of the following must be known when using the sum of the year’s digit?

A. Acquisition cost
B. Residual value
C. Useful life
D. All of the above
Q16. Which of the following items can be capitalized (i.e. recorded in the balance sheet as PPE)?

A. Initial operating losses whilst demand builds up

B. Cost of training staff on the new asset
C. Cost of preparing the site for installation

D. Cost of excess materials resulting from a purchase error

Q17. The depreciation charge is required to be based on:

A. The profitability of the asset being depreciated

B. The replacement cost of the asset being depreciated
C. A period not exceeding 5 years for plant and machinery, and 20 years for buildings and land

D. The expected useful life of the asset being depreciated

Q18. When the depreciated cost of a tangible asset is higher than its recoverable amount:
A. An impairment loss should be recognised only if the NRV is higher than the value in use

B. The tangible asset must be reported at its fair value

C. An impairment loss should be recognised as expense in the income statement
immediately

D. An unrealised gain must be accounted for

Q19. Which of the following statements best describes the term 'impairment loss'?

A. The amount by which the recoverable amount of an asset exceeds its carrying value
B. The systematic allocation of an asset's cost less residual value over its useful life
C. The removal of an asset from an enterprise's balance sheet

D. The amount by which the carrying value of an asset exceeds its recoverable amount

Q20. Which one of the following statements best describes the 'carrying value' of an asset?

A. The higher of the asset's NRV and its value in use

B. The amount at which the asset is recognised in the balance sheet after deducting any
accumulated depreciation and accumulated impairment losses

C. The higher of the asset's value in use and its recoverable amount
D. The cost of the asset less its residual value

Q21. During the year, WALA KANG JOWA Company purchased a new machine. A P120,000
down payment was made and three monthly installments of 360,000. The cash price would have
been P1,160,000.
The entity paid no installment charges under the monthly payment plan but a P20,000
installation charge would have been incurred with a cash purchase.

What amount should be capitalized as cost of the machine?

1,160,000 + 20,000 = 1,180,000

Q22. SINGLE KA FOREVER Company acquired a machine with a cash price of P2,000,000.
Down payment 400,000
Note payable in 3 equal annual installment 1,200,000

20,000 shares of SINGLE KA FORERVER Company at fair value 800,000

Prior to use, installment cost of 50,000 was incurred. The machine has residual value of 100,000.
What is the initial measurement of new machine?

2,000,000 + 50,000 = 2,050,000

Q23. Kingfisher Company purchased a van with list price of P3,000,000. The dealer granted a
15% reduction in list price and an additional 10% cash discount on the net price if payment is
made in 30 days.
Irrecoverable taxes amounted to 40,000 and the entity paid an extra 30,000 to have special horn
installed.
What amount should be recorded as initial cost of the van?
3,000,000 x .85 x .90 = 2,295,000 + 70,000 = 2,365,000

Q24. At the beginning of the current year, OAR Company purchased a new machine on a
deferred payment basis.

A down payment of P200,000 was made and four annual installments of P600,000 each are to be
made every year end. The cash equivalent price of the machine was 2,300,000.

Due to an employee strike, the entity could not install the machine immediately and thus incurred
30,000 of storage cost. Cost of installment excluding the storage cost amounted to 80,000.
What is the initial amount to be capitalized as the cost of the machine?

2,300,000 + 80,000 = 2,380,000

Q25. At the beginning of the current year, PINAASA KA LANG Company exchange an old
packaging machine, which has cost of 1,200,000 and was 50% depreciated, for a used machine
and paid cash difference of 160,000.
The fair value of the old packaging machine was determined to be 700,000.

What is the gain on exchange?

700,000 – 600,000 = 100,000
Q26. At the beginning of the current year, DI KA CRUSH NG CRUSH MO Company bought
machinery under a contract that required a downpayment of P100,000, plus 24 monthly
payments of 50,000 each, for total cash payment of 1,300,000. The cash equivalent price of the
machine was P1,100,000.
The machinery has estimated useful life of 10 years and estimated residual value of 50,000. The
entity used straight line depreciation.
What amount should be reported as depreciation of machinery for the current year?
1,100,000−50,000
= 105,000
10

Q27. Bitterness Company acquired a machinery on January 1, 2019.

Cost 1,200,000
Residual value 120,000

Estimated useful life 8 years

What is the accumulated depreciation for 2020 using sum of the years' digits?
8+7
(1,200,000 − 120,000) 𝑥 8 𝑥 (8+1) = 450,000
( )
2

Q28. On January 1, 2019, WALANG POREBER Company purchased a new machine for
4,000,000. The new machine has an estimated useful life of eight years and residual value was
estimated to be 400,000.
Depreciation was computed on the sum of the years' digits method.

What is the carrying amount of the machine on December 31, 2020?

8+7
(4,000,000 − 400,000) 𝑥 8 𝑥 (8+1) = 1,500,000 (Accumulated Depreciation)
( )
2
4,000,000 – 1,500,000 = 2,500,000

Q29. YOU'RE BEAUTIFUL Company acquired machine on January 1, 2020.

Cost 3,000,000
Residual value 150,000
Useful life 8 years
What is the depreciation for 2020 using double declining balance?
1
3,000,000 x (8 𝑥2) = 750,000

Q30. Mr. Mabait acquired office equipment on June 16, 2020 for his repaired shop business. The
cost of the equipment is P25,000. It was estimated to have a useful life of five years. It is
estimated that after five years, the office equipment can be sold of a scrap value of P1,000. The
company uses the straight-line method of depreciation.

If the accounting period being reported by Mr. Mabait is for the month ending June 30, 2020,
what is the depreciation for the current period?
0